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Sept. 7, 2017 - Ron Paul Liberty Report
21:24
Bubble Troubles: The Fed Has Done It Again

Despite flooding in Texas, Ron Paul was able to call in an audio Liberty Report. The crooked monetary system and Federal Reserve are in the spotlight.

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Time Text
Bubbles and Reserve Policy 00:14:28
Hello, everybody, and thank you for tuning into the Liberty Report.
As you see, we are not in the studio.
We have not quite been able to recover from the hurricane.
I'm still tied down at my home, but I did want to reach you through at least some audio and talk about the economy.
And today, the co-host will be Chris Rossini, who's high and dry in New Jersey.
Chris, welcome to the program today.
Hello, Dr. Paul.
Good to be with you again.
Good.
And this is probably a variation of what we usually do, and that is Missbusters.
But we're going to talk a lot about the economy and what's going on.
And Chris, you have a few suggested items that we might talk about.
Yes, we're going to concentrate a lot on the Fed today because they seem to always fly under the radar.
There's a lot of stuff in the news that has to do with foreign policy, which is very important, and there's also stuff that isn't important.
But the Fed is guaranteed to stay out of the limelight, so we're going to shine a light on them again.
We'll start with bubbles.
And it seems like no matter how many times we experience the booms and the busts that the Fed creates, the prescription is always the same for them to save us, quote unquote, and just do it again.
Well, they have done it again, and there's a lot of bubbles.
So if you could cover those right now, Dr. Paul, thanks.
Yes, and you know, the left and the liberals, the Keynesian always want to say, well, this is all a consequence of capitalism, too much freedom.
This is inevitable, and that's why the economy will always collapse under free markets.
But there is some fluctuations in market supply and demand.
You know, prices go up, there's more production.
If they overproduce, they have to back up.
But there's sort of soft cycles that go in and back and forth as the market adjusts.
But that's normal and natural.
When you talk about bubbles, it's abnormal because what has happened is most important information for anybody, whether you're a saver or an investor, an entrepreneur or whatever.
The most important information on making a good judgment is what the interest rates are.
That tells you how productive the society is, what the people are doing.
Are they saving?
If they're not saving, interest rates would go up, and then the people who are investing might have a different opinion.
But the Federal Reserve, since its very beginning, interfered with interest rates, and as the years went on, much more so.
And they don't say that all the time.
What they say is, well, we have to stimulate the economy because it's important.
Actually, I don't believe in free markets from the very beginning, but it's gotten worse.
The worse the problems have gotten, the more the people and the markets and the financiers become dependent on government manipulation of interest rates.
And yet it is this production, keeping interest rates low, supposedly, to help the economy is something that if it doesn't go well, it makes distortions, and that is it causes not so much a healthy growth on the economy, but it causes inflation of prices and prices get out of hand.
And then that sends a false signal.
Matter of fact, if prices don't go up, our central bank, the Federal Reserve, gets a little bit annoyed.
So they try to keep stimulating them, but the bubbles are there.
Right now, they're still, we're back in housing bubble.
We're back, even the automobile industry is in a bubble.
Everything is distorted.
Everything is distorted because The lack of knowledge about the real interest rates causes not only higher prices in different areas, but it causes malinvestment.
It causes business people to build too much in the wrong areas.
And instead of allowing the correction, correcting the mistakes of the Fed, which they have done over the years, this all stopped probably in this century, both in the 2000 downturn as well as certainly in 2009.
Instead of allowing corrections to occur and liquidate debt and liquidate malinvestment, they just said pile on, pile on, print, print, print.
And that is what they have been doing.
And it's really massive and it's international like it's never been before.
In the past 10 years, the central banks have purchased over $15 trillion worth of sovereign debt.
And even this year, they added another $1.5 trillion, which means they're not stopping.
They're in a panic mode.
They can't understand.
Our beliefs aren't working.
Print money, and the markets will respond.
And at certain periods of time in the destruction of a currency, that does work, but eventually it fails to work, and more and more is necessary.
So what has happened, they've created the biggest bubble, and that's the bubble in debt, sovereign debt.
And that is what we're living on.
And the people who trade in it and deal with it can make a lot of money.
And the markets can make money.
And even with interest rates very, very low, people can still make money at this when they're in business with the Federal Reserve.
But the people suffer and they don't do well.
And they pretend they're going to take care of them, but they really don't.
And so my assumption now is that we're worse off than we were at 08 and 09.
There will be a correction.
We may well have started this already.
I predict a time that in the not too distant future, you will not hear our president bragging about the wonderful marketplace and how positive it's been ever since he's been president.
I don't think you're going to hear that too much because he will have to start blaming.
Hopefully he'll blame the right thing, and that is the Federal Reserve and big spenders, the Republicans and the Democrats.
But that's not likely to happen.
But I think that the correction is on its way.
It's going to get much worse.
It's going to be worse than 07 and 08, 09.
And therefore, it's urgent that as many people as possible come around to understanding how did this all come about?
Is it the fallacies of the free market, like we're hearing incessantly?
Or could it be the fallacies of progressivism, big spending, big government, and central king that creates money out of thin air?
