Just as government always lies about its wars and their “progress," they also lie about the economy and inflation. It’s not very hard to do when a compliant media parrots the same lines in unison. Ron Paul talks about the Fed’s massive creation of new dollars in 2008 and how it created an even bigger problem that we’re now going to have to face.
Just as government always lies about its wars and their “progress," they also lie about the economy and inflation. It’s not very hard to do when a compliant media parrots the same lines in unison. Ron Paul talks about the Fed’s massive creation of new dollars in 2008 and how it created an even bigger problem that we’re now going to have to face.
Just as government always lies about its wars and their “progress," they also lie about the economy and inflation. It’s not very hard to do when a compliant media parrots the same lines in unison. Ron Paul talks about the Fed’s massive creation of new dollars in 2008 and how it created an even bigger problem that we’re now going to have to face.
I want to talk about inflation, something I've been thinking about for a long time.
You know, even before the breakdown of the Bretton Woods Agreement, back in the 60s, I became fascinated in the subject of monetary policy and inflation, and that certainly warned us about 1971 when the Bretton Woods system broke down.
But it's been an ongoing problem.
It's pretty amazing that the dollar delinking from gold has lasted so long, even though there's been lots of ups and downs.
But we want to talk about inflation, and we want to make sure that we get the definition of inflation out there correctly, whether it's just the CPI going up or whether it has something to do with the Federal Reserve.
But right now, one of our challenges is the fact that most people believe that inflation is prices going up, and the CPI is the best measurement of that.
And the government wants you to believe that, because if that is the case, if you see the CPI is going up, then you wouldn't blame the Fed for that.
You have to blame people who are making profits or not making the not right stuff and there are shortages because the free market doesn't work, that sort of thing.
So there's quite a bit of difference, and that's one of the reasons why they want us to believe that the CPI is independent of the Federal Reserve.
But Chris, I'm sure you've looked at this and studied it because we've talked about it so much.
And there are a lot of things that are increasing in price.
So there's price inflation out there, which is a significant event.
And that is not, and they are not calculated in the CPI.
People depend on the CPI and the PPI.
But what are some of the things that you've thought about that we should be talking about and we shouldn't exclude from the problems that the consumers face?
Well, since the government and the Fed is a source of inflation, you shouldn't automatically believe them when they tell you what inflation is.
You never want to believe government statistics or take it with a grain of salt at most.
Because just like with the wars, they will stretch the truth and always tell you that things are great, things are turning around, the economy is great.
Remember, politicians want to get elected.
They want to keep their parties in power, and they don't mind not telling you the truth.
And on the other side of that coin, many people will believe politicians over their own eyes.
Inflation Manipulation00:11:27
So even if prices are rising on their bills, if Barack Obama says there's no inflation, then there's no inflation in their minds.
But there is inflation out there.
We're going to point to it.
And we see it in the stock market, the bond market, the Bitcoin in art and luxury goods, and of course, student debt and the cost of government.
So there is plenty of inflation out there, Dr. Paul.
And it started back in 71, but it got a nice kick in 2008 with the Fed's trillions of dollars that they printed.
Yes, and we haven't seen the final conclusion with those trillions of dollars that the Fed created because they've been sitting around and the markets didn't really absorb them.
But they are coming out of the woodwork now and they're entering the economy and you're seeing more of the prices going up.
Mortgage debt is going up.
Property values are going up.
Farm properties are going up.
And all these things, there's a lot of prices of these various things going up and yet not calculated in the CPI.
How about the cost of medical care?
Atrocious.
And I've noticed one thing over the years that, yeah, it's a monetary issue.
The Fed starts this whole ball rolling and gets the inflation going.
But then again, then there are regulations like in the housing markets.
Banks were told they had to make bad loans and compounded the problem.
Same way in medical care.
As soon as the government gets involved in medical care, all this expense is going to the middleman who doesn't produce anything and interfered with the doctor-patient relationship and costs have skyrocketed in medical care while the quality has gone down.
And what about education costs?
Think of the expense of going to one of these Ivy League schools.
What kind of an education do you get?
It's usually propaganda coming from the far left and nothing to do with a true education.
So there's a whole lot of inflation.
And when you think about the cryptocurrency, there's a ton of inflation in that as well.
And the final results of that are yet to be seen.
