Today's financial hardships stem first, from the Fed's unconstitutional existence, and second from the Fed's decade of near 0% interest rates and QE. Those disastrous policies created a decade's worth of bad and uneconomic investments. Rising interest rates under Powell are the cure to those very bad decisions. But the "hangover" is that all of the bad investments piled up since 2008 become exposed.
Of course, there are calls to turn the printing presses back on, which are calls to perpetuate the original problem and make it even worse. The Fed has no business fixing interest rates in any direction, or counterfeiting even a single dollar, but the big blunder was 0% rates and QE. That made today's hardships inevitable.
Today's financial hardships stem first, from the Fed's unconstitutional existence, and second from the Fed's decade of near 0% interest rates and QE. Those disastrous policies created a decade's worth of bad and uneconomic investments. Rising interest rates under Powell are the cure to those very bad decisions. But the "hangover" is that all of the bad investments piled up since 2008 become exposed.
Of course, there are calls to turn the printing presses back on, which are calls to perpetuate the original problem and make it even worse. The Fed has no business fixing interest rates in any direction, or counterfeiting even a single dollar, but the big blunder was 0% rates and QE. That made today's hardships inevitable.
Hello everybody and thank you for tuning in to the Liberty Report.
With us today is Chris Rossini, our co-host.
Chris, welcome to the program.
Great to be with you, Dr. Paul.
Very good.
We'll visit today with a little bit of economics and maybe we might even mention gold.
And gold has been in the news again.
This time gold has taken some corrections.
I'm sure it caught the attention of anybody that's been interested in what happens with gold.
But we don't deal with just thinking about gold.
We think more about the money.
Instead of saying, what's the price of gold?
We want to think about what is the value of the dollar.
And it's the value of the dollar that determines the ratio to gold.
And that's the important issue.
And that's important because the way governments react, it makes a big difference.
If they think it's just the price of gold, they might want to regulate it and come in with all these schemes of what you do to regulate and fix prices.
But anyway, we'll be talking about that.
But I do want to recognize Birch Gold, the company we are partners with, dealing with the gold issue.
And they have some information and literature that they will pass out if you have not gotten interested or want to refresh your memory about it, because there's nothing utterly stable about the ratio between gold and silver, and you have to make investment decisions, and that's what Birch Gold does.
They help in that sense.
So if you're interested in getting some information, and it's free, you don't have to pay for it, you just text Ron, 98-9898, and they will send you the material.
This can be very helpful to you and might help you understand the big shifts.
One thing for sure, the conditions we have today in the economy is instability.
You can't really analyze things on economic rules because you have economic rules and economic conditions, and then you have a lot of other variables, but the one variable that you can bet nobody has a computer that can figure it out, and that is what will government do?
But ultimately, is what will the consumer do?
And of course, Austrian economics teaches that there's a subjectivity in what the consumers do and what's happened.
So that's some of the reasons why getting a little bit more information about gold may be very helpful to you.
And once again, you can get this from Birch Gold if you text Ron at 989898.
Okay, and Chris, we want to talk a little bit about what's going on now.
And it's a mess.
And I think the word I used in the introduction was unstable, instability.
And, you know, things are gyrating.
And, you know, the stock market in a way is less so than one might anticipate.
But I think it's rigged as well.
I think almost every decision made by the Federal Reserve and the government and Treasury is designed to protect the corporations and big banks.
Big banks, you know, can get bailed out where the benefits go to the ones who are on the inside.
But the payments have to come from the average person, the middle class and the poor.
So you can find trillions of dollars off-budget by the Federal Reserve and bail out their friends.
At the same time, They tax, and I'll tell you what I mean by tax, they tax the poor and the middle class.
Well, they don't pay much income tax anyway, but how can you tax them?
Well, you just print up the money, debase the currency.
And the percentage of money that you need to buy food is very high in the poor, and it's irrelevant in the very wealthy.
So I don't care what the price of bread is, but others do, and that's where the taxes fall on those individuals, and that also leads to social chaos.
And that's what we're facing.
But we do see, say, face a lot of financial chaos right now, especially in the banks.
Big banks are failing.
