Show: The Young Turks
Cenk Uygur: Now, the interview we’ve been waiting for for a while. Dr. Ron Paul, the Congressman from the great state of Texas. Dr. Paul, thank you for joining us.
Ron Paul: It’s good to be with you.
Cenk Uygur: We have a lot to discuss. Let’s get to the economy first. Tim Geithner is asking for more regulatory power at the Treasury Department today. What do you make of that? Are you in favor of that proposal or against it?
Ron Paul: No, I’ll be opposed to it because it implies the fact that all of our problems have come from not having enough government bureaucrats running around and regulating the economy, and that’s not the case.
We have plenty and the more we get, the worse the economy gets. I mean early in this decade, we had problems with Enron and they created the Sarbanes-Oxley bill and introduced many, many more regulators and actually the condition had gotten much worse.
So, you know, we should have regulations on the market, but they should be different. They should be regulating the Federal Reserve and they should make sure that there’s no fraud and no theft, and these kinds of things. So there’s a lot that can be done, but not the type of regulation which is a prior restraint type of regulation. I’m opposed to that.
Cenk Uygur: That’s a fascinating perspective on that. I want to save the Fed for a little bit later because I know you have strong opinions on that. But let’s talk about regulation for a second. You think that there should be less regulation, but when we deregulated, when we can go to the Glass-Steagall Act that allowed commercial banks to join up with the security interests and the insurance companies, that led to banks that were too big to fail, and then on top of that, when we deregulated the CDSs [credit default swaps], that allowed wide-scale gambling that got us to this mess in the first place. Wouldn’t we be better off if we had regulators watching out for how much risks these companies were taking?
Ron Paul: Yes, yeah. As soon as fraud is committed, then you deal with it. But none of that can happen without the Federal Reserve creating easy credit and all this leveraging and the pyramiding of debt. That’s where the bubble comes. The bubble doesn’t come from the lack of regulation. It comes from the Federal Reserve that artificially lowers the interest rates that causes this speculative binge and then they do all of those kinds of things.
When they commit fraud, you know, the Enron scandal was taken care of with all the fraud laws in Texas, and that was handled, so we didn’t need more laws. But a lot of that stuff when it happened, these derivatives is the ultimate climax of a speculative binge that comes from money, that comes out from thin air.
And so that created the problems, the debt created the problems and borrowing contributed to it. So we’re trying to solve all of our problems by spending more, borrowing more, and printing a lot more money, and then people will say and I think in your question implies why we had too much freedom of the market and too much capitalism.
But that isn’t true, we haven’t had anything near what, I think, capitalism is like. I mean we have this artificial monetary system, we have crony capitalism, we have the military-industrial complex, we have a huge deficit financing and we don’t have anything near what capitalism is all about, and now what we’re talking about is partnerships, so we’re moving towards fascism now rather rapidly.
Cenk Uygur: Representative Paul, you know, I want to get to the Fed like I said before, but one more question here. When you say regulation is not the answer, the SEC in 2004 removed the rule that allowed for a 12 to 1 ratio between equity and debt and allowed basically any kind of ratio you would like, which led to people taking out more loans and getting riskier and riskier prospects.
Ron Paul: Alright.
Cenk Uygur: Isn’t that situation where we could have used more regulation?
Ron Paul: No, but what you demonstrated is fraud. You know, in a free market, anything could go.
Cenk Uygur: It’s not fraud, though. I mean it’s what SEC allowed —
Ron Paul: That’s what leveraging is. You see, it was legalized that they could have that type of leverage. In a free market, you can only lever out if you have reserve, a 100 percent reserve, then you don’t have to —
Cenk Uygur: Only if there are rules, only if there are rules. Not if, you know, in a free market, if there are no rules, then you get blown out of your life.
Ron Paul: Well, yeah. No, you can’t. The rule is you can’t commit fraud, you can’t say you have money in the bank if you don’t. Now, we literally created a system, which is called fractional reserve banking that the banks don’t have actually have any money.
Every bank is insolvent. If everybody went to the bank tomorrow and asks for their money, you know, they don’t have it. The whole system is based on the fact that the government will always bail them out and that creates the moral hazard.
So, well, I think you’re concern would be dealt with rather sharply with the free market because the free market would be much tougher. There would be no freebie. It would a 100 percent reserve standards.
Cenk Uygur: Yeah, Congressman.
Ron Paul: So it is as well. You’d have to read Murray Rothbart on that to really understand it, but a 100 percent reserves would solve that problem.
Cenk Uygur: And… but…
Ron Paul: And they would be held to task by no permission to commit fraud and literally, by what you described is we legalized fraud, and that’s what our monetary system is. We legalized counterfeit, that’s what we do.
Cenk Uygur: Well, I mean, yes. Congressman Paul, just a question about what you’re talking about and then sort of another follow-up question. The ideology that you’re talking about, is there an American precedent for that? Or is it kind of a pie in the sky? I mean, what —
Ron Paul: Well, that sort of asking like is there a precedent for perfect socialism and of course the extreme, of course, was the Soviets and that wasn’t perfect.