But I imagine that you wouldn't have nearly a half a trillion dollars invested in cryptocurrencies if there wasn't inflation by the monetary system.
Because if you had to only resort to savings, which would happen in a free market economy, people save money in excess of what they consume.
That would become capital.
And that restrains making a lot of mistakes or pushing prices up too high, restrains the malinvestment.
But you can't come up with these kinds of monies to make all these prices go up in a free market.
Yes, you will have fluctuations in the free market, and that is important to modulate the supply and demand in the various industries.
But it doesn't do this in a massive sort of way of what we have here.
And also, you have to think about when the Fed creates this money, it loses a lot of control on where the money goes and what the velocity is, how fast the people use the money.
Then again, and I'm sure you're aware of this, Chris, is the fact that there's another source of monetary inflation, not only the Fed creating all that money for the bailout, but what about fractional reserve funding as well?
Yes, fractional reserve, that goes, we could go way back.
Bankers have always been trying to get an edge on lending more money than they have to lend.
And that's how fractional reserve, that's what that means, is they have a fraction of what people believe is in the bank.
So if I was to go to the bank and everyone was to go to the bank, we couldn't all get our money, even though we all believe our money is there, because they just don't have it.
They've loaned it out.
And that's fraudulent to do that.
But they got in with the government.
They made this whole system up with a central bank that manages it all.
And that's the source.
When inflation hits and our consumer prices really do start to rise, we have to point the finger where it belongs, and that's the Fed.
It's not greedy businessmen who just want to make more money.
It's not oil chics or thousands of other reasons that they could come up with to take our eyes off the Fed.
It's the Federal Reserve.
Yes, and they put a lot of energy into protecting their interests and the image of the Federal Reserve.
One thing I can say in the time that I've been involved in politics, I think the attitude has changed.
And I bet a lot of our viewers recognize the fact that the Federal Reserve is not a friend of the American people and a friend of the consumers.
And they are the culprits behind all of this.
But our government still is very determined to portray myths.
The one myth that just really bothers me a lot because it still floats around here, and that is governments portray the CPI as the ultimate measurement of inflation.
And when the people don't take the credit the Federal Reserve has created and use it the way they want, they just produce more and more credit and thinking, well, they need to do this.
But one of the measurements that they have been using in these last couple years as a sign when they can see the economy is picking up is price inflation with the CPI again.
If the CPI doesn't go up like they think it should, then it's a weak economy.
So if the CPI is going down a little bit, which could happen in a free market and sound money, CPIs could go down.
That's one of the advantages.
You get more for your dollar and the dollar is worth more.
But no, they decided that the goal is a 2% inflation rate.
So they set out the goal as deliberately debasing the currency at a precise rate of 2% as a sign of a healthy economy and sticking it to the consumer, which means mostly the poor people and the middle class, because the banks don't care about this.
And the people who are living off the Federal Reserve and big government, they don't care about this.
But that is the policy that has to be the most ridiculous ever that a rising CPI equates with a healthy economy.
Then if you say, well, it looks to me like the most prosperous country in the world might be Venezuela.
They have lots of CPI going up and that must be really good, which is obviously not the case.
And for them to think that they can get prices to go up at 2% rate and hold it there is foolish.
I think eventually what we're going to see, well, prices will be, and they'll finally have to recognize what we're recognizing here is that it's going up at a certain rate and not doing any good.
And that is what the real problem is.
And they think that a rising consumer price is going up.
But what they're going to run into is the CPI, even the government measurements are going to go up much faster than they want.
And they're going to have a problem on their hand.
How are we going to slow it up?
Oh, what we need to do is raise interest rates and cut off the money again, once again, causing the distortions.
But there's been so many distortions in the economy now with the distortion of the money supply and the interest rates.
And I think, Chris, you mentioned the fact that prices are pretty important.
And what about the price of interest rates, the price of money?
That, to me, is a key problem and why we have so much expansion of debt and malinvestment.
Yes, interest rates should be set in the market.
freely between savers and borrowers.
There need not be a central bank that artificially manipulates interest rates because it causes distortions.
It causes problems that are ultimately going to have to be fixed.
And the Fed, when they create this money, they can't control where it goes.
We're dealing with hundreds of millions of people.
In fact, much of the world uses dollars.
