Myth-Busters: Central Planning Is A Hopeless Charade
Description
Today, Ron Paul smashes the idea of central planning in all of its various forms. The Fed only distorts the economy by printing money and manipulating interest rates. If you've ever had a yearning for socialized healthcare, visit a VA hospital. You'll quickly change your mind. It's time for NATO to go, and much more. Don't miss it!
Be sure to visit http://www.ronpaullibertyreport.com for more libertarian commentary.
Description
Today, Ron Paul smashes the idea of central planning in all of its various forms. The Fed only distorts the economy by printing money and manipulating interest rates. If you've ever had a yearning for socialized healthcare, visit a VA hospital. You'll quickly change your mind. It's time for NATO to go, and much more. Don't miss it!
Be sure to visit http://www.ronpaullibertyreport.com for more libertarian commentary.
Description
Today, Ron Paul smashes the idea of central planning in all of its various forms. The Fed only distorts the economy by printing money and manipulating interest rates. If you've ever had a yearning for socialized healthcare, visit a VA hospital. You'll quickly change your mind. It's time for NATO to go, and much more. Don't miss it!
Be sure to visit http://www.ronpaullibertyreport.com for more libertarian commentary.
Hello everybody and thank you for tuning into the Liberty Report.
Today is the day that we do MythBusters and the co-host is Chris Rossini.
Also Chris is the editor of the Ron Paul LibertyReport.com.
Chris, nice to have you with us today.
Great to be back with you, Dr. Paul.
Thanks.
Very good.
I imagine you have a couple subjects today to talk about and dispel some myths that float around and have been floating around for a long time.
Yes, we're going to go after central planners today.
And what better way than to start with the great enabler of central planning, the beating heart of government and intervention, and that's the Federal Reserve.
This week, Fed Chair Janet Yellen gave a speech, and she was pleased to announce that, quote, consumer spending appears to be expanding at a moderate pace, driven by solid income gains, improved household balance sheets, and the ongoing effects of increases in wealth, end quote.
Now that implies that she and her cohorts, the central planners, that by printing money, they're increasing wealth creation.
That's a big myth.
Please go after that, Dr. Paul.
Yes, matter of fact, the opposite is true.
It is a myth to think that if you print money, there's more wealth.
Some people might benefit by it, but there are more victims than those who benefit.
But there's a lot of belief that all you have to do is manipulate and you can control the economy.
You can do central economic planning by manipulating interest rates and also increasing spending and increasing the money supply, which is a model that's been followed for a lot of decades, especially since the 1930s during the Depression.
This was all started.
But it's gotten much worse lately.
It got much worse after 1971, after we left the gold standard totally and completely.
But this idea that if you spend more money by the Congress and then the federal government prints the money to pay the bills, then all of a sudden a lot of people are wealthier.
But this actually decreases wealth because what it does, it transfers wealth.
Some people do benefit, but some people will lose wealth because they don't earn what they should earn in the savings account.
And therefore, somebody will benefit at the other time others will suffer.
But what it does, it manipulates the business cycle.
It causes booms and busts, unemployment, and then the government gets much more involved than they do the bailouts.
So this whole idea that central economic planning is a good idea through the manipulation of money.
I think the thing that bugs me the most about this is the fact that this is used to criticize free markets.
Oh, see what happens when you have free markets?
Look at the doldrums we're in.
Look at what's happened to Japan.
And what we need is more socialism and more welfarism and more spending and lower interest rates and they go on and on.
But this has nothing to do with free markets.
This is a gross distortion of free markets because it's very important that the market decides where the money goes and that production should be encouraged.
Taxes should be low.
There's a lot of conditions like this.
But this notion that if you just increase the money supply and get government to spend more money, then all of a sudden there will be an increase of wealth.
But by doing this, they actually dilute wealth because if you have a savings account and they print a lot of money, your money in the bank goes less.
And right now, you don't earn any interest.
At the same time, they're talking about negative interest rates.
So, this idea that you can central economically plan is a farce, really.
And so often it's done for one reason, and they seem to benefit, and that is to pump up the stock market.
And that's been going on for a long time.
So, when yelling gets out there and now it makes these announcements, sometimes you see some very positive things happening in the marketplace.
