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Vietnam War at 50: Have We Learned Nothing? – Article by Ron Paul

Vietnam War at 50: Have We Learned Nothing? – Article by Ron Paul

The New Renaissance HatRon Paul
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Last week Defense Secretary Ashton Carter laid a wreath at the Vietnam Veterans Memorial in Washington in commemoration of the “50th anniversary” of that war. The date is confusing, as the war started earlier and ended far later than 1966. But the Vietnam War at 50 commemoration presents a good opportunity to reflect on the war and whether we have learned anything from it.

Some 60,000 Americans were killed fighting in that war more than 8,000 miles away. More than a million Vietnamese military and civilians also lost their lives. The US government did not accept that it had pursued a bad policy in Vietnam until the bitter end. But in the end the war was lost and we went home, leaving the destruction of the war behind. For the many who survived on both sides, the war would continue to haunt them.

It was thought at the time that we had learned something from this lost war. The War Powers Resolution was passed in 1973 to prevent future Vietnams by limiting the president’s ability to take the country to war without the Constitutionally mandated Congressional declaration of war. But the law failed in its purpose and was actually used by the war party in Washington to make it easier to go to war without Congress.

Such legislative tricks are doomed to failure when the people still refuse to demand that elected officials follow the Constitution.

When President George H. W. Bush invaded Iraq in 1991, the warhawks celebrated what they considered the end of that post-Vietnam period where Americans were hesitant about being the policeman of the world. President Bush said famously at the time, “By God, we’ve kicked the Vietnam Syndrome once and for all.”

They may have beat the Vietnam Syndrome, but they learned nothing from Vietnam.

Colonel Harry Summers  returned to Vietnam in 1974 and told his Vietnamese counterpart Colonel Tsu, “You know, you never beat us on the battlefield.” The Vietnamese officer responded, “That may be so, but it is also irrelevant.”

He is absolutely correct: tactical victories mean nothing when pursuing a strategic mistake.

Last month was another anniversary. March 20, 2003, was the beginning of the second US war on Iraq. It was the night of “shock and awe” as bombs rained down on Iraqis. Like Vietnam, it was a war brought on by the US federal government’s lies and propaganda, amplified by a compliant media that repeated the lies without hesitation.

Like Vietnam, the 2003 Iraq war was a disaster. More than 5,000 Americans were killed in the war and as many as a million or more Iraqis lost their lives. There is nothing to show for the war but destruction, trillions of dollars down the drain, and the emergence of al-Qaeda and ISIS.

Sadly, unlike after the Vietnam fiasco there has been almost no backlash against the US empire. In fact, President Obama has continued the same failed policy and Congress doesn’t even attempt to reign him in. On the very anniversary of that disastrous 2003 invasion, President Obama announced that he was sending US Marines back into Iraq! And not a word from Congress.

We’ve seemingly learned nothing.

There have been too many war anniversaries! We want an end to all these pointless wars. It’s time we learn from these horrible mistakes.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.

Is Congress Declaring War on ISIS…or on You? – Article by Ron Paul

Is Congress Declaring War on ISIS…or on You? – Article by Ron Paul

The New Renaissance HatRon Paul
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Passage of Senator Mitch McConnell’s authorization for war against ISIS will not only lead to perpetual US wars across the globe, it will also endanger our civil and economic liberties. The measure allows the president to place troops anywhere he determines ISIS is operating. Therefore, it could be used to justify using military force against United States citizens on US territory. It may even be used to justify imposing martial law in America.

The President does not have to deploy the US military to turn America into a militarized police state, however. He can use his unlimited authority to expand programs that turn local police forces into adjuncts of the US military, and send them increasing amounts of military equipment. Using the threat of ISIS to justify increased police militarization will be enthusiastically supported by police unions, local officials, and, of course, politically-powerful defense contractors. The only opposition will come from citizens whose rights have been violated by a militarized police force that views the people as the enemy.

