Show: Reality Report
Gary Franchi: Welcome back to the Reality Report. Joining us now to discuss the Federal Reserve Accountability Act, HR 1207, and to help us track down the stolen loot is Congressman Ron Paul.
Congressman Paul, welcome to the Reality Report. It’s great to have you here on the show. You know, a lot of things are going on in the country today. We’ve got this new bill you’re introducing, the Audit the Fed Bill, HR 1207. Let’s jump right into it. Can you explain the bill and why we need it?
Ron Paul: What the bill does is it repeals the portion of the code that prohibits us in Congress to find anything out about what the Fed is doing behind the scenes, how much they’re involved in international financial affairs, what the agreements are, what kind of contracts they are, where all the credit they create goes, which companies they bailed out exactly, and which banks get benefits, which countries get benefits and what the agreements are in international banking.
They’re completely secretive. Whey they were established and the GAO existed, the GAO never had explicit authority to audit the Fed and even in the 1950s and the 1960s and the 1970s, people said, “Hey, we ought to have the right to do that.” But there was never, you know, a real compelling argument to make them do it, but they did make an attempt in 1978. They passed a law that gave the GAO authority to audit the Federal Reserve, but like so much of what they do in Washington, when they pretended doing one thing, they’re actually doing the opposite. They were responding to the demand to audit the Fed and in the authority, they excluded certain things, the most important things, and there was a list of five things that we weren’t allowed to look at.
So my bill, 1207, repeals the prohibitions and mandates an audit of the Fed just to find out what they’re doing and right now, there’s a lot more interest than there’s ever been throughout the history of the Fed, mainly because of this mess that the Federal Reserve has gotten us into and there is a loud and justifiable outcry by the American people for transparency on what we’re doing, especially after the TARP funds, the $700 billion that was appropriated with no strings attached. Now, they’re saying where did this money go, did it go into whose pocket and who got the bonuses and what not.
But now, they’re starting to realize a lot more funds that are involved with the Federal Reserve where there’s hundreds of billions of dollars of appropriated funds that the Congress appropriated. The Federal Reserve actually deals in trillions of dollars that we don’t know exactly what they’re doing.
Gary Franchi: If the bill is passed and an audit is started, could the audit simply discover that the Federal Reserve is fulfilling its mandate as laid in the Federal Reserve Act?
Ron Paul: Possibly, but that’s highly unlikely because their mandate is to have stable prices and to be the lender of last resort, but not for the world. They weren’t supposed to bail out countries, which is what I suspect they’re doing. That might be the argument they’ll use and like so much of what they do, most of the people in Washington, whether it’s in the judicial, executive branch, or legislative branch, they never feel like they’re not fulfilling the mandate of the Constitution. They just have a little different interpretation.
Gary Franchi: Right.
Ron Paul: So they’ve stretched it already on the information we do know about the Fed on what they can do, but they’re certainly doing… I mean, one mandate was stable prices and full employment, so I would say they’re a total failure in central economic planning, but I wouldn’t be surprised if they used that argument.
Gary Franchi: So one of my main concerns is that if an audit were to occur that, you know, with so much corruptions going on all the different corporations that it wouldn’t be very difficult for them to just go ahead and cook the books, what do you think about that?
Ron Paul: Well, I think so. You know, we do call periodically for these investigations when we look into, say, the 9/11 or assassination, we set up commissions and they investigate, but I’ve always come to the conclusion that most of the time, they end up covering up, you know, not really getting to the bottom of it and telling us the truth, so the benefit of this depends on the character of the people who are in charge.
So if you have the same people who perpetuated the crimes investigating the crimes, you’re not going to get much information. Once in a while you get a little bit more when you change parties, but maybe not always. They play politics a bit, but do you take what’s going on now with the Obama administration on the issue of torture there. You know, they’re going to expose it to a degree. They might not prosecute, but the new administration endorses essentially the same position. It might close down one prison, but then they go to rendition. They might talk about open government, but at the same time, they go to court and defend the power of the executive branch to have state secrets, so I think you have to always be concerned.
You know, if the right people do the audit, you’d have the truth, but some audit is better than no audit. Let me tell you that.
Gary Franchi: Who would be the one performing the audit? Would, I mean, the government…?
Ron Paul: The GAO.
Gary Franchi: The GAO. Tell me a little bit more and tell our viewers a little bit more about the GAO and their responsibilities to government.
Ron Paul: The Government Accounting Office, they do a lot of it. They’re supposed to, you know, if you want to monitor any agency, as government agency goes, they’re reputation is probably better than most. They’re supposed to be independent-minded and they’re not supposed to be covering up. So if you had to depend on one agency, they’re accountants and they’re supposed to go in and look at the books. So, you know, they shouldn’t be automatically written off, but like you suggest, there’s always a chance that somebody is going to do exactly that.
