Ron Paul: War Is No Solution to the Depression!

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Ron Paul speaks to a crowd at New England College in Henniker, NH on September 1st, 2011.


This is a rush transcript. If you notice any errors please report them using the “Help improve this post” link at the bottom of this post.

Man on Dias: Congressman Ron Paul to the New England College.

Ron Paul: Thank you, thank you very much, what a nice welcome. Sometimes I don’t get the same welcome in Washington DC. But thank you very for coming out, I understand that this particular lecture meeting should deal with economic policy, it just happens that I’m fascinated with economics and economic policy. Matter of fact, it was economics that got me involved in politics many, many years ago. One thing that was fascinating to me after I had studied some economics, decided to get involved in politics and went to some of these preliminary meetings and met other candidates, and they would be very interested in politics and maybe have a degree in Political Science. And I asked him, “What are your economic policies, what school of thought do you follow? Are you a Keynesian, a Marxist, a socialist or are you an Austrian economist or supply-sider?”, you know, all the different things that you can be. And most of them didn’t really care that much. Politics was for politics sake, and the purpose of politics was to get elected. Well, I have a different definition for the purpose of politics, I think the purpose of politics and all political action is to preserve liberty; that’s what I like.

But it was and the 1960s that I came across the Austrian school of economics, and for some reason I became fascinated with it and then the predictions made in the 1960s actually came about later on. The purpose of what I have been doing is to promote liberty and also to talk about economics. But in those early years it was slow going because very few people really were concerned about the deficit and the different things that I have been concerned about for a long, long time. But it’s different now, people are really worried about just about everything in this country and especially economics. I had gone through college, I had some economic courses like most of us do; we get economic courses. But I didn’t really fully understand much about what was going on in the economy. But I was going into medicine and I spent most of my time in college studying hard to get in medical school. So I didn’t pursue it a whole lot then, but during my medical school and through my residency, I did have some time that I had to break away from my studying in medicine, so for some weird reason I got fascinated by reading economic textbooks. And the one individual that influenced me early on was the Noble prize winner, eventually he won a noble prize, and that was Friedrich Hayek, who was a student of Mises. And Mises, of course, is the well known Austrian economist. Many of us consider him probably the greatest economist of the 20th century.

But becoming fascinated with them and they were especially interested in monetary policy. The reason monetary policy becomes very important is because if you understand monetary policy, you understand financial bubbles; if you understand financial bubble, you understand the business cycle; if you understand the business cycle, you know why there are recessions and depressions; if you understand that, then you understand why there are no jobs; and if you understand that, then you know what you’re supposed to do. So it is very important to understand the monetary system as well as the free market system. But during the 1960s it was predicted by many, matter of fact, Henry Hazlitt, who was a journalist basically but he was also a good free market economist who befriended Mises when he came over from Austria. Mises was Jewish and he had escaped Nazi oppression and got here and Hazlitt befriended him and yet Mises never had much of a position. But he was certainly welcomed in this country and had a few students. But Hazlitt was well known in this country because he wrote financial articles about the Bretton-Woods Agreement, the one that occurred not too far from here, and that was the pseudo gold standard, that was the coming out of World War II. Yes, we needed a link to gold, but we didn’t want a real gold standard and this sort of thing, and that’s a larger story. But it also introduced the notion of the IMF. And the World Bank and the IMF would do all the bailing out and take care of all the devaluations. So it was a lot of money mischief is what it was. But still that monetary system had a lose link to gold, even though we as American citizens were not allowed to own gold, it was illegal because Roosevelt took that away from us in the 1930s. You had too much freedom, American citizens had too much freedom because there was a vote against the money, against the currency and nobody likes to be embarrassed by that, so they just took in the gold. And Hazlitt predicted in 1945, he said “The Bretton-Woods Agreement, the pseudo gold standard, cannot work, it will fail”. And reading that and studying that, I assumed they were correct. But the confirmation came on august 15th of 1971 and that system broke down. So there’s been no linkage of our currency to gold ever since then.

