Mr. Chairman, I am extremely concerned over current US policy toward Yemen, which I believe will backfire and leave the United States less safe and much poorer. Increasing US involvement in Yemen may be sold as a fight against terrorism, but in fact it is more about expanding US government control and influence over this strategically-placed nation at the gateway to Asia.

The current administration, according to today’s testimony of Assistant Secretary of State Jeffrey Feltman, has dramatically increased foreign aid to Yemen, from $17 million in FY 2008 to $40 million in FY 2009, to $67 million for FY 2010, to, according to the president’s recent budget sent to Congress, $106 million for FY 2011. That represents an incredible six-fold increase in US aid to Yemen over just four years, at a time when the US economy continues to falter.

When I look at the US assistance plan for Yemen I see that it is primarily focused on nation-building. That is the failed idea that if the United States sends enough money to a foreign government, with which that government purchases US-manufactured weapons and hires US-based consultants and non-governmental organizations, that country will achieve a strong economy and political stability and in gratitude will become eternally friendly to the US and US interests. I have yet to see a single successful example of this strategy.

According to Assistant Secretary Feltman’s statement, “Priorities for U.S. assistance include political and fiscal reforms and meaningful attention to legitimate internal grievances; better governance through decentralization, reduced corruption and civil service reform; human rights protections; jobs-related training; economic diversification to generate employment and enhance livelihoods, and strengthened natural resource management.” How can we believe that the US government can achieve abroad what we know it cannot effectively achieve at home? We are going to spend millions of dollars to help create jobs in Yemen as we continue to shed jobs in the United States?

Yemen is a country mired in civil conflict. The Shi’ites in the north, who make up a significant percentage of the country’s total population and a majority in their region, have been fighting against what they see as the discriminatory policies of the Sunni-based government in the capitol, Sana’a, for years. Yemenis in the south, who up until 1990 were a separate country, likewise oppose the central government and threaten to escalate this opposition. Added into this mix are elements of what are called al-Qaeda in the Arabian Peninsula (AQAP), some of whom are left over from the US-supported fight against the Soviet occupation of Afghanistan in the 1980s, and others have been radicalized by their exposure to Wahhabi extremism in US-allied Saudi Arabia. Still others in AQAP are veterans of the insurgency against US occupation of Iraq. We cannot forget either those Yemenis who were held for years by the United States without charges at Guantanamo Bay. How many of those were innocent of terrorist actions or intent but became radicalized under such conditions?

Saudi Arabia’s concern over the Shi’ite unrest in north Yemen has led to unsubstantiated claims of Iranian involvement in attempt to draw the US into a regional problem that has nothing to do with the United States. Saudi Arabia has struggled with unrest among its own Shi’ite population and is determined to prevent any spill-over. There are some here in the US who repeat false claims of Iranian involvement in the hope of expanding the US military presence in the area. Others in the United States irresponsibly call for a US pre-emptive war in Yemen. We should be clear on this: expanded US involvement in Yemen plays into the hands of bin Laden and his organization as has been made clear on many occasions. Luring the United States into a conflict in Yemen by falsely advertising it part of a war on terror will certainly radicalize the Yemeni population against the United States. It will weaken our over-extended military and it will further destroy our economy.

Similarly, the US-backed central government in Sana’a stands to gain by claiming its internal problems are part of a global crisis that requires US intervention. The central Yemeni government has much to gain by making its battles and its problems our battles and our problems. But that gain will come at the expense of US soldiers, US security, and the American economy. I wonder how long it will be before the US establishes a permanent base on the strategic territory of Yemen?

I hope, as we begin to debate the foreign affairs budget for next year, that we may yet change course from that of the last administration, where the failed policies of interventionism, militarism, and nation-building have left the United States in a diminished position in the world.

