Channel: CNBC
Show: Squawk Box
Date: 11/13/2009

Joe Kernen: But Chris Dodd has a bill taking aim at the Fed. The overhaul bill that he proposes would reduce the role of the Federal Reserve. However, Congressman Ron Paul has been on that crusade for some time now, calling for more transparency at the central bank. He joins us this morning.

Congressman, great to see you. Hello.

Ron Paul: Thank you, nice to be with you this morning.

Joe Kernen: Let me start with… you remember Treasury Secretary Geithner and what he wanted to do. He wanted to vastly embolden the Fed in a lot of these areas and give them more power. What was your initial reaction to what he wanted to do?

Ron Paul: Well, it was terrible because I start with the idea that regulations won’t solve our problems. In Washington the only choice is whose going to be the big regulator. So it’s not much of a choice for me. I certainly don’t want to give the Federal Reserve more power, so I don’t like it when Geithner says, “Give the Fed more power”. So I’d much rather have somebody else do it even though I think that’s not going to solve the problem.

Joe Kernen: Really? So the Dodd Bill sets up a lot more different regulators, although there might be a single on, you don’t like that one much more?

Ron Paul: Oh no. See, the problem is that we have a flawed system. We have artificially low interest rates, we have the lender of last resort, we have this horrendous moral hazard in our system. Instead of correcting the problems and changing policy, what we do is we say “We can tinker with the symptoms with regulations” and that even further interferes with the market forces. We need the market to work and we have not allowed the market to work for many, many decades. Interest rates are always artificial, “too big to fail” was always there. There was always the lender of last resort. As long as you have that, regulations will not solve the problem. Take, for instance, after ENRON went down we immediately passed Sarbanes-Oxley saying “we didn’t have enough regulations.” It had nothing to do with it. Where did some of the companies go then? There were too many regulations so they had to leave this country.

So I would say that we’ve embarked on the wrong course and whether you put the regulations in the Fed or outside the Fed, it’s not a whole lot different. But we certainly don’t want to give the Fed more power. It’s much easier for the Congress to assume the responsibility of oversight if it’s outside the Fed. For some reason up until recently the Fed was sacred. You weren’t even allowed to ask questions, let alone get the answers. And now, of course, the momentum is in the direction of “even the Fed ought to be transparent” and I think that, of course, is very important.

Joe Kernen: What’s your bill? You got how many co-sponsors and do you still like your bill, because I saw somewhere that you said it’s already been gutted?

Ron Paul: Well, the intention is that one time they said they would put it into Barney Frank’s bill. It never actually got in there. So the plan now is to get an audit put in to the bill. But it will be a pseudo-audit, it won’t amount to much. We have 309 co-sponsors and we have all the Republicans on the bill as well as about a 130 Democrats. So it’s very, very bipartisan. There has been a national poll – which I’m surprised that there even would be polling on this subject, I would never have dreamt about it a couple of years ago. But 75% American people say, “Yeah, we should know what’s going on with the Fed”. So that 75% of the electorate saying that we should do our job and look at the Fed is the reason why there is well over 2/3rds of members of Congress supporting this bill. This bill would pass tomorrow if we brought it up under suspension, but the powers to be, the Fed, is working frantically, they’re editorializing, they’ve hired a lobbyist. They do not want us to know what they’re doing and they use all kinds of frivolous arguments why the Congress is not allowed to know what they’re up to.

News Anchor: What makes you so confident, Congressman, that the GAO is competent enough to audit the Fed reliably? And what do you make of those who say that Congress already has the right to ask a lot of questions to the Fed; they do it every time the chairman comes to the Hill?

Ron Paul: But they’re not allowed to ask the right questions. You’re not allowed to ask what kind of arrangements they make with a foreign bank or foreign central banks or foreign governments or international financial organizations or the details of the discount window, which companies got their benefits. So no, we’re not really allowed to. Now, the GAO may be far from perfect, but they probably have one of the best reputations in Washington if you’re going to look into something. It’s been bipartisan and somebody asked me once, “Who’s going to regulate the regulator,” you know, who’s going to regulate and check out the GAO. I think that’s a decent question, but under the circumstances there is not much else that we can do. They are the ones that we should look to to looking into the Fed.

News Anchor: Congressman, you said we’re on the wrong course. I wonder if you can tell for us what you feel is the right course. I mean, you’ve written a book called “End the Fed”. So you want to end the Fed, but my guess is when you talk about the market working you also want to end deposit insurance. Is that part of the problem also?

Ron Paul: Oh, sure. I think deposit insurance… immediately people say “Oh, my accounts won’t be insured”. No, they will be insured by private companies and each and every individual bank would be monitored instead of having massive bank failures and financial crises and each and every individual bank…

News Anchor: Can I just ask you this: You’ve seen the pictures of the 1930s when we had runs on banks. Is that something that’s acceptable to you that people should be afraid they would lose money in the event of a bank failure?

Ron Paul: Well, if you had private insurance there wouldn’t be. But the bank runs is a consequences of Fed policy. You know, the Fed has been around since 1913 but their first crisis came from the inflation through World War I and we had the depression of 1920-1921 and it lasted about a year. But back then they didn’t believe that you should bail out everybody and pump more credit in. They allowed the liquidation of the malinvestment, they allowed the debt to be eliminated and then go back to market interest rates and go back to work again.

But today, ever since the depression, Hoover and Roosevelt set the standard along with Keynes. Keynes is really the individual we follow and it’s not a market phenomenon. We don’t have market interest rates. We have guarantees that people are going to make mistakes; we have guarantees that we’re going to have too many houses. But what do we do now? We had a program where both Congress and the Fed encouraged the housing industry. Finally the bubble burst, which so many of us predicted would happen. So what are we trying to do in Congress right now? We’re trying to stimulate housing and to keep prices up. What we need to do is let the prices of houses drop and we don’t want to stimulate anything, we want the prices to adjust, we want these houses that were overly priced to get low enough so poor people can buy houses once again. And now we come up with cash for clunkers and all this silly stuff here. We have no confidence whatsoever in the market economy.

News Anchor: And just one more thing which is that when you talk about the right course, if I am not mistaken, you want to go back to the gold standard? Is that the right way to run monetary policy, in your opinion?

Ron Paul: No, but I’d like to go forward to a commodity standard. There were a lot of always in the old gold standard because there was bimetallism and fixed price between gold and silver. It’s still on the books that gold and silver is legal tender and we ignore it. If you use gold and silver as legal tender today, you go to jail. There is nothing in the law that says a Federal Reserve note equals a dollar. We can’t even define a dollar. No, we should have a definition of a dollar. How can you have a measuring rod which you can’t define? It’s totally foolish.

I really like the idea of allowing the market to determine what backs the currency, make sure there are no-fraud laws, and really look into the matter whether or not we should have fractional reserve banking. Yes, you have the Fed creating money out of this air, but then this is magnified by fractional reserve banking which is really fraudulent. And all it does is build financial bubbles guaranteeing the business cycle and the collapses, and as long as you patch it together, the longer you do that, the bigger the bubble. And now we’re in the midst of a big correction.

News Anchor: So just to be clear, no fractional reserve banking means a dollar loaned out equals a dollar on reserve, right? Or a dollar of capital? Is that what you would do?

Ron Paul: Yeah, if you put a hundred dollars in the bank today, the bank immediately has $190. No, if you put a $100 in today you have to say it has to stay there for 3 months and then you can loan it out for 3 months. But you don’t expand the money supply. The money supply, the Fed creates a trillion and in a few months it’s nine trillion. And that’s where the distortions come from and of course, everybody loves it when it’s going up because the prices of houses are going up and everything’s happening that seems to please a lot until the correction comes. Politicians love it. You can fight wars that you don’t have to pay for, you can run the welfare state that you don’t have to pay for. So if you believe in limited government, you have to look at monetary policy and decide that you just can’t create money out of thin air. That is the culprit and you can’t solve the problem by regulations.

News Anchor: Speaking of policy, Congressman Watt has this amendment that would audit the 13-3 powers of the Fed, the special stuff that allowed them to do so much of what happened over the past year. You’re saying that does not go far enough. Is that right?

Ron Paul: Oh, no, that’s just… the Fed has already agreed to that. The Fed’s position is, “Yeah, we’ll let you look at that. We’re going to wind those programs down anyway”, but the big stuff that is done behind the scenes, the Fed is part of the Plunge Protection Team and they can create the credit and they can make all the deals overseas. And that’s what we need to look at. But I would agree with that bill, because it is more than we’re getting now. This is what got the attention of a lot of people when members of Congress started asking about 13-3 and these extensions of loans and who’s getting the money. That’s very, very important. But that’s still only minor compared to what I’m talking about.

News Anchor: Ron, you’re a doctor too, right?

Ron Paul: Yes, that is correct.

News Anchor: So you got comments on health care, I bet. And how about the dollar, we’re orchestrating a pretty nice decline there, too, aren’t we? That’s interesting. But we’re out of time. Are you ever in this area?

Ron Paul: On occasion, and the dollar is the big issue.

News Anchor: Well, get in here.

Ron Paul: I’d like to come in and talk to you.

News Anchor: Come in here for two hours. We’ll let you just go off.

Ron Paul: I don’t know if I can stand you guys for 2 hours.

News Anchor: You can do the talking. We’ll just let you loose and we’re going to advertise it before we do. Thank you, Congressman. We appreciate it.

Ron Paul: Alright, thank you.

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Date: 11/12/2009

Ron Paul: I’d like to talk about monetary policy a bit. The dollar has been in the news, gold has been in the news, and a significant event has just recently transpired. It happened on November 2nd and to me it was a very significant event. That was the day the Indian central bank announced that it had purchased 200 tons of gold from the IMF. And that was more or less the tipping point on this recent surge in the gold price.

The reason I think this is a significant date is in some ways it is almost the opposite of what happened back on August 15th, 1971, That was a very special day in monetary history and I talk about that a whole lot. That is when the world announced that gold was officially demonetized, no currency would be linked to gold, the dollar would still be the reserve standard and everything would be okay. Instead what we got was the biggest bubble in the history of mankind, which is now being deflated.

So, to me the fact that the central bank of India has now purchased this gold at the same time the IMF is getting rid of the gold and the west is getting rid of the gold, means that there is a major shift in economic power; and that is from the west to the east. And this is no surprise. Jobs have gone to the east, productivity has gone to the east, savings have gone to the east. The west has become more indebted and it’s not just the United States, it’s Europe as well.

And I think this signals the time when gold will be re-monetized. I don’t think it’s ever been demonetized in the sense. I think gold has always been money, but they pretended it wasn’t money. In the 1960s they wanted to demonetize gold and by 1971 they claimed they officially did it. And even throughout these several decades they pretend that gold is not money. At the same time, economic laws still prevail. But this announcement I think will prove to be a very significant announcement.

On this very date Geithner, Security of the Treasury, is over in Singapore meeting in an economic conference, and he’s talking about the dollar. He says, “It is the official policy of the United States government to have a strong dollar policy,” which always fascinates me. The Federal Reserve is what is in charge of the dollar, and they can double the money supply. But then we have the Secretary of the Treasury… and this is not just this time, this has been this way over the years. The Secretary of the Treasury goes before the public and says, “It is the official policy of the United States to have a strong dollar”. At the same time, they’re chiding the Chinese for having a currency that’s too strong. Which means, we want a weaker dollar against the Chinese Yuan. So on and on it goes.

And I frequently get a question, which I think is an old fashioned question, but we still get it. They ask: “Do you think the United States is going to devalue?” Well, they’re constantly devaluing. We devalue our money on a constant basis. There was a time when devaluations were official and pronounced in the sense that on August 15 there was a devaluation. They took the price of gold from $35/ounce up to $38/ounce. It was an 8% devaluation, it was a big deal. But we constantly do it. Shortly thereafter, two years later they devalued another 10% and then they tipped the price of gold up to $42/ounce. But since that time, since they claimed the dollar and gold are not connected, we’ve had constant devaluation. If you look at gold at $1,100/ounce, you’re looking at about a 97% or 98% devaluation. So it’s a constant devaluation.

So here we have a government’s official announced policy is we have a strong dollar, at the same time the real policy is constantly devaluating the dollar. And, of course, for an economy to grow you ought to have relatively stable currency. People shouldn’t have something wildly fluctuating, and certainly you shouldn’t have a currency that can be created out of thin air.

And that’s where we are today. But my concern for many, many years has been the eventual consequence of what this will have on the dollar. We’ve seen a financial crisis build, we’ve seen a lot of liquidation of debt, we’ve seen a lot of purchasing of bad debt by our government and by the Federal Reserve. At the same time, it’s all done by the creation of new money out of thin air. We can do that just so long. You can defy economic laws for a while. But just like you can keep gold at $35/ounce and you can manipulate markets, eventually the economic laws will rule.

And I think this is what will happen – is we will continue to do this. Congress has no concern; they’re willing to pass a medical care program which is going to cost trillions of dollars and pretend it won’t cost anything. They’ll always be a cost and the pressure is going to be put on the dollar. The financial obligation we have to maintain our empire and our welfare state is just overwhelming. And they’re illiquid. I mean, if we look at Medicare and Medicaid, these programs are literally bankrupt. So everything is dependent on the willingness of the world and the people to put trust in the dollar, at the same time, regardless of what our Secretary of the Treasury says, we are embarking and continue to just print the money in an unlimited fashion and that means devaluation regardless of what they tell us.

To me that is very, very dangerous. If we want to preserve our freedoms in this country we will have to address the important subject of liberty and understanding that, and what rights are all about. But we also have to understand the issue of monetary policy. We need to know more about the Federal Reserve and that is why the success we’ve had with the transparency act and auditing the Fed is so beneficial. But it looks like right now if push comes to shove, the major journals now are working very hard to downplay our efforts and to belittle what we’re doing. But the momentum is on our side and we need this information out because eventually to preserve our freedoms in this country we will also have to understand money and have monetary policy reform.

Question: Dr. Paul, what is the significance of the IMF selling?

Ron Paul: That’s a very important question because it has a great deal of significance. If the IMF is giving up the gold, this means that they are weakened. They will have less clout in saying what the next reserve currency will be. If they wanted to have an international reserve currency they would at least have to pay a little bit respect for gold. But it also means that great strength is going from west to east. Those countries that are buying gold, like China and India and these other countries, are more likely going to be in the driver’s seats for setting up the next reserve standard. In the west, western central banks and the IMF, the gold is leaving. And this means that the economic power is shifting to the east and if history is of any value to us it means that the military power may shift as well.

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A growing number of Americans are becoming aware of the Federal Reserve System, what it is, how it has precipitated our financial crisis, and how it continues to pursue policies that delay economic recovery and weaken the dollar.

The Fed’s actions, combined with the federal government’s bailout bills and stimulus packages, have struck a nerve in the American people.

Recent polls have shown that more than 75 percent of Americans support efforts to audit the Fed, something which my bill, HR 1207, the Federal Reserve Transparency Act, aims to do. HR 1207 has the support of 304 members of Congress, and the Senate version of the bill, S. 604, is supported by 31 U.S. senators.

Fed Chairman Ben Bernanke has embarked on an ambitious program of monetary expansion, more than doubling the monetary base to almost $1.9 trillion and doubling the size of its balance sheet to over $2 trillion, placing the American economy in a precarious position.