And when they don't know what to do and nothing is working, just create that much more.
It's failing.
And pretty soon they're going to have to wake up and admit the truth.
Some are already admitting the truth.
And there are some negative opinions about central banking.
But right now, that's the only game in town until the whole financial system is destroyed.
And one key thing that I'll take from what you said there is the people suffer.
And that's what the Fed does, even though they're hidden from us.
And I have a very first-hand experience yesterday.
I was walking into the supermarket.
And as I'm walking in, a couple is walking out, and they were loud, loud enough for me to hear their conversation.
And they were just complaining about how expensive everything is.
The potato salad was this much, and they couldn't believe it.
And they were frustrated.
And in my mind, I'm not saying anything to them, but I know that the Fed has a hand in that, and they most likely have no idea about that.
So if you could talk about the Fed's bogus 2% inflation target that they have, is that even moral to have?
And what's the actual reality of inflation?
Well, it's the most foolish thing I ever heard to have this official policy.
It is the policy, but they usually aren't so blunt about it.
But to brag about it and say this is astute economic monetary planning, and this is what we want.
If we have prices going up at 2%, things will be much better off.
But that's like saying, I'm going to take 2% of your savings every single year.
Of course, it's much more than that.
Like the people you overheard, they know there's a problem out there.
It's just because government statistics can deceive us.
And the government CPI isn't anything like it was in the 70s, some people.
And yet they try to deny it.
But the idea that if prices go up, we'll be better off.
It's insane.
Jobs aren't going up.
And one other thing that they claim that if you create a lot of credit, real wages will go up.
Even today, we had a report.
Real wages are not going up.
They're going down, if anything.
We know that there's a tremendous number of people who are not in the labor participation.
The labor participation rate is down to 63% or something.
So even though you read statistics and hear statistics of all these new jobs, you know, the big picture shows that the good jobs aren't out there, and they do have a job.
Their standard of living is going down.
And a lot of people on fixed incomes, like the elderly, their standard of living is going down a lot more than anybody realizes.
But all they're going to do is print more money, print more money, like this is going to solve the problem.
The other thing is, recently, you know, in the news, just yesterday and today, they were talking about Trump and some people in Congress, especially liberal Democrats.
They want to end this whole thing about national debt limit, raise the national debt.
Such a nuisance to always have to raise the debt.
It becomes political and all.
But the truth is, it's hardly the solution.
They're right.
It's secondary to what the problem is.
But the whole thing is, the reason that the debt is a problem is we've created a system of big government spending welfare and warfare and easy money and intervention and boosting all these bubbles.
And what do they do?
They feed into debt.
They couldn't have it.
If you didn't have a Fed, we wouldn't have a national debt.
Who would pay for it?
We'd have maybe, if it were legal, it would be some, but nothing like we have now, $20 trillion of debt.
So they said, well, it's a nuisance.
Let's get rid of it.
But it's really telling us there's something seriously wrong.
And of course, the culprit is the facilitator.
The facilitator is the Fed who's always there to stand by.
Liberal conservatives who like war spending and liberal conservatives who like welfare spending and financial people in the markets they need and want help all the time.
And then it's also the propping up of other currencies that we're supposed to be doing as the reserve currency of the world.
So we're far from understanding, at least at the official levels, that what is really going on.
And the other thing that has done, which is serious, and this might be a big crack in the bubble, and that is the bubble in the reserve currency of the world.
In less than last year, our dollar has been down 10% over with the international, the other currencies, and it's at a 32-month low.
That's pretty significant.
Now, that might not alarm some of the people in the administration.
A lot of populist protectionists like it.
They want the weak dollars.
Well, that'll help our exports.
And they want that, but it's a form of form of protectionism.
But you can't get rich by debasing the currency.
You can't get rich by having a weak dollar so you spend more for imports.
Or you can't get rich by causing retail prices to go up by our consumer.
If we care American people first, you don't promote inflation.
Therefore, you don't promote debt.
And you address the subject of the Federal Reserve.
That would be dealing with the American people first.
As a matter of fact, there would be a spin-off, and we would help the world in this problem anyway, except we have done the opposite.
We've been in charge of the world currency, especially since World War II.
And so we've exported our inflation, and we still do.
But it looks like it just may be coming to an end.
Yep, let's hope so.
And even though we're forced to live under this crooked system that we have, real money is always waiting in the wings.
And as you pointed out to me earlier before the show, year to date, the price of gold is up approximately 17%, which is very good for the year.
Now, central banking advocates and Keynesians, they don't want us paying attention to gold.
A lot of them call it just a pile of rocks.
You don't need that.
Yet the price of gold tells us that it's not just a pile of rocks.
Can you talk about that, Johnson?
No, 6,000 years of history to back up our beliefs on this.
But we have to realize that we have to challenge the official pronouncement of Chairman Yellen because I wanted to make sure, you know, about gold being money.
So I wanted to get some reassurance from her master.
No, that was Bernanke.
I'm sorry.
Is gold money?
And he said, no, it isn't.
So we're challenging the Federal Reserve.
But that's our business, challenge the Federal Reserve.
But they don't want the rules of the gold standard.
That would immediately limit big government spending.
It would change the whole nature of what has happened.
And because in the early stages of the debasement of a strong currency, actually things get better.
So we have done well over the many decades because we were making use of the wealth that we have accumulated.
Why Gold Matters 00:06:28
But now that is coming to an end.
The dollar is a better measurement of really what's happening in terms of gold.
The price of gold is important.
The value of the dollar to other currencies is good.
But in a way, even if the dollar didn't go down a lot with the other currencies, it might be because the other currencies are weak, which they are.
But even with the other weak currency, our dollar still goes down.
But the gold is a very good way to measure what's happening to a country, how much spending we have, how much debt we have, what's happening to the system.
It's not going to be good on a very short term because things don't work quite that well because you can pick out times in our recent history where if you say Rona sounds right, you better have gold.
And so back in 1980, if they had to buy gold at $800 an ounce, it'd be more than $800 now.
But for the many, many years, it wouldn't have been.
So it's not going to be instantaneously besides.
Government is rigging the price of gold all the time.
And they rigged the price of gold at $35 an ounce, and that lasted for decades until finally that broke down, and gold went from 35 to 800, which is a reflection of what reality was.
Although the market is not, you know, it doesn't stop on a dime.
Sometimes it overreacts, sometimes it underreacts.
So it went from 35 to 800.
That's a huge gain.
And that was by, you know, from 1971 to 1980.
And then for almost 20 years, gold was in the doldrums.
From 800, it drifted all the way back to $270.
And the inflation continued, but the people didn't discount it.
They weren't concerned.
And I guess they figured, you know, it'll work out.
But come year 2000, gold is back down to 270.
And all of a sudden, the market decides and overwhelms the government rigging the prices.
And the market takes the price of gold up to $1,800.
And yet that was probably an overshoot.
But on the fundamentals show, there's something wrong.
It's not the kind of information that would be easy to trade and make a bundles of dollars just on trading.
But then that $1,800 announcement went back to over $1,000 an ounce back to less than two years ago.
And it at that time at $1,050.
Now it's gone up $200 since that time.
So I think that long term, if you watch it cautiously, don't think that on a very short term you can invest and make a killing and sell it.
But long-term protection and understanding fundamentals, realizing gold is the real money of the centuries, is very, very helpful.
And I remember one statement that I thought was profound that Ronald Reagan told me when we were in a private conversation.
He says, any country that has ever, any great country that has gone off the gold standard never remains great.
And there's probably a great deal of truth to that, because if you look at history, you find out that as great nations start to disintegrate, they're also debasing their currency.
It's a bad sign for us that we're debasing our currency and pretending that is proper, moral, and good economic policy.
And I consider it's closer to insanity.
And to extend on that with the great nation, apparently China wants to be a great nation.
And there was some major news proving that gold isn't just a pile of rocks, which is what we're told to think.
But China is set to launch a crude oil futures contract that's priced in yuan, their currency, but it'll be convertible into gold, which is major news and can over the long term really affect the dollar and the quote-unquote petrodollar.
Can you talk about that, Dr. Paul?
Yeah, and this shouldn't go, this shouldn't be ignored.
This is very significant.
It doesn't mean tomorrow in 30 days or so, but they talked about doing something like this.
The various countries that are tired of how we mismanage the financial world.
So it's been out there.
This is a precise suggestion.
And it may well go through.
And this will really hurt our dollar.
And it's going to push the gold price up.
And it will be a really big problem for us because that means our spending and everything else is going to go up and our debt is going to get much worse.
But this was indicated several decades ago when they started looking where the gold was going.
And the gold was actually leading the West.
The Western banks, whether it was Canada, United States, or England, they were selling gold to central banks.
Oh, it's not money.
Let's sell it.
But guess what?
There were banks in the Far East, Japan and China and India, they were buying gold up.
So there has been a shift.
And when we, as a powerful economic system after World War I, due to various factors, we were the economic power, but we also had most of the gold, too.
And that lasted for a long time.
But because we have mock gold, we don't use it and there's no soundness.
Just having a weaker dollar is thinking increase our exports and solve our problems and we'll keep printing money so that everybody can suffer from more price inflation.
If they ever get that price inflation going, they're going to have so much they're going to say, I wonder how we stock this.
And that could turn on a dime and be, and they'll have to admit that it's more than 2%.
But no, this whole thing about China setting this program up, I think, is a sign of the times and it's something to be watched.
And maybe we'll have a lot new more news in the next two, three months.
It might even take longer.
But that is the trend.
Away from the dollar hegemony and the power that we have in the economic system, which we use as a wedge for everything we want to do militarily around the world, all the sanctions we put on, because we control the financial system.
Dollar Hegemony Threats 00:00:26
We can put on sanctions.
And if they don't obey us, then we threaten them with bombs.
I think that whole system has aggravated a lot of countries, and that's why you're seeing proposals like this.
Anyway, I want to thank our viewers today.
And Chris, thank you very much for helping us out on this Ron Paul Liberty Report today.
Of course.
Thank you, Dr. Paul.
Well, good.
It's good to have our listeners today.
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