Walter Jones interviews Ron Paul on “Washington Watch”

Congressmen Walter Jones and Ron Paul discuss the economic crisis, monetary policy and foreign policy.

Date: 3/3/2009
Show: Washington Watch
Host: Congressman Walter Jones


Walter Jones: Welcome to the March Edition of “Washington Watch”. Today’s guest is a very dear friend of mine. And not only is he a friend of mine, he is also a friend of the American people, and I’ll explain that in just a moment.

But as Congressman Ron Paul from the 14th district of Texas, Dr. Paul enjoys a national reputation as a leading spokesmen for limited government, lower taxes, free markets, and a return to sound monetary policies based on a commodity backed currency. He serves on the House Financial Services Committee, the International Relations Committee, as well as the Joint Economic Committee.

In 1988 Dr. Paul was the Libertarian party’s candidate for the United States presidency. Most recently, he was a Republican candidate for the presidency in the year 2008. I have met his lovely wife and she is a very lovely person, Carol. They reside in Lake Jackson, Texas, and they are the proud parents of 5 children and 17 grand children. Dr. Ron Paul, thank you for being on the show today.

Ron Paul: Good to be with you, Walter.

Walter Jones: I remember the last time you were on, it was right before you officially announced, but you had announced, that you were going to be a candidate for the presidency on the Republican Party and, Ron, I want to tell you that you have a lot of supporters in the 3rd district of North Carolina. Many times during the campaign when you were with other candidates and you all were having the debates and the forums and everything, I had numerous people who stopped and asked me if I knew you and I said, “he was one of my best friends in congress, and he is a man that I have learnt a great deal from”. I remember the Liberty Caucus.

Today, I want to have you speak about the fact, going back to the bailout, but even in the last 2 weeks, the United States government has spent 1.2 trillion dollars on programs. I am just going to give you for the next few minutes an opportunity to tell the people of the 3rd district why you and I have voted against the stimulus package and were opposed to the bail out, and how this is going to impact the economy and the monetary policy of this country.

Ron Paul: Well, very simply, I know you have heard me say this before; we got into trouble because we have spent too much money. Our deficits are too high, and then we resort to printing money, which is the inflation. And we have not being doing this not for a year or two, but for a decade or two. And finally that financial bubble has burst. So what are the leaders of our country saying, both congressional and the executive branch leadership, even in the previous administration, the previous Congress? That is, that we need to spend more money, run up a bigger deficit and print more money. It absolutely makes no sense, and yet we are doing exactly the thing that got us into trouble and we think that’s going to get us out of it. I use the example of 1921 as what we should do. There was a recession/depression at that time because of the consequence of the inflation to pay for the bills for World War I, and that’s expected. So, that lasted for one year, because back then they didn’t think the government should solve all the problems, and they liquidated the debt and the mal-investment disappeared.

In the 1930s booth Hoovers and Andrews did the exact opposite. That depression didn’t end until the end of World War 2, that’s when we got back on our feet again. So, if you recognize the cause you certainly wouldn’t pursue the same policies and that is why I argue the strong case for fiscal restraint.

Walter Jones: Dr. Paul, during the discussion and debate about the bailout at Wall Street, I had numerous people in my district, hard working people, some middle aged, some young with small children that I would see in the grocery store and other parts and places in the district, and they kept asking me and I actually asked this to Mr. Bernanke. I said, “Mr. Bernanke, my people want to know, the people ask me where are we getting the money”. I said, “Are we going to print the money?” And I think his answer was something like “Oh, we just borrow the money from central banks” or something.

I wish you would touch on the fact that a nation that has to go to other governments to pay its bills… I don’t know, you’re the expert, I don’t know how it survives for so long.