If all this excess money begins to be loaned out, the Fed risks creating a hyperinflationary crisis similar to 1920s Germany. If the Fed contracts this money, it risks harming the banks it desperately wants to see bailed out.

Continue reading…

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Venue: House Financial Services Committee
Topic: Systemic Regulation, Prudential Matters, Resolution Authority and Securitization
Date: 10/29/2009

Ron Paul: Mr. Secretary, more and more people today are looking critically at the Federal Reserve and wondering what’s going on. And, of course, the people are asking more questions and they want to know exactly what role the Federal Reserve has played in our financial crisis.

In the past, the Federal Reserve was held in very high esteem; they produced prosperity and full employment and stable prices. Today they are wondering somewhat differently, and many economists are joining in this. Today the Congress is by the number of 307 who are asking for more transparency of the Federal Reserve.

But also everybody agrees that we have a financial crisis and we’re working very hard on regulations and I think sometimes we get misdirected in this because if indeed the source of our problem is coming from the Federal Reserve, then you’re depending too much on regulations without looking at the real cause. We’re treating symptoms rather than the cause.

Just the idea that the Federal Reserve is the lender of last resort contributes horrendously to moral hazard, especially when we’re dealing with the reserve currency of the world. But if everybody knows that no matter what happens, the lender is going to be there to bail them out.

You had an interview this year and you were asked what you thought were the real causes of this crisis, and I was fascinated with your answer, because in a way it seems like you might have agreed a little bit with what I am saying. You listed as number one that the monetary policy was too loose for too long, and that created this just huge boom in asset prices, money chasing risks, people trying to get a higher return. That was just overwhelming powerful.

And I think that really makes my point and unless you deal with that and the suggestion is that what we do is move in with more regulations and hope and pray that it will work. But again, if this is true, that a monetary policy way too loose lasted too long, how can the solution be speeding it up? How can you say, “Well, this is the real problem so we’ll double the money supply, interest rates were too low at 1%, so let’s make them a 0.25%”. I mean, I can’t reconcile this. How can you reconcile this on just common sense?

Timothy Geithner: Congressman, there is one part of that quote you omitted which is that I said “monetary policy around the world was too loose for too long.” And I think you are right to say that this crisis was not just about the judgment individuals to borrow too much or banks to lend too much. It wasn’t just about failures in regulation and supervision. It was partly because you had a set of policies pursued around the world that created a large credit boom, asset-price boom. And I think you’re right to emphasize that getting those judgments better in the future is an important part of the solution.

Ron Paul: Okay, on the issue that it is worldwide and we don’t have the full responsibility – there is a big issue when you are running and managing the reserve currency of the world, and other countries are willing to take those dollars and use those as their assets and expand and monetize their own debt. So it would not lock in their economy, it’s a worldwide economy and it’s our dollar policy and our spending habits and our debts that really generated this worldwide crisis. That’s why it’s not a national crisis. It’s a worldwide crisis.

Timothy Geithner: Again, I am not sure I disagree, but I would say it slightly differently, which is that a bunch of countries around the world made the choice to tie their currencies to ours, and effectively adopt our monetary policy. And that made monetary policy too loose in their countries. But it also created this wave of investment and savings into US financial assets which pushed interest rates down here and pushed up asset prices up here. But you’re right to say you look at the global mix of policies, we have responsibilities to get that right. We can’t do that on our own. And that’s important to think about, not just about regulations.

Ron Paul: Well, I think we do have a responsibility of our own. If we’re managing the world reserve currency, we can deal with that, we can deal with our spending policies, our deficits, the pressure on the Fed to inflate. So I think if we do what’s right, it will benefit the entire world.

Timothy Geithner: I agree with that.

In your testimony you also talked about talking about a new international court, and that you’re working on internationalizing regulations, which literally scared me. I think we have too many regulations already, and they don’t solve the problem.

Ron Paul: But, in those negotiations, since this issue of a new reserve currency is being discussed in the ordinary media, you hear reports… just this morning I read the U.N. is planning a new reserve currency. In these reports, can you tell me every time this conversation comes up and what is being talked about and how you relate to what the Chinese are saying? Yes, they’d like to see a new reserve currency, they’d like to participate. It seems that would be some very important information for us.

Timothy Geithner: I will be happy to come and talk to you about that privately or in another context.

Mr. Speaker: The gentleman’s time has expired.

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Venue: Joint Economic Committee Hearing
Date: 10/22/2009

Transcript

Ron Paul: Thank you, Madam Chairman and welcome, Dr. Brummer. I appreciate this opportunity to attend this hearing. I’m sorry I have to leave shortly to do some votes, but I did want to make a couple of points and maybe you can follow upon this later on.

In the several years that I have been here I have never met anybody that is not for a sound economy, everybody is for the economy. Everybody debates the issues and what we should do. We have a Federal Reserve that dictates the money supply and what the interest rates should be. And they want a sound economy and then the Congress rates the regulations. We have regulating agencies that are supposed to give us a sound economy, and yet we have probably real unemployment close to 20% and still a lot of problems.

Although I find that everybody wants a sound economy, nobody talks about a sound dollar. And I know you’re interested and have worked in the monetary field. But we don’t talk about what sound money is, and I don’t know how you can have a sound economy without a sound dollar. As a matter of fact, we talk too often about a weak dollar. We allow the Fed to devalue the dollar by printing too much money to accommodate the Congress. At the same time, we say that the secretary of treasury has the job of maintaining a strong a dollar, at the same time the dollar keeps going down.

And this has a lot to do without our imbalance of payments and all the problems that we face. But a lot of people say this is great, you know, a weak dollar is good for exports. Well, you know if you look at it from an individual level and you’re a saver, who wants a weak dollar? Who wants to have their dollar lose their purchasing power? And yet we actually say “Yeah, we should”. And I hear comments that come across that say, “Well, it’s okay to have a weaker dollar as long as it’s orderly”. Well, if a weak dollar is bad, if it goes down suddenly or orderly, you’re still hurt and you’re paralyzed. There should be no [...] in economics that argues the case it is good to have a weakening dollar and see your purchasing power dried up.

So my concern is that we don’t talk about the value of money. On the books still, and the Constitution still say that there is a definition for a dollar in terms of a weight for something that governments can’t create… precious metals. But at the same time, under the law… and the laws says that the Federal Reserve notes are legal tender and everybody has to obey all he laws doing it, because a Federal Reserve note is a dollar. If you’re asking, “What is a dollar?”. Well, we don’t know what a dollar is, but there is nothing on the books that says that a Federal Reserve note is a dollar. This is like building a building with a measuring rod that constantly changes. I cannot see how you can ever have a sound economy without a sound dollar and getting back to defining what a dollar really is. Our founders knew about this, they advised us and we have ignored it and we’re in a mess.

I yield back.

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Show: Jason Lewis Show
Date: 10/21/2009

Transcript

Jason Lewis: As we suffer through the post housing bubble bursting, I guess the bursting of the housing bubble that has given us this economic malaise, this malinvestment that’s been worked off, let it be known that this is probably the third bubble in a row created by monetary policy. We remember the tech stocks of the 1990s, then we had the housing bubble – actually that was the second – and now we’re in the midst of a commodity bubble, that critics of the Federal Reserve say is all due to a massive increase in easy money. Well, perhaps the nation’s leading critic of the Fed is the congressman and author Ron Paul. His latest book is called “End the Fed” talking about the Federal Reserve. And he joins us now. Congressman Paul, welcome to the Jason Lewis Show.

Ron Paul: Thank you, good to be with you.

Jason Lewis: Yeah, same to you. Now this is something that’s near and dear to your heart. And there is no question that a number of critics of the Fed would point to easy money, at least I would and I think you would, as one of the culprits of the housing bubble. The question is, what system should replace it? And that’s what you address in your book.

Ron Paul: Well, what we should replace it with is essentially nothing. When it comes to central banking, you don’t need a central bank. What you replace it with is sound money. And we allow the markets to set interest rates. We don’t believe that we should have interest rates fixed; it’s sort of price fixing. And the Fed is always giving bad information. Interest rates are very, very important in a market. If the people save, interest rates go down and then the producers and the investors know that there are low interest rates and there is capital there.

But for the last 20 or 30 years we’ve essentially not been savers, we’ve been spenders. But lo and behold, interest rates are low and the only way that could happen is if the Federal Reserve was creating money out of thin air. So they send all this false information that there was a lot of savings, a lot of capital available and then they overinvested, they made mistakes. In a way they’re responding in a logical fashion, but illogically, because they’re not taking into considerations the fact that the Fed has created artificially low interest rates. That’s a very serious mistake.

Jason Lewis: That’s effectively the von Mises view, the Austrian school view, that when you create these sorts of easy money policies, which we certainly have had with the federal funds rate hovering near 0% now for a year, and before that throughout the first part of this decade, creating the bust and boom cycles, that people see these artificially low interest rates and that’s an excuse for more loans and in many cases bad loans, and an excuse for malinvestment. But in addition to monetary policy, if we take a look at housing policy, we had some crucial fiscal and regulatory issues that drove the housing bubble as well. Fannie and Freddie, you had the Community Reinvestment Act, you had the housing quotas at HUD. Without those, some people say, the housing bubble wouldn’t have been as bad either.

Ron Paul: I think that’s true. I think that made it worse. I think it was the combination of low interest rates and artificially created credit, along with the pressure by the Congress to make bad loans. They literally would penalize banks if they did what they called redlining, saying, “Oh no, you have to give loans to people who don’t qualify”. It was absolutely bizarre what they were doing. You know, when the prices were going up and there is a boom part of the cycle, everybody feels pretty good about it and they don’t worry about the consequences. It is sort of like when you’re out on a drinking party and figure “I’m not going to worry about my headache the next morning”. Now we have our headache which came because we were overdoing it with excessives and it is very painful.

Jason Lewis: Well, it is a classic malinvestment, to use an Austrian phrase. It is when you have these misguided signals. When it comes to interest rates, you want interest rates to be determined by supply and demand, not by any artificial lever. And when you had all the fiscal and regulatory incentives, the moral hazard, we made bad investments. Bad investments are those that don’t return a profit that allows you to service the debt. And it has been my view for quite some time that had we not bailed out Bear Sterns, had we not tried to re-inflate with money – it is even easier now, as you well know, congressman – the Fed’s balance sheet has doubled. Had we not done that, we would have had a very sharp correction, but we’d probably be out of it by now.

Ron Paul: That’s right. We’ve done exactly the wrong thing. What we should have done is allowed the markets to liquidate bad debt and get rid of the malinvestment. But instead, our policies now in Washington are to try to keep the prices of houses up to stimulate the building of houses. There are a million and a half houses sitting out there, the prices need to go down. That needs to be clear to people who have some money; prices have to get down to the price range where they can buy. But instead, we’re propping up the prices and we’re doing the same thing. So you can’t solve the addiction to easy credit with more easy credit.

But on the next bubble, I know the commodity prices are high and I think of that as less of the bubble and maybe a more normal reaction. I think the bubble where the artificial prices are, are the bonds; the bonds are so high because the Federal Reserve keeps the interest rates low, which means the price of the bonds go up. So one of these days these interest rates are going to turn around, there will be loss of confidence in the dollar and then maybe if there is a run from the dollar there will be a run from buying our debts.

Ron Paul: We’re already seeing a weakening of the dollar.

Ron Paul: That’s the major problem we face.

Jason Lewis: A run from the dollar will be catastrophic and we’re seeing a weakening of the dollar. Plus the Fed has set up a system where it’s easier for bankers to say, “I’m going to borrow at the federal funds rate of 0%, buy a 2 or 3 year treasury bond, give it right back to the government and I’ll make money on the spread. Who needs to lend to private business?”

Ron Paul: Yeah, why take the risk. That’s what are they doing. They’re reporting record profits, and we’re supposed to all feel good about it. And it is all insider trading, they put people who do insider trading on the private business, but this is all insider stuff, you know. The Federal Reserve, the big banks and easy credit to them. And people who might be able to use this credit are not getting these loans, the confidence is not there. There is a lot of reasons why they’re not getting the loans, but there are still people who are making a lot money. I mean the real crime is when you see huge banks and big companies like Goldman Sachs making not hundreds of millions, but literally billions of dollars. I mean, Goldman Sachs has something like 21 billion dollars which at the end of this year will be passed out in bonuses, and it’s not like they produce goods and services.

Jason Lewis: Well, let me tell you something. You think that’s money, wait till Al Gore’s carbon credit exchange is implemented. And you’ve got these same bond traders now trading carbon credits, which will go up in value every year as the allowable emissions go down every year.

Ron Paul: Yeah. It’s the same people, too. They make money when the bubble inflates and then they’re first in line for the bailouts.

Jason Lewis: What, though, would give you confidence that going to a more private banking system backed by gold would be any less volatile? For instance, if you take a look at where the price of gold has gone in the last couple of years, it has doubled. I think it was $500 not long ago. If you’re on a traditional gold standard, then people would start turning in their dollars for gold and you would have rampant deflation in the middle of a downturn. Isn’t that why William Jennings Bryan was bemoaning the fact that we were crucifying the economy in a cross of gold?

Ron Paul: Well, yeah but I didn’t accept his arguments. Back then he actually wanted to inflate with silver. Can you imagine that? He wanted more silver, and today all we want is computers. We don’t even print the money, we don’t even waste time printing the money; we create the money with computers. So it isn’t the gold that’s unstable, it’s the paper in relation to gold. But you will see a lot of ups and downs, especially when most people are still thinking in terms of the dollar. But gold, in the long term is very, very stable and maintains its purchasing power and it is the dollar that is unstable.

Part 2
Jason Lewis: Your book does a great job, especially in the beginning about fundamentally laying down the functions of a bank; a store, a warehouse, as well as a venture capital outfit. And when you combine the two, especially when the government backs it, you’re asking for trouble. Which is why I think the banks ought to have to buy private insurance, if you don’t get back to some other system, instead of federal insurance. That’s a huge problem. But I actually think the monetary policy in general, Congressman Paul – and I am sympathetic to your argument, obviously – but I think it’s a lack of political will, it’s kind of like a manifestation of a nation that has lost a lot of self-reliance and a lot of intellectual and personal fortitude. By that I mean one of the reasons the politicians wanted to go off the gold standard was because it was easy. It was easy to inflate, it was easy to fund government programs, as you point out in the book. But the same is true for a monetary policy; if you adopted John Taylor’s rule or go back to Freedman and a hard monetary rule, where velocity would be the only swaying thing, which wouldn’t be a whole lot different than fluctuations in the price of gold, if you can get the political authorities to be firm and disciplined on that, that would work too, it seems to me.

Ron Paul: Yeah, but you know you can’t trust the politicians, they’ve never been trustworthy, and that’s why we’re in this mess. Milton Freedman and I used to debate this issue, and he always conceded that an honest to God gold standard would be okay, the kind of gold standard that I believed in, because you can’t trust the government because they will do what they did do.

Jason Lewis: Right.

Ron Paul: But the important thing that Murray Rothbard talked about was making sure it was a gold coin standard; that if you have paper, you always can vote immediately by walking into a bank, and you want to see if you got your gold coins. So it can’t be a gold bullion standard, it has to be in coinage. And I don’t know why these ETFs now are getting so huge. If some people are skeptical and ask, “Do they always have the gold there?” But what if we do have some ETFs and they started issuing certificates against them and they were willing to have the public audits and they did have the gold and they would always send you the gold every time you turn it in… All of a sudden you would have certificates that would be maintained…

Jason Lewis: How many currencies are you talk about? You’re talking about 100% private banking. How many currencies do you want?

