09/23/09 – Rep. Ron Paul – The Scott Horton Show

I want to make my coffee sweet.
I want to spill some butter on my bread.
And I just got to have my meat.
When you start rushin'.
All right, everyone, welcome back to the show.
It's Antiwar Radio on KOS 95.9 FM in Austin, Texas.
I hold here in my hand a book called In the Fed.
It's by Representative Ron Paul, represents District 14 on the Gulf Coast of Texas, of course.
And he's also the author of A Foreign Policy of Freedom, The Revolution of Manifesto, The Case for Gold, Freedom Under Siege, a great many other books.
He writes for us at Antiwar.com.
You can find his archives there at Antiwar.com slash Paul.
And I'm happy to welcome him back to the show.
How are you doing there today, Dr. Paul?
Good.
Thanks for having me on.
Good.
Well, you're welcome.
I'm happy to have you here.
Let's talk about war.
In this book, In the Fed, about the Central Bank, you bring up foreign policy and America's relationship with the rest of the world over and over again.
What's the connection, sir?
You know, it's almost hard for me to talk about one subject without talking about the other.
I remember during the campaign, it was announced that the debate tonight would be on economic issues and not foreign policy.
And I don't know how to separate the two because there's always an economic consequence, rather serious, on domestic policy because you spend a lot of money.
You run up the debt.
It causes monetization of the debt.
It causes inflation.
It takes funds away from domestic spending.
So I keep harping on this, and the Fed facilitates excessive spending, whether you want it for domestic reasons or for international reasons.
And it tends to be that liberals want to spend it here at home, and conservatives tend to want to militarize it.
So it makes it easy.
If we had to pay for every penny we ever spent overseas and collect it as we needed it, it wouldn't happen.
Can you imagine what the people would say if their taxes went up in order to pay for this?
But the sinister tax of inflation where they just print the money and then you suffer the consequence, that to me is one of the most horrible parts about the monetary system that we have.
Well, and you really make a very strong case about that in the book, that we could not have an empire.
We could not have our troops stationed overseas except for the fact of inflation because really it's kind of a hidden tax.
It's like picking the corners off the dollars in your pocket, and you don't really realize that you're being pickpocketed because it's just a little bit out of time, kind of out from under you.
Right, and then the consequences always come later, and you never know exactly who the victims are.
Right now, some of the victims of past inflation has been that some prices are high.
The cost of government, the cost of education, the cost of medical care, that's related to inflation, but nobody wants to relate it.
If that were the case, the liberals would be the biggest champion of sound money.
And in the past, and even today, we do have some that recognize this, that running up debts and printing money is not beneficial.
But we still have a long way to go to educate enough people to realize that we are only looking around for the victims, but it would be very difficult to run these wars.
I read one article once that made the case for saying that never has there been a war without debasing the currency.
In the old days, it might have been diluting the coins or clipping the edges of the coins or printing paper money.
Today, it's a mere computer that creates credit out of thin air.
But nevertheless, it's still sinister, and there's a good rule to remember.
If you have inflation and debasement of the currency, you eventually wipe out the middle class.
At the same time, for a long time in the process, the wealthy just get wealthier.
Well, yeah, it's really incredible.
You begin the last chapter, the way out, Chapter 15, with this quote from 400 B.C. about the debasing of the currency.
That was from the frogs, I believe, wasn't it?
Right, yeah, Aristophanes.
Yeah, that's it.
They've been doing it for a long time, and in the book, I mention a couple of biblical passages.
The Bible has something to say about honesty of weights and measures, and yet we continue to do it.
Even most people know recent history.
They know about German runaway inflation, Zimbabwe, and Mexico, and yet they don't want to accept the responsibility of saying, oh, is that what it means?
That means we have to balance our budget?
So it was unfortunate they didn't put it in the Constitution that we couldn't borrow money.
Borrowing, though, isn't the full consequence, but it just sets the stage to encourage the politicians to borrow and get reelected.
But boy, when they can borrow, and then if they come up short, they can send the bills over to the Federal Reserve.
That's a different story.
