Ron Paul talks with Lew Rockwell about monetary policy, Austrian Business Cycle Theory, skepticism about the Fed, and how free markets and nationalism will thwart the Keynesian elite’s plans for a global fiat currency.
Lew Rockwell: Well, it’s wonderful to have as our guest this morning, Dr. Ron Paul, long-time Congressman from Texas, author of a wonderful book called “End the Fed.” Ron, we could talk about many of your achievements. In fact, I could take up the whole show just beginning to scratch your achievements. But, I want to mention this morning the extraordinary thing you’ve done, building on the work of great Austrian economists, whether it’s Mises and Rothbard and Hayek and Hazlitt, Sennholz. You have actually made the Fed unpopular in a lot of quarters. You’ve actually brought the Central Bank into question, which has, to my knowledge, never been true in this country. So all of a sudden, Bernanke’s worried. And now, it looks like you are going to be Chairman of the Monetary Policy subcommittee, be able to hold some interesting hearings. At this very time, people all over the world are questioning the Fed, questioning the new quantitative easing. There’s real dissent, isn’t there?
Ron Paul: I think so, and I guess I enjoy thought that maybe I helped a little bit, but it took a little more than just me, because it took two things. It took a lot of other people who have been talking about Monetary Policy and Austrian Economics for a long time as I have had been doing from the Mises Institute. That’s one thing, but the other thing is that a lot of us were talking about this for many years, and it was falling on deaf ears. I think what has really helped us get some attention on this is has been the total failure. I see this 2008 as a very special year in the declaration of the failure of the nonsense the Keynesians have been preaching and the whole idea of fiat money. That has made it easy; so it has come together, and hopefully, we have participated in doing something very positive, and that we can continue to do this in order to talk about what type of reforms we’re going to have to have, because I’m working on the assumption that reforms have to come; That you cannot maintain the system this way. I fear that the reforms will come from another angle and that will be internationalism. Not just an IMF fixed exchange rate but an IMF worldwide fiat currency. So that’s why our work is cut out for us, and sometimes they take advantage of the chaos. We see the chaos as an advantage. They’ve messed it up, so we can offer an alternative, and we’ve gotten some attention. But the other side, who want worldwide government and worldwide control of the monetary system, also see it as an advantage, and those are the people that we’ll have to compete with.
Lew Rockwell: Well you mentioned the Keynesians, John Maynard Keynes of course, famously called for a world currency, a world fiat currency. He called it, “The Bank Core.” He wanted a world Central Bank. Is this what we’re facing? I remember when the trilateral commission was first established. Its key job, as delegated to it by David Rockefeller, was a bringing together—first of all, the creation of European Central Bank and then combining it with the Bank of Japan and the Federal Reserve in to a World Central Bank. I guess they might have to do it slightly differently now, but this has been their goal for a very long time hasn’t it?
Ron Paul: Yeah, I think so, and I think they’re going to continue, so the chaos, to them, sometimes is an advantage. That’s sort of the way foreign policy works too. There were desires to pass the Patriotic Act and desire to invade Iraq, but when a chaotic event occurred, like 9-11, it wasn’t that they thought up these new things to do; they’re just looking for opportunities. In monetary policy, they’re always looking for opportunities, and they’re more or less here. I think they’re content to keep the status quo going as long as they’re benefiting, and they can satisfy enough people, but when it breaks down, then they use this as an advantage to promote their agenda. It’s going to be a significant fight, but I think there’s a reason to be encouraged because, just like you say, “More people are thinking about this now.” And when they spontaneously start talking about ending the Federal Reserve, you know that we’re making inroads. If the grassroots are now saying, “We don’t need the Central Bank, and they’re not our friend.” It might be pretty hard for them to be convinced that, “Oh, what we need now is super Federal Reserve, a worldwide Federal Reserve, under the United Nations and the IMF.” So we have to keep working on that to make sure the people resist it because if they resist, it’s going to be much more difficult for them to impose it on us.
Lew Rockwell: You know, Ron, I’m noticing for the first time ever, coming from the German Finance Minister, a subordinate government of the US openly criticizing the Federal Reserve. I don’t remember anything like that ever happening. And then, of course we have Brazil and China and other places, being worried about what the Fed is doing—worried about currency wars, worried about what use to be competitive devaluations in a new mode about increase protectionism. All the things, of course, reminding us of other aspects of the 1930s.