No, there’s no perfect example of a free society, but we probably have had the best example and the best introduction. We also have the maximum amount of productivity. We have the maximum amount of wealth created when we were a much freer society.
We had probably experienced the best periods of time in our history when we have had economic growth was the latter part of the 19th century and prices actually went down and people were much richer. So, but no, my goal is idealistic and I know I can’t reach that, but it’s the opposite of a socialist-fascist type of system.
Cenk Uygur: Yeah, we’re talking with the Texas Congressman Ron Paul. Dr. Paul, just, you know, sort of to follow on that with a bit more big picture here, you know, what you’re talking about, your ideology.
If you could have one part of your thought process enacted into law, what would be the first thing in terms of attacking the problems that are in our economy right now, what would be the number one in your priority list?
Ron Paul: Well, understanding why personal liberty is so important. If a person understands personal liberty, they understand the right of that individual for everything he earns, he gets to keep and that is his property.
And to do that, you have to have a private property free market system, but you have to understand that everybody owns their own personal life, which guarantees their social freedoms as well. The same freedom I’m talking about in the economy is the same freedom I want the press to have, there should be no prior restraint, and I don’t want people legislating morality in their personal lives.
So I apply those same rules to the economy as I do to personal freedom as well as to the press where there is no prior restraint. I don’t want prior restraint. And when people hurt each other or if the press libels somebody, they’re responsible. But the press didn’t make mistakes. There’s no doubt and do they can do bad things and dumb things and there’s a lot of horrible things that come out when I protect freedom of speech. But at the same time, I don’t ever want prior restraint.
So I don’t want prior restraint in the economic matters, except for these basic rules of no fraud and no counterfeit and no violence.
Cenk Uygur: Well, Representative Paul, it seems that we’re almost having a discussion about what we mean by free markets because, you know, and that’s important, because do I want free market? Of course, I do. Am I in favor of capitalism? Obviously.
But I think that in order for capitalism to thrive, there has to be certain rules and regulations. As a sporting event, if you’re going to play basketball, you need certain rules. Otherwise, everybody will commit a foul because it’s in the nature of human beings to want to take things to their advantage, which is how the system works and capitalism works.
So, you know, when you’re saying 100 percent reserve, if I have that right, wouldn’t that be a rule, too?
Ron Paul: Yeah, but it would be a no fraud rule. If you put a $100 into my bank and you want it there tomorrow, if I don’t want to commit fraud, I can’t loan it out.
But if you put a $100 in my bank, I can loan it out to the next person and keep $10 in the bank in reserves. There’s a $190 in a split second, and that to me is fraud.
Cenk Uygur: So that it’s so —
Ron Paul: So if you put a $100 in my bank and promised you don’t want it for three months, then I can loan it out for three months. So, yes, there are very strict rules, the market is very, very strict.
For instance, the market is very strict in protecting property and protecting the environment because you have no right to violate another person’s property or another person’s life and it’s in many ways much stricter today. When you depend on the government, then the corporations are going to charge the government and then they get control and they get special privileges and then you end up with all these rules benefiting a certain… that’s why there’s a huge tax code because everybody gets to lobby for what they want.
Cenk Uygur: Well, that’s certainly true.
Ron Paul: And so —
Cenk Uygur: We’re talking with Congressman Ron Paul from Texas. Congressman, what I want to follow up with there is if you have a 100 percent reserve rule, wouldn’t that slow the economy tremendously because investment is the, you know, the engine of the economy and obviously that would slow down investment to nearly a stop.
Ron Paul: Yeah, it would slow down, but it would be more solid growth. You would have no bubbles.
Cenk Uygur: Well, you would have no bubbles, that’s true.
Sam Seder: But if that philosophy were adopted to the insurance industry as a whole, in terms of life insurance and health insurance too, that would be, I would guess, somewhat disastrous because this philosophy is operated —
Ron Paul: Why?
Sam Seder: Because that’s how the insurance, you know, industry will take your premium and pay it out on someone else’s. It’s not a savings account just for you.
Ron Paul: Yeah, but there’s a contract. You see, the economic contract should be identical to the social contract. I’m sure you wouldn’t object to people socializing and volunteering and practicing all their habits and religious practices and sexual practices.
We don’t say, “Well, you might do something wrong. You might gamble or you might smoke something you shouldn’t be smoking, so we got to take care of you.”
So you can’t have this pre-emptive rules, but if you protect property and do what you promised to do and never defraud people and don’t steal from people, I mean, there’s strict rules.
But it is true you don’t have the huge problems. You don’t have the stock market going up, but the pill… everybody loves the inflation, you know, in this fraudulent system and always depending on the government to take care of them.
Conservatives love it in the social sense because “the government will take care of us. My kids will be raised up and they’ll know not to ever look at dirty pictures and they can’t have or do Internet gambling”.
Liberals tend to think, “well, with the government there regulating, they’ll never be, you know, any problems in the economy, and there will always be a safety net”.
