Ron Paul and Judge Andrew Napolitano appeared on David Asman’s America’s Nightly Scoreboard on Fox Business to discuss the Federal Reserve, government spending, and the failure of Keynesian economic policies.
David Asman: Joining us now, with more about all this from Clute, Texas, Republican Congressman and the man who knows all about the Fed, Congressman Ron Paul. Congressman, great to see you. Before we talk about the Fed, I know that’s the meat of this subject for you, but let’s talk about Tim Geithner and his talk about spending more. What do you think about that?
Ron Paul: It’s insane! It’s spoken like a true Keynesian. . They’ve been taught that. They’ve been teaching that in our colleges for 40, 50 years, David. I’m impressed. You didn’t get taken in by all that stuff. You must have gotten your education elsewhere…
David Asman: Well, I did…
Ron Paul: … but most people in Washington…
David Asman: I don’t think it’s fair to say that many other people got take – I don’t think a lot of people were taken in by this stuff anymore. Do you?
Ron Paul: Well, I think they’re losing their support. I mean, we actually talk about Austrian economics and free markets, and sound money, and getting rid of the Fed, and getting the Fed out of rigging interest rates. Two, three years ago, that wasn’t happening but it’s… I think it’s the obvious failure of the system, not only in the United States but worldwide. I think we’re facing a crisis equivalent to what happened with the Soviet system. It just collapsed.
When money quits working, the system won’t work and they just can’t keep spending and taxing, and regulating, and borrowing. It doesn’t work but they never quit. They never give up. So although you recognize and I recognize it more and more, our catching on and knowing what’s happening, people like Geithner and Bernanke, and the rest of them, they’re not going to give up.
Just think, if Bernanke came out and agreed with us. He would have to admit… I don’t know how long he’s been an academician, but he would have to say “Oh you know, I really messed up my whole hypothesis about the cause of the Depression. Oh, I was wrong! I’m sorry, folks.” You know, he can’t do that. Psychologically…
David Asman: Yeah, that’s unlikely… You’re exactly right, Congressman. They’re never going to give up but they may have to. They may be fired. I mean, we’re going to have an election this term that could be as significant as any midterms we ever had in this country where a lot folks who support these folks are going to be fired. Won’t that drill the message home? Won’t that clarify things?
Ron Paul: It’s going to help but this is not going to be the solution because we will still have a lot of people in Congress that were there during the Bush years, and they spent money too. But I think maybe a lot of them have learned their lessons and we will have some new people but we won’t have control over the executive branch and we haven’t reined in the Fed yet. But the most important thing is that people are waking up. This Tea Party movement and the change in the elections that are going on… I think this is all very, very positive and…
David Asman: Do you think it’s worth it? As tough as life is going to be when all the spending catches up, with all the spending, all the printing of money… as difficult as that’s going to be, do you think in the long run, the fact that we are all now clarifying things so clear in our own minds, about too much spending and too much money printing, does that make it worth? Are we really going to shift in a fundamental way, here in America, in our economic policies?
Ron Paul: Well, that’s the big question. But I know one thing. If those of us who at least believe we understand it and believe in a different system, and we do nothing… I mean, it’s inevitable that you know, it’s doom and gloom. You know, that’s what we should expect. But, no. I’m more encouraged and I think… I go to a lot of college campuses, I’m encouraged that young people are looking at other types of economic theories, and they’re looking at the free market and property rights, and they don’t expect to be taken care of by the government. So that’s where I’m encouraged. But it’s not going to happen with one election. One election can build a momentum. Just like one summer, like last summer, there was a momentum built by these rallies and people confronting their congressmen. That was a big, big summer.
David Asman: Yeah.
Ron Paul: And now there’s a big election. That all is helpful but what we replace with what we have in Washington makes all the difference world.
David Asman: Oh, it sure does. It sure does. And I…
Ron Paul: And I think ideas are the only thing that really counts. You know, the elections and all are important. Politicians, they think they’re really important. But ultimately, it’s what the people endorse. The people have to support us. If we want a cut and not hear people from cradle to grave, and we’re not the policeman of the world. The people have to do understand that it’s in their best interest. That’s what the government will change.