Ron Paul: Yeah, I think so. Although the internationalists, the one world government people, are very powerful, and they do have a lot of influence, and we need to fear them. I think two things will contain them. One is the market. Just remember how the Bretton Woods was supposed to be propped up. Finally, the market overwhelmed them, and it broke down. That’s when gold broke loose from 35 dollars an ounce. The other thing that I’ve always assumed to be the case, I’ve not proven correct yet, but I don’t think they can kill nationalism. You know we like to be called “American,” and I think the Frenchmen like to be “Frenchmen,” and the Germans, “Germans.” I don’t think the European Union is all that solid. I think that this fact that people like their independence—I wish they’d carry it all the way through to small units of government, all the way back to the individual—but I think there’s a healthy desire for all people in the world to be identified. That’s what is so wonderful about limited government that permits that as long as nobody wants to dominate each other. There’s nothing wrong with wanting to be with like-minded people and being friends with their neighbors. So I think, there’s reason to be optimistic that the market and the sense of nationalism will always be helpful to us.
Lew Rockwell: You know, Ron, I know one of the bills that you plan to introduce this coming January is a bill to audit the gold, and you mentioned what happened with the breakdown of Bretton Woods, and a lot of people would think that in the late 1960s and before Nixon closed the gold window, that a lot of gold left the United States during that chaotic monetary period under LBJ and then under Nixon, and I know, you’d like to see what exactly is there and, of course, who owns what’s there.
Ron Paul: Yeah, seeing the gold and counting bars won’t give you the answer that we need because they could give it to another country, but hold it for them. They could have swap arrangements. They could lend the gold out. So it’s a lot more than that. I mean, to fully audit it, I think you have to know what the Fed has done, all their agreements. You have to know what our Treasury has done, especially the Exchange Stabilization Fund, which has legal authority to deal in gold. That was set up in the 1930s, after Roosevelt stole the gold from the American people. They were told they could trade in gold and try to set prices and that kind of thing. Now, their reports don’t reveal it, but somewhere, I think buried in the records, you might find out that they participated in this, probably indirectly. It’s probably not right out in front, and that’s what is so difficult. Even what the Fed does, you could have the Fed turn over all the books and say, “Well, we loaned so and so some money,” because they can make loans to other countries and other Central Banks. It may be secretly quid pro quo—“We’re going to give you this ten billion dollars, but your obligation is to buy Treasury bills or buy Fannie Mae mortgages,” and this sort of thing. So it’s not an easy audit, but I still think it has to be pursued. It should be done now that Republicans are back in control because it’s supposed to be a little neater and a little cleaner. If you’re taking over a business, you want to make an assessment. What do we have? What do we own? And what are our plans? If gold has to be used again, and history is on our side, gold is always used again—it’s always constantly used, sometimes more so than others. An assessment of what we have and what kind of obligations we are, I think that is mandatory. I’ve been very pleased with my mere mentioning of that, I wasn’t out putting up press releases, but it was a large number of people in the financial community—not necessarily the hard-money people. A lot of people in the financial community have expressed a deep interest in this, think it’s very logical, and this should bring in progressives and libertarians and conservatives. Anybody who’s honest should say, “Why can’t we know?” It doesn’t mean we have to all agree on what monetary policy should be, but there’s no reason in the world why we can’t have transparency, whether it’s that of the gold or what kind of deals the Fed is making.
Lew Rockwell: Ron, I know that you said that when you become Chairman of—we certainly hope, keep our fingers crossed—you become Chairman of the Monetary Policy subcommittee, you are aware that they’ve blocked you three times in the past with various insider shenanigans, even though by seniority standards, of course you should be taking Barney Frank’s place as Chairman of the entire committee. But if they don’t block you again, and I think it would be very, very difficult for them to do so, you said you want to open up the books of the Fed, make it transparent, share with the American people exactly what this very, very powerful institution—maybe the most powerful institution in the world—has been doing.
Ron Paul: Yeah, there is a goal. We want transparency. We want people to have more information. I believe this is important that when the time comes when reform would be forced upon us, that we will know what we’re dealing with, and then we can offer reforms. In order to do that, we have to have a better understanding by a lot more people about the business cycle. Business cycle theory is not the top priority in Washington, matter of fact, they’ve ignored it totally, and don’t think much about it, and if they do, they’ll accept the notion, “Oh well, there’s not enough people spending money. If you don’t want a downturn you just print more money and get people to buy stuff.” That’s their idea of understanding the business cycle. So I think, what I would like to do is pursue that in the committee and have people come in and start talking about the business cycle and how that is related to Monetary Policy. I will welcome those who disagree with us and say, “Look, we don’t agree with this.” And, bring our people in and say that there is a connection. You have all kinds of variations, you could have the Keynesians talk, and you can have the Moderates come in too and make their claim. You could have Supply siders talk. But, I think our views can stand off against any of those views, and it’s very important that people come around to understanding how Monetary Policy is the key element in understanding the business cycle.