But there's a lot of money being used to bail out the banks, and banks are being sold.
The Fed comes to a rescue.
And things are chaotic.
But if there wasn't this determination to print whatever is necessary, it would be even worse.
But that doesn't justify it.
That just means you're giving it more morphine to an addict.
And oh, yeah, I'm feeling better today.
I think I like this stuff.
So the markets will feel better, but they're not feeling a whole lot better.
Right now, there's still a lot of concerns, even though the stocks were up today and people were feeling a little bit better.
But ultimately, the problems are there.
And when you think about it, another way they handle this, we're noticing it, especially here in Texas, property taxes go up to compensate for the inflation that is created.
And that hasn't hit the market yet.
They talk about the damage done in the commercial properties, and they say that hasn't even hit yet.
So they have the problems of the regional banks, they have the problem of commercial properties.
And so there's a lot out there.
And it's based on the big issue is debt.
Oh, that's okay.
The debt will be taken care of because they're working together.
And I think they said hello to the president the other day.
So therefore, now there's going to be a bipartisan solution.
Always seems to happen.
The deadline of when we start to default at 1st of June, that's a farce because the deadline has been long passed.
That's when you default by printing money, debasing the value, and cheating the people who have to rely on a reasonable definition of what the money is.
No definition, and the economy just wanders.
The speculators come in.
The special interests are protected.
And the policies continue.
The welfare state marches on, talk about stopping it, but it doesn't stop.
It can't.
You're not going to take one nickel out of any program that people want because it would be bad psychology.
So they can't do that.
And there's not going to be bringing the troops home.
More people are talking about it, and I like that, bringing our troops home.
But no, the special interests control that.
And so far, the welfare warfare state is in big, big, you know, is in good condition, and it's going to continue.
But, Chris, what I argue is we have to understand the money issue and the disintegration of the value of the dollar, which was at first defined at 1/20th of an ounce of gold.
Therefore, the price of gold was $20.
That was a long time ago, and since that time, that's moved up a little bit.
It's over $2,000.
So this shows what's going on.
But anyway, Chris, tell us what we ought to be doing and tell us what we ought to send a message to Washington on.
Yeah.
Well, Dr. Paul, what we're trying to do today is to correctly identify the problem.
Obviously, there's financial turmoil.
But what can happen is you could misdiagnose the problem, and your solutions will just make things worse, which is what government is notorious for.
So we have a Federal Reserve, and I'm going to state the obvious first.
It should not exist.
It's unconstitutional, immoral, but it does exist.
No one knows what interest rates should be.
The market should set them.
But today's problems send from 10 to 15 years of 0% rates and QE.
Everybody should remember what that was, because that created a decade's worth of malinvestments, crazy investments.
Anybody, just look at our warped economy.
Look at what corporations are doing.
They're losing money on this woke stuff, and they don't learn from the other ones.
Another one will do it and they'll lose tons of money.
I mean, this is not a normal economy.
This is all, and who's financing all of this nonsense?
So these are all malinvestments, and malinvestments need to be liquidated.
And that's what rising rates do.
Rising rates puts pressure on all the stuff that was just dreamed up with 0% interest rates.
So the problem, obviously, it hurts.
We're living in turmoil, but the turmoil was inevitable the moment that they put rates at zero and then kept it there for 10 to 15 years and printed all those trillions of dollars.
So the solution is not, you know, oh, stop, stop, start printing again.
That'll just make the problems worse.
So that's what we're trying to do today, pin the blame where it belongs on QE and 0% interest rates.
Rising Rates and Malinvestments00:04:00
Very good.
I want to go over once again, because I've mentioned certain dates in monetary history that are very important.
And if we would observe this and anticipate what harm they will do, maybe we would slow it up.
But sometimes, you know, cause and effect is difficult with monetary policy.
Sometimes they can cheat, run up debt, print the money.
People feel good about it, and it could last a lot longer than it deserved.
And yet, right now, what's a big problem is it's not doing well, and people are starting to get frightened, which they should.
But of course, when our country started, there was a definition of the dollar.
It was defined in silver weight, but it was also recognized that the gold dollar back then, there was a ratio of $20 to an ounce of gold.
