All Episodes
Previous Next
July 31, 2015 - Ron Paul Liberty Report
27:13
Ron Paul: 'I'm Sending a Message to Paul Krugman'

Ron Paul responds to Paul Krugman's recent smear, "The Old Man and the CPI." Krugman's ageist and racially-charged argument is demolished. Ron Paul responds to Paul Krugman's recent smear, "The Old Man and the CPI." Krugman's ageist and racially-charged argument is demolished. Ron Paul responds to Paul Krugman's recent smear, "The Old Man and the CPI." Krugman's ageist and racially-charged argument is demolished.

|

Time Text
Calling Me Names 00:02:51
Hello, everybody, and thank you for tuning in to the Liberty Report.
Today, I'm sending a message to Professor Paul Krugman.
The reason I'm doing this is he wrote an article recently that got my attention, and in a way, he started calling me names, and nobody likes to be called names.
He started off with the title.
It says, The Old Man and the CPI.
Nobody likes to be called old.
I certainly wouldn't like to be told that I have old ideas, and that to me is the most important thing.
But he starts off with the title, but then, you know, actually it gets a lot worse after that.
The whole idea that he had was that he had to discredit me one way or the other.
One thing he did early in the article, which really surprised me, and Professor, I don't think you really meant this in a nasty way, but comparing me to Bernie Madoff, I don't think that's quite what you wanted to do because here you are, you're a well-known professor.
You write for the New York Times, and you have had a one and Nobel Prize, and then nobody's going to believe you that there's a similarity between Ron Paul and Bernard Madoff.
But that's your problem, not mine.
But then you go into some other names, which really is a bit of a surprise too.
They just don't be gentlemanly about talking, you know, academically, speaking about ideas.
You call me a crotchety crank, and I don't believe I am that way.
I think most people compliment me as not being cranky and having a lot of fun in the world of ideas and presenting the cause of liberty.
But that I can understand and I can tolerate, and maybe you were doing it in jest or whatever.
But it did annoy me when you started attacking supporters of mine.
Now, that's when you're really getting me disturbed.
So if you were trying to get me upset, you were coming pretty close to it when you said the supporters were crotchety old white guys feeling cranky.
White guys?
And he sort of go on when you mentioned white guys, you said, you're going to further explain that.
And I thought, boy, what's he going to talk about white guys?
And it sort of, is he talking about racism or what is going on?
So he goes on and explained that he condemns the white following because so many of the supporters that I have, including myself, that we don't believe in forcibly redistributing wealth.
Disagreements on Wealth Redistribution 00:04:51
We think if people earn wealth, they have a right to keep it, and that's what made American great.
So therefore, we're very much opposed to the redistribution of wealth.
So he interprets the redistribution of wealth only helping poor people get food stamps and that we're opposed to that.
So that's why we're racist.
We're white people who are pays to it.
So I wonder what he thinks when a black person earns money and would like to keep it and have low taxes.
Is he a bad person then too?
I don't think so.
But he's arguing that if you argue against welfare, then you're racist.
Professor, if you check the statistics, you will find out that a lot more welfare go to the wealthy than to the poor.
The perfect example is how the Keynesians, your crowd, your MIT people, took care of the recession by printing more money and spending more money and passing it out, bailing out the banks and bailing out the corporations, massively expanding the 1%er's wealth, at the same time adding to the destruction of the middle class.
So this is quite a bit different than what you're referring to.
Self-reliance shouldn't be a bad word.
To say that a person, I want to take care of myself, I want to work, I'd like to keep what I earn, and I'm not going to be dependent on the taxpayer, that is not an evil.
Just think if everybody did that, we wouldn't have the problems that we have today.
Because when the mischief makers get involved and think they can run the economy, the central economic planners exist, and the monetary managers, of which you're one, the results are not your goals.
So I will never question your goals.
I've worked with a lot of people that believe in what you're talking about, and they're not bad people, because they want to help people.
They want to help the poor.
And so the poorer the society gets and the smaller the middle class gets, the argument is always spend more money, have more programs, and yet never addressing the subject that printing money doesn't help.
It helps the wealthy, it doesn't improve the situation.
I think that we should have a better conversation on the economic policies.
And you did even mention that in your article.
And one criticism was that you wanted to downplay the importance of monetary policy.
You know, that's not that important.
It doesn't cause inflation.
It doesn't cause big government.
And you don't give away money and you don't print money and all this sort of thing.
He says, you explain it as being a technical tool in the management of the economy.
Well, if that is the case, it's doing a lousy job.
And I'm going to have some charts up here in a few minutes.
Some charts to emphasize my point that I'm making, that the failure of Keynesian economics is loud and clear.