Ron Paul: Of course, that’s the ideal. In the Constitution we still have the responsibility and authority to issue the gold and silver coins as legal tender, and no authority to have a central bank and print money. But you still could have private banking. But they’re fraudulent, they always cause the same problem.

Jason Lewis: I’m up against the clock. When we come back I want to talk a little bit about your book “End the Fed” and some other topics as well with Congressman Paul. And you’re absolutely right, of course, about Freedman, he used to say you can have a floating rate or you can have a hard fixed rate, as you describe it. But you could never have a pegged rate with an act of the central bank, which is why we have these currency runs and these reserve raids and all of this nonsense. You’re right about that. But, let me see if I can get you to concede real quick here before we break the first time – if you had a hard-and-fast rule, that Freedman espoused, or now John Taylor espouses, that said the monetary authorities will not grow the money supply more than 2 or 3%… whatever the rule would be… would it work?

Ron Paul: It probably would work better than what we have, but Mises still argues that even if you have 1% you’re going to have distortions that will build up over time and then have to require corrections. You want a free market balance of supply and demand. So it wouldn’t be as bad. He always said the bubbles would less huge by doing this. But it goes back to human nature. If they’re allowed to print at 3% and you have a crisis come and then there is the incentive and then they give up, and then the hard-and-fast rule is no longer hard-and-fast.

Jason Lewis: No, no, you’re right. The first thing we should do is repeal Humphrey Hawkins and then pass your bill to audit the Fed. I’m all for those two provisions; those would be good starts anyway. Hold that thought. Representative Ron Paul is our guest. We’ll come back and talk about a few other things as well with the congressman from the great state of Texas on the Jason Lewis show.

The book is called “End the Fed” by Congressman Ron Paul. There are a number of people who have endorsed the book and not the least of which Arlo Guthrie. Rarely has a single book not only challenged, but decisively changed, my mind. The congressman is coming off his presidential campaign of 2008 with this book. I think it is timely and not to mention some constitutional issues about all of this, such as health reform which in addition to being horrible economics is patently unconstitutional, unless you believe in an ever expanding, elastic, inter-state commerce laws. We really do have a crisis in the country and at this time, Congressman Paul, it all seems to me that you need a credible opposition party. Is there one?

Ron Paul: Well, there is one, I believe, but it is not well enough known to be a viable party to really compete. And I don’t think that another party, a third or fourth or a fifth party can compete under the rules today. I think the people are demanding it. But when the time comes to vote, they don’t hear about the other ones, the third party system means they can’t get on the ballots, they don’t get into the debates. It’s a very, very undemocratic process that we have. We go and die to spread democracy around the world and democracy does not thrive here. Especially when you come to the conclusion that the policies really aren’t any different between the Republican and Democrats, where can the independent go or where does the third party person go? You can’t even get on the ballots. I mean it is rather sad and it is why people are resorting to anger right now rather than resolution and saying, “I can solve the problem”.

Jason Lewis: There doesn’t seem to be any thinking within the party. I hate to be so blunt… you can’t be this blunt given the rules of being a gentleman on the House floor and elsewhere… but the Democrats are just socialist. I mean they really are and there is very, very little doubt in my mind about that. But the Republicans are not only not much better, but they’re growing increasingly intolerant of any sort of divergence in their views. Ronald Reagan in an interview in 1975 in Reason Magazine said, “The heart and soul of conservatism is libertarianism”. But you can’t be a libertarian in the Republican Party. You got kicked out of the party, for all practical means and purposes, for defying the orthodoxy on Iraq.

Ron Paul: That’s right. They’re very open to a liberal moderate. You can really lean left and they’ll go out of their way to support you. They’ll say, “Oh well, we have to have an open door for a broad-based party.” But if you are libertarian and if you are a constitutionalist and you point out the infractions of the Republican Party, then you’ve overstepped your bounds. And I think the reason is the more libertarian constitutional approach is saying what the Republican Party claims they are. You know they say, “We’re for personal liberty, we’re for balanced budgets, we’re for minding our own business” and if you ask them, “Why don’t you vote that way?” then they don’t want to hear that and then they resent it.

Jason Lewis: Yeah. I mean we could have just dismantled Fannie and Freddie with the majority President and the majority party. They could have done that long, they did not.

Ron Paul: Early in this decade I introduced legislation just to remove the line of credit to the Fed; legislation that said if you keep doing this you’re going to have a major housing crisis. But they wouldn’t consider that for one minute. What happened after ENRON? We passed Sarbanes Oxley. Dozens and dozens of businesses overseas by more regulations. And that’s why there really isn’t any difference. Monetary policy and foreign policy and domestic welfare policy really remains the same. I mean we didn’t slow up, we passes the proscription drugs program, we doubled the size of the Department of Education. That’s not what Ronald Reagan talked about. He wanted to get rid of the Department of Education, but we don’t even talk about that anymore.

Jason Lewis: That’s why there is a crisis right now. I mean, there is no fundamental opposition. There is angst against the Democrats but there is no credible opposition right now and boy I’ll tell you, it’s hard to see a vision down the road where someone really stands up. Now, a lot of people are still talking about Ron Paul running again. Would you entertain a run as a third-party ticket in 2012, although it doesn’t sound like it?

Ron Paul: No, that seems like a long way off and I think it depends on a lot of things. I’m up for re-election next year and I don’t know what’s going to happen for a year or two. You could have a slight reprieve on this, or you could have a dollar crisis starting next month. If we’re in the midst of a dollar crisis no matter where we are, I’m going to want to speak out on it.

Jason Lewis: Alright, Congressman Ron Paul, keep us posted and good luck on the book.

Ron Paul: Thanks a lot, thanks for having me.

Jason Lewis: You bet, glad to have you. Very interesting guy; don’t have to agree with everything, but he’s got something important to say. Ron Paul on the Jason Lewis Show.

Related posts:

1. End The Fed & Consider Outlawing Fractional Reserve Banking Channel: CNBC Show: Squawk Box Date: 11/13/2009 Joe Kernen:...
2. Fed Audit Will Show What They’re Hiding In this speech to Congress, Ron Paul refutes Ben Bernanke’s...
3. Ron Paul on The Daily Show with Jon Stewart Show: The Daily Show Host: Jon Stewart Date: 9/29/2009 Transcript...

Part 1: http://www.youtube.com/watch?v=Dl5hZJdqe0k
Part 2: http://www.youtube.com/watch?v=vytM_29ne-E
Part 3: http://www.youtube.com/watch?v=nisyuy2LMjU
Part 4: http://www.youtube.com/watch?v=wxgQZOOopQM
Part 5: http://www.youtube.com/watch?v=mzwXf6ogSxA
Part 6: http://www.youtube.com/watch?v=U4Vo6kfRJAk

Channel: FoxNews.com Strategy Room
Show: Freedom Watch
Host: Judge Andrew Napolitano
Date: 5/20/2009

Transcript

Judge Andrew Napolitano: Good afternoon, everyone. It’s 2 o’clock in the East, 11 out West, and the Liberty Power hour is back. Welcome to a brand new episode of Freedom Watch, streaming live from the highly acclaimed Strategy Room on FoxNews.com. I’m Judge Andrew Napolitano.

We’ll discuss today the issues that profoundly affect your civil liberties, your personal liberties, your financial liberties, and your right to have a government that stays within the confines of the Constitution.

We encourage you to take part in today’s show. Send your tweet to Shelly Roche who is seated next right to me. She’s not by remote. She’s right here today. We’ll answer your questions throughout the show.

Congressman Ron Paul may be with us. He was just called to vote, but Lew Rockwell, Tomas Woods, Dr. Rand Paul, Glen ‘The Wrestler’ Jacobs, Otto Guevara, Jason Talley, and Pete Eyre of the Motorhome Diaries will all join us.

But right now, Lew Rockwell and Tom Woods join us from the Mises Institute in Auburn, Alabama and we’re hoping Congressman Paul will join us as well.

Lew and Tom, welcome back to Freedom Watch.

Lew Rockwell: Judge, it’s great to be with you as always.

Tom Woods: Thank you, Judge.

Judge Andrew Napolitano: Thank you, guys. Tom, let’s start with you. Since last we met, the government has indicated that yet again it wants to give more powers to the Fed. This morning there was a story on Bloomberg.com and also on the WallStreetJournal.com that the Congress wants to take some of the regulatory authority away from the SEC, regulatory authority that we should have in the first place, and give it to, of all people, the Fed.

Now, this raises a lot of implications. What are they?

Tom Woods: Well, to me, the most significant implication is what we’ve long suspected, which is that our political class is completely clueless, that they’re, once again they’re chasing after symptoms instead of causes.

And if anything, the thing that needs to be regulated is the Fed itself. I mean, the idea that this institution that is totally unaccountable creating trillions of dollars, the Bloomberg Financial Network has to sue them for them to disclose any information… the idea that they would be competent regulators of genuinely private actors is absurd.

In fact to the contrary, the Fed under Alan Greenspan, it was understood by everybody. The Financial Times newspaper made it clear that everybody knew that Alan Greenspan, if you’ve gotten into big trouble as a major Wall Street actor, he would eventually come riding to the rescue.

Then, now, if he would stop doing that, then we get a lot more sane behavior on Wall Street. But it’s the Fed that is the source, the ultimate source of all the moral hazards because it creates the boom and bust cycle and then when the bust comes, all the major players come asking the paper money producer, the Fed, to bail them out of the bust that they themselves created.

It is moral hazard with an exponent beside it and the idea that they should be regulators, especially when Ben Bernanke himself said that his own regulators had already looked into the mortgage market a couple of years ago and they found that is was stronger than ever.

I mean, who in the world could trust these people to do anything?

Judge Andrew Napolitano: Well, that’s the question. They obviously can’t be trusted because as a private bank with government powers, they obviously have a vested interest. How could a private bank, Lew, possibly regulate certain aspects of compliance with the Securities and Exchange Commission regulation for publicly-traded corporation without having some kind of an inherent conflict of interest?

Lew Rockwell: Well, it’s nothing but a giant thing of these conflicts of interest and one of the ways we can look at this recent crisis or the results of the crisis is that some of the worst people on Wall Street have been taking further power over the Treasury and over the Federal Reserve and now, of course, then also within the Treasury-Fed struggle, and there will always be struggles in Washington that no one talks about.

Judge Andrew Napolitano: Right.

Lew Rockwell: CIA hates the FBI, the FBI hates the CIA, the Treasury hates the Fed, the Fed hates the Treasury, the Fed hates the SEC, the Fed wants all power, and, of course, as you pointed out and Tom points out, this is secret. It’s unaccountable and but it’s run by the people who brought us this crisis, who brought on the artifial boom and now, this horrible recession or depression, which despite all the business about green shoots and mustard seeds we’re a long way from getting out of.

So to put the criminals who created this, in charge of allegedly making sure that it doesn’t happen again, all they will make sure of is that their pals on Wall Street and the banks that are connected to them will further be able to rip off the American people.

Judge Andrew Napolitano: You know, Tom, I’m struggling in my memory for a Depression-era Supreme Court opinion, which believe it or not, obviously it was before FDR had tried to pack the court, basically said that an industry could not receive powers from the Congress to regulate itself or some select group in the industry couldn’t receive powers from Congress to regulate the rest of the industry, but this Fed is such a weird bird in our constitutional system.

I would bet that most of Congress thinks it’s part of the government. I know that most of the public thinks it’s part of the government. But here you have a private bank, private bankers, basically the inheritors of the same class of people that brought us the Fed in 1913. Can you imagine what could they do to enrich themselves if they were the regulator of all publicly-traded corporations?

Tom Woods: You see, I think you’re thinking of the so-called Sick Chicken case that was used to overturn the National Industrial Recovery Act.

Judge Andrew Napolitano: Is that Schechter vs Schechter Chicken or…

Tom Woods: Right. I think that’s the one, but yeah… I mean, the idea that we can delegate powers, in my opinion, the Federal government shouldn’t have in the first place, and then delegate them to some outside agency, is certainly dangerous.

Judge Andrew Napolitano: Right.

Tom Woods: But what’s most important for us to explode forever is this naive civics-class version of how American history works that all our 6th and 7th graders are taught, which is that when our government establishes something like the Fed or a direct government agency, it’s always done for the sake of the common good and to make us all better off, and we never think and we’re never taught that maybe it’s a big ripoff.

And, you know, Murray Rothbard, the late great economist pointed out in a speech he gave in the 1980s. He said, “You know, if the steel industry wants higher tariffs, nobody sits back and says, ‘You know, I bet the higher tariff decision by the Federal government was a cool, calculated decision that was meant to improve the well being of everybody.’” No, we all know that that’s an industry decision and they’d lobbied for it and they do it to enrich themselves, but as soon as you apply that analysis to the Fed or to any other agency and say, “Wait a minute. Maybe there are private actors here who are doing this not for the common good, but heaven forbid, maybe they’re actually doing it to benefit themselves.” Well, you’re not allowed to say that because these are all here for the common good and I’ve taken a little bit of abuse from left wingers who are supposed to be the ones who question authority, but when it comes to questioning the Fed, absolutely not. Whatever Ben Bernanke says in his press release, we’re going to bow down before it.

Judge Andrew Napolitano: You probably don’t even realize how profound and how accurate is the last sentence that you just uttered, “Whatever Ben Bernanke says, we’re going to bow down before it.”

I’m going to break a little news right now to the two of you and to our Freedom Watch listeners. As you may know, the Fox Business Network sued the Treasury Department and the Fed under the Freedom of Information Act seeking copies of all documents evidencing anything to do with the expenditure of TARP funds; copies of checks, copies of agreements, e-mails, et cetera.

The same Federal judge that two months ago granted Fox’s summary judgment against the Treasury Department and ordered the Treasury Department to comply and we believe it has, late last night threw out Fox’s case, dismissed Fox’s case against the Fed saying, “I don’t want blood on my hands.”

Question, Lew Rockwell, how could a life tenured Federal judge be afraid of the Federal Reserve?

Lew Rockwell: Well, the Federal Reserve is the central institution of evil in American society and in the American government. I mean, without the Federal Reserve and its ability to create money out of thin air by the trillions as Tom points out, we couldn’t have had the warfare state, the welfare state, we couldn’t have the vast bailouts and handouts to all the special interest that go on. This is the most powerful, untouchable institution in society and thank goodness therefore that Ron Paul has been targeting it with his legislation and is raising people’s interest in it.

Because when I was a kid, we, you know, everybody’s eyes glazed over when you talk about the Feds.

Judge Andrew Napolitano: Right.

Lew Rockwell: It’s the name on the bill in your wallet. Now, more and more Americans realize they are ripping us off. They’re ripping us off by horrendous amounts. They’re causing unbelievable human suffering in this country and all around, in fact, the whole world, the Federal Reserve.

So I can understand the judge as being afraid. I don’t appreciate the fact that he gave into his fear and obviously didn’t do what the Constitution and justice and economic logic and many other things would tell us he should have done, but really they are so far untouchable.

