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be reason to stop and think about this, but we do not look at that particular article too often any more. Also for moral reasons, I object to this. Even if we accepted the idea that we should interfere and be involved in this type of activ- ity, it is unfair because the little guy gets squeezed and the big guy gets all of the money. It is not morally fair because it cannot be. One thing that annoys me the most is when Members come to the floor and in the name of free trade say we have to support the Export-Import Bank. This is the opposite of free trade. Free trade is good. Low tariffs are good, which lead to lower prices; but subsidies to our competitors is not free trade. We should call it for what it is. We have Members who claim they are free traders, and yet support managed trade through NAFTA and WTO and all these special interest management schemes, as well as competitive devaluation of currencies with the notion that we might increase exports. This has nothing to do with free trade. I am a strong advocate for free trade, and for that reason I think this bill should not be passed. There are good economic reasons not to support this. Because some who favor this bill argue that some of these companies are doing risky things and they do not qualify in the ordinary banking system for these loans and, therefore, they need a little bit of help. That is precisely when we should not be helping. If there is a risk, it is telling us there is something wrong and we should not do it. It is transferring the lia- bility from the company to the taxpayer. So the risk argument does not hold water at all. The other reason why economically it is unsound, is that this is a form of credit allocation. If a bank has money and they can get a guarantee from the Export-Import Bank, they will always choose the guarantee over the nonguarantee, so who gets squeezed? The funds are taken out of the investment pool. The lit- tle people get squeezed. They do not get the loan, but they are totally unknown. Nobody sees those who did not get a loan. All we see is the loan that benefits somebody on the short run. But really in the long run, it benefits the big corporations. Many times it doesn’t even do that. Take a look at Enron. We have mentioned Enron quite a few times already. If we add up all of the subsidies to Enron, it adds up 326 Pillars of Prosperity to $1.9 billion. That is if we add up the subsidies from OPIC as well. And look at what Enron did. They ran a few risks, and then they lost it. Who was left holding the bag? The taxpayers. Madam Speaker, I strongly urge a no vote on this bill. If Mem- bers are for free trade, they will vote against this bill, and will vote for true free trade.  Don’t Antagonize Our Trading Partners Congressional Record—U.S. House of Representatives April 1, 2003 Madam Speaker, this week we will be working on the $75 bil- lion supplemental appropriation to pay for the war. Financing the war is not as simple as it appears. It involves more than just pass- ing a piece of legislation labeled as support for the troops. It has now been fashionable to bash France and Germany and other friends if they are less enthusiastic for the war than we think they should be. Yet foreign corporations provide millions of jobs for American citizens. French companies alone employ over 400,000. There is a practical reason why offending the French and others may backfire on us. In 2002 we earned $11.9 billion less from our investments over- seas than foreigners did here. This is not a sign of financial strength. A negative balance on the income account contributes to the $500 billion annual current account deficit. Since 1985 when we became a deficit nation, we have acquired a foreign debt of approximately $2.8 trillion, the world’s largest. No nation can long sustain a debt that continues to expand at a rate greater than 5 per- cent of the GDP. This means we borrowed more than $1.4 billion every day to keep the borrowing binge going. This only can be maintained until foreigners get tired of taking and holding our dollars and buying our debt. Bashing the French and others will Free Trade: Real versus Phony 327 only hasten the day that sets off the train of economic events that will please no one. In thinking about providing funds for the war and overall mil- itary expenditures, not only must every dollar be borrowed from overseas, but an additional $150 billion each year as well. The cur- rent account deficit is now 44 percent greater than the military budget and represents the amount we must borrow to balance the accounts. The bottom line is that our international financial condi- tion is dire and being made worse by current international events. It is true that military might gives a boost to a nation’s currency; but this is not permanent if fiscal and monetary policies are abused. Currently, our budget deficits are exploding, as there is no restraint on spending. No one can guarantee permanent military superiority. The dollar has already significantly weakened this past year, and this trend will surely continue. A weaker dollar requires that we pay more for everything we buy overseas. Foreign borrowing will eventually become more difficult, and this will in time cause interest rates to rise. Be assured that domestic price inflation will accelerate. Economic law dictates that these events will cause the recession to linger and deepen. My humble advice, consider being nicer to our friends and allies. We need them more than we can imagine to finance our war efforts. There is more to it than passing the supplemental appro- priation. Besides, we need time to get our financial house in order. Antagonizing our trading partners can only make that task that much more complicated. The day will come when true monetary reform will be required. Printing money to finance war and welfare can never be a panacea.  