But I remember that day very well because it was such a startling thing to happen. Nixon did it with an executive order. Well, he didn’t admit it, but he was going after gold speculators, worldwide gold speculators speculating against the dollar. But he was really admitting that we we’re broke and we can’t honor our dollar anymore because even though we as Americans couldn’t go to the bank and get gold, a foreigner could put down $35 and get gold, and they had done that for about 10 years or so through the 1960s because we printed so much money. And it doesn’t take a genius to figure out that if you print a lot of money, the value of the money goes down and therefore $35 dollars was a good deal. And we did this, we got rid of 500 million ounces of gold at discount price until we were practically out of it and Nixon, by an executive order, just said, “No more”. He was declaring literally bankruptcy at that time. And we defaulted. We have a lot of talk these days about defaults, well, in the 1930s we defaulted when you couldn’t take your $20 in and get an ounce of gold. So Roosevelt did that and Nixon admitted default. There was another default in the 1970s when we used to be able to take a dollar bill, a Federal Reserve note, and get an ounce of silver, a silver dollar out of it, so that’s another default. But anyway, the default was announced in 1971. To me it was a major, major incident that occurred. And yet, the very next day, everybody from the Chamber of Commerce to the stock markets loved it. stock markets soared. And not only did they close the gold when they got rid of the gold standard, they put on a 10% tariff, which is a huge tax on every import that came in. And they put on wage and price controls, and they put controls on what people could make and what you charge; it was a devastating decade. But the immediate reaction by the establishment business people was, “This is wonderful”, and they thought it would be wonderful. Well, the euphoria didn’t last long. Anybody who studied and remember, the decade of 1970 was terrible and it ended up in the late 1970s with interest rates at 21% and inflation rates of 15% and at that time it was thought that the whole system could come down. But it was revived and that downturn was salvaged and now we have been living on printing press money. Worldwide we issue the reserve currency and the other countries take it and this has created the biggest financial bubble in the history of the world. Now it’s been announced several times in the last decade that we’re facing this problem. The initial announcement came in the year 2000 when the NASDAQ bubble collapsed, and this was a warning sign that something big was happening. And since that time, we’ve had really no new jobs. I mean, we’ve had 37 million new people in this country, but no real new jobs, the jobs kept going overseas. And people said, “What going on, what’s happening?” And every time we’d have a downturn, ever since 1971 we’ve had quite a few, every time we’ve had a downturn, the conventional wisdom was, “Well, you have to spend more money. The consumer has to spend more money, the government has to spend more money, corporations have to spend more money; everybody has to spend more money”. But the problem had been they had spent too much and they were too much in debt.

So if you liquidate the debt, you can go back to spending money again, but just piling on debt on debt and pyramiding debt; you can do it for a while, but eventually you can’t do it anymore. And this is what we’ve been doing, why the crisis has been building, and also the reason that the monetary policy is so important. You cannot understand the business cycle unless you understand the Federal Reserve. And if you fully understand the Federal Reserve, you have to decide what you want to do with it. And I say the very first thing we start with is, is we need to audit the Fed and find out what they’ve been doing and who they’ve been helping out. They created approximately … well, they managed 15 trillion dollars for the bailout, a third of that 15 trillion dollars went to foreign banks, including the bank that Qaddafi was part owner in. I mean, the whole thing is just really crazy. This whole idea that you can get wealthy by just duplicating monetary units makes no sense whatsoever. We are getting more transparency, we’re getting to know a little bit more about the Fed. But the most important thing we have to learn if we want to get out of this mess, is we have to understand the business cycle. Why do the good times lead to bad times? And they really started shortly after … well, they’ve been around for a long time, but they’ve been minimal because we didn’t always follow the gold standard, we did fractional reserve banking and we went off gold during the Civil War and there were other problems. But because we respect the gold standard, we always went back and got back to a reasonable level without too much trouble. But in 1913, the Fed was created, the first big inflation was from World War I. So we had to have a correction. Too many dollars had to be adjusted, there has to be prices go up to adjust this distortion. So in 1921 we had a significant depression, it was bad, really bad and it lasted a year, but we didn’t pay that much attention to it, you hardly even read about it in the textbooks. But it was serious and the correction had to come. And then they went back to inflating again in the 1920s which created another artificial bubble. That bubble had to burst, it did in 1929. And then that time around, both Republicans and Democrats became more political and said, “We can’t let the people suffer, we have to take care of the people because they’ll be a run on the dollar and they’ll be bankruptcies and everything. So they got involved by spending more and keeping prices up. One example of how silly it was, was the country is poor, we had a great depression, the farmers were having a tough time, people were starving. The farmers weren’t making enough money, so they said, “Well, there’s too supply, so we want the farmers to make more profits and that will solve our problems. So how do we get the prices up? Well, we need less supply, so we’ll make the farmers plough in half the crops, then the prices will go up.” And how that was supposed to help poor people, I don’t know what they were thinking about. But that was the kind of thinking that went on and it was that kind of thing of propping up mistakes. And, of course, the depression lasted for a long, long time. The depression started with the bust in 1929, and it really wasn’t over till 1947. Most people say, “You’re wrong, war ends depressions, war is good for the economy”. Terrible, terrible thinking. Not only is it morally dangerous to talk about economic benefits from war and war profiteering, but it is true, it lowers unemployment because 16 billion people had to go to war. And tens of thousands or hundreds of thousands didn’t come home. But just because they’re employed and doing something as destructive as war, doesn’t end the depression. And the depression did go through World War I, which I remember clearly because the rationing and the difficulties and it was a continuation of the depression. So this was not an answer. But we’ve continued this and unfortunately, we haven’t changed our attitudes about the business cycle. Even today, even this week or next week when you hear a new plan, probably it will have more spending to stimulate jobs. Governments can’t create jobs, they can create mischief, they can have jobs that are taken from someplace else. But if you produce 10, say, bureaucratic jobs, you might have had 20 productive jobs. So just because you see 10 bureaucratic jobs, it doesn’t solve the problem. We can’t get out of our recession/depression until you get rid of the mistakes, which is called mal-investment, misdirected investment, over-investment, too much debt. But politically, there’s a problem. I mean, politicians can’t say the truth: “We are bankrupt, we can’t spend any more money”. They say, “Oh yes, we can, we need it”. I mean, the only justification is we need it, we want it, we deserve it, we’re entitled to it.