But it also explains the ideas that we're trying to explain is the fact that there's a lot of people who don't benefit, and that is why there are so many people in this country so angry, and they're disgusted with the fact that some get richer, and the poor get poor, and the middle class gets wiped out.
And it is a result of central economic planning through the Federal Reserve and also with the spending idea.
But they have claimed for many, many decades that debt doesn't matter.
Debt is good.
Even conservatives believe that.
They maybe pay you lip service to not running up the debt, but if they were serious about it, Republican conservatives have had the chance over these last several decades to actually cut spending.
But it's never cut.
And supply-side economics have taught: don't sweat these interest rates.
I mean, don't sweat the debt.
Just make sure the tax burden is low for everybody.
But it's good to have low taxes, but this whole idea that you can spend money and run up a debt and still have low taxes, it makes a mess of things.
And that's why we're facing this crisis today.
Because of these fallacies, because of these myths, that too many people have been taught over many decades that spending is good, debt is not bad, printing money is necessary, and everything will be okay.
Well, it isn't okay, and the world is speaking out.
The people in this country are speaking out.
It's a failed policy.
It's an end of an era.
People have to wake up to this because the big question isn't whether Keynesianism will fail and interventionism will fail.
It's what is it going to be replaced with?
Will the socialists win or will the advocates of free markets win?
And of course, my vote is very clearly for the free markets and sound money.
And mine as well, Dr. Paul.
VA Hospital Pitfall00:09:01
Next, let's move to planning in medicine, government and medicine.
Now, it's long been said that anybody who starts to fall for the idea of government-controlled health care, they should visit a VA hospital.
It's almost like taking your kids to the bad part of town to show them what it's like.
And so, anybody who starts to fall for that idea should visit a VA hospital.
It'll change your mind quickly.
Now, it's an election year, and the presidents are coming out.
Presidential candidates are coming out.
Ted Cruz says, I give you my word: if I'm elected president, there will be real accountability at the VA.
Now, Dr. Paul, please explain why real accountability is impossible with government planning.
Of course, this has been said before, and it's been tested, it always fails.
It's sort of like saying, well, let's put a businessman in charge of the post office, and all of a sudden it'll be run.
It's the same principle.
It's a bureaucracy, and they're not accountable to anybody.
They're not accountable to stockholders, and therefore, you know, it encourages the bureaucratic approach, which is one of the worst things to do because the people will not respond to the needs of the customers or the patients.
And almost all medical students these days go through several months' training in VA hospital.
I was at Duke Medical, and we spent time at the VA hospital there.
One of my introductions to VA medicine was somebody had very, very serious lung problems, emphysema and couldn't breathe and was a smoker.
And I went in the next day because I had seen the patient the day before and they said, well, he died during the night.
Somehow he was in this oxygen tent.
They were using oxygen tents at that time and lit up a cigarette.
And I thought, wow, you know, here they put him in an oxygen tent.
And I thought, well, this is an extreme case.
And not everybody goes to the Veterans Hospital has that type of experience.
But they don't have a good experience.
Medical students and presidents didn't feel good about what is going on at the VA hospitals.
So bureaucracy means they wait for long periods of time.
It's socialized medicine as it's worth.
It's a single-payer system.
And yet now, the people who say, well, Obamacare is not working real well, but they don't want free market medicine, they say single-payer system.
Well, it's been transitioning in that direction for a long time because when I started in medicine, it was the doctor-patient relationship.
The patients paid the doctor.
If they had insurance, they went and collected it.
So it is so much different now than it was back then.
But I was responsible to the patients, and that was it.
But third-party payment, and it's close to that now, but it's bureaucratic, you know, even outside the VA hospital.
But it's also, you know, interference in the practice of medicine.
But the incentives are not there.
The costs run up.
And also, they may have changed it, but I doubt it.
It was easy, very easy, to get into the hospital if you would wait in line and people were admitted.
And quite frequently, it was thought by many in medical school that people get admitted and they have not medical needs as much as other needs.
It was a lot of other conditions, more social conditions that prompted the use of these hospitals.
But it's the worst system conceivable, and there's no easy answer other than moving away from that.
And if we are going to provide medical care for our veterans, they should have a debit card.
Give them a debit card, a limited amount of money.
This is what you get per year to buy your insurance and go buy your own insurance.