As we start the new year 2010, the establishment politicians, economists and Wall Street are trying to convince themselves that we have turned the corner and economic growth has once again begun.  The predictions that conditions are getting back to normal come from those who never saw the crisis coming and don’t have the vaguest notion what caused it.  Some of them concede that it could be a jobless recovery.  That will establish a new definition for a recovery.
 Official unemployment is at 10% but even the government knows that if everyone is counted, including those individuals that are too discouraged to even be looking for work, the unemployment rate is 17%.  Free-market economists claim the actual unemployment rate is closer to 22%.
 There’s reason to believe that the correction is just barely started and has a long way to run.  If the financial bubble came from excess credit created by the Federal Reserve, doubling the money supply can hardly be a solution.  It wouldn’t make much sense for a doctor taking care of a very sick patient from severe infection to deliberately give the patient another infection.  Yet that’s what the PhD doctors are doing to our very sick economy.  It can’t work.  It will make the economy much sicker. If our leaders don’t wake up soon, the economy will be brought to its knees.  Great danger lies ahead.
 In foreign policy, it’s always crucial that the motives of those who would do us harm are understood.  Denial of the truth and accepting more politically palatable excuses will guarantee that threats to our safety will continue as we pursue a seriously flawed involvement overseas.
 It’s the same in economic policy.  If there’s denial or ignorance of the real cause of financial bubbles and the inevitable corrections that must follow, the economy cannot be reenergized.
 We should have learned the lesson from the Depression of the 1930s that it was a predictable result from the Federal Reserves orchestrated excesses of the 1920s.  Instead, the new-born Keynesian economists who took charge made certain that the correction would not be a one or two year affair as were the previous corrections in our history.  The aggressive intervention by Hoover and Roosevelt, the Republicans and the Democrats, turned a short recession into the Great Depression, which lasted until the end of World War II.
 The real tragedy was that the interpretation of the 1930s institutionalized bad economic theories.  Unfortunately, and erroneously, the Depression was blamed on the gold standard, free markets and a lack of regulations.  Though monetary policy was analyzed, its importance was 100% misinterpreted.  The low interest rates and excess credit of the 1920s, driven by Federal Reserve policy, was not considered a factor in producing the stock market bubble and the mal-investment.
 Instead, the 1930s analysts and even later analysis by Milton Freidman and the monetarists, along with academic “scholars” like Bernanke, came to an opposite conclusion: the Fed was at fault but only because it was too tight, arguing that massive monetary inflation was the only answer to the slumping economy.
 And now we are witnessing a grand experiment by the very person who for years claimed special knowledge regarding the Depression. Chairman Bernanke is in the midst of trying to solve the problem of massive monetary inflation and excessively low interest rates instituted by his predecessor, Alan Greenspan, by implementing even more inflation at historic rates.  The sad part is the answer to his very risky experiment with the wealth of our country and the health of our economy will take years to analyze.  The conclusions will be just as flawed as they were in the aftermath of the Great Depression by an intellectual and political community that had totally rejected commodity money and the principle of free market with the current understanding in Washington.
 One hope, though, is that free-market thinking and Austrian economic theories will have greater influence in the next decade or two, since their influence is now on a dramatic upswing.  But there are a lot of hurdles to overcome.
 In the 1930s, in an effort to find the true cause of the crisis, Congress ordered an official investigation.  It became known as the “Pecora Investigation” named after Ferdinand Pecora, the aggressive chief council of the hearings.  It received a lot of public attention and brought about many major changes but, tragically, every conclusion made and new policies implemented caused the depression to worsen and legitimized bad economic theories that continue to haunt us to this day.
 The Federal Reserve was not blamed except for not printing enough money fast enough.  Artificially low interest rates and mal-investment, the main source of the grossly distorted economy and bubble of the 1920s were exonerated.  Not enough regulations were blamed, thus the Glass-Steagall Act and the Securities Act of 1933 were passed and deepened the depression.  Separating commercial and investment banking and the newly created SEC were to have solved all future problems—as long as the Fed was free from any restraint in its money creation operation to serve big-government spenders and members of the banking cartel.
 Since the flaws in the monetary and economic system were not corrected but made worse after the Depression, it was to be expected that periodic booms and busts would persist.  The longer these cycles could be papered over with new money and credit, the greater would be the distortions and debt that would one day have to undergo a major correction.
 That correction is now in its early stages.  Since the dollar was the reserve currency of the world and totally fiat since 1971, without any linkage to gold, the financial bubble became worldwide.  This bubble that burst in 2008 was the largest in history.  During the formation of the bubble, the U.S. as the issuer of the world currency received undeserved benefits.  We essentially became the counterfeiter of the world and no one called us on it.  Even today, the trust in the dollar that persists has buffeted the pain of the correction for us.  This unique setup was a prime cause for our balance of payment deficits and the huge foreign debt we owe—the largest in the history of the world.  The discord in the world financial system is telling us that it’s time for us to pay for our profligate spending and massive foreign indebtedness.  We have lived, as a nation, far beyond our means and the message is, for the foreseeable future, that we will be forced to live beneath our means as this debt is paid.
  The inflation optimists are excited about current signs of economic growth and have even announced the end of the recession.  It is conceivable that a reprieve can be achieved and the penalty that our economy must endure delayed.  A reprieve must not be confused with a pardon; one is a temporary delay, the other an exemption.  The payback for our excesses is certain to come.
  Massively increasing debt and monetary inflation can slow the crash and change some government statistics encouraging the optimists.  But real job growth and return of prosperity will remain elusive.  The odds of us once again becoming an exporter of manufactured goods, like steel, cars, and textiles, are remote.
  Ironically, a reprieve may well restore some confidence and motivate some spending and investment.  But instead of restoring long-term growth, it may well act perversely by precipitating price inflation and higher interest rates.  Since today’s interest rates are artificially set, much of our investing is unproductively misdirected.
  Current enthusiasm in the stock market is once again a reflection of the message that low interest rates send.  Thus too, the government’s stimulus package has helped to sustain the bond bubble, which in time must be deflated in order to get back to sound economic growth.  All of this activity poses a threat to the dollar.
 Governments are very powerful, and when in partnership with the monetary authorities that can inflate the currency at will, big government thrives.  Welfare demands and senseless wars can be financed for long period of time through inflation, as long as trust in the currency lasts.  Trust, though ultimately controlled by facts, can be misleading, since currency values can gain benefit from a country that has a strong military and wealth and a reasonably healthy economy.  Eventually, markets and reality overwhelm, and illusions about a currency’s worth become a reality.
  Today, reality is setting in and the first of three major events has begun.  The worldwide financial system, built on a foundation of paper, has received the shock waves of an impending collapse.
 The wild speculation and the derivatives market, the stock market bubble, the insurmountable debt—public and private—and the massive mal-investments have been shattered.
 The only solution so far offered worldwide, but led by the United States has been to “print money” faster, keep interest rates low at practically zero percent, and remove all stops for controlling deficits.  These are the very policies that caused the disequilibrium, and doing more of the same, but only faster, can hardly help our economy.  The addiction to easy credit and deficit defies a wise political solution.  Politicians are incapable of delivering the message of frugality, common sense, and sound money.