And even the politicians who make some attempt now in Washington … just think of the people who came with the title of being elected because they belonged to the Tea Party Movement, they want changes done. They’re getting blamed for everything, they were only elected 6 months ago and they want to make changes, and they’re getting blamed of 50 years of bad economic policy; it doesn’t make any sense whatsoever. So we do have to look at sound economic principles. And, to me, it isn’t too complicated because we had a pretty good example of what we should do. This country has been the freest country really in the history of the world, it’s been the most prosperous country in the world. It believed in sound money (have a gold standard), it believed in property rights (you own your property), it believed in contracts (you fulfilled your promises, you have to follow contracts), you can’t hurt other people, you can’t steal and you can’t defraud people. So there are a lot of regulations in a free market economy. So we became the most prosperous country in the world. And all of a sudden, though, something happened because it wasn’t the protection of the principles of liberty and our constitution that became most important for the politicians, it was the wealth. And they thought, “Well, we got to make sure everybody gets their fair share, we got to shift around, somebody needs this”. So the government got in responding to the lobbyist. So they concentrated on the materialism that is produced in a free society and that undermined the principles of liberty. But still, for 10, 20, 30 years we were so wealthy. We had this wealth and we consumed the wealth, we chased our good jobs overseas, we chased our capital overseas, we’ve destroyed the value of our currency, and then we had to start borrowing. We used to be a creditor nation, during the 19th century and into the 20th century we were the creditor nation, we loaned money to other people. Now we’re the biggest debtor nation in the history of the world; 3 trillion dollars. And who’s one of the biggest creditor nation? China, we have to go to them. Every time somebody asks for something, they’re saying, “Yes, I know it’s a problem, I know it’s difficult, it’s a tight budget. But you go over hat in hand and ask China to loan us a little bit more money. Go and hawk a little bit more to foreign enemies”.

But that can last for so long. We can spend, we and produce, you destroy that and you can borrow and you can do that for so long and then you can start printing money, and that’s what we’ve being doing and it’s amazing that it’s lasted this long because it’s based on trust. It’s based on the trust that we are the most powerful nation in the world. But we’re getting poorer by the day and we’re getting more indebted by the day and therefore our economy keeps going down and so far we have not yet had any strong suggestion of going in a different direction, like really changing the tax code. We have a tax code that chases capital away. Corporations are making a lot of money, but why open a new business in this country, it takes years to get a business opened up too often. And the money is chased overseas and they start businesses elsewhere. I’ve had business people tell me it takes them 3 weeks to start a business in China and it takes 3 years to maybe get started in this country; to fill out all the forms and all the requests and all the permits. So we have chased capital away. But when the country gets to issue the reserve, which is the dollar … of course, the dollar is like gold, all the other central banks take the dollar and they put it in their bank and they use that as a reserve and they build their economy on it. In the old days, it used to be gold that had to be a reserve, and then that was phased out. In our country we had gold and silver as reserves and then later on we started just using treasury bills.

So the more money Congress spent and the more treasury bills they issued, the more the Fed bought those with money created from thin air and they put them in the reserves. So everybody said, “What the heck, buy a treasury bill, that’s a safe investment, we’re okay”. So everybody thought this was just grand. But now the Federal Reserve holds derivatives, derivatives that they had to buy to bail out the banks, they’re held in the Federal Reserve to back up our currency, and it doesn’t make any sense and it’s not going to last. So I think what we’re witnessing today is the coming to the end of the dollar reserve standard. It’s never happened before, there’s never been a bubble like this before, and it’s not going to be easy. But we have to get some people who understand this and more and more people are. This is where I’m very encouraged. Even on the business news these days they’re starting to talk about sound money and the business cycle and a tax policy that makes sense. But then the other part is saying, “Get me more money, get me more stuff, and don’t worry about where, just get it for me and worry about paying for it some other day. There’s an emergency, get me the money right now”. And there’s a conflict there, but it will come to an end. Unfortunately, it’s going to come to an end with an economic crisis where they just reject the dollar. So we have to do whatever we can as individuals, and we as politicians, and anybody who’s involved, to correct it and work our way out of this. And each little program that I talk about, I always like to see a transition to say, “If we do this, save our money here, put some against the deficit, take care of some other people over here.” But the truth is, the likelihood of us working our way out of it isn’t very good. And that means that we are going to face a major decision here in the next several years of deciding what we want in our country; whether we really believe in the constitution or not. We got into this mess because we’ve had too many people in Washington that rationalized and said, “You know, the constitution is outdated, we don’t need to follow it”. We got into trouble because we had too many like that. And you know, I’m convinced that we can get out of this problem by only sending people to Washington that will take their oath of office seriously.

