The Fed's counterfeiting has created the biggest economic bubble in history. A severe economic crisis will be the inevitable result. Indications from Fed Chairman Powell are that more QE will be on the way. Can an increase in the disease succeed in being the cure?
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Bubble Economy Warnings
00:13:03
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| Hello, everybody, and thank you for tuning in to the Liberty Report. | |
| With me today is Chris Rossini, our co-host. | |
| Chris, good to have you on the program. | |
| It's great to be with you, Dr. Paul. | |
| Well, very good. | |
| And we have a few things to talk about. | |
| Believe it or not, we're going to talk about monetary policy, the Federal Reserve, and how wonderful the economy is, because that's good for politics. | |
| But we try to do that at times. | |
| We try to put a good spin on foreign policy, but it's pretty hard if you want to be really upfront the best you can and don't lie to ourselves. | |
| I think most of the lies that are perpetuated in politics is because the politicians lie to themselves. | |
| They end up believing this stuff so often. | |
| But anyway, we do persist because I think it's one of the important issues. | |
| The monetary issue was the issue that drove me into speaking out in politics with the idea of, well, at least I'll speak out without much expectation of anything coming of it. | |
| But this week's an interesting week. | |
| There were some attention. | |
| There was a lot of attention given this week because Powell was before the banking and the Senate banking committees and testifying. | |
| It wasn't anything too startling, but there was repetition, of course, of how do we manage and the usual questions, and the markets didn't get rocked, but there were some statements. | |
| And I want to pick on one thing to start with, Chris, and that is he inferred, he was pretty explicit about it, that on the next downturn, it isn't like, will we have another downturn? | |
| But the next one, and the inference was it has to be worse because you know what? | |
| We don't have any tools left. | |
| It used to be, he's not saying these words, but this is what I think is in his mind. | |
| We used to have the tool of just, you know, lowering interest rates, and we could perk up the economy, spend more money, and monetize the debt. | |
| But he was saying, you know, we don't have that tool. | |
| So when the next one comes, it's going to be more tedious. | |
| And he says, we may well have to start off with QE again. | |
| And I said, we already did. | |
| You know, back in September when the repo market seized up, you started back, and there's hundreds of billions of dollars even this day that we speak. | |
| Almost $80 billion had to be injected in order to keep the overnight rates from going above near zero. | |
| But the management of money is their calling, and they're trying to do something that I think is impossible. | |
| They can fool a lot of people a lot of the time, but you know what? | |
| Eventually, all the people don't get fooled, and there's a lot of people looking for who's going to get the blame. | |
| And I think that's the political question. | |
| And you and I, Chris, have talked about that. | |
| Well, maybe, you know, even if a crunch comes, a real crash comes this summer, Trump is, you know, pretty capable at public relations, and he might not suffer as other politicians have. | |
| And he's already, and I've said this before, he's already lined it up. | |
| He'll be blaming the Federal Reserve, which is sort of right, but he's also fed it into the Federal Reserve. | |
| He spent all the money and put the pressure on them to print all the money. | |
| Right, Dr. Paul. | |
| He has been the biggest cheerleader of the Fed's policies of low interest rates, artificial interest rates. | |
| And this week he even tweeted, best USA economy in history. | |
| And I also found a quote from the Fed chairman Powell, who he said, there is nothing about this economy that is out of kilter or imbalanced. | |
| Boy, are their views the polar opposite of ours. | |
| Now, we do not deny the existence of this bubble. | |
| It is a real bubble, just like the housing bubble was real and the stock market was real. | |
| What we're saying is that it's artificial. | |
| It's built on a house of sand. | |
| And just like the housing bubble and the stock market bubble, there will be a very real bust. | |
| And because this is the biggest bubble of them all, it's going to be the biggest bust of them all. | |
| And the reason is not because we have the best economy in history. | |
| It's the exact opposite. | |
| It's the biggest distortion in history. | |
| Now, you can have great economy, great growth, prosperity that is sustainable, that it has a solid foundation under it, but you need sound money. | |
