This Wednesday, Ron Paul, Rand Paul and Peter Schiff participated in Judge Andrew Napolitano’s online show “Freedom Watch”, joining Cody Willard and others in a refreshing discussion about the latest economic and political developments.
Channel: Fox News Strategy Room (online only)
Show: Freedom Watch
Host: Judge Andrew Napolitano
Judge Napolitano: It’s 2 o’clock on the east coast, 11 o’clock in the morning on the west coast. It’s Wednesday and it’s time for Freedom Watch. I’m Judge Andrew Napolitano for Fox News. Joining me today, from the Capitol Rotunda is Congressman Ron Paul from the great state of Texas. Joining us on the telephone is Lew Rockwell from the Von Mises Institute and also from LewRockwell.com. In the studio with me is Peter Schiff from EuroPacific Capital. And to my left, my good friend and colleague from the Fox Business Network, Cody Willard. Thanks very much for joining us.
Congressman Paul, if you’ll excuse us, we’re going to be using this microphone here so as to make it a little easier for you to hear us and, hopefully, for us to hear you.
Is there any effort on the part of Democrats in the Senate as we speak to block the 410 billion dollar supplementary spending program that the house overwhelmingly passed on a nearly party line vote?
Ron Paul: Well, I’m sure there are a few, but I don’t think it’s going to happen. You mean the Democrats? You’re looking for the Democrats to stop it? Well the Republicans might try and they don’t have the votes so I just don’t think that’s going to happen. My guess is that they will pass it, but it remains to be seen.
Judge Napolitano: Can the government give any thought to the long-term consequences to this kind of spending? I mean, since the last time you and me spoke, the Congressional budget office, which purports to be non-ideological and basically neutral, says that if the President continues introducing budgets like the one he introduced last week, then the total debt by his third year in office will be in excess of 12 trillion dollars. Doesn’t that scare anybody in the administration, or on the Democratic side of the aisle?
Ron Paul: It doesn’t seem to, because they continue to do it and the Republicans didn’t do such a good job on their own, so the Democrats are just pursuing it and making it that much worse. But one of the things they have going for them is that this debt is big and it has to be liquidated because it won’t be paid. We’ve know that as far back as Adam Smith who said that, “Countries don’t pay their debt, what they do is liquidate the debt”. And it’s an ongoing process, you know. The debt is growing nominally, but you know, they’re working on inflation. I believe they want inflation to come back, that’s what they are trying to do. They think inflation creates prosperity, but it also liquidates debt. So they can get this inflation rate back up to 10%, they get rid of 10% of the debt. That’s what they are doing. So they don’t make it a concern. They don’t think of it in the terms that we might think of it, like maybe we would have sound money and these nominal debts mean something.
So the dept will be liquidated, but the mischief they cause, that’s what is really the bad part… taking this money, taking it from good resources and popping it into government spending, and they’re doing harm with it. That’s where the real harm is.
But no, I don’t see any serious attempt. The rhetoric is better now with the Republicans, they’re talking about it and they’d like to cut back and they’re voting better. I think the Democrats are sticking to their reputation and they’re more honest about it, they’ve never preached fiscal conservatism. Therefore, they’re spending and I expect they are going to continue and I don’t think there are going to be any cuts.
This idea that we can pass these budgets and at the same time have a fiscal program to cut the deficit in half in about 4-5 years from now, that gets to be pretty silly. They talk about that with a straight face, I don’t know who believes them. But they do.
Judge Napolitano: Well Congressman Paul raised that, Lew Rockwell, it’s utterly farcical, I think, for the government to suggest, for the President to suggest at the same time that they’re adding trillions and trillions in debt, that he can cut the deficit in half. What will happen when these debts come due? I mean, can they refinance bonds, or can they just borrow more money to pay back the interest on the money they have already borrowed, Lew Rockwell?
