The economic roller-coaster of booms and busts, that we're all forced to ride, is a creation of the Socialistic institution called The Federal Reserve. By manipulating interest rates and by generating money out-of-thin-air, the Fed creates an artificial boom. Everything artificial must ultimately return to reality. The sooner the return, the better.
The economic roller-coaster of booms and busts, that we're all forced to ride, is a creation of the Socialistic institution called The Federal Reserve. By manipulating interest rates and by generating money out-of-thin-air, the Fed creates an artificial boom. Everything artificial must ultimately return to reality. The sooner the return, the better.
The economic roller-coaster of booms and busts, that we're all forced to ride, is a creation of the Socialistic institution called The Federal Reserve. By manipulating interest rates and by generating money out-of-thin-air, the Fed creates an artificial boom. Everything artificial must ultimately return to reality. The sooner the return, the better.
Hello everybody and thank you for tuning in to the Liberty Report.
With me today is Chris Rossini, the co-host.
Chris, welcome to the program.
Great to be with you, Dr. Paul.
Very good.
Want to talk about the Fed today again and we will continue to talk about the Fed, I think, for a long time until we get rid of it or until it self-destructs and they become insignificant.
And the latter is probably more likely to happen before we get a vote in the Congress to change the monetary policy.
But we want to talk about the bubble mentality because the bubbles exist.
And yesterday I was on an interview show and they asked me, okay, Ron, what are you going to do if you had the power to do it?
How can you solve, what can you do to solve the problem?
And, you know, smoothly, that is, work your way out of it.
And I said, really, you can't do it because the die has been cast.
The inflation has been institutionalized, and that is the monetary inflation, the QEs.
We're dealing with QEs, and we're dealing with all the consequences.
So we have a big bubble.
And so far, the consensus is, especially in the last 50, 60 years, the consensus has been that you paper it over, you delay it, you don't admit the mistakes, you don't allow debt to be liquidated, and you don't get rid of the malinvestment.
You just add on to it.
And this is what we have been doing.
And in a way, it makes people happy.
Even getting out of this last recession, which was very, very severe, and nobody in the administration or the Federal Reserve would admit it was their fault.
It was capitalism, but they're there to correct things and not let people suffer.
So they come in and they patch it up.
So the total collapse didn't occur.
But the patching up gives you temporary relief.
It's like taking a drug, a dose.
And yet the distortions in the bubble just gets bigger and bigger.
And that's what we're seeing.
And a lot of other people are seeing, quite frankly, I think a lot of people in the marketplace are seeing it too right now because they talk about the economic statistics.
And yet right now, a lot of people are selling stocks.
I think the big guys are getting out and letting the other people come in and buy these stocks up.
So we're in a bubble economy.
And Austrian economics has a few ideas on what you should do if you have a bubble economy and how to correct it in the best way, in the quickest way possible.
Yes.
And, you know, for people that read our title, we say that the sooner the better that the bubble bursts.
And that may, on the face of it, look kind of cold.
I mean, do we want economic pain for people?
And of course not.
But that's not the choice.
The choice is not pain or no pain.
The choice is pain or greater pain.
And keeping the bubble going guarantees greater pain.
And we want less.
So we should take the recession, depression, whatever it is, now rather than later.
And if we want to not deal with this at all, we should do what you said at the beginning of the show is to get rid of the Fed.
Because the Fed creates an economy-wide boom and bust.
Even in a free market, there would be localized booms and busts because resources have to shift from one place to another.
But it wouldn't be everyone all at once going on this roller coaster up and down.
That's a creation of the Fed.
If you get rid of the Fed, you get rid of that.
Yes, in some ways we can compare this to an individual or a company when they get into trouble to a certain degree.
Because when a company goes bankrupt, they have to do something about it.
They can borrow for a while, but they can't solve their problems.
If they're not producing a good product and they don't know how to run their company and they're bankrupt, just borrowing more and more money is a dead end street.
And yet, that's exactly what our governments do, and that's exactly what the Fed does.
They get into trouble, and they just create more debt and more fiat money.
And it seems to help on the short run, especially it's going to help the people that the Federal Reserve was designed to help, and that's the bankers and the big corporations.
They do benefit from this on the short run.
An individual or a business can't do that.
They can't print the money, but they can borrow the money and they can go further into debt.
But there's an end to this.
It's much more difficult to let people realize that the end has to come to really get back to sound economic growth rather than waiting for a cataclysmic end to this.
So this is what's happening now.
So they resort to debt.
And actually, this notion was introduced in 1913, but it really didn't get active until the 30s.