| And we have the exact opposite. | |
| We have a credit illusion that makes things look good. | |
| And when it falls apart, it's really, really bad. | |
| And I don't think they're going to come to their senses because there's a little bit of pain taking the medicine. | |
| So they're going to continue to do this. | |
| This is why people should be prepared for it to understand it. | |
| But the one thing that is not understood very well is that when governments take over the management of money and they inflate the currency and distort the interest rates, that you do have an unstable economy. | |
| But it's not always the same way. | |
| You know, at the end of the last century, it was the NASDAQ. | |
| A lot of money went in the NASDAQ bubble, but then when it crashed, it affected a lot of other people. | |
| Then, of course, a lot of people identified the housing bubble, and lo and behold, that was correct. | |
| The housing bubble let go. | |
| Now, we have, I see a lot of those bubbles out there, but I don't know how many of those will be the best, which one will be the best indicator to be watching. | |
| My guess would be it's debt, because yes, we inflate the currency. | |
| Does it translate into economic growth? | |
| And the statistics, even Federal Reserve statistics show, you know, as the money supply grows, the real economic growth is pretty flat. | |
| So it isn't achieving. | |
| It used to be in the old days, okay, we'll stimulate the economy, and so many new dollars could produce so many new economic success. | |
| And this is why the rhetoric sometime right now, and you pointed out that, Chris, the rhetoric is very, very positive. | |
| But with the amount of inflation of the money supply, we should have really something big going on. | |
| But, you know, they never seem to ask, nor do the socialists who want to give a socialism, they never ask, well, if that's the case, why is it these countries that usually just totally fold on Venezuela or Zimbabwe? | |
| They printed a lot of money, but the more they printed it, the worse things got. | |
| So where the money goes and how it's been, how the people are going to react is not a predictable event, just that it will happen. | |
| You know, there will be a distortion and there will be a correction. | |
| And because this so-called on the surface, there's been a tremendous boom, I think that means that we're going to have to face up to a lot more problems. | |
| But it's a system that is very, very friable. | |
| And the number one economic threat to us and why we have so many problems sitting out there, whether it's the consumer prices or the amount of debt that exists, it's the fact that the government can do this and people spend it the wrong way. | |
| I mean, just think of the consumer debt. | |
| It's $14 trillion now. | |
| A lot of credit cards and mortgage debt and also student debt. | |
| I mean, it's a tremendous amount of debt. | |
| So I think debt is a good measurement because eventually it would have ended a long time ago. | |
| It would have never gotten like this if you'd have had interest rates. | |
| But when you get interest rates real low, the economic information is, oh, there's savings out there. | |
| But people just dispose with that because that doesn't happen because we don't allow the market to work. | |
| But the message that the investor gets is, it's money is cheap. | |
| Let's do it. | |
| And they will borrow and they will consume, but it would be over in some other area. | |
| And then they get a lot of dollars and they protect it. | |
| They don't really invest it. | |
| And then they come up short in spite of all that money out there, all this printing. | |
| You know, in the morning, they don't have enough money for the repurchase agreements. | |
| And the Fed comes to the rescue. | |
| They're up to over half a trillion dollars. | |
| And this question about will they resort to QE again and QE4? | |
| Well, of course they will because they have. | |
| And I've used the date, and I want people to remember the day, September 17th of last year, was the morning people woke up and it was not predicted. | |
| Austrian economists would predict that this is a possibility, but there was nobody in the marketplace with a lot of money involved that really said, oh, tomorrow we're going to have a problem with there's not enough liquidity because that's all the government does is provide liquidity. | |
| And that is when the near-zero interest rates shot up to 10% and the ballgame was over as far as I was concerned. | |
| They have to think differently now. | |
| That is why, you know, Powell says it's not going to be enough just to grab hold of the control of the interest rates and we'll get everybody back up to speed again and nobody will worry about the economy. | |
