Ron Paul to Fed: Stop Buying Illiquid Assets, Open up the Dollar to Competition


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CNBC: The other thing the markets are looking out for, about an hour from now, the Federal Reserve’s interest rate decision. Texas Congressman and Republican Presidential Candidate Ron Paul has been calling for an “end to the Fed” for years, so what better day to talk to Congressman Paul than today, “Fed Day.” Good to see you, Congressman. Thank you very much for coming on.

Ron Paul: Thank you.

CNBC: So, it looks like one thing we will see—I don’t know if you take any solace in this—is this end to this $600 Billion bond buying program on schedule, the end of so-called Quantitative Easing. Is that at least going in the right direction, from the Fed’s #1 critic?

Ron Paul: Well, if they quit, maybe that’s going in the direction. But it’s going to continue, I think is what will happen. If they quit, interest rates will go up, and the markets wouldn’t like it, and there would be panic, and they’ll do it again. So, what they do in one week or two weeks or three weeks is pretty irrelevant. My challenge to the whole system is, how did we ever get to this point where we think individuals or a small group of people can get in a room and decide what interest rates should be? It’s sort of—everyone would check the idea if a few people got together and said, “You know, prices are too high, and people don’t like high gasoline prices. We are going to fix the price of oil at $75.00 a barrel.” Everybody would say, “Wait! Price controls?! They don’t work!”

CNBC: No, they don’t.

Ron Paul: But why do they accept this notion that price controls with money work? Because it really doesn’t.

CNBC: Well, we had a State Senator come on our show last week. He wanted to cap the price of gasoline, and we basically had that exact conversation about that, about price controls.

Ron Paul: There you go.

CNBC: Well, definitely, we’ll give you that. But let me ask it to you this way then, from the Federal Reserve’s—from the point of view of watching the Federal Reserve. Absent just going away and eliminating the Federal Reserve—and I know you’ve been a proponent of that for a long time—what could they do differently now, as opposed to the course that they are taking? What could they change that would make sense, inside as opposed to outside the current structure?

Ron Paul: Well, the first thing they should do is swear off buying illiquid assets, like they did in the crisis. They bought the illiquid assets that would have bankrupted some of the banks, which they deserved, and they dumped them on the taxpayer. The other thing is, not only the illiquid assets, they shouldn’t be allowed to buy, but why not just tell them they can’t buy Treasury Bills? As long as they finance our debt, there is no major crisis, we’ll keep spending the money. We’ve been doing it, especially since 1971, because there have been no restraints. So the Fed always complains about the Congress having too big of a debt. But the debt wouldn’t occur, the deficits wouldn’t occur if the Fed wasn’t always there to pick up the pieces and say, “Oh, well, we have to do it. We have to monetize it.” So they should be restricted. But I’d like to suggest another thing, because in all my writings I don’t say, “Close the Fed down in one day,” because that would be chaotic. But I always advise that you could introduce the notion of competing currencies. Legalize the Constitution, legalize gold and silver—and if nobody likes it, they can ignore it, but if people want to use it, they can. We live in a modern age, and we can calculate the differences. Internationally they trade currencies. We could trade currencies here. But you’d have to get rid of the taxes on the gold, and you’d have to change Legal Tender Laws.

CNBC: So it seems like a lot to get. I mean, I always try to look at what can be done, realistically, within our own political system versus what somebody wants to do. And you’ve been outspoken about this for many years. Even one of our viewers wrote in and said, “If you get Congressman Paul on, just ask him, if he took office, if he was President, how long does he think it would realistically take to go back on the Gold Standard? Would that be something you could—and how would you even go about doing that, just logistically?

Ron Paul: Well, we have a very good example in our history on how it was done once. We were off the Gold Standard from 1861 till 1878. They made the decision, but it was rather easy then, because we weren’t running huge deficits; we didn’t have a warfare state; we weren’t overseas; and we didn’t have a welfare state. And they quit printing greenbacks, and it was a pretty mild transition. It was uneventful. But today it would be very very difficult, and that’s why I keep arguing the case for competing currencies and a transition. Because when you—if you continue to do what we do, you’ll have to deal with it with a cataclysmic crisis where the world rejects the Dollar. And right now it’s in the interest of everybody, because everybody uses the Dollar as if it were gold. When they reject the Dollar, we will be forced to accepting the notion that we no longer can issue the reserve currency of the world, and that will play havoc with us. I’m trying hard to avoid that crisis.

CNBC: Where, when—well, I’m sure everybody is, but—where is that crisis coming from. It’s just hard to see cataclysm in 3% interest rates, for the government to borrow money for ten years. People look at that and they say, “Boy, if things are so bad, wouldn’t investors be demanding much higher interest rates?” It just doesn’t look like the world’s about to fall apart. But apparently you think it is. When?

