Ron Paul Answers Questions on C-SPAN’s Washington Journal

Channel: C-SPAN
Show: Washington Journal
Date: 12/03/2009


Susan Swain: Former presidential candidate, Ron Paul of Texas, a member of the House Financial Services Committee and the author of the bookEnd the Fed” is our guest for our next program. Dr. Paul, thanks for coming in this morning.

Ron Paul: Thank you.

Susan Swain: One of the things I wanted to start with is the fact that Ben Bernanke is going to be up on the Senate side of the Hill today with a confirmation hearing on re-nomination of his position. You’ve been speaking about the Fed for quite a while now. It seems as though the chorus has gotten louder.

Ron Paul: There is no doubt about it. But I think it’s symbolic of the severity of our recession/depression. The people are very worried and they’re sending strong messages to Washington. I guess the reason that the bill I had to audit has become very popular. People are very, very concerned and I think rightfully they’re looking more closely at the Federal Reserve. It’s generally been ignored. As long as we’re surviving and doing well, they don’t look to the source of our problems. But now that we’re in serious trouble, people are becoming much more aware of how the Federal Reserve operates and how they participate in the crisis that we have.

Susan Swain: Give us a list of the tough questions that you would ask if you were on that panel questioning Chairman Bernanke today?

Ron Paul: Why do you think we should have a Federal Reserve at all? And why won’t you tell us how you spend the money, who do you buy the assets from and at what price? What kind of deals do you make with foreign governments and foreign central banks? What are the agreements? Have you ever been involved in the gold market, you ever buy and sell or loan the gold in order to keep the gold price lower? So, we can ask them a lot of questions, but we’ve asked those kinds of questions over the years and you never get answers.

Susan Swain: Is the information to any of those questions available?

Ron Paul: No, not really. To be sure, there are a lot of assumptions and people postulate. But we know approximately how many bad assets they brought up in the mortgage security market in the crisis; over 800 billion. We know they created money out of thin air to do that. We don’t know how much they paid and who they paid, who they bailed out, who they refused to bail out, because these assets were called illiquid. And illiquid means really they’re worthless. But indirectly the taxpayer ends up buying these and they probably paid these companies, Goldman Sachs or somebody like that, the nominal value – the face value. And it might have even been worthless or worth 10 cents on the dollar.

So it’s very, very important, especially when you finally come to the conclusion that this is the source of the problem, this mischief of the Fed creates the business cycle, it causes inflation, it causes the unemployment. And they say they don’t want transparency; they want independence. Independence means secrecy. And the American people are waking up and realizing that the Congress has a responsibility. They created the central bank and they ought to act more responsibly by knowing what they are doing.

Susan Swain: How would the American economy function if there weren’t a Fed?

Ron Paul: A lot better. I mean, we have perpetual business cycles that have gotten continuously worse. And now we’re in the midst of one very big one. The Fed came into existence in 1913 and it wasn’t too many years later that they gave us the Depression. They were responsible for the Depression.

Susan Swain: In what way?

Ron Paul: Well, when they started in 1913 they inflated; that means they created excessive credit, had interest rates too low, and that was for World War I. But then they still understood that they couldn’t keep doing this, so in 1920 they quit inflating and they had a pretty bad depression in 1920/1921. But they didn’t interfere with it; the corrections occurred and it as over and nobody even remembers about it. But then they want back to inflating in the 1920s thinking, “We’ll stimulate the economy and keep printing money”. So they had the stock market bubble as a consequence and then they felt, “Oh, this might be getting out of hand” and they tightened up the credit and they bring on the correction but they perpetuated the depression by continuing to do the same thing; continuing to prop up bad debt and not allowing the correction to occur like they did in 1921.

And it goes on and on. We’ve had recessions since then, there have been numerous. But because they were able to cover over them rather quickly and sort of put them aside, all they did was build a much bigger bubble which was destined to burst and that’s what happened in 2008. Well, that bubble has burst and now we’re in the midst of a correction which has a long way to go because they’re doing exactly what they did in the Depression – they’re trying to prop up all the bad debt.