Even though there is no evidence that the federal government’s mass surveillance programs have prevented even a single terrorist attack, we are still continuously lectured about how we must sacrifice our liberty for security. The cries for the federal government to take more of our privacy will grow louder as the war party and its allies in the media continue to hype the threat of terrorism. A president armed with the authority to do whatever it takes to stop ISIS will no doubt heed these calls for new restrictions on our privacy.

Following last year’s mass shooting in California, President Obama called for restricting the Second Amendment rights of any American on the “terrorist watch list.” The president also used the attacks to expand the unconstitutional gun background check system via executive action. Can anyone doubt that President Obama — or a future anti-gun president — will use the absolute power to do whatever is necessary to stop terrorism as a justification for imposing new gun control measures? Using the war on ISIS to justify more gun control will be particularly attractive since even many pro-gun politicians will support gun control measures if they are marketed as part of the war on terror.

As the American economy faces continued stagnation, and as challenges to the dollar’s status as the world’s reserve currency mount, an increasingly authoritarian government will impose new restrictions on our economic activities and new limits on our financial privacy. In particular, our ability to move assets out of the country will be limited, and new reporting and other requirements will limit our ability to use cash without being treated as criminals or terrorists. Those who carry large amounts of cash will find themselves at increased risk of having the cash confiscated by police under civil asset forfeiture laws.

If Senator McConnell’s declaration of perpetual war passes, presidents could use the war on ISIS as a justification to impose new restrictions on our use of cash and our financial privacy via executive action. After all, they will say, the government needs to make sure cash is not being used to support ISIS.

The only way to protect both liberty and security is to stop trying to impose our will on other countries by military force. The resentment created by America’s militaristic foreign policy is ISIS’s most effective recruiting tool. Adopting a non-interventionist foreign policy that seeks peace and free trade with all would enable the government to counter legitimate threats to our safety without creating an authoritarian police state.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.

Congress is Writing the President a Blank Check for War – Article by Ron Paul

Congress is Writing the President a Blank Check for War – Article by Ron Paul

The New Renaissance HatRon Paul
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While the Washington snowstorm dominated news coverage this week, Senate Majority Leader Mitch McConnell was operating behind the scenes to rush through the Senate what may be the most massive transfer of power from the Legislative to the Executive branch in our history. The senior Senator from Kentucky is scheming, along with Sen. Lindsey Graham, to bypass normal Senate procedure to fast-track legislation to grant the president the authority to wage unlimited war for as long as he or his successors may wish.

The legislation makes the unconstitutional Iraq War authorization of 2002 look like a walk in the park. It will allow this president and future presidents to wage war against ISIS without restrictions on time, geographic scope, or the use of ground troops. It is a completely open-ended authorization for the president to use the military as he wishes for as long as he (or she) wishes. Even President Obama has expressed concern over how willing Congress is to hand him unlimited power to wage war.

President Obama has already far surpassed even his predecessor, George W. Bush, in taking the country to war without even the fig leaf of an authorization. In 2011 the president invaded Libya, overthrew its government, and oversaw the assassination of its leader, without even bothering to ask for Congressional approval. Instead of impeachment, which he deserved for the disastrous Libya invasion, Congress said nothing. House Republicans only managed to bring the subject up when they thought they might gain political points exploiting the killing of US Ambassador Chris Stevens in Benghazi.

It is becoming more clear that Washington plans to expand its war in the Middle East. Last week the media reported that the US military had taken over an air base in eastern Syria, and Defense Secretary Ashton Carter said that the US would send in the 101st Airborne Division to retake Mosul in Iraq and to attack ISIS headquarters in Raqqa, Syria. Then on Saturday, Vice President Joe Biden said that if the upcoming peace talks in Geneva are not successful, the US is prepared for a massive military intervention in Syria. Such an action would likely place the US military face to face with the Russian military, whose assistance was requested by the Syrian government. In contrast, we must remember that the US military is operating in Syria in violation of international law.