Ron Paul: Well, we do borrow a lot from oversees and that is part of the problem. And since this crisis broke we have appropriated a lot of money, you know, even early last year, that was the first 100 million package, and then there was funds, and then there has been another subsequent bailout package. And that adds up into the 100s of millions of dollars, that’s huge. But we also have another problem with what the Fed does secretly. But the money that we’re spending and running up these deficits… in the last 12 months our national debt went up 1.5 trillion dollars, that’s historic highs. So we can tax people to pay these bills, but who’s left to tax. Even the Democrats are having trouble figuring out who they are going to tax next, so that’s not an easy option.

The second thing is, they can borrow money, and they are still borrowing a lot and the foreigners are still loaning us money, but that will eventually end because there’s a limit to that. A lot of this is just being financed by the Federal Reserve. The Federal Reserve monetizes the debt. They can create money with a computer. If there is a treasury bill floating out there, if there’s 10 billion dollars worth of debt out there and nobody wants it, the Fed can buy it with nothing. All they do is create credit automatically with a computer and they buy that.

But what really bothers me the most is not all this spending, everything is bad and getting in this trouble was a mess, but is the fact that the Fed can extend credit and buy up assets on the Q.T. They are doing that and if you add up what the Congress has done plus what the Fed has done, the obligation now is 9.3 trillion dollars and quite a few of those trillions, matter of fact most of that has come from the Fed. And, of course, we are not allow to find out exactly what the Fed is doing, we have enough trouble finding out what the Treasury is doing, let alone the Fed.

Walter Jones: Today I believe that you will soon be introducing legislation on the floor. You asked me and the other members, whether Republican or Democrat, to join you in this legislation dealing with the Federal Reserve. Would you maybe explain that to the viewers because you will be introducing that soon, I think?

Ron Paul: Yes, as a matter of fact I did get a chance after we talked, and I appreciate your support on this bill. But I am not the kind to be overly aggressive and go out and get the names and sign up and do the legwork that I should do. But, while we were sitting there it was rather amazing. You and I were talking and before I knew it I had twelve signatures on, which is pretty good, and I didn’t even get off my chair. And we had, what; three, maybe about five Democrats came over, which tells me it’s a ripe issue. And what it is, it’s a Federal Reserve transparency act.

Walter Jones: Right.

Ron Paul: In the code it said the G.A.O. has an obligation to audit the Fed, except for A, B, C, D, which is everything. So under the law we’re not even allowed to get any answers from the Federal Reserve. So this isn’t dealing with returning to the gold standard and then these major moves, this is just saying “Do we have a right to know?” And this is ripe, and the fact that we were getting signatures like that, and just common sense would tell almost any member of Congress to say, you know, can you imagine someone going home and saying “Oh yea, there is a bill that says the Congress has a right to know what the Fed’s doing”. – “Oh no, I don’t think we have the right”. So I think I am getting energized here with this, I think I am getting a lot of support.

Walter Jones: I know you can because at the time of this country’s history today, I think there is more distrust than I have seen in a long time of government, and particularly up here in Washington because, as you may have mentioned, the previous administration and this administration seem to be out of touch with the American people. They really do. And the fact that the Federal Reserve has so much power and influence, and yet members of Congress, the American people, can’t ask them a question, its crazy.

Ron Paul: I think I could make the case for saying the that the Chairman of the Federal Reserve Board is more powerful than our President. When you think he can control trillions of dollars without appropriation, he is certainly more powerful than the Congress.

You know, we’re over there, we think we’re important voting on an 800 million dollar package, but he can go and crate 3 trillion dollars and not even tell us. So… no, there’s a good reason for distrust, and in a way it’s a blessing in disguise that this system isn’t working so well, because it’s calling attention to it. And you’re right, we’ve have lost credibility. We’ve lost credibility in our own party as well as the whole Congress. People are frightened and scared. To me the key is coming up with the right ideas and the right understanding, because people too often when they are frightened, they do the wrong things, you know.