Of all these independent agencies that were created in the evil progressive era, the Fed is the holiest. It’s a holy sanctum there on Constitution Avenue. You can’t even take a picture of the building. The guards come out and want to take the film out of your camera, just like the old Soviet Union.

This place needs scrutiny. It needs examination. People need to learn about it, and by the way, I want to say to everybody, if you want to learn about the Fed, first read Tom Woods’ New York Times bestseller, ‘Meltdown’.

Judge Andrew Napolitano: Right.

Lew Rockwell: It will explain to you what this institution is and why it needs to be, not only examined and the sunlight shine on them, but really it needs to be abolished if the future of our country is to include prosperity and freedom.

Judge Andrew Napolitano: Tom, I wasn’t fully fair to the federal judge because I just quoted the most outlandish part of his opinion and he obviously gave other reasons on the record, but I’m scandalized that a federal judge would be afraid of anything in our system.

But Congressman Paul, who couldn’t be with us, his proposed legislation has 170 co-sponsors in the House and now has been introduced in the Senate by the Socialist Independent from Vermont, Senator Bernie Sanders.

So you’ll never know where this is going to go, but if the Fed were audited, if this bill became law, and a judge’s fear of blood in his hands meant nothing, what in the name of God do you think we’d find out?

Tom Woods: Yeah, that’s a good question. I mean, that I’d like to talk to Dr. Paul about. Because in my understanding is that everybody around the world knows that the Fed is engaged in all kinds of phony baloney accounting and if you actually got a real audit, it would blow the lid off the whole thing.

Because, I mean, just imagine what would you do, and I don’t mean you, Judge, in particular, a saintly man. But I mean, what would the average person do with the types of power Ben Bernanke has and the Federal Reserve Board has. You know, they can create legal tender money out of thin air by a grant of government monopoly.

You know, the idea that this isn’t going to be abused is pretty well laughable and I think Congressman Paul’s idea is that once people are able to look at this thing for the first time, and it actually is talked about as a political issue for the first time in almost a century, that’s step 1 to them thinking about what needs to come next.

And incidentally, sometimes we hear people saying, “Well, you know, you folks, you have no solutions to propose. All you want to do is abolish things and get rid of things. Well, you know, what do you propose in its place?”

And just before I came on the program, I put together links to all the free market economists like Henry Hazlit, Murray Rothbard, F. A. Hayek, and Ron Paul, and how they proposed step by step to get out from under the system we’re in and back to a free, sound money system.

So I put that up on TomWoods.com, my website, so that we can easily… you can go there and see that there is a way out of this. This is not a fated existence. We don’t have to live with this thing. It is not part of nature. It’s not just a given factor of life. We can free ourselves from it.

Judge Andrew Napolitano: I was scandalized that a federal judge would use that phrase, “I don’t want blood on my hands.” The same federal judge that basically told the Treasury to go take a hike when they told Fox and other news media, by the way, adjoined in the lawsuit. When they tried to tell Fox to go take a hike and that they weren’t going to release the TARP documents, which we since have seen, including former Treasury Secretary Paulson’s notes, which included a threat, and basically said, “If you don’t let us buy stock and accept the TARP funds, expect to hear from your regulator.”

That regulator, Tom, would be the FDIC and what the FDIC could do to any one of the top 15 bank holding corporations in the country could be almost catastrophic for its shareholder value, for its employee time and for its public relations in terms of a 3- or a 4- or a 5-year audit, and that’s basically what Henry Paulson threatened.

We would not know about that threat had it not been for the Freedom of Information Act request, which was complied with by order of the same federal judge who is afraid to do the same thing with the Fed. Tom.

Tom Woods: Well, to me, there should be outrage upon outrage all over the country about this and yet, you know, all we get in the major media is just a big echo chamber where issues like this hardly ever come up. You know, once in a while, they’ll write an article about Paulson or they’ll write an article about Bernanke, but they’re still overawed by these people.

When Bernanke was interviewed by 60 Minutes, I forget who the journalist was, but instead of confronting him with issues like this on which he recently become know about, but all of the mistake in predictions he made, all the bone-headed decisions, instead of asking him that, before going in to see him, he’s walking through the Federal Reserve building saying, “Ooohh, look at this wonderful building. Look at this big seal and oh, what was your childhood like or, you know, what’s the toughest part of being a Central Banker. I mean, it’s like they all come from Pravda, our journalists.

Judge Andrew Napolitano: Right, right.

Tom Woods: And even if they weren’t a bunch of toadying lackeys, they’re too ignorant even to know what to ask. I mean, how are we supposed to keep a free society with people like these running the media?

Judge Andrew Napolitano: Guys, the tweets have been coming in. As you know, Shelly Roche is here with me and I think she has one for Lew Rockwell.

Shelly Roche: I do indeed. All this talk about, you know, solutions and if we are able to audit the Fed, what happens next? AdamCFL asks, “What would our economy look like without the Federal Reserve and what will happen after an audit?”

Lew Rockwell: Well, without the Federal Reserve and with sound money, we’d have what seems like almost a science-fiction situation. Your money would be worth more the longer you hold it. The money you would put away as a young for your retirement would buy more when you retire.

Because without the Federal Reserve constantly diluting the money supply, you money with the capitalist system would just be producing more and more goods and services. Your money is worth more all the time, so this is magnificent.

Also, we wouldn’t have our artificial booms and busts like the dot com bust, like this housing bust, and much wider, of course, than housing.

So we would be far better off. We’d be a far more prosperous society. Every American would be better off economically, from the top to the bottom of society, poor people would be better off, rich people would be better off than all the rest of us and everybody in between.

What’s going to happen next after Ron Paul’s bill? If this bill can get passed and I can guarantee you that the bad guys in Congress; Pelosi, Reid, and for that matter, McConnel and Boehner on the Republican side are scheming for ways to block this bill or to make it so that it has no effect because they’re scared of this bill.

Judge Andrew Napolitano: I’ve got to tell you, Lew. In an e-mail that Ron Paul sent this morning in which I said, “What’s the strongest argument against the bill?”

He said, “You’re not going to believe this. You just won’t believe it. The argument they’re making against the bill is that the government shouldn’t get involved in private enterprise and the Fed is a private bank.”

Now, a, they have never admitted the Fed is a private bank, b, since when have the Democrats or any of the big government people feared the government getting involved in private enterprise?

Lew Rockwell: Well, of course, again this is the holy of holies of the modern American regime, the Federal Reserve. We couldn’t have this worldwide empire, we couldn’t be fighting all these horrible wars all around the world if it weren’t for the Federal Reserve.

George Bush never had to worry about getting a vote on an appropriation because they didn’t have to tax or borrow the money, they could just print it up, so that kind of business could not go on if we didn’t have a Federal Reserve.

That’s what they fear. This would be that we’d return to a situation where the finances of the federal government would be like that of a state. If they issued too many bonds, if they did too much spending, there would be questions of default on the bonds without a central bank.

Judge Andrew Napolitano: Right.

Lew Rockwell: So there’d be tremendous restrictions on government overspending and over-reach in every area of their life.

Tom Woods: And Judge, by the way, you’ll notice the only private enterprise that Democrats typically don’t want to involve themselves in or regulate are phony baloney private enterprises that are basically government monopolies like Fannie and Freddie that had monopoly privileges. Well, they don’t want to regulate that.

Judge Andrew Napolitano: Right.

Tom Woods: Or the Fed, which has a monopoly privilege to issue money, they don’t want to regulate that. Those are the parts of the economy that most need the regulations –

Judge Andrew Napolitano: …and certainly need to be exposed.

Tom Woods: — because we, the taxpayers, are on the hook for all the bone-headed things they do. Those are the things that if we’re going to have them at all, but we shouldn’t, those are the things we should regulate, the private economy and the profit and loss system can regulate itself.

It’s precisely institutions like this that need oversight, and naturally those are the ones they want to leave unchecked.

Judge Andrew Napolitano: Guys, we have to go. Lew Rockwell, Tom Woods. It’s always a pleasure. Until next Wednesday on Freedom Watch. Thanks very much.

Tom Woods: Judge, thank you.

Lew Rockwell: Thank you.

Judge Andrew Napolitano: Thank you. Well, we’ll get Dr. Rand Paul on.

I get e-mails on this all the time, what can we do?

Shelly Roche: Yeah.

Judge Andrew Napolitano: What can we do? What can we do? Now, you are part of a movement, Shelly, of young people that does things. What advice would you give to me to tell the hundreds of emailers that email me every day, what can I do that I should tell them to do?

Shelly Roche: That’s a great question. I get that. That’s probably 50 percent of the tweets I get are, you know, what do we do? What’s next? What can we do to make this happen?

And I think using the technology tools that we have available to us really helps us organize. It helps us spread the word. There are so many more people today that know what’s going on in the government because of shows like this in the Internet, and Twitter, and Facebook and that sort of thing.

Judge Andrew Napolitano: Yeah.

Shelly Roche: So that’s one thing. That’s where you can get started.

Judge Andrew Napolitano: Well, the Internet is certainly the key and Freedom Watch has become sort of a focal point, if you will, of a lot of freedom-loving individuals, many of whom are as youthful as my good friend Shelly here and as youthful as my next guest, for exchanging information, political information, economic information, tactical information about who’s up, who’s down, who needs support, who needs help and what arguments should be made.

Now, talking about who’s up and who’s down, we may have a real surprise coming in the state of Kentucky. I don’t want to jump the gun, Dr. Rand Paul, but might you have some kind of announcement coming about your political future and the future of freedom in the Commonwealth of Kentucky?

Rand Paul: I do. We’ve announced that we’re forming an exploratory committee to run for the US Senate.

Judge Andrew Napolitano: Well, congratulations to you and obviously, we wish you well and it will be a great race. Just a little bit of the logistics, are you going to challenge Senator Bunning in a Republican primary or are you going to run as a Republican or are you going to run as a Libertarian? What are the mechanics for getting out a message of freedom in a system where the two parties seem to control everything?

Rand Paul: I’m going to be running as a Republican and it’s still uncertain what Bunning, what his plans are. At this point, he says he’s running, but he’s encouraging other candidates to form exploratory committees that will compete with him for raising money and he says he will run unless he doesn’t raise enough money. So there’s a lot of doubt created by encouraging other people to run as to whether or not he’ll stay in the race.

Some Republicans I meet, even on the Executive Committee have been telling me for months that it’s a done deal. He’s not really running and if he is running, he needs to overcome that doubt, but because of that, we are organizing. I’m traveling the state. We’ve got a website, RandPaul2010.com and it’s done by some really old political hacks out in California, age 24 and 25.

Judge Andrew Napolitano: Those are the best kind of political hacks to have because as you may have heard, Shelly Roche and me chatting as we were going through the mechanics of getting you on air with us. The Internet is such a powerful tool and it is the youth of America that forms the basis for this movement.

Dr. Rand Paul, what is the state of the Republican Party in Kentucky? We know what its state is nationally. It’s extremely minority and to me, numerically, a minority. I don’t think the Republicans even know what they stand for anymore.

Rand Paul: Well, the interesting thing is there’s sort of a division in Kentucky they way there is in a lot of states. The leadership of the Republican Party went along with the bank bailout, but if you were to do a poll of the Republican primary electorate, I think you’d find out 80 to 90 percent across the country and particularly in Kentucky, would have voted no against the bank bailout.

So we’re sort of at odds with our leaders, which maybe means we need a new set of leaders.

Judge Andrew Napolitano: You know, as I’ve mentioned to you on radio on Brian and the Judge earlier today when we talked about this. I was interviewing John McCain the other day who was trying to sound a little like your father.

And I said, “Wait a minute, wait a minute, wait a minute. Surely you remember September of 2008 when you suspended your campaign and flew into Washington supposedly to address the financial mess that the country was in. At that point, 70 percent of the people were against the bailout. There are a lot of people who think you might be President today if you had voted against the TARP. You went along with it.”

“Well, when the President of the United States says there’s a problem and he asked you to do it, you’ve got to go along with it.”

I said, “Wait a minute. The President of the United States wants to borrow trillions and you voted against that. Is there any difference between a Republican that wants to borrow trillions and a Democrat that wants to borrow trillions?”

Rand Paul: Yeah, and that’s the real problem. It’s that, for example, all throughout the Bush administration, very few, if any, Republicans voted against the budget. When the deficit reached $500 billion in a year, you had Ron Paul and about five or six Republicans who would vote against it, maybe 20 Republicans, but very few have the guts to vote no.

Look at the alternative now. We complain and all the Republicans voted against Obama, President Obama’s 1.75 trillion but you know what their alternative was? It’s like 400 or 500 billion with a plan to balance it in 10 years. Nobody believes you’ll ever balance a budget in 10 years if you don’t have the guts.

You’ve got to stand up the way 30-some odd states do and you have to balance it every year and I think one simple way of presenting this to the American public is, let’s just introduce the budget from 2004 in 2010 and presto, you’ve got a balanced budget.

Judge Andrew Napolitano: Let me ask you about a couple of specifics. I think I have an idea where you stand on them, but I want to hear it from you nevertheless. The most offensive parts of the PATRIOT Act are about to expire. The most offensive part of the PATRIOT Act is that which allows Federal agents to write their own search warrants without having to present probable cause of a crime to a judge. It will expire at the end of this year.

So even if you run, you wouldn’t be in the Congress by then, but it’s an issue the Congress will be grappling with. Where do you stand on that? And the issue of closing Guantanamo Bay, where do you stand, and that is closing the prison camp for foreign detainees, not the naval base, but the prison camp for foreign detainees at Guantanamo Bay, where do you stand on that?

Rand Paul: Well, I’m absolutely opposed to the PATRIOT Act. I would have voted no on it and I would vote to sunset any provisions as quickly as we could. I think one of the greatest descriptions of it is in this little book we read in my book club not too long ago, “Constitution In Exile“. Have you heard about that one?

Judge Andrew Napolitano: I have. You’re so kind. Thank you.

Rand Paul: But it is true and [...] what I love is that there’s about a 4-page summary you have of the destruction of the Fourth Amendment going from the late 1970s and ties it to the present of what has happened to the Fourth Amendment.

When I go to like a gun crowd, what I like to tell them is I’m here to support the Second Amendment, but you know what, you can’t have the Second Amendment if you don’t have the First Amendment. That’s why McCain-Feingold really damages groups like gun groups and then I’d say, “Look, you can’t have your Second Amendment if you don’t believe in the Fourth Amendment.”

Judge Andrew Napolitano: Right. Which is why Thomas Jefferson…

Rand Paul: And so you really have to explain this to people and I think a lot of people understand it, but they don’t realize that 99.9 percent of the Republicans all voted for the PATRIOT Act.

Judge Andrew Napolitano: Absolutely, and it’s funny how you run through the amendments as you did, Dr. Paul. It’s the reason that Thomas Jefferson, and the anti-federalists said, “You want this Constitution, you get these ten amendments in there.’

Congressman, I almost called you Congressman because I spend so much time with your dad. Dr. Rand Paul, thanks for joining us.

Rand Paul: Thank you, Judge.

Judge Andrew Napolitano: Of course, we wish you the best. We hope you’ll come back from time to time and visit with us again at Freedom Watch.

Rand Paul: I’d love to, and tell your viewers to look at my website, RandPaul2010.com.

Judge Andrew Napolitano: RandPaul2010.com. Thank you, Dr. Paul.