The prospects of such an escalation are not all that far-fetched. At the insistence of Saudi Arabia and with US backing, the representatives of the Syrian opposition at the Geneva peace talks will include members of the Army of Islam, which has fought with al-Qaeda in Syria. Does anyone expect these kinds of people to compromise? Isn’t al-Qaeda supposed to be our enemy?

The purpose of the Legislative branch of our government is to restrict the Executive branch’s power. The Founders understood that an all-powerful king who could wage war at will was the greatest threat to life, liberty, and the pursuit of happiness. That is why they created a people’s branch, the Congress, to prevent the emergence of an all-powerful autocrat to drag the country to endless war. Sadly, Congress is surrendering its power to declare war.

Let’s be clear: If Senate Majority Leader McConnell succeeds in passing this open-ended war authorization, the US Constitution will be all but a dead letter.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.

Save The Apologies, Just Stop Promoting War! – Article by Ron Paul

Save The Apologies, Just Stop Promoting War! – Article by Ron Paul

The New Renaissance HatRon Paul
November 2, 2015
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Usually when politicians apologize it’s because they have been caught doing something wrong, or they are about to be caught. Such was likely the case with former British Prime Minister Tony Blair, who recently offered an “apology” for the 2003 invasion of Iraq. Blair faces the release of a potentially damning report on his government’s conduct in the run-up to the 2003 US/UK invasion of Iraq.

Similarly, a batch of emails released from the private server of former Secretary of State Hillary Clinton show Blair pledging support for US military action against Iraq a full year before the decision to attack had supposedly been made. While Prime Minister Blair was assuring his constituents that he was dedicated to diplomacy in the Iraq crisis, he was communicating through back channels that he was ready for war whenever Bush decided on it.

A careful observer of public opinion, Blair took the surprising step of “apologizing” for the Iraq war during an interview on CNN last month.

However, there are two other characteristics of politicians’ apologies: they rarely take personal blame for a misdeed and rarely do they atone for those misdeeds.

Thus Tony Blair did not apologize for his role in pushing the disastrous Iraq war. He did not apologize for having, as former head UN Iraq inspector Hans Blix claimed, “misrepresented intelligence on weapons of mass destruction to gain approval for the Iraq War.”

No, Tony Blair “apologized” for “the fact that the intelligence we received was wrong,” on Iraq. He apologized for “mistakes in planning” for post-Saddam Iraq. He boldly refused to apologize for removing Saddam from power.

In other words, he apologized that the intelligence manipulated by his cronies to look like Saddam had weapons of mass destruction and posed a threat to the UK turned out to not be the case. For Blair, it was someone else’s fault.

But if we are waiting for any kind of apology from George W. Bush for Iraq, we shouldn’t hold our breath. Likewise if we are looking for any kind of apology from President Obama for a similarly disastrous war on false pretext against Libya, we shouldn’t bother waiting.

If they ever did apologize, we can be sure that like Blair they would never really confess to their own manipulations nor would they seek to atone for the destruction their manipulations caused.

In fact, far from apologizing for leading the United States into the Libya war based on a false pretext, President Obama is taking US ground troops into Syria on a false pretext. Let’s not forget, this US military action was sold as a limited operation to save a small religious minority stranded on a hilltop in northern Iraq. After one year and thousands of bombing runs against Iraq and Syria, Obama announced last week he is sending US ground troops into Syria after promising no fewer than seven times that he would not do so.

Here’s an idea: instead of apologies and non-apologies from politicians, how about an actual debate on the policies that led to such disasters? Why not discuss why the US keeps being drawn into wars on false pretexts? But that is a discussion we will not have, because both parties are in favor of these wars. They are ready to spend us into Third World status to continue their empire. When we get there, we will never hear their apologies.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.

House Benghazi Hearings: Too Much, Too Late – Article by Ron Paul

House Benghazi Hearings: Too Much, Too Late – Article by Ron Paul

The New Renaissance HatRon Paul
October 26, 2015
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Last week the US House of Representatives called former Secretary of State Hillary Clinton to appear before a select committee looking into the attack on a US facility in Benghazi, Libya, in 2012. The attack left four Americans dead, including US Ambassador to Libya, Chris Stevens.