The question that we as a people have to ask ourselves is what should the role of government be. And the role of government is precisely defined in the constitution, and the role of government should be there to protect our liberties, give us a strong national defense, provide for a general environment, is what I like to think of, to let us operate, to let us function, to let us have our freedoms and our liberties and allow us to keep the fruits of our labor. We don’t need to assume that prosperity comes when we cough up and give the federal government all our money and let them spend it, that’s where the problem is. We have to trust freedom, freedom doesn’t bring about perfect equality, but neither does socialism and neither does the interventionism that we have today. Just think of the inequality of what happened with this crisis. During the crisis building, it was a housing bubble which was talked about by the Austrian economist quite frequently. I wrote about it and spoke about it. And it was there, we knew it was coming. So it burst, so what happened? Some people were making a lot of money, and then they turned into big time speculators with derivatives and all the instruments, and they got themselves into trouble. The banks were in trouble and these mortgage companies were in trouble. We had these guarantees with Fannie Mae and Freddie Mac. So the bubble burst, so what happens? They rushed to Congress, “There’s a calamity on our footstep, we have to do something”. It’s almost like what they tell you when they want you go to war: “Oh, there’s a calamity, there’s going to be a nuclear bomb dropped on us tomorrow unless we go to war and start the war and try to stop these people”. So, they come in and they say, “The calamity is coming, there’s a depression coming, unless bail them out”. So guess who gets bailed out, the banks get bailed out, and the big businesses get bailed out. And what happens to all the bad debt, did it get written off the books and did we liquidate it so we can get back to growth again? No, we propped up all the mistakes because the Fed went and printed all this money and brought up all these assets they call illiquid. Illiquid means they’re not worth anything; so you own them now. So what happened to the depression? The people who deserve the depression didn’t get it, they’re still making a lot of money, they got bailed out and we bought all their bad stuff. But what about the people who thought the government would always take care of us with their housing programs and all the giveaway programs? They lost their jobs and then they lost their houses. So the very people that were supposed to benefit by all these government programs and all these promises and easy money, were the ones who have suffered the most. So therefore we have to revamp them, we have to restore our confidence and belief and understanding about what we were given, how the marketplace works. There’s a better understanding today of how the market works and how the monetary system works than it was even at the time of our founding. So I never accept this idea that we have to go back to an old-fashioned gold standard. No, it can be modern, it can be better than anything ever before. But all I want to do is reject the old-fashioned ideas of tyranny, regulations, government control, abuse of the people, bad money, and all the things that bring us to our knees.

Our history is so clear where paper money always fails, gold money always lasts. It’s been around for 6000 years. And yet we’ve only had a short experiment with this free society. We’ve had the freest society. But most of history and most of the world today are controlled by tyrants, and we’re moving in that direction. We don’t call them tyrants, but we have a lot of control coming out of Washington. We lose a lot of our freedoms, our personal liberties, our control of our land, the control of our money, the control of our lives, the control of how we travel at the airports, I mean, it’s on and on how much liberties that we have lost. We’ve even gotten to the point now where the federal government is so wise, that they’re going to make all your decisions on everything you eat, drink and smoke. And therefore, if you happen to think that raw milk is good for you, you better check with the federal government because they don’t want you to do that. So I say let’s have a policy of reinstating liberty. If we had a free society, a president doesn’t have to know what you want to do. I don’t have to know what is best for you. I might make a mistake and I don’t know what you want, that’s what freedom is all about; you’re responsible. I don’t know what religion you want to follow, I’m not going to tell you. So why doesn’t that apply to everything? Your intellectual pursuits should be your decision. Why shouldn’t your economic pursuits be your own business? Governments can’t take care of it. Once a government embarks on taking care of us and protecting us from ourselves, there’s no liberty left.

And unfortunately, we have moved sharply in that direction and yet the people are now waking up. The contest is there, like I said, the contest is between those who have come to believe and they sincerely believe it and I can understand why they believe it, they make an entitlement synonymous with rights. It’s not a right to be entitled to somebody else’s property. But as long as they believe they’re entitled to it, we’re going to have a job on our hands because the pie is shrinking, it’s shrinking rapidly. And you know the debt problem, even though I don’t like taxes and my tax program would be very low. I’d like to get it down to like no income tax. We have to admit the biggest problem with the debt right now is the fact that the revenues are down because there are now jobs, nobody’s able to feed the cow, keep pouring the money up here because our productivity is down. And, therefore, if we don’t change the appetite, if we allow this to happen, the jobs are disappearing, productivity is disappearing, but they’re still a strong appetite. Just listen to them every single day, the appetite for you to take care of me. I want you, the government, to take care of me. Who is the government? You’re the government. In my vision of what would happen if we could go through a transition is, I wouldn’t come to you and say, “What you need to do is you need to sacrifice more”. I don’t want you to sacrifice your liberties, you don’t have to sacrifice your liberties to be safe. You’re allowed to be safe and you need to take care of it and be responsible for it. But you don’t need the sacrificing, the only people who would really sacrifice were the people who on the receiving end of big government; the big banks and the big corporations, the military-industrial complex, the big farmers that have all the benefits, the bureaucrats in Washington, the bureaucrats that we don’t need. Yes, they would have to sacrifice. But if you’re willing and able and desire, if you want to take care of yourself, you really don’t have to sacrifice. All you would get from me would be the effort to give you your maximum amount of freedom and responsibility to take of yourself.