That would be one way to help a little bit, but even that would not work because food stamps for the poor aren't exactly the answer to less people getting government welfare payments.
But it's the whole idea that you can run it centrally planned by the government, by a bureaucracy, and think it will be efficient.
And changing management will not happen.
I argue this case, whether it's economics or an intervention is military policy or monetary policy, just the management.
You can't better manage something that is unmanageable.
And socialized medicine is unmanageable and it's very expensive and quality always goes down.
So there's pretty good reasons why we ought to give up on this approach without saying, well, you know, if we put military people, put people into the military that we shouldn't take care of them.
That's not the argument because there's still a lot of people around.
I, you know, dealt with people who got sick and had problems from the Vietnam War and other wars, and they were drafted.
So they've been made victims.
So we do have some responsibility there, but this is the most inefficient way to do it, is the VA hospital.
And there's many other better ways.
And it's not going to be solved by some new president coming and say, I'm going to appoint this guy to run the VA administration, and everything is going to be perfect.
Not going to happen.
Next, Dr. Paul, central planning around the world, and let's deal with NATO.
And I'd like to thank Pat Buchanan for providing this quote that we're going to use.
And it's from Dwight Eisenhower, who was the first commander of NATO.
And he said back in 1951 that if in 10 years, which means by 1961, all American troops stationed in Europe for national defense purposes have not been returned to the United States, then this whole project will have failed.
Dr. Paul, we're 65 years later, and NATO is pushing onto Russia's border.
Please explain why this organization has to go.
Well, it's very easy.
Eisenhower was right.
It has been a failure.
And there were some even before Eisenhower said we should have never gotten into NATO, like Robert Taft.
He didn't like the idea and thought that the responsibility for us would be to fight wars that we don't need to be involved in.
And that is the case certainly right now, and it would be very expensive.
But it has transitioned to something new and different.
Somebody who is very authoritarian and likes our military operations overseas will like NATO.
And they take the position that we're in charge of NATO.
We pay the most money.
We have the military.
We have to do the hard work.
So we're in charge.
And that will be our little army that we won't have to use our U.S. forces to do it.
We'll get other people to do it along with ours.
And that's exactly what happened in Afghanistan and Libya.
And we had NATO involved in Ukraine and all these things.
So it's a horrible idea.
It's intervention, and it leads to bigger problems and very expensive, of course.
But, you know, Eisenhower was correct on this.
It's interesting that Eisenhower was a bit of an interventionist, but he was sort of a sneaky interventionist.
He was for using the CIA and the other operatives.
And of course, he was involved in Mossadegh, removing Mossadegh from Iran, which has led to a lot of problems over a lot of years.
So it wasn't that he was with us on non-intervention, but he did not like the idea.
He saw enough war that he wasn't interested in more military wars and especially getting our military involved.
But the failure is clear-cut, it's obvious out there, it does us no good whatsoever, and it actually makes us less secure because it leads to our bankruptcy, it leads to more enemies, and it leads to us trying to have a global approach to things.
And you can't do it that way.
I mean, defending the country under attack is pretty simple in the sense that we know who attacked us and we have to do something about it.
But this is completely different.
And I think what Eisenhower was worried about, it would tend to become more offensive rather than defensive.
And that's exactly what's happened.
I mean, everywhere we go now, NATO is used in an offensive manner.
They're the ones who lead the charge and bombing and all these things.
So yes, when we have a non-interventionist foreign policy, not only will we get out of NATO, but the best thing for the world could be is that NATO is disbanded.
Manipulating Money Supply00:07:24
I would think that would be the best way to go.
Okay, Dr. Paul, on this episode on central planning, we started with the Federal Reserve.
We're going to end with the Federal Reserve.
It shows how key it is to enable all this mess that we have to deal with.
Now, the Federal Reserve messes with interest rates and they print money.
And any other rate other than a market rate means that the Fed distorts the economy.
So every day of its existence, it's distorting the economy in some way.
Now, in a free society with sound money, savings would determine interest rates and which investments would be made and when.
Please explain why that is far superior than the system we have today.
Well, what we have today with the manipulation of interest rates is exactly opposite of a free market capitalism.
So it's canceled out capitalism as most people understand it.
And as you infer, capital comes from savings.