Instead of eliminating the debt and eliminating the mistakes, the malinvestment and getting back to work, they’re buying up the bad debt. Instead of buying up all these housing securities… see, the housing prices should go down sharply, more so than they have. And the debt should be liquidated and then people would come back. But instead, Congress and the Fed keep trying to stimulate, to keep the prices up, keep housing building going on. There are 18 million houses sitting out there to be bought. The last thing they need is a stimulus. They need correction; they need a pause. And it would be painful to permit the correction – for about a year. But this way they’re going to drag it out for a decade or two by prolonging the agony.

Susan Swain: All morning we’ve been talking about jobs creation. What’s your prescription for it?

Ron Paul: Well, one would be to get rid of the Federal Reserve because they’re responsible for the unemployment. They create the bubble and it seems to be great when the bubble is being inflated because it feels good. People can buy houses and prices of houses go up, then they think they’re rich and they borrow against the equity. But it’s all an illusion. So they create the bubble but when the inevitable correction comes you get the unemployment. So you need to get rid of this whole concept that you can have central economic planning by a secret group of men and women behind closed doors that can run the economy by talking about the price of money – what should the interest rates be, what should the supply of money be.

It’s a totally rejection of free market capitalism. It’s a Keynesian planned economy and it’s been predictable. The Austrian economist I started reading in the 1960, all their predictions have been correct. They don’t have a timetable, they can’t say when the bust will come and what the price inflation will be next year, what the unemployment rate will be. But we do know that the correction always comes. There is always a price to be paid. The devaluation of the dollars always occurs and the more you try to prop that up, the longer the unemployment lasts and the deeper the recession gets.

Susan Swain: Let’s hear your questions or comments for Ron Paul beginning with Rich (Republican line) in Orange Park Pennsylvania. Good morning, Rich.

Rich: It’s actually Orange Park, Florida.

Susan Swain: Sorry.

Rich: Alright. Congressman Paul, I know you’re a follower of Austrian economics. But not all Austrians are the same. I’m curious as to which Austrian economist you most likely follow, Mises, Hayek or Rothbard.

Ron Paul: I think all three. They have slight disagreements. Menger started the school, Mises followed up. Mises is the best known and probably the person I look to the most for intellectual guidance. Hayek was a student, he’s a great person, talks about competing currencies. Rothbard studied under Mises, I knew him rather well. Sennholz was another. I look to all of them, their disagreements are rather minor compared to the difference between what they’re saying and what Keynes has said.

What’s going on today is a contest between Mises Austrian economics and Keynes, because Mises was a well known economist in the 1920s and the 1930s and he predicted the Depression. But he was totally rejected because people didn’t want to hear it. They didn’t want to hear that you couldn’t inflate the money supply and regulate the economy and have deficits. And people loved Keynes because it sounded like a panacea. But what we’re doing now is having competition between the two factions. But what’s evident now is central economic planning and central banking has totally failed and that’s why we’re in the midst of this crisis. So I think the Austrian economists, all of them, are winning right now.

Susan Swain: Our next telephone call is from Columbus, Ohio. This is David on the Independent line. David, go ahead please, you’re on the air.

David: Good morning. Good morning, Congressman Paul.

Ron Paul: Good morning.

David: I have to tell you I was thinking about you the other day. I’m running for Congress here in Ohio’s 15th district and we had a question and answer session and I’m a supporter of a noninterventionist foreign policy. And my opponent accused me of being an isolationist. I was sitting there and it kind of reminded me of the instance with you and John McCain there. But my question for you is this: concerning the president’s Working Group on Financial Markets, if you were elected president in 2008, would you have kept the group? Could you explain why you would disband the group? If so, would we have seen more transparency and what would their function have been?

Ron Paul: Well, it’s another secret group and it was created by an executive order. I would just reverse the executive order. We don’t need another group of people even though they are part of the government like the Federal Reserve and treasury and the CFTC and SEC people are all involved. But they get together and they have this subtle authority to do whatever they want to prop up markets. For all we know, they buy and sell. It’s called the “Plunge Protection Team” and when it was started in 1987 after the stock market crashed, Wall Street sort of liked it, and probably some still do, thinking, “Oh, this will prevent the crash”.