As might be expected, however, the “Benghazi Committee” hearings have proven not much more than a means for each party to grandstand for political points.

In fact, I would call these Congressional hearings “too much, too late.”

Four years after the US-led overthrow of the Libyan government – which left the country a wasteland controlled by competing Islamist gangs and militias – the committee wants to know whether Hillary Clinton had enough guards at the facility in Benghazi on the night of the attack? The most important thing to look into about Libya is Hillary Clinton’s e-mails or management style while Secretary of State?

Why no House Committee hearing before President Obama launched his war on Libya? Why no vote on whether to authorize the use of force? Why no hearing after the President violated the Constitution by sending the military into Libya with UN authorization rather than Congressional authorization? There are Constitutional tools available to Congress when a president takes the country to war without a declaration or authorization. At the time, President Obama claimed he did not need authorization from Congress because the US was not engaged in “hostilities.” It didn’t pass the laugh test, but Congress did next to nothing about it.

When the Obama Administration decided to attack Libya, I joined Rep. Dennis Kucinich and others in attempt to force a vote on the president’s war. I introduced my own legislation warning the administration that, “the President is required to obtain in advance specific statutory authorization for the use of United States Armed Forces in response to civil unrest in Libya.”

We even initiated a lawsuit in the US District Court for the District of Columbia asking the courts to rule on whether the president broke the law in attacking Libya.

Unfortunately we got nowhere with our efforts. When it looked like we had the votes to pass a resolution introduced by Rep. Kucinich to invoke War Powers Resolution requirements on the president for the use of force in Libya, Speaker Boehner cancelled the vote.

Why were there no hearings at the time to discuss this very important Constitutional matter? Because the leadership of both parties wanted the war. Both parties — with few exceptions — agree with the ideology of US interventionism worldwide.

Secretary Clinton defended the State Department’s handling of security at the Benghazi facility by pointing out that there are plenty of diplomatic posts in war zones and that danger in these circumstances is to be expected. However she never mentioned why Benghazi remained a “war zone” a year after the US had “liberated” Libya from Gaddafi.

Why was Libya still a war zone? Because the US intervention left Libya in far worse shape than it was under Gaddafi. We don’t need to endorse Gaddafi to recognize that today’s Libya, controlled by al-Qaeda and ISIS militias, is far worse off – and more of a threat to the US – than it was before the bombs started falling.

The problem is the ideology of interventionism, not the management of a particular intervention. Interventionism has a terrible track record, from 1953 in Iran, to Vietnam, to 2003 in Iraq, to 2011 in Libya and Syria. A real Congressional hearing should focus on the crimes and mistakes of the interventionists!

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.

Politicians Exploit School Shooting While Ignoring Bombing Victims – Article by Ron Paul

Politicians Exploit School Shooting While Ignoring Bombing Victims – Article by Ron Paul

The New Renaissance HatRon Paul
October 14, 2015
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Following the recent Oregon school shooting, many politicians rushed to the microphones to call for new gun-control laws. President Obama even called on gun-control supporters to “politicize” the shooting, while some members of Congress worked to establish a special commission on gun violence.

The reaction to the shooting stands in stark contrast to the reaction to the US military’s bombing of an Afghanistan hospital run by the international humanitarian (and Nobel Peace Prize winning) group Doctors Without Borders.

Our Nobel Peace Prize winning president did apologize to his fellow Nobel laureate for the bombing. However, President Obama has not “politicized” this tragedy by using it to justify ending military involvement in Afghanistan. No one in Congress is pushing for a special commission to examine the human costs of US militarism, and the mainstream media has largely ignored Doctors Without Borders’ accusation that the bombing constitutes a war crime.

The reason for the different reactions to these two events is that politicians prefer to focus on events they can “politicize” to increase the federal government’s power. In contrast, politicians ignore incidents that raise uncomfortable questions about US foreign policy.