And it’s all well intended, but it turns out that it’s self-destructive because you do have… when the counterfeiter comes to town, you don’t know it’s counterfeit but everybody is very wealthy. But when it’s discovered what’s going on then the house of cards then collapses. So all of the good times that you might see by the government participating collapses into what we have now, and yeah, I’m afraid we’re going to be in a depression.
But also there are arguments. There are always reasons how they can finance wars and these government regulations going in and military-industrial complex gets control of the government and then they build all of these weapons.
This just goes on and on and you couldn’t do that in a free society. I mean, not under our Constitution. That should never have been done anyway.
Cenk Uygur: Representative Paul, let’s move on to the Fed that you mentioned earlier. I know that you have some concerns with it, to say the least.
A lot of people might not even know what the Fed really is and how much power they have. They’ve done an Enron around Congress now and loaned out trillions of dollars to these insolvent banks.
Ron Paul: Right.
Cenk Uygur: Is there any way that Congress can gain control over what the Fed is doing? Or are you powerless?
Ron Paul: Oh, yeah. No, we can, it was created by Congress in 1913. A lot of people, the conspiracy people, say that it’s a private bank and nobody knows anything about it and we can’t do anything.
It’s secret because the Congress allows it to be secret. It was created in 1913 and since then, of course, it was to be here for it finances wars, financed World War I, the problems of the 20’s and, you know, on and on.
But it also causes the business cycle because they create money out of thin air. They literally can counterfeit money. But there’s no authority under the Constitution to have a central bank.
Jefferson and Hamilton argued this case and Jefferson was against it and Hamilton loved it. So we had a national bank. It lasted for twenty years and then another second national bank and then Jackson got rid of that. Jefferson got rid of the first one.
But then we didn’t have a real super-dooper central bank until 1913 and we’ve had, you know, so many problems since, but it can cause booms and people feel very good, but the penalty is so bad. I mean this is how you end up, you can end up with runaway inflation and that is so destructive.
There’s a lot of paper wealth that has been wiped off the books here with this correction, but ultimately, if it wipes off the value of the dollar, then you said, “What could the Congress do?”
Well, a modest step is the bill that I’ve just recently introduced – HR 1207 – and I’m getting a good bit of support from both sides and it says that if the Fed has to answer questions. Can you imagine they don’t have to answer questions?
They are exempt. A law was written in the early 1950s. It said the Federal Reserve was exempt from GAO auditing of all things that are important. All their negotiations, all their deals and everything they do, they don’t have to answer questions, and you mentioned even the trillions.
Yes, I think there could be 5, 6, 7 trillion dollars of guaranteed loans and extended loans, taking care of all their buddies. I mean that is the big thing. I call it the Fourth Branch of Government.
Conservatives, liberals, populists, whoever they are, libertarians, they should all be concerned about what’s happening because it affects every single one of us.
The value of money is a big issue.
Sam Seder: Congressman, in terms of the politicians and people in Washington that we know, with who we are most familiar, who are the people that are protecting this sort of clandestine behavior on behalf of the Fed. Who are the people that are going to be opposed to HR 1207?
Ron Paul: Probably the leadership of both parties.
Sam Seder: Yeah.
Ron Paul: And it’s always the leadership in the White House. And I’ve always argued that regardless of which of the two parties you have in power, foreign policy stay the same and monetary policy stay the same.
You know, I think we’re witnessing that. I mean, McCain and Obama never talked about monetary policy and the Fed and here you already know that they’ve created trillions of dollars and the Congress doesn’t even know about it.
They’re bigger than the whole Congress. I think all this talk about salaries, you know, these bonuses and even these hundreds of billions that we appropriate, I think all are just a distraction for the really big things that are going on. Nobody can even comprehend trillions of dollars, but they can comprehend $165 million worth of bonuses.
I don’t know exactly, you know, why that happens, but I know foreign policy doesn’t change. The wars are not going to end, even though Obama had, you know, much better statements on foreign policy, but monetary policy will not change, either.
And, you know, some people think we should live within our means and balance our budget, including a lot of Democrats. A lot of Democrat friends I have think so, and yet Republicans are elected to do something like that, and then look at what they did on the deficits.
So I think the only way we’ll come to our senses and reform this whole thing is that we have to realize that, for the most part, the leadership of both parties, we can’t find the answer there. I think it has to be found outside that realm.
Cenk Uygur: All right, Representative Ron Paul. There are some things that we certainly agree on as far as the excess of the system. There are definitely things we disagree on as far as the solutions are concerned.
But it is an interesting conversation and we’d love to have you back on to talk about marijuana as well because that’s also so huge in the news, but we’ve run out of time here and we really wanted to thank you for your time.
Ron Paul: Well, thank you. I’m against that drug war you know that.
Cenk Uygur: I didn’t know that.
Sam Seder: Thanks.
Cenk Uygur: And we agree on that as well.
Ron Paul: If it’s a drug war and there’s war overseas.
Cenk Uygur: Yes. We’re not doing well with the wars.
Ron Paul: Okay, there you go.
Cenk Uygur: Okay, Congressman. Thank you.
Sam Seder: Thank you, Congressman, for joining us. We appreciate it.
Ron Paul: Bye bye.