But even if they get in the market and they slow up a bad day, they get in and start buying, they can’t change the markets. It’s sort of like them interfering in the gold market and keeping the price of gold artificially low and the dollar artificially high. Eventually the market wins out. So no, we shouldn’t have these economic planners; in a way they’re an extension of the Federal Reserve and the Federal Reserve is a key member of the president’s working group on financial markets. We shouldn’t have that. We should get rid of it. We should really believe in the marketplace, believe in the free market economy and that’s when people make the decision.

Actually, Austrian economics teaches that the businessman doesn’t run the show and labor doesn’t run the show. The consumer runs the show. The consumer votes every single day with every single thing they buy when the market is working. So if the businessman isn’t doing well or is paying too much for labor, they go out of business. And they have to be left to go out of business. Today, we interfere. People tend to go out of business and then we prop up all the people who have made the mistakes. So the free market economy doesn’t serve the special interests of high cost of labor or profits of businesses. But it does serve the consumer and we’re all consumers.

Susan Swain: Well, talk more about your philosophy of wages then. People complain that they’re not able to compete with the salaries paid in other countries and that they have to be able to earn a living wage for life in the United States.

Ron Paul: Yeah, and they have been shortchanged because in the last ten years or so real wages are going down. But that’s again back to the Fed; they depreciate the currency. So if they’re making 20 dollars an hour or 25 dollars an hour or 30 dollars an hour, it never keeps up with the cost of living. So inflation is a tax. Taxes are higher than the salaries are going up, so that hurts labor.

But on the other side of the coin, if you had a free market you wouldn’t have the Fed destroying the value of the currency, but you wouldn’t have the power of the labor union to push the car automobile employees (the labor in automobile industries or steel industry or the railroad industry) way above the market, to be paying some of these people 80 dollars an hour when the market rate should be 40 dollars an hour. But they get it because of the power and influence of unions; they put them out of business. This was so dramatic.

Look at what happened to Michigan where the unions have been strongest. They’re the ones who destroyed General Motors, not by themselves, but in combination with what the Fed does and overregulations and lot of other things. But companies in the south might have less regulations and they might have a more market level for labor and they survived.

But you can even do this globally. Once again, the businessman has to make profits to exist. So he goes to keep labor cost down to get the consumer the best deal. But our problem is our whole country has interfered with the marketplace and pushed costs so high with overregulations and inflation and all these problems. So we’re pushing labor overseas. And that, of course, exports jobs and everybody gets hysterical about this and they say, “We have to stop it and we have to draw the line and don’t permit this to happen”. But they have to change the policies. The jobs going overseas is a symptom of very bad policy. So you have to talk about the policies that prompted this to happen.

Susan Swain: Well, Ron Paul will talk about Federal Reserve. Karl, Democrats line 11, Oregon.

Karl: I’d like to ask him what we’re going to do about the debt that we got. And he’s talking about keeping labor down. The thing about it is I haven’t figured out why in the hell that we can’t come to a happy medium where a company makes a fair wage and a worker makes a fair wage. A worker has got to be able to live.

Susan Swain: Thank you, Karl.

Ron Paul: He’s absolutely right. He has to have a fair wage. But as I explained, the wage is not fair and it is going down because the money is being depreciated. His question about the debt is very important. What are we going to do about the debt? Well, we’re not going to pay it off, we know that.

When a country gets so deeply in debt that it can’t be paid, they liquidate it; they default. They don’t default by not paying it. If you own a treasury bill and if you have $10,000 in a treasury bill, you’re always going to get your money. But the Federal Reserve doubled the money supply last year, so if you have a treasury bill that is 5 years and you finally go and take the money out in 5 years, instead of getting $1,000 back you might $500 worth of purchasing power or $400 worth of purchasing power.

The dollar right now is worth 4 cents compared to the dollar that the Federal Reserve inherited. But the debt is liquidated, in the true sense of the word, in the purchasing power. If we owe 10 trillion dollars and we inflate or destroy the value of the dollar at 20% a year, that’s 200 billion dollars that’s wiped off the slate. So governments always default, but they don’t default like an individual or a company does by just refusing to pay because they don’t have the money. Governments are always powerful enough to create new money and deceive the people. But nevertheless it’s every bit as immoral, it’s more deceitful and it’s something that should be prohibited and it has to do with the nature of money and that is why fiat money, paper money, is so dangerous to us.