Rand Paul: Thanks, Judge.

Judge Andrew Napolitano: It’s a pleasure. All right, Glen ‘Kane’ Jacobs, welcome, big guy. Welcome to Freedom Watch.

Glen Jacobs: Hey, thanks, Judge. I’m a big fan. I haven’t had the chance to pick up the Dred Scott’s Revenge yet, but I’ve enjoyed your other books.

Judge Andrew Napolitano: Well, you’re very kind to say that. Thank you very much. With the exception of your former, maybe future colleague, Jesse Ventura, I don’t think that I’ve ever spoken to a professional wrestler on the air. That’s a thrill for me. Absolutely.

Where do you see the country going from your point of view? You’re a small businessman. You’re an entrepreneur. You’re an athlete. You’re an entertainer. You come in contact with people in all walks of life.

Where are we going? And are you happy or disturbed about it?

Mr. Glenn Jacobs: Well, I think I probably like everybody else you’re going to have on your show. I’m disturbed. Long term I’m actually optimistic. But short term, I’m pessimistic because, of course, of the things that the government is doing is 180 degrees from the way we should be doing, both with fiscal policy and with monetary policy.

But like I said, long term, I think what’s going to happen is I think because of shows like this, because of the message that it is getting out there, because of Ron Paul’s campaign in 2008, I think the American people are thirsty for real change and, of course, that’s what’s President Obama capitalized on to win the presidency.

But I think that they’re looking for the sort of change that we talked about; more freedom, re-investment in free markets, and individual liberty. And I think to solve the country’s problems, the only way to do that is to embrace those principles.

Judge Andrew Napolitano: Our viewers, as you’re speaking to me, are looking at pictures of you. We just saw your shaved armpit and now we see your incredible washboard stomach.

You and I have not met in person yet, but I very much look forward to when we can and maybe when you could be here in New York and then engage with us for the full hour of the show.

Are you surprised at the number of young people that are so active and willing to be combative for their liberties? I mean, it wasn’t too long ago when young people were complacent and just sort of expecting their jobs to be handed to them. But it is the generation, even younger than you and certainly younger than I that are really the backbone of this movement.

Glen Jacobs: Yeah. It’s very refreshing and you’re exactly right and we saw that with the Ron Paul campaign. All the young people were getting involved.

And once again, I mean, I think reality has this tendency to shake people up and with the young people, they’ve been told certain things about America, about the country, and then the reality isn’t quite the same, especially when you look at things like the unfundable liability of Social Security and Medicare. Those things are coming due; the debt, which is going to be a burden on these kids.

And let’s face it. I mean, you know, we talk a lot about people being dumbed down and apathetic. I don’t think that’s true. I think people are smarter than we give them credit for. They just have to have things explained to them in a way that they understand, and the young people are thirsting for knowledge and they’re thirsting for a new and different way.

So, yeah, in a way it’s surprising. But in a way, it’s not. I think it’s just human nature.

Judge Andrew Napolitano: Speaking of young people, our resident young person, Shelly Roche who deals with all the tweets that we get during the show who is seated next to me and we’ll jump in on the conversation. I’m sure that some of the young folks who tweet with you have some questions for Kane.

Shelly Roche: Sure, sure, they do. Here’s one from Byrd in Flates saying Kane is in an amazing position to have a positive influence on the youth. They love your letter to Robert Reich. How do you start up conversations with some of your fans and some of the people that follow you to kind of get some these concepts out there?

Glen Jacobs: Well, it’s becoming a little easier now since people sort of know where I stand and I don’t have to initiate the conversation. And it’s hard, of course, it’s almost nearly impossible when you’re talking with total strangers.

But a lot of times, you have to get to know people a little bit. You can understand what makes them tick, of course, and if you can tick an area that they’re not pleased with what the government is doing, and sometimes, you have to wait a while. Sometimes, they’ll bring it up themselves.

But if you can pick that area, you can sort of expand on things from there.

Judge Andrew Napolitano: Well, what’s it like in the wrestling community? I mean, do you discuss… because I happen to believe, Kane, that everybody, everybody is a libertarian. Everybody wants to be able to do their own thing and essentially wants to be left alone.

People in the government are not libertarians because freedom is an obstacle to them. It challenges them. It questions them. It looks for a transparency and it makes them justify their behavior.

But on all the people you deal with, professional wrestlers, colleagues, managers, fans, what do you find people are most thirsty for?

Glen Jacobs: Well, from our standpoint, we are not subject to withholding tax. We have to pay our own federal income tax. So unlike most folks, we really know how much a chunk that takes out of our income, so a lot of the guys do pay attention to politics for that very reason.

And I really think that in general the things the people are most worried about is the unbelievable spending spree that Washington has been on since the end of the Bush administration. I think that really bothers people and rightly so.

Judge Andrew Napolitano: Shelly, any questions or tweets for Kane?

Shelly Roche: Quite a few rolling in. Here’s a suggestion from Jay Huntson, “Could you adapt a new persona in the WWE that promotes liberty and freedom?”

Glen Jacobs: Well, I have to see. I don’t know.

Shelly Roche: Okay.

Judge Andrew Napolitano: All right.

Shelly Roche: All right.

Judge Andrew Napolitano: Okay. Where did Kane come from, by the way? What is the origin of that?

Glen Jacobs: It’s Kane and Abel.

Judge Andrew Napolitano: Okay.

Glen Jacobs: All right. All right.

Judge Andrew Napolitano: All right. Shelly, anymore questions for Kane?

Shelly Roche: What are some of your biggest influences? I know that you’re at the Mises Institute. What else has really influenced you in your freedom quest?

Glen Jacobs: Well, yeah, the Mises Institute has been an Austrian economics in general, it has been huge influence on me. Also, you know, the great thing about the Internet now is it just a pipelines for information. It’s a repository of information about any subject.

A couple of books that I’d recommend are Harry Brown’s “Why Government Doesn’t Work” and also, of course, you have F.A. Hayek’s “The Road To Serfdom“. I take bits and pieces from all sorts of different people about different things. For example, Judge Napolitano on his explanation of natural law and constitutional principles that are supposed to protect our natural rights, which are not given to us by government but which are endowed by our creator for a feature of our nature as human beings.

So I’d say it’s many, many various and different sources.

Judge Andrew Napolitano: Do you discuss Austrian economics with other pro wrestlers? Because I would like to be a fly on the wall for those conversations, Kane…

Glen Jacobs: Well, the thing about it is the beauty of the Austrian economics. You know, people has this misconception that economics is about numbers and it’s not.

Judge Andrew Napolitano: It’s about freedom.

Glen Jacobs: The problem with that is it’s leaving the human component completely out of the equation and economics is the study of human action and it’s the study, really, of cause and effect. Now, we’re not sure what the effect is always going to be because it’s depending on what people do.

But by its own token, it’s not a physics equation and it’s a verbal science, so you are able to discuss it with people and explain things in ways that they understand and you know, all of a sudden, light bulbs go off because, of course, that’s the way things work. That’s the way the world works.

Judge Andrew Napolitano: Are you as distressed as I am at the first 125 days of the Obama administration in which following the Bush administration and its utter disregard for the natural law and constitutionally protected rights, it has destroyed freedom of contract, basically destroyed shareholder rights, basically said to bondholders and shareholders of corporations, “You’re going to take this, you’re going to take that.” Said to shareholders, “You can’t have,” for example, General Motors, Rick Wagoner as chairman, “we’re going to fire him.”

Did you think that you would see the days, still in your youth, when we would be approaching this system of, I’ll call it what it is, fascism, which is private ownership but government controlled.

Glen Jacobs: Well, that’s exactly what it is and it is very disturbing. The fact that central planners believe that they can succeed and it’s not a market failure. You know, some folks would say that they’ve succeeded when the market failed, but the market didn’t fail.

The market had lots of problems because the government intervenes so much and the market could not break freely. But you know, from a constitutional perspective, too, Judge, every day when I read the news, it’s Obama wants this, Obama promises that, Obama says this. But if you read the Constitution, Article 1 Section 1 says that all legislative powers shall be vested in Congress.

Judge Andrew Napolitano: Right.

Glen Jacobs: And with things now, it has moved to a point to where… and I think to the degree that Congress is actually supposed to be the superior body to the President and the Supreme Court is supposed to be the inferior body. There was supposed to be checks on the powers of Congress. But we’ve moved to the point where we have what Ludwig von Mises would call omnipotent government.

Judge Andrew Napolitano: Right.

Glen Jacobs: I mean, you know, the President can virtually do anything that he wants, can say anything that he wants, and he’s making law, and he’s not supposed to do that, and, of course, President Obama wasn’t the first one. He followed a precedent that it’s been set for him, but by the same token, it is pretty distressing.

Judge Andrew Napolitano: Glen, you’re very eloquent and you’re very powerful, and you understand and then explained this stuff so nicely. I really appreciate you coming. Would you promise me that the next time you’re appearing anywhere around New York City, you’ll come and visit us on Freedom Watch.

Glen Jacobs: I will certainly try. What you guys are doing is a tremendous service and sincerely, you’re making a difference.

Judge Andrew Napolitano: Glen ‘Kane’ Jacobs. Thanks very much.

Glen Jacobs: Thanks, Judge.

Judge Andrew Napolitano: Stay awhile and we’ll be watching for you. We are joined now by Congressman Otto Guevara from Costa Rica. Congressman Guevara, welcome to Freedom Watch.

Otto Guevara: Yeah, hello. How are you doing?

Judge Andrew Napolitano: We’re doing fine, thank you. Judge Napolitano here along with my sidekick, Shelly Roche. We’re coming to you from FoxNews.com in the middle of New York City. Where did we find you, Congressman?

Otto Guevara: Right now, I’m in San Jose, Costa Rica in Central America.

Judge Andrew Napolitano: What is the prospect for a Libertarian Revolution in Costa Rica as we speak? You’ve been fighting for this since you got home from Harvard Law School.

Otto Guevara: Yes, I did. And we formed the political party. It’s called the Movimiento Libertario back in 1994 and basically there was a real battle in order to get a foot in Congress. That happened in 1998 and mainly because of the electoral system in Costa Rica, a proportional representation, I got elected in 1998 as the only congressman of the Libertarian Party here in Costa Rica and I stayed in Congress for ten years.

We don’t have in Costa Rica consecutive re-election and I’ve been the presidential candidate of that party in the last two elections and right now, I’m preparing my campaign for the next election in February 2010, so we’re about eight months away from this election day and we hope that in this next election, Costa Ricans will basically support freedom.

Judge Andrew Napolitano: What’s the state of the economy in Costa Rica? What’s the state of economic freedom in Costa Rica? And what kind of obstacles are there for you making basic civil liberties and free market arguments?

Otto Guevara: It’s been so difficult and that’s why we decided to form this Libertarian Party back in 1994 because Costa Rica has been a very socialist state with state-owned monopolies for almost everything.

And so very recently, we have been able to break up the monopoly in telecommunications and also in insurance and also access to Internet. For example, right now, in Costa Rica, there’s only one company with which you can make this phone conversation, so you can only buy insurance to a state-owned company.

We’ve been, with our votes, we have right now 10 percent of representation in Congress. We’ve been pushing very hard in order to break up those monopolies.

So, as a political party, we’ve been very active in promoting liberty and freedom in Costa Rica and we have defended Costa Rica from the intention of the politicians to raise taxes. We’ve been defending property rights. We’ve been also trying to convince the Costa Ricans to move to a certain… that the Costa Ricans will be able to choose the school where they can send their children or choose also their doctor that can attend to them.

We’ve been fighting very hard for liberty and for sure, today we are a freer country than we were back in 1994 and that’s because of the participation of Movimiento Libertario, our Party in the politics in Costa Rica.

Judge Andrew Napolitano: Are Costa Ricans surprised that the United States of America, which once was a beacon of freedom and hope seems to be moving more in an authoritarian direction? I mean, I believe this started with Abraham Lincoln but without getting too historical, it’s certainly progressed under George Bush, in which the Republicans shredded the Fourth Amendment of the Constitution and it continues now under President Barack Obama where the Democrats with some Republican support seem to be shredding the principles of the free market.

Are Costa Ricans surprised at this?

Otto Guevara: For many Costa Ricans, there is no surprise because that’s also what they want in Costa Rica. For the Libertarians in Costa Rica, we are surprised and also convinced that if the government of the United States is yielding in the defense for those civil liberties and individual rights, we in Latin America are going to take the responsibility also to make Costa Rica a beacon of liberty in the Americans.

Also, Panama is a good example for which we are going to be working very hard in Latin America to build a free society for these countries.

I’m the president of the Libertarian Party and liberal organizations in Latin America. We have about 54 organizations and we are pushing very hard in Latin America for these ideas; private property rights, individual rights, a free market, the government concentrated basically on providing a good judicial system and also a good national security system, but that’s it and we’ve been very successful so far in at least conveying the ideas.

In Costa Rica, we have a political party, a practical liberal political party, a libertarian party and we’ve been able to raise the support for our cause up to 10 percent and we have a pretty good chance in this next election, even to win the election if we have the support from all the fellow libertarians, brothers and sisters, all over the world.

Judge Andrew Napolitano: Congressman Guevara, my colleague, Shelly Roche, who receives all the tweets and e-mails during the show, has received quite a number from folks that wish they could direct their questions to you personally, so Shelly has some questions for you. Fire away, Shelly.

Otto Guevara: All right. Hello, Shelly.

Shelly Roche: Hello. Congressman, what have you learned in your experiences with liberty in Costa Rica that you can help us with in America?

Otto Guevara: Well, basically, Costa Rica is a very interesting case. It’s a small country where you can test these ideas of liberty and you can show to everyone that these ideas work. The public policy is based on the philosophy that liberty can work.

And you can have Costa Rica as a pilot project where you can prove in a very socialist government that these ideas put into practice can create a better environment for the people to prosper, can create more happiness, more prosperity and the country will be able to overcome poverty and improve dramatically the quality of education, of health, of wellbeing of the people and that’s something that we’ve been working on.

Judge Andrew Napolitano: You know, you used two very important words, Congressman Guevara; happiness and prosperity. Could anybody seriously make an intellectual argument that the socialists of Latin America have brought about happiness and prosperity?

Otto Guevara: We have, in many cases in Latin America, different regimes, socialist regimes, where they create poverty and unhappiness; a people that is not happy.

You can start with Cuba, and then you can pull up Venezuela, Bolivia, Ecuador, Nicaragua, and you can mention many different countries who have this in the last decades in Latin America where socialist public policies have been enacted and they have created a lot of poverty, corruption and unhappiness for the people, and we believe that what Latin Americans needs and what different societies in the world need is more freedom.

Through more freedom, our public policies based on the philosophy of liberty, you will generate or you will create this environment of prosperity for the people and through prosperity, you’re going to have a people that is more happy.

Shelly Roche: Now, I read somewhere that you say that political participation is one of the most effective ways that we can promote liberty. Here in the US we often have people who are willing to run for office but don’t necessarily have the resources to do that. What advice do you have for them about getting started and moving along in the political process?

Otto Guevara: Well, basically what I tell people in Costa Rica and also in different parts of Latin America is that, first of all, people have to have that decision to participate. If people don’t participate in the defending these ideas, this post is going to be taken by the socialists or the interventionists or authoritarians.

