Date: 02/09/2011
- 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’
Transcript
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!
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Teresa Beghin
April 2, 2012 at 11:04 am | Permalink | Reply
Are people not paying attention to the way this Country has been run in the last 15+ years??? My goodness, Our Country which is supposed to be a free nation with a Constitution in place to protect our rights is slowly deteriorating. Pay attention to what President Bush passed with the Patriot Act… And then Obama with his NDAA Bill. Are you not affraid of what is happening all around you??
Why is it that the Federal Reserve is so secretive? Why are the doors locked so tightly that not one person..no matter who it is can verify what’s really in there? I am shocked at President Obama’s actions. He has done the complete opposite in what his campain was all about. I really can’t remember one thing he’s done that he promised to do. It’s really all been a huge lie. He’s actually done the complete opposite than what his promises were all about in his campain.
What makes this so bad is that even I voted for President Obama. After learning about who he really is and his devotion to the Koran…NOT America and the Bible or this Countries Constitution, he could care less about it. Think about his Birth certificate, SS# and most of all proof that Obama is NOT qualified to be our President, he wasn’t even born in this Country. Obama actually scares me with his actions…it’s all spend, spend, spend with Obama.
RON PAUL is our answer. He upholds our Constitution and our rights. Ron Paul believes in America and making peace with the World…not war. Ron Paul wants to bring all our troops home immediately and stop the spending with these wars our current Government created. You know…we are actually the terrorists, The Middle East wasn’t our enemy until 1992 when we started bombing innocent villages, Women, Children ect.. for no apparent reason. Please read up on the subject, you can find plenty about it on the internet. I really hope that more people in this Country wake up and start reading about what’s really happening all around us. If they do, they will find that our Country and it’s Constitution that brings us our freedom is in REAL trouble. Funny thing is that I have always been a Democrat but because of President Obama I have now switched over to Republican because of Ron Paul and what he stands for. Ron Paul is a true fighter for our rights and I believe in him and so do our troops along with many college students….they are our future and have to deal with the mess that’s been created.
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That’s what you were brain washed to believe. The Fed is incredibly “for profit”, billions upon billions of dollars for profit and it’s been proven over and over. Look at the 400 some billion they have stashed over in Switz with the rich. Our entire country is ran by private off shore bankers, our Presidents are puppets for the public. Learn the truth.
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According to Gandhi, every revolution goes through four stages…
☑ First they ignore you (Pre-2007).
☑ Then they laugh at you (2007-2008).
☑ Then they fight you (2008-2011).
☐ Then you win.
Join the R[̲̅ə̲̅٨̲̅٥̲̅٦̲̅]ution…, Ron Paul 2012.
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they’re done in a different way now and the old way says 8-9 percent which makes a lot more sense to my mother who goes grocery shopping and has seen the increase in food prices. 2 and a half percent inflation my ass.
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I’m not sure I will agree that CPI is “rigged”, but what *is* intriguing is that the Federal Reserve ceased publishing M3 money supply statistics just as it began to monetize the bailouts and stimulus spendings. Even if you’re not an Austrian economist, that should raise an eyebrow.
Also, Keynesianism (well… Monetarism really, but that’s just supply-side Keynesianism) causing stagflation? Who would’ve known?!
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Ron Paul finally got something right: decreasing the purchase of bonds (contractionary monetary policy) will decrease the interest rate. But does he really think the Fed should pursue contractionary policies while the economy is recovering from a recession? And does he really think Congress will finally agree to cut government spending due to higher interest rates? If possibility of defaulting on our debt won’t do it, and their constituents won’t understand the concept, then why would they?
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The Federal Reserve is a cartel? Competition from banks providing other currencies should be permitted? Does Ron Paul think the Fed is a for-profit corporation? The Fed doesn’t sell us the money supply. It has consistently utilized open market operations in an effort to stabilize unemployment while minimizing inflation. When unemployment is high and Real GDP is stagnant/decreasing, the Fed buys bonds, and vise versa. The effects of monetary policy are right out in the open.
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Ron Paul doesn’t seem to comprehend even the very basics of macroeconomics. The fact that he opposes the Fed seems to cause viewers to believe that he is some sort of economic genius whose distrust of the government equates with factual correctness. He consistently concocts data and demonstrates his ignorance of the situation throughout this appearance. The Fed may very well be lying to us all under a shroud of secrecy, but that doesn’t make this man any less inept.
