Ron Paul: Rescind America’s Fictitious $1.6 Trillion Debt to the Federal Reserve


Lori Rothman (Fox News): And hello everybody. Welcome. I’m Lori Rothman, sitting in tonight for David Asman. Stocks are tumbling today. Wall Street may be waking up to the idea that a deal to raise the debt ceiling (especially one with tax hikes) is exactly the last thing a huge majority of Americans want right now. The fact that Americans don’t want a deal is hanging over the White House talks like a giant elephant. A recent CBS News poll finds that just 24% of Americans support lifting the debt limit, but 69% say the debt ceiling should not be raised. Americans are aware of the consequences, too. Fully, 72% believe it is at least somewhat likely the economy will take a severe downturn if the debt ceiling is not raised. Americans clearly do not want more spending, no matter what. The President is not listening.

[Video clip: President Barack Obama: I’d rather be talking about stuff that everybody welcomes, like new programs, or the NFL season getting resolved. Unfortunately, this is what’s on our plate.]

Lori Rothman: Republican Congressman Ron Paul (R-TX) says, “Everybody does not welcome new programs.” He is running for President and he has his own solution to the debt problem. Welcome, Congressman.

Ron Paul: Thank you. Good to be with you.

Lori Rothman: Great to have you. You famously said that we should not raise the debt ceiling, and you have an idea to save 1.6 trillion with one swipe at the Fed’s balance sheet. Explain the idea.

Ron Paul: Right. We’re over the debt limit and they’re worrying about it. And I said, one solution — if we wanted to get serious and get down to business in the next year, do all the work we should do — we could get a reprieve, because we owe $1.6 trillion to the Federal Reserve. But where did they get the money to buy our debt? Well, they created it out of thin air. So taxpayers keep working hard to pay the interest to the Federal Reserve, as well as to finance these bonds if the Fed wants to take the monies. So I would say that is not a real debt. It’s a fictitious debt. It’s a dishonest debt, and that we’re not obligated. So if you don’t want pay interest for a while to the Fed, or just quit paying, then we can meet all our other obligations, and people shouldn’t be panicking that we’re going to default on our debt.

Lori Rothman: But it isn’t fictitious debt, Congressman, if you consider that that liquidity is in the financial markets. And so, if you wipe off the bonds and other assets off the Fed’s balance sheet, you still have all that money — right — that’s being hoarded by the banks, and at some point it’s going to be lended [sic: loaned] out. And then you have a big problem with inflation, don’t you?

Ron Paul: Well, this doesn’t change it. It stays the same. The Fed is not about to call that money back in. They’ve said, “Oh, when are we going to end QE2 and when are we going to downsize our balance sheet?” They’re not going to do that! The market—

Lori Rothman: But the Fed needs to have those to maintain those bonds, so that if it does call that liquidity out, in inflationary times, it can do that, to sell those bonds back into the financial marketplace.

Ron Paul: Well, all they have to do is raise Reserve requirements, and they would accomplish the same thing. So no, you don’t have to do that. But what I’m exposing is the fiction of the Federal Reserve on how they buy bonds, and what do they do with the interest, and why we owe them money, and why they contribute to the total debt of the country. And it’s not real debt in the sense that, if you owned a Treasury Bill, that’s a lot different. Or if we owe — if a Chinese owns a Treasure Bill, yes, if we default on that, that’s going to raise some eyebrows, but the Federal Reserve is quite different. I mean, this is debt that they were able to buy out of thin air. But they’ve already monetized that debt; that money is in the economy. Now, if you expect next month the Fed is also about ready to shrink the money supply, well, that would provide a problem. But that isn’t likely. That isn’t going to happen. They’re not in any mood to do that. And they’re going to continue buying debt, as they always have, so they can — they have plenty of room for manipulation, believe me! They manipulated trillions of dollars during the bailout and took care of their friends. They’re not handicapped. The only thing that’s handicapping the Fed now is people want transparency. Before, they did it in the dark of night and nobody knew what was going on. Now that we’ve exposed them, we have to see the Federal Reserve Board Chairman having press conferences, and—

Lori Rothman: I know that you are notable for — you’ve written a book about wanting to get rid of the Fed. Would you at the very least, though, be satisfied, Congressman, if the Fed just ditched its dual mandate – right — just got rid of the jobs mandate and just focused on price control? Because really the Fed, Bernanke was right when he said fuel prices, energy prices and food prices were transitory. We’ve gotten a bit of a lift off the gas price.

Ron Paul: Well, I think that’s a good suggestion, because they’ve had a dual mandate — one, stable prices and one for employment. We have no stable prices and no full employment. So I would take both mandates away from them and let them have a check-clearing outfit there, or something like that. But no.

Lori Rothman: So you must love this idea for an infrastructure bank. The jobs report — the June jobs report — was horrible. And now there’s a talk — they’re not calling it “stimulus,” but by any other name it would amount to that. What does this country need for job creation?

Ron Paul: Yeah. Well, what you need to do is change everything that we’ve been doing. We have too much spending and too much taxes, too much regulation, too weak of a currency, and we’re doing all the things wrong. But the most important thing that we’re doing wrong – and devastating thing – is we don’t allow the correction to occur. We don’t allow the liquidation of debt. We prop up all the mistakes. We buy the bad debt, where the banks that held this bad debt and these derivatives, they should have all gone bankrupt. Instead, the taxpayers got stuck with them. So we bailed out the financial institutions — the banks and the corporations and Wall Street — and they’re doing quite well. And yet, they said there would be a depression, of course, if we didn’t bail them out. We still had the depression! We still—

Lori Rothman: So do you think Americans don’t want a deal on the debt ceiling? Sorry to interrupt you.

