Ron Paul: Bring the Troops Home, End the Welfare State, Stop Monetizing Debt

Ron Paul: Well, I’m always hopeful but I’m very doubtful, I don’t think much will come of this. I think they will fight over it. I mean they’re talking about cutting some military spending which I’m all for, a matter of fact, I wrote a letter along with some others to recommend this and they’ve at least addressed the matter, and they talked about bringing a third of our troops that are stationed overseas. But they’re liable to put them into Afghanistan, so I don’t think these are real cuts, I just think they’re dealing with this in an incorrect fashion. It’s not strictly a budgetary problem, it’s a philosophic problem — the philosophy of government.

As long as we’re going to the policeman of the world and as long as we pretend we’re going to run a welfare state from cradle to grave, it’s not going to work. And these figures, how can you rely on these figures — how do they know what the revenue will be? They don’t even know what the employment rate will be in a couple of years. So I’m not all that hopeful, they’re not going to start anything until 2012. They’re talking of a total $200 billion cut by 2015?? I mean, what does that mean?

Last year the national debt went up $1.6 trillion, so I’m skeptical —but I’m for all the cuts that they have there, I don’t think I will vote against that they have suggested.

Dylan Ratigan: If you were to be able to set the North Star, however, for a conversation about not just the deficit, cause the deficit obviously is symptomatic of a philosophical operating system in this country, not just at the Federal Government but on the State Government and all the rest of it, and for that matter financial system a bond market that indulges the politician’s behavior, where would you begin the process of correcting it, if you think this is philosophically misguided?

Ron Paul: Well, I would say that we should have a new foreign policy and bring all our troops home and defend our country and not police the world. I would wean ourselves off of the welfare state. But I think there’s one law that you could pass that would bring both of those issues to a halt, and that is prevent the Fed from monetizing debt, so if Congress spends too much – which they always do – the Fed comes to their rescue and they buy these bonds in order to keep the interest rates low.

But if the Fed wasn’t there, they’re the perpetrators of this, because if the Fed didn’t do that, interest rates would go up – this would hurt the economy, and the members of Congress say “hey, why are interest rates up?” Well, we’re hogging all the capital — and they would have to quit. But that system is so engrained and that would an overwhelming task, not very many people would entertain that thought, so I don’t think they’re on the verge, just changing their philosophy. I think we’re working toward a dollar collapse, and as long as they’re buying our bonds and I think this is going to continue.

But I already see, I think there’s hints that they’re buying our bonds less enthusiastically right now than they did a few months ago.

Dylan Ratigan: And let’s talk about that, so it’s presumed that the dysfunction comes from the ability for politicians to spend money they don’t have and the ability to spend that money is empowered by virtue of the Federal Reserve and the central banking system which allows money printing. If you were to look at the world’s reaction to that at this point, as we see Obama traveling the earth, it is wholesale critical. Basically America is being accused of currency rigging against the world the same way we accuse China of its currency rigging. The commodity prices are at records. That’s a clear indication of people skepticism of the value of currency in general.

The reason cotton is up 100%, corn, gold, oil and the World Bank had floating the idea of tying currencies once again back to gold as opposed to having fixed interest rates which is what the Federal Reserve obviously advocates for — when you look at all of the little pieces, the explosion in commodity prices, the political backlash that, forget China being a currency manipulator, we’re a currency manipulator and then more and more rhetoric that really is aligned with you. Do you have any faith that the financial markets might demand the changes from our government that our politicians are incapable of demanding?

Ron Paul: Eventually, and just think of the different attitude about this $600 billion proposal compared to the 1.7 trillion injection. The attitudes are changing, attitudes are very important. Once they get inflationary expectations where they’re seeing the price inflation on the commodities, pretty soon that is going to be injected into the future, then everything the Fed does to lower interest rates will raise interest rates. Just printing money eventually does the opposite and I’m afraid that’s what we’re moving into.

So that’s why watching some of the interest rates carefully will give us an indication and what the foreigners are doing and what China is doing. But to just jump on China and say “they’re all at fault” without us looking at our deficits and the way we manipulate our currency, I think that’s a copout.

Dylan Ratigan: So, and you know obviously I agree with you in that regard. If we were to back away from this for just a moment though and look at the complexity of this problem and the need to try to avoid generational warfare in this country between the old and the young, the need to try to avoid the demonization of the Chinese or any other foreign entity as we try to deal with this — the problem solving here, how do we create an arena for problem solving we look at the riots emerging in London, as we look at what’s going in China, as we look at what happens when you basically barbarically try to address this and that “barbaric” is my word.

How do we alter the path to create an environment where we can really have a conversation globally China, the Middle East, Western Europe and America — that addresses the fact that there’s $60 trillion in debt here. I mean we all know the numbers, we need a real meeting in the world at this point and it doesn’t feel like the American political leadership is creating the space for that to happen.

Ron Paul: That’s right, and that is where our responsibility as the congress as they have a responsibility for that and that’s what they should be doing. Now another suggestion that could work if they wanted to because Conservatives are going to argue “you don’t cut a nickel out of military”. I say that’s not defense, that’s military and we should look at it. But what about, another suggestion just go through the process and try to whittle down on the budget, get it as low as you can and then have a rule and say “Well, the budget is so many percentage, is 20% over budget.” Cut every single program exactly the same, and you don’t have to do it all in one year, maybe have a 10 year period and cut down a certain percentage until you get it balanced, at least it would send a signal if they would agree to that.

But they’re not going to, I’ve heard a couple of our new freshmen even say “Hey, there’s not much we can cut, we can only cut the nondiscretionary funds and there is not enough there to cut, and we certainly can’t cut military.” That bothers me that freshmen are coming in with that attitude and they’re throwing up their hands. There’s nothing left to cut!… but the alternative, they don’t want the pain of the cutting, but the pain of destroying the currency, as you know is going to be much worse and that’s what I’m trying to head off…

Dylan Ratigan: And then, and in the more, I can have a bridge to you and you to me because truly without the proper theater to address this problem and with the kicking-the-can down the road being what it is, the commodity traders who walk around in New York talking about the blue dollar trade, buying commodities, buying gold and waiting for the issuance of the new currency — in their minds, that should be avoided obviously if we can do it and without creating the beginning of that conversation, there’s no way we can get to the end of it.

Thank you so much, Dr. Paul, for everything that you do in that regard.

Ron Paul: Thanks for having me.