Doubleheader today — what to make of the off-again, on-again Russian use of an Iranian base to bomb ISIS in Syria and Ron Paul’s reaction to reports that the Federal Reserve is drawing up plans for another $4 trillion injection of cash via quantitative easing.
Ron Paul: Hello everybody, and thank you for tuning in to The Liberty Report. With me today is co-host Daniel McAdams, and, Daniel, it’s good to see you.
Daniel McAdams: Good morning, Dr. Paul.
Ron Paul: Well, very good. Today, we’re going to do something a little bit differently, we’re going to deal with two items. The first item we’re going to be talking about is the question of whether or not the Russian are still using an air base in Iran to bomb Syria, which is significant, and there are some questions about that now. And the other item is a working paper for the Federal Reserve came up with the astounding prediction that they better prepare for the next bailout, another 4 trillion dollars, and that’s significant, too. They’ve pumped in that much already, and they’re already planning for the next one. But, anyway, on the first item, there are contrary articles about this, it’s only been a week ago, I guess, when they started using an Iranian base to bomb Syria. It seemed to be not a big deal, nobody was yelling and screaming.
We knew the Iranians and the Russians were invited by Assad to help save his regime, and it was in their interest to do so, so it wasn’t a surprise that they’re allies, as everybody knew that. But all of a sudden we started seeing articles here just in the last 24 hours, and one major article with a major headline from the New York Times claims “Iran Revokes Russia’s use of the Air Base”. This is just outright clear cut says that it revokes, but as we dwelt into this, it doesn’t look absolutely like that. Because they claim that it’s a spokesman for the Foreign Affairs Office who said this, and we’re not sure where this came from. I’m sure you’ll comment on that, but also, there was something on Radio Free Europe that said that Ali Larijani, the Speaker of the Parliament, said this isn’t true, the deal is still on and it’s still happening: “They’re mainly refueling, but they are still close friends”.
I found it interesting when they asked, “What’s the United States’ position, what do they know?” And they said, “Well, it’s just not clear”. Well, that’s about right, I think we spend up to 80 billion dollars on a surveillance, they know everything that we do. But it’s not clear to the United States government really what’s going on. They’re probably telling the truth, to them it’s probably not very clear because they didn’t tell us a week before what’s going to happen. Al-Jazeera, which is another source, said it’s definitely stopped; so we have all these conflicting reports. It is significant, it isn’t the end that ends all on the skirmishes and the wars that are potentially going to be started over there, but I think it’s significant. So, what about the headline on New York Times, first off, “Iran Revokes Russia’s use of the Air Base”. Whom are we going to believe?
Daniel McAdams: This whole thing really does have would whiff of disinformation, because when this was announced a few days ago, it was a significant development. This is a development of a real strategic partnership for Russia to be able to use a base so much closer to Syria to bomb them. This is mostly around Aleppo, which is where really the Al-Qaida has its last stand, and if they’re defeated there, it will really be a big blow for the insurrection. Them being able to use the base is a big deal, and I think panic and alarm bells were going off in Washington, and then, all of a sudden, you see these stories. When I first saw them, I thought, “Wow, something big must have happened”. We were preparing for the show, and I started reading it, because I wanted to find out, where is the declaration, what exactly did the Iranian government say?
And nowhere in this New York Times story is there a definitive quote. There’s a general who said, “They were behaving a little bit ungentlemanly by bragging about It”, but that was it, and there was just no source.
Ron Paul: Well, it seems to me that Larijani might be the closest to being the official spokesmen for the Iranians, and he says, “We’re still doing it, and we’re still working together to save Assad from the foreigners that are coming in”. It seems like there are some people who would like to create divisiveness, and show, “Well, the Russians aren’t getting along with the Iranians”, and stir up trouble, and stir up the factions within Iran. Because it’s never uniform beliefs on all these issues. Maybe they’re trying to make things look a lot worse than they really are.
Daniel McAdams: You know, I think Pepe Escobar coined the term “The Empire of Chaos”, and it seems more like that. On the one hand, as you point out, the mainstream media in the U.S. wants to highlight the infighting between Russia and Iran, but on the other hand, U.S. policies are driving them into each other’s arms when it comes to Syria. Neither Russia nor Iran want to see Al-Qaida take over, which the U.S. is backing by proxy, indirectly and even directly. None of them want to see this, so why are they pushing them into each other’s arms? Look at what the Denver Post said: “Obama and the U.S. should be alarmed by Russia operating out of Iran”. Why, if they’re hitting Al-Qaida and ISIS and taking them out, why should we be alarmed, we should be happy, it will save us the jet fuel.