So libertarians should take possessions in teaching in the universities, in writing articles for the newspapers, in conducting TV shows and this show is like the one you’re conducting. They should run for office. They should go and take every position they can because this battle for liberty is a battle that we have to conduct every day in every trench because the enemies of liberty, they don’t sleep. They are always trying to get our liberty out of us.

So, we, the freedom fighters, we need to fight every day in every trench and the political trench is one of the most efficient for changing the societies where we live and in promoting the ideas based on the philosophy of liberty.

Judge Andrew Napolitano: Congressman Otto Guevara from Costa Rica, it’s a pleasure. We hope you come and visit us live and in the studio when you’re in New York City.

Otto Guevara: Thank you very much, Judge. I surely will let you know in order to go in and visit you.

Judge Andrew Napolitano: Thank you. Godspeed to you. Thank you very much. Jason Talley and Pete Eyre join us now. The two of them, wow, are part of the Motorhome Diaries.

Hey, guys, welcome to Freedom Watch.

Pete Eyre: It’s good to be with you.

Jason Talley: Hey, Judge.

Judge Andrew Napolitano: Pete, what happened?

Pete Eyre: Well, I assume you’re referring to the new incident down in Jones County, Mississippi.

Judge Andrew Napolitano: Yes, absolutely. Well, what was your involvement with the police and what did they do to you, guys?

Pete Eyre: Well, we were driving from New Orleans to Nashville. We had to meet up on Wednesday night in New Orleans, we were driving to Nashville for Thursday evening. We got pulled over in Jones County, Mississippi, which is kind of southeast part of the state and we got pulled over initially because a deputy Atkins said he couldn’t read our tag.

We have temporary tags from New Hampshire. We moved there as part of the Free State Project, but we got pulled over. I was the driver. He ordered me to exit, so I did so with my license in hand and he asked me how many other occupants were in the vehicle. I said two and he asked if there are firearms in there or drugs, and I said no drugs, but there are a couple of firearms. I told him they were locked, disassembled, and kept separate from the ammo.

And he seemed all right with that and then he asked the other occupants to merge, so Adam Mueller, the third part of our Motorhome Diaries crew emerged with a video camera in his hands and the officer asked him about it and Adam basically said, “You know, I’m filming just to make sure everyone is held accountable,” and the officer advised him to stand behind his vehicle and then he asked Jason to step out of the vehicle.

So Jason came out and Jason was told to stand in front of the RV, so basically we’re all kind of separated and at that time, a second officer appeared and walked directly towards Adam with the video camera and asked what he is doing and before Adam had a chance to fully respond, the officer had ripped the camera out of his hand and cuffed him and they’d put him at the back of the car.

Judge Andrew Napolitano: Now, let me just interrupt you at this point. Where were you coming from, where were you going to, what are or what is Motorhome Diaries, and why do you think the cops roughed you guys up?

Pete Eyre: Well, there’s a lot of questions there. Basically, we’re coming from… basically the Motorhome Diaries is… Jason and I had previously worked at Libertarian Think Tank World, so we can have a bigger impact from taking our message from K Street to Main Street, USA. The message that people should be free to act as long as they don’t initiate force against others. So bought an RV. We got Adam Mueller who moved in and we’re traveling around the country and meeting with freedom-loving people; people that reject government violence and in favor of voluntary society. We, yeah, basically we have real-time documentary. We videotape people who share their stories and hope that, you know, to motivate other people and hopefully then can learn from each other.

So we had just come from New Orleans where we had a really good meet up with a lot of liberty minded people and then we were driving to Nashville, Tennessee for a meet up there and along the way, we got pulled over.

So basically, we’re peaceful travelers and I was pretty cooperative with Officer Atkins. He pulled me over. After they’d put Adam at the back of the car, another officer arrives and they asked Jason to produce identification and because he was a passenger, he didn’t feel the need to do so.

You know, he respectfully and politely declined. They asked him three times, and then they asked him to put his hands on the RV and he did not do so. They put Jason in a chokehold and pepper sprayed him. They took him and tackled him and took him to the ground and then arrested him.

Then they brought a K-9 officer and, you know, they kept asking me if we had any drugs or anything like that and I said that I’d already answered these questions. Are we free to go, are we free to go?

And they eventually, the K-9 officer threatened me with… he said, “I’m going to get the ATF involved. You’re going to face some time like 10 years in federal prison for transporting firearms and I said, “Hey, I believe I am operating within the law and if I’m not, maybe they’ll allow me to be changed.”

But, you know, he asked me, “Well, you can tell me if there’s drugs. Maybe they’re not yours, maybe they’re with these other guys.”

But they ended up bringing the dog around. I did not consent to a search. So he brought the dog around. He said the dog was triggered and I said, “Well, I know, you know, in some instances, dogs can be trained to be triggered by their handlers,” and he got up in my face and said, “Are you calling me a liar? Are you calling my dog a liar?”

But they ended up searching the RV, externally and internally, and basically ripping it apart without a warrant, and then I was brought to the jail as well where Adam and Jason already were, so we were kept in a cage there for about 10 hours. We got pulled over at 9:30 in the morning.

Judge Andrew Napolitano: Was one of you sprayed with mace in your eyes?

Pete Eyre: Yeah, Jason was. That’s correct.

Judge Andrew Napolitano: All right. You know, my producer, George Szucs, called the Sheriff’s Department and asked them to participate in the show and, of course, they wouldn’t. He asked them for a statement, which they said they

But Jason, I think you’ve found some absurd statement in the local newspaper from this sheriff probably in anticipation of the litigation that I hope you guys will file.

But did they ever say anything publicly about why they stopped you, why they arrested you, why they threatened you with dogs, why they sprayed you with mace, why they ripped apart the RV just because you had an out-of-state license tag on your vehicle?

Jason Talley: Well, Judge, we’re hoping that maybe you can represent us in court, but we can talk about that later.

But the officer, the sheriff there at Jones County, he said that “we had no idea what their plans were” and this is a statement that he gave to the local newspaper as justification for why they, like Pete said, pepper sprayed me, choked me, tackled me, confiscated our camera, something he didn’t mention was that they had our camera and they told us that we would get it back on our court date.

But then when we went in to our RV, which was completely ransacked and things were broken inside, the camera was there. The footage that Adam took, about five minutes’ worth, was deleted.

Judge Andrew Napolitano: Was there obvious evidence inside the vehicle that you guys are libertarians, civil libertarians, freedom-loving people, Ron Paul supporters, supporters of the Free State in New Hampshire. Was that obvious to these cops as they and their dogs were ripping your RV apart?

Jason Talley: Well, here’s the interesting thing, we always had plans to modify our RV. Actually, we painted it just yesterday and so now, it looks like a libertarian mobile.

But at that time, it looks like a bunch of the members of AARP could be driving around this. Now, we’re young people and some people say that we might have been profiled because we were young people driving in this RV, but when they walked inside illegally without a warrant, of course, one of the officers saw some of our stickers because we were originally sponsored by Libertystickers.com.

Judge Andrew Napolitano: Wow.

Jason Talley: And I mean, the entire inside is saturated with pro-freedom stickers, a lot of Ron Paul stuff and so he was like, “Oh, I knew it. I know what kind of guys you are.”

Judge Andrew Napolitano: I know what kind of guys you are.

Jason Talley: And so, yeah…

Judge Andrew Napolitano: We have a lot of listeners and viewers who have been sending their tweets and, of course, you’re aware of the support that has come to you from all across the country, but my colleague, Shelly Roche, has some tweets and some e-mails for the two of you.

Shelly Roche: The biggest question I’m getting is both for the Judge and for the Motorhome Diaries’ crew that, “How do we know what our rights are in this situation? What should we do? What are we obligated to tell to the police if they pull us over? And then, you know, what happens next?”

Judge Andrew Napolitano: Let me give you just a little bit of advice and your timing was bad. You should have gotten arrested a week later. I’m kidding because a week after this incident, the Supreme Court of the United States came down with an opinion called Arizona vs Gant, which said that the police cannot inspect a vehicle or the contents of the vehicle on the basis of a motor vehicle stop.

Now, that’s already the law in some states on the basis of state law and the state constitution, but obviously not in Mississippi. It is now the law of the land.

You will be able to use that case when and if, and I hope you do, we’ll talk about it off the air, of course, sue these guys in a federal court, but it now is absolutely unlawful for them even to ask to go inside the motor vehicle without probable cause of crime, something they see with their own eyes.

Anything else you want to tell us before we wrap up, Pete?

Pete Eyre: Yeah, this is Pete again. I just want to echo what Shelly said about the support we have. Right before Jason got arrested, he was able to take a picture, send out a tweet, and that was the last communication we had with the outside world for about 12 hours and the support we received was just amazing.

It really showed the strength of the freedom movement. We had some people step up and we raised a few grand in a just a few hours to post our bonds and get our RV out of there, and the phone calls, we got 300 to 500 phone calls to the jail, the sheriff’s office, the attorney general and governor.

So from the bottom our hearts, thank you to all of you and hopefully this helps inspire other people to stand up for their rights knowing that the community is there.

Judge Andrew Napolitano: Well, we just want you to respond to one more twit and you probably should know we have Motorhomediaries.com up in the screen. Well, what is the e-mail or what is the website for people that want to follow the progress of this case and support you?

Pete Eyre: Motorhomediaries.com is our main website, but they could go to Motorhomediaries.com/jonescounty. We are keeping track of what’s happening.

Judge Andrew Napolitano: Right.

Pete Eyre: Because we feel… I mean, we’re lucky, right? We know our rights and we stood up for them, but motorists all the time in Jones County are getting harassed, whether they’re out of towners like us or they’re residents.

Judge Andrew Napolitano: Got it.

Pete Eyre: So we’re going to be back in their community. We’ve decided we’re going to spend a week there and we’re going to do some live video, talking to the residents there, people who have or had problems with the Sheriff’s Department, and it just like… it will also show the good side about the Jones County community.

Judge Andrew Napolitano: Well said.

Pete Eyre: There are some great people there. They just have a very bad sheriff.

Judge Andrew Napolitano: The camera is the new gun today and it’s absolutely lawful in Mississippi and in any state of the Union to film the police when they are in public and just keep those cameras rolling.

Shelly has one more tweet for you, and then we’re off the air until next week and I hope you guys will come back.

Shelly Roche: Yeah, so now, a lot of people are asking what’s next for you and you kind of talked about that you’re going to be spending some time back there and educating the people and I think that’s what I’m getting a lot of feedback about, you know, what happens next? You know, what do we do in this situation and just to make sure that you document what you’re doing and share that with your network of people.

Judge Andrew Napolitano: I think you should knock on the doors of the homes of the police that tormented you and have the cameras rolling and just shake their hands and say, “Hey, why did you do this to me?”

Everybody would want to see those tapes. Jason Talley, Pete Eyre, thanks very much for joining us. Good luck. Stay in touch with us. You know how to reach me through my producer and we have a lot more to talk about off air.

Pete Eyre: Thanks, Judge, we’ll do.

Judge Andrew Napolitano: Thank you, guys. That’s it for Freedom Watch. Do we have the great Eric Bolling here? Is he ready to take this camera and to take this chair from me? No, he’s not here. All right. You’re going to have to wait for him. Until next Wednesday at 2 o’clock Eastern, 11 o’clock in the West, stay free.

You did it!! Thanks to your support, “Freedom Watch” with Judge Napolitano, Ron Paul, Peter Schiff, and more is FINALLY being considered for an open time slot on Fox News Channel.

They’ll make the decision soon, and we’re up against some big name shows, so we’re not quite there yet. We need one more concerted effort to:

1. Flood them with emails requesting the show

and

2. Bump the viewcounts on YouTube AND the Fox website.

Watch on YouTube:
http://bit.ly/EVUvn

Watch on Fox website:
http://is.gd/BPOx

********************
Send as many emails as you can, get your friends to send… here’s the address:

yourcomments@foxnews.com

Here’s a sample email you can cut and paste (from Austin Petersen of the LP):

To Whom it May concern:

I am writing today to request that Judge Napolitano’s Freedom Watch be given a chance to be aired on Fox News Channel.

There are so many people out there I believe that would watch it because there just aren’t any shows that really cater to independent minded people like me who care about things like personal and economic freedom.

Having a show like this on television would really be exciting and I would definitely watch it and get my friends and family to watch it too. Fox would be opening up a whole new market and bring in lots of new viewers! Please put it on air!

Thank you!

***********************
THANKS SO MUCH FOR YOUR EFFORTS… This is the closest we’ve ever been to having our message heard by millions every week.

Shelly

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Show: Reality Report
Date: 5/7/2009

Transcript

Gary Franchi: Welcome back to the Reality Report. Joining us now to discuss the Federal Reserve Accountability Act, HR 1207, and to help us track down the stolen loot is Congressman Ron Paul.

Congressman Paul, welcome to the Reality Report. It’s great to have you here on the show. You know, a lot of things are going on in the country today. We’ve got this new bill you’re introducing, the Audit the Fed Bill, HR 1207. Let’s jump right into it. Can you explain the bill and why we need it?

Ron Paul: What the bill does is it repeals the portion of the code that prohibits us in Congress to find anything out about what the Fed is doing behind the scenes, how much they’re involved in international financial affairs, what the agreements are, what kind of contracts they are, where all the credit they create goes, which companies they bailed out exactly, and which banks get benefits, which countries get benefits and what the agreements are in international banking.

They’re completely secretive. Whey they were established and the GAO existed, the GAO never had explicit authority to audit the Fed and even in the 1950s and the 1960s and the 1970s, people said, “Hey, we ought to have the right to do that.” But there was never, you know, a real compelling argument to make them do it, but they did make an attempt in 1978. They passed a law that gave the GAO authority to audit the Federal Reserve, but like so much of what they do in Washington, when they pretended doing one thing, they’re actually doing the opposite. They were responding to the demand to audit the Fed and in the authority, they excluded certain things, the most important things, and there was a list of five things that we weren’t allowed to look at.

So my bill, 1207, repeals the prohibitions and mandates an audit of the Fed just to find out what they’re doing and right now, there’s a lot more interest than there’s ever been throughout the history of the Fed, mainly because of this mess that the Federal Reserve has gotten us into and there is a loud and justifiable outcry by the American people for transparency on what we’re doing, especially after the TARP funds, the $700 billion that was appropriated with no strings attached. Now, they’re saying where did this money go, did it go into whose pocket and who got the bonuses and what not.

But now, they’re starting to realize a lot more funds that are involved with the Federal Reserve where there’s hundreds of billions of dollars of appropriated funds that the Congress appropriated. The Federal Reserve actually deals in trillions of dollars that we don’t know exactly what they’re doing.

Gary Franchi: If the bill is passed and an audit is started, could the audit simply discover that the Federal Reserve is fulfilling its mandate as laid in the Federal Reserve Act?

Ron Paul: Possibly, but that’s highly unlikely because their mandate is to have stable prices and to be the lender of last resort, but not for the world. They weren’t supposed to bail out countries, which is what I suspect they’re doing. That might be the argument they’ll use and like so much of what they do, most of the people in Washington, whether it’s in the judicial, executive branch, or legislative branch, they never feel like they’re not fulfilling the mandate of the Constitution. They just have a little different interpretation.

Gary Franchi: Right.