Ron Paul: Let me still fin — let me—

Lori Rothman: Go on.

Ron Paul: Let me finish. We still ended up with the depression, because the People lost their jobs and lost their houses. Go ahead.

Lori Rothman: No, I just wanted to put to you — I mean, fine. Leave the debt ceiling; deal with the economic consequences; we hear you. So, I mean, do people just not want a deal in the end? I mean, how are we going to sort out and deal with the ramifications here?

Ron Paul: The ramifications of what is going on now and how we get back to full employment? Is that the kind of thing you’re talking about?

Lori Rothman: Absolutely.

Ron Paul: Yeah. Well, you have to do what I said. You have to change policies. We do have to cut, but we have to cut a lot! But we have to change the philosophy of government. We can’t maintain an empire. As long as we think we can do that, we’re on the way — I mean, we are literally and technically bankrupt; we can’t pay our bills, and we don’t have enough income. The only thing that keeps us going is counterfeiting our money. And the people — even today — people were buying dollars, because there’s nothing else out there other than gold. So yes, the dollar is still providing funds, but we’re counterfeiting the money. But we’re defaulting because the dollar’s going down in value when you look at your prices. The government — our government — defaults all the time. And we’re going to continue to default. But the way we’re going now, though, it’s going to be much much worse than — if we raise the debt limit, it’s going to be much worse than us biting the bullet and saying, “We need to change our attitude. We have to look at this. We have to change our way.”

Lori Rothman: We’ll have to leave it there. Thanks for engaging us, Congressman Ron Paul. Appreciate your time.

Ron Paul: Thank you.


  • bdmenne

    Wow, Fox News anchor is bodaciously smoking hot.

  • brad238899

    He never ceases to amaze me. Dr. Paul is so intelligent.

  • werbelloff

    does obama really think we like the idea of “new programs” which just means more govt spending?


  • ForbiddenStallion

    Ron’s got major grapes!!!

  • lilsm555

    Ron paul is the only politician who has not sold out.

  • luckygalloway

    its weird fox news is treating ron paul decent somethings up. i think fox finally jumped on the ron paul wagon

  • ronniepage
  • vic4rp

    Yeah,It was the people that lost their jobs and homes,they didn’t get bailed out,wall street trash boys and big banks are the winners of the bail outs.And don’t forget their BIG BONUS! OH Yeah,there is a depression out here for the people, not the big fat cats….They got bailed out ,so life goes on as usual for them.

  • ReeferRevolution

    moxnews .com????? anyone else catch that?

  • sodajr

    Heck yeah! Go Ron Paul!!!

  • 1eyednewt

    RP 2012!

  • iddicted

    This lady is smart though it says fox news I’m confused

  • Wenutatation

    Ron Paul has good plan BUT does he know how to get there? I hope this works

    • Libertarian777

      He’s not that serious about that proposal. If you listen he says the proposal just brings to the forefront the absurdity of the fed. He’s learning to sensationalize some of his positions. Think of it this way. The treasury issues pink paper (treasury bills and bonds), these are debts, and your labour (taxes) are the backing for these debts ( ie you’ve been sold into debt slavery). in exchange for your debt slavery, the fed prints green pieces of paper and exchanges the pink paper for green paper. Has ANY wealth been created? Has ANY productive activity taken place? NO and NO. See how absurd the situation is. The government doesn’t create anything. It only TAKES from the productive members and gives it to unproductive members who vote for those benefits.

      Remember Marx said “from each according to his ability, to each according to his need”. That is socialism. That is the USA today.

  • TravistheHuman

    “I Would Rather be Talking About Stuff That Everyone Welcomes, Like New Programs or the NFL Season Getting Resolved”

    What kind greedy moron dose Obama think I am?

  • w0y1z92753

    Ron Paul, no double speak, no spin, no bullshit. Just common sense and solid policy that is governed by the CONSTITUTION. Please America, make this man your next president.

  • w0y1z92753

    If America fails to elect Ron Paul, not only is the US fucked, the entire free world is fucked.

    • ANaggingVoice

      Actually, if the electoral college fails to vote him in then ‘what you said’. The only thing our (regular citizens) vote does is sway the opinion of the electoral college.

  • buddcinder

    LOL……people think Paul will get to fix things. If he gets in power and tries to change the way the FED steals Americans money they will give him a motorcade and a grassy knoll. It’s the one lead that was never followed when JFK was shot. Coincidentally a month after he started printing real gold backed greenbacks.

  • megatroll

    I’m European and I wish Ron Paul would PERSONALLY hang Obama and his NWO/Bilderberg/Bank cartel masters. They won’t be able to hold up this farce forever. Even the most brainwashed of American sheeple are waking up now.
    Your days are counted you monsters!

  • MrFinnbar5000

    by 2;39 run paul rules and shows why we need to end this monsterous phony ass fed! god i live this man! lol ron paul 2012

  • watertonrivers

    Screw the Fed, we don’t owe them a dime!!