David Asman: Look, we want to bring in a friend of yours, Judge Andrew Napolitano, just a second. But I wanted you solo for a second. There’s the judge. I want you solo on the issue of the Fed, on what the Fed is doing. Because the suggestion that they haven’t printed enough… You have Geithner saying we haven’t spent enough and then Bernanke over at the Fed saying we haven’t printed enough money, and we’re going to essentially print about $1 trillion dollars more, in order to lower interest rates. There’s one calculation by the way. Let’s put that up if we can.
An individual from Goldman Sachs who actually calculated how much spending $1 trillion dollars would equal. That would equal about a .25% drop in interest rates. Now, we’ve seen interest rates come down two full percentage points in the past couple of years, and we haven’t had more spending, we haven’t had more investing. We haven’t had more people buying homes because people are afraid of the future. So, is $1 trillion dollars printing more money worth a .25% drop?
Ron Paul: No. Everybody’s going to do is confirm the concerns that people have. They’re worried about the future and if they see the Fed panicking again… Already debt is at $2 trillion, they’re going to pump it another trillion? And you know, they… With the Congress and the Fed in these past two years, they injected $2.7 trillion dollars. They got a blip of $100 billion dollars in GDP with $3.7 trillion injection. And when you count it with inflation, there was no GDP increase. All that money and no increase! But it did bail out the rich, and what this does is I think it stimulates this hatred against people with money and the big guys getting bailed out, and everybody gets thrown in this thing. The productive individuals and the people who live off the government are all in the same category now if they happen to have money, and that has to be straightened out. Crony capitalism has to be separated from capitalism.
David Asman: As I mentioned in my opening remarks… I mean, Wall Street loves free money because they go ahead and gamble. That’s the reason that gold is up so much because they’re borrowing money for free, buying things like gold, which are sort of temporary investments that don’t lead to any real growth in the academy to make a quick buck. So Wall Street and Main Street have even more reasons to be against each other when you have all this distorted monetary policy.
Ron Paul: And you can include the banks as well. They get the money.
David Asman: Alright.
Ron Paul: The reason the middle class gets wiped out is the people who get to spend their money first have a stronger currency. By the time it circulates, prices go up. And you already mentioned that inflation is coming back. Food prices, according to General Mills will be up 5%.
David Asman: And of course, they don’t include food prices in their inflation. But let me bring the judge in here, if I can. And this is why, Judge, the folks who started this country back in the 1700s felt so deeply about maintaining the value of the dollar.
Judge Napolitano: They felt so deeply about maintaining the value of the dollar that they wrote in the Constitution that if the government couldn’t take life, liberty, or property without suing you for it, it couldn’t do so by manipulating the currency supply. And they felt so strongly about the currency supply that in 1792, they enacted the Coinage Act which said, “Anybody in the government who does anything to devalue the coin of the realm,” they didn’t use the word ‘realm’ of course, “shall suffer death!” This is the first death penalty enacted by the United States Congress!
That’s how certain they were that they wanted only the free market to regulate the value of the dollar. I wonder what the Federal Open Market Committee would feel today about the death penalty.
David Asman: Congressman, did you realize there was a death penalty attached to debasing the currency?
Ron Paul: Yeah. Yeah, I’m very much aware of the Coinage Act of 1792.
David Asman: By the way, was it ever an enacted? Did anybody actually paid for their life?
Ron Paul: Oh, no. And I have to modify that a little bit. They used the word ‘counterfeiting’ but that’s what the Fed is. They’re counterfeiters. You and I counterfeit, we go to jail.
David Asman: Right.
Ron Paul: We literally allow one individual to control the counterfeiting machine in central economic planning. They’ve been doing it. You know, the Chairman of the Federal Reserve, and this is the power I personally believe is greater than our President because he can give money to Central Banks around the world, to other governments around the world. He fixes interest rates. He’s a taxer because with inflation that is a tax so he is very, very powerful and it’s time it came to an end.