Ron Paul: Well, I don’t know when. But it could be tomorrow or a month or two years from now, because you can’t predict timing as much as you predict trans—

CNBC: Brought on by what?

Ron Paul: We did not know when the housing bubble would collapse, but we knew it would collapse. But it’s going to be brought on by the loss of confidence in the Dollar. We almost lost complete confidence in the Dollar in 1979, and it took 20% interest rates in order to save the economy and save the Dollar. So, it will happen. And you can’t compare it to—our Dollar compared to the Euro or the yen. Everybody’s in business, and they also all use the Dollar as their reserve. So you only can measure it against real money, which is the price of gold. The price of gold when the Fed started was $20.00 and now it’s $1550.00, so that’s a huge devaluation. And also, prices are going up. No matter how much they tell us, the housewives know that prices are going up. So we have about an 8% price inflation. That is devaluation of the Dollar. And there are people now who are claiming that’s “good” because real debt goes down. And that’s why the Fed wants to devalue the Dollar. The worst thing you can do for a people is purposely devalue the Dollar. That is morally wrong; it’s bad economics; it’s actually unconstitutional, and it leads to big trouble. And that what we’re doing: we’re stealing wealth from the People by devaluing the currency. You need a strong currency to invite in capital. That’s what we need to get our economy going again.

CNBC: All right. Congressman Paul, it’s always good to talk to you. We appreciate your views. And thanks for bringing them on the show.

  • jb4rp2012

    This guy ProgressiveInAmerica is a troll… Just ignore him… LOL, he has banned me from posting on his posts… He is intellectually bankrupt…

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  • OutlaYa

    Obama is the way to the way to change? That’d be funny if it weren’t true. Oh, did I mention it’s a change for the worse? My 10 y/o is ashamed of voting for obama in his mock grade school election, can’t believe an adult would still admit to bein a supporter to the downfall of America.

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  • playk999

    Ron Paul just gets better each time I seem him! RON PAUL 2012!

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  • nurd180

    old bag

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  • featherian

    RON PAUL for president!!! lets start by that ,

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  • waterchildtera

    wow the truth

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  • HindsightProductions

    Its interesting to me how so many people will go to any length to slough off RP and his ideas as crazy, yet they fail to attack his arguments. It only shows how completely brainwashed people really are. “He’s a crazy old coot… blah blah blah” Wake up folks. The dollar WILL become worthless, and soon. PS the Fed is composed of PRIVATE banks and currency is based on nothing. Do the math.

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  • diurdi

    This is a rather good interview actually. At the start Ron comes of well educated and knowledgeable, which gives him credibility for his later statements which, ofcourse, are more controversial for the status quo.

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  • mjbarrowful

    change legal tender laws!

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  • tranceemerson

    legalize the constitution *thumbs up*

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  • iShysty05


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  • fireriver29

    Brilliant dr Paul! School them untill the day we win!

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  • 2skullscrushing

    THE TALKING HEADS ARE STUPID ASSHOLES. Ron Paul as always schools the dumb shits.

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  • TheEpoxyExpert


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  • BHarris25

    I wish this man would get elected already, he deserves his turn.

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  • whatisahumans

    What a retard. Ron Paul just says “legalize” everything, even if it makes no fucking sense.

    Nobody thinks the Constitution is illegal. Nobody thinks gold and silver are illegal. Fuck off you moron.

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    • Jim

      Oh I don’t know, it makes sense to me. It’s more about removing restrictive, unproductive, non constitutional federal laws, than it is about legalizing anything.

      Gold and silver not illegal. Hah, you do realize that as a citizen you are NOT ALLOWED to have gold?

      Read and learn:

      Before you make assumptions and statements, it might be worth your while to at least KNOW what the heck you are talking about.

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  • HomleandSecurity

    We need the Fed. It keeps me rich.

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  • JeffSalmeri

    Money and currency are different things. Currency, like the Dollar, is a certificate for redeemable money. Money is the tangible asset behind the currency. Gold and silver used to be the money behind US currency. Now our “money” is the strength of the US Military. One day our military will not be their to force foreigners to accept our currency. Either we will return to a tangible asset or be under the monetary rule of another nation. It is not the gold standard that is unrealistic. It is paper.

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  • enjerth78

    Many investors ARE demanding more, but with the Federal Reserve as a “buyer of last resort” they hold the interest rate down on government debt by buying bonds at a rate that the market won’t. The Fed’s bond buying program is about keeping the interest rate to rise to a level that is comfortable for the majority of investors, because it would cost the government too much to let the interest rate rise on it’s colossal debt. The cataclysmic crisis IS in the works.

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  • capucchan8

    I’m a fan but I’m guessing Ron has assets in silver and gold

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    • Steve

      In times like this you’d be a fool to hold onto paper. Don’t be last man holding the monopoly money! Buy silver, gold, platinum, and palladium now while you still can!

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