Susan Swain: Michael Freeman says of your political philosophy: always liked your independence, but he forever loves public schools, roads, bridges, regulated businesses and medical care improvements.

Ron Paul: Who does?

Susan Swain: This viewer. So he’s trying to square your independence with the fact that he appreciates that the public sector brings us things like schools, roads, bridges and the like. What would you say to him?

Ron Paul: Well, first, the Constitution doesn’t give us that authority to do any of that. When Eisenhower developed the interstate highway system he used the excuse of saying “This is for national defense purposes”. They realized that it wasn’t constitutional to do it. But that doesn’t mean you wouldn’t have some public roads because all the states would be able to do that and they could coordinate in their efforts. Schools still could be local and public and they probably could be doing a lot better job than we have been for the last 30 years or so with the federal government getting involved. But there is no authority for the federal government to be involved. So there is no benefit from that.

So yes, some of those functions would exist, but some of them could be picked up by private sources. You do have a lot of roads in private developments paid for by the developer. They’re protected and they have security and there are other ways that it could be done. But the fact that you don’t do it at the federal level in order to run up debt, because once you assume government can give all these things to people, they get involved in medicine, and education, and all the things that are not in Article 1 Section A. This means it becomes a political football and the politicians say, “Ah, we got to do it. We got to get re-elected” and they vote for all this and then there is no money. They try to raise taxes but there is a limit. They try to borrow and there is a limit or the interest rates go up. But then the wonder comes: “the Fed will take care of us”. We can send those treasury bills over to the Fed, the Fed has this magical machine, they just crank it out and they crank out new money, which is the tax because it devalues the currency.

Susan Swain: Next question is from Lincolnton Georgia, Al, republican line.

Al: Good morning, Dr. Paul.

Ron Paul: Good morning.

Al: The debt requirements for the U.S. government for the next year are figured to be about 350 billion dollars a month, and that doesn’t include the future bailout. So we’re looking straight at in the trillions where the state can guarantee corporations in the FDIC and the like. How can foreigners possibly be buying up all this debt now? Much less, in the future, especially when Japan and Britain are doing pretty much the same thing with their horrendous debt requirements; they’re money printing. Is gold telling us that we right now have near total monetization by the Fed and these other central banks?

Ron Paul: Well, some of the countries, say China for instance, sort of fed into this. They were glad for us to buy products from them and they were savers and they end up with a lot of dollars – more than a trillion dollars – and they don’t know what to do with them so they buy our treasury bills. So they would feed it back and that would the economy by keeping our housing industry going and they kept thinking they were benefiting by that.

But they’re getting worried about it and they talk about it. “Well, there is a limit, you guys over there in the United States better be careful”. But they can’t bring the house down, either, because holding too many dollars. They have to sort of protect the dollar and they’re going to ease out and they’re easing out now by easing in to gold. Just as India and the east are doing, the gold is leaving the west and going to the east. Production is leaving the west and going to the east. The IMF is selling gold but the Europeans sold gold. And we suspect that even our government may have loaned the gold which we’d like to know for sure if we could get an audit. But it is shifting over, but the price of gold is telling us not that the price of gold is going up but the value of the dollar is going down.

Historically, for 6000 years the value of the money has always been measured by gold. And that’s an economic law that just exists and you can’t repeal it by saying, “Oh no, we have a very smart group of people who know how to make paper money act like gold”.

Susan Swain: Ben Bernanke’s confirmation hearing will begin at 10 am Eastern Time, with live coverage on C-Span 3 and This question by Twitter is, “I’d like to know how Ron Paul would explain economic crises before the Fed was created? It can’t be all the Fed’s fault.”

Ron Paul: That is a good question because there were certainly booms and busts. But there was a lot of times inflation by fractural reserve banking that wasn’t prohibited. We certainly had a lot of inflation during war times, whether it was 1812, or whether they inflated especially during the civil war period. As a matter of fact, they went totally off the gold standard in the civil war period, but it was always excessive credit. That means we did not have a perfect system before.