So they can't compartmentalize where the money goes once it's created.
But it's unusual because the media gets involved and they start cheering when the money goes into the stock market and there's a bubble or the housing market.
And then the central banker is lifted on a pedestal as a maestro like Alan Greenspan was.
But if it goes into higher gas prices or higher food prices, now it's not so good.
But the truth is none of it is good.
It's all distorting.
And what we need is for prices to tell the truth about supply and demand.
We need the truth to make good decisions.
The Fed prevents us from making good decisions.
Now, there's a lot of misinformation.
There's a lot of people who've been taught the wrong type of economics and they disagree with us.
But there's a lot of conspiracy involved with these bad ideas, and it's purposely deceitful to us.
And I would say that one measurement of inflation over the years has been gold, because we can trace the value of an ounce of gold for thousands of years, and it's pretty sound.
Not all the ups and downs are exactly what you think they should be.
But ultimately, gold is a pretty good measurement of inflation.
And that is one of the reasons that government liked control of the money system, especially when it was backed by gold, and even when it's not backed by gold, like today.
Because if gold would go up purely at the market rate, if it goes up too fast, what would happen if next month gold doubled its dollar price?
And people, this would be a panic because gold is very reliable.
So the government had a lot of interest in manipulating the gold price.
And you say, oh, no, that's too much conspiracy stuff for me.
But what did they do, you know, from when they started the Bretton Woods in 1945 up until 1971?
They manipulated the exchange rate of gold to dollars at $35 an ounce, saying the dollar is as good as the gold, as good as gold.
The market finally overwhelmed and made it go into the marketplace, and that's when they had to close the gold window.
But even now, even though they don't have a connection to gold like that, actually, I see that the government probably technically has a legal authority to be in the gold money in the gold market because of some legislation in the 1930s.
But I'm sure that they get in there and if gold's going up too fast, they're capable of doing that.
Other people don't believe this.
They've done it in the past, and if it serves their purpose of not saying that, because if gold goes up too fast, it's a reflection of bad inflationary policy and bad monetary policy by the Fed.
So I believe that exists.
What about the CPI?
That's a government measurement.
And sometimes it gets moving too fast, so they change the rules and give you a different CPI.
So that's another lie that they portray by saying, well, prices aren't going up.
Possible Market Correction00:07:35
Behave yourself.
There's no inflation.
We don't have to raise your Social Security benefits.
And then what if tomorrow the stock market goes down 20%, which is conceivable.
It's happened before.
In 1987, it went down 20%.
So it's conceivable that there'll be a correction.
But after it went down that much in 1987, there was an invention by our president, our conservative president back then, and created the Plunge Protection Team.
The Federal Reserve and Treasury and others involved, Treasury, that they would interfere in the market to make sure that nobody realizes the truth.
So they're always propping up the symbols that say that the Fed is doing a good job.
The Fed gets away with a lot because if there has been over the period of time, I think they're losing their credibility, but they have always gotten credit for the boom times.
And then if there was a correction, then it was somebody else's fault.
It was the corporations or the banks or the consumers, somebody speculate too much.
And then they say, but there's a recession going on, but the Fed got us out of the recession.
And so they were winning all the time.
But they're not winning like that now because they're at the end of their strings.
What are they going to do if we have a sharp downturn with interest rates at 1%?
How are they going to lower it at 2% or 3% to stimulate the economy?
It's just not going to happen.
So Chris, do you have a little summary for us today on how you look at this problem?
And are you optimistic that we're going to solve it in the next month or two?
Optimistic long term, pessimistic short term.
As Ludwig von Mises pointed out, when the central bank inflates, it carries the seed of its own destruction within it.
And that's what we have to realize when crisis occurs.
The crisis is the Fed printing the money, creating an artificial economy.
That's the crisis.
The pain that must follow, that's what we call the crisis, the financial crisis of 2008, 2000, the busts.
But those are the cure.
Those are not the real crisis.
Even though they're painful, they're bringing us back to economic reality.
The Fed takes us out of economic reality.
So it's important to be able to distinguish what's happening, kind of like when you get a fever.
The fever is not a crisis.
It's the bacteria or the virus that the fever is curing.
So that's, you know, we're going to go through it, economic pain, but it's actually the correction is the cure.
What we have to do is stop looking to the Fed and the government to save us.
We have to get rid of all of their activities so that we can live normal and sound lives.
Right.
The way I see this is there's a contest going on.
It's been going on maybe throughout the ages, but it's very precise right now.
It's a contest between the market and the government.
And I demonstrated that by saying, you know, when gold was fixed at $35 an ounce, eventually the market won and they had to quit and allow the price of gold to go up or the dollar to go down in value.
So it's a contest.
Markets sense when there's too much debt and too much malinvestment that you have to correct it.
You have to have a deflationary factor.
You should really allow prices to go down, a cleansing of the economy.
And yet that would ultimately restore, you know, a period where you can have growth again.
And that is what we've quit doing.
In 1921, when we had a bad depression, it lasted a year and a half and it was over because back then they didn't bail out everybody.
But by the 1930s, they had shifted Keynesianism and said, don't ever let it happen.
But now we're at the end of this Keynesian period because the bailout that we witnessed in 09 is still plaguing us.
But the government and the special interest and the banks always demand inflation to prop up the debt.
And a lot of support comes from that.
If you're on the receiving end of anything from government, you don't want the real truth about this.
And it is true that if you allowed that deflationary period to occur, even though it might be one year, there will be people who would have to back off.
But if it happens to an individual, if an individual has been living way beyond his means, and finally the banks won't loan him any more money, he has to quit.
He has to cut back on spending.
He has to work harder and get rid of the debt.
Then he can have his own personal economic growth.
But governments are different.
And especially if you have the reserve currency of the world like we do, you have more license to steal by just printing more and more money.
So this is the contest between the market demanding deflation and liquidation of debt versus the government that says debt's not a big problem.
We have to complete and continue to inflate and spend.
That's why they're in stalemate in Washington today.
They've been in stalemate for quite a while.
But once again, this tax bill, nobody should believe that all of a sudden this is mysteriously going to heal all the wounds.
That's not going to happen.
Will it change the responsibility of Congress and the government?
No, government is going to continue to grow.
Deficits are going to continue to grow.
And this problem is going to demand that we inflate even more.
So even though there's a period that we're seeing now in the stock market, everybody's feeling pretty good about themselves and that things are working out.
Believe me, when you look at all the statistics, there's a lot of places over there where there's a lot of inflation, a lot of malinvestment.
Now, I do want to finish on one bit of information that I found rather interesting, and that has to do with a report the Federal Reserve of New York put out in 2014.
They said that we should have a different gauge for inflation.
I thought, well, that sounds like a pretty good idea.
I wonder what they're going to do.
And I expect it to be totally negative.
But they made a suggestion along the lines about what we're talking about here.
They made the suggestion that in just looking at the CPI, they ought to include the PPI, the CPI, commodity prices, the prices of financial instruments, the bonds, and the stocks, and make it all inclusive.
And that's more or less what we're talking about.
Now, that was a proposal that was made in 2014, three years ago, and it's floating around.
They obviously have not accepted it.
Maybe they look at it each month, but believe me, they wouldn't be talking about, well, we need more than 2% inflation because this measurement measured by the Fed is over 3%.
And I'm suggesting that if you measured everything that we should be, the prices and the distortions are even greater than that.
So that's a little bit of information that maybe there'll be some members of the Federal Reserve that would say that maybe we should question just following the CPI.
But what they should question is this whole idea that prices are the answers rather than once again, as we have in the past, look at the money supply.
Look at what they did to bail out in 2008 and 09 from taking the balance sheet to 800 billion up to $4.4 trillion and they don't know what to do with it.
And now it's starting to leak out and fractional reserve banking is setting the stage, I think, for a lot more price inflation.
Fed Ignored Views00:00:46
So I think the more people who understand this, the better it will be for all of us to try to protect ourselves and hopefully have a little bit of influence on the people who represent us in Washington.
But unfortunately, if I call up the Fed and ask them if they're interested in my views, I don't think they're going to welcome me because that wasn't the case when I was in Congress.
But eventually they'll become irrelevant because sadly, they're going to continue to do what they do and things will have to be changed, not because they've done it deliberately for philosophic reasons, but because of a necessity because of this system going to fail.
But Chris, I want to thank you very much for joining us in this very special program.
Thank you too, Dr. Paul.
Very good.
And I want to thank our viewers today for tuning in.