Ron Paul: Just yesterday or so we saw that our government was going to get ready to change policy, it was just talk. Our government was going to direct their attention only at getting rid of Assad and forget about these rebels, because they’re not doing a very good job. Yet, who would ever believe that there’s any Democratic or any Republican that isn’t super gung ho to get rid of ISIS, and the American people are with them, unfortunately, because they’re irrational at times about this. They’re with them, but, then again, on real policy, they don’t want if the Russians or the Iranians go after Al-Qaida or after ISIS, they object to it. I think our policy is Schizophrenic, to tell you the truth.
Daniel McAdams: I wrote a little piece yesterday, because I watched the press spokesman of the Pentagon do his daily press briefing, and it was astonishing. Even the people there who were used to this were pretty surprised. Because essentially what Peter Cook, the spokesman, said, was that we are establishing a no-fly zone over parts of Syria, and he specifically warned Russia and Syria against flying in the area when the U.S. or it’s coalitions are operating within Syria. I think that’s a major, major shift, and it changes a lot of things on the ground. But the U.S. is working with the YPG, Kurdish militias, in that area, and they’ve been firing at Assad’s forces, and then when Assad’s forces fire back, they say they are attacked. But now, Turkey is firing on the YPG that the U.S. is backing, so it’s like alles gegen alles, everyone is fighting everyone in Syria.
Ron Paul: Yes, and I watched part of that as well, and the first early part of what the State Department person said sounded pretty good: “We’re working for peace, we’re working for this. Outsiders should stay out”, until the conclusion was, “What we need to do is get those Russians to quit supporting Assad”. He wouldn’t say the word, but he meant, “We’re for regime change, it’s our job”. So they say one thing … and I thought, “This is typical, the politicians say one thing and they mean something else, and then they contradict everything they’ve claimed they believe in, they contradict it and have a different policy.
Daniel McAdams: Yes, that’s absolutely correct.
Ron Paul: You know, there was one statement made by a group in Iran that I found fascinating, and they sort of were questioning whether or not they should have the Russian planes landing there, which is certainly their prerogative on debating it at home. But the group said, “Just possibly, we should reassess this, because it’s anti-constitutional”. And I thought that’s interesting, there are people that, even though on the surface it may look like it’s in their best interest, this group and this individual is saying, “Well, it looks like it could be anti-constitutional”, like maybe they should get more permission and maybe their constitution says they have to have a declaration of war. And I thought, “Well, you know, it’s too bad that we don’t have a few people in Washington thinking along those lines”.
Daniel McAdams: Yes, it was interesting, because we’re told that Iran’s parliament is a sort of monolithic structure that is heeding the Ayatollah, but here, there seems to be a pretty good debate, not only about whether it’s constitutional to allow the Russians to use the base, but also the issue of civilian control of the military. I think the speaker of parliament, Larijani’s, put down of this general was basically keeping him in place: “You don’t have a role to talk about this policy”. It’s amazing they’re talking about their constitution, where we have troops on the ground in Syria completely unconstitutionally.
Ron Paul: But we’re spreading our exceptionalism, and we’re spreading democracy, and we’re spreading peace and prosperity, so we can’t be challenged. Unless you’re a patriotic American, then you should be permitted to challenge policy, but that’s another story.
Okay, I want to go on to item number 2, which I mentioned at the opening, and that has to do with this working paper by one of the Federal Reserve Board’s staff people. It came out, they released it, and it’s preparing the people for what’s coming. The Fed and others are meeting at Jackson hole this weekend to solve all the monetary problems of the world, and everything will be okay next week. But, just in case there is a downturn, they’re recognizing that they don’t have much leeway to deal with the downturn. They know a downturn is coming, everybody knows it, they always come because it is inevitable to have a downturn after you have an artificial boom time, and the Fed creates that, so they’ve guaranteed the downturn. It’s just a matter of when it’s coming and what exactly will precipitate it. I believe it’s already started in many areas of the economy.