After 9/11 people were frightened and they were willing to vote and do some things rather rapidly. They do it in foreign policy, they do like right now… spend and inflate. We have to come up with sound ideas. I don’t think it is a party thing, I think it is a true revolutionary change. The right ideas would become pervasive and go into both parties, just as I think the bad ideas got into both parties.

Because I don’t like Keynesian economics because I think that leads towards socialism. But both parties are Keynesian in the fact that they believe the economy should be planned, that you can print money, deficits don’t matter. If the economy gets in trouble you have more deficits, then the government spends more money, it totally contradicts all free market principles.

Walter Jones: Again, you have been such a leader in so many areas, but particularly, let me ask you, I want to get to another subject or two in just a second, but tell the viewers just a little bit if you can in a short period of time about the history of the Federal Reserve.

Ron Paul: The Federal Reserve came into existence in 1913. There was a banking crisis in 1907 and people said, “Well, we were on the gold standard, why did that happen?” Well, because the gold standard wasn’t always followed. There was a lot of inflation, which means to me, a lot of credit is created excessively. There were national banks that created this credit and they would be bank runs, but they were usually short lived and yet they used that as an excuse to say, “We have to have a lender of last resort”. Which means when there are bad investments, the tax payers get bailed out because the government comes in, which is the tax payers, and they bail out people. This is what’s happening now.

Just think of all this money that we’ve appropriated. We’re bailing out the rich and they’re going away with huge bonuses and the tax payers are getting stuck. So that was the reason they came in, it was to be the lender of last resort, and they wanted a flexible currency. One of the gold standards is not flexible, it’s rather rigid, you just don’t create money out of thin air. The gold standard holds people in check. So the purpose was to undermine the restraints placed on government, which was the gold standard, to allow government to print endlessly. It didn’t happen immediately, you know, in the 30s when they got into trouble then they confiscated the gold, after ’44 they went to a dollar exchange standard. In 1971 there was no gold. And so this bubble that we have developed is the fact that the Federal Reserve over all those years got more and more power.

My fear is that they are finally going to admit that this system doesn’t work anymore, that they have rejected the system, that they are going to go to an international system, something under the United Nations, under the IMF and the World Bank because they want to internationalize all regulations. That means we lose the restraint of gold, we lose the restraints of free markets and we lose our sovereignty. This does not mean that we should be opposed to cooperating and trading and being friends with people. That is a voluntary internationalism, but what they are working for is international control through the finances, because the dollar standard is wiped out. That’s what the message is today. From 1971 until now we’ve had just the dollar standard. We got to print the money….

Walter Jones: Right.

Ron Paul: …spend endlessly, live way beyond our means and now we are suffering the consequences. Though now I believe the plans are being laid that there will be an international paper standard, which means all the power is going to leave the United States and go to some international organization which will make us subject to those standards. So far we’ve sort of had benefits we didn’t deserve. Because we get to print the money that’s why we were able to afford to buy all this stuff from China. Because paper money became our greatest exports. That’s part of the reasons why our jobs left this country is because if you can print money why work. If you’re the counterfeiter of the world, you know, if you and I had the printing press we wouldn’t have to worry about our finances forever, and that’s the way we were for a long time.

Walter Jones: This move to an international system, do you see that happening, possibly happening in the next 5-6 years or will it take longer if it continues to move forward?

Ron Paul: I think it will be at least 5 years, but the standard we have today is in such bad shape that it might demand that something come out, they might just declare a worldwide emergency because things aren’t functioning very well right now and everything was based on the dollar. But right now there’s still some support for the dollar itself. Not the dollar financial system, that’s all collapsed, but the dollar itself. People are still buying dollars, we can still use them. But if the dollar is rejected, the interest rates start going up, price inflation goes up and people are leaving the dollar… The end of a currency can come very swiftly. Now this downturn in the financial system came very quickly, but the end of currencies come quickly too. Once people realize, there is trust in the currency right now, it’s not deserved, but there is trust in it because we are an economic power house and we are a military power house.

