Ron Paul and Real Bills Doctrine

[virolai]

Does he support it?


Is he at Rothbard´s side?
http://mises.org/rothbard/genuine.asp

or at Fekete´s?
http://www.financialsense.com/editorials/fekete/2008/1107.html

 

[krazy kaju]

No, he doesn't support a long refuted belief.

The real bills doctrine is false for the simple reason that it doesn't take into account both supply and demand. If there were a run on a bank and it decided to sell all of its very liquid assets, those assets' prices would plunge along with liquidity due to a sudden release of supply and stable and/or falling demand. If the real bills doctrine were true, mortgage backed securities would still have to be liquid and trade at a reasonable price, which is not what is happening at all.