Ron Paul: So they’ve stretched it already on the information we do know about the Fed on what they can do, but they’re certainly doing… I mean, one mandate was stable prices and full employment, so I would say they’re a total failure in central economic planning, but I wouldn’t be surprised if they used that argument.

Gary Franchi: So one of my main concerns is that if an audit were to occur that, you know, with so much corruptions going on all the different corporations that it wouldn’t be very difficult for them to just go ahead and cook the books, what do you think about that?

Ron Paul: Well, I think so. You know, we do call periodically for these investigations when we look into, say, the 9/11 or assassination, we set up commissions and they investigate, but I’ve always come to the conclusion that most of the time, they end up covering up, you know, not really getting to the bottom of it and telling us the truth, so the benefit of this depends on the character of the people who are in charge.

So if you have the same people who perpetuated the crimes investigating the crimes, you’re not going to get much information. Once in a while you get a little bit more when you change parties, but maybe not always. They play politics a bit, but do you take what’s going on now with the Obama administration on the issue of torture there. You know, they’re going to expose it to a degree. They might not prosecute, but the new administration endorses essentially the same position. It might close down one prison, but then they go to rendition. They might talk about open government, but at the same time, they go to court and defend the power of the executive branch to have state secrets, so I think you have to always be concerned.

You know, if the right people do the audit, you’d have the truth, but some audit is better than no audit. Let me tell you that.

Gary Franchi: Who would be the one performing the audit? Would, I mean, the government…?

Ron Paul: The GAO.

Gary Franchi: The GAO. Tell me a little bit more and tell our viewers a little bit more about the GAO and their responsibilities to government.

Ron Paul: The Government Accounting Office, they do a lot of it. They’re supposed to, you know, if you want to monitor any agency, as government agency goes, they’re reputation is probably better than most. They’re supposed to be independent-minded and they’re not supposed to be covering up. So if you had to depend on one agency, they’re accountants and they’re supposed to go in and look at the books. So, you know, they shouldn’t be automatically written off, but like you suggest, there’s always a chance that somebody is going to do exactly that.

Gary Franchi: Let’s shift gears and look at the global currency for a moment here. What danger does a global currency pose to US sovereignty?

Ron Paul: Well, it removes it. One more step, we’ve lost a lot already, you know, as early as the early 1950s going into war in Korea, it was done under a UN resolution and that was the undermining of our national sovereignty. But ever since we’ve had the United Nations, we have the World Bank where we just give money to the World Bank and then they spend that money for all kinds of reasons. We have the IMF, which, you know, manipulates currencies for a long time and tried to have a world currency even back when Bretton Woods was started with the Special Drawing Rights, and then more recently, probably 10 years now, they’ve had the WTO, the World Trade Organization. It’s just international regulations.

So even if we don’t come up with a new fiat worldwide currency in the next year or two, there seems to be a consensus by so many that we need a lot more regulations. It wasn’t freedom. They said it was the free enterprises and that happened. It was the lack of regulations. So now they want to internationalize these regulations and that’s likely to happen, but ultimately they will have to have a new currency, but if it’s a new worldwide fiat currency, the only way it’s going to work is by forcing people to use it and when they do that and it has no value, then it’s like living in the Soviet system and then there’s an underground economy.

But I think they’re working on that and they’re talking about it. They’re talking about reviving this notion of Special Drawing Rights and calling it money, but that’s just a worldwide fiat currency and the people who get to control that bank, you know, control the whole situation. You control the money, you can control just about anything you want, and right now, it’s the Federal Reserve that controls a lot more of the money and the economy than does the Congress. As powerful as the Congress and the executive branch is, the Federal Reserve has a lot more power behind the scenes.

Gary Franchi: Do the states individually have the right to print their own currency?

Ron Paul: No. They do not. There’s very few prohibitions on the states. For the most part, you know, the Constitution protects that and they want the states to do just about everything, but there were a few things; one, going to war, the other was on the currency, and the other one was on trade. We were to have trade amongst the states and there should be no restrictions and, of course, now we’ve lost that prerogative over war, but there is a prohibition against the state because the states did it before the Constitution was written and they inflated and it was a big problem, and then in the early years they destroyed the Continental dollar and they had runaway inflation.

So the founders were very knowledgable about the currencies and they did not want to have anything to do with inflation, so the prohibitions were written in there. They didn’t want the federal government to do it. There was no authority with the Central Bank, and that only gold or silver could be used as legal tender and therefore the states could not use it.

And yet, the federal government imposes on the states exactly the opposite. They force everybody to use something as legal tender called Federal Reserve notes and if you insist on using, you know, gold currency that existed at one time at the face value, you’re in big fight. You’re in for a big fight with the authorities and you ended up in court.

Gary Franchi: You know, the word “economic collapse” is thrown around a lot and I think the people need to have a better clarification of what exactly it means. What is an economic collapse? What does it look like?

Ron Paul: Well, there’s a couple versions of it. We’ve seen the financial structure collapse, you know, the lending agencies, the pyramiding of debt and all the speculation all the way up into these trillions and trillions of dollars worth of derivatives. Well, that’s all over with. That was a house of cards and it works fine when the value is going up, but it’s probably easier to look at it like the housing bubble. I mean, it used to be that people put money into the savings & loan and somebody else borrowed the money and built their house, but now, you know, it became very complicated. There were no savings. The Fed created the credit and then there were guaranteed loans and Fannie Mae would buy these and then they would collateralize these and then sell them. You know, it went on and on.

That system collapsed because it was built only on the fact that as long as prices went up, it would work. So that’s what we’re all witnessing, that collapse, but the one that is likely to come and the one that is much worse is the collapse on the confidence of the currency itself. Ironically, with the collapse of the financial system and the banks and the large corporations with all the trouble they got into, instead of it destroying the dollar overnight, what it actually did was give the dollar a reprieve because as people were scurrying around and trying to protect what they have, they literally went and bought dollars to park them, even if they couldn’t earn any interest. They would buy Treasury bills and we still benefited by that because we still have a lot of wealth in our country and we have the military to back it up and people felt more confidence, so they have been parking their money in dollars.

But you can’t continue to double the money supply every year and run up $2 trillion worth of debt in a year and maintain confidence. So if the confidence is lost, which it will, then people will dump dollars. Now, that is a financial calamity. That is really a financial panic and that leads to real chaos, political chaos and everything else. But at the rate we’re going, we’re working real hard in Washingto to do exactly that, unfortunately.

Gary Franchi: Now, in the event of an economic collapse, and you mentioned the states don’t have the ability to print their own currencies, but there is an upsurge in local currencies, even private currencies like the Liberty Dollar or ALCS-approved Silver Rounds, and really they are gaining popularity. Do you think that economies that isolate themselves by using these local currencies will have a better chance of recovery?

Ron Paul: I don’t know whether you have to think about that in an isolated community. I think if you just take the whole country the first 10, or 15, or 20 percent of the people who, on their own, say that I can preserve wealth by holding something of real value. This is a lot different than printing their own money, but if you hold your money in something of real value that people will seek like silver coins or gold coins, they are all going to do quite well whether they’re together or not. They’ll learn to talk to each other.

But just like right now, people are anticipating that there could be a shortage of ammunition for guns and if there’s a law that says you can’t get it and nobody would even want to buy it because there’s too many rules and regulations and somebody has this, it could serve as money as well.

If something of real, raw value that the people want that you can’t get by just printing it, so I think that does happen. I think the best argument is to use government legal tender coins. You know, they’re talking about legal tender and all, but they get awfully confused in arguing the case against, you know, if you had an old-fashioned silver dollar and if silver soars back up to $50 an ounce or something like that, and you start using it, you’re using government legal tender. But they’re going to strongly object to it because it proves the failure of their system, yet it says right there, legal tender for one dollar, and that to me is a lot better than pretending that we can create a new currency.

But when chaos comes, things of real value will serve as money and it could be anything and after World War II, it turned out it was cigarettes, you know, for a while, anything that people really want. In our early years tobacco was used as money. Anything is better than government paper when people lose confidence in the government paper.

Gary Franchi: Something like something that has real value, a commodity people need. People want. When you have paper, you know, you can only do a few things with paper.

Ron Paul: Yeah. And then the gold and silver has always proven to be the most convenient. That’s why Mises has always argued that money, real money, has to come into existence through the market. Something that everybody desired and understood and believed in and it was recognizable and you could divide it and the characteristics aside, the whole notion that if we were starting a new community and two or three people got together and said, “Oh, we’re going to be the moneymakers. We’re going to print the money and everyone is going to use it.”

Well, everybody would laugh at them. “What, you mean you’re going to print the money and tell us what the money is?” It would be a joke. Yet, that’s where we have ended up because we’ve destroyed the system that we had and the reason it functions is because it once was linked to gold. You can’t create a new currency out of thin air, but one that becomes totally fiat will operate until the people catch on.

Gary Franchi: Now, you’ve talked about competing currencies before. Do you anticipate introducing a bill at some point, this is actually coming from Debra, Missouri. She’s asking if you would introduce a bill that would allow for competing currencies.

Ron Paul: Yeah, I imagine. I can’t keep with all of the bills, but in the past I have and I probably will get around to it, if I hadn’t done it and that is to make it legal for you to use gold and silver coins and it could, instead of closing the Fed down in one day, which makes people look a little bit nervous, to say, “Well, you have the right to opt out today.” Like I said before, the government comes knocking on your door if you want to opt out of the system.

But in order to do that, you have to repeal the legal tender laws. You have to get rid of taxes on silver and gold coins. Why? How could money be money if you go and buy a coin that you get taxed on and then if you sell the coin or use it, you’d have to pay capital gains tax on it, so they don’t want us to think of precious metal as money.

Gary Franchi: Let’s talk about ending the Federal Reserve and what it would take to make that happen. Obviously, I believe I think an audit is a good first step. You’ve got a lot of momentum behind this bill. It’s really picking up steam. Like I said, I think it’s a good first step in getting rid of the Federal Reserve system by introducing transparency. Do you see this as a general first step to the abolishment of the Fed like your other bill, I believe, it’s 833.

Ron Paul: Yeah. It would be nice if the whole country woke up and the Congress woke up and for philosophic and constitutional reasons decided, “Oh, yeah. This was our mistake and we should do something differently.”

But that’s not going to happen and conditions will get a lot worse and if we have more evidence to show what they have been up to, then, you know, moving into allowing a competing currency, I think, would be much more likely. And then if that happens and you have total chaos that said we’d just self destruct because people will quit using the money.

Gary Franchi: So we would have to introduce competing currencies and let the market determine, for instance, if we introduce a silver-backed currency, you know, that’s printed out of the US Treasury and becomes the US note backed by the silver and gold and let the market determine the…

Ron Paul: The market would have to help us determine the so-called price or the exchanges because first, you know, gold is $900 today, but there’s so many dollars that are unaccounted for. It might have to be into the thousands, but you really don’t know. The market would have to help adjust that, but even to get it fixed again, you’d have to have a government that would absolutely promise to live within its means, balance the budget, give up the warfare state, give up the welfare state and not print money anymore, which, you know, that’s just a lot more than we can anticipate here, you know, for quite a while and that’s why I keep saying that people would have to have the option of getting out of this system and let time take care of it.

Gary Franchi: Let’s see. I mean, a lot of question coming in here. I’ve got Carey from San Diego. She’s saying, well, how much support is there in Congress for HR 1207? What is the word in the halls of Congress concerning the bill?

Ron Paul: Well, it’s getting better all the time. Believe it or not, a lot more people outside of Washington have heard about this than on the inside, but that’s the way the system works. We had a couple of weeks’ break at Easter, when I came back, I think we immediately had like 17 or 18 people sign up on one day, which means that the people at home are doing their job because I had one member come up and he said, “I have four town hall meetings while I was there and on every single meeting, there were three or four people” who wanted to know whether he was going to support 1207.

Well, he really, you know, he had a general idea about it, but politically, it was to his benefit. You know, the people are stirring out there. In this sense, you know, pressure from the people, it’s pretty important. Most of the time though over the years, the pressure from the people has always been to spend more money and print more money and not have to tax people and keep doing this.

So now, I think the manner is good and I think it’s the right step. Everybody, if we had a vote today in the Congress on more transparency of TARP funds or the Federal Reserve, I cannot imagine anybody voting against transparency and that’s all we’re talking about.

You know, because Barney Frank is sympathetic. I know a lot of people don’t like him and all this, but he’s sympathetic on principle to knowing what the Fed is doing, so I work with him on that. The one thing he didn’t agree with me is on monetary policy. You know, he sort of likes Keynesian economics but he just happens to agree we should look into it.

Now, there are populist Democrats and there are some in Texas. They like it because they don’t like the Fed at all, but they want the Congress to be the inflationary people, “let Congress do it all”, and they’re not strong believers in gold and silver. So there’s different reasons, but to get this bill passed, we have to bring them all together, so I have liberals and populists and conservatives and libertarians. I’m getting a bunch of people now supporting this just on the principle that government deserves to be transparent to the people.

Gary Franchi: When Aaron Russo was alive, we would have conversations and I would say, “Aaron, what steps we need to take to get this country back on track?” And he always said, “Gary, we need to audit the gold in Fort Knox.”

Do you think there’s value in finding out how much gold, where is the gold at Fort Knox?

Ron Paul: Yes. If I had to guess, I would lean 60 to 40 that it’s probably there. But 40 percent question is a big deal and there hasn’t really been a true audit. I was on the Gold Commission in the early 1980s and there were 17 members and I brought up the subject. You know, “we’re studying the gold and gold in the monetary system, we ought to, you know, we’ll have a thorough audit and find out if the gold is really there”, and there were 15 who voted against it and 2 of us voted for the audit so it never got anywhere.

So we should know and the shenanigans that could go on, I mean, they could take it out, they could sell it, they could loan it and all these kinds of things they’ve been doing over these last ten years to keep the price of gold from going up. Our gold might have been a part of the vehicle that they were using.

So, you know, I mean, if we get serious about this it has to happen. We ought to be more serious, you know, about what should be done with the gold at the IMF. They’re talking about selling more or maybe all of it and giving the proceeds to the poor countries of the world, which means the dictators so those poor countries would end up getting it, but the gold should just be returned to the host countries.

I mean, we put the largest percentage in. It should come back to us. It’s pretty hard to give it to the people they took it from. But I think since they don’t believe in gold, we would all be better off if the gold was in the hands of the people. So I’d sell it. I’d sell the IMF gold. Under today’s circumstances, I’d let Treasury sell it because they’re not going to have a sound gold standard any longer. I’d just soon, you know, allow the gold standard to develop in the marketplace and that’s a way to do it also.

Gary Franchi: Some people have raised the concern that by advocating an end of the Fed, we may be… the message itself could be coopted by the international bankers by saying, “Okay, we’ll end the Fed, but then we’re going to give you the World Bank in its place or we’ll give you the IMF in its place.” What do you think about that?

Ron Paul: Well, they might, but I hope we can answer that argument. If we get rid of one thing and you give us something ten times worse, how is that going to be a solution?

Gary Franchi: Right.

Ron Paul: You know, if the power to create money out of thin air and manipulate the economy is bad when the United States does it, what makes anybody think it’s going to be a lot better if we just turn it over to another secretive body, which is under the United Nations.

Gary Franchi: Now, Linda in Kenneth Square says, how can each citizen help to get this passed, this bill, HR 1207?

