- Ron Paul: QE2 Is a Total Failure and Bernanke Is Delusional About Inflation
- Ron Paul Doesn’t Want to Violently Overthrow the Fed, He Just Wants to See It Go Away
- Ron Paul: Asset-buy program ‘hasn’t done anything for Main Street’
Aaron Task: Big developments on Capitol Hill, Wednesday, Fed Chairman, Ben Bernanke testifying before the House Budget Committee and Texas Congressman, Ron Paul hosting for the first time as Chairman of the House sub-committee overseeing the Central Bank. Congressman Paul, thank you for joining us. I want to get your thoughts first on the Chairman’s testimony. He essentially said that QE2 is working, that it’s helping you create jobs but the Fed needs to remain on the same path because we’re not quite there yet. What is your response to his testimony?
Ron Paul: I would say, there’s a partial truth to that. He has maintained some jobs on Wallstreet—they’re doing pretty well—but hasn’t done anything for Mainstreet—hasn’t done anything to give us real jobs. He hasn’t done anything for people who are losing their houses. I would think that overall, it’s a total failure and we haven’t even seen the bad effects from QE2—they’re yet to come. As a matter of fact, even QE1, those bad effects haven’t been fully felt. They’re in the mainstream there and they’re going to come out. One question came up on my hearings today, where are all three of the individuals testifying, is ‘What are you going to do to unwind this?’ Bernanke is so overconfident, “I can take care of it”, and just like he knew this crisis was coming. Now, he can take care of anything. He says ,”I can take care of any conversation because I can print all the money in the world” and he says, “Don’t worry about unwinding”. He can take care of it. Don’t worry about it. But, I tell you what, the three individuals we had today, they were from different spectrums of the clerical spectrum and they said they have no idea how to do it and that only spells trouble. None of them were too optimistic that its’ going to be removed easily.
Dan Gross: Congressman, one of the other things he was confident was that these policies were not triggering inflation. He pointed the fact that inflation at home is under control. There might be inflation overseas but those people have their own monetary policies that they should be taking care of. How did that go over with you?
Ron Paul: That subject came up and I, quite frankly, made fun of that because he looks at the CPI and they rigged that number. They like to ignore food and energy—few people use food and energy. Therefore, he looks at government statistics which are fudged to re-insure that he doesn’t have to do anything. When he has to do something, he can. But, he doesn’t talk much about commodity prices, they’re skyrocketing. Food prices are going up. What about a bond price? He is supposed to give us full employment and stable prices and we have neither. We have high unemployment and we have very unstable prices. How did the Fed do? This wasn’t all under Bernanke but on a Greenspan. Look at what housing prices did. They skyrocketed and then they crashed! So the last thing in the world they is give stable prices and for him to say that ‘Well, we have no inflation’, I think there’s plenty because the real definition of inflation is when they increase the money supply. The ill effects come later on and most of the time unpredictably it comes with higher prices. So, we do have the inflation, the ill effects of higher prices and mal-investment will continue. We’re trying to correct the massive problem that we have this last decade, doing exactly the same thing but more. They got into this mess and…
Aaron Task: Ripton Ryan and some others are pushing to remove the dual mandate from Fed so that they would only focus on price stability as opposed to price stability and full employment. It sounds like you don’t think that that would do the trick.
Ron Paul: Oh, no! I mean, I’d vote for it but what difference would it make. They do what they want. We can’t even audit. We can’t find out what they’re doing. They’re going to lower interest rates because they think that that would stimulate the economy and do something with prices, that’s one thing. But they could lower interest rates for the same thing. All we want is create jobs. For us to say, “Oh, don’t mess with jobs anymore”, it’s not going to change policy at all. There’s central economic planners—they’ve been doing it for years. They’ve had absolutely no restraints in the last thirty years. Us tinkering with the rules and say, “Concentrate on this, but not on this. But we don’t have any right to say anything about your monetary policy.” I think that’s a dream!
Dan Gross: What is on your agenda for overseeing the Fed and what changes would you like to see?
