Ron Paul's Libertarian Lesson for John McCain

Weak Dollar = High Gas Prices

The Bush administration is overlooking the fundamental reason as to why gas is so expensive: a weak dollar.

Europeans have not been hit as hard by the aggregate oil demand shock since their currency has held its value better than the greenback.

Of course, the Federal Reserve is to blame for pushing down the dollar's value by lowering interest rates, injecting massive liquidity by flooding the market with dollars (i.e. Term Auction Facility & Term Securities Lending Facility). This causes foreign investors to flee dollar denominated asset classes (i.e. stocks, bonds, mutual funds) and go into something they judge to be more stable (i.e. foreign stock market indexes and commodities, such as oil, wheat, soybeans, corn, etc.).

The Fed is pursuing this policy because they are trying to keep major investment banks afloat (Bear Sterns, Goldman Sachs, Lehman Brothers, JP Morgan et al) due to these investment banks holding risky Structured Investment Vehicles (SIVs) or Mortgage Backed Securites (MBAs) whose valuations are over priced. The creditors to these investment banks are worried and are demanding payment and these banks are facing a liquidity crunch because they don't want to liquidate assets at fire-sale prices in a depressed market.

Essentially, what the Fed is doing to prop up Wall Street investment banks is hurting all American consumers by weakening the dollar.

Dr. Paul is right on the money. The price of oil, which has been subject to massive government price distortion, has remained steady when denominated in gold.

Jake in Salt Lake of UT @ May 19, 2008 13:31:21 PM

Rep. Paul's book

Regarding: "Ron Paul should give a series of lectures..."

I believe his book (which I haven't read yet) lays out his philosophy. I was very (pleasantly) surprised to see it on the New York Time's bestseller list.

Gavin Andresen of MA @ May 19, 2008 13:28:59 PM

No Doubt

I'm a liberal democrat, and, I would like to say that people like Ron Paul and Denice Kucinich are REAL PATRIOTS.

Why these men are silenced, I too greatly fear for our country.

Bob of CA @ May 19, 2008 13:26:08 PM

Ron Paul did not drop out

Just because you have not seen him on TV does not mean he has dropped out. Check out his site for the facts.

cdm of SC @ May 19, 2008 13:22:01 PM

Ron Paul is in the Race

Ron Paul has not dropped out of the race.

Liberty of CA @ May 19, 2008 13:17:42 PM

Ron Paul

I truly thought our only hope was for the election of Ron Paul. What a shame he dropped out.

I greatly fear for our country.

Beverly Brenner of TN @ May 19, 2008 13:07:04 PM

Education

Ron Paul should give a series of lectures on economics, history, foreign policy, the constitution, and even philosophy.

McCain, along with all Republicans and Democrats would do well to attend.

"The freedom message brings us together." - Ron Paul

Chad of CA @ May 19, 2008 12:55:41 PM

Education

Ron Paul should give a series of educational lectures on economics, history, foreign policy, the constitution, and even philosophy.

John McCain, along with most of the establishment Republicans AND Democrats would do well to attend and take notes.

With all the uproar about the Republicans falling apart...people should really think about and understand Dr. Paul when he says, "The freedom message brings us together, it doesn't divide us."

Chad of CA @ May 19, 2008 12:51:11 PM