Now, very briefly, I do want to mention a little bit how I would like to see the priorities in cutting spending because we should always have a proposal on how we could work our way out of it. if we have the destruction of our currency, that is a different story. But I want to talk a minute about where I would cut first, it involves foreign expenditures.

And a lot of times when you hear about economic policies, we supposed to be talking about spending and tax policy and regulations, and that is very important, but you cannot separate foreign expenditures from economic reality. The Soviet System collapsed because of expansion of their empire that they couldn’t manage and they finally had to declare bankruptcy and the Soviet System fell apart. And that wasn’t new, that has happened throughout history. Large countries, sometimes they last a long time, sometimes hundreds of years, but eventually they fail because they produce less and they expand themselves and they can’t afford it. Things move much quicker these days and if we don’t change our way, we will have to see significant changes. But we spend well over a trillion. Some people estimate 1.5 trillion dollars to manage our foreign policy overseas. And, to me, this should be the easiest place to cut. Why can’t we cut there because there are so many programs at home that we should have never started, but I don’t particularly want to say, “Well, what we need to do is start cutting, so my first proposal is we cut aid for child healthcare or cut the aid for the elderly or something like that”. That doesn’t make any sense at all. But even though I know it’s a threat if we don’t do the right thing, everybody is going to get hurt because the money won’t buy anything. So I think we can save a lot of money, I’d bring the troops home, all the troops home.

The immediate effect for this would be you wouldn’t even have to discharge them from service. People worry about that: “Will you discharge them?” No, just let them come home and let them spend the money at home instead of in Germany and Japan and South Korea. But economically you shouldn’t worry too much about that because we sent millions home after World War II and they came home and they were discharged and we cut spending in half and we cut taxes by 30% and that finally led to getting out of the depression. So if you have the right circumstances, jobs will be there. But nevertheless, really I’d bring the troops home to save a lot of money, and then spend in the places that people really need it. And you will eventually have to take the subject of economic policy which means lower taxes, lower capital gains taxes, invite capital back. You have to have a sound currency, you have to minimize these regulations. If you want regulations, let your state do it, not the federal bureaucrats. So there is definitely a program available, fortunately for me it coincides with my personal beliefs, it also coincides with the constitution so I’m very thankful for the founders, the way they wrote it because it’s a pretty tough document for curtailing government. The whole document was written to restraint federal government. They always assumed that we, as individual states, would take care of ourselves. They didn’t think we would have this monstrosity in Washington taking care of every little thing that we do. So the constitution, unfortunately, has not gone down well in the last 100 years. Every year it seems to be getting worse. What we need is a restoration of confidence that we ought to follow the constitution, restoration of the confidence that freedom really is the answer and believe that we can be a great nation and we can spread our goodness, but not through the barrel of a gun. We should spread our goodness by setting a good example economically, setting a good example by being friends with any country that wants to and trade with them. And the founders believe strongly that trade with people, talk with people, don’t get involved in their entangling alliances, don’t go into nation building.

So I see this election as an opportunity and I think it’s an opportunity for the American people to speak out and decide what they want. If you want the status quo, you probably don’t want me. If you want to see some changes, you probably might well consider voting for me. But we are facing this serious crisis and fortunately one great thing that’s happening, I believe, because I travel the country a lot, I go a lot to the universities and I notice everybody here is under 30, and that is great. I do talk to all you young people, all the college students, but the college students and the young people who are thinking about paying these bills and getting a job, obligations overseas, instinctively they are much more anti-war than the people who are later in life decide, “Oh yea, I guess it’s patriotic to be for the war, let’s go do it”. But even if you think we should be doing some of this, we’re broke, we can’t do it anymore. But I’m encouraged because I have a lot of young people who are studying now free market economics, understand the principles of liberty, willing to assume responsibility for themselves. So for that reason I’m optimistic in the long run. In the short run, we have to face our problems.

Thank you very much.

Now I understand that we’ll be able to take some questions. If I see a microphone … if there’s a no microphone, please speak up. Is there going to be a microphone? I guess not. So, nice and loud.

Question: Yes, how much influence does the federal have over the U.S. treasury, and how are we going to find out?