Gary Franchi: Let’s shift gears and look at the global currency for a moment here. What danger does a global currency pose to US sovereignty?
Ron Paul: Well, it removes it. One more step, we’ve lost a lot already, you know, as early as the early 1950s going into war in Korea, it was done under a UN resolution and that was the undermining of our national sovereignty. But ever since we’ve had the United Nations, we have the World Bank where we just give money to the World Bank and then they spend that money for all kinds of reasons. We have the IMF, which, you know, manipulates currencies for a long time and tried to have a world currency even back when Bretton Woods was started with the Special Drawing Rights, and then more recently, probably 10 years now, they’ve had the WTO, the World Trade Organization. It’s just international regulations.
So even if we don’t come up with a new fiat worldwide currency in the next year or two, there seems to be a consensus by so many that we need a lot more regulations. It wasn’t freedom. They said it was the free enterprises and that happened. It was the lack of regulations. So now they want to internationalize these regulations and that’s likely to happen, but ultimately they will have to have a new currency, but if it’s a new worldwide fiat currency, the only way it’s going to work is by forcing people to use it and when they do that and it has no value, then it’s like living in the Soviet system and then there’s an underground economy.
But I think they’re working on that and they’re talking about it. They’re talking about reviving this notion of Special Drawing Rights and calling it money, but that’s just a worldwide fiat currency and the people who get to control that bank, you know, control the whole situation. You control the money, you can control just about anything you want, and right now, it’s the Federal Reserve that controls a lot more of the money and the economy than does the Congress. As powerful as the Congress and the executive branch is, the Federal Reserve has a lot more power behind the scenes.
Gary Franchi: Do the states individually have the right to print their own currency?
Ron Paul: No. They do not. There’s very few prohibitions on the states. For the most part, you know, the Constitution protects that and they want the states to do just about everything, but there were a few things; one, going to war, the other was on the currency, and the other one was on trade. We were to have trade amongst the states and there should be no restrictions and, of course, now we’ve lost that prerogative over war, but there is a prohibition against the state because the states did it before the Constitution was written and they inflated and it was a big problem, and then in the early years they destroyed the Continental dollar and they had runaway inflation.
So the founders were very knowledgable about the currencies and they did not want to have anything to do with inflation, so the prohibitions were written in there. They didn’t want the federal government to do it. There was no authority with the Central Bank, and that only gold or silver could be used as legal tender and therefore the states could not use it.
And yet, the federal government imposes on the states exactly the opposite. They force everybody to use something as legal tender called Federal Reserve notes and if you insist on using, you know, gold currency that existed at one time at the face value, you’re in big fight. You’re in for a big fight with the authorities and you ended up in court.
Gary Franchi: You know, the word “economic collapse” is thrown around a lot and I think the people need to have a better clarification of what exactly it means. What is an economic collapse? What does it look like?
Ron Paul: Well, there’s a couple versions of it. We’ve seen the financial structure collapse, you know, the lending agencies, the pyramiding of debt and all the speculation all the way up into these trillions and trillions of dollars worth of derivatives. Well, that’s all over with. That was a house of cards and it works fine when the value is going up, but it’s probably easier to look at it like the housing bubble. I mean, it used to be that people put money into the savings & loan and somebody else borrowed the money and built their house, but now, you know, it became very complicated. There were no savings. The Fed created the credit and then there were guaranteed loans and Fannie Mae would buy these and then they would collateralize these and then sell them. You know, it went on and on.
That system collapsed because it was built only on the fact that as long as prices went up, it would work. So that’s what we’re all witnessing, that collapse, but the one that is likely to come and the one that is much worse is the collapse on the confidence of the currency itself. Ironically, with the collapse of the financial system and the banks and the large corporations with all the trouble they got into, instead of it destroying the dollar overnight, what it actually did was give the dollar a reprieve because as people were scurrying around and trying to protect what they have, they literally went and bought dollars to park them, even if they couldn’t earn any interest. They would buy Treasury bills and we still benefited by that because we still have a lot of wealth in our country and we have the military to back it up and people felt more confidence, so they have been parking their money in dollars.
But you can’t continue to double the money supply every year and run up $2 trillion worth of debt in a year and maintain confidence. So if the confidence is lost, which it will, then people will dump dollars. Now, that is a financial calamity. That is really a financial panic and that leads to real chaos, political chaos and everything else. But at the rate we’re going, we’re working real hard in Washingto to do exactly that, unfortunately.
