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.


  • sLeepPastNooN

    1:00 Oops, did just say that? – Hand Gesture

  • thelumberjackjohn

    only in nfl season more important then the economy

  • kalvin6996

    Ron Paul 2012 Freedom is popular! End the Communism!

  • innulja

    RON PAUL 2012! It’s you or NOBODY!!!!

  • bobshenix

    Yes Mr. Obomber, we know that you’d prefer for the American public to stay distracted on nonsense while you start another unnecessary war and run America into the ground with your wonderful “programs”.

    But the game is up, you fraudulent liar… BOTH you and Bush have been the worst presidents in history. The people are waking up to the bullshit. And the bailout that got forced through Congress was the biggest bank heist in history… with the BANKS stealing the money from American taxpayers!!

  • 1moartime

    the NFL? seriously? people, please, for the love of god, don’t vote this fucking piece of shit or anyone else but Ron Paul for president. he’s our only hope. i’m begging you. you all know you can’t vote in a sarah palin or an obama and everything will be ok. think it through. no one cares about us except ron. listen to him. really LISTEN. for fuck sakes…the god damn NFL…what an asshole.

  • crazeyspivey

    Stupid bimbo silicone reporter with elitist puppet strings attached to her……..someone please go smack some sense into her. Teach her some manners too, for interrupting President Ron Paul.

  • katsfanman

    ” I,d rather be talking about stuff that everybody ” Ya barry we know you are confused ! Wake up and listen ! Ron Paul has the answers!

  • Libertarian777

    She’s retarded. Inflation’s transitory? Yes gas prices are off their highs but they still up double digit % over the last year

  • vilekyle22

    Right now all Ron is thinking is “Two Jugs of unpaseturized milk”

  • Yabuturtle

    Ron Paul doesn’t debate, he owns people’s arguments. Also that girl’s really beautiful. 🙂

  • vJpRIzM

    Look at this news pundit protecting the central bank system of great Britain. This is America, bring back the silver and gold backed green back.

  • To proofread a transcript, you say to go to your writeboard. Where is it? I don’t see any links for a writeboard.

  • pjmack79

    obama just comes off as….very unitelligent and no spark at all….very hollow

  • aladin

    there some people here talking how we should not default to feds why not. destroy the fed america will stand up and take a long overdue breath. destroy the feds you destroy the banks and destroy the banks you got free country and those who say well who will give credit. credit unions. look what is happening in greece banks want to own greece and america is already owned by banks.

  • 4evaFranyify

    I’m 14 and I taught myself politics because of Ron Paul. I’m going to tell my parents to vote for him. I’m going to tell my friends to tell their parents. I’m going to grow up to become a true American Politician that defends the rights and liberty of the people through the constitution. Go Ron Paul!

  • sendyoshit

    Ron Paul knows his shit and is backed by reason and common sense. You can’t win a debate against him.

  • OldSkaterGuy

    Obama is a babbling idiot when he is not reading from a teleprompter.. “I want to talk about the NFL” go to hell Obama. I want my fucking vote back you liar!

    Ron is one of the few admirable politicians we have today.

  • ChairborneRGR

    She has a great rack!

  • Gerry

    Don’t you people know you can’t trust a guy with 2 first names?