Show: Morning Meeting
Host: Dylan Ratigan
Dylan Ratigan: Joining the morning meeting is Congressman Ron Paul, Republican from Texas and a member of the House Financial Services Committee. His amendment to audit the Fed won approval in committee yesterday along with sweeping financial overhaul bill. Congressman Paul, your thoughts on the Fed chief?
Ron Paul: Well, I’m glad they’re talking about the Federal Reserve chairman and whether or not he deserves reappointment. But I think it misses the key point, and that is the functioning of the Federal Reserve, the whole purpose of the Federal Reserve, and all the power that they have and the fact that they’re secret. Bernanke is guilty of participating in this and I think it’s very important that the more they debate and the more they draw attention to the Federal Reserve, the better. But the problem is much bigger than Bernanke himself.
Dylan Ratigan: Elaborate briefly as to what that problem is and how the consequences, the sickness of that problem is manifesting itself in America today and the risks it poses for the future.
Ron Paul: Well, we have no restraint on monetary authorities and they do it in secret. So the last restraint on creating new money was eliminated in 1971, so they’ve had free license to create easy money, easy credit, and creating the bubbles and paper them over.
But right now they’re in the midst of a big crisis that they have caused. So it is the fact that they can manipulate the economy by artificially low interest rates with increasing credit which creates the bubble. So it does encourage these fancy derivatives and all these problems that you have and housing bubbles. But those are the symptoms and regulations won’t solve that. So more regulations prior to the bust might have helped a little bit, but that wasn’t the solution. It was curtailing the Federal Reserve’s power to create money and credit out of thin air. That is the culprit and it serves the interest of Congress because there is a lot of debt run up in the Congress. All these deficits have to been monetized. So it’s a collusion. The Congress is a little bit hypocritical of saying, “Oh, it’s all the Fed’s fault”, but the Fed accommodates the Congress, but its’ a whole system of deficit financing and printing press money and finally it has come to an end. But this was predictable, nobody who has studied Austrian economics should be surprised of this happening.
Dylan Ratigan: So as you go down the cascade from the incentive for the bankers to make money by printing money, who wouldn’t do that given the opportunity, to the incentive for the politicians to take the free money and give away cheap housing loans, reduce the cost of food, reduce the cost of energy by using these insurance fraud that the banks came up with ten years ago; that’s a win for the politicians. So the banks win, the politicians win, and the vigilant press isn’t there to do its job. I failed at CNBC and Bloomberg before in doing a better job by, for instance, being very critical on things like the swaps. And the vigilant voter is not there to throw people in Congress out for their failure to do this. And so absent a vigilant press and absent a vigilant a voter, how do you compete with this system where everybody in control is incentivized to run up the bill and everybody who’s taking the bill is asleep at the switch, being the voters and the press?
Ron Paul: Well, it’s an educational matter because everybody has accepted without question that Keynesian economics was good and was proper. It was good for the Fed to manage the economy with this control of the money supply and deficits weren’t bad, and it wasn’t problem. But now that has ended and quite properly the people are way ahead of the Congress and the Federal Reserve and they’re demanding information. The first step is to find out exactly what the Fed has been doing. As a matter of fact, nothing has changed. I mean, keeping interest rates now at less than 1% allows banks to borrow this money and then arbitrage it and invest it in treasury bills. And now Bank of America is making a lot of money again.
Dylan Ratigan: The taxpayer has been given them a great money machine, it’s just that it doesn’t do anything for anybody else, Congressman.
Ron Paul: No, No. it’s the same old story, though. You can’t solve the problem by just more of the same problem. So until we look at the nature of money and the nature of the Federal Reserve, the first important step is to open up the books and find out exactly what they have done, who has benefited and who has suffered as a consequence of Federal Reserve policies.
Dylan Ratigan: Very quickly, Congressman Paul, isn’t this ultimately a referendum on the U.S. government, and whether the U.S. government actually works in the interests of America and its future, or those who are in control of the government?
Ron Paul: Yeah, I think so and I talk a lot about what we have to ask is what should the role of government be. And if we think that the role of government ought to be to police the world and run a welfare state and not worry about deficits, we’re completely wrong. And what it’s telling us now won’t work; it’s coming to an end. So if we had the proper role of government, you know, we might consider looking at the guidelines given to us by the Constitution.
Dylan Ratigan: Ah, you’re crazy.
Ron Paul: Yeah, I mean that’s an extreme view. But then we would change our attitude about what government should be doing and we can correct this. But as long as we keep doing exactly the same thing and never giving up any of the perks and protecting the special interests and continuing our presence around the world. I mean, what do they do? They don’t have the money to expand the war, so they say, “Oh, let’s put a tax on business, put a tax on Wall Street”. Wall Street has benefited, but just more taxes on capital can’t possibly help tide us over with this foreign policy that we got.
Dylan Ratigan: Remember, you have that magic money printer back at the Federal Reserve and they can keep it secret. So you don’t have a problem.
Ron Paul: Well, that’s what they do, you know. I think transparency is the name of the game right now and we’re winning that fight. Transparency will reveal the problems that we have and maybe we’ll do something about it.
Dylan Ratigan: Well, Congressman, you have our open and unabashed support in that particular mission. I could not agree more. Once we can see what we’re dealing with, at least then we can try to deal with it.