David Asman: Let me ask. We know where you both stand philosophically with regard to the Fed. But let me ask whether it’s reasonable to assume that there will be any change. We know that there will probably changes as a result of this election and spending, the way we spend money. But first, starting with you, Judge. Do you think anybody will really try to change the way we print money? The way the Fed works.
Judge Napolitano: Yes. I think we’ll see an incremental change, David. I think Congressman Paul’s legislation to audit Fort Knox… Is there really any gold there? Shouldn’t we know how much gold is there? To audit the Federal Reserve. That will open up a Pandora’s box. When that legislation passes and I predict it will, the President will veto it. It will eventually pass when a president who would be in favor of it would sign it because there’s a yearning in the part of the public to know what the heck the Fed has been doing.
David Asman: To know what’s in Fort Knox!
Judge Napolitano: When the public finds out what’s in Fort Knox and what the Fed has been doing…
David Asman: I would assume… Have you ever seen the movie “Goldfinger”? I would assume that you open the doors and there’s all this gold.
Judge Napolitano: Well, the government wants us to assume! But the government can’t prove it!
David Asman: Congressman, you think it’s possible there may not be any gold there?
Ron Paul: Well, I think the gold will probably be there but what we need… When we investigate this, we have to look at the swap arrangements because they do swap it around and make loans and sell it. But if they took me into a room and showed me a bunch of bars of gold, you’d have to have an authentic audit, and it would include more than just counting bars. You want to find out who owns it. But I think regardless, we are a very poor nation as far as our true wealth goes because all we have is debt and we need to know about the gold because someday soon…
David Asman: Well, all we have… When you say ‘we’, you’re talking about the government. I think a lot of people feel that they have been spending the last three or four years straightening out their own accounts. As I mentioned in the beginning, Americans are spending a lot less than they used to. They’re cleaning out their dead accounts as best as they can. So the economy, if it’s a collection of individuals, peoples, excluding the government, doing pretty well…
My final question though for both of you, do you think it’s reasonable to assume that things will get so bad that maybe we’ll be forced to go back to a gold standard which would essentially mean getting rid of the Fed? Judge?
Judge Napolitano: Hallelujah, if we go back to a gold standard. Hallelujah, if we get rid of the Fed. It would solve 90% of the problems that we face today. It would restrain the government. It would be a natural restraint on the government. They couldn’t print cash if they didn’t have gold to back it up. What are we going to do with $13 trillion dollars in debt? And there’ll be $14 trillion in another year. How are we going to pay that?
David Asman: Just by not adding to our expenses. But, Congressman, do you think that we could go to a gold standard?
Ron Paul: Oh, yeah. All countries, when they destroy the paper currency will eventually have to quit the printing presses and go to some sound monetary system. So yes, I think it’s coming but I think we’re going to have a calamity, a real collapse first. I think all the incrementalism we can get, the better prepared the people. But they’re going to tinker the politician. This is too painful to cut spending. And even with some new people there, it’s still going to be too painful. So we will march on to the destruction of the dollar and runaway inflation.
David Asman: I agree with your philosophy 100% in these matters but I think that the people are ready for a sweeping change. I don’t think it’s going to be an incremental change. I think this is going to be a sweeping change
Ron Paul: Well, the sweeping…
Judge Napolitano: You know what the sweeping change is called? A revolution.
David Asman: Okay, quickly, Congressman.
Ron Paul: I think the sweeping change will come but it will come after the collapse but I’m always working to try to prevent that.
David Asman: Gentlemen, you both have so much to talk about. You can continue the discussion more this weekend by the way because Congressman Ron Paul will be Judge Andre Napolitano’s guest on Freedom Watch. It starts at 10 a.m. on Saturday, Eastern Time. But if you miss that, it’s repeated in all kinds of places, 8 p.m. that night, Sunday, 7 and 11 p.m., so there’s no excuse not to see Ron Paul, Andrew Napolitano. Gentlemen, thanks to both of you.