Channel: Fox Business
David Asman: Congressman Ron Paul who joins us now by phone from Texas and has been warning us about all this for quite some time. Congressman, it’s good to have with us. Did you expect it to be this big this soon?
Ron Paul: Well, I’m not a bit surprised. As a matter of fact, I think it’s going to be bigger than 1.8.
David Asman: Wow.
Ron Paul: There was a time, a few years ago, I predicted we’d have a deficit in one year of $1 trillion, but here we are, we’re really approaching $2 trillion. It shocks me, but it doesn’t totally surprise me because of the kind of arguments I hear in Washington. It’s always spend, never cut, print money, borrow money, nobody is denied anything, fight every war in the world, give everybody every benefit in the world. I mean, sometimes I just think they’re delirious, you know.
David Asman: There does comes a time, Congressman, and you’re always warning about this, when you have to pay for it, when you can’t just presume that it’s all free money that it actually does come home to roost and catches up with you. How are the folks out there, let’s not get caught in the weeds quite yet of monetary policy, how are the folks out there watching going to feel the effects of this deficit?
Ron Paul: Well, the deficit will be liquidated. We know that. It is never paid. It has to be liquidated and that’s a good thing. That should be liquidated when it gets out of whack and when we go through these processes, the government should get out of the way and the debt should be liquidated.
But the big debt, the big $50 trillion, you know, we do talk a lot about passing this on to the next generation, but we’re past that now. We’re in the process of liquidating that debt and that is through the destruction of money. All the debt is going to be paid.
David Asman: Okay. Let me just speak clearly, Congressman. Just so that the folks out there understand when you’re talking about liquify. It’s almost like the Wizard of Oz, you know, I’m going to liquidate her.
You’re just talking plain and simple about printing money and that creates inflation to pay the bills, correct?
Ron Paul: Right. We can’t pay the bills and we’re not productive enough or smart enough to quit spending and pay the bills off. So what we’ll do is we’ll literally pay. You know, we owe China about a trillion. Well, they’re going to get paid, but they’re going to get paid with money that is worth a lot less.
So Bernanke doubled the money supply in the past eight or nine months. Now, that hasn’t translated in doubling all the prices, but it will eventually and maybe it will be a lot worse, then the dollar is only worth 50 cents on the dollar, so we are liquidating debt.
Our national debt, as horrible as it is, is actually going to be going down without taxation. But believe me, it’s a lot worse than paying your bills and working our way out of it because runaway inflation is just horrendous.
David Asman: It’s scary. It’s scary. By the way, we’re looking at pictures just so you know, Congressman, of you interrogate or questioning I should say Ben Bernanke who we are about to hear from, by the way, in about a half hour, but let me just run a clip from that hearing. This was just a couple of weeks ago between you and Ben Bernanke and then get you to comment.
Ron Paul: Okay.
David Asman: Go ahead. Run the clip.
Ron Paul: Give me an idea what you precisely would do if you faced a situation where prices are going up 10 percent with no economic growth.
Ben Bernanke: Well, I think that’s an unlikely scenario. But we certainly would have to take steps to ensure price stability because if inflation gets out of control, we know that it has very adverse effects on the economy, both in the medium and long term and so we would obviously have to address that.
David Asman: Now, that was just last week, by the way. Clearly at that point, Congressman, he had an inkling because these guys know before we do what the deficit was going to be. He thinks, and correct me if I’m wrong, but I think he believes that before we actually create huge inflation to pay for this thing, we’re going to grow our way out of it. Do you agree with him?
Ron Paul: No, it’s impossible and I argued also that same day that we already have the inflation because free market people define inflation as increase in the money supply. One of the consequences of that will be rising prices and everybody knows about it. But he believes that he knows how to remove all this excess credits when the time comes.
But my point is that inevitably fiat money leads to the conditions where prices are going up, the economy slows up so much that nobody will turn, you know, the spicket off.
David Asman: All right. Let me stop you right there because you’ve throwing a lot out there. The Obama administration says US economy is going to expand at 3.5 percent annual rate by year-end and again, they support Bernanke’s side that we can grow our way out of this. You say that’s just a pipe dream.
Ron Paul: Well, yeah, I don’t believe that’s going to happen and even if you had a 3 percent nominal growth, what s the real growth going to be? What if we have a 6 percent inflation rate? You’re still losing. So you have to know what they’re talking about, but we’re not going to grow our way out of it. I mean, just look at… we’ve lost 5 million jobs. Our steel plants are overseas. We don’t build cars anymore. We don’t save in a real sense.
So all of a sudden, to be able to grow our way out of it and with this kind of spending and taxation and burden on the people? No, it’s not going to happen. We may get a little reprieve, a little bounce, that’s what the stock market is saying, but I surely wouldn’t be reassured by that.
David Asman: All right. Finally, the Central Bank president, we call him Central Bank president, the Federal Reserve Chairman Ben Bernanke says that the Central Bank is, “Prepared to reduce the assets on its balance sheet promptly as the economy recovers in order to ward off inflation.”
You don’t believe that Ben Bernanke, by the way, who’s up for reappointment as chairman, I believe, in December, you don’t think he has the gumption to do that?
Ron Paul: Well, you know, he said that if there’s growth, he’ll remove it. But my point and my question was is what if there is no growth and then I also said that he would be between a rock and a hard place because, you know, if you turn off the money spicket, then the economy tumbles even more.
David Asman: Yeah.
Ron Paul: No, he [...] in inflation.
David Asman: By the way, did you say he’d be between Barack and a hard place?
Ron Paul: The rock.
Ron Paul: The rock and the hard place. That’s pretty good.
David Asman: Yeah. That’s pretty good. I thought… all right.
Ron Paul: He’s going to have a tough time making that decision and politics enter into it. You know, if you have sound money instead of designing a central economic planning system through banking, which is the Federal Reserve System, we’d be a lot better off. I mean, that is what we should have, a sound money and free market economics. We should be saving money.
Today, why do you want to save money when you get less than one percent in your savings? Who’s going to save? We need to spend less. Everybody says, “Spend more, don’t save money and prop up prices. Keep the prices high. Don’t lower the price of labor. Don’t lower the price of goods. Don’t lower the prices of houses. Build more houses.”
David Asman: Yeah.
Ron Paul: We need a correction. Correction should be a good word. When the government screws things up and makes things, you know, so much out of whack, we need a correction and a correction is a healthy thing and everything we do in Washington, everything the Central Bank does is they work real hard to prevent the correction. That’s why it’s prolonged.
David Asman: Well, and you and I both know they won’t be able to do that. You can only go against Mother Nature so long before it comes back to bite you. Congressman, we’ve got to leave it at that. Ron Paul, great to hear from you, sir. Thanks for being here.