Lew Rockwell: You know Judge, John Meynard Keynes said that too often people are enthralled to the ideas of some defunct economist. Well, all the people in Washington, with the exception of Ron Paul, are enthralled to the defunct economist Keynes, and Keynes believes that unlimited amounts of spending on anything, even building a pyramid, and unlimited amounts of debt in this sort of economic situation makes sense.
So I think they actually believe that this is going to work; that an economic catastrophe caused by unlimited spending and credit and debt and money creation can be solved by just stepping up all those horrible things. So I guess they believe what they are doing, but they are creating an economic disaster like we’ve never seen in the history of the civilized world.
Judge Napolitano: Peter Schiff?
Peter Schiff: Unfortunately, you know, Lew is right on what he is saying. The problems that the Republicans who are trying to oppose what is going on are facing now is that they have no credibility on the issue, because where were they when George Bush was doing the same thing, you know. And Obama has got this change issue working for him now, but in reality all he is doing is continuing the failed policies of Bush, but he is able to say, “We tried freedom, we tried capitalism, we tried limited government, but that didn’t work so now we’re going to have this change.”
But we never tried any of that, you know. We’re in trouble because we did exactly what Barack Obama wants to do now, only Barack Obama wants to do more of it.
Cody Willard: I’d love to ask Congressman Paul… I went back this week and I’ve been trying to find a lot of quotes and history from, say, 1933 to 1935; the mid 1930s. And I guess this is where I’m going with this.
Is it possible that all of this liquidity and all of this excessive… whatever they’re doing… bailing and printing of money, causes at least a temporary 2 to 3 year, maybe even a 2 to 3 quarter phenomenon, where it seems as if the economy and markets are starting to pump and work again, and it’s very illusionary and then we really fall of the cliff?
Ron Paul: Well, it is hard to predict that completely. I would think that the markets don’t believe what we in Washington and what the Fed has done so far is any benefit, because the markets are supposed to anticipate the future. So if they are anticipating that they are worth something, the markets would have settled down by now.
So I’m not anticipating a lot of benefit from this, so if you were talking about somebody in the 30s, yea the economy bounced up a little bit but that depression never ended until the end of World War II.
Cody Willard: I guess, Dr. Paul, what I am looking at there is, you know, some of the biggest bull rallies are in the bear market contexts, and we’re obviously in a vicious bear market. So is it possible that both the economy and the markets rally off, because of all the excessive dollars floating around?
Ron Paul: Yea, I guess there are going to be some people who can time this and there could be a major bear market rally, but they’re a lot braver than I would be. But that won’t solve the problem, I mean, we’re just digging a bigger hole for ourselves, and this is going to be for a long time.
Lew Rockwell is right. This is the biggest in our history, the biggest in the history of the world, we are the biggest debtor in the history of the world, we had the biggest bubble because we’ve had the dollar reserve standard where we could literally print the gold. Everybody uses the reserve currency. It is big and it’s much bigger than I think even those of us who are concerned about this ever anticipated. And the fact that we haven’t had a real significant bear market rally here in the last year or two means that, who knows, it might not come. Maybe there’s a lot of pessimists out there that won’t…
Peter Schiff: Look, I think we’re certainly more likely to have a bear market rally in stocks than any meaningful bounce in the economy. You can have a bear market rally at any time, and of course I think people on Wall Street can become overly optimistic and read too much into it. I mean, this is a major bear market and those rallies help keep it going because they sucker people into the market and they create complacency, they create a lot of hope, because a bear market slide is a slope of hope and it’s those bear market rallies that create the hope.
But as far as the economy, you know, Rush Limbaugh got himself into some trouble when he said that he wanted Barack Obama to fail. Well, you know what, the reason he wants Obama to fail is because he wants the economy to succeed. There is no way the economy can succeed if Barack succeeds in getting his agenda through Congress. It can only do damage.
Judge Napolitano: It was an unfortunate choice of words, not an unfortunate selection of ideas.