Because even in 1931, with a depression that occurred there, 1929.
And so what they did is they just allowed it to go.
And the market turned down, the debt was liquidated, and they went back to economic growth again.
But since that time, it's always been patching it up, patching up, which short-term benefits, but long-term, just a bigger, bigger bubble that threatens more.
And you mentioned it, it engulfs more people.
And ultimately, though, when the whole thing comes down, even those who have benefited, many wealthy people will suffer the consequence too.
But they've been pretty shrewd.
The people who in charge, even in a country like Venezuela and others, that get into trouble, the very wealthy, the control and the politicians, they're able to protect themselves.
But the longer the bubble builds, and the longer we prevent the correction, the more people that get involved, and the greater danger it is.
And the greater danger will be that it will be paid for, which means that the economic benefits of printing money, which, you know, generates some benefits to people.
When interest rates are very, very low, you can get easier housing and more people buy houses, but then you have a housing bust and people lose jobs and lose their houses.
But yes, some people will benefit, but ultimately, when the bankruptcies occur, there's an unwinding of this and there's going to be serious political problems with this.
And we already see the distortion because of the distortion between the rich and the poor.
And that's the middle class plus versus that 5% maybe that seem to be doing quite well.
But that just is a source for more socialism promotion.
Oh yeah, we need socialism to iron out these discrepancies.
But they don't admit to how that happened.
And then they come back and they say, what we need to do is we just need more of what caused the problem.
We need more spending, more debt, more Federal Reserve printing of money, and actually believing that that will be an answer.
Yes.
If you are interested in the truth, I'm going to assume our viewers are.
The bubble is a crisis.
We've been in crisis since 2008.
Now, it's very counterintuitive because when you turn on the television, you have Wall Street traders, they love it.
The magazine covers, we're in the greatest economy ever, the president says, but we're really in a crisis.
And when we return to economic reality in a recession, that's the cure.
And what happens is, and you can bet on it, people are going to be asking the government to get involved, do something, help us.
And what they want is to prevent the cure from happening.
And everything that the government does with bailouts, with price controls, with QE from the Fed, it prevents the cure from happening.
And these very policies help the people that want the help.
So it's just a downward spiral.
You know, Zero Hedge this morning had an article talking about a speech that Yellen gave just a couple days ago.
And I found it interesting because the introduction to the article was that Yellen is concerned, concerned about the coming crisis, and something has to be done.
But it turns out that her concerns and her answers, we shouldn't be surprised, are exactly opposite of what we're talking about.
Because there's a concern, she's going to blame it on anybody who leaned toward free markets by trying to reduce regulations and that undermining Dodd-Frank.
She's afraid there will not be Dodd-Frank because they put Dodd-Frank in position so the next crisis will be handled through regulation.
So they distort everything through inflation and lower interest rates and all this activity and spending.
And then how do you iron this out?
Do you iron it out with reassessing your monetary policy?
No, you iron it out with regulation.
So if there's a failure to what the Federal Reserve does, it's not because of the failure of the system or their theories.
It's a failure of not having enough regulations to take care of these problems.
If there's a distortion in wealth distribution, well, what you do is you tax some people and you turn it over and you pass out the money to somebody else.
So it's a complete distortion of what should happen and blaming the lack of regulations for the crisis that we, the crisis that we're likely to have.
But also, Chris, I'm sure you noticed that the Fed's been trying to shrink their balance sheet.
And I thought it was interesting that in October, they were moving along and Powell said, hey, no, this is looking good.
And we know what our goals are, and we have to have a neutral interest rate, make sure the interest rates coincide with economic growth and things are good.
And it looks like we can do this for a while longer and get these interest rates back up.
And the market didn't like it.
The market didn't like it.
The stock market went down.
There were some other negative singles.
And this made a lot of people nervous.
And also, it made our president very unhappy.
And like all other presidents, presidents are always unhappy with the Fed not keeping interest rates low enough and they don't print enough money to pay for all the deficits.
The executive branch wants to run up.
But Trump did it differently.
Instead of behind the scenes putting pressure on the Fed, he did it out in the open, which is characteristic of his personality.
And I think it's pretty good because it's more honest about it.
But of course, it's lousy economic policy.
But that, along with the fact that the market has changed and the people and maybe the stock market investors are interpreting what's happening a little bit differently, all of a sudden the Federal Reserve said, we've overstepped our bounds.
And within six weeks, they changed their course.
They say, oh, no, we better pause on this a little bit.
I wouldn't be surprised if this pause turns into a long pause because if economic conditions deteriorate and things aren't going well and the president is still a powerful president, annoying the Fed, I tell you, they're not likely to jump back in.