Ron Paul: How much influence does the Federal Reserve have over the treasury? Well, I don’t think one has it over the other, because the same group of people run the show. Sometimes it comes from the same bankrupting organization, the secretaries of the treasury is frequently from some New York banking interest, as is the Federal Reserve’s. So you really don’t get independent minded people there. But the collusion really is with the people, the politicians, the treasury, and then the Fed. The people want stuff and the politician wants to be reelected and he doesn’t want to raise taxes. So he gives the stuff to the people, he gets reelected, and then they borrow the money. Or if they run out of borrowing power, then they have to go to the Fed and the Fed prints the money. They literally don’t print money anymore, they just use a computer. During those bailouts, they created hundreds of billions like trillion dollars for their stimulus plans. But what is so astounding is the Fed might create ten times that much and they’re off the books, they do it in secret. But they all know what each other is doing. I’ve never figured it out. I’m still trying to figure it out as long as I’ve studied this and been in Washington. I don’t know exactly whether the Congress knows exactly how this works or they just take it for granted and say, “Oh, I’m going to spend money, I’m going to get reelected” and they stop there, or whether some people … I imagine leadership in Congress very well knows how the Federal Reserve props up big government. That’s the real problem with the Federal Reserve; it encourages big government. If you look at every statistic economically since 1971, whether it’s spending or the debt, entitlements, foreign adventurism, all the stuff, the curve goes up sharply because there’s always that lender of last resort there. So I don’t think so much as the Fed controlling the treasury or treasury controlling the Fed as much as it’s all one system and it seems like everybody benefits, and the people benefit. When everybody was getting a house they brought a house for a hundred thousand, yet next year it was a 150 thousand, they go out and borrow another 25,000 dollars. All the rules of frugality were thrown out the window. What else does the Fed do to throw out the rules of frugality? Let’s say you were wise enough to realize what this mess was, you didn’t want to mess around with the stocks and bonds and all this. What if you decided, “Well, I want to play it safe, I want to put my money in a CD”? So what does the Federal Reserve do? If you’re dependent on CDs and interest rates, they drive your interest rates down to 1% or 2%, and the market rate would be 6% or 8%. But they give the money for free to the banks, the banks loan it back to the government, and then they make a lot of money. So they’re all intertwined. It is not so much a few people getting together and advising this, it’s an economic system that has to be challenged. It’s an economic system of central banking, fiat money, and economic interventionism.

Question: My question is regarding the FDA and the health of the American people. When will we see Washington take a stand to try to fight cancer, obesity and diabetes? I think it’s coming out of a lot of the food that we eat, a lot of the pharmaceuticals that get pushed constantly to cure people and a lot of the additives that are put in the foods such as nitrates and what not; they’re banned in Europe and we still have them. What would you do?

Ron Paul: Okay, I think I got it. He asked, what more could we do with the FDA to give you more protection against bad ingredients and bad food products. I would say a lot less, because I’m sick and tired of the FDA because they’re only controlled by the drug companies. I believe in good nutrition, obviously, and you know, there’s a lot of education going on on nutrition on the internet. But if it comes to nutritional products and people who really want to pursue it, they get closed down, they get raided by federal agents. So no, I apply the rule that you, as individuals, have a lot of responsibility. But the businessman and if somebody has nutritional products and other things, they better not commit fraud. If they say, “You buy my stuff since I want to cure your cancer”, that is fraud, they’re just ripping you off. But when the FDA is involved, too often the drug companies that are involved and I don’t think they’ve given us good protection. They’ve certainly destroyed a lot of our liberties but they haven’t made us safer. It doesn’t mean you don’t have any regulations. I think if you want some, the fraud regulation is the best one. But states can do something about it, too. But to have a federal bureaucracy sending out armies of bureaucrats to check up on everybody’s eating habits … that’s not my idea of living in a freedom country.

Question: Congressman Paul, first it is an honor to be in the same room with you, sir. The mainstream media is purposely avoiding you and you get 10% of the coverage that you deserve. And it was interesting when Anderson Cooper thought he could leverage your ideas, which were brilliant, about FEMA, by getting you on the air and really making you look bad or like a fool, but the opposite happened. But they’re purposely avoiding you. I’ve done a lot of thinking about this problem and I believe I wrote 18 pages on it for you, and I believe if you implement any of my ideas, you will get the coverage you deserve and we will have you as our President. I’m wondering if you’ll take a look at my ideas.

Ron Paul: Okay, I sure will, and if I don’t personally get it handed to me, Jesse here will make sure I do. Thank you. Well, let me just comment once about the media coverage. I think I should get John Stewart on my PR team. But, you know, I’ve been doing this for a lot of years, so compared to certain years ago, I think I’m doing great. But compared to how others might do it, how others might get coverage, it’s a different story. People want to know what I think is the reason that they wouldn’t give me more coverage. Sometimes I don’t think they have the vaguest idea what I’m talking about, because people have been conditioned like: “Gold standard? I mean, that’s weird, we like paper. We think paper money”. So they don’t understand the issues as well. But then there’s another group that has influence in our government as well as in our media that don’t want to hear the truth about what I’m talking about because there are a lot of special interests that like these wars overseas. There’s a lot of money to be made and all the lies told entices to go into these wars. That to me is a real sore spot. So anyway, thank you very much. Here we go, here.

Question: Yes, as the gentleman said, it’s a privilege that you happen to be here. If you are want to be elected as our next President, I want to know what you are going to do about the deficit because we the people didn’t cause the deficit and why do we have to pay?