Peter Schiff: Well, of course, the media, the democrats, everybody spun it as if we can simply want him to succeed…
Judge Napolitano: I want to get back to something Congressman Paul said earlier, and actually, Peter Schiff said earlier. Congressman Paul and the members of the House who typically and traditionally vote with you, have been absolutely consistent, and unfortunately there’s just a few of you, in their defense of the fair market, no matter who was in the White House.
So here is my question: Have Republicans, other than those who have consistently supported the free market, have the rest of the Republicans in the House suddenly found their free-market bearings, suddenly read a copy of the Constitution, suddenly embraced capitalism, suddenly realized that only private dollars and not public dollars can get us out of this. Or, is this just politics? Do they just want to put a thumb in the eye of as many Democrats that they can.
Ron Paul: I think 90% are with the second, this is politics. I don’t think very many of them, there are few that have ever heard of Austrian economics and the business cycle theory from the Austrian economists. So they are in the business of politicking, and they thought they could maintain power by acting like Democrats when they were in charge, so they went along with Bush because they didn’t want dissension. Some of their instincts are better than their votes, and now they are using their instincts, but they don’t have a deep seated philosophy. They are not concerned about personal liberty. They don’t understand how the Constitution really protects bad behavior; personal, controversial behavior, just like it protects controversial speech. They don’t understand these things, they are not concerned about it. They are more concerned about say, if they guard warriors. It is more important how it would play back at home, am I opposed to the use of drugs? They are not concerned about civil liberties, same way with all the activities after 9/11 and all the things that you, Judge, have talked about, you know, habeas corpus and personal liberties and privacy. I mean, they look at how does it play back home. They’re political animals first, they are very less likely to be concerned about the philosophy behind what has made our country great.
Judge Napolitano: Is there any hope, I mean, if Barack Obama succeeds and the Democrats or his allies at Capitol Hill succeed, they are wrecking the economy even further with crushing personal debt and crushing inflation on us. How do we get out of this?
Lew Rockwell: Well, they are certainly capable of putting us into a very long term depression the likes of which we have never seen, worse even than the 1930s. But I think the market is capable of getting us out. The market even right now is liquidating debt, is operating through [...] to do all the things that are necessary that the government is trying to prevent. Prices are falling in housing, despite what the government wants. The market is functioning, and I think the market is more powerful than the state and will eventually get us out of this. But when that’s going to be? Could be very long. Could be 10 or 20 years.
Cody Willard: You say there that the market is bigger than the government and I used to agree with that up to until about 6 to 8 months when they started the slippery slope of TARP and the trillions of dollars of interferences and interventions, whatever you want to call it, appropriations that they are doing. So I am not sure that the market in this country is bigger than the government any more. Are we at a tipping point?
Lew Rockwell: Well, you’re certainly right that the government is growing at an unbelievable rate, both under Bush and under Obama, and what he proposes to do grows the government even more. But there is such a things as economic law that the government can’t repeal and can’t do anything about. So they can destroy the dollar, they can do horrendous damage to us, but they can’t prevent economic laws from operating. They can’t prevent supply and demand and all the other things from operating, they are not that powerful.
Peter Schiff: Well, they can try, and they probably will. They can put in price supports, like they are trying to do for housing. They ultimately might have price ceilings on things like food and energy. As I said, once in place it starts to get out of control. So the government can try to interfere with market forces, but when they do they create painful distortions. They either create gluts like how we have with housing, or they’re going to create shortages.
Cody Willard: Guys, what I’m trying to come back to though is the magnitude of these changes. The policy changes we have seen and the appropriation, the magnitude of this. It used to be a trillion dollars maybe, now its 10 trillion dollars, talking on its way to 12 and 13 trillion dollars.
Peter Schiff: And it’s amazing that Barack Obama is criticizing Bush for doubling the deficit, as he is proposing a near 2 trillion dollar deficit in one year himself. How can he possibly criticize Bush?
Judge Napolitano: Before we switch gears, Congressman Paul, how did Ben Bernanke react to the legislation that you introduced calling for an audit of the Fed. Did he give you a call on the phone?