If the political and media elites were really interested in preventing future mass shootings, they would repeal the federal “gun-free” schools law, for example. By letting shooters know that their intended victims are defenseless, the gun-free schools law turns schoolchildren into easy targets.

Even some who oppose gun control are using the shooting to justify expanding federal power instead of trying to repeal unconstitutional laws. Some opponents of new gun control laws say Congress should expand the federal role in identifying, tracking, and treating those with “mental health problems.” This ignores the fact that many shooters were using psychotropic drugs prescribed by a mental health professional when they committed the horrible acts. Furthermore, creating a system to identify and track anyone with a “mental health problem” could deny respect for individuals’ Second Amendment and other rights because they perhaps once sought counseling for depression while going through a divorce or coping with a loved one’s passing.

While our political and media elites are eager to debate how much liberty people must sacrifice for safety, they are desperate to avoid debating the morality of our foreign policy. To admit that the US military sometimes commits immoral acts is to admit that the US government is not an unalloyed force for good. Even many proponents of our recent wars support using the US military for “humanitarian” purposes. Thus they are as reluctant as the neoconservatives to question the fundamental goodness of US foreign policy.

Anyone who raises constitutional or moral objections to the US use of drones, bombs, indefinite detention, and torture risks being attacked as anti-American and soft on terrorism. The smear of “terrorist apologist” is also hurled at those who dare suggest that it is our interventionist foreign policy, not a hatred of freedom, that causes people in other countries to dislike the United States. Which is a more logical explanation for why someone would resent America — a family member killed in a drone attack launched by the US military or rage over our abundance of liberty?

The disparate reactions to the Oregon school shooting and the Afghanistan hospital bombing shows the political class is unwilling and unable to acknowledge that the US government cannot run the world, run our lives, or run the economy. Clearly, politicians will never stop expanding the federal government and give us back our lost liberties unless and until the people demand it.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.

Blame America? No, Blame Neocons! – Article by Ron Paul

Blame America? No, Blame Neocons! – Article by Ron Paul

The New Renaissance HatRon Paul
September 21, 2015
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Is the current refugee crisis gripping the European Union “all America’s fault”? That is how my critique of US foreign policy was characterized in a recent interview on the Fox Business Channel. I do not blame the host for making this claim, but I think it is important to clarify the point.

It has become common to discount any criticism of US foreign policy as “blaming America first.” It is a convenient way of avoiding a real discussion. If aggressive US policy in the Middle East – for example in Iraq – results in the creation of terrorist organizations like al-Qaeda in Iraq, is pointing out the unintended consequences of bad policy blaming America? Is it “blaming America” to point out that blowback – like we saw on 9/11 – can be the result of unwise US foreign policy actions like stationing US troops in Saudi Arabia?

In the Fox interview I pointed out that the current refugee crisis is largely caused by bad US foreign policy actions. The US government decides on regime change for a particular country – in this case, Syria – destabilizes the government, causes social chaos, and destroys the economy, and we are supposed to be surprised that so many people are desperate to leave? Is pointing this out blaming America, or is it blaming that part of the US government that makes such foolish policies?

Accusing those who criticize US foreign policy of “blaming America” is pretty selective, however. Such accusations are never leveled at those who criticize a US pullback. For example, most neocons argue that the current crisis in Iraq is all Obama’s fault for pulling US troops out of the country. Are they “blaming America first” for the mess? No one ever says that. Just like they never explain why the troops were removed from Iraq: the US demanded complete immunity for troops and contractors and the Iraqi government refused.

Iraq was not a stable country when the US withdrew its troops anyway. As soon as the US stopped paying the Sunnis not to attack the Iraqi government, they started attacking the Iraqi government. Why? Because the US attack on Iraq led to a government that was closely allied to Iran and the Sunnis could not live with that! It was not the US withdrawal from Iraq that created the current instability, but the invasion. The same is true with US regime-change policy toward Syria. How many Syrians were streaming out of Syria before US support for Islamist rebels there made the country unlivable? Is pointing out this consequence of bad US policy also blaming America first?