But if you took the long term, say from the beginning of our country up until 1913, because they usually would go back to restraining the effort to inflate, prices remained relatively stable in the long term. It’s only been since 1913, and especially since 1971, when the last link of gold has been removed. So those debts and crises that occurred were usually short lived, because they got out of whack by excessive credit going into the market, and a lot of speculation. But they knew to leave it alone, they didn’t try to prop up all the bad investments and the bad debt. There was no rescue operation and it was over rather quickly.

But this argument has being on for a long time. Jefferson and Hamilton argued about a central bank and we had 2 central banks in our history and Jefferson got rid of one and Jackson got rid of the other one. So it’s an ongoing process. But it’s the secretness and the power that exists with the central bank that finally usually it arouses the people to the point of saying, “This is a bad deal, we need to know more about what’s going on”.

Susan Swain: We have about 15 more minutes with Ron Paul. The next telephone call is from Port […], Florida. This is John on the independent line.

John: Very good morning, Dr. Paul.

Ron Paul: Good morning.

John: I have a question for you. I think it was January or February of this year when there was a story that broke about a couple of guys trying to smuggle 135 billion dollars worth of government securities into Italy. And there were rumors the Federal Reserve was involved. But that story seemed to have dropped as quickly as it came on the scene. Do you have any update on that?

Ron Paul: No, I’m sorry I don’t. I remember reading that but I don’t know exactly what was going on. But you know, it reminds me of the stories verified of us shipping carloads of cash over into Iraq to be distributed. Literally billions of dollars of cash and there was no auditing of that process. They don’t really know exactly where this cash went into Iraq. So a lot of those things happen. But maybe something like that would come out in an audit, but I’m afraid even with an audit they would be able to cover their trails and cover up most of that kind of stuff.

Susan Swain: If the legislation coming out of Chairman Barney Frank’s Financial Services Committee, of which you are a member, becomes law, will the economy be in a better state or worse?

Ron Paul: I think it will be in worse state even if it has the audit provision in it. You know, it is a tremendous amount of regulation and Chairman Frank has been sympathetic to having more transparency in the Fed. He didn’t vote for my amendment, but he did nothing to try to prohibit it. He’s been very fair and he said it’s going to be in the final bill and he knows that I will vote against the final bill if that would be helpful.

And Chairman Frank has heard me say this so many times, “You can’t compensate for the mistakes of the Fed by regulators” thinking that we create all these mistakes and prices going up and artificial interest rates and mistakes are made, you can’t say, “Well, we’ll just have regulation that will cancel out all those mistakes”. I see this as an impossible task. I want regulation but I want it to be free market regulation. I want bankruptcies to occur and I want, of course, transparency of the Fed. I want treasury regulated so we know what they’re doing. But the regulations that are packed into that bill remind me of the kind of regulations that we did in the mid-1930 which prolonged the depression.

Susan Swain: One viewer took away from what you just said: “So Ron Paul has decided even before an audit that the audit will do no good. Interesting.

Ron Paul: Well, no. Of course, if we had an audit we’re going to do a lot of good if it’s a true audit. But the whole thing is the question was, will it cancel out those regulations, and no. So the audit will not correct all our mistakes if we’re making more mistakes and it really isn’t meant to solve the problems. It’s meant to get to the seed of the problem. Because my bill actually purposely got away from managing the money supply and monetary policy because it would have been too controversial. We had 313 co-sponsors. But they would have never co-sponsored if I would have said, “Oh, this is interfere and regulate the money supply, that’s what would happen”. So no, things do not get better just with an audit, except, that is a stepping stone to find out who are the beneficiaries and what kind of mischief they’re in and hopefully that would lead to a more commonsensical approach to monetary policy.

Susan Swain: Kansas City, Missouri, Shawn on the Democrats line.

Shawn: Yes, thank you C-span for taking my call and I would like to ask Ron Paul two questions. Should these corporations that deal with China be tried for treason, being that they’re using their profits to build their military to aim their missiles at us? And two: During the Korean war China killed a lot of American troops and we’re in such a bad shape in our country, why do we keep giving billions to all the other countries, you know, to aid them, like Israel, Egypt, Saudi Arabia. Ain’t that hurting us, too?

