Ron Paul: Global Reserve Currency Is Good, As Long As It’s Gold

Date: 4/2/2009


Paul-Martin Foss: Dr. Paul, you’ve seen some pretty bad federal budgets over the years and you’ve voted against every budget for over a decade. Is this one of the worst budgets you’ve seen, and do you see any room for improvement in the next few years?

Ron Paul: It is one of the worst, but, you know, compared to what they put on the floor, what we’re voting on today, compared to the current year, it’s actually a little bit better, believe it or not.

They’re projecting a $1.5 trillion deficit and they’re claiming this is going down $400 billion. But I don’t happen to believe this; this will turn out probably the worst year because in a time of recession and the income is always less than they expect and expenditures are always much higher, so they’re projecting now that we’ll have $1.1 trillion.

I’m predicting that we’ll probably have a $2 trillion deficit and this $3.6 trillion budget, I predict, I bet you, it’s over $ 4 trillion because they’ll have supplementals. I’ve never been here where they haven’t had supplemental, and they don’t have all the war money in this budget, and actually where some people thought we might be able to cut back a little bit would be on foreign policy and the war, since Obama had talked about bringing the troops home.

He is actually putting a lot more troops in Afghanistan and the war is spreading into Pakistan, so those expenditures are going up. So I’m sure we’re going to have a lot of supplementals, and so I think this is going to be a very, very bad budget and it’s not going to help us get out of recession.

Paul-Martin Foss: Since you mentioned the supplementals, do you see also potentially any supplemental economic bills, maybe another TARP program, another stimulus package, do you foresee anything like that in the next year?

Ron Paul: I wouldn’t be surprised because this economy is not going to bounce back because we have been spending a lot of money, but when government spends the money, it is not necessarily a positive, it’s actually a negative because it’s taken out of the economy and it’s not spent wisely.

So things will probably get worse and since they don’t know too much what to do around here other than more of the same, I mean we got into trouble by spending and borrowing and printing money, so they said, “Well, we’re in trouble. What are going to spend, borrow, and print more money?” So I would expect that they will do this and I just think it’s delaying the inevitable. It’s going to delay the correction that we need. We really need to get things back to normal rather than just assuming that if we spend more money, that this is going to solve the problem.

Paul-Martin Foss: Switching gears a little bit, the G20 is currently meeting in London. What types of proposals do you think are going to come out of this latest meeting?

Ron Paul: Probably nothing of real importance. There’ll probably be a lot of talk and a lot of publicity about how they’re going to work together. One proposal they’ll probably suggest that they’ve been talking about and that is to globalize all regulations.

You see, they’re making the assumption, just as we do here in the Congress, that the problem is that there is too much freedom, there is too much capitalism, and therefore we have to regulate and since the so-called regulations that we’ve had until now haven’t worked, they want to globalize it, which means more world government. They want to have more UN, more World Bank, more IMF, more WTO, and I think they’re moving into that direction.

Also, they probably won’t have an announcement, but I am convinced that they’re talking about it behind the scenes, but won’t admit it, is they have to admit to themselves that this financial crisis has brought us to a point where we have to admit the dollar reserve standard, which we have been operating with since 1971 has failed, so that’s why the financial system has collapsed, but we still have the dollar sitting out there and they think, “well, we’ll just rebuild it.” But they can’t do that. They’d like to or they’d like to introduce a new currency.

Even in 1944, when the IMF was started, they talked about paper gold; these were the Special Drawing Rights. They thought that if they could just create paper money out of thin air, then it would work as if it were gold. Well, that never got off the ground, but they kept thinking about that and they’re talking about that again.

But on occasion, you have countries like Russia and maybe even China suggest, “well, well, if you are going to do that, maybe the IMF should put gold in as a reserve against these Special Drawing Rights.”

At the same time, the IMF is announcing they’re going to sell gold, sell gold to help the third world nations. You know, one of the things they’re claiming they’re trying to do with the Group of 20 rather than the Group of 7 is that they’ll bring in the third world nations, the developing countries, so that they can get help from the richer countries.

But what I see, what I get nervous about is that we all may end up like a developing country. You know, the seven richer countries may be just getting poorer rather than the rich countries bailing out the poorer countries.

So there’s a need for another reserve currency. That’s the wonderful thing about a gold standard. It is global. There’s nothing wrong with having a global monetary system because that would be very good. But if you didn’t have fluctuating values, this would stabilize and enhance trade. This would be very beneficial.

There’s token talk about gold, but very little. I think they’re talking behind the scenes much more than we hear about in having this international world currency, but if it’s strictly fiat, strictly created out of thin air, it will not substitute, and like I said I think the greatest danger of what will come out of the G20 meeting will be globalization of regulation, more global government, more world government rather than dealing with national sovereignty, sound money, sound economics, balanced budgets, savings and allowing the marketplace to work.

We, right now, are in the process, nationally and internationally, blaming freedom on all our problems, that we’ve had too much freedom. But this happened in the 1930s, they blamed the gold standard and capitalism, so that introduced into the 1930s the welfare state. But now, we’re going to the next stage and it’s much worse this time, and we hear so rarely that the cause has been that we had too much government, too much taxes, too much regulations, a fiat monetary system, and this is why I think we live in very dangerous times, and hopefully our side can perk up and win this intellectual argument.

Paul-Martin Foss: What do you think it would take to bring a return to the international gold-based system and do you think that something coming about in the present age would be more similar to the classical gold standard or the Bretton Woods kind of gold exchange standard?

Ron Paul: I don’t think we’re on the verge of it, but if they decide they have to… if you have runaway inflation, then you’re forced to do it. This is what has happened in the past. The only way you can get stability back is to quit printing money and stabilize the currency and quit the spending.

I think if they did go back, they are not likely to accept the type of gold standard that the free market requests and that is a gold coin standard where you have the actual gold in circulation or you can get gold from the bank, if you wanted to, which would restrict the government. That is what we would need and want, but the most, I think, we could hope for and that is not on the horizon, not soon, would be some type of a gold exchange standard where they will use gold in their reserves.

It would help just as the dollar reserve standard of the Bretton Woods from 1944 to 1971, we weren’t allowed to own gold, it wasn’t a gold standard, but there were restrictions on how fast they could print money.

So it was after 1971 when there was no gold attachment that everything skyrocketed. The growth of government, the spending went up, the deficits went up, so right now, I would think that most they would consider is some loose linkage, but that again would just set the stage for maybe a temporary reprieve.