Ron Paul: Oh yes, he called me, wanted to congratulate me and he wanted to support my bill. You know, interestingly, just recently, I cannot name his name but I was talking to a former member of the Federal Reserve board and told him about the bill and he was friendly enough.
I said, “What do you think of that?” He said, “I think it’s not a very good idea”. And I said, “Do the people at the Federal Reserve ever talk about, are concerned about the dollar”. I said, you know, I’m always talking about the dollar and what this is going to do to the dollar. And I said, “Do they know that all this debt and inflation could hurt the dollar?” He says, “Yes, they do.” He confirmed it. He said, “They absolutely do.” He says, “But they can’t answer your questions in public because it would cause panic.”
Judge Napolitano: This administration came to power and we all knew the words that they used, “hope” and “change”. But one of the words that they really used was “transparency”. I would think the President himself should be in favor of transparency at the Fed if he wants to be ideologically consistent. What are they afraid we will find out, Congressman Paul?
Ron Paul: Well, what they’re going to find out is, that’s the first step. Once we get the audit bill passed and we can reveal what they are doing, I think the next step is to end the Fed. That’s why they don’t want that.
You know, we had some very good comments made by our Senator Bernie Sanders yesterday from Vermont. I talked with him this morning and we’re going to be talking a lot about the need for having transparency.
And I think the mood is right. The mood is right both with the Democrats and the Republicans, because they don’t know exactly what is going on but they know the American people are sick and tired of just throwing money out there, whether it’s to the Treasury and nobody knows where it goes, whether they send it to Iraq and nobody knows where the bundles of money go, or whether the Federal Reserve can create 2 trillion dollars, and they don’t even have to tell us.
As a government all onto itself, it’s bigger than the whole U.S. Congress. They create trillions in a day, you know, in a short period of time, and in the Congress we do talk a little bit when we pass 400 million or 800 million. But the Fed is a much bigger problem and, Judge, I do have to excuse myself here in a minute unless you have a quick question.
Judge Napolitano: I have one last question, and it’s about your conservation with my colleague Glenn Beck yesterday. Congressman, former Federal Judge Alcee Hastings has introduced legislation that would direct the Department of Homeland Security to set up Fema camps in now closed U.S. military bases. Domestic camps, ostensibly for humanitarian basis but, of course, once the camps are there they would be available to the government for whatever purpose. Is this piece of legislation likely to pass? Question 1. Question 2: Even if it doesn’t pass, do the camps exist already?
Ron Paul: Not that I can tell. I don’t know where they are. But something similar happens when they go in and try to deal with hurricanes. They do bring in trailers and try to find housing, but in the sense of having an armed camp and a concentration camp… no, I don’t believe that exists.
But, whether that bill passes or not, I don’t think that bill is going to pass, what I fear is they already have this type of power. When the Fema comes in they overrule all state powers and all private entities, and they keep people out of their houses, they take their guns from them. Just think of what happened in New Orleans. They have suspended, you know, the Insurrection Act and off and on they attack the Posse Comitatus. So they have tremendous powers, and this whole idea that you can have a presidential order… you don’t have to have Hasting’s bill passed to be fearful. So we should remain vigilant and keep an eye and hopefully curtail this, because yes, the markets, like Lew says, finally win out. But in the meantime, what they try to do is they increase their authoritarian rule and they try to force us to compensate for how the market is trying to tell us how we should act.
So, it’s a very dangerous time we live in. The main problem is not the threat to our financial stability, but a threat to our liberties and that’s what should motivate all us.
Judge Napolitano: Congressman Paul, I think you know that in about 20 minutes we’re having a… forgive me… younger, handsomer version of you, another well known physician named Dr. Rand Paul, join us. And I thank you very much for your time and just wanted to make sure you watch when your son is on here.
Ron Paul: Yeah, don’t let him get off easy now, you give him some challenges.