Channel: Fox Business
News Anchor: Today during the AIG hearing, Representative Ron Paul declared that free markets and capitalism weren’t working. Watch this.
Ron Paul: We had a system where the free market wasn’t working, we didn’t have capitalism. The allocation of capital came from the direction of the Federal Reserve and a lot of rules and regulations by the Congress. We had essentially no savings and capital is supposed to come from savings. We had artificially low interest rates. So, looking at all that, then this means we’d have to look differently at what our solutions should be.
News Anchor: So what should our solution be? Joining us now is Representative Ron Paul, Republican from Texas. Congressman, always great to talk to you, sir.
Ron Paul: Thank you.
News Anchor: You made a really interesting point today, Congressman. You said that we’re pointing a lot of fingers and focusing only the victimization, but we’re not looking at the cause of all of this financial mess. If you could pick one cause that has gotten us here, what would you say it is?
Ron Paul: Easy money. The Federal Reserve artificially lowering interest rates, deceiving the people, the investors, the savers into believing that there’s a lot of savings out there, and that we should invest more and build more houses and build more cars.
It’s the mal-investment which is every bit as dangerous from inflation of the money supply, as is the high prices that usually come. So I would say the artificially low interest rates are the real culprit. It creates a bubble and causes excessive spending. And what have we done since the crisis has hit? We’re just doing more of the same. We’re deceiving everybody in the recovery period, and that’s why I am predicting the recovery is going to be prolonged.
News Anchor: Alright. You know, you had Treasury Secretary Geithner and Ben Bernanke in front of you today, just a week after we had all this outrage with Americans just furious about these bonuses at AIG. Do you feel that the Treasury secretary and the Fed chairman explained effectively to you their reasoning of why we got to this point where we are with AIG and the bailout of the company?
Ron Paul: I don’t think so. Maybe somebody else understood it better than I did, but I thought it was a lot of double-talk going on. Besides, there is no easy answer for this. I mean we, the Congress appropriates all these huge sums of money without strings attached, and then when the public becomes knowledgeable of some easy and huge bonuses, you know, then we have to scream and howl and be outraged. I don’t think we got to the bottom at all, because the problem came from the initial bailout.
So you can’t tinker around and say, “Well, we’re going to put a 90% tax on these bonuses”, and solve the problem with an unconstitutional move. That certainly won’t solve the problem and we have to go back one step and ask, “Why in the world did we appropriate that money?”
But what do we do instead? We just appropriate more and more money and turn on the spickets with the Federal Reserve and they have no obligation to tell us what they are doing.
News Anchor: Well, then should we just be free markets then, Congressman? Should we just let AIG fail? They made the bed and they should lie in it and they should fall apart in it as well.
Ron Paul: Yes, but there’s a lot of things you can do to smooth things over. You might get rid of the income tax so people would have money to spend, you might de-regulate the market and get away from crony capitalism. Yes, and the good assets would have been bought up by now, the bankruptcy would have been declared a lot sooner, the good assets would have been bought up and we could go back to work again.
You take a company like General Motors… you bail them out and prolong the agony and the bankruptcy. There’s good parts of General Motors that would be bought up, and the sooner we buy that up and allow the market to allocate capital, the sooner we get back on our feet again.
We can’t make the assumption that only the politicians and the Federal Reserve can allocate capital. That is the crime that we have committed and we have to change that attitude if we want to solve our problems.
News Anchor: Congressman Ron Paul from Texas. It’s always great to talk with you, sir. Thank you for being on Fox Business once again.
Ron Paul: Thank you.