Ron Paul: Yeah, it is. But businessmen doing business with China is not treason. But us being in the arms business selling weapons around the world, whether it’s to Israel or to the Arabs, I mean, we arm both sides of all the conflicts and most of the time the weapons end up being used against us. So I think that is very bad. But not doing business with China would be like saying, “Let’s not do business with Japan, let’s not do business with Germany”. China has changed. I mean, they don’t believe in individual liberty like we do. But I’ll tell you what, in some areas they believe in economic freedom. I mean, it’s easier to start businesses over there and their prosperous people save, and they do some things that we used to be known for. They’ve become our banker. So I would say that yes, those kind of things happen. And the Korean war… but I don’t even think we should have been involved in the Korean war. It was a tragedy. What were we doing over there? What were we doing in Vietnam? So I just don’t think that coming down hard on China and saying that they’re all at fault … I think if they’re willing to trade and be honest with us, we should treat them more like Japan and Germany because they killed a lot more Americans than the Chinese did.

Susan Swain: Jon is watching us in […], Pennsylvania on the Republican line. You’re on for Ron Paul.

Jon: Yes sir. I’d like to read you quotes from July 1922 in the Harpers magazine; the business and financial section titled “Industrial activities and improving conditions” by John Grant Dater. “Despite the presence of various adverse factors in the situation, general business is much better at this writing early in June than it was at the beginning of the year. And the outlook for the future is more promising than it has been at any time since the reaction set in more than two years ago. In consequence of the severity of the depression and the necessity for drastic liquidation continued over many months, the improvement that has to go up thus far has been more pronounced in the conditions surrounding money and credit than elsewhere. But it has been finding a reflection of late in the numerous departments of commercial activity. And the movement has gathered such momentum as it has progressed as to lead to the conclusion that the betterment is something more than a mere seasonal recovery”. And I’d also like to state real quickly, Representative, that I once lost a house down in Pasadena, Texas in about 1990 and that was due to the depression down in Texas that was happening. And that was when […] laid off like 50,000 people and nothing was ever done. People lost their momentum and their lives, you know. And I know after I left Texas nothing was ever right in my life because I was no longer a Texican and I also wasn’t from Texas, it wasn’t right, you know? And you see everything happening today with giving everybody extended unemployment and all like that, I didn’t have anything down there in Texas. Everybody just ignored the situation.

Susan Swain: So, how are you doing today, Jon?

Jon: I guess not too good. The only thing I got is 8,000 bucks, and I rent. Thank you.

Ron Paul: Well, you know, as far what they should do, you quoted what it was like coming out of the Depression of the early 1920s. The unfortunate thing is they went back to inflating again in the 1920s so that lead up to the Depression. But they got over that depression in 1920 and 1921 rather quickly and too bad we didn’t do that a year or so ago. We would have been talking about true recovery by now. And they talked about liquidation and the debt would be liquidated if we would have just allowed it to happen.

Susan Swain: A viewer named Manuel […] asks by Twitter, “Will Ron Paul run for President in 1912?

Ron Paul: Oh, that is a long time off, I don’t have any plans to do that.

Susan Swain: Miami, Mike on the Independent line for Dr. Paul. Go ahead please.

Mike: Good morning, Mr. Paul. Supposing we enforce one single labor law – equal compensation all over the world, minimum wage compensation – just that single law. Could you please comment what would be the economic result if we only enforce that and don’t bring up anything else? Because I think this could be done easily and it’s going to have the largest impact on the economy.

Ron Paul: I would say, let all labor cost be dictated by the market. Let not the government have any interference in what the price of labor should be. Whether it is minimum wages or artificially high wages by force of government. The market should set labor and you would have full employment.

Susan Swain: Next is […] Michigan. Good morning to Joel on the Democrat’s line.

Joel: Hi.

Susan Swain: Joel, you are on the air.

Joel: So, Congressman Paul, I’m afraid I lay the blame at the door of the legislature.

Susan Swain: Why is that, sir?

Joel: Well, you know, particularly in times like this we need to help our suffering neighbors. But the legislature refuses to tax and instead it accomplishes its goals by letting the Fed inflate the currency. I wonder if you can comment on this.

