End the FED
In today’s appearance on MSNBC’s Morning Joe, Ron Paul discusses the failures of Keynesian economics, the true cause of the financial crisis, and the need to end the Fed.
Show: Morning Joe
Channel: MSNBC
Date: 9/15/2009
Transcript
Mika Brzezinski: And here with us now, the co-founder and editor-in-chief of the Huffington Post, Arianna Huffington joins us. And with us from Washington, Republican representative from Texas and member of the financial services and joint economic committees, Congressman Ron Paul. Congressman, thanks very much for joining us. Your thoughts on the President’s speech and hope that we actually are going to turn our economic problems around?
Ron Paul: Well, at least he was a little bit cautious. He wasn’t bragging that it was turned around and he shouldn’t be because we have a long way to go. He suggests that the answer will be easy credit to make sure people get some low-interest loans. Without really looking at it, he should realize that we got into this mess because we had easy credit and artificially low-interest loans, and we pushed this on the people, caused all the malinvestment and a bubble to form so you can hardly solve the problem of a bursting bubble with trying to re-inflate and create a new bubble. We’ve gotten away with it now for several decades but it’s not going to happen this time.
Mika Brzezinski: Okay, but how do we not re-create a new bubble, how do we not find ourselves in — can you hear him?
Joe Scarborough: Let’s just stop right here. I actually lifted a speech that you made in the banking committee on September 10th, 2003. I remember that date because your words were so dramatic. Ron, while everybody else was saying, “Oh, if we don’t help people out through these loans with Fannie and Freddie then we’re just horrible people, we hate poor people,” you said and you predicted, “If we continue to inflate this bubble this way the housing crisis is going to cause an explosion and there is going to be damage worldwide.” What did you know, Ron Paul, in 2003 that nobody else on the banking committee, or the United States Congress, or in the media knew? What did you know?
Ron Paul: I think it reflects an understanding of economics. I didn’t know anything special other than the fact that I’ve studied Austrian Economics and their understanding of the business cycle comes from the Federal Reserve, the creation of credit. We’ve been working with Keynesian Economics since the Depression; we’ve had perpetual bubbles and recessions and ups and downs and inflation and Nixon really sealed it over when he said, “We’re all Keynesians now,” and we still are in Washington. They still use Keynesian Economics to try to solve these problems. It isn’t all that complex. Interest rates are very, very important and prices are very, very important in a free market. When you distort prices, like wage and price controls, everything ceases up, nothing can happen. But when the Federal Reserve comes in and fixes the prices of interest rates you deceive the savers and the spenders and the investors. People believe that there has been a lot of savings and interest rates are very low. And that wasn’t the case, we weren’t saving a penny. We were giving low interest rates because we were creating money out of thin air. That’s why I keep coming back to the Federal Reserve, it was the policies of the Federal Reserve that created this and we shouldn’t have been surprised at all that we eventually had this tremendous financial crisis.
Host in grey suit: So, Congressman, is your solution then to get rid of the Federal Reserve? What else are you proposing we do here to make sure this kind of stuff doesn’t happen again?
Ron Paul: Well, first off we ought to obey the Constitution, live within our means and balance the budget, quit war-mongering and quit the welfare state. Minor things like that. But eventually you don’t need the Federal Reserve. No, it’s caused too much trouble. Central banking has always been harmful. It’s a seductive way of financing big government. Conservatives love it because you can pay the military bills. Liberals love it because you can pay the welfare state bill. But it’s all deception, it’s all a tax. It eventually destroys and hurts the very people you are trying to help. You try to help poor people by giving them stuff for free but you end up giving them inflation. They are the first ones to lose their jobs, they’re the ones who suffer the most from inflation. We have inflation today much more so than anybody admits because that’s why the cost of medicine is so high and the cost of education is so high. It’s the devaluation of the dollar. So with all these good intentions of helping poor people, the very people who are doing this are actually making it more harmful and hurting those they want to help.
Joe Scarborough: Arianna, let’s talk about September 15th, today. You have been writing in the Huffington Post for some time about the fact that this administration and the last administration couldn’t stand up to Wall Street, couldn’t pass the tough regulations that need to be passed. You still think that’s the case and now Andy was just saying you took on Larry Summers.