Last year I was asked by another Fox program whether I was not “blaming America” when I criticized the increasingly confrontational US stand toward Russia. Here’s how I put it then:

I don’t blame America. I am America, you are America. I don’t blame you. I blame bad policy. I blame the interventionists. I blame the neoconservatives who preach this stuff, who believe in it like a religion — that they have to promote American goodness even if you have to bomb and kill people.

In short, I don’t blame America; I blame neocons.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.

New Military Spending Bill Expands Empire But Forbids Debate on War – Article by Ron Paul

New Military Spending Bill Expands Empire But Forbids Debate on War – Article by Ron Paul

The New Renaissance Hat
Ron Paul
May 18, 2015
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On Friday the House passed a massive National Defense Authorization for 2016 that will guarantee US involvement in more wars and overseas interventions for years to come. The Republican majority resorted to trickery to evade the meager spending limitations imposed by the 2011 budget control act – limitations that did not, as often reported, cut military spending but only slowed its growth.

But not even slower growth is enough when you have an empire to maintain worldwide, so the House majority slipped into the military spending bill an extra $89 billion for an emergency war fund. Such “emergency” spending is not addressed in the growth caps placed on the military under the 2011 budget control act. It is a loophole filled by Congress with Fed-printed money.

Ironically, a good deal of this “emergency” money will go to President Obama’s war on ISIS even though neither the House nor the Senate has debated – let alone authorized – that war! Although House leadership allowed 135 amendments to the defense bill – with many on minor issues like regulations on fire hoses – an effort by a small group of Representatives to introduce an amendment to debate the current US war in Iraq and Syria was rejected.

While squashing debate on ongoing but unauthorized wars, the bill also pushed the administration toward new conflicts. Despite the president’s unwise decision to send hundreds of US military trainers to Ukraine, a move that threatens the current shaky ceasefire, Congress wants even more US involvement in Ukraine’s internal affairs. The military spending bill included $300 million to directly arm the Ukrainian government even as Ukrainian leaders threaten to again attack the breakaway regions in the east. Does Congress really think US-supplied weapons killing ethnic Russians in eastern Ukraine is a good idea?

The defense authorization bill also seeks to send yet more weapons into Iraq. This time the House wants to send weapons directly to the Kurds in northern Iraq without the approval of the Iraqi government. Although these weapons are supposed to be used to fight ISIS, we know from too many prior examples that they often find their way into the hands of the very people we are fighting. Also, arming an ethnic group seeking to break away from Baghdad and form a new state is an unwise infringement of the sovereignty of Iraq. It is one thing to endorse the idea of secession as a way to reduce the possibility of violence, but it is quite something else to arm one side and implicitly back its demands.

While the neocons keep pushing the lie that the military budget is shrinking under the Obama Administration, the opposite is true. As the CATO Institute pointed out recently, President George W. Bush’s average defense budget was $601 billion, while during the Obama administration the average has been $687 billion. This bill is just another example of this unhealthy trend.

Next year’s military spending plan keeps the US on track toward destruction of its economy at home while provoking new resentment over US interventionism overseas. It is a recipe for disaster. Let’s hope for either a presidential veto, or that on final passage Congress rejects this bad bill.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.

The Other Half of the Inflation Story: Credit Expansion Adds Noise to Price Signals – Article by Sanford Ikeda

The Other Half of the Inflation Story: Credit Expansion Adds Noise to Price Signals – Article by Sanford Ikeda

The New Renaissance Hat
Sanford Ikeda
May 7, 2015
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More money means higher prices. It’s too bad not everyone understands that connection. Even some economists don’t get it. Readers of the Freeman do, I’m sure. And they also understand why that’s a bad thing.

Increasing the supply of money and credit, other things equal, will cause a general rise in wages and prices across an economy. When the Federal Reserve, the central bank of the United States, excessively “prints money,” the result is “inflation” as it’s now commonly called. For those who get the new money after everyone else has spent theirs, inflation means incomes will now buy fewer goods, and every dollar lent before prices rose will be worth less when it’s returned.