Gary Franchi: Now, in the event of an economic collapse, and you mentioned the states don’t have the ability to print their own currencies, but there is an upsurge in local currencies, even private currencies like the Liberty Dollar or ALCS-approved Silver Rounds, and really they are gaining popularity. Do you think that economies that isolate themselves by using these local currencies will have a better chance of recovery?
Ron Paul: I don’t know whether you have to think about that in an isolated community. I think if you just take the whole country the first 10, or 15, or 20 percent of the people who, on their own, say that I can preserve wealth by holding something of real value. This is a lot different than printing their own money, but if you hold your money in something of real value that people will seek like silver coins or gold coins, they are all going to do quite well whether they’re together or not. They’ll learn to talk to each other.
But just like right now, people are anticipating that there could be a shortage of ammunition for guns and if there’s a law that says you can’t get it and nobody would even want to buy it because there’s too many rules and regulations and somebody has this, it could serve as money as well.
If something of real, raw value that the people want that you can’t get by just printing it, so I think that does happen. I think the best argument is to use government legal tender coins. You know, they’re talking about legal tender and all, but they get awfully confused in arguing the case against, you know, if you had an old-fashioned silver dollar and if silver soars back up to $50 an ounce or something like that, and you start using it, you’re using government legal tender. But they’re going to strongly object to it because it proves the failure of their system, yet it says right there, legal tender for one dollar, and that to me is a lot better than pretending that we can create a new currency.
But when chaos comes, things of real value will serve as money and it could be anything and after World War II, it turned out it was cigarettes, you know, for a while, anything that people really want. In our early years tobacco was used as money. Anything is better than government paper when people lose confidence in the government paper.
Gary Franchi: Something like something that has real value, a commodity people need. People want. When you have paper, you know, you can only do a few things with paper.
Ron Paul: Yeah. And then the gold and silver has always proven to be the most convenient. That’s why Mises has always argued that money, real money, has to come into existence through the market. Something that everybody desired and understood and believed in and it was recognizable and you could divide it and the characteristics aside, the whole notion that if we were starting a new community and two or three people got together and said, “Oh, we’re going to be the moneymakers. We’re going to print the money and everyone is going to use it.”
Well, everybody would laugh at them. “What, you mean you’re going to print the money and tell us what the money is?” It would be a joke. Yet, that’s where we have ended up because we’ve destroyed the system that we had and the reason it functions is because it once was linked to gold. You can’t create a new currency out of thin air, but one that becomes totally fiat will operate until the people catch on.
Gary Franchi: Now, you’ve talked about competing currencies before. Do you anticipate introducing a bill at some point, this is actually coming from Debra, Missouri. She’s asking if you would introduce a bill that would allow for competing currencies.
Ron Paul: Yeah, I imagine. I can’t keep with all of the bills, but in the past I have and I probably will get around to it, if I hadn’t done it and that is to make it legal for you to use gold and silver coins and it could, instead of closing the Fed down in one day, which makes people look a little bit nervous, to say, “Well, you have the right to opt out today.” Like I said before, the government comes knocking on your door if you want to opt out of the system.
But in order to do that, you have to repeal the legal tender laws. You have to get rid of taxes on silver and gold coins. Why? How could money be money if you go and buy a coin that you get taxed on and then if you sell the coin or use it, you’d have to pay capital gains tax on it, so they don’t want us to think of precious metal as money.
Gary Franchi: Let’s talk about ending the Federal Reserve and what it would take to make that happen. Obviously, I believe I think an audit is a good first step. You’ve got a lot of momentum behind this bill. It’s really picking up steam. Like I said, I think it’s a good first step in getting rid of the Federal Reserve system by introducing transparency. Do you see this as a general first step to the abolishment of the Fed like your other bill, I believe, it’s 833.
Ron Paul: Yeah. It would be nice if the whole country woke up and the Congress woke up and for philosophic and constitutional reasons decided, “Oh, yeah. This was our mistake and we should do something differently.”
But that’s not going to happen and conditions will get a lot worse and if we have more evidence to show what they have been up to, then, you know, moving into allowing a competing currency, I think, would be much more likely. And then if that happens and you have total chaos that said we’d just self destruct because people will quit using the money.
Gary Franchi: So we would have to introduce competing currencies and let the market determine, for instance, if we introduce a silver-backed currency, you know, that’s printed out of the US Treasury and becomes the US note backed by the silver and gold and let the market determine the…
Ron Paul: The market would have to help us determine the so-called price or the exchanges because first, you know, gold is $900 today, but there’s so many dollars that are unaccounted for. It might have to be into the thousands, but you really don’t know. The market would have to help adjust that, but even to get it fixed again, you’d have to have a government that would absolutely promise to live within its means, balance the budget, give up the warfare state, give up the welfare state and not print money anymore, which, you know, that’s just a lot more than we can anticipate here, you know, for quite a while and that’s why I keep saying that people would have to have the option of getting out of this system and let time take care of it.