Anyway, they’re preparing for this, and they want to assure the people that they’re on top of it and they’re thinking about it, so their proposal is not completely new. It might take another 4 trillion dollars of QE. So they have a problem there, but I’m sure that you’re reassured that things will work out okay, and that your kids will go out and be able to get their education and good jobs, and we won’t have to worry about a healthy economy.
Daniel McAdams: I don’t know if any of that 4 trillion dollars is going to find its way into our bank accounts. But I was reading it this morning, too, and the first thing I thought about was this is what you warned about since forever, of course. But certainly back when they started slashing the rates, you said, “This is not working, you going to get to the point where you’re backed up against the wall, and there’s no where left to cut”. This is exactly what the Fed said in this memo you talked about.
Ron Paul: Right, and the word thrown out, even by our opposition, and I think our friend, Paul Krugman, might have used those words, “We might have to use helicopters to just drop money on the people”. That’s where they’re shortcoming comes up. They can inject money into the financial system, but they have no way of knowing where it’s going to go, and, right now, it has not gone to the people, even though their prime concern was the stock market and Wall Street. But they don’t want a lousy economy, I’m sure they were hoping the people would feel wealthier and would go out and spend money and businesses will come back. They had no idea how the economic cycles work, and that you have to liquidated bad investments and bad debt. No, they just print more money.
They’ve taken it down to 0%, and they don’t have many options, so they have to think about helicopter money. I can’t quite visualize, I think it’s a good example how to think about it, but literally it’s not true that they can use helicopters. But I think what they’re talking about is how to get the money into the hands of the people so that they spend more money. There’s a lot of ways the welfare state does that, they’re never going to stop Social Security, unemployment benefits are always going to come. If Obama Care flops, like it is, and the private companies go broke because it was an insane problem, the government is going to take over, and they’re always going to produce money; cash out of thin air, and they will be able to spend it. That already is an example, because where they spend the most is where the most inflation is, and that is in education and medical care. So they will do that.
One thing along with the 4 trillion dollars is, I believe that as time goes on and the next president is going to have to deal with it, we’re going to have a sharp downturn. Neither candidate right now says, “What we really need to do is spend less money”. We should cut back a little bit, when it comes to infrastructure, they’re one-upping each other. They say, “We have to spend the money”. That sounds good on the surface, they think that’s going to help, but it has never helped before. And yet, this is what they’re going to offer. But they’re going to offer a lot more spending. Matter of fact, the spending is going to be automatic, because if more people become unemployed and more people go on food stamps, even though there’s been a recovery for a long time, I don’t think there are any less people getting food stamps.
Nobody quits getting food stamps. They might go and get a party time job or something, but the food stamps and the housing assistance and the medical assistance continues, and it will continue until this insanity ends with people saying, “Well, this is crazy, this whole idea of 0% interest rates is so absurd”. Most good economists and most that understand a little history, in particular Jim Grant, says, “This hasn’t happened in 5,000 years”, and they have no leeway. The old conventional thing of mischief and manipulating and economic planning and getting us out of recessions can be done to a degree, but, eventually, people lose confidence in money.
Daniel McAdams: I think you mentioned before we came on, that Grant had something about this strange relationship between the stock market and bonds.
Ron Paul: Yes, he was saying, “This is a strange world, the stocks are at record highs, and bonds are at record lows”. And he said the interest rates are so low, and the low interest rates represents depression. He says, “This is worse than the great depression, when you look at the bond interest rates and the stock market says there’s great prosperity”. So we’re living under very special conditions. I wished it weren’t so serious, because it’s really entertaining to think about all the ramifications of this and how is this going to play out. But, unfortunately, there’s going to be a lot of people suffering. I think a lot of people are suffering, and I think that’s why 65% to 70% of the American people are already angry, in spite of the fact that you look out there and there’s great prosperity and the stocks are going high.
Also, recently you made a point about one group of people who were really buying into our stock market, and that’s the Swiss National Bank. They create their credit out of this air, and they’re buying stocks hand over fist, and they’re not buying cheap stocks, they’re buying good stocks. So that has to be beneficial to the stock market. But I believe that that’s more than just one country that does that, because I believe that we’re not allowed to know what the Fed does internationally, I believe there’s a lot of mischief regarding what we do with big banks and foreign governments and foreign central banks. And I believe it’s in the world’s interest to keep our economy going and the dollar solvent, even though some are angry, and people who are foreigners are buying our bonds and our treasury’s less so, there’s still an interest.