So if an individual's earning $100 for something and he needs $75 to live on, and he saves $25, or he invests that $25 into something that would help him earn money, equipment or whatever, that would become capital.
So it's key.
But one reason why people save is the interest rates they earn.
But the central economic planners say, well, if we control things, we can decide what consumers will do.
And sometimes they get lazy and they won't spend enough of their money and they think they have to save their money.
Well, that's very important.
They're saving money because they're sensing that they might have a rainy day and they have to do this.
But the savers are enemies of the central economic planners.
So they come along and they say, well, let's manipulate interest rates down.
Well, when they're low, they do benefit some people.
It's usually the banks and the big investors and the people who are always too big to fail.
And they do benefit tremendously.
But lately, in the last several years, especially since 1987, after they introduced this notion when Reagan started the president's working group on financial market, which is also called the Plunge Protection Team, it was designed to make sure there'd be no stock market crash.
Well, we've had a couple since then.
They've always been ultimately rescued for the big guys, but they haven't revived economic growth.
So it's a dead end if you think you can centrally economic plan by manipulation of interest rate.
It's actually morally wrong because it's price fixing and it benefits one group over the other.
Total socialism occurs when the government, when the state controls all prices.
Then nobody knows what the price of anything should be.
Now, we still have a lot of market economy because of prices.
It's an incentive to be more productive and compensate for this.
And we limp along.
But the most important rate is that rate that is made available to the banks, the Fed funds rate, and now it's essentially zero, and the money is going to become available probably below zero, and interest rates will go boy.
So you talk about distortion.
Even if you took interest rates from 3% down to 2%, Mises says that is still bad, and it will still cause malinvestment.
So what it does encourage people to do things, they think, oh, there's savings out there, so we have room to invest.
But what if it comes from just printed out of thin air?
It's total deceit, misleading.
And that is why we have been living with many, many bubbles.
But we, you know, there's some correction.
You know, in 2000, there was a bubble, the NASDAQ bubble, and then there was a housing bubble, and we sort of get over it.
But we never get better.
We never go back to normal.
We never go back to economic growth.
We never go back to building a middle class.
And we never get back to the standard of living, which was equivalent to, say, in the early 1970s.
We're not there.
And so we just sort of limp along.
And then during this time, even though there's these token corrections on some of these bubbles, the big bubble is still out there.
The big bubble has to do with the dollar, the dependency on the dollar.
Everybody resorts to using the dollar because it's the reserve currency of the world.
And this distorts lending markets.
So who's doing all the borrowing?
The government's doing all the borrow.
But eventually, even if they're borrowing for nothing, there comes a time when you have to start paying.
And if you're not a government that's printing them the money, you end up with a problem like Detroit.
They run out of money.
People leave and there's no income, but then the debt is there, so they go bankrupt.
Well, that will happen to a country, but it's going to be a lot different when that happens.
And that means people will leave the dollar.
But it all has to do with this power to manipulate the money supply and the interest rate.
So if you couldn't get rid of the Fed and you had one thing that you could do to sort of rein in the Fed is take away this tremendous power they have to arbitrarily out of thin air, and it's usually we're designed to one person right now.
Usually the chairman of the Fed announces about the interest rates and decide it, and then they change it.
Well, that is such a myth that she has the vaguest idea what interest rates should be.
And you can't do it with 9, 10, 11, 12, 15 people.
Only the market can decide what interest rates are.
Very, very important, just as a price is for any goods and service.
So if you have an automobile that isn't being sold because the government put a price control on it or any item, you have to get to the market rate.
The people will decide.
In a free market economy, which is very hard for a lot of people to believe because it means a non-political system, it means it's designed to help the consumer.
The consumer gets the best deal, and we're all consumers.
But it's not designed for the banks.
It's not designed for the businessman.
It's not designed for labor wages that are higher than market rates.
It's designed to help the consumer.
Then everybody else is obligated to accommodate the consumers, to give the best product at the lowest price.
And under those circumstances, it would be much better.
But get rid of the power of the Fed to manipulate interest rate.
It is a myth that they do any good.
All they do is harm when they have this power.
So that would be a start.
And then the next day, we'll get rid of the Fed.
And that would be my solution.
But I want to thank you, Chris, for being with us today for our program.
Thank you again, Dr. Paul.
And I want to thank the audience for being with us today.