And that lasted for about 120 years or so.
It lasted all the way up until 1913 when this was the opening salvo against sound money, introducing the whole idea of a central bank that would lead, as predicted even back then, because there was resistance even then, it would lead to the day when they would easily debase the currency.
It didn't happen right away, but they happened to use the Fed to fight the World War I, and there was an inflation there that required a depression of 1921.
So it was off to a bad start, but it worked because we were a wealthy country.
We had a lot of natural resources, and there was a lot of growth there.
So it wasn't like, oh, they did this, they passed this, it's going to lead the problem.
Well, it takes a while because that in itself didn't make a difference.
But came the depression that was brought on by the Fed because of the inflation of the 20s.
And we had the Great Depression.
You know, Roosevelt was elected to come in and do something.
So he closed the banks and stole the gold from the people.
That is, they had to turn it into the government, even though their gold coins are worth $20 an ounce.
They took the gold in.
And what did the government do?
They immediately debased it and made it $35 an ounce so that the people didn't get the benefit of this, but the government did.
So those were big dates.
Then that was in 1933.
Roosevelt did that.
But then they limped along with the ratio at $35 an ounce.
And it was predicted then, because we became the reserve currency of the world, that we'd print too much, we would build an empire, we lead to all the problems that we have.
But people were feeling good about it.
They were on a drunken binge, free money.
And it seemed to do pretty well.
But the predictions that it wouldn't last came about in 1971.
Finally, the foreign holders of dollars, Americans couldn't own gold, but foreigners could.
And the pseudo-gold standard was if you have a four, if a foreigner had $35 an ounce, they could turn it in $35 and get an ounce of gold.
Well, we were running out of gold, so Nixon closed the gold window.
And so, boy, that's a big deal.
That's going to lead to even bigger problems.
Not the next day, but as days went on, it kept getting worse.
But in the 70s, gold jumped from 35 up to $800.
But they continue to do that.
What was the big, next big event?
Chris has already mentioned it.
And that has to do with QE.
They ran into a lot of problems and the predictable events of recession, depression, and came.
And that, of course, led to the big, they called it the giant recession.
But it was a depression in 2008.
That's when they introduced the notion, well, boy, this is a big deal.
We better really, really inflate the currency.
So they had QE, quantitative easing, whatever you need.
Low Interest Rates Conundrum00:08:18
Oh, if you need low interest rates, we'll take them so low they'll be negative.
They took them down to zero, but the real rate was less than that.
And then people say, well, feeling good, and things are still limping along.
But eventually, that was predictable because from 08 up until the present time, we're feeling the consequence of that ridiculous policy of QE, artificial interest rates, huge budget spending, and deficits.
And now we're at this crisis period of time that will not go away easily, Chris.
Right, it will not.
And that's, you know, what we're going through is not easy.
And who knows what's ahead?
It may get even harder.
But this is what happens when you print funny money, QE, zero interest rates.
I mean, what an absurd idea.
And now we've got to face the consequences.
And there's an analogy that a lot of us use because it's so good of an analogy.
You know, all that QE, it takes us away from economic realities.
It's an artificial situation, artificial boom.
It makes you feel like you're richer than you really are.
And it's very similar to drinking alcohol.
You know, you detach from reality a little bit.
But when you overconsume, you're going to have a hangover.
And when the hangover appears, you don't say, oh, look at him.
He's sick.
Get him a drink.
Hurry up.
He needs more to drink.
No, you'll eventually die if you do that.
But look at what's happening now and what's going to happen.
They want to keep doing the bad stuff.
Print more, print more.
Stop.
Stop this.
Go back.
Pivot.
They want them to pivot.
And we live in our world, is one of cause and effect, and we can't get rid of that.
But unfortunately, people, no matter what it is, run to government to try to eliminate effects.
Do something to eliminate this pain.
The government will do something, but it will add to your pain every single time.
There's no exceptions.
So, you know, and that's what may happen.
If they do pivot at some point soon or whatever, they're just going to create a bigger mess down the road.
Very good.
You know, the manifestations of inflating the currency is not always the same.
