We can't say that nothing is manufactured in America. The U.S. government and the Federal Reserve are a tag-team that constantly manufacture problems for Americans. They both quickly turn around and claim they'll fix the problems that they created. But their "fixes" just end up creating new and even bigger problems! Ultimately, the problems become so numerous and so complex that the time finally comes to throw in the towel. The story of big government and central banking is always the same; massive arrogance followed by a humbling return to economic reality.
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.
It's great to be with you, Dr. Paul.
Very good.
Let's talk about the Federal Reserve today, talk about interest rates, and a few things like that.
You know, there's a bit of chaos in the markets, even in the last couple of days.
Gold has done a lot of gyrations, up sharply, down sharply.
I'm sure it confuses a lot of people because it's not anticipated.
I watch gold markets all the time, but I'd be the last one to say, you know, in three hours from Mala, I know what the rate, the cost price of gold would be, so therefore let's buy some contracts.
Because it would be very, very difficult because it's a commodity that's universal, but it's also universally manipulated, you know, by governments and all the special interests.
So there's a lot of activities.
Then there's the talk of, are we going to get a new currency?
Will it involve gold?
But this can be very disturbing.
All I know is that the chaos that we have had here recently is the fact that we're not honoring gold and using gold as a modifier and modifying the economy and having a definition of the unit of account.
It's chaotic already, but I think it's going to get a lot worse, and we want to talk about that a little bit later.
But I wanted to say that under these conditions, it's hard to say, what should I do about gold?
Well, you don't look at today's price or yesterday's price or what happened three days ago or what somebody told you is going to happen because it's very difficult.
I look at the big picture, which means that when there is no restraint placed on the authorities, monetary and political authorities to live within their budget and they are allowed to print money, prices are going to rise in a general economy due to price inflation, and also gold will go up.
So that doesn't tell you on a day-to-day basis what to do.
So I think people have to understand that because under certain conditions today, they say, well, it's the interest rates that determine everything.
Well, in the 1970s, it wasn't exactly that simple to figure it out, nor can we figure that out right now.
But because I talk a lot about gold and gold and monetary policy and government spending and deficits was a fascination for me.
It's one of the reasons I got involved in politics and economic education.
And also the reason why I work with people who do more investing and research on gold on a little bit shorter term, although realizing that a lot of this is not, a lot of this investing in gold can't be minute to minute or hour to hour or even day to day, but it has to be thinking a little bit longer term.
And that is one of the reasons why I work with Birch Gold Group, because they are aware of the differences between hour-to-hour trading and also protecting your interest, protecting your stocks and protecting your savings, because that's the real threat.
That's the devastating threat of what happens when a government destroys the value of the money.
It's happened before.
Certainly at the beginning of our country, it happened with the currency.
They destroyed the currency.
In 1971, they proved that bankruptcy could lead to the destruction of the link between gold and paper money.
So this is the reason why I think it's good to have another source of money and gold and an understanding.
And the reason why I do work with and partner with Birch Gold Group.
Now, if you want to get a little more information from Birch Gold, you can do that.
They will offer some material for you if you text Ron 989898.
That's Ron 989898.
They will send material.
They don't charge for that.
And they explain some of the discussion about taxes, how you convert maybe some stocks into gold investments.
So this I advise, and I support this idea.
I support the Birch Gold Company.
So once again, remember, if you think this is chaotic, and even if you've been looking at it, I look at, even though I've been looking at gold way before the Bratton Woods broke down back in the 60s.
So I'm fascinated with it, but it scares me because of the seriousness and the danger of people being wiped out.
And this is why I do encourage people to get involved.
So this is the reason I do work with Birch Gold.
So once again, Ron 989898.
Hey, Chris, we're going to talk a little bit more about this, exactly how much confidence we have at the Fed.
Should we relax and just behave?
They'll take it.
These are a lot of smart business people.
A lot of them have PhD, and they were in government schools since they were in first grades.
So they are great men and women of wisdom.
So how can we be challenging this?
Because they put all their thinking together.
And do they come up with a solution?
No, they come up with a program that is designed for chaos.
And they're doing a very good job.
They're successful.
Chaos is what we have.
We have to try to sort this out and get people to understand, especially the big connection, how spending and debt and the Federal Reserve, rising prices, weak economies, unemployment, why there are big strikes, all these things are connected.
And they're much more prevalent when there is a stock market crash or any other time.
It's more prevalent when the government is involved and manipulating, especially the monetary system by rigging interest rates because they believe that.
They do it all the time.
And that's about the biggest thing in the news.
Oh, they did.
They're going to.
Interest rates are going up.
Oh, that means we can earn a little bit of interest.
Okay, we'll sell our gold for the moment.
We're going to buy something else.
Well, some people do that, but I tell you what, rigging interest rates is doomed to fail.
And the question is, is when and how many people are going to be hurt.
That's right, Dr. Paul.
