Channel: Fox Business
Neil Cavuto: Ben Bernanke is back up on Capitol Hill. Ron Paul is wondering why the Capitol even bothers because if the Texas congressman and former presidential candidate had things his way, there wouldn’t even be a Federal Reserve, a point he underscored in sometimes testy exchanges with Bernanke today over its often secretive efforts to fix the country’s financial system.
Ron Paul: So it seems to me that you’re in the midst of massive inflation, but I guess you have a different definition. When you double the money supply, that’s not inflation itself? Or are you looking at only prices.
Ben Bernanke: May I respond?
Barney Frank: Briefly.
Ben Bernanke: Inflation is the change in the price of the consumer price level, which is very stable right now and the various measure of money, as you know, in the broad measures of money, the measures that cut the measures of money in circulation like M1 and M2 are not growing quickly.
Neil Cavuto: So Congressman, he more or less said your inflation concern was misplaced. What do you make of that?
Ron Paul: Yeah, yeah, that’s what he said. But when it comes, people will realize they should have been more concerned. Just like he was totally unconcerned about the crisis building. Remember the many years and months before the crisis hit, he reassured everybody that there were no problems. So I don’t know why we should be reassured by him now saying, “Don’t worry about inflation.”
But I was trying to make the point that the definitions are different. If you increase the supply of money, that is inflation. It causes harm, even if you don’t have your rise in prices yet. But we do have rising prices in medical care, as your previous speaker just said, there is a lot of inflation out there.
Neil Cavuto: And you’ve been arguing that a lot of this federal printing of money led by the Fed and all these rescues and bailouts where we are pulling money out of our you know what, I mean, that’s going to be eventually inflationary. Now, you, to be fair to you, you’ve been saying this long before even our economists started picking up on this. What is your worry now? How pronounced is this threat? How soon is this threat?
Ron Paul: Well, I don’t think you can predict, that’s one thing, Austrian economics teaches you that you can predict trends, but not timing and yet, it will come because the money supply has been increased. There will a…
Neil Cavuto: He said he’s going to be ready for that, Congressman, and that the Fed is already ready to act when it happens.
Ron Paul: Yeah, sure.
Neil Cavuto: But you argue once you see it, it’s too late to address it.
Ron Paul: Yeah, he also said that he will never monetize the debt. Well, he has no choice. If he doesn’t monetize the debt, interest rates are going to skyrocket and that he doesn’t want and the financial markets don’t want that. So he would be fired rather quickly by the president if he allowed, if he said, if he lived up to saying, “I’m not going to monetize any debt.”
Neil Cavuto: Well, by the way, do you think he is going to be reappointed by the president?
Ron Paul: Probably. But, you know, I don’t worry too much about that because I don’t blame him for creating this tremendous mess. He’s not doing much to help us, but he didn’t create the huge bubble. So about putting another manager in, it’s who… you’re asking about who should be the central economic planner through monetary policy and I don’t think there’s anybody in the world smart enough to do it because the system is deeply flawed. So whether he’s reappointed or not doesn’t matter, but my guess is that he probably will get reappointed.
Neil Cavuto: Let me ask you, Congressman. We have seen, certainly in the markets and in some of the economic numbers and certainly in most of the corporate earnings we’ve been getting thus far for the second quarter, some surprisingly good news. In fact, a number of companies are saying that they see light at the end of the proverbial tunnel. Things are looking up. I don’t know all these people buying Apple products, but they must be millionaires because the company is on fire. So my point is, is the economy or the markets or these companies are telling us something that, your concern notwithstanding, things are looking up?
Ron Paul: I guess, temporarily they could. They’re looking up at Goldman Sachs, that’s for sure. But if you look at the unemployment rate and I mentioned this today, that if you look at the private statistics and add up all those people who’ve given up looking for jobs, the numbers are closer to 20 percent. They’re not feeling very good about what’s happening. More people now are storing…
Neil Cavuto: So you’re not buying it. And the bottom line is you’re not buying this.
Ron Paul: No. No.
Neil Cavuto: So if you’re right and I’m not jumping to the false conclusions that you might be making, but slow down with inflation is stagflation. Do you see that where we are heading?
Ron Paul: Yeah, yeah, that’s what we’re going to have and as far as the economy is concerned, I think most people now are starting to recognize that the correction hasn’t really taken place, especially now they’re talking about the commercial properties. Nobody is denying that there are some problems out there.
So if there’s a little blip in the economy after doubling the money supply and bailing out everybody and they come up with a few favorable statistics, if that makes everybody feel good, fine. But I wish it were better than I think it is.
Neil Cavuto: All right. Congressman, it’s always good seeing you. Be well.
Ron Paul: Thank you.