They always take advantage of it.
Well, you know, I hear a lot of people who are really free market types say, well, you know, we've got to have a central bank.
I mean, I'm completely against the scandalous bailouts and these trillions of dollars, and they need a real audit, and they need to be put in check, but at the end of the day, we have to have a central bank, right?
And I was just wondering if you could really address that, because it always seemed to me like they were kind of going back and looking at the situation we're in and what the bank does, how it operates, but it's almost like they failed to go that one more step where, well, why exactly do we need the bank?
It's got to be the backstop because the entire banking system is built on fraud.
If the entire banking system wasn't built on fraud, then we wouldn't need a central bank that would be the lender of last resort or whatever to make sure that the thing doesn't come unzipped, just like what happened a year ago.
Well, I think they fail to look at history.
They fail to look at our Constitution.
They fail to understand free market economics, and therefore, out of convenience, they go along with the conventional wisdom of 50 or 60 years of government schools because they do teach you that very early on, that it's perfectly all right, and that the Federal Reserve is there to get us out of trouble, but they ought to look at it differently.
They ought to look and see the relationship of the Federal Reserve and all the problems we've had.
If the Federal Reserve do as I argue, that they create a bubble, and the bubble causes the need for the recession or the correction, then they're looking at the wrong thing.
They can hardly expect the Federal Reserve to solve the problems they created by doing exactly the same thing.
It just won't happen.
Well, and it goes to the age-old question of stupidity or the plan, too.
I think I've read quotes from around 400 B.C. of people back then wondering the same thing, whether Ben Bernanke really just believes the Milton Friedman rather than the Murray Rothbard explanation for the Great Depression, and no matter how many times you explain it to him correctly, he just is not smart enough to understand or has too much prestige at stake to go back on his opinion, or if he knows good and well that what he's doing is actually very destructive, but he's pretending to play dumb, basically, to you.
Which do you think it is there?
I think it's the prestige issue.
He's studied this case for a long time.
He's staked out his reputation on it.
He did his thesis on this, and he has to make it work in order to prove that he's correct.
And I think it's more that.
I don't think he does it deliberately.
I think that he's just intellectually confused.
He certainly isn't an Austrian free market economist, and he certainly isn't one that thinks we should follow the Constitution in a strict manner because it's rather clear on what we can do and can't do.
So he's written about it, and he agreed with Milton Friedman, and he said that, yep, our only problem in the Depression was we didn't print enough fast enough.
So he's doing another test, and he's going to print faster than he did in the Depression, but they followed this policy to some degree in the Depression, and it prolonged it.
They propped up bad debt and bought bad debt, and now we're doing it even more so.
So in that case, since he's doing it more than they did in the 30s, it means that the very, very weak economy, regardless of what the government calls it, the very weak economy is going to last longer than the Great Depression.
Well, you know, you talk about the threat of massive price inflation as the result of the massive inflation, the actual inflation, the creation of the new currency.
But I talked with Bob Murphy on the show last week, and he said that the Federal Reserve was paying the banks to basically keep all their money at the Fed.
They created these trillions of dollars, and they gamed all the banks, and then they said, but don't spend it.
Don't lend it out.
Leave it, in fact, in our vault.
And so I wonder exactly how that works, and is that, you know, dictionary definition inflation, will it necessarily lead to mass price inflation if the banks, in fact, don't circulate the currency around?
They just keep it to keep themselves from going out of business during the hard time.
Well, that's right.
This is propping up the banks.
The banks, you can borrow the money endlessly, and they get money injected into it, and if they leave it at the Fed, they get paid interest on this.
So that discourages the need, you know, to loan the money out.
But there is a condition where the Fed does inflate the currency and pumps the money out, and yet the banks themselves get skittish because they've been burned, and they're not anxious to loan, but then the people aren't anxious to borrow.
I mean, who's going to go out right now and build a house, you know, because there were too many houses built?
So it's a condition called pushing on a string.
So the question is, does that mean there will be no inflation?
Currently, I think there's still a lot of inflation, but the big question is, will it get so bad the government will have to admit to it?
