Ron Paul's Statement on the Housing Bubble

Here is presidential-hopeful Ron Paul explaining that the Fed's intervention in the economy is ultimately responsible for the housing bubble, not capitalism, not supply-and-demand, and not (directly anyway) lenders.

But capitalism is not to blame for the housing bubble, the Federal Reserve is. Specifically, Fed intervention in the economy-- through the manipulation of interest rates and the creation of money-- caused the artificial boom in mortgage lending.

The Fed has roughly tripled the amount of dollars and credit in circulation just since 1990. Housing prices have risen dramatically not because of simple supply and demand, but because the Fed literally created demand by making the cost of borrowing money artificially cheap. When credit is cheap, individuals tend to borrow too much and spend recklessly.

This is not to say that all banks, lenders, and Wall Street firms are blameless. Many of them are politically connected, and benefited directly from the Fed’s easy money policies. And some lenders did make fraudulent or unethical loans. But every cent they loaned was first created by the Fed.

The Federal Reserve provides the mother’s milk for the booms and busts wrongly associated with a mythical “business cycle.” ...Unless and until we get the Federal Reserve out of the business of creating money at will and setting interest rates, we will remain vulnerable to market bubbles and painful corrections. If housing prices plummet and millions of Americans find themselves owing more than their homes are worth, the blame lies squarely with Alan Greenspan and Ben Bernanke.

Nothing new here. But I have been glad that at least one potential candidate hasn't been afraid to deal with the truth and say it like it is. Of course, that probably means he won't win; but he has my vote anyway.