 We can expect that the course we are on to continue and accelerate, since the first event, the collapse of the financial system, is still in its early stage.
 The housing crisis is far from over; the commercial property crisis has not yet gotten much attention, and the financial obligations of the government are growing exponentially.  And none of this forces the slightest pause in the expanding of welfare growth.  The number of regulations, which are indeed a tax, are exploding though the market was already suffering from regulatory excesses. There’s a consensus in Washington that “wise” regulations can compensate for all the mistakes made by the Federal Reserve, the Executive Branch, and Congress.  This fallacy has been around a long time and will be difficult to overcome.
 The pessimism of the middle class continues to get worse despite the prognostication of Wall Street and the Administration.  Most Americans know that the standard of living and real wages have not gone up for the past 10 years.  If you’re not a shrewd stock trader and instead invested in stocks 10 years ago and held on, in real terms you would have lost 20% of your savings.  The middle class is poorer also because house prices have crashed and many have lost their homes.  On top of this, all we hear about is the trillions of dollars of debt and entitlement obligations that have been racked up for future taxpayers to pay.  When it is revealed that the insider friends of the Fed and Congress get billions of dollars in bailout at the expense of the middle class, it’s no wonder the people are taking to the streets and directing their hostilities toward both Republicans and Democrats in Washington.  Many would agree it is well-earned anger and properly directed.
 This anger and frustration will certainly grow as the consequences of the collapse of the financial system become more severe.  The concerted effort to prevent the correction the market demands, guarantees a prolonged agonizing crisis.  Every effort to reverse the tide will depend on spending, higher deficits, increased taxes and money creation.   This effort is now providing another grand bubble: the dollar/bond bubble.
 The next event will be a dollar crisis.  A full-blown dollar crisis will be worse than our current financial crisis  The extent of a dollar crisis depends on whether or not the Washington politicians wake up and change their ways—a dubious hope.
 More likely, the insanity will continue until some not yet known event will undermine the confidence of the dollar worldwide.  Signs of less desire by foreigners to hold our dollars are already present.  I’m certain our Treasury and Federal Reserve are pulling out all stops to prevent a massive run on the dollar.  At present the “orderly” retreat from the dollar is working.  But it won’t last.
 China is quite active in investing in natural resources around the world, including Iran.  While we live in the dark ages and believe only our military presence and military threats can protect our access to oil, China is actually spending some of their savings investing in their future access to energy and other precious metals and minerals.
 But the orderly retreat from the dollar won’t last forever.  Since 1973, shortly after the breakdown of the Bretton Woods Agreement, the dollar has lost 32% of its value against a Federal Reserve basket of currencies. But that doesn’t tell the real story, since that is a measurement against all other currencies, and they are fiat currencies as well.  This gave the dollar an artificial benefit from its position of power in great wealth and military prowess.  The dollar in relationship to gold, however, is down 97% since 1971, and 82% as measured by the CPI.  The dollar, mismanaged by the Fed, has not been a benefit to the savers who sought to responsibly take care of themselves.  They’ve been cheated by a rotten system and are just beginning to understand exactly how the Federal Reserve has been responsible for the swindle.
 It is impossible to predict the time when confidence will be lost, but it can come quickly.  Resorting to buying other paper currencies will not be of much help.  When the dollar crashes, most likely the purchasing power of all currencies—since all countries hold dollars as a reserve—will go down as well.
 This means that dollars and other currencies will go into buying consumer items, precious metals and other physical properties.  Consumer prices will soar, as well as interest rates.  The central bank will lose control; and the more they inflate, the worse the confidence becomes.  The interest rates will respond to these efforts by rising sharply.
 If the Fed tries to reverse the run on the dollar, interest rates will also soar, and the pain on the American citizens will be of such proportion that political chaos will result.  Either scenario leads to political and social chaos—the third event, and the most dangerous.
 With no ability of the federal government to fund its commitments, international or domestic, major changes will occur in our system.  The social unrest will elicit cries for government to exert unusual force to head off a complete breakdown of law and order.  The ultimate trap will be set for a system of government claiming to protect a free society.  If more power and police authority are not given to the federal government, it will be argued that only anarchy will result.  If more government policing power is given, it will mean a lethal threat to civil liberties.  Already we have permitted the notion that a single person, the Attorney General or President, can decide who is an “enemy combatant”, thus denying that individual the right to habeus corpus, permitting indefinite detentions without charges made.  This attitude toward civil liberties has changed significantly since the fear built around 9/11.
 Yes, I know declaring one an “enemy combatant” is reserved for the radical Muslims engaged in terrorism against the United States.  To be reassured by this reasoning is quite dangerous and naïve.  Logic should not lead us to equate suspects with terrorists, and include American citizens, and yet this has already been set by precedent.  Under difficult circumstances, our political leaders will not be hesitant to use these powers to maintain order.  Tragically, the people may even demand it.
 We are rapidly moving toward a dangerous time in our history.  Society as we know it is vulnerable to political and social chaos.
 This impending crisis comes as a consequence of our flawed foreign and domestic economic policies, a silly notion about money, ignorance about Central Banking, ignoring the onerous power and mischief of our out-of-control intelligence agencies, our unsustainable welfare state, and a willingness to sacrifice privacy and civil liberties in an attempt to achieve safety and security from an inept government.  Dangerous times indeed!
 What can be done about it?  Must we wait for the inevitable and expect to restore our liberties in a street fight against the overwhelming power of the state?  Not a good option!
 The only way that we can prevent blood from running in the streets is to offer a better idea of the proper role of government in a society that desires first and foremost -liberty.
 And that is impossible without a firm commitment by our thought leaders to the ideas of freedom, the source of all creative energy and prosperity. An all-powerful state is the threat to that ideal.
 The prevailing attitude of the people-as it once was in early America-must be that of liberty and self reliance, rather than the nanny state and dependency relying on government force to mold all private choices.
 If this is understood, a smooth-although not painless-transition to a free society is achievable.  Ignoring this option will be very destructive to everything that is dear to the hearts of most Americans.
 What is it that we must do?  We must immediately:
• Balance the budget by reducing spending
• Change our foreign policy to that of non-intervention
• A full audit and more supervision of the Federal Reserve leading to abolishing the Federal Reserve
• Legalize competition to the Federal Reserve with competing currencies
• Regain respect for civil liberties and privacy while reigning in the CIA
• Wean ourselves off the dependence of wealth transfers by government
• Abolish crony capitalism—no subsidies, no bailouts, no regulatory or tax privileges to protect the powerful elite especially the military industrial complex
• Eliminate the income tax, inheritance tax and taxes on savings and dividends.
None of this can happen without the restoration of Congress to its dominant position of the three Branches of Government as was originally intended by the Constitution.  The Executive and Judicial must be reined in, and Congress must assert its prerogatives over all legislation curtailing all unconstitutional agendae through budgetary controls.
 