Lew Rockwell: Ron, I saw a prediction this morning that to “clean up” the Freddie and Fannie mess will cost six hundred and eighty six billion dollars. In other words they’re saying, almost seven tenths of a trillion dollars. And of course, who can believe them, right? Who knows what they mean by “clean up?” Is this is something that would be coming up this next year or two, that huge dark hole—Fannie and Freddie mess.
Ron Paul: Very definitely, and it won’t be only a few of us doing that. I think the members, the Republican members, of the House Financial Services Committee. I think there’s quite a few in there that are quite willing to look into that. They say it’s a partisan issue you know because the former Chairman of the committee was very much into subsidizing and helping Fannie Mae and Freddie Mac, and they have all supported the transparency of the Fed. So I think they will be looking into it, and I think they are going to have a hard time literally appropriating that money. I think, when push comes to shove, of course, the Fed is always there. They will not allow the liquidation and the correction, which is so necessary. But, I don’t think, on the surface, (the Fed, or) the Congress is going to come in and bail them out. Unfortunately they won’t push hard enough for what I think is important. If we have six hundred billion dollars of bad debt out there, the quicker you find out what it’s really worth, and let the people who are holding the bad debt suffer the consequences, but instead the people who have been making all this money over these years when the bubble was being formed, they’re getting the bail out. And who’s getting stuck with all these illiquid worthless assets?—the American tax payers. That’s why it’s so pessimistic for our dollar—our dollar not doing very well. I think it looks like the dollar and the Canadian dollar is about 1 for 1 right now, so that’s a dramatic change.
Lew Rockwell: Ron, you were, of course, talking about what was going to happen with Freddie and Fannie. This was no news to you, or anybody who was listening to you. You predicted all of this, and I think it’s absolutely true that there are other Republicans interested in this issue. But, you know the other important issue that you’ve devoted so much time to, the issue of war and peace. I must say, I suddenly worry about the Republicans as being even worse than the Democrats.
Ron Paul: Yeah, I’m not too optimistic about that. I want to always make the point, especially with those more conventional conservatives that it’s a fiscal affair as well. That wars ring up deficits, that doesn’t change our minds, but it also makes the point that wars can’t be fought perpetually nor can you maintain an empire. It easily comes to an end for economic reasons. I have read—I don’t have proof of this—but I believe it’s very likely to be true, there’s never essentially there’s been never a war fought without government’s debouching the currency. Even in the old days, they would clip coins or dilute the matter and steal the gold or do whatever but they never do it with an honest system of having the people pay for… You always have to deceive the people into paying for the war. Can you imagine if they knew that they couldn’t have deficit financing? You have ten billion dollars going over to Iraq to build bridges versus ten billion dollars to spend here at home. They’d give up on that war real quick! That’s why the deceitfulness of monetizing debt and printing money is so bad, and it encourages not only the mal-investments and the problems you get with the fiat currency, but it also encourages a war, which then compounds because the expenditure is one thing but then the long-term cost and the people coming back that have been injured and sick and also the perpetuation of the problems. You start a little war, “Yeah, we’re going to take over Iraq and have it over in a couple of weeks, and we’ll get all our money back because oil is going to pay for it.” But here we are, still in Iraq,and there’s still a lot of violence there. Christians are all being run out of the country. They’re heading to Afghanistan and Pakistan and Yemen and on and on. What do they do? They say it’s time to come home. No, they say, “When are we going to bomb Iran?” But that will have to end, and I think it’ll end not through our persuasion as much as economic reality will end that foolishness.
Lew Rockwell: Ron Paul, you’ve been telling us about economic reality for a long time. Finally, at least many people out in the country are listening. I hope a few of those types in Washington pay attention to you. It’s going to be very exciting to see you as Chairman of this committee. The hearings on the business cycle theory and what the Fed has done to us, how they created this problem. Thank goodness for all you’ve done and all you continue to do.
Ron Paul: Well, thanks for having me on.
Lew Rockwell: Bye-bye.
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Thanks to Cynthia Sharp for proofreading and editing this transcript!