Gary Franchi: Let’s see. I mean, a lot of question coming in here. I’ve got Carey from San Diego. She’s saying, well, how much support is there in Congress for HR 1207? What is the word in the halls of Congress concerning the bill?
Ron Paul: Well, it’s getting better all the time. Believe it or not, a lot more people outside of Washington have heard about this than on the inside, but that’s the way the system works. We had a couple of weeks’ break at Easter, when I came back, I think we immediately had like 17 or 18 people sign up on one day, which means that the people at home are doing their job because I had one member come up and he said, “I have four town hall meetings while I was there and on every single meeting, there were three or four people” who wanted to know whether he was going to support 1207.
Well, he really, you know, he had a general idea about it, but politically, it was to his benefit. You know, the people are stirring out there. In this sense, you know, pressure from the people, it’s pretty important. Most of the time though over the years, the pressure from the people has always been to spend more money and print more money and not have to tax people and keep doing this.
So now, I think the manner is good and I think it’s the right step. Everybody, if we had a vote today in the Congress on more transparency of TARP funds or the Federal Reserve, I cannot imagine anybody voting against transparency and that’s all we’re talking about.
You know, because Barney Frank is sympathetic. I know a lot of people don’t like him and all this, but he’s sympathetic on principle to knowing what the Fed is doing, so I work with him on that. The one thing he didn’t agree with me is on monetary policy. You know, he sort of likes Keynesian economics but he just happens to agree we should look into it.
Now, there are populist Democrats and there are some in Texas. They like it because they don’t like the Fed at all, but they want the Congress to be the inflationary people, “let Congress do it all”, and they’re not strong believers in gold and silver. So there’s different reasons, but to get this bill passed, we have to bring them all together, so I have liberals and populists and conservatives and libertarians. I’m getting a bunch of people now supporting this just on the principle that government deserves to be transparent to the people.
Gary Franchi: When Aaron Russo was alive, we would have conversations and I would say, “Aaron, what steps we need to take to get this country back on track?” And he always said, “Gary, we need to audit the gold in Fort Knox.”
Do you think there’s value in finding out how much gold, where is the gold at Fort Knox?
Ron Paul: Yes. If I had to guess, I would lean 60 to 40 that it’s probably there. But 40 percent question is a big deal and there hasn’t really been a true audit. I was on the Gold Commission in the early 1980s and there were 17 members and I brought up the subject. You know, “we’re studying the gold and gold in the monetary system, we ought to, you know, we’ll have a thorough audit and find out if the gold is really there”, and there were 15 who voted against it and 2 of us voted for the audit so it never got anywhere.
So we should know and the shenanigans that could go on, I mean, they could take it out, they could sell it, they could loan it and all these kinds of things they’ve been doing over these last ten years to keep the price of gold from going up. Our gold might have been a part of the vehicle that they were using.
So, you know, I mean, if we get serious about this it has to happen. We ought to be more serious, you know, about what should be done with the gold at the IMF. They’re talking about selling more or maybe all of it and giving the proceeds to the poor countries of the world, which means the dictators so those poor countries would end up getting it, but the gold should just be returned to the host countries.
I mean, we put the largest percentage in. It should come back to us. It’s pretty hard to give it to the people they took it from. But I think since they don’t believe in gold, we would all be better off if the gold was in the hands of the people. So I’d sell it. I’d sell the IMF gold. Under today’s circumstances, I’d let Treasury sell it because they’re not going to have a sound gold standard any longer. I’d just soon, you know, allow the gold standard to develop in the marketplace and that’s a way to do it also.
Gary Franchi: Some people have raised the concern that by advocating an end of the Fed, we may be… the message itself could be coopted by the international bankers by saying, “Okay, we’ll end the Fed, but then we’re going to give you the World Bank in its place or we’ll give you the IMF in its place.” What do you think about that?
Ron Paul: Well, they might, but I hope we can answer that argument. If we get rid of one thing and you give us something ten times worse, how is that going to be a solution?
Gary Franchi: Right.
Ron Paul: You know, if the power to create money out of thin air and manipulate the economy is bad when the United States does it, what makes anybody think it’s going to be a lot better if we just turn it over to another secretive body, which is under the United Nations.
Gary Franchi: Now, Linda in Kenneth Square says, how can each citizen help to get this passed, this bill, HR 1207?