Signs abound that angry Americans are now more ready than ever before for a change in direction that is indeed real.  If this program were improvised-even suddenly and dramatically-the adjustment, though significant and to a degree somewhat painful, would be much shorter and of minor consequence compared to the chaos and poverty that will result if we refuse to change our gluttonous appetite for a free lunch.

I rise in reluctant opposition to this resolution. Certainly I am moved by the horrific destruction in Haiti and would without hesitation express condolences to those who have suffered and continue to suffer. As a medical doctor, I have through my career worked to alleviate the pain and suffering of others. Unfortunately, however, this resolution does not simply express our condolences, but rather it commits the US government “to begin the reconstruction of Haiti” and affirms that “the recovery and long-term needs of Haiti will require a sustained commitment by the United States….” I do not believe that a resolution expressing our deep regret and sorrow over this tragedy should be used to commit the United States to a “long-term” occupation of Haiti during which time the US government will provide for the reconstruction of that country.
I am concerned over the possibility of an open-ended US military occupation of Haiti and this legislation does nothing to alleviate my concerns. On the contrary, when this resolution refers to the need for a long term US plan for Haiti, I see a return to the failed attempts by the Clinton and Bush Administrations to establish Haiti as an American protectorate. Already we are seeing many argue that this kind of humanitarian mission is a perfect fit for the US military. I do not agree.
Certainly I would support and encourage the efforts of the American people to help the people of Haiti at this tragic time. I believe that the American people are very generous on their own and fear that a US government commitment to reconstruct Haiti may actually discourage private contributions. Mr. Speaker, already we see private US citizens and corporations raising millions of dollars for relief and reconstruction of Haiti. I do not believe the US government should get in the way of these laudable efforts. I do express my condolences but I unfortunately must urge my colleagues to vote against this resolution committing the United States government to rebuild Haiti.

