YouTube Channel: Financial Services Republicans
Ron Paul: Today the Chairman of the Federal Reserve Board was before the Financial Services Committee. I did get a chance to ask him a question or two and I made the point that we can’t continue to work on the assumption that credit comes out of thin air, that credit is not equal to capital. True capital comes from people who work hard, live within their means and save some money; that’s where capital comes from. Because we didn’t understand that we got into this trouble, but right now we’re doing exactly the same thing to get us out of trouble. In the past year, the Congress has run up a deficit of 1.5 trillion dollars. We’ve created an obligation to the Federal Reserve of 9 trillion dollars and hasn’t done any good, because people don’t have the confidence in the system, and unless we understand that, we can’t change it.
Bernanke made the point that we didn’t have price inflation last year and therefore there’s no inflation, but that’s not true. He’s increased the money supply faster than any other Federal Reserve Board Chairman ever, and that’s inflation and that eventually will cause harm. It already causes harm because it distorts interest rates. We got into trouble because interest rates were artificially low, and that causes people to do the wrong thing; it’s called mal-investment. People build too many houses or build too many apartments or they buy too many cars and they bid up prices and there’s a mal-distribution of capital, and therefore you can’t solve that problem. So as soon as we understand the monetary system the better.
What I am fearful of is the Central Bankers of the world are planning a new monetary system for us and we don’t know about it and we don’t have access to this information. The monetary system broke down in ’44; we had Bretton Woods, that one broke down in ’71; and this one is in the midst of breaking down. Something has to replace it; my argument is replace it with Constitution, replace it with gold and silver which is mandated in the Constitution and not fiat money which is just printing press money.