And I believe that's one of the reasons that you have become interested in addressing my issues and what I'm talking about, because it doesn't make any sense.
Why would you bother writing articles about me in a major article and using bad language and calling me names?
You know, I was in Congress a good many years.
I never passed any legislation.
I wasn't a major advisor.
You claim that you're part of the MIT crowd that really can run the show and has done such great things.
And you have the MIT people all scattered all about playing a significant role in this.
So I don't think that I deserve that much attention.
But for some reason, you're giving it to me.
So I'm trying to figure out why would you spend this much time?
I know you get paid for it.
You have to spruce things up.
And you have a podium.
You have the New York Times, even though the number of people reading the Times, the numbers are going down.
But anyway, you are determined to continue in this effort.
But I'm just really amazed.
In some ways, I think it's a compliment.
Why bother?
You know, I don't even have a post office named after me.
And so far, Obama hasn't called me for advice.
And I know you have been called by president.
And besides, you have a Nobel Prize.
So everybody must think that you have all the answers.
It's just that there's a few of us that don't quite buy into this.
Because there are some of us who still believe that debt is a problem.
And you teach, you've taught your students that debt isn't a problem.
Don't worry about it.
Disagreements on Inflation 00:15:15
We think spending is a problem, that we spend too much money by the government, then there's no money left for the people.
And we talk about this seriously.
So there are some disagreements there.
And the one thing that could help, let's say we were serious about communications, and I've always been serious about it because there were a lot of good friends in Washington and Congress who called themselves progressives.
And we would come out with our agreements and show them where we're in agreement, a person like Ralph Nader and others, and say, yeah, we agree on civil liberties and we agree on a foreign policy.
We disagree on some economic problems.
But the one thing that we could sit down and talk about is why I think some of this stuff sounds like demagoguery when I listen to what you say.
I don't think you have the vaguest idea about Austrian economics and the definition of inflation.
Because even in your title, you indicate the CPI, the CPI.
Sure, I talk about the CPI, but I also have an understanding of why the CPI is not sacred.
First, it's fudged.
It gets changed when it's going up too fast.
We do know that the current CPI, if you use the old standards, would be going up at probably 4% instead of 2%.
So we could stop for a minute.
And what I would like to do, if we ever had a real conversation, I would say, Professor Krugman, what is your definition of inflation?
And I think you imply that inflation is the CPI and there's no inflation, so therefore, we who are concerned about the monetary system and too much money being printed.
You're completely wrong because the CPI didn't go up.
But there's a couple things.
When you talk to Austrian economists, when you talk to free markets, an economy that's not run by authoritarians and not run by people who think they know all the answers, they would say that we don't know what the money supply should be.
And we don't know what the interest rates should be.
But you do because you're an authoritarian.
But Austrians define inflation as expanding the money supply.
And you can't deny, and I'll show a chart here shortly, how the money supply has expanded since 1971, since we severed the last link to gold.
It's been massive.
So if we have an understanding, you just can't demagogue it and call us names.
You have to say, well, no, inflation is only counted by the devaluation of the dollar through inflation and the CPI measures this and we compensate and we raise Social Security checks.
Well, I will show a chart that shows that the real wages don't actually respond to this.
We in the free market camp define inflation as the increase in supply of money.
CPI can go up.
We have no pretense that we know when it's going to go up.
And that value, whether it's interest rate numbers or our cost of living, values are determined in the marketplace in a subjective manner and not by one of your calculations and have a mathematical formula like if government and the Federal Reserve does ABC, you're going to have CDF results.
We don't believe in that.
We believe all that Mickey Mouse with your very, very complicated mathematical formula.
I think most people are laughing at that because they're never right.
They never predict anything that's right, even though you're saying that you have been correct here recently that we've came out of the recession of 08, 09.
But talk to the middle class about it.
They're not out of the recession.
They're in a depression.
And the real reason why I think you have to downplay what I've been talking about is not so much me, because I'm not eloquent enough or powerful enough to be bothered with.
But those who can teach and reveal what free market economists really believe in and how it works is better understood today than it has been throughout centuries, throughout history.
We're not talking about Adam Smith and other people, and we're not talking about authoritarian economics.
That's what you're talking about.
Authoritarian economics, where the government runs things, that's been around for thousands of years.
And we don't want that.
We want the market to work.
We want volunteerism.
We don't want people coming down with dictates from the government.
You know, one time I asked Chairman Bernanke about the definition of money.
Was it gold money?
He said, no, that's not money.
And I imagine that you would agree with that.
But a Federal Reserve note, that is money.
By fiat, by declaration, by mandate, by law, the government can make paper money per se.
And we don't believe that is the case.
Sure, it might work for a while.