I rise in strongest opposition to this new round of sanctions on Iran, which is another significant step toward a US war on that country. I find it shocking that legislation this serious and consequential is brought up in such a cavalier manner. Suspending the normal rules of the House to pass legislation is a process generally reserved for “non-controversial” business such as the naming of post offices. Are we to believe that this House takes matters of war and peace as lightly as naming post offices?

This legislation seeks to bar from doing business in the United States any foreign entity that sells refined petroleum to Iran or otherwise enhances Iran’s ability to import refined petroleum such as financing, brokering, underwriting, or providing ships for such. Such sanctions also apply to any entity that provides goods or services that enhance Iran’s ability to maintain or expand its domestic production of refined petroleum. This casts the sanctions net worldwide, with enormous international economic implications.
Recently, the Financial Times reported that, “[i]n recent months, Chinese companies have greatly expanded their presence in Iran's oil sector. In the coming months, Sinopec, the state-owned Chinese oil company, is scheduled to complete the expansion of the Tabriz and Shazand refineries -- adding 3.3 million gallons of gasoline per day.”

Are we to conclude, with this in mind, that China or its major state-owned corporations will be forbidden by this legislation from doing business with the United States? What of our other trading partners who currently do business in Iran’s petroleum sector or insure those who do so? Has anyone seen an estimate of how this sanctions act will affect the US economy if it is actually enforced?

As we have learned with US sanctions on Iraq, and indeed with US sanctions on Cuba and elsewhere, it is citizens rather than governments who suffer most. The purpose of these sanctions is to change the regime in Iran, but past practice has demonstrated time and again that sanctions only strengthen regimes they target and marginalize any opposition. As would be the case were we in the US targeted for regime change by a foreign government, people in Iran will tend to put aside political and other differences to oppose that threatening external force. Thus this legislation will likely serve to strengthen the popularity of the current Iranian government. Any opposition continuing to function in Iran would be seen as operating in concert with the foreign entity seeking to overthrow the regime.

