Venue: House Financial Services Subcommittee on Domestic Monetary Policy and Technology
Hearing: Regulatory Restructuring: Safeguarding Consumer Protection and the Role of the Federal Reserve
Ron Paul: Thank you, Mr. Chairman. I want to thank you for holding these hearings because I think they’re very important and the subject, Consumer Protection and the Role of the Federal Reserve, is to me a very important issue.
I look at this somewhat differently than others because they talk about consumer protection and they’re thinking about financial products and services, credit cards and gift cards and that if there’s any harm done to the consumer that just additional regulation will handle this.
But I think there’s a much bigger issue related to the consumer and the Federal Reserve, something I think is neglected in a serious manner. For instance, the Federal Reserve has something to do with the value of our money. The Federal Reserve has been around since 1913 and now, we’re working on a 4 cent dollar, so the systematic destruction of the value of our money has not helped our consumers. Our consumers are destroyed by the loss of their purchasing power.
The fact that the Federal Reserve regulates interest rates and gets them down to one or two percent, so if you happen to be a saver and you’re in retirement and you put money away, you get punished. Maybe the market would say that the interest rate ought to be 5 percent or 6 percent or 7 percent, if you’re a saver. But we punish them and it all has to do with the regulations and the manipulations going on with the Federal Reserve because the Federal Reserve is hardly a protector of the consumer when it distorts the interest rates that are paid to the savers and they’re the consumers.
Think about how the consumer was protected with the collapse of the financial bubble. The financial bubbles, it’s well known, come from inflating the money supply with lower interest rates, malinvestment, and too much debt. The source of all this mischief comes from the Federal Reserve and who suffers? The consumer. Who benefits? The people who have been making bundles on Wall Street and the bankers for years when the bubbles were being built, and then all of a sudden, the bubble burst and who gets punished? The little guy gets punished. He loses his trillions and trillions of dollars of value and who gets bailed out? Goldman Sachs and we pretend that the Federal Reserve is going to protect the consumer when the consumer is being destroyed under these conditions?
Think about the consequence of the collapse of the bubble that has been artificially created. Who suffers? It’s the consumers, the people who lose their jobs, the poor people, the middle class. This type of system that we have today historically, it is well known that if we pursue it and we are pursuing it because the middle class gets wiped out. Look at all the inflation throughout history. All the paper monies of history, the middle class eventually gets wiped out because the value goes down and the people who suffer the most aren’t the people on Wall Street. The people who suffer the most are the middle class. They lose their jobs, they lose their houses, and I just think that as well intended as this is to have more regulations to protect the consumer with their financial products and their other services, maybe it will help a little, but if you don’t address the subject of how the consumer is destroyed, it won’t help.
Mexico has gone through this quite a few times with destruction of currency. Who gets wiped out? The middle class, they are all holding peso. If the peso goes to the dogs, the middle class gets wiped out. Now, and I’ve had correspondence and meetings with members of Congress from Mexico and now they have a savings account in Mexico where if you’re frightened about the destruction of currency, you can actually go in and have a savings account in silver. Now, that is… they’re trying to help protect the consumer.
But here in this country, if you happen to want to use silver and gold as legal tender, you’ll go to jail, even though the Constitution tells us exactly what to say. So ultimately, this process will work its way through the Congress and there will be another consumer protection agency, but it’s not going to do a whole lot until we address the subject of how do you protect the little guy, the middle class, by having honest money and not allowing the monetary system to inflate at will behind closed doors and to benefit special interests.
This is what’s been happening for a long time. Some day, we’re going to have a revelation and find out that when we open up the books and find out every agreement that was ever made between the Federal Reserve and Goldman Sachs and have it on the record, maybe then we’ll find out how we can protect the consumer and not have a system that protects all the wealthy on Wall Street as well as those individuals that happen to work for Goldman Sachs. I yield back the balance of my time.