Ron Paul: Okay. You know, there’s still a Congress to deal with, but the President is fairly powerful. I’d like the president to be a lot weaker. I don’t want to be a president that going to go to war without your permission through your Congress. I don’t want to be a strong president and tell you how to run your life and your personal values, and I don’t want to pretend that I know how to run the economy, because I don’t know, and no one individual, none of the bureaucrats or politicians know. But what am I going to do about the deficit? You know, they’ve given me a name down in Washington, sometimes I never thought I was the greatest, some people sort of like it because I have voted no a few times. So they call me, they’ve given me the name of “Dr. No”. But my wife didn’t like it too much, staff people tend to like it, but my wife didn’t like it. And I understood her point, it sounds negative because I’m for something, I’d like to talk about what I’m for. And she says, “As long as they spell that with a ‘k’, I’m okay with that”. On what I would do, instead of being Dr. No, I want to become known as Dr. Veto.

Question: Could you talk about how education is tied to economic growth, and what you would do improve the quality of education in this country?

Ron Paul: I didn’t hear you the first time.

Question: Could you tell us how you perceive a connection between a good educational system and economic growth, and what you would do to improve our educational system as President?

Ron Paul: Well, how do I see the connection between good economic growth and education? I think it’s crucial and I think that we had a pretty good example of how it could come about. Not that I’m saying we should go back to that age. But, you know, look at how the founders were educated. Generally there was no such thing as a public school system. They were educated on their own and by their families and by tutors and they learned the classics and they learned a lot more than we learned in 12 or 15 years of our school system. But it is crucial of the connection, and that’s one of the reason why I object to Washington taking over, because they’re not very efficient, they waste a lot of money and money isn’t the answer. What we have to do is have responsibility for the education be placed on the parent and something very local; the parent and the local community. But, you know, in the federal government we have a responsibility for only one city, and that’s Washington DC and they’re getting about 17,000 per student a year and they have lot of laws in Washington, laws against drugs and guns and violence an all this. But it’s the most violent, I better not say ‘most’, it’s very violent, and the educational system is very bad and yet almost every year they come and say, “You know, we just need more money”. It’s not more money, it’s not more bureaucracy, it has a lot to do with the determination of parents. If you have the breakdown of the family, sometimes it’s hard to solve all these problems and just say, “Well, the family doesn’t exist so therefore the federal government becomes the family”. It’s not quite so easy as that. But I think the more local … when I see a lot of homeschooler support, and we have a lot of homeschooling in Texas and they don’t spend a whole lot of money on their kids. Its’ a very small amount and they end up doing a real, real good job. But I would agree in general that there is a definite connection with it and I don’t find answers in Washington at all. Here we go, right here, the gentleman here.

Question: I was a coordinator for (?) for six months, he was a nice guy and you reminded me a lot of him. When you mention Texas and home schools, my daughter lives in Texas and they got a ranch there and they home school their own kids. A lot of the people think that the people who are in Washington don’t think too much about the average people. They want us to take their cut, but they don’t want to. What do you say about this?

Ron Paul: I think the cut should be across the board. If you’re going to cut benefits, then the economy should never be exempt. Now, they did take a token cut, it wasn’t very much. Congress took a 10% … well, actually it wasn’t in pay, but it was in their expenditures, so they did cut a little bit. But the one thing that I have done personally was the fact that even in 1970s when I first went to Washington, I recognized what a real boondoggle the retirement system was. And I had been in the military for 5 years and I had been in Congress for a few years, which would qualify me for pretty good retirement. But I have chosen not to participate in it just to make the point there should be limits. So I’m willing to cut plenty, believe me, I wouldn’t be hesitant to cut anything.

Question: Dr. Paul, aside from setting a good example in your next 4 years as president, what else could you do as an executive to stop the next guy waiting in the wings to use these illegal, anti-constitutional powers?

Ron Paul: I can’t do anything about that. You can set an example and hopefully have enough time to bring about the good changes, and then the American people would decide. If the American people say, “Boy, that worked. We love having our freedom back and we’re prosperous again, we haven’t had a war”. We haven’t had one war death in the whole time I was there, and they would see the savings. Governments reflect the people and that’s why I talk a lot about education, trying to change the people’s minds. Because if you want to change government, the people have to give them some support. So I would never ignore trying to get people’s support. But, you got to lead too, you got to know what you stand for. But if it works as I assume it would, then the people would endorse it. But you can reverse some things, you know, I wouldn’t use the executive order to write legislation, but I would use the executive orders to cancel out bad regulations.

Question: In the same wake that the Tea Party folks are being blamed for what little correction is happening at this point, I’m rather worried that if you are the President and the correction really takes hold and we have to struggle through it, somehow the free markets are going to get blamed for it, you’ll get blamed for it. But it really is bad policies for 50 years that we have to come over.

Ron Paul: That’s a good point.

Question: How do you see making sure that the focus on getting through it doesn’t cause a bad mark for free markets?