This legislation seeks to bring Iran in line with international demands regarding its nuclear materials enrichment programs, but what is ironic is that Section 2 of HR 2194 itself violates the Nuclear Non Proliferation Treaty (NPT) to which both the United States and Iran are signatories. This section states that “[i]t shall be the policy of the United States…to prevent Iran from achieving the capability to make nuclear weapons, including by supporting international diplomatic efforts to halt Iran's uranium enrichment program.” Article V of the NPT states clearly that, “[n]othing in this Treaty shall be interpreted as affecting the inalienable right of all the Parties to the Treaty to develop research, production and use of nuclear energy for peaceful purposes without discrimination and in conformity with articles I and II of this Treaty.” As Iran has never been found in violation of the NPT -- has never been found to have diverted nuclear materials for non-peaceful purposes -- this legislation seeking to deny Iran the right to enrichment even for peaceful purposes itself violates the NPT.

Mr. Speaker, I am concerned that many of my colleagues opposing war on Iran will vote in favor of this legislation, seeing it as a step short of war to bring Iran into line with US demands. I would remind them that sanctions and the blockades that are required to enforce them are themselves acts of war according to international law. I urge my colleagues to reject this saber-rattling but ultimately counterproductive legislation.

Mr. Speaker thank you for holding these important hearings on US policy in Afghanistan. I would like to welcome the witnesses, Ambassador Karl W. Eikenberry and General Stanley A. McChrystal, and thank them for appearing before this Committee.
I have serious concerns, however, about the president’s decision to add some 30,000 troops and an as yet undisclosed number of civilian personnel to escalate our Afghan operation. This “surge” will bring US troop levels to approximately those of the Soviets when they occupied Afghanistan with disastrous result back in the 1980s. I fear the US military occupation of Afghanistan may end up similarly unsuccessful.
In late 1986 Soviet armed forces commander, Marshal Sergei Akhromeev, told then-Soviet General Secretary Mikhail Gorbachev, "Military actions in Afghanistan will soon be seven years old. There is no single piece of land in this country which has not been occupied by a Soviet soldier. Nonetheless, the majority of the territory remains in the hands of rebels.” Soon Gorbachev began the Soviet withdrawal from its Afghan misadventure. Thousands were dead on both sides, yet the occupation failed to produce a stable national Afghan government.
Eight years into our own war in Afghanistan the Soviet commander’s words ring eerily familiar. Part of the problem stems from a fundamental misunderstanding of the situation. It is our presence as occupiers that feeds the insurgency. As would be the case if we were invaded and occupied, diverse groups have put aside their disagreements to unify against foreign occupation. Adding more US troops will only assist those who recruit fighters to attack our soldiers and who use the US occupation to convince villages to side with the Taliban.
Proponents of the president’s Afghanistan escalation cite the successful “surge” in Iraq as evidence that this second surge will have similar results. I fear they might be correct about the similar result, but I dispute the success propaganda about Iraq. In fact, the violence in Iraq only temporarily subsided with the completion of the ethnic cleansing of Shi’ites from Sunni neighborhoods and vice versa – and all neighborhoods of Christians. Those Sunni fighters who remained were easily turned against the foreign al-Qaeda presence when offered US money and weapons. We are increasingly seeing this “success” breaking down: sectarian violence is flaring up and this time the various groups are better armed with US-provided weapons. Similarly, the insurgents paid by the US to stop their attacks are increasingly restive now that the Iraqi government is no longer paying bribes on a regular basis. So I am skeptical about reports on the success of the Iraqi surge.
Likewise, we are told that we have to “win” in Afghanistan so that al-Qaeda cannot use Afghan territory to plan further attacks against the US. We need to remember that the attack on the United States on September 11, 2001 was, according to the 9/11 Commission Report, largely planned in the United States (and Germany) by terrorists who were in our country legally. According to the logic of those who endorse military action against Afghanistan because al-Qaeda was physically present, one could argue in favor of US airstrikes against several US states and Germany! It makes no sense. The Taliban allowed al-Qaeda to remain in Afghanistan because both had been engaged, with US assistance, in the insurgency against the Soviet occupation.
Nevertheless, the president’s National Security Advisor, Gen. James Jones, USMC (Ret.), said in a recent interview that less than 100 al-Qaeda remain in Afghanistan and that the chance they would reconstitute a significant presence there was slim. Are we to believe that 30,000 more troops are needed to defeat 100 al-Qaeda fighters? I fear that there will be increasing pressure for the US to invade Pakistan, to where many Taliban and al-Qaeda have escaped. Already CIA drone attacks on Pakistan have destabilized that country and have killed scores of innocents, producing strong anti-American feelings and calls for revenge. I do not see how that contributes to our national security.
The president’s top advisor for Afghanistan and Pakistan, Richard Holbrooke, said recently, “I would say this about defining success in Afghanistan and Pakistan. In the simplest sense, the Supreme Court test for another issue, we’ll know it when we see it.” That does not inspire much confidence.
Supporters of this surge argue that we must train an Afghan national army to take over and strengthen the rule and authority of Kabul. But experts have noted that the ranks of the Afghan national army are increasingly being filled by the Tajik minority at the expense of the Pashtun plurality. US diplomat Matthew Hoh, who resigned as Senior Civilian Representative for the U.S. Government in Zabul Province, noted in his resignation letter that he “fail[s] to see the value or the worth in continued U.S. casualties or expenditures of resources in support of the Afghan government in what is, truly, a 35-year old civil war.” Mr. Hoh went on to write that “[L]ike the Soviets, we continue to secure and bolster a failing state, while encouraging an ideology and system of government unknown and unwanted by [the Afghan] people.”
I have always opposed nation-building as unconstitutional and ineffective. Afghanistan is no different. Without a real strategy in Afghanistan, without a vision of what victory will look like, we are left with the empty rhetoric of the last administration that “when the Afghan people stand up, the US will stand down.” I am afraid the only solution to the Afghanistan quagmire is a rapid and complete US withdrawal from that country and the region. We cannot afford to maintain this empire and our occupation of these foreign lands is not making us any safer. It is time to leave Afghanistan.