Ron Paul: I think it’s dealing with your particular congressman. They’re political animals. They want to stay there and if the numbers are great enough, they’ll respond and right now, one thing I’ve noticed in Washington, the people who are in marginal seats, Republicans getting into a little trouble, they realize that our numbers – supporters for limited government – are growing and they’re trying to appeal to many of us.

And then the Democrats, the Democrats happen to be, you know, in a Republican seat who wants to hang on to it, they want to identify with what we are doing and they’re signing on to this bill, too, and trying to get active. So the key to it, go to town hall meetings, make phone calls, go to the offices, talk to the congressmen when you can, talk to their legislative directors, so it’s emails, faxes, the whole works. The very best thing is if you can get to a town hall meeting, talk to the congressman in person and never be angry about it. Always talk about it in a serious way, “Will you please take a look at this,” and just play on this transparency because this is the issue. We deserve to know and the people want to know… “why wouldn’t you be able to support something like this?”.

Gary Franchi: Now, I want to ask you about the possibility, is there any value to introducing something that could be brought to a state-level vote across the country in all 50 states to support an audit of the Federal Reserve?

Ron Paul: Well, I think so. I think it wouldn’t have a lot of legal clout, but it would have, again, polical clout and there would be a good educational tool and if you had just literally dozens and dozens of states passing these resolutions, I think it would be good. I think this has helped. I think eventually some of our drug laws are going to be changed because the states are changing them and passing resolutions. I think that’s very good. Also I think on the money issue, this would be helpful and I love these resolutions, although it won’t be held up in court, but when a state said, “We’re only going to deal in silver and gold. We were told the only thing we could use is silver and gold as legal tender.”

It just makes them look so foolish. They’re not going to accept the argument, but it makes them look so foolish that they at least have to think about it. You know, I guess that’s true. That’s what the Constitution says and yet, the states are speaking out, but I see all that activity as mostly educational but very beneficial.

Gary Franchi: Well, we’ve also got this movement now, this state sovereignty movement. The states asserting their 10th Amendment rights. You brought up secession recently. What can you speak to about that movement?

Ron Paul: Yeah, well, once again, they’re good, just for the publicity. But, you know, if the federal government cared about that issue, all they have to do is read the 10th Amendment themselves. But if the states do it, why should they listen to the states now, so I don’t think it will change anything just because the states pass these unless there’s enough of them and there’s enough pressure that will be put on the federal government, but the law is the law and the Constitution is very clear that they shouldn’t be doing things like this, but they’ve been doing this for years and years and years, taking over all the state authority and especially since the Civil War where it was eventually eliminated this whole idea that state should have sovereignty rights.

Gary Franchi: Now, Roger in Rochester, New York is asking, have you gotten any feedback as to whether the committee will allow this to go to the floor?

Ron Paul: I think there’s a pretty good chance. Barney Frank was asked that in a meeting. I think it was on the Internet this week and he said he was sympathetic. He disagreed with me on monetary policy, but agreed with me absolutely and he has promised me in public at the banking committee hearings, that he will hold hearings on this. I think that he will give us a fair shake. I don’t know whether he would ever let it come exactly the way I had it written, but it’s not like they’re absolutely close minded.

Now, we might meet more resistance with Nancy Pelosi, but not with Barney Frank. I think Barney Frank, at the right time, will see to it that we get a fair hearing on it.

Gary Franchi: Now, we’re telling people contact their congressmen, tell them to endorse or co-sponsor the bill. Can people do the same thing with the committee? Can they contact the committee members and say, “Hey, raise awareness, raise pressure for the bill.”

Ron Paul: Yes, they can do that and it’s beneficial, but it’s not near as effective as going to your own senators and your own congressman because Bernie Sanders introduced that into the Senate. I do have to run. I have another call coming in, but if you have one quickie, I can close up here.

Gary Franchi: Well, Dr. Paul, I just want to thank you for joining me on this edition of the Reality Report. Let’s see, Jeff in Jacksonville says how much more time will pass before we can begin the mainstream media talk about 1207?

Ron Paul: That’s a good question. When you hear… when CNN calls me up or a couple of other ones call me up and want to talk about this, then we know that day has arrived. It’s not here yet, but it may be in the midst of a currency crisis where interest rates are very high and the cost of living is going up 10 or 20 percent a year, then they might be much more interested, but we don’t know the date that’s going to be.

Gary Franchi: All right, well, Dr. Paul. Thank you so much for joining us and taking time from your busy schedule and we hope to have you back on the Reality Report and speaking to the people, so you have a great day. Thank you so much.

Ron Paul: Thank you.

Gary Franchi: Bye bye.

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Event: Congress’ Joint Economic Committee
Date: 5/5/2009

Transcript:

Ron Paul: Welcome, Chairman Bernanke. I have a couple of questions, but first I want to mention that I find it awfully frustrating at times when we always talk about inflation and we only talk about the prices and say, “We have prices under control, there is no inflation”. We have to realize that the monetary base, the liquidity was doubled in a few short months. To me there is a lot of inflation out there. It’s already inflated, we’re in the midst of inflation. Because the prices haven’t gone up doesn’t mean we don’t have the distortion. And it was that system that gave us the financial bubble. Artificially low interest rates, the mal-investment, all the mistakes made. And now we’re trying to correct all that by doing the very, very same thing.

So, I think someday we’re going to have to address this somewhat differently because I’m not very optimistic that we can solve our problems with more spending and more borrowing and more inflation in order to solve those problems. But you’ve answered this question several times, I want to bring it up again and this question has to do with when will some of this liquidity be drained? And I don’t think the answer you’ve given is very specific and I don’t expect to get a more specific answer, but I’m going to try.

What if we have a situation where prices, which is not the best measure of inflation, but let’s say the consumer price index (CPI) is going up 8% to 10% and there is no economic growth. Where are you then, because that’s not impossible, it’s happened. It’s happened in our history, it happens throughout the world, it’s a common thing, it puts you between a rock and a hard place. If you drain, interest rates go up and the economy further crashes. If you don’t, you have the explosion.

Can you give me an idea what you precisely would do if you face the situation where prices were going up 10% with no economic growth?

Ben Bernanke: Well, I think that’s an unlikely scenario but we certainly would have to take steps to ensure price stability, because if inflation gets out of control we know it has very adverse effects on the economy, both in the medium and long term and so we would obviously have to address that.

Ron Paul: Which means you would have to raise interest rates?

Ben Bernanke: This is exactly the same problem which is always faced by monetary policy, which is in a recovery when the economy is starting to grow but has not yet gotten very far, perhaps, and unemployment is still above where we would like it to be. You know, you have to take away the punch bowl, as someone once said, in order avoid the inflation risk.

Ron Paul: I see this as the real problem because we practice economic planning through manipulation of money and credit. Socialism always fails because they don’t have a pricing structure. Interventionism and inflationism fail because we don’t have a free market pricing system of money; the interest rates. Therefore it fails, it comes to conclusion and inevitably it leads to a more socialized economy. Just witness what we’re talking about. Taking over companies, taking over insurance companies, taking over banks. This has been the prediction of the free market economists and yet we continue down this path of socializing our entire economy.

I do want to address one other subject and it has to do with transparency. You said you have made a commitment to transparency and openness, which is very good and there is a lot of us that want that. And I have dealt with that and have a legislation, HR 1207, dealing with that. But in a real sense, I know what you’re doing here, but the code really protects you from telling us some of the things we’d like to know. For instance, in 1978 when the GAO was given the authority to audit the Fed, it put the exclusion in there that you can’t ask these questions. Precisely, if I wanted to know about all your agreements and discussions with foreign central banks, with foreign governments, with international financial organizations, you have no obligation and you haven’t volunteered to do this. So is there a way that you would, since you’re moving in this direction, move and consider supporting a position where Congress has a right to know these very, very crucial, vital issues dealing with their money?

I mean, everything you do deals with their money. Would you ever be open to repeal some of these provisions?

Ben Bernanke: Yes I would. Now, if you let me be specific. We have many programs where we lend money, we take collateral, and obviously we are repaid. I want to assure you, first of all, that we have very substantial oversight and controls, we have precise internal divisions which monitor these things, we have an independent IG and we have an external auditing company, a private company which provides audits every year and has given us a clean bill of health on all our financial controls, all levels of Sarbanes-Oxley requirements. That being said, if Congress needs more information about the operations that we’re doing, exactly how we manage our collateral and how we manage our lending and those sorts of things, I think we can talk to you about providing more information about that and if necessary working with the GAO.

Where I’ll be very careful, where I’d like to be just very clear, there’s been some discussion of the GAO “auditing monetary policy”. I don’t know what that means, but I certainly would resist any attempt to dictate the Federal Reserve how to make monetary policy. It’s the independence of monetary policy which is crucial to the maintenance of price stability and economic growth in this country. And that would not be acceptable but if it’s an issue of making sure that we’re appropriately managing our systems and doing what we’re saying we’re doing in terms of our lending, we want to be open, we want you to understand that we’re taking every precaution to protect the taxpayer.

Ron Paul: Of course, the policy is the only thing that really counts.

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Date: 4/2/2009

Transcript:

Paul-Martin Foss: Dr. Paul, you’ve seen some pretty bad federal budgets over the years and you’ve voted against every budget for over a decade. Is this one of the worst budgets you’ve seen, and do you see any room for improvement in the next few years?

Ron Paul: It is one of the worst, but, you know, compared to what they put on the floor, what we’re voting on today, compared to the current year, it’s actually a little bit better, believe it or not.

They’re projecting a $1.5 trillion deficit and they’re claiming this is going down $400 billion. But I don’t happen to believe this; this will turn out probably the worst year because in a time of recession and the income is always less than they expect and expenditures are always much higher, so they’re projecting now that we’ll have $1.1 trillion.

I’m predicting that we’ll probably have a $2 trillion deficit and this $3.6 trillion budget, I predict, I bet you, it’s over $ 4 trillion because they’ll have supplementals. I’ve never been here where they haven’t had supplemental, and they don’t have all the war money in this budget, and actually where some people thought we might be able to cut back a little bit would be on foreign policy and the war, since Obama had talked about bringing the troops home.

He is actually putting a lot more troops in Afghanistan and the war is spreading into Pakistan, so those expenditures are going up. So I’m sure we’re going to have a lot of supplementals, and so I think this is going to be a very, very bad budget and it’s not going to help us get out of recession.

Paul-Martin Foss: Since you mentioned the supplementals, do you see also potentially any supplemental economic bills, maybe another TARP program, another stimulus package, do you foresee anything like that in the next year?

Ron Paul: I wouldn’t be surprised because this economy is not going to bounce back because we have been spending a lot of money, but when government spends the money, it is not necessarily a positive, it’s actually a negative because it’s taken out of the economy and it’s not spent wisely.

So things will probably get worse and since they don’t know too much what to do around here other than more of the same, I mean we got into trouble by spending and borrowing and printing money, so they said, “Well, we’re in trouble. What are going to spend, borrow, and print more money?” So I would expect that they will do this and I just think it’s delaying the inevitable. It’s going to delay the correction that we need. We really need to get things back to normal rather than just assuming that if we spend more money, that this is going to solve the problem.

Paul-Martin Foss: Switching gears a little bit, the G20 is currently meeting in London. What types of proposals do you think are going to come out of this latest meeting?

Ron Paul: Probably nothing of real importance. There’ll probably be a lot of talk and a lot of publicity about how they’re going to work together. One proposal they’ll probably suggest that they’ve been talking about and that is to globalize all regulations.

You see, they’re making the assumption, just as we do here in the Congress, that the problem is that there is too much freedom, there is too much capitalism, and therefore we have to regulate and since the so-called regulations that we’ve had until now haven’t worked, they want to globalize it, which means more world government. They want to have more UN, more World Bank, more IMF, more WTO, and I think they’re moving into that direction.

Also, they probably won’t have an announcement, but I am convinced that they’re talking about it behind the scenes, but won’t admit it, is they have to admit to themselves that this financial crisis has brought us to a point where we have to admit the dollar reserve standard, which we have been operating with since 1971 has failed, so that’s why the financial system has collapsed, but we still have the dollar sitting out there and they think, “well, we’ll just rebuild it.” But they can’t do that. They’d like to or they’d like to introduce a new currency.

Even in 1944, when the IMF was started, they talked about paper gold; these were the Special Drawing Rights. They thought that if they could just create paper money out of thin air, then it would work as if it were gold. Well, that never got off the ground, but they kept thinking about that and they’re talking about that again.

But on occasion, you have countries like Russia and maybe even China suggest, “well, well, if you are going to do that, maybe the IMF should put gold in as a reserve against these Special Drawing Rights.”

At the same time, the IMF is announcing they’re going to sell gold, sell gold to help the third world nations. You know, one of the things they’re claiming they’re trying to do with the Group of 20 rather than the Group of 7 is that they’ll bring in the third world nations, the developing countries, so that they can get help from the richer countries.

But what I see, what I get nervous about is that we all may end up like a developing country. You know, the seven richer countries may be just getting poorer rather than the rich countries bailing out the poorer countries.

So there’s a need for another reserve currency. That’s the wonderful thing about a gold standard. It is global. There’s nothing wrong with having a global monetary system because that would be very good. But if you didn’t have fluctuating values, this would stabilize and enhance trade. This would be very beneficial.

There’s token talk about gold, but very little. I think they’re talking behind the scenes much more than we hear about in having this international world currency, but if it’s strictly fiat, strictly created out of thin air, it will not substitute, and like I said I think the greatest danger of what will come out of the G20 meeting will be globalization of regulation, more global government, more world government rather than dealing with national sovereignty, sound money, sound economics, balanced budgets, savings and allowing the marketplace to work.

We, right now, are in the process, nationally and internationally, blaming freedom on all our problems, that we’ve had too much freedom. But this happened in the 1930s, they blamed the gold standard and capitalism, so that introduced into the 1930s the welfare state. But now, we’re going to the next stage and it’s much worse this time, and we hear so rarely that the cause has been that we had too much government, too much taxes, too much regulations, a fiat monetary system, and this is why I think we live in very dangerous times, and hopefully our side can perk up and win this intellectual argument.

Paul-Martin Foss: What do you think it would take to bring a return to the international gold-based system and do you think that something coming about in the present age would be more similar to the classical gold standard or the Bretton Woods kind of gold exchange standard?

Ron Paul: I don’t think we’re on the verge of it, but if they decide they have to… if you have runaway inflation, then you’re forced to do it. This is what has happened in the past. The only way you can get stability back is to quit printing money and stabilize the currency and quit the spending.

I think if they did go back, they are not likely to accept the type of gold standard that the free market requests and that is a gold coin standard where you have the actual gold in circulation or you can get gold from the bank, if you wanted to, which would restrict the government. That is what we would need and want, but the most, I think, we could hope for and that is not on the horizon, not soon, would be some type of a gold exchange standard where they will use gold in their reserves.

It would help just as the dollar reserve standard of the Bretton Woods from 1944 to 1971, we weren’t allowed to own gold, it wasn’t a gold standard, but there were restrictions on how fast they could print money.

So it was after 1971 when there was no gold attachment that everything skyrocketed. The growth of government, the spending went up, the deficits went up, so right now, I would think that most they would consider is some loose linkage, but that again would just set the stage for maybe a temporary reprieve.

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