Without the Federal Reserve there could be no welfare state and no warfare state, and that’s just two of the compelling reasons why we need to end the secretive and unaccountable institution’s financial monopoly as soon as possible.
Eric Bolling: Hello, America, and welcome to “Money Rocks”. You know, yesterday we did a whole show about gold. Well, there’s more to the story. A real quick history lesson about where gold has been. 1880 to 1933, the US currency was on what was called the “gold standard”. That means every paper currency that we held was tied to a piece of gold. FDR killed that in 1933. 1944, Bretton Woods Agreement – fix the price of gold and also fix a basket of world currencies tied to that gold price. Guess what happened? Everyone around the world starting hoarding gold. We were quickly running out of gold, so in 1971, President Nixon “nixed” any ties to the gold standard.
Why is gold precious? A couple reasons. No. 1, jewelry demand, investment demand, and this one right here, guys, the fear, the perception of what is to come. Give me that full screen. Here is where the demand comes from for gold. Here’s all the gold ever mined by humans in the world. Only 163,000 metric tons that would fit under the Eiffel Tower. 51% of it is in jewelry. 18%, “official” sector. That means government’s holding gold. 17%, investment. 12%, industrial. And this one, the 2%, unaccounted for.
That brings us to today, in a situation where people are flocking the gold and leaving the dollar. What does that say about the status of our currency? What does it say about the status of our country? What if people no longer had faith in paper money and carried around anything, anything but dollar bills in their pocket? Congressman Ron Paul of Texas has been asking these tough questions longer than anyone on Capitol Hill. He thinks the answer lies in the Federal Reserve that is spiraling out of control. He joins us from Washington, D.C. Thanks for joining us, Congressman.
You’ve been talking about…
Ron Paul: Thank you.
Eric Bolling: … eliminating the Fed for a long time. That means eliminating the Fed printing presses but then, Sir. Then, Sir, how do we pay for all the spending?
Ron Paul: Well, you have to ask how did we pay for it before 1913. You have to pay your bills by spending less money. You can’t have a welfare state. You can’t police the world. You can’t have a warfare state. Government has to change. But if you want big government, you have to have a Federal Reserve and just think of what’s happened since 1930. I mean, we have had tremendous increase in government and it really exploded after 1971.
You know, before 1971, we had less than $1 billion measured by M3. Today it’s over $14 trillion. The price of gold is not going up. It’s just the dollar is being devalued and some people have this silly notion that a weak currency is good and that’s all our federal government doesn’t – even Bernanke admits he wants inflation. He’s looking for it because that’s the way you pay your debt down. That’s how you default on sovereign debt. So to me, it’s wicked, because the people get cheated. They get cheated out of…
Eric Bolling: Right.
Ron Paul: … their savings. They get low interest rates. So it’s a wicked system and it was never meant to be, and it’s coming to an end. That’s what people have to realize.
Eric Bolling: Well, Congressman, I think you’re alluding to, when you say “that’s how you pay your debt”… If you were to print a bunch of $100 bills and people held on to them under their mattress, eventually, those $100 bills would be worth less and less. Therefore, there’s lesson of commitment by the government. But here’s the question, Sir. We need the currency. What do we do? We’re still going to need dollars. They still have to go to the corner and hail a cab, and pay with a $20 instead of a $5, that they may have done 20 years ago.
Ron Paul: Yeah. Well… I mean, they did it before. They paid with coins but even in the modern age with the technology, you don’t have to. I mean, there are exchange rated funds now. You can exchange gold over the internet. So, yes, there would be substitutes and there could be certificates. We had gold certificates. It’s the limitation of the Fed to print and create money that is the purpose.
Eric Bolling: But, Sir…
Ron Paul: People didn’t log heavy gold around their pockets. They carried silver certificates in my lifetime. You know, in 1965.
Eric Bolling: What’s the difference? There’s the question. What’s the difference between a silver certificate and a $100 bill, the Benjamin’s stamp on the front?
Ron Paul: The big difference is they can’t print a silver certificate without having the silver. So it restrains the monetary authority. It retrains the counterfeiters. It restrains those people who want big government. See, Conservatives want big government for some reasons. Liberals want it for other reasons. But they work hand in hand. They work together because they both brought about the Fed. They like the Fed to monetize debt. That’s the purpose of the Fed. But they get us into trouble. Over these many decades, the Fed has gotten credit for the good times and when we had a recession, they got credit for getting us out, and it was all an illusion. They should get all the blame for the bubbles and all the blame for the inflation, all the blame for the unemployment. And now, the secret is out. People now, main street Americans are walking up and they know there’s something strange about the Federal Reserve.
Eric Bolling: Well, Congressman, let me ask. I think what you’re trying to tell me… Tell me if I’m reading this right, is that we have to go back to the gold standard, go back to a Bretton Woods type agreement where you say everything we print better have some sort of value to it other than just a seal of the US.
Ron Paul: Well, we need a gold standard but the Bretton Woods was deeply flawed. Henry Hazlitt wrote about that back in 1945 and said it wouldn’t work because there was too much license. We weren’t even allowed to own gold. Yes, we should have a gold standard. We could start off by obeying the Constitution: only gold and silver can be legal tender; no emitting bills of credit, which is printing press money. But today we know a lot more about monetary policy than we did in the 19th century. We had bimetallism then. We had silver and gold fixed at 16 to 1. But, that wasn’t the market. So there’s a lot of things that we can do but the most important thing is have money of real value. Paper money never last. All paper currencies end…
Eric Bolling: Congressman,…
Ron Paul: … badly and that’s what we’re in the process of doing right now.
Eric Bolling: We’re going to run out of time with you, Sir, but one of the panelists last night had what I consider a pretty darn good idea. Instead of tying the dollar or the dollar bill, or the US currency to an ounce of gold, tying it to some form of energy. Whether it’s a barrel of oil, a gallon of gasoline, something that’s a little bit more fungible, probably a lot more available to us. What do you think of that idea?
Ron Paul: Well, I would let the market to determine it. I believe in competing currency as I would legalize that. That wouldn’t be legal under the Constitution but I would think it’s incorrect to say it’s more fungible. The reason gold is money because it’s naturally fungible and you can convert it. If I want to check on you, if you’re the banker, you’re the government and you’re there to issue me a certificate, I can’t go and get a barrel of oil from you.
Eric Bolling: But, Sir, here’s the difference. Here lies the difference. If I wanted to hoard gold, I could probably do it myself. But you can’t really hoard barrels of oil because they’re hard to store. They’re too big.
Ron Paul: Well, that’s good. That’s why it won’t work. You have to be able to get it. And the gold coin standard is the most important because governments cheat. You can’t trust government. And if you have a gold coin standard, you always can check on the politicians to make sure they’re not cheating us. And that’s why you want a gold coin standard.
Eric Bolling: Congressman Ron Paul from Texas, we appreciate your time, Sir. Thank you very much.
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