And my thoughts are that we'll have the crisis and it's going to come.
And Dodd-Frank will not save us.
And what will they do?
Interest rates are too low.
Is it another QE4 coming and just purchasing things here and there?
What I think will happen, the QE4 will come.
But it will be different.
There will be a lot of massive buying of assets, even though they're pretending they're reducing their assets.
There's going to be buying of assets.
But I think this maybe the helicopter, the helicopter policy will come about, that they will have to pass out the money to the poor people instead of just bailing out the wealthy people and the bankers and the international.
They'll do that, but they're going to pass out a lot of money.
But that is when this whole idea that they have things under pseudo-control and manipulation by manipulating interest rates and money supply and regulations.
But that's when people will lose confidence in the dollar.
Yes.
And I'll finish, Dr. Paul, by saying that we can fast forward to the end of this.
The Fed will destroy itself.
There's no doubt about it.
Like Dr. Paul said, the chances of Congress repealing the Federal Reserve Act are nil, but we don't need them to repeal it.
The Fed will destroy itself.
And at that point, we're going to have to live through that, or somebody will, but at that point, there'll be an opportunity.
More centralization, you know, those people are going to be out there, or there'll be an opportunity for a solid foundation to get rid of this stuff.
Opportunity After Fed Destruction00:03:58
And that would require sound money, free markets, voluntary interactions, private property, all of these ideas, non-aggression.
If these ideas are strong enough, they can rise up out of the waste that's created by the end of the Fed.
You know, I'd like to finish by just talking about the two greatest incentives for this entire system.
And if you look at the history of the Fed, it was pushed by the bankers, and the bankers want to protect it, and they still are, and they do benefit tremendously from this.
They get cheap money and free money and all kinds of benefits.
So the banking system, very much behind the Federal Reserve System, and they have benefited by it.
But it also, philosophically, it is endorsed by a lot more people because the average person on the street either doesn't care or say, hey, no, I've got lower interest rates for my house, and they'll go along with it.
But the Federal Reserve philosophically exists for big government.
It came in 1913.
Foreign policy changed to be a militant foreign policy.
We had the IRS and we had the income tax, and then we had this monetary system that changed.
But all this was a significant change in our attitude about the role of government.
Yes, the strict restraint on government from the time of our foundings was gradually whittled away even before 1913.
But 1913, the Progressive Era really introduced this whole idea that the government is responsible for taking care of the people.
And therefore, they promoted and endorsed and continue to do so, and that is the welfare state.
And also introduced this notion, especially since in recent years, since World War II, that we have this moral obligation to spread American exceptionalism and police the world.
So these are all justified in their minds in a moral way.
And the system is designed to help poor people in the middle class.
It does exactly the opposite.
It gives us wars overseas.
It destroys the middle class.
More people homeless living on the streets.
It doesn't do what they claim it's going to do.
And yet that's how it gets sold.
And the Congress likes it because Congress will satisfy the people.
People want stuff.
And how do Congressmen get re-elected?
They vote for this.
And is it one party versus the other trying to solve the problem?
One says don't spend so much and the other one says spend more?
No, it's all one party.
They all support it.
They support the Fed.
They support the fund, you know, the wars overseas and endlessly.
So it's the philosophy of government as well as understanding that in the process of endorsing this system, it also props up the special interest in the banking system.
And I think that I feel like the job we have on our program here is to emphasize this because the crisis is coming and the more people who can understand this, the better chance we have in the reforms that will be necessary and why you have to have sound money and why you can't depend and take and listen to yellow and say, oh, the problem is we need more regulations.
If we'd only have regulations, we can fix all the mistakes.
We have a wonderful Fed doing what they need to do, but the market messes it up and we need just regulations to make sure no mistakes are made.
Well, I tell you, that's going to end and we have to convince the American people of that so that they will understand that when the crunch comes, it wasn't because of too little government and not enough regulation.
It came because there was way too much government and that they thought the role of government there was to take care of people from cradle to grave and police the world.
Hopeful Distance Ahead00:00:36
But we will have that opportunity.
Hopefully it's a distance time off, but it'll be coming sooner than we expect.
But anyway, we should be prepared.
And I think the answer is in philosophy and it's not in guns.
It's in philosophy and trying to change people to show that their lives are better off if they have more liberty and sound money and free marketplace and property rights.
That has been what has been successful throughout history and has provided the greatest amount of prosperity for the middle class.
We shouldn't give up on that.
I want to thank everybody for tuning in today to the Liberty Report.