| I think there's a lot to worry about the economy and that has economic repercussions as well as political. | |
| Right, Dr. Paul, you touched on a very big number that I'm going to talk about as well, and that's the household debt for the first time surpassed $14 trillion. | |
| You know, that's just another sign of the bubble economy. | |
| And, you know, in a bubble economy, you have bubble jobs. | |
| You have people in jobs that they're going to lose them once the party is over. | |
| And it's unfortunate because they're losing the jobs loaded with debt. | |
| So they're going to be without a job and loaded with that. | |
| And you can't turn to the government. | |
| The government's even worse positioned than you are. | |
| So what are they going to do? | |
| They're going to print. | |
| They're even saying it. | |
| The Fed will use tools aggressively if they are needed. | |
| And they're going to be needed. | |
| So they're going to print. | |
| And, you know, that's the exact thing that you do not want when you're out of a job and you're loaded with debt because printing will drive up prices. | |
| You know, if you're out of a job and loaded with debt, you want prices to come down. | |
| Fed's not going to allow that to happen. | |
| They're going to print money and they're going to drive up prices. | |
| So you're going to be without a job, loaded with debt, and prices are going to be rising around you. | |
| This is what happens when people do not understand the toxicity of the Federal Reserve. | |
| Yes. | |
| And, you know, when the problems come and hit home and the usual conventional things aren't working, there's a lot of talk, too, about, you know, how do we get the money into the hands of the people? | |
| And there are good Federal Reserve statistics that show that in the last 10 years, there's only been an increase in real wealth in the very wealthy. | |
| Everybody else, although compared to what, there's shown that they are doing better. | |
| But no, if you take a 10-year period, people, only the very wealthy has more wealth than the middle class and the rest. | |
| But I mentioned the fact that there's a lot of money out there, and people don't know what to do with it. | |
| Some of them just put it where they can't lose it. | |
| A guy like Buffett, he actually doesn't know where to put it, so he has to park it someplace because there's so much of it. | |
| But eventually, though, the politics of it will be with the socialists running and demanding equal justice before the Federal Reserve, they're going to want some of the action, and they're going to get it. | |
| I think the helicopter money will come, which means that cash will be passed out to the individuals. | |
| And there were presidential candidates on the Democrat side. | |
| They actually wanted to do that. | |
| I want to give everybody $1,000 a month forever, you know, and that'll stimulate the economy. | |
| Well, it will stimulate purchases of goods and services, and prices will go up. | |
| It won't have anything to do with it because you have to have productions and savings and allow interest rates to determine how it will be spent. | |
| But when it's very definite, you can see that there's a lot more effort to send checks directly out, not that there's not a lot already, but when they really emphasize this, that is when I think that although we see a lot of price inflation already, I think you'll see a lot more price inflation if you have the helicopter money moving in, and that will be a currency cash inflation. | |
| That's the kind that Zimbabwe and Venezuela have, and the kind that we tinkered with in the 1970s. | |
| And lo and behold, they came up with this such a surprise that prices were going up in the midst of a recession, you know, the stagflation. | |
| So I think as time goes on, more people will, reading some statistics, say, well, the economy is doing pretty good, but there's inflation, you know, this sort of thing. | |
| So they'll keep trying. | |
|
The Stake Is High
00:05:26
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| They're not going to give up because so much is at stake. | |
| When I say it's at stake, it's at stake for the big money managers, big business, and the big banks. | |
| There's a lot at stake, and they get less consideration, and that is the average person. | |
| Although politically, they seem to get all the attention when you think essentially every one of the Democratic candidates are talking about how you build the welfare. | |
| And you have Republicans in. | |
| The welfare system never backs off. | |
| And spending goes on not only just as fast as the Democrat, very often more than the Democrat. | |
| So that's going to continue, and the default's going to explode. | |
| Eventually, it's going to quit because people will lose confidence. | |