328 Pillars of Prosperity The United States Trade Rights Enforcement Act Congressional Record—U.S. House of Representatives July 26, 2005 Mr. Speaker, I rise in strong opposition to this legislation. Isn’t it ironic that the proponents of “free trade agreements” like CAFTA are lining up squarely behind a bill like this that threatens a trade war with China, and at the least calls for the United States to initiate protectionist measures such as punitive tariffs against “subsidized” sectors of the Chinese economy? In reality, this bill, which appeared out of the blue on the House floor as a suspension bill, is part of a deal made with several Members in return for a few votes on CAFTA. That is why it is ironic: to get to “free trade” with Central America we first need to pass protectionist legislation regarding China. Mr. Speaker, in addition to the irony of the protectionist flavor of this bill, let me say that we should be careful what we demand of the Chinese government. Take the demand that the government “revalue” its currency, for example. First, there is sufficient prece- dent to suggest that doing this would have very little effect on China’s trade surplus with the United States. As Barron’s magazine pointed out recently, “the Japanese yen’s value has more than tripled since the breakdown of the Bretton Woods system, yet Japan’s trade surplus remains huge. Why should the unpegging of the Chinese yuan have any greater impact?” As was pointed out in the Wall Street Journal recently, with the yuan tied to several foreign currencies and the value of the dollar dropping, China could be less inclined to purchase dollars as a way of keeping the yuan down. Fewer Treasury bond purchases by China, in turn, would drive bond prices down and boost yields—which, subsequently, would cause borrowing costs for residential and some corporate customers to increase. Does any- one want to guess what a sudden burst of the real estate bubble Free Trade: Real versus Phony 329 might mean for the shaky U.S. economy? This is not an argument for the status quo, however, but rather an observation that there are often unforeseen consequences when we demand that foreign gov- ernments manipulate their currency to U.S. “advantage.” At the very least, American consumers will immediately feel the strengthening of the yuan in the form of higher U.S. retail prices. This will disproportionately affect Americans of lower incomes and, as a consequence, slow the economy and increase the hardship of those struggling to get by. Is this why our constituents have sent us here? In conclusion, I strongly oppose this ill-considered and poten- tially destructive bill, and I hope my colleagues will join me in rejecting it.  330 Pillars of Prosperity International Affairs In these selections I discuss U.S. economic relations with other countries, outside the narrow context of trade policies. History shows that the most productive and peaceful behavior would be to mind our own business, not giving taxpayer money to regimes we like or imposing punitive sanctions on those we dislike. I believe the U.S. should withdraw from organiza- tions such as the IMF, World Bank, and United Nations, as they uncon- stitutionally delegate U.S. sovereignty to international bodies, which are unaccountable to the American people. PART SEVEN Dissenting Views on H.R. 7244 Congressional Record—U.S. House of Representatives May 15, 1980 Mr. Speaker, once again your committee has recommended pouring billions of tax dollars down an international rat hole, bringing to approximately $16.5 billion the total amount of wealth we have taken from the American people and given to the Inter- national Monetary Fund. The approximately $5.5 billion increase in our quota is the largest single increase in history, and it occurs at a most dangerous point in the history of the international mon- etary system. Bailing Out the Banks In his appearances before the Senate and House Banking Com- mittees on this bill, Federal Reserve Governor Henry C. Wallich had some disturbing things to say about the purposes of this mas- sive increase in our quota. Many of these statements are allusions to the desperate condition that seems to exist and be worsening in repayments of loans by developing countries to large American, Japanese, and European banks. 1. In an environment of increased international financial strains and of increased sensitivity of the U.S. economy to developments abroad, the United States also benefits indirectly from the IMF’s efforts to allevi- ate such strains. In many instances, without temporary financial assistance from the IMF, countries would be 333 forced to take severe adjustment actions that could have a disruptive effect on the international economy. 2. The strengthening of the financial position of the Fund resulting from the increase in Fund quotas is an essential element in preparing for the strains that may well develop on the international financial system in the next year or two. 3. Given the expected increases in demands for bal- ance of payments financing, as well as the large exter- nal indebtedness that many countries already have with commercial banks, the IMF should be in a position to meet a larger proportion of the immediate financing needs of its members in the coming years than it has assumed recently. A strengthening of the Fund’s finan- cial position by an increase in members’ quotas would increase the likelihood that more countries would come under the Fund’s conditional lending umbrella. 4. The letter from the chairman of the subcommit- tee inviting the Board to testify has accurately pointed to the dilemma facing the international financial sys- tem: a high level of lending by banks to developing countries could lead to excessive risk concentrations at banks. 5. Between the end of 1974 and the end of 1979, out- standing claims of banks from all countries on non-oil developing countries increased on average about $20 billion per year. 6. The rapid expansion in lending by foreign banks has caused some concern among foreign regulatory authorities. The German and British authorities have begun to require banks in those countries to maintain detailed records on a consolidated basis including, as a minimum, lending by their head offices and foreign branches. Since last fall, Japanese banks have been con- strained by a request from the Ministry of Finance to limit their international lending. 