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.


  • Apexed818

    can anyone rephrase her argument, the one right before ron paul gave his retort. I’m not well versed in financial terminology.

  • uturniaphobic

    how can RP even think while looking at that reporter! what drive what tenacity! nothing phases him! wow!

  • xxxserialxxx

    Maybe she’d get answers if she stopped interrupting Dr Paul.

    Fuck Fox News.

  • happilea

    Anyone else seen the video of Anonymous bringing a class action lawsuit against the FED?

    They are asking for help from those that can assist them…Thats all I know just watched the video a few minutes ago and surprised that this is not yet worthy of news coverage.

  • AwesomeBeatles

    Also watch, “The creature from Jekyll island”, on You Tube. The Federal Reserve is totally illegal. The lady is a nut job, she does not understand our money scam. We/us/her are slaves to these bansters.

  • 505bazza

    In 1986 global military expenditures reached $900 thousand million.

  • 505bazza

    At 1986 rates, the expenditure is more than $1.5-million a minute. . . . Are we all more secure as a result of this kind of technological emphasis?

  • AwesomeBeatles

    Ron Paul is the answer. Who does the fake debt go to ? Wake up America. Watch “Freedom To Fascism”, on You Tube.

  • 505bazza


  • TrippingTheTube

    Face it, the reason the Fed shed gold was because it was an obstacle to their printing endless dollars for their empire. It was a scam people. Gold is a good backer because it maintains a steady value and is desirable. But we can use bananas or anything else, as long as it can’t be counterfeited by the banking elite. Counterfeiting, btw is one of only about 4 crimes mentioned in the constitution. Also mentioned is the immorality of a fiat currency. Think they were on to something?

  • biozamadotcom

    I give props to Fox just for their ladies
    it’s really long over due.

  • HyperBorealOperator

    Obama is such an idiot. I can’t understand why people say he’s so smart. He’s a moron and shows that every time he talks.

  • Brett Istre


  • BillyBatsonMarvel

    So go ahead raise the ceiling on our demise.

  • Probuilt7

    I was looking at her, uhm, face.

  • kasperx01

    Ron Paul. there are many who are afraid of what you stand for,. they will come for you. there are those who stand to lose there grip on society, they will try to slander your name. there are those that believe you embody what they are afraid to speak of, they will join you. keep it up RON Paul 2012

  • W33Dblazer

    fuck fox news…

  • MsDowntowns


  • Junior

    I think this suggestion to selectively default on bonds held by the Fed is simply stupid and will likely cost Mr. Paul a lot of problems.

    So far, I think Mr. Paul made these three mistakes:

    -Suggests to end the Fed but never gives a clear answer as to how he will do it

    -Asks for gold to compete with the USD as another legal tender, but that would bring a faster fall of the USD, and the mob will want his head. Either you eliminate the Fed or you keep it. But don’t compete with it.

    -Openly tell people that the Treasury should default on the bonds held by the Fed. He is for sound money and then he wants to debase the USD? Who advised him? Is he gone crazy? Hopefully nobody watched this interview…You don’t hear this nonesense even in third world countries. They do it, but they don’t openly promote it on TV!

  • dvssk8er3

    Ron has that bitch soooo wet , she wants him.