Madame Speaker, I rise to introduce the Free Competition in Currency Act of 2009.  Currency, or money, is what allows civilization to flourish.  In the absence of money, barter is the name of the game; if the farmer needs shoes, he must trade his eggs and milk to the cobbler and hope that the cobbler needs eggs and milk.  Money makes the transaction process far easier.  Rather than having to search for someone with reciprocal wants, the farmer can exchange his milk and eggs for an agreed-upon medium of exchange with which he can then purchase shoes. 

This medium of exchange should satisfy certain properties:  it should be durable, that is to say, it does not wear out easily; it should be portable, that is, easily carried; it should be divisible into units usable for every-day transactions; it should be recognizable and uniform, so that one unit of money has the same properties as every other unit; it should be scarce, in the economic sense, so that the extant supply does not satisfy the wants of everyone demanding it; it should be stable, so that the value of its purchasing power does not fluctuate wildly; and it should be reproducible, so that enough units of money can be created to satisfy the needs of exchange.

Over millennia of human history, gold and silver have been the two metals that have most often satisfied these conditions, survived the market process, and gained the trust of billions of people.  Gold and silver are difficult to counterfeit, a property which ensures they will always be accepted in commerce.  It is precisely for this reason that gold and silver are anathema to governments.  A supply of gold and silver that is limited in supply by nature cannot be inflated, and thus serves as a check on the growth of government.  Without the ability to inflate the currency, governments find themselves constrained in their actions, unable to carry on wars of aggression or to appease their overtaxed citizens with bread and circuses.

At this country's founding, there was no government controlled national currency.  While the Constitution established the Congressional power of minting coins, it was not until 1792 that the US Mint was formally established.  In the meantime, Americans made do with foreign silver and gold coins.  Even after the Mint's operations got underway, foreign coins continued to circulate within the United States, and did so for several decades. 

On the desk in my office I have a sign that says: “Don't steal – the government hates competition.”  Indeed, any power a government arrogates to itself, it is loathe to give back to the people.  Just as we have gone from a constitutionally-instituted national defense consisting of a limited army and navy bolstered by militias and letters of marque and reprisal, we have moved from a system of competing currencies to a government-instituted banking cartel that monopolizes the issuance of currency.  In order to reintroduce a system of competing currencies, there are three steps that must be taken to produce a legal climate favorable to competition.

The first step consists of eliminating legal tender laws.  Article I Section 10 of the Constitution forbids the States from making anything but gold and silver a legal tender in payment of debts.  States are not required to enact legal tender laws, but should they choose to, the only acceptable legal tender is gold and silver, the two precious metals that individuals throughout history and across cultures have used as currency.  However, there is nothing in the Constitution that grants the Congress the power to enact legal tender laws.  We, the Congress, have the power to coin money, regulate the value thereof, and of foreign coin, but not to declare a legal tender.  Yet, there is a section of US Code, 31 USC 5103, that purports to establish US coins and currency, including Federal Reserve notes, as legal tender. 