I cannot conceive of something happening in Jackson hole this weekend that’s an attack on the dollar, and somebody stands up to the United States and says, “Look, we’re sick and tired of you exporting your inflation, giving us your pieces of paper, and you want us to keep sending you your oil and our cheap products”. They’re not going to say that, because everybody is in bed with the system, and those who aren’that, will be punished, because we control the financial system, we can put sanctions on them, we can deny them their defenses, because we promised to defend their country. There’re not going to have a problem there, and nor will the suggestion and the reassurance, “Well, if we run into this trouble, we can pump out another 4 trillion dollars”. One day we’ll notice that will come to an end.
Daniel McAdams: It makes you wonder, the average person would see that 4 trillion dollars and his eyes glaze over. How would you tell them if they asked, “How is this going to affect me if this 4 trillion dollars is pumped into the economy?”
Ron Paul: Well, what’s going to happen is, eventually the people will see that the dollar is losing real value, and interest rates will go up, and there will be a lot of inflation. There will be price inflation, and there is a lot of price inflation, but it will be to the degree that if you have a currency inflation. That’s the type of thing Zimbabwe and Venezuela has, they know how to use helicopters and they put the money in the hands of the people. But that will not create investments in good businesses, it’s not like all of a sudden we’re going to get steel mills back or something like that. It will just bid up the prices, it will go into that. Just like today, in the last 8 years or so, the money has gone in, stocks have done well, houses are back to doing well, especially very expensive houses.
Farm real estate has skyrocketed, and people expect a correction on that, and expensive houses have gone very high. Like I said, education is going to continue to skyrocket. And as Obama Care breaks down, you’re going to see a real mess trying to get healthcare, and it will be people who can afford it, and the price will go up. So the people will suffer. The main rule that the people will have to face up to on currency debasement, first it destroys the middle class, and second, the prices go up for the poor and the middle class. They suffer the most, and then you combine that with a weak economy, the more the government does … see, right now, if they have unemployment assurance and pump more money into Social Security, some of them will say, “That’s good”.
But there will be a point when that doesn’t do any good. Okay, the 4 trillion dollars already didn’t help, now they’re planning another 4 trillion dollars. They’ll get to a point where they’ll say, “Let’s do 8 trillion dollars”. All of a sudden, people will say, “Nobody wants this money”, and that’s what you’re going to see. People are going to suffer, and it’s much easier preventing this rather than taking care of it. And, once it hits, the most important thing is allowing the correction to occur. Get off this kick that spending will solve our problems, printing money will solve our problems, and debt doesn’t matter. You have to get over that. You have to try to eliminate mistakes, just like an individual who’s trying to get back on his feet again in an ordinary economy, but all they have a debt. They work, work, work, and all they do is pay debt. They have to liquidate debt one way or the other.
The market will liquidate the debt, they will not liquidate the debt by not paying people who have treasury bills, it will be liquidated through inflation. That’s what the Fed is desperately trying to do, it’s trying liquidate debt through that means. But the market isn’t working quite the way they think it should.
I want to thank everybody for tuning in today, I was delighted that we could cover two subjects today. First, the subject of whether or not the Russians will continue to use the Iranian bases, and also, the subject of the Fed’s willingness and plans and reassurance to the people, “Don’t sweat it, there is a recession probably coming not in the too distant future”. And they will print the money and they will need at least 4 trillion dollars, and, of course, there will be a major meeting this weekend at Jackson hole. Central bankers will be there, our Federal Reserve will be there, you’ll hear some fancy speeches. There will be a reassurance, there will not, in my prediction, be an attack on the dollar. There will be a reassurance. Everything they will say will be designed to give reassurance to the stock market and to the dollar.
I don’t believe there’s going to be an attack on the dollar, the market will attack the dollar when the time comes. It has to be attacked and knocked down. In that case, then what will happen is we will have true monetary reform, the Fed will self-destruct, and our efforts to reform the system and have honest money, which is associated with liberty, will be resolved. Hopefully, that day will come soon. I wished we could do it sooner to prevent the many hardships that will come on the road that we are going on today.
Thank you very much for tuning in today to The Liberty Report, please come back soon.