Male News Anchor: Well, my next guest voted no to raising the debt ceiling, and says out of control spending is to blame for the downgrade. Republican presidential candidate, Congressman Ron Paul, joins me. And, of course, Lisa, now, from Clute, Texas. Congressman, thank you for joining us tonight.
Ron Paul: Nice to be with you.
Male News Anchor: You know, I have to ask you, when you listen to the S&P comments, and as well from John Chambers, the concern is about partisan politics. You are no stranger to partisan politics. Is it possible that some of your politics is frankly how we got here in the first place?
Ron Paul: Yeah, I think it is, and it is rather strange, because at one time, S&P was way behind the curve, and now they seem to be a little bit ahead. But I think we’ve had a problem for so long, and I trust the markets much more than these agencies to do the grading of the bonds. Matter of fact, it’s strange also, because there’s still a lot of people buying our treasury bills. And in relationship to other currencies, our dollar holds its own.
But what I watch and what I think is more significant long term, is the relationship of our dollar to gold, because gold is the only thing that really measures long term value of a currency. So I think what they’re saying in the market today is no, we’re not going to default, we’re going to pay our bills and we’re going to pay the treasury bills and we’ll pay the interest. But what they’re saying is, the money is going to get cheap, the prices are going to go up, and we’re going to have a lot of inflation. I think that’s what the markets are saying and I think that’s what our votes said before. And this is what I predicted all along; there was no way they were going to quit sending the checks out to Social Security recipients or to the bond holders, but they’re going to send money out that has a lot less value, and that to me is more dangerous.
Female News Anchor: I just want to break in here because I think it’s agreed that no one thinks that the U.S. would ultimately default on its debt, not even as we approached that August 2nd deadline. However, there are a lot of questions about when do we get our country, the economy, back on tract, when do we get our fiscal house in order. And there are really not that many places to go with monetary policy, and I think that was what was manifesting itself in the stock market today.
Ron Paul: Yeah, it is true. We’ll wait and see what Bernanke says tomorrow. His only tool is printing more money and now we’re back to square one, we’re back to where we were when he started the QE2. But I think the default is inevitable, it’s just the way we default. We’ve defaulted many times over our history, when you think about how they refused to pay the gold in the 1930s and in 1971 to foreigners.
Male News Anchor: I’m sorry, I have to interrupt you. You just said default is inevitable, the United States defaulting is inevitable? Did I hear you right?
Ron Paul: Yeah, but you got to understand my definition of default. If you give me a dollar and I give you a dollar back in a year and it buys 20 cents, I’ve defaulted. The government defaults, they’ve cheated, they’ve taken 80% of your money. That’s the way all governments default. So when the debt gets this high and once you borrow more than 40% of your budget, I mean, it can’t be sustained. So the tinkering around with budgets and pretending they’re going to cut, nobody believes that, because they’re not cuts, they’re cuts on proposed increases.
And today, it was so discouraging because Obama was supposed to be a little bit more reluctant to go to these many wars that we’re involved, but one thing he did, he made a big emphasis to protect the military-industrial complex: “We cannot back off on that.” So the spending is going to continue, the entitlements will continue, the military spending is going to continue, but the dollar is going to lose value against goods and services and it’s already started.
Male News Anchor: Alright, Ron Paul, let me ask you, in less than a minute, it’s a tough challenge, in less than a minute, give us 2, maybe 3 bullet points, a plan, what can we do to fix this thing?
Ron Paul: Well, you can’t do anything unless you let the liquidation occur. We have prevented it in the 1930s, the Japanese prevented it, and these last 4 years we have prevented it. You have to allow the liquidation of debt and the malinvestment. You can’t have growth if you’re trying to build it on a stash of debt. So there’s been no liquidation of debt, so you have to liquidate it one way or the other. But right now, you should allow bankruptcies, no more bailouts, no more printing press money; let the market work its way out, and then you will get back to square one and you can have growth again.
Otherwise, you’re just going to delay this for days and weeks and months and years; who knows, it could be another decade. Look how long Japan has been going through this. They did not liquidate the bad debt, we’re not doing it either, we haven’t learnt a lesson in many, many years.
Male News Anchor: Alright, Representative Ron Paul from Texas, thank you for joining us.