334 Pillars of Prosperity 7. Weighing all these factors is indeed complex, but, on balance, I would conclude that the general risks are somewhat greater in 1980 and 1981 than in 1974 and 1975. The situation clearly varies greatly from country to country. Recent history has taught us that the posi- tions of some countries can improve dramatically in a short period of time. Unfortunately, in other cases, the external situation has deteriorated rapidly over time, either as a consequence of financial mismanagement or because of external (and sometimes internal) events over which the country has little control. These warnings and allusions to impending crises cast some light on the perceived necessity for this massive infusion of Amer- ican tax dollars into the IMF. The money will apparently be needed to bail out some banks that have made risky loans to the socialist governments of developing countries. Worldwide Inflation Ever since World War II, the IMF has permitted and encour- aged worldwide inflation. This has been done through providing reserves to facilitate international payment problems. One of the reasons given for passage of this bill is that it will enable the IMF to handle the large imbalances of payments that now exist and are expected to persist into the foreseeable future. The developing nations, like the developed nations, have to face reality. There is no free lunch. An increase of international liquidity merely serves as another source of price inflation. It is true that recipient nations can buy goods and services in the international markets at yester- day’s prices, thereby gaining in relationship to those who have not yet gained access to the fiat money, but this only can be paid for by those who must restrict their purchases in the face of higher prices. By creating added liquidity, the IMF can indeed redistribute wealth, but it cannot create new wealth. The net trade imbalances of the nations that import more than they export can be met by gifts of new liquidity of IMF reserves, at least for as long as such reserves are honored by the producing nations. But this is simply a giveaway program. International Affairs 335 [...]...336 Pillars of Prosperity In effect, it steals resources from one group of citizens and gives them to another group The transfer of resources from one nation to another makes the IMF just one more foreign aid bureaucracy The wealth of middleclass citizens of the nations of the West will wind up subsidizing the grossly inefficient programs of the elitist, socialist, envious,... Western Hemisphere, I would like to state my strong objections to the manner in which this piece of legislation was raised I was only made aware of the existence of this legislation this morning, just a couple of hours 356 Pillars of Prosperity before I was expected to vote on it There was no committee markup of the legislation, nor was there any notice that this legislation would appear on today’s suspension... First, they merely celebrate the postponement of the day of reckoning of their financial Ponzi scheme It took 50 billion in U.S dollars to save creditors who had unwisely invested in Mexico prior to the crisis of two years ago Much of this $50 billion also included U.S credit extended through the IMF, the World Bank, and the Bank of International Settlements, much of which is yet to be repaid Second, foreign... WTO, $2.2 billion of United States tax reductions for American businesses violates WTO’s rules and must be eliminated by October 1 of this year 344 Pillars of Prosperity Much could be said about the WTO’s mistaken Orwellian notion that allowing citizens to retain the fruits of their own labor constitutes subsidies and corporate welfare However, we need not even reach the substance of this particular... hardly necessary since the IMF is financially able to pursue other courses It has 103 million ounces of gold on hand 3 38 Pillars of Prosperity and could easily sell what is needed to keep their scheme of worldwide inflation going—for a while longer that is—without further taxing the American taxpayer The IMF’s official position is that gold is not money so they have no more reason to hold gold than diamonds... Of course, it is at slightly lower interest rates, but they are more than doubling the time of repayment All investments involve some risks The rewards of such risk-taking are appropriately realized by investors as loans are repaid American taxpayers should not, however, be forced to subsidize the Wall Street financier any time such entrepreneurial ventures are unprofitable The true test of the professed... States to Principles of the Marshall Plan Congressional Record—U.S House of Representatives May 21, 1997 Mr Speaker, I rise to make some comments about the Marshall Plan because my interpretation is somewhat different than the conventional wisdom of the past 50 years I happen to believe the understanding of the Marshall Plan is probably one of the most misunderstood economic events of the 20th century... be safe and secure, so the large number of dollars then flowed into Europe It was interesting that the conditions were improved in Europe not so much because of America but sometimes in spite of America, 342 Pillars of Prosperity because many of our economists went to Europe at this time and advised them that the most important thing that they could do, especially in Germany, was to maintain price... only to see its gold sold off to finance the financial follies of the Third World socialists We could learn a lesson from the Swiss experience, and I hope we do I urge my colleagues to reject this bill Big Bankers Get Their Bailout Congressional Record—U.S House of Representatives March 24, 1 983 Mr Speaker, in spite of the expressed concern for the poor by the proponents of big government policies,... politically-connected get International Affairs 345 the benefits of exercising their position as a preferred group; preferred, that is, by the Washington and international political and bureaucratic establishments As a representative of the people of the 14th District of Texas and a Member of the United States Congress sworn to uphold the Constitution of this country, it is not my business to tell other countries . the United States—three full years ahead of schedule—with half a billion dollar profit to us. 3 38 Pillars of Prosperity The reporting of this payback and the State of the Union Address was all favorable,. depreciation and reduced buying power. 340 Pillars of Prosperity In essence, the bailout of Mexico and the financing of the pay- back with interest, to the sheer delight of the politicians and their Wall. will see even greater disruption 336 Pillars of Prosperity of international economic cooperation. The IMF may have failed in its attempt to create a world of price-controlled stability; it will