Although I was not in Congress when either the Lockheed or the New York City bailouts were enacted, I would have opposed both of those actions, as well as the proposed action regarding Chrysler, for many of the same reasons. Let me explain those reasons.

In a nation that is sinking in a sea of debt, it is irresponsible for this Congress to be considering a measure that would add billions to that debt. The expansion of credit is one of the primary forms of inflation. It is not merely inflationary in its effects; it is inflation itself. If this $1.5 billion is created by the federal government, it will ripple and percolate through our banking system, and because of our fractional reserve system, the ultimate growth in the money supply will be far more than $1.5 billion. The standard multiplier is six; that means an infusion of $1.5 billion will eventually result in a $9 billion increase in the money supply. In his testimony before the House Banking Committee, the former Chairman of the Council of Economic Advisers, Alan Greenspan, stated that

    Loan guarantees, insofar as the issue of inflation is concerned, are virtually indistinguishable from on-budget financing, and that the major cause of inflation into this country has been an excessive amount of credit preemption, largely in the area of guarantees, which . . . has created excessive monetary growth and is the base of inflation in the system.

A vote for the Chrysler bailout is, simply put, a vote for further inflation.

Some may argue that the inflation is necessary in order to avoid unemployment, echoing the now repudiated idea of A.W. Phillips, that less inflation means more unemployment and vice versa. The past few years of our experience with inflation and unemployment should convince everyone that high inflation and high unemployment can exist side-by-side. I believe the connection is even closer: Inflation causes unemployment – perhaps not immediately, but in the longer run – and we are now in the longer run of our past inflationary policies. It follows that a vote for aid to Chrysler, because it is a vote for inflation, is also a vote for more unemployment.

Source: LeeRockwell