Historically, legal tender laws have been used by governments to force their citizens to accept debased and devalued currency.  Gresham's Law describes this phenomenon, which can be summed up in one phrase:  bad money drives out good money.  An emperor, a king, or a dictator might mint coins with half an ounce of gold and force merchants, under pain of death, to accept them as though they contained one ounce of gold.  Each ounce of the king's gold could now be minted into two coins instead of one, so the king now had twice as much “money” to spend on building castles and raising armies.  As these legally overvalued coins circulated, the coins containing the full ounce of gold would be pulled out of circulation and hoarded.  We saw this same phenomenon happen in the mid-1960s when the US government began to mint subsidiary coinage out of copper and nickel rather than silver.  The copper and nickel coins were legally overvalued, the silver coins undervalued in relation, and silver coins vanished from circulation. 

These actions also give rise to the most pernicious effects of inflation.  Most of the merchants and peasants who received this devalued currency felt the full effects of inflation, the rise in prices and the lowered standard of living, before they received any of the new currency.  By the time they received the new currency, prices had long since doubled, and the new currency they received would give them no benefit.

In the absence of legal tender laws, Gresham's Law no longer holds.  If people are free to reject debased currency, and instead demand sound money, sound money will gradually return to use in society.  Merchants would have been free to reject the king's coin and accept only coins containing full metal weight.

The second step to reestablishing competing currencies is to eliminate laws that prohibit the operation of private mints.  One private enterprise which attempted to popularize the use of precious metal coins was Liberty Services, the creators of the Liberty Dollar.  Evidently the government felt threatened, as Liberty Dollars had all their precious metal coins seized by the FBI and Secret Service in November of 2007.  Of course, not all of these coins were owned by Liberty Services, as many were held in trust as backing for silver and gold certificates which Liberty Services issued.  None of this matters, of course, to the government, which hates competition.  The responsibility to protect contracts is of no interest to the government.

The sections of US Code which Liberty Services is accused of violating are erroneously considered to be anti-counterfeiting statutes, when in fact their purpose was to shut down private mints that had been operating in California.  California was awash in gold in the aftermath of the 1849 gold rush, yet had no US Mint to mint coinage.  There was not enough foreign coinage circulating in California either, so private mints stepped into the breech to provide their own coins.  As was to become the case in other industries during the Progressive era, the private mints were eventually accused of circulating debased (substandard) coinage, and with the supposed aim of providing government-sanctioned regulation and a government guarantee of purity, the 1864 Coinage Act was passed, which banned private mints from producing their own coins for circulation as currency. 
 
The final step to ensuring competing currencies is to eliminate capital gains and sales taxes on gold and silver coins.  Under current federal law, coins are considered collectibles, and are liable for capital gains taxes.  Short-term capital gains rates are at income tax levels, up to 35 percent, while long-term capital gains taxes are assessed at the collectibles rate of 28 percent.  Furthermore, these taxes actually tax monetary debasement.  As the dollar weakens, the nominal dollar value of gold increases.  The purchasing power of gold may remain relatively constant, but as the nominal dollar value increases, the federal government considers this an increase in wealth, and taxes accordingly.  Thus, the more the dollar is debased, the more capital gains taxes must be paid on holdings of gold and other precious metals.

Just as pernicious are the sales and use taxes which are assessed on gold and silver at the state level in many states.  Imagine having to pay sales tax at the bank every time you change a $10 bill for a roll of quarters to do laundry.  Inflation is a pernicious tax on the value of money, but even the official numbers, which are massaged downwards, are only on the order of 4% per year.  Sales taxes in many states can take away 8% or more on every single transaction in which consumers wish to convert their Federal Reserve Notes into gold or silver. 

In conclusion, Madame Speaker, allowing for competing currencies will allow market participants to choose a currency that suits their needs, rather than the needs of the government.  The prospect of American citizens turning away from the dollar towards alternate currencies will provide the necessary impetus to the US government to regain control of the dollar and halt its downward spiral.  Restoring soundness to the dollar will remove the government's ability and incentive to inflate the currency, and keep us from launching unconstitutional wars that burden our economy to excess.  With a sound currency, everyone is better off, not just those who control the monetary system.  I urge my colleagues to consider the redevelopment of a system of competing currencies and cosponsor the Free Competition in Currency Act.