Ron Paul: Well, whom are you going to tax? People are paying too much taxes already, so that’s not going to work. But I agree with your statement: look to the legislature. They’re the source of the problem, yes. They’re in collaboration with the Federal Reserve. But if you’re going to start bailing out and you don’t want the Fed involved, that means you’re right; you have to raise taxes. But raising taxes right now in the midst of a recession, or any time, just destroys capital. And capital is what’s in the banks: that is true savings. And then you don’t have anybody to invest and build businesses and create jobs. So you don’t want to tax and you don’t want our government to go into further debt, and you don’t want the Fed to print.

But I would not think for a minute that any solution or any good could come from raising taxes in order to prop up a system that we created in the legislature. So I agree probably with half of what you’re saying: the source of the problem is in the legislature that has permitted this to go by.

For instance, the housing bubble occurred because of the Fed easy credit. But also the legislature, the Congress, passed laws that actually dictated that banks make these sub-prime loans. “Give loans to people who don’t qualify”, and it’s like a Christmas tree. You buy a house for a $100,000 and the value goes up to $150,000 and they borrow against it. So that was a result of legislation. So it was artificial. It looked great but it was like a drug addict taking drugs and feeling good and they don’t want to have the symptoms of removing the drug. So some day the drug should be removed or we’re going to kill the patient.

Susan Swain: What about a tax specifically to fund the war in Afghanistan?

Ron Paul: No, I mean, my answer is the same: no taxes. We should be lowering taxes. But we shouldn’t be in the war; we don’t need any of those wars. I mean, we’re in a financial crisis now and we have a foreign policy that’s a major reason why we’re in this financial crisis. We spend over a trillion dollars a year in maintaining our empire around the world. We’re in a 130 countries, we have over 700 bases, we’re still in Korea, we’re in Japan, we’re in Germany, we’re all over the Middle East.

The president’s speech the other day, to me, was like conditioning us for the next war in Pakistan. So no, you don’t raise taxes, that will only encourage them. What we need is take all their money away from them and say “bring the troops home, save the money, defend this country” and we’d be much safer. Because it’s our presence, especially in the Middle East, that motivates people to become radical extremists and potential terrorists that will commit suicide. It’s because they detest occupation of their land and we get into trouble and we think, “Oh, we need to occupy more countries”, only compounding our problems, both internationally and for our safety, but it also compounds our financial problems. I think the worst thing we could do is raise taxes to pay for that war.

Susan Swain: Last call, Matthew on the Republican line.

Matthew: Hi, Dr. Paul. Am I on?

Susan Swain: You are, Matthew.

Matthew: Hi Dr. Paul, we had a twitter message about you running in 2012 and I guess I can’t let that one slide under the table. I’m one of those college students that was awakened by your message. And I look at what the Republican Party is right now and I can’t see a Palin or a wannabe hyper-partisan. No, you know, you’re called Dr. No but it’s a principled no. These guys do noes because it suits them politically at the moment and I just… why don’t you just run […] become another champion for liberty and then you can just quietly back away.

Ron Paul: Yeah, let me ask you a question. How can I compete with the popularity of Palin? I mean, she has a lot of people very interested. I know our views aren’t the same, but you have to say that she has a lot of popular appeal. But no, I don’t have an answer. I didn’t say no, but I have no plans to do it. So in a way, you know, in the climate we have, that’s a long time off. I mean, couple of years is a long time when you think of this crisis. One thing I did say, though, that I have said in the past is that if it’s readily apparent that we’re in a dollar crisis, a severe dollar crisis, it’s going to be hard for me not to speak out.

Susan Swain: Matthew, is that your answer?

Matthew: Yeah, I guess for now. We’ll wait and see.

Susan Swain: What was your answer to the question about competing with Governor Palin?

Matthew: Well, all I will say is that I was at that Nevada state convention and we would have had more delegates than John McCain, but that’s a separate issue. Ron Paul knows all about that.

Susan Swain: Matthew, thank you so much for your call. And Representative Ron Paul, thank you so much for being here on a day when the Senate is going to ask the question about whether or not Ben Bernanke should be reappointed for another term. We appreciate your time.

Ron Paul: Thanks for having me.

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