There's been a lot of paper money around the world.
But you should know monetary history better than this.
Paper money never lasts.
And when I called that up to Chairman Greenspan, he said, well, things are changing.
We are better managers now than ever before, and we can do it.
We are smarter than ever before, and we can dictate paper to be money, and we can say gold is not money.
Well, you know, you and I talking about this will not solve this, that we cannot do it, because time will take this.
The market will prove this.
If I'm absolutely wrong in 10, 20, 30 years, everybody will know I was absolutely wrong.
But if it turns out that this system has to be revamped, and it may be revamped a lot sooner than you're suspecting, unless you're worried about it and you're covering yourself, that the market will tell us.
But there could be another reserve currency.
There could be another currency come in with metallic backing to it.
This is usually the way they get out of monetary problems by restoring confidence.
But we have a long way to go because most people are not very confident in what the government tells us.
But I want to go into some charts now because I know professors like charts and I love charts, even though it just is a moment of history and you can look at history from it, but you can't predict the future.
But I want to use the charts in many ways to make my point.
The first chart we're going to look at is the money supply.
It's M2.
Now, it's hard to pick the best measurement for money supply when there is no definition.
Nobody knows what the money supply is.
One time in the 70s when I asked, I think it was Paul Volcker this question.
I said, how can you manage the money supply when you can't define it?
Because he wasn't able to define it.
He didn't know whether it was M1, M2, the monetary base, old silver dollars, gold dollars, what?
I said, how can you manage something you can't even define?
Well, that's a pretty good question.
Anyway, I picked M2.
Most people know about M2.
What I want to show here is that money has been created in a wholesale manner since 1970 when the link to gold was severed.
And you say, well, that's good.
And that's why we've had such great economic growth since that time.
But as you see all those gray lines, those are all recessions going on.
But you can see dramatically down there about 1971, this curve is very, very sharp and it's going to continue.
It's not going to decrease.
Now, if there was such a thing as deflation, that line would turn down.
But it hasn't.
Prices might not be going up as fast in the CPI for certain reasons.
The money supply is going up.
We still have a lot of inflation.
And the other thing about that is sometimes you can have a lot of prices going up and they're never in the CPI, such as rents right now.
They exclude rents, and rents are skyrocketing.
Education, skyrocketing.
But that's not inflation.
That's just something else.
It's the CPI that we have to watch.
Now, I want to go on to the next chart, next chart, which is a reflection of the increase in the money supply.
And this is an index started way back in 1775.
I mean, long-term history about measuring prices.
And they started off in 1775.
One was the baseline for prices.
And you see the blips along the way on the bottom of the screen, and those are the wars that we fight and different things.
But they're very, very small blips.
But then we see when the Federal Reserve came in, the dollar then was backed by an ounce of gold at $20 an ounce.
And we immediately inflated for World War I and World War II.
But there was still some linkage to gold.
But then that was given up in 1971.
And look at what happened in 1971.
Tremendous increase in the CPI.
And you'll say, Rondo, that doesn't work because the CPI is hardly even moving.
Well, Professor, you have to realize that the CPI doesn't tell the whole story.
That is used for fiction to try to fool the people and even used to fool the markets because everybody's looking at it, so it even affects the markets and they can do this.
But anyway, money supply up, CPI has been up, and now the next chart I want to go to is where's all this money going?
It's going to help the people, right?
Because that's what we want.
And actually, I believe, Professor, that you want to help the people.
I want to help the people.
I don't think either one of us deliberately want to impoverish the people.
So taking a look at this chart, we see that total spending since 1971 has gone up 287%.
Well, just think of all those good things we're getting from the government.
We get to spend that money on wars and go around fighting wars.
And your argument is that all spending is good for the economy.
Sure, go over there and bomb a bunch of people, pay a lot of military personnel, build tanks, blow them up, blow up bridges, then rebuild them.
That is where the money goes.
It's not going to the people.
Going to corporations, the military-industrial complex, they do quite well.
The bankers do quite well.
Financial services.
And the government and the one percenters are in that crowd, and they're doing quite well.
But take a look at that bottom line that's very, very flat.
And over all those years, it was only up 24% for the median household income.
That's a lousy job.
And the MIT gang's been in charge all this time.
But you'd argue and say, oh, yeah, but they didn't do it quite the way I want.
I would do this a little bit differently.
And this doesn't mean anything because they didn't do it quite right.
They didn't print monies quite strong enough.
And most of the Keynesians now, including yourself, said that the only thing that we have to do is never give up on inflating the currency like they did in the 30s.
Because in 1937, when the Fed raised the interest rate, they restored the recession and depression.
And so everybody's terrified of this, and this is one of the reasons it's going to be real tough for the Fed ever to deliberately raise interest rates.