Arianna Huffington: Yesterday, when Larry Summers spoke, I asked him whether he really believed that they would have fundamental reform of Wall Street, because they had been saying that since the administration took office. And the truth is that they are all like the captain of the ship telling us we are going to go in this new direction but the autopilot in the boiler room is set in a different direction than the one they want to take us.
Joe Scarborough: The same direction.
Arianna Huffington: The same direction we are going now, and the autopilot is really controlled by the lobbyists in Washington. You know, thousands of lobbyists spending literally tens of millions of dollars, undermining reform efforts. Remember what happened, this is critical, to the cramdown amendment? I would love to ask Congressman Paul about that. The cram down amendment was critical to the foreclosure reform effort, because without that, without being able to modify your mortgage purchase, nothing is going to work. Now we are having thousands of foreclosures everyday which is affecting the whole community. This is not just people who took crazy sub prime loans. They are people who are losing their homes because they lost their jobs. There was a moving article in the New York Times about over a million school children are going to school right now, homeless. This is having a huge impact, not just on this generation but on the next one, and the administration is still more concerned with saving Citigroup and saving the big five banks which are now much bigger than they were a year ago.
Joe Scarborough: You started to bring it up and it’s a question, Ron, that I keep raising on my show. Why is it that the same people, and I know Arianna you’ll agree with me, the same people who got us in this mess, whether you talk about Tim Geithner who was at the reel of that ship for a very long time or whether you’re talking about Larry Summers who was a part of some things that happened in 1998 and 1999 or whether you’re talking about Hank Paulson that was pushing for 41 leverage rates. Why is it that these same people who got us in trouble in the first place are the same people who are still running this economy?
Ron Paul: Well they’re in charge and they have the power and they’re believers in Keynesian Economics but they are the ones who caused the trouble. Look, the President wants to give more power to the Federal Reserve and if you come anywhere close to my understanding of the Federal Reserve that’s the last thing, I want to get rid of the Federal Reserve and he wants to enhance it. But I think they are locked in, whether they are Republicans or Democrats, they are going to support the corporations, even in medical care reform. Who do you think is going to come out well in this? Corporations, drug companies, and insurance companies, they are being protected. You know, some conservatives accuse Obama of wanting socialized medicine. I don’t think so, I think he wants to perpetuate corporatism, whether it is in the financial markets or in medical care or whatever. I just think the difficulty is the transition: how do you go to where we need to go without hurting people. And quite frankly, you can’t do it, people are going to be hurt one way or the other. I just want to minimize the pain and I just don’t want to put the pain on the taxpayer.
Joe Scarborough: Arianna, you would agree with Ron Paul in that corporations, are getting, you believe, a free ride off of this administration as well as the last.
Arianna Huffington: Well I would also agree with Congressman Paul that this is not capitalism. This is not free enterprise capitalism.
Joe Scarborough: This is not capitalism at all.
Arianna Huffington: This is absolutely not capitalism. This is really oligopoly. We have 92 smaller regional banks that have failed but the five big banks are bigger than ever, their profits are growing, their toxic assets are still on the books. That’s what I want us to discuss. Congressman Paul, how come a year later, after the bailouts which were supposed to get rid of the toxic assets, the toxic assets are still there and still a potential time bomb for another economic meltdown.
Joe Scarborough: And Ron, we are up against a hard break so give us a 30 second answer.
Ron Paul: Well, because they haven’t solved the problem. Some of the toxic assets are now owned by the taxpayer. That’s one thing. But this is my argument: they won’t get rid of them. You have to liquidate and you should allow the correction to occur in one year and get all those bad assets out of the way. The fact that they’re propping them up means that we are working very hard to perpetuate this problem into the second great depression, if not as bad but much worse if we continue to do what we’re doing by not allowing toxic assets to be liquidated.
Mika Brzezinski: Absolutely right. Congressman Ron Paul.
Joe Scarborough: He was right before.
Mika Brzezinski: We are going to continue this conversation on the radio, you’ll be our guest. It’s 10:00 am to noon EST, on WABC radio. Congressman Ron Paul, his book is called End the Fed. Thank you so much for being our guest on Morning Joe, we will talk to you on the radio.