But as you have studied it and have expressed your concern about the burden placed on our military, that it is precarious. If we lose that image and we lose this idea that we are not the economic power and the economic power is moving east into Asia, then I’ll say “Hey, time to leave the dollar.” That could precipitate a crisis and require that something be done next year or the year after, because the foundation has been eroded and that could happen. My guess is that it’s not going to happen for another 5 years or so.

Walter Jones: Dr. Paul, I wish we could talk for an hour because I am always fascinated with your knowledge and appreciate it, and I know the people watching the show do. We’ve only got 3 or 4 more minutes. I want to, very briefly, because you’re on the International Relations Committee… I’ve got a concern, you have a concern about the President’s recent announcement of 17,000 more troops going into Afghanistan, a large percentage of that are Marines from our district. Well, I have about 2 minutes and I’m going to give that full time to you to talk about your concern, and my concern.

Ron Paul: Well, this is one issue on which I really enjoy your support and co-operation because we’ve talked and worked on so much and you’ve been a leader in this. As a matter of fact it was through your motivation and desire to get a letter written, and you and I and others now, Republicans and Democrats, and you’re a much harder worker than I am. You are willing to go and get people to come along with us, and that’s because you are the friendliest guy in Congress and you’re able to do this.

But no, it’s serious business, and our letter is telling Obama, “Just slow up, think about this. You indicated that you weren’t going to do more warmongering, you were going to do less and think about bring troops home”. But even though he did admit even during the campaign he thought more troops should go in Afghanistan. But our letter merely says, “Stop and think about it before you do it because of the ramifications, because of what might happen”, and I think that you made a strong suggestion in the letter that said that, “How many other people have done this, and it’s failed, and why just repeat it”.

Also, one of my suggestions was to point out that Bin Laden actually had it in his strategy plan to suck us in, bring us over there because it made us an easier target, and he thought for sure that what we would do was eventually bankrupt ourselves. We used to be his ally when we were doing the same thing – bankrupting the Soviets. We brought them to their knees and the old Mujahedin now becomes the Taliban, and Bin Laden is allies with them, and sometimes we’re our own worst enemies, you know.

And this is the reason to me why this is so important that we change policy. Of course, I take a rather strong opinion about that. I believe in a constitutional non-interventionist foreign policy. I think we should defend this country and I think right now our troops, you point this out all the time, our troops are getting tired, there’s less defense, we motivate people to want to come over here and kill us, and we are spending ourselves into bankruptcy. That is not the way to protect this country.

Walter Jones: Dr. Paul, you’re exactly right, and I feel as you do. We need to protect America, and we need to protect America by having a strong military and by having a strong economy, and certainly you have articulated extremely well today in 20 minutes of this show just where America is, and you feel, as I do, that we can rebuild America, but we got to get smart. We cannot make the mistakes of the past, we’ve got to look at where we are and where the future is and I got probably a minute more if you got anything you would like to say in closing.

Ron Paul: Well, I want to thank you for having me on your program, this is very nice and I want to say that I really enjoy working with you, and make a point, and I hope that this isn’t construed in anyway a negative, but you’ve been willing to change your mind on some issues, which is something rather rare in Washington. And you’ve seen some of the things and you’ve changed your opinion a bit on foreign policy. You are leading the charge now on trying to slow up these troop deployments and all this, so I want to complement you on that. That really gives me a lot of encouragement because sometimes people get so locked in that even when they know they are doing something wrong… “Oh I can’t change now, I’ve done it this way all along”, but I want to really tell you I appreciate that because I believe this is the way we have a strong national defense to use a more sensible foreign policy.

Walter Jones: Dr. Paul, thank you for being on our show today and in just a moment, Glen Downs, my chief of staff, is going to join us for a few minutes to talk about some of the issues facing the constituency in the 3rd district. Dr. Ron Paul, thank you for your service to America. God bless you Sir.

Ron Paul: Thank you.