Ron Paul: I think it’s dealing with your particular congressman. They’re political animals. They want to stay there and if the numbers are great enough, they’ll respond and right now, one thing I’ve noticed in Washington, the people who are in marginal seats, Republicans getting into a little trouble, they realize that our numbers – supporters for limited government – are growing and they’re trying to appeal to many of us.
And then the Democrats, the Democrats happen to be, you know, in a Republican seat who wants to hang on to it, they want to identify with what we are doing and they’re signing on to this bill, too, and trying to get active. So the key to it, go to town hall meetings, make phone calls, go to the offices, talk to the congressmen when you can, talk to their legislative directors, so it’s emails, faxes, the whole works. The very best thing is if you can get to a town hall meeting, talk to the congressman in person and never be angry about it. Always talk about it in a serious way, “Will you please take a look at this,” and just play on this transparency because this is the issue. We deserve to know and the people want to know… “why wouldn’t you be able to support something like this?”.
Gary Franchi: Now, I want to ask you about the possibility, is there any value to introducing something that could be brought to a state-level vote across the country in all 50 states to support an audit of the Federal Reserve?
Ron Paul: Well, I think so. I think it wouldn’t have a lot of legal clout, but it would have, again, polical clout and there would be a good educational tool and if you had just literally dozens and dozens of states passing these resolutions, I think it would be good. I think this has helped. I think eventually some of our drug laws are going to be changed because the states are changing them and passing resolutions. I think that’s very good. Also I think on the money issue, this would be helpful and I love these resolutions, although it won’t be held up in court, but when a state said, “We’re only going to deal in silver and gold. We were told the only thing we could use is silver and gold as legal tender.”
It just makes them look so foolish. They’re not going to accept the argument, but it makes them look so foolish that they at least have to think about it. You know, I guess that’s true. That’s what the Constitution says and yet, the states are speaking out, but I see all that activity as mostly educational but very beneficial.
Gary Franchi: Well, we’ve also got this movement now, this state sovereignty movement. The states asserting their 10th Amendment rights. You brought up secession recently. What can you speak to about that movement?
Ron Paul: Yeah, well, once again, they’re good, just for the publicity. But, you know, if the federal government cared about that issue, all they have to do is read the 10th Amendment themselves. But if the states do it, why should they listen to the states now, so I don’t think it will change anything just because the states pass these unless there’s enough of them and there’s enough pressure that will be put on the federal government, but the law is the law and the Constitution is very clear that they shouldn’t be doing things like this, but they’ve been doing this for years and years and years, taking over all the state authority and especially since the Civil War where it was eventually eliminated this whole idea that state should have sovereignty rights.
Gary Franchi: Now, Roger in Rochester, New York is asking, have you gotten any feedback as to whether the committee will allow this to go to the floor?
Ron Paul: I think there’s a pretty good chance. Barney Frank was asked that in a meeting. I think it was on the Internet this week and he said he was sympathetic. He disagreed with me on monetary policy, but agreed with me absolutely and he has promised me in public at the banking committee hearings, that he will hold hearings on this. I think that he will give us a fair shake. I don’t know whether he would ever let it come exactly the way I had it written, but it’s not like they’re absolutely close minded.
Now, we might meet more resistance with Nancy Pelosi, but not with Barney Frank. I think Barney Frank, at the right time, will see to it that we get a fair hearing on it.
Gary Franchi: Now, we’re telling people contact their congressmen, tell them to endorse or co-sponsor the bill. Can people do the same thing with the committee? Can they contact the committee members and say, “Hey, raise awareness, raise pressure for the bill.”
Ron Paul: Yes, they can do that and it’s beneficial, but it’s not near as effective as going to your own senators and your own congressman because Bernie Sanders introduced that into the Senate. I do have to run. I have another call coming in, but if you have one quickie, I can close up here.
Gary Franchi: Well, Dr. Paul, I just want to thank you for joining me on this edition of the Reality Report. Let’s see, Jeff in Jacksonville says how much more time will pass before we can begin the mainstream media talk about 1207?
Ron Paul: That’s a good question. When you hear… when CNN calls me up or a couple of other ones call me up and want to talk about this, then we know that day has arrived. It’s not here yet, but it may be in the midst of a currency crisis where interest rates are very high and the cost of living is going up 10 or 20 percent a year, then they might be much more interested, but we don’t know the date that’s going to be.
Gary Franchi: All right, well, Dr. Paul. Thank you so much for joining us and taking time from your busy schedule and we hope to have you back on the Reality Report and speaking to the people, so you have a great day. Thank you so much.
Ron Paul: Thank you.
Gary Franchi: Bye bye.