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The Fed doesn’t print money. The CPI DOES incorporate food and energy costs. Unstable housing prices are not a consequence of uncontrolled inflation. To say that we cannot anticipate a higher price level as a consequence of buying bonds (expansionary monetary policy) is to entirely ignore all of our knowledge of the effects of monetary policy.
“And now investment will continue…”
Continue to…? Ah, yes, INCREASE, as interest rates decrease due to purchase of bonds you so despise.
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He wasn’t the chairman of the fed, he was the chairman of the congressional committee overseeing central banking. There is a huge difference because an overseer of a committee can still oppose it without being hypocritical.
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VOTE FOR RON PAUL!!!
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Paul tells it like it is. The Ponzi scheme Fed stole $8.4 TRILLION from the auctions of Treasury securities last year. Congress never asked about it. It is embezzlement that is leading to national bankruptcy. Ref. 3w scribd dot com message 49040689.
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If I may, please;
America I beg of You. Look into Ron Paul’s issues. This guys is as genuine as they come. Mr. Ron Paul is the American system working, literally handing us the “right guy.”
He puts his nation/Constitution first before himself as his 22 year track record indicates.
Please, Mr. Ron Paul for Republican Nomination and then President 2012.
Thank You
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If I may, please;
America I beg of You. Look into Ron Paul’s issues. This guys is as genuine as they come. Mr. Ron Paul is the American system working, literally handing us the “right guy.”
He puts his nation/Constitution first before himself as his 22 year track record indicates.
Please, Mr. Ron Paul for Republican Nomination and then President 2012.
Thank You
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Monitary theory is no where near as complicated as it is made out, and basically people have a good understanding of how it ought to work based on their understanding of currency (that’s doller bills and coins). This is the way that money used to work in practise when most of the money people used for trade was actually doller bills and coins. Now this makes up a fraction of the money traded (a fraction like 2%) the remainder is bank credit which is simply created as accounting entries by banks and only has a fraction of the physical currency to back it up actually in existance. This is possible due to fractional reserve banking.
If everybody was able to print their own doller bills this would cause inflation. If everybody was able to extend their own bank credit at low (currently zero in the US) interest rates then this will clearly also cause inflation. It is illegal to print doller bills for precisely this reason and it should not be legal to create bank credit for the precisely the same reason, especially as this privilege is only available to a select group now (called banks).
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Ron Pauls extremely liberal views rather slant the picture. The real problem is caused by the fractional reserve banking system which causes boom and bust cycles and (often poorly) distributes capital through the economy, this includes the recent crash in 2008. Of course this is what Ron Paul is advocating to fix by a return to the gold standard, but this is something which has been tried before and it didn’t work then because the same people were in charge of allocating credit (the banks) and they did it in their own self interest (which creates the bubbles). The point is that they will create and structure lending to support certain areas of the economy which they feel are most deserving and so earn a commission for this, but they often don’t get caught out risking their own capital when their plans collapse (due to the bubble).
He is absolutely correct that the FED is responsible for this but blaming the national deficit on the government is really ignoring the scope to which the FED and private banks can expand or contract the money supply by extending or calling in credit (this is what happened in 2008). Basically if you think that the government is bad at allocating resources towards the best use in society you should see what a bad job the private sector does of this when they can turn a profit doing so.
There should be a federal reserve like entity but instead of trying to control the size of the money supply through the indirect setting of interest rates they simply control it’s size by growing or shrinking it in line with inflation targets (these could be zero which appears to be Ron Paul’s ideal, but in this case new money might still need to be created or destroyed due to an increase in the population using that money supply). It becomes illegal to expand (or contract) the size of the money supply by extending bank credit at the same time, in the same way that counterfeiting currency is illegal now. The new money created would be handed to the government of the day to spend into the economy on goods and services, which will be the part that Ron Paul’s will not like.
Once you have a stable money supply which no longer creates interconnected boom and bust cycles, massive inflation (compare the US$ cost of a house in 1970 and today, it’s called inflation) then he and other republicans can focus on their liberal agenda/shrinking government.
There is already a bill proposing this in the US congress
http://www.govtrack.us/congress/billtext.xpd?bill=h111-6550
and similar proposals in the UK
http://positivemoney.org.uk
Fractional reserve banking is the problem and caused the 2008 crisis. The reason that everything is connected and the reason that both QE and deficit reduction are not effective are clear, they are neither of them addressing the real cause of the problem. This is not republicans versus democrats it’s real economics vs fractional reserve banking and the economic myths supporting it.
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So funny, Bernanke held his annual public press meeting on the exact day Ron Paul took a break from the floor.
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