| And that's when everybody better be prepared. | |
| Right, Dr. Paul. | |
| I'll finish up by saying, you know, we have a lot of smart viewers, many thousands of them. | |
| So this is not going to come as a surprise to them. | |
| But crisis is an opportunity for people that are in power. | |
| You know, that's when people run to government. | |
| Please help me, help me. | |
| And boy, if you're into power, that's exactly what you want. | |
| So there's definitely people who believe that they're going to swoop in and pick up the pieces with their socialism, with their interventionism, cronyism, whatever they have in their minds. | |
| We have to always remember that central planners cannot succeed. | |
| They always miscalculate. | |
| They can't factor in all the variables because we don't even know all the variables. | |
| Think about what they've done in the Middle East, how they were going to bring democracy and freedom and rebuild into a paradise. | |
| They've done no such thing. | |
| It's been 20 years now. | |
| And they'll never do such a thing. | |
| So there's no doubt that there's people waiting in the wings with their crazy ideas thinking that they will rebuild society, this capitalist failure. | |
| They will do no such thing. | |
| They can make things a lot worse if we allow them, if people do not understand and don't at least know the right ideas. | |
| And that's where we come in because liberty is the only way out. | |
| We can have a society built on free markets, sound money, voluntarism, but people have to want it. | |
| They have to know about it. | |
| And hopefully we're contributing to that. | |
| Very good, Chris. | |
| And I'm just going to follow up on your point that when these problems hit, there are those individuals and companies and banks who know about it and they take advantage of it and they grow in wealth. | |
| Not everybody at the same rate, but the big ones really do manage to capitalize on the disaster that they helped create. | |
| But I'd like to think that there are other opportunities too from our viewpoint. | |
| Because if we're worth our salt and we can get the message out and draw attention to sound money, why liberty is better than slavery and socialism and deficits and all the things that are going on, people should hopefully think about it because the evidence, if they look at history, the evidence is overwhelming that the world is better off and this country is better off that follows these principles. | |
| Because if you take it, it's never perfect, but if you take our history in the United States, which was way better than the average third world nation and other countries around the world, we had the largest middle class ever. | |
| But I tell you what, if we're honest with ourselves, we're starting to realize our middle class is in trouble and that's why the socialists are gathering steam now. | |
| See, we told you freedom doesn't work. | |
| And that has to be refuted. | |
| As long as the people buy into this thing, we just needed more government, more money, more debt in order to do that. | |
| We have to make the case and say that the troubles we're having right now are due to the fact of big government taking care of the wealthy people and they have a monetary system that is detrimental to the people. | |
| If that message isn't heard, then yes, when the crunch comes, there's going to be more authoritarianism and there's going to be a lot poorer people in the world. | |
| But I tell you what, I can be encouraged when I go and talk to a lot of young people because they're not all the same and joining the socialist. | |
| We need socialism. | |
| We need socialism. | |
| It's the media and the college professors that endorse that and make it look like it's really the way things are going to go. | |
| I don't think it has to go that way, but I also know that thinking that we have to gather up our guns to keep it from happening, I'm not in favor of that because I don't know how to shoot a gun. | |
| But I'll tell you what, the message of liberty and our position is so much more powerful than that. | |
| So that is what the answers are. | |
| It has to be done with that. | |
| Ideas have consequences. | |
| And the ideas of welfareism, it wasn't the ideas of socialism that created our system today. | |
| It was the ideas that became very, very popular in the 20th century. | |
| And that is interventionism. | |
| It is not socialism. | |
| It's not communism. | |
| And it's not fascism. | |
| It's interventionism serving the special interest. | |
| But the people that see this coming to an end, ah, see, they're capitalists and see what they did. | |
| That has to be refuted. | |
| And it's only free market individuals believing in the personal liberty that can do that job. | |
| I want to thank everybody for tuning in today to the Liberty Report. | |