Sunday, January 6, 2008

Ron Paul confused on inflation, healthcare

REP. PAUL: There is an inflationary factor. We can't afford it. We do have good medical care, but the costs are so high now that our people in this country are actually going to India and getting their heart surgery done. They pay the plane ticket, the hospital, and the hotel and they get it for half price. So it's inflation.

But if you don't understand how inflation comes, we can't solve this problem. It comes from deficit financing with this war-mongering foreign policy we have.

(8:20 in)
In the past, Ron Paul has shown that he fundamentally doesn't understand the basic nature of inflation. But in the New Hampshire debate, Ron Paul reveals that he doesn't even understand his own arguments. Ron Paul usually rallies against inflation because of the fact that it has caused the value of fiat currency to decline, especially compared to the fiat currency in other nations. The Paultards will take this argument and run with it, insisting that the US dollar is "monopoly monopoly" that will soon become worthless.

So how does this argument against inflation apply to his example regarding India? It doesn't. The person who flies to India for a surgery isn't paying for the surgery in backed currency gold bullion. He isn't getting a job in Indian tech support to earn Indian backed currency until he has enough money for an Indian surgery. No, the person is taking the American dollars that he earned from his American job, and spending that money in a different nation. The money is adjusted for inflation, and it's adjusted for the currency exchange.

The fact that his money goes twice as far in India compared to how far it does in America isn't a sign that our dollar is weak. Quite the contrary. It's a sign that our dollar is relatively strong. Now, perhaps Ron Paul could try argue that while our dollar may be strong compared to India, it isn't as strong as it should be, and so the difference should be even greater. But that's not the argument that he was trying to make.

Ron Paul is making the argument that if people in India can perform surgeries for half as much money, then so should we. And maybe we should. But this isn't a problem with a problem with inflation. Remember, Cuba is another nation where surgery is much cheaper than in the US, and yet I doubt that Ron Paul would ask us to model our monetary system after Cuba. Ron Paul may be a doctor, but he's a doctor who likes to misdiagnose our economy based on his own personal biases, rather then finding the actual problems.


Anonymous said...

Ok clearly you don't understand that the Fiat system is flawed because of one simple fact. There is no check on how much the Federal Reserve can print. For instance we just had a 100 billion dollar infusion of cash into the war effort. This is after the budget had been approved. Where did this magical cash come from? A loan from the Fed. When more money is printed the value of the money in your hand goes down. Basic econ 101 my friend. If you argue the Fed doesn't have that kind of power then why do they have autonmous control interest rates? The pound is now worth $2 when 8 years ago is was $1.3. Inflation is real. A standard set on precious metals curbs the ability to print money; therefore curbs inflation. You are a bright person and can clearly see the logic behind this.

Ron Lawl said...

The nonsense of the gold standard was already explained in a previous article.

Jake Young: I'm convinced. The gold standard is a bad idea.