And I say it will.
Eventually, this money will circulate.
We have a vehicle for distributing money to be spent that is more available to us than it was in the Depression because everybody's getting a check from the government, you know, practically, whether it's welfare checks, unemployment checks, Social Security checks, and for that reason, we will see the inflation.
But it might for a while just be inflation of the cost of government.
You know, taxes aren't really going down.
They're going to have to keep paying for the government.
So we just don't know which prices are going to go up.
But the value of the dollar is not going up.
People, even though the government says there's only one or two percent inflation, people at the end of the month aren't saying, oh, that's pretty good.
I have more money left over here before, so prices must be going down.
Foods doesn't cost me as much anymore.
That's not happening.
In the Depression, that did.
There was a lot more deflationary pressures in the Depression than there is now.
Do you feel like you're making progress?
It seems like from this end of the TV that when you go on these shows, there's really nobody prepared to try to refute you even.
And so you get up there and you say, well, look, the recession is the result of this big artificial good time that we had that was the result of the Fed dumping too much credit into circulation.
So now we're suffering the consequence of that.
It's, you know, your quick TV news oversimplified explanation of the Austrian theory of the business cycle there.
But it seems like the news people just go, oh, yeah, that makes sense.
And it seems to me like you're actually really kind of winning.
There's nobody up there prepared to even try to argue with you about this stuff.
Yeah, and I don't think it's me alone.
I think it's the fact that there are many radio programs like yours and others, and I think the Internet.
I was actually pleasantly surprised and shocked at how many people have been introduced to these views as the campaign was going on.
I didn't convert these people all of a sudden.
I maybe helped and invited more people in.
But a lot of people have heard about this.
Now, the campaign, I was excluded by certain channels explicitly because they didn't like my anti-war position and they didn't like me, you know, being as objective as I was.
But since then, some of those same channels have had me on 30-some times because it's strictly on economic policy and they are willing to listen because there's a greater demand now to explain what's going on.
And I think this has been very helpful in the fact that 75% of the American people now support 1207 to audit the Fed.
You know, two years ago, probably nobody would have been known.
If you'd have asked them about auditing the Fed, they'd have looked at you.
What are you guys talking about?
So I think we are making progress, but it means the intellectual community and the people who circulate these ideas have been very helpful in doing this.
Well, and this book and the Fed is certainly going to be helpful as well.
If I can ask you one more question, last I checked, you were on the Foreign Relations Committee in the House of Representatives, right?
Right.
Is there anything that you can do to stop this war in Afghanistan before it gets worse?
Can you introduce a new resolution?
Can you start a new fight in the Foreign Relations Committee, Dr. Paul?
It'll be continuous, and I think that we've made some inroads because some of the Democratic leadership, Pelosi and others, have talked in question about more troops, and Obama has actually put a relative hold on this.
I don't think he's going to change policies, though.
I think it's going to continue.
We have a coalition of some Democrats and Republicans that were just put a letter together to send to the president to urge no more troops in Afghanistan and give us the plan on bringing them home.
But you know the truth.
They really aren't winding down the war in Iraq.
They just bring a few here, a few home, send more over there, and then send a whole lot of contractors over and more violence ever.
But he's not going to walk away from Afghanistan, and that's the only true option that we have.
To do half a job might be the worst thing.
No, the worst thing is sending more over there to get killed.
But even if you don't send more troops and you try to do it with a smaller number of troops, it just prolongs the agony.
And they don't even talk about our option of saying bring them home.
They're talking about should we send 5,000 or 40,000?
Should we have this and that?
I think the debate ought to be why did we ever go, and why not just bring them home?
You argue the case for sending more.
I'll argue the case for bringing them home.
That's where the debate ought to be.
All right, well, I have a ton more questions here, but I know that you're in a hurry today.
I really appreciate all that you do, Dr. Paul, and your time on the show today.
Thank you, Scott.
All right, everybody, that's AntiWar.com's man in the House of Representatives, Dr. Ron Paul, representing District 14 on the Texas Gulf Coast.
We'll be right back.