Patriot,

Here we are, at the end of another turbulent year, while our
economy is sleep-walking toward catastrophe.

As I discuss in my latest column below, a crash is coming.

We all need to prepare ourselves, and that means introducing as
many people as possible to the ideas of liberty, including Audit
the Fed.

If you support the work Campaign for Liberty is doing to inform
and mobilize patriots, please consider chipping in a contribution
today.
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For Liberty,

Ron Paul

The Mother of All Economic Crises

Nouriel Roubini, a former advisor to the International Monetary
Fund and member of President Clinton's Council of Economic
Advisors, was one of the few "mainstream" economists to predict
the collapse of the housing bubble. Now Roubini is warning that
the staggering amounts of debt held by individuals, businesses,
and the government will soon lead to the "mother of all economic
crises."

Roubini properly blames the creation of a debt-based economy on
the near-or-at-zero interest rate and quantitative easing
policies pursued by the Federal Reserve and other central banks.
The inevitable result of the zero-interest and quantitative
easing policies is price inflation wreaking havoc on the American
people.

The Fed has been trying to eliminate price inflation with a
series of interest rate increases. So far, these rate increases
have not significantly reduced price inflation. This is because
rates remain at historic lows. Yet the rate increases have had
negative economic effects, including a decline in the demand for
new homes. Increasing interest rates make it impossible for many
middle- and working-class Americans to afford a monthly mortgage
payment for even a relatively inexpensive home.

The main reason the Fed cannot raise rates to anywhere near what
they would be in a free market is the effect it would have on the
federal government's ability to manage its debt. According to the
Congressional Budget Office (CBO), interest on the national debt
is already on track to consume 40 percent of the federal budget
by 2052 and will surpass defense spending by 2029!

A small interest rate increase can raise yearly federal debt
interest rate payments by many billions of dollars, increasing
the amount of the federal budget devoted solely to servicing the
debt.

The federal government's fiscal picture is made worse by the fact
that the Social Security "Trust Fund" will begin to run deficits
by 2035 while the Medicare Trust Fund will run deficits by 2028.
The looming bankruptcy of the two major entitlement programs,
combined with the unwillingness of most in Congress to reduce
either welfare or warfare spending, puts the Fed in a bind. If it
raises rates to the levels needed to really combat price
inflation, the increase in interest payments will impose
hardships on individuals and businesses, as well as raise federal
interest payments to unsustainable levels.

This will cause a major economic crisis including a government
default on its debt causing a rejection of the dollar's world
reserve currency status. Also, if the Fed continues to facilitate
federal deficits by monetizing the debt, the result will be an
economic crisis caused by a collapse in the dollar's value and
rejection of the dollar's world reserve status.

The crisis will lead to social unrest and violence, as well as
increased popularity of authoritarian movements on both the left
and the right. This will lead to government crackdowns on civil
liberties and increased government control of our economy.

The only bright spot is this crisis will also fuel interest in
the ideas of liberty and could even help bring about a return to
limited, constitutional government, free markets, individual
liberty, and a foreign policy of peaceful trade with all. Those
of us who know the truth have two responsibilities. The first is
to make the necessary plans to ensure our families can survive
the forthcoming turmoil. The second is to do all we can to
introduce as many people as possible to the ideas of liberty.


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The mission of Campaign for Liberty is to promote and defend the
great American principles of individual liberty, constitutional
government, sound money, free markets, and a constitutional
foreign policy, by means of education, issue advocacy, and
grassroots mobilization.

© Campaign for Liberty, 2012. Paid for by Campaign for Liberty
and not authorized by any candidate or candidate's committee.

Because of Campaign For Liberty's tax-exempt status under IRC
Sec. 501(C)(4) and its state and federal legislative activities,
contributions are not tax deductible as charitable contributions
(IRC § 170) or as business deductions (IRC §
162(e)(1)).

www.CampaignForLiberty.org


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