If inflation continues, people will eventually learn to demand more for what they sell and lend in order to compensate for the purchasing power that inflation keeps eating away. That, in turn, will cause prices to rise faster, which makes planning for households and businesses even more difficult. In the past, that difficulty has led to hyperinflation and a breakdown of the entire economic system.

But as awful as all this may be, it’s really only half the story, and perhaps not even the worse half. What follows is a highly simplified story of what happens.

The structure of production

If you’d like to build a sturdy house, you’ll need to have some kind of blueprint or plan that will tell you two things:

  1. how the frame, floor, walls, roof, plumbing, and electrical system will all fit together; and
  2. the order in which to put these components together.

Even if the house was made entirely of identical stones, you would need to know how to fit them together to form the floor, walls, chimney, and other structural components. No two stones would serve exactly the same function in the overall plan.

The economy is like a house in the sense that each of its parts, which we might call “capital,” needs to mesh in a certain way if the eventual result will be order and not chaos. But there are two big differences between a house and an economy. The first is that the economy is not only much bigger, but it consists of a multitude of “houses” or private enterprises that have to fit together or coordinate, and so it’s an unimaginably more complex phenomenon than even the most elaborate house.

The second major difference is that a house is consciously constructed for a purpose, typically for someone to live in it. But an economic system is neither consciously designed by anyone nor intended to fulfill any particular purpose, other than perhaps to enable countless people with plans to do the best they can to achieve success. It’s a spontaneous order.

The way all the pieces of capital, from all the diverse people in the economy who own them, fit together is called the capital structure of production.

Credit expansion distorts the structure of production

When people decide to spend a certain portion of their incomes on consumption today, they are at the same time deciding to save some portion for consumption for the future. The amount that they save then gets lent out to borrowers and investors in the market for loanable funds. The rate of interest is the price of making those transactions across time. That is, when you decide to increase your saving, other things equal, the rate of interest (what some economists call the “natural rate of interest”) will fall. The falling interest rate makes borrowing more attractive to producers who invest today to produce more goods in the future.

That’s great, because when the market for loanable funds is operating freely without distortions, that means when people who saved today try to consume more in the future, there actually is more in the future for them to consume . Businesses today invested more at the lower rates precisely in order to have more to sell in the future when consumers want to buy more.

Now, if the Federal Reserve prints more money and that money goes into the loanable funds market, that will also increase the supply of loans and lower the interest rate and induce more borrowing and investment for future output. The difference here is that the supply of loans increases not because people are saving more now in order to consume more in the future, but only because of the credit expansion. That means that in the future, when businesses have more goods to sell, consumers won’t be able to buy them (because they didn’t save enough to do so) at prices that will cover all of the businesses’ costs. Prices will have to drop in order for markets to clear. Sellers suffer losses and workers lose their jobs.

And, oh yes, all that credit expansion also causes inflation.

While this process sounds rather involved, it’s still a highly simplified version of what has come to be known as the Austrian business cycle theory. (For a more advanced version, see here.) Of course, each instance in reality is significantly different from any other, but the narrative is essentially the same: credit expansion distorts the structure of production, and resources eventually become unemployed.

The explanation is more involved than the typical inflation-is-bad story that we’re more familiar with. Indeed, that probably explains why it’s the less-well-known half of the story. Even Milton Friedman and the monetarists pay little attention to the capital structure, choosing instead to focus on the problems of inflationary expectations.

Again, for Austrians, the problem arises when credit expansion artificially lowers interest rates and sets off an unsustainable “boom”; the solution is when the structure of production comes back into alignment with people’s actual preferences for consumption and saving, which is the “bust.” Most modern macroeconomists see it exactly the opposite way: the bust is the problem, and the boom is the solution.

An intricate, dynamic jigsaw puzzle

To close, I’d like to use an analogy I learned from Steve Horwitz (whom I heartily welcome back as a fellow columnist here at the Freeman).

The market economy is like a giant jigsaw puzzle in which each piece represents a unique unit of capital. When the system is allowed to operate without government intervention, the profit-and-loss motive tends to bring the pieces together in a complementary way to form a harmonious mosaic (although in a dynamic world, it couldn’t achieve perfection).

Credit expansion, then, is like someone coming along and making too many of some pieces and too few of others — and then, during the boom, trying to force them together, severely distorting the overall picture. During the bust, people realize they have to get rid of some pieces and try to discover where the others actually fit. That requires challenging adjustments and may take some time to accomplish. But if the government tries to “help” by stimulating the creation of more superfluous pieces, it will only confuse matters and make the process of adjustment take that much longer.

Inflation is bad enough. Unfortunately, it’s only half the story.

Sanford Ikeda is a professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism.

This article was originally published by The Foundation for Economic Education.

Political Murders in Kiev, US Troops to Ukraine – Article by Ron Paul

Political Murders in Kiev, US Troops to Ukraine – Article by Ron Paul

The New Renaissance Hat
Ron Paul
April 22, 2015
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Last week two prominent Ukrainian opposition figures were gunned down in broad daylight. They join as many as ten others who have been killed or committed suicide under suspicious circumstances just this year. These individuals have one important thing in common: they were either part of or friendly with the Yanukovych government, which a US-backed coup overthrew last year. They include members of the Ukrainian parliament and former chief editors of major opposition newspapers.While some journalists here in the US have started to notice the strange series of opposition killings in Ukraine, the US government has yet to say a word.Compare this to the US reaction when a single opposition figure was killed in Russia earlier this year. Boris Nemtsov was a member of a minor political party that was not even represented in the Russian parliament. Nevertheless the US government immediately demanded that Russia conduct a thorough investigation of his murder, suggesting the killers had a political motive.As news of the Russian killing broke, Chairman of the House Foreign Affairs Committee Ed Royce (R-CA) did not wait for evidence to blame the killing on Russian president Vladimir Putin. On the very day of Nemtsov’s murder, Royce told the US media that, “this shocking murder is the latest assault on those who dare to oppose the Putin regime.”Neither Royce, nor Secretary of State John Kerry, nor President Obama, nor any US government figure has said a word about the series of apparently political murders in Ukraine.

On the contrary, instead of questioning the state of democracy in what looks like a lawless Ukraine, the Administration is sending in the US military to help train Ukrainian troops!

Last week, just as the two political murders were taking place, the US 173rd Airborne Brigade landed in Ukraine to begin training Ukrainian national guard forces – and to leave behind some useful military equipment. Though the civil unrest continues in Ukraine, the US military is assisting one side in the conflict – even as the US slaps sanctions on Russia over accusations it is helping out the other side!

As the ceasefire continues to hold, though shakily, what kind of message does it send to the US-backed government in Kiev to have US troops arrive with training and equipment and an authorization to gift Kiev with some $350 million in weapons? Might they not take this as a green light to begin new hostilities against the breakaway regions in the east?

The Obama administration is so inconsistent in its foreign policy. In some places, particularly Cuba and Iran, the administration is pursuing a policy that looks to diplomacy and compromise to help improve decades of bad relations. In these two cases the administration realizes that the path of confrontation has led nowhere. When the president announced his desire to see the end of Cuba sanctions, he stated very correctly that, “…we are ending a policy that was long past its expiration date. When what you’re doing doesn’t work for fifty years, it’s time to try something new.”

So while Obama is correctly talking about sanctions relief for Iran and Cuba, he is adding more sanctions on Russia, backing Saudi Arabia’s brutal attack on Yemen, and pushing ever harder for regime change in Syria. Does he really believe the rest of the world does not see these double standards? A wise consistency of non-interventionism in all foreign affairs would be the correct course for this and future US administrations. Let us hope they will eventually follow Obama’s observation that, “it’s time to try something new.”

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.