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Tuesday, August 2, 2011

Ron Paul offers a real solution to the debt crisis.


Purchase at the liberty store

By Pete Kasperowicz
August 2, 2011

Ron Paul on Monday introduced legislation that would lower the federal government's debt by canceling the roughly $1.6 trillion in debt held by the Federal Reserve.

Paul has argued for the last few weeks that this idea is a quick way to make the growing fiscal crisis more manageable. Under his bill, H.R. 2768, the $1.6 trillion that the Treasury owes to the Federal Reserve would disappear.

The Federal Reserve began buying Treasury bonds in earnest late last year as part of its effort to keep long-term interest rates down. But Paul has argued that Fed purchases of Treasury debt represents a debt that the government owes to itself, and one that also leads to an unwanted and inflationary increase in the money supply.

Paul has also said the Fed is allowing the federal government to continue a spending binge it otherwise would not be able to afford, and is forcing the Fed to print money to keep up.

"If the federal government cannot cut spending and bring the budget back into balance, the Fed undoubtedly will be forced to simply monetize trillions of dollars in Treasury debt, which is nothing more than a stealth form of default," Paul said back in May. Full Story