Show: Joe Scarborough Radio Show
Host: Dylan Ratigan
Dylan Ratigan: I want to welcome Dr. Paul to the program. Congressman, its Dylan Ratigan, surprising you here for Joe Scarborough. But I appreciate you making some time for him this morning anyway.
Ron Paul: Well, thank you. Thank you for having me.
Dylan Ratigan: Walk us through your view of how you sort of differentiate what the structural problems in America are, and how you would address them?
Ron Paul: I think the basic flaw is that they think there are two sets of economic laws. If you or I get into trouble and we spend too much and have too much debt, and then we lose our jobs, we have to pull back. We have to quit spending, we have to pay down our debt, we have to work twice as hard and get back on our feet again.
Now if government does this, if they spend too much, borrow too much, print too much and have too much inflation, government is too big, it’s a burden, they say that the problem is we don’t have enough. So they apply different economic laws and the Keynesians come up with this silly notion that everything depends on consumer expenditures, regardless of how much debt there is.
But the market is smarter than that. The market says there’s a limit to debt, even or maybe especially for governments, because it may end differently. It may end up with runaway inflation or a weak economy. But it always ends, that debt eventually has to be liquidated, and they’re pretending they don’t have to liquidate debt. So everything we’ve done in Washington today is to transfer the debt…
Dylan Ratigan: Yep.
Ron Paul: …from the people who caused the problem to the innocent people, and this just prolongs the agony.
Dylan Ratigan: What struck me, Congressman, is that the only people who seem to not truly understand that are those who are in leadership in our government. And I say that relative to the voter and look at the Scott Brown election and the rest of it. The only people that seem willing to fire somebody for exactly what you just described, basically this wealth transfer and risk transfer where the wealth is transferred to those who created the risk. They kept the wealth, they still have it, and then they transferred the risk to the American people and the future American generations. And the American people, it was all done in plain sight; we can all see it. And yet they’re pretending that it’s… I don’t know… 1890 and there is no Internet and there’s no infrastructure so nobody can see what’s happened.
Are you concerned that because the voter quite honestly understands this better, I think, than most politicians are willing to give them credit for, that we’re just going to see, forget anti-Democrat or anti-GOP or whatever it might be in a given month or week, but just a fundamentally anti-incumbent wave from the voter until they see politicians who actually work to establish the rule of the law for investment and lending, encourage innovation, and hard work?
Ron Paul: I think that’s the case and the one thing is the people in Washington are slow learners. They isolate themselves from the public. They pretend to pay attention to the public, but they don’t really listen or understand, I think they’re mixed up on their economic policies. But the middle-class, typically, is the one that suffers the most when governments overspend and over-inflate. And it isn’t like it’s just been a year or so. I know we did everything from the fall of 2008, it’s been going on longer than that. I think the onset of the downturn for the middle class came years ago when the NASDAQ bubble burst. It was sort of held together with the housing bubble. But, you know, real wages haven’t gone up, investments for the average person have not gone up. If you just bought and held, you’re down 20% to 25%.
Dylan Ratigan: Worst decade ever.
Ron Paul: Right. So the middle class is very much aware of this and then all of a sudden they see the problems with AIG and Goldman Sachs and they say, “What a rip off we’re getting”. And the real problem that I see is we haven’t really felt the pain yet. And they’re pretending that we’ve turned the bend and the numbers look better, the numbers look better for Wall Street, but Main Street and the unemployment figures; there’s no improvement yet. So I think it’s going to get much, much worse. And then, you know, the big concern is, how do we bring about the transition.
Dylan Ratigan: Right. And that’s my concern, Congressman. I’ll just reset for everybody so they know who we’re talking to. We’re listening and we’re talking to Congressman Ron Paul. How do we avoid the unrest that is possible? I mean when you got 20% unemployment and a political body that serves the interests of those that control it, as opposed to the interests to the future of this country, that’s a precarious position to be in.
Ron Paul: Yes, it is. And the reaction in economic terms when you have a real disaster might be similar to the reaction to 9/11 on international policy. The people said, “Well, we need to be taken care of. The sole purpose of the government is to make us safe. We will give up our liberties to be safe. We won’t look at the causes, but we will be dependent on the government to further protect us.” So there is the contest now between sound economics and self reliance and sound money versus the people who say, “Take care of us. And even if you have to have law and order, I mean we have to be taken care of, we have to be made safe.” And the only thing that I know from doing this over the years, is to try to receive them with a better idea because I think that’s the only thing that does work.
Dylan Ratigan: So the president walks into the room and says, “Dr. Paul, I’m going to go with a spending freeze on discretionary spending. You’ve seen the proposal. Your response and a better alternative as you see that as what?”.
Ron Paul: Well, I think I’d freeze it too. But I’ll freeze every single penny and I’d have done it a long time ago. But even a freeze isn’t enough, you need to cut. You need to cut spending and this freeze is a political stunt. It doesn’t happen for a year, it’s not very much. It’s only 1/5th of the budget, and the Congress has to deal with this and the big spenders are already screaming about it. So that’s not going to happen.
Dylan Ratigan: And it’s the laziest thing. I mean if you were to look at how to deal with the termite problem, the structural problem, the fact that you do not have not only the reality nor the sense of fair play, and that those who have custody of other people’s money have exploited that position to extract wealth as opposed to honor that position by being great lenders and investors for capitalism. How do you fix that?
Ron Paul: First you have to have sound money. You can’t have a Federal Reserve system that supposedly creates capital. You don’t create capital by a computer, you create capital by people working hard and limiting their spending so that they can have savings. But for decades now we have depended on the Federal Reserve to substitute savings with just money out of thin air. And that doesn’t work. You’d have to stop completely all the bailouts and you’d have to be willing to accept the fact that bankruptcy is good when it needs to be done. Not transferring debt to innocent people, but bailout shouldn’t be permitted.
And also, we have to get to the point where the people make the decisions; not the government. The government keeps claiming these stimulus packages creates more jobs, saying, “Oh, it saves this certain number of jobs”. Well, how do they really know and even if they did, you might say, “Well, if we would have taken that trillion dollars and allowed it to be put into pockets of the American people, maybe it would have created good jobs, productive jobs, and building for the future.” But to take money or print money and give it to the government to make these decisions; government s aren’t capable of making these economic decisions. They’re always political. I mean, they’re always pressured by the special interest. The most simple way I can put this is we ought to restore our confidence that freedom works and that a free markets work and we should have sound money. But the big problem is a lot of people don’t understand that. They think the Federal Reserve is part of capitalism. It has nothing to do with capitalism.
Dylan Ratigan: But isn’t that the key thing? In other words, people look at the liberal rule making that’s advocated for the innovative portions of our economy, whether it’s science and engineering, technology, or some of the creative professions from fashion to lipstick; I don’t care. And they mix up the liberal potential of that side, in other words, the liberal rule making that is beneficial to the innovative side and have assigned that same language to the custodial portion of our economy, which is the banking system, and have made it such that the custodians of other people’s money suddenly are given these liberal rules to hide the money, to take risks, hide risks. They don’t have to disclose anything. That’s not the kind of de-regulations that I don’t think anybody was thinking about.
Ron Paul: I think a good example of that is AIG and Goldman Sachs. The Federal Reserve was doing something and the information like we had about the imbalances with Goldman Sachs should have been out there so investors could make a decision. But when the Federal Reserve got hold of it, and they wanted to do the bailout, that’s their argument against my auditing bill, “Oh, we don’t want the people to know that the banks are in trouble”. What if the SEC, what if you had a company and it was bad and you didn’t want to your stocks to go down so you go to the SEC, and you say, “Look, this would be bad for me.” So the SEC helps you cover up the information. But, you know, the SEC when they find this out, people went to prison under fraud laws, under ENRON. But the Federal Reserve does exactly the opposite. They protect the bad investments. So you would have to change the whole nature around. The market is a pretty good regulator.
Dylan Ratigan: If it has information. If the consumer is well informed, they tend to make good decisions. As does a vigilant voter who’s well informed; they tend to make good decisions. But when the government conspires with portions of our economy to withhold information that’s in the self interest of those pieces at the expense of everybody else, I think the voters get pissed off, with all due respect.
Ron Paul: Yeah, and you know, I have to give the people some credit right now, because transparency is a very good word for the average person. But Washington still doesn’t like it. Just look at the support we got for the bill to try to get more transparency of the Fed. I mean, this is not just conservative or Republican, there are libertarians, conservatives, progressives. Everybody across the spectrum is in support of more transparency. I think that’s very healthy. And the more we can see, the less you get away with the backroom deals and the bribes in DC, the less you get away with hiding risks, whether it was ENRON hiding risks or AIG and Goldman Sachs hidings risks. The more we’re able to see, the more real the prices are, the more the buyer takes advantage of the digital revolution and forces the seller to deliver quality or go out of business, which last we checked, was why we’re here, yes?
Ron Paul: Yes, that is it. And when we hide that information it makes it very difficult for the investors to make decisions and savers to make decisions and purchasers to make decisions. So it’s a great item and that’s what a society is all about. But today we have a government that protects government secrecy in almost everything it does. Look at what it’s done to undermine our privacy; whether it’s financial privacy, medical privacy, all types of security, our Internet, our phones and everything else. I mean, it can be looked into rather easily today in this atmosphere in which we live.
Dylan Ratigan: Yeah. Listen, Dr. Paul, I can’t tell you what a pleasure it is everytime I get to talk to you. Thank you so much for the time this morning.
Ron Paul: Thanks for having me.