Ron Paul Dear Colleague on the ABCs of the Asian Financial Crisis
Ron Paul Dear Colleague on the ABCs of the Asian Financial Crisis
(J. Bradley Jansen was Ron Paul’s legislative staffer for these issues at this time)
The ABCs of the Asian Financial Crisis
What is the Asian financial crisis?
“To one degree or another, most of these countries have been facing difficulties with their balance of payments, over-expansion of production capacity, rising real estate values, overvalued equities, and excessive bank lending.” (CRS: The 1997 Asian Financial Crisis Nov 25, 1997 p 6)
How did we get in this mess?
The Austrian Business Cycle theory explains that government intervention in the credit supply distorts the cost of money (interest rates) which causes a misallocation of credit. The resulting malinvestment is a direct consequence of the manipulation of the money supply by governments. Adding liquidity, the standard IMF remedy to any currency crisis, merely fuels the inflation machine and compounds the problem-effectively pouring gasoline on the fire.
Who benefits?
If we were to put purple dye on the money that we are sending to these countries in the bailouts today, the Wall Street fat cats will be walking around with Purple Pockets tomorrow. The money also funds lavish bailout bureaucracy salaries and corrupt foreign government officials-both groups argue for the gravy train to continue.
Who suffers?
The people who work hard and save but have their earnings washed away. With these fiat currency devaluations, the working people (who don’t have money in Swiss bank accounts or in other “hard” currencies or gold as their rulers do) have lost up to 80% or their savings and earnings (in U.S. dollar terms).
How would we get out of the IMF?
The Articles of Agreement of the IMF sets up the framework by which a country withdraws. The money that the US has “lent” the IMF (about $42 billion ) is then repaid to us.
Therefore, Ron Paul and others will be introducing legislation stating, “The Secretary of the Treasury shall immediately withdraw the United States from the International Monetary Fund, and shall seek to negotiate an agreement on the method of settling accounts” with the IMF.
What would a world without the IMF look like?
The Republic of China (on Taiwan), due to geopolitical realities, was kicked out of the IMF and knows that it could never receive an IMF bailout. Therefore, the island does on its own what the IMF cannot force its aid recipient countries to do. Taiwan has been a relative oasis of stability in a sea of crises. The top ten industrial companies in Taiwan had an average return on equity of 14% in 1996, much higher than the 4% for a similar company in South Korea; a typical debt-to-equity ratio of a Taiwanese company is 1-to-1 compared to a range of 4-to-1 to 8-to-1 for the South Korean chaebol (Forbes January 12, 1998).
For more information or to cosponsor, please contact Bradley Jansen at 225-2831.