Ron Paul: I’d like to see the true audit of the Fed so we know what we’re doing and then talk about reforms. They shouldn’t be fearful and I don’t think they’re all that fearful because I’m not calling for the violent overthrow of the Federal Reserve System. All I’m really wanting to do is expose them to what they’ve been doing and have a real discussion about monetary policy. The real reform that I want is competition. They have a cartel, it’s a banking monopoly. They want a central economically plan by rigging interest rates and what the money supply should be. All I want to do is let the people have a competing currency. Let them have a hard currency. Internationals have competing currencies all the time. They go in from the Yen and the Euro and the Dollar and the Swiss Franc. So, they go in place. But in this country, if you start using gold and silver coins as legal tender, you go to jail. So, I would say, just let competition occur and if they really mess up, people will go to a good currency. If I’m completely wrong there’ll be no harm done. Why should they be so fearful of a little bit of competition? The goal is not to immediately close down the Fed but that’s what we’re going to get. The Fed is going to destroy the dollar. If you look at the dollar in 1913 and now, it’s worth 2 cents on the dollar of 1913. They continually debase the currency. They continually believe they can lower the real debt by debasing the currency and that nominal debt will be much lower if you have inflation. So, they’re working very, very hard for inflation.
Dan Gross: Congressman, the counterpart to that argument is that in a crisis, the Gold standard doesn’t do you an awful lot of good. The country is during the depression that stayed in the Gold standard the longest were the ones who had the most difficulty getting out of the ditch and sort of being prepared for what came in the 1930’s and 1940’s.
Ron Paul: No, I don’t agree. I would have to dissect that out but take 1921, we inflated for the war, so we had our inflation. The recession, which a natural correction for that inflation in 1921, it was one year and the GDP went down very sharply. It was a dramatic one year depression—it was all over—because we went back and remained on the Gold standard but it was exactly because we weren’t on the Gold standard in the depression and that we tried to prop up prices and all this mischief and regulations, that’s what prolonged it. It isn’t so much that the Gold standard can automatically correct all the mistakes; the Gold standard keeps you out of trouble. That’s the whole thing. You can’t inflate and create this artificial bubbles but no, and once again, I’m saying “Let the people make a choice”. If they like paper money and you want paper money, you want to take care of your kids in thirty years, put your money away in treasury bills. Earn no interest at all and see what that will purchase for you in thirty years. But, just think of what would happen if you would have saved your money in gold for the past ten years. Your gold was 270, now it is 14, 13.50 hundred dollars. There’s strong evidence that if you want to preserve value, you have to have something of sound value. You can’t turn it over to the politicians. See the Fed accommodates the big spenders. They complain about the Congress spending too much money, well, they do because the Fed accommodates them. Interest rates don’t go up because the Fed creates the money. So, there’s a coalition here, the big government conservatives get together with the big government liberals and they spend, spend, spend and the deficits run up and the Fed cries and screams. But then the Fed keeps the interest rates low. They weren’t there.
Aaron Task: So, Chairman Bernanke, one of the things he also talked about was that Congress needs to do more to get the deficits under control. He said, “even if economic and financial conditions return to normal, the federal budget will remain on an unsustainable path, unless the Congress enacts significant changes in fiscal programs.” Is he right about that?
Ron Paul: He’s deflecting the real problem and that’s the Fed. All he needs to do is quit buying treasury bills, the interest rates will go up and the Congress will quit spending. Here he is, he’s the accommodator and he’s the instigator and promotes this, so, I would say he’s part of it. But, it’s the appetite for big government that is the real problem.
Aaron Task: Do you think we’ll see an audit of the Fed this year or at least a Bill that gets passed?
Ron Paul: No. We got a partial audit last year, we’ll follow up on that and we’ll keep plugging away but we do definitely need more transparency of the Fed and the Tea Party people, who have come, agree to that. We’re going to have continued momentum in that direction.
Aaron Task: Congressman thanks very much!
Ron Paul: Thank you!