But that line tells you what happens.
The money goes to the government to the special interest, and what does the median household income?
It stays very flat.
And guess what happens to the middle class?
It continues to expand massively.
The middle class is shrinking.
And there's a large number of people now that are not employed, fully full-time employment, even though the unemployment statistic is low.
There's a lot of unemployment that is not full-time.
And this is one of the reasons the middle class is so upset.
And another reason they're upset is they're broke and they have inflation to deal with and they can't pay their bills.
If there was no inflation and the income was even going up modestly, they would be happy.
But it hasn't adjusted.
The people who are getting Social Security are not happy.
But the Keynesian answer is send them a bigger check.
It'll help.
It'll solve the problem.
Well, I don't believe it's true.
And I want to go to the last chart, which has to do with the stagnant real wages.
Here we have bigger paychecks.
You see the line down at the bottom from 1964.
It went up nearly tenfold.
Oh, yeah, we're making more money.
We're not making $2.50 an hour.
We're making $20 an hour.
But what about the standard of living?
Has this helped the middle class?
No, it's destroying the middle class.
And look at the line across the top.
That's real dollars.
And that's not too hard to come, you know, to calculate.
$2014, flat.
And that's over a long period of time.
And there should be no question about why people are unhappy in this country.
Then also, one thing, one tool that you would use, Professor Often, is to say, well, it's all the Republicans' fault.
The Republicans did this, or they wouldn't do this, and this sort of thing.
Well, that is not the answer, because obviously, when you throw that out at me as an accusation, sure, I was in the Republican Party, but I probably 95% of the time voted against them because they were voting just like Democrats, and they were run by Keynesian economists, the people who believed in this nonsense.
So I voted against them all the time.
So to say that it's a Republican function and not recognize that the important issue is what is the economic philosophy, and this is where you brag about it, the economic philosopher of the MIT gang and how important they were.
Need for Economic Planning 00:04:06
But what are their answers for this?
Where is the middle class?
And if you say, well, we didn't get to do it the way we wanted to do it, well, you've had a lot of years to try.
You've been trying since the Depression, and every year you're expanding it, and it's not working.
So I think that the handwriting's on the wall, the authoritarian approach is anti-liberty.
That's my biggest beef because that's what I want.
I want voluntarism.
And One thing that we'd have to come to understand, any of those who would be running the government, is where the really deep flaw in Keynesian economics is that you can't make these predictions.
There's no way you know what the money supply should be.
There's no way that you should know what the interest rates should be.
It's distortion.
Free market interest rates are so vital and crucial.
So you can't deal with this unless you talk about not the CPI.
You need to talk about the malinvestment.
You need to talk about the bond bubble.
If you want to see an inflation bubble, go look at the bond bubble and see what's going on there.
The credit in a system like this is a false illusion because it's going to cause people to make mistakes.
And you can't know what is right.
The big difference between what you as a professor and the Keynesians teach is that you believe you can know.
We are more humble as Austrians, free market people.
We claim we don't know what the people want.
We claim we don't know what the money supply should be.
We know that the interest rates should be determined by the market.
And, you know, the road to more knowledge, I think, is the first admission of what we don't know.
Austrian economists are quite capable of admitting what they don't know, but what they do know so far has panned out to be correct.
And right now, there's more need than ever for Keynesian, there's more need for ever than to have free market economics and understanding that what we've had doesn't work and the day will come, the opportunity is there, because this system is failing.
I think that is the main reason you are so concerned about any message getting out.
So I believe that very soon we will have a ramification of all that's happening.
There will be a chance to make a decision.
But the biggest thing that we should be worrying about is the welfare being of the middle class and economic intervention, inflationism, debt, and wars.
That is the cause of our problems.
The answers can all be found in a clear understanding of what liberty is all about, why we need property rights, and why we should continue to keep this principle that self-reliance shouldn't be punished.
It should be rewarded.
You shouldn't punish people for saving money.
And yet, Federal Reserve officials have told me quite frequently that, yeah, they don't get any interest anymore with people who save, but that's part of our planning.
We can't do much about that.
On a free market, it wouldn't be like that.
So let's hope that there would be some reconciliation someday on the acknowledgement of the failure of the system that we have and not to blame Republican free marketeers for this problem.
That just doesn't hold water because the Republicans are just as Keynesians as the Democrats.
Anyway, I thank you for all the attention you have given me, Professor Krugman.
I've gotten a lot of comments.
I was surprised even on the New York Times, he wrote some favorable comments in there.
So I don't know.
I think you probably have to try again and explain all these problems that I point out and why the middle class is suffering and what you're going to do with it with more economic planning.
Export Selection