Ron Paul: That’s a big job and you’re touching on the same subject about perceptions and who gets blamed for what. Because exactly the wrong thing happened in the depression. I talked a little bit about the depression, and it came, it didn’t blame the Federal Reserve, it blamed the gold standard and it blamed free enterprise. And that’s why they needed more government. But the free enterprise system was abused and the gold standard was abused and that was what the real cause was, and we didn’t need more of the same. So, once again, it’s change in opinions and change in attitude to make sure the people understand. But the timing element is so crucial. And that’s why I’m 50/50 on this, or maybe even leaning more negatively than positively that it’s hard to convince people that you have to grit and bear it if you don’t have jobs overnight. And you have to liquidate some of this debt. But the most important thing that I can offer, though, is to make sure that I am going to do the darnest to keep the government off your back and out of your lives and out of pockets; that’s the biggest thing.

Okay, here we go, in the back.

Question: I just wrote and article about how the SEC has given over the past few years (?) what they’re not allowed. And then the heads of the SEC were going on to join big corporations. (?) pushed through the (?) Bill and then went through to work for pharma for a million dollar contract. Our own Judge Greg put forward a 700 billion three page bill for the bailout and then went on to work for Goldman Sachs. Larry Summers in 1998 wrote the horrible bill about financial deregulations that led to where we are today. He’s not in jail, nor is Phil Grant. It can go on forever, how can you stop this madness?

Ron Paul: I agree with you, because we have a system of what is it called corporatism, which is quite different than corporation honestly making a good living and giving you a good product which is completely different. But once the government gets involved, whether it’s the SEC or the military-industrial complex or the banking industry, believe me, there is corruption in there. The laws should take care of it and the more you have this intertwining of Goldman Sachs coming in to the treasury and the Federal Reserve, the worse it is. When ENRON failed – it was a Texas company – there was an SEC and it didn’t prevent it from happening. But the ENRON people were convicted under state fraud laws and they went to prison over it. And then what did the federal government do? They came in and gave us Sarbanes-Oxley, which really doesn’t protect us. If anything, it misleads us thinking that, “Oh, the government will always take care of us, they regulate, SEC will check your company and we don’t have to act responsibility”. So other than the fact that I think most of your criticism is directed towards corporatism rather than free market corporations. I think that explains it.

Okay, we have time for a couple more.

Question: Congressman, you’ve repeatedly called for the abolishment of the income tax, at the same time calling for an increase in tax credits. Even a small federal government must spend, preferably on national defense to secure our borders. So what do you propose as the main revenue source for the federal government?

Ron Paul: Okay, he’s concerned with my tax program, and in the idealistic I’d get rid of as many as I could. He says, “How are you going to pay for the government?” Well, if you want to be the policeman of the world and you want to continue the entitlement system, no you can’t do what I want. I want to live within the constitution and we would challenge the entitlement system and we wouldn’t be the policeman of the world. We have a weaker national defense for all the money we spend around the world. So you could spend probably 20% of what we do in the DOD and defend ourselves. We’re over there starting wars that don’t need to be fought. But it isn’t like it’s strange or brand new or never been done before. We didn’t have the income tax until we needed the income tax to go into World War I. You’re more likely to get things like that and then there’s no holding back. The wars become more numerous, the welfare state gets too big, then we can’t afford it and we borrow and we print money. Of course, I emphasize the Federal Reserve encourages that type of spending, but the tax system does too. As long as you have it there and can depend on it. But you’re right, there’s not enough money coming in if you cut all these taxes. But I have pretty strong confidence in the American people that you’re just a lot smarter than the people I know in Washington, let me tell you. You know better how to spend the money.

Question: TSA and the body scanners.

Ron Paul: There you go. Did somebody make any money of those TSA scanners? Okay, let’s finish up over there.

Question: Hi there. I am wondering sometimes you get asked these questions about what you would do if you do cut back on entitlement as a safety net. If you have generational people who are dependent upon the system, what would you do? What is the method, you think, to get those people so they could become more self-sufficient and that you could actually wean people off of being useless?

Ron Paul: Yea, that’s the whole problem, do we have enough time and can we wean them off, and I work with the assumption we should and we could. But I’m not overly confident that it’s an easy chore to do that. But I think it would take a while. We’d have to cut massively in order to take care of the people who are really dependent; the elderly and for child healthcare and things like that. That still requires a lot of money to wean them on. But I would start doing it. I would cut this militarism, I would cut the Department of Energy and Department of Education and Department of Commerce and Department of Agriculture and just really cut back in order to wean people off. But there would be more production because I would allow young people who are just going out in the workforce, if you think it’s a bad deal and you say, “I want to take care of myself and I don’t want to pay the next 50 years for all these government programs”, I’d let you to opt out. People talk about opting out of Obama care. I think opting out of just about all the systems ought to be our right. The medical care system, generally speaking, you should have a right to opt out. We have a right to opt out of educational system by home schooling and private schooling. So you don’t have to get rid of everything, you can opt out. I’d like to have you opt out of the monetary system too and legalize gold and silver.

Question: Yes, Dr. Paul. Social Security belongs to all of us, we put our hard earned money in Social Security on the promise that we would get guaranteed benefits when we retire. Would you consider cutting benefits, raising the retirement age, or removing the salary in order to reduce future endeavors?

Ron Paul: You asked me whether I would consider those things, I said certainly, because someday we’re going to have to do something, and we should try to work our way out of it. But I would see what we could first …

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