You know, you can't predict the exact length of time, but you can predict certain events.
So if there is monetary inflation, QE is gigantic monetary inflation, you know it's going to debase the value of the currency and certain prices will go up and that will happen, but still you don't know the details.
So this irrational policy might be designed to protect the banks and the big corporations, protect the foreign policy of intervention and all these things.
But eventually the policy, and the policy was designed, well, how they describe it is they were describing it as, you know what, if we could only get the prices to rise instead of the prices being so low and interest rates so low, we want 2% interest rate, 2% price increases, which is crazy.
They want to purposely debat value and steal the money and the value of the money at a 2% rate.
Well, that came and went and now it's up to 10%.
So guess what?
The goal is 2% inflation rate.
So now they're working to try to get it down.
That's how crazy their policies are.
But, you know, it is manifested by certain things.
One is that people are realizing that the reserve currency of the world is being challenged.
And that is a big deal.
Every day you hear stories about competition for the dollar as a reserve currency.
And also, though, in the middle is the plan that some have for having a worldwide digital currency to measure everything everybody does.
That's not going to happen overnight.
But just the thought of it and the goal of that, it's already started to a large degree.
That will not be good.
Liberties are lost under these conditions, Chris.
Very good, Dr. Paul.
I'll finish.
And yes, just because they have crazy ideas like CBDCs does not mean that it is inevitable.
They had a crazy idea of vaccine passports where we were supposed to stay up to date constantly every six months or whatever and then prove that we're up to date.
And in order to function in society, they did not get that.
So they are not all knowing.
They're just flawed human beings that have too much power.
I'll finish by saying, Dr. Paul, we live with scarce resources, land, labor, capital.
These are not unlimited.
None of them are unlimited.
And prices are supposed to tell us the truth.
They're not supposed to lie to us.
We're supposed to have profits and losses.
Profits tell you, hey, do more of this.
People want this.
Make more of these.
You're doing good.
Losses are the opposite.
Stop doing this.
Do less of it.
Or stop altogether, like the horse and buggy.
We need these signals, the marketplace to do this.
This cannot be centrally planned.
Now, when the central planners come in and they rig prices and profits and losses are all messed up, not telling you the truth, all these bad ideas get funded.
All these bad ideas now have to compete with all the good ideas.
And when that competition heats up, prices get, you know, we get inflation.
Because all of these ideas are all competing for scarce resources.
And ultimately, you get to where we are now, where the Fed has to give up.
You have to raise interest rates.
All the unprofitable stuff is exposed.
And all the unprofitable are going to scream and holler that they should be saved.
But, you know, you just can't do it.
In a world with scarce resources, you need honest prices, honest money, honest profits and losses, and then you can have an honest economic prosperity.
Chris, thank you.
We're witnessing a period of time where people do get confused on what's happening because sometimes they say, well, let's stop the inflation.
And they'll go to the members of Congress and the government and say, well, the prices are going up too high.
So give me more money so I can pay the bills.
And of course, it's too much money that created the inflation.
And that just further dilutes the value of the money.
But there are other things going on in this at the state level, which I get pretty excited about because several states now, and there will be a vote next week in Missouri's House dealing with this subject.
And that is putting an emphasis and permitting, once again, what the Constitution says, that the states can only make gold and silver legal tender.
And they deal with this.
Several other states have done it, but Missouri is having this very special vote.
I think it's fantastic because it's very constitutional, calls attention to it, and also reflects the fact that more and more people are waking up to the fact how important this issue is and how do you solve it.
And it doesn't have to be, you know, passing a bill into Congress that abolishes the Fed.
I mean, that would be nice, and we're not quite ready, but we are ready for state legislatures to stand up and say, and we have an obligation.
It says that only the states can regulate, you know, the can only regulate gold and silver as legal tender.
That to me, I think, is great, and more will do it.
So I think the educational effort to teach people about the Federal Reserve and how biased it is, auditing the Fed is great.
We'll learn more about it, but we still need to do everything possible.
We need to raise up another generation that's taught different economics in our schools.
And all government schools are teaching the same economic policy.
They are not teaching free market sound money economics.