It really is chaos because we have people that interfere with the marketplace.
And when you interfere with the marketplace, you create chaos.
Now, they think that they're creating order, at least that's how they sell it to the public, but it's the exact opposite.
If you want order, don't fix prices, don't counterfeit money, and you'll have order.
Okay?
So this week, Jamie Diamond, the CEO of JP Morgan, big banker, was interviewed, and it caught our attention.
And he discussed what has been going on.
He says, quote, first of all, interest rates went to zero.
And I want to interject there for a second.
Interest rates did not go to zero in the market because that would never happen.
Interest rates were suppressed by the Federal Reserve to zero.
Okay, so back to Diamond.
He goes, going from zero to 2% was almost no increase.
Going from zero to 5% caught some people off guard.
I'm not sure if the world is prepared for 7%.
We urge our clients to be prepared for that kind of stress.
These 200 basis points will be more painful than the 3% to 5%.
End quote.
Now, the problem, and this is how politicians are going to frame it, is they're raising interest rates and that's the problem.
No, the problem was going to zero.
You know, first off, the problem is interfering at all, but going to zero is a major bad one.
Because at zero, every goofy idea, uneconomic idea received funding.
Let's change the whole world into electric cars.
Let's blot out the sun.
All this social stuff that has ripped apart our culture that needed money.
So all that cheap money was used to rip apart our culture.
And the kicker of them all, let's provoke wars with nuclear powers like China and Russia.
All this comes with the 0% interest rates.
So now the Fed raising rates to 3% to 5% to perhaps 7 is now choking all of that off.
So in a sense, it's good.
It's choking off all the uneconomic stuff.
It's making it much more expensive if the government thinks that they're going to go to war with Russia and China.
But the point of all of it is none of this should be happening.
We should have market interest rates, not the Fed and the government tag teaming to manipulate the market by printing money and manipulating rates.
You know, various people try to describe the real dilemma because the dilemma you read on the financial pages is what's the Fed going to do?
Why are they in such a dilemma?
Because it's back and forth and everybody has an opinion.
To me, right now, the Fed has concentrated on prices going up.
There for a while, when interest rates were artificially low, there was not a psychological or real reason why a lot of prices would be rising.
Nobody was concerned about price inflation, even though it was still existing.
It was sort of silenced and not talked about.
But they did that.
And then they said, well, prices aren't going up at all.
And prices going up is a sign of a healthy economy, which is totally bewildering.
Because when you have a real healthy economy with sound money, prices go down and the consumer is benefit.
But no, the Fed decided what we need now is because we're worried about economic turf long term.
And that means prices ought to be going up at the rate we think is best.
But to have prices go up, I'll be devaluing the currency means you have to debase the currency.
You have to steal value from the currency.
But they found out what the proper amount would be.
People would tolerate it.
It would stimulate the economy and everybody would be happy.
Is this just destroy the purchasing power of the dollar by 2% a year?
And that will be magic.
And at the time, I thought that was about the craziest thing I ever heard of to purposely devalue the currency and believe in it as an economic benefit.
But I know my thoughts at that time were, you know, they're going to get their 2% inflation, but it's not going to last very long.
By that time, the psychology will be concerned about the value of the dollar, and prices would rise.
And all of a sudden, we had prices rising at 7% and 8%.
Now they tell us it's three or four, but it's still for the average person going to the store to buy groceries.
It's seven, eight, nine, ten percent.
So prices are rising.
They don't rise for everybody the same way.
The poor people and the middle class, the person on the margin, they pay a much higher percentage of their income, and they're hurt much more.
Where if the other people who want the interest rates to come down, they think that will stimulate the economy.
So when interest rates were too low, prices going up too slowly, they wanted to go up.
So then when it comes on, and I go, oh, now, now the prices are going up too fast.
How are we going to solve that?
Well, we sort of helped along this recession, depression.
Not that they weren't concerned or understood about economic growth.
What they said, we just want to see prices going up.
And that's magic.
And it's argued that is helpful.
But when the recession comes, the people have been locked into this Keynesianism.
And people will flock to Washington, all the special interests, the people whose wages and prices have eroded.
You know, they said, what we need to do now is we need more money.
We need more money and more price control because we're hurting.
And frequently they get exactly what they want.
They certainly got a lot more money.
Just look at the money, the explosion of the monetary base since COVID came in because, oh, it's going to be hard on the economy.
So now we're suffering the consequence of that massive monetary inflation.
And people now, see, the real dilemma is first it was we don't have enough price inflation.
So now they have it.
Now we have too much price inflation and they have to work on that.
But their dilemma is how much should we do?
How much can we raise our interest rates without hurting anybody?
And guess what?
Their biggest client, the people who benefit tremendously, the banking system, who don't want these interest rates soaring like this, they want interest rates lower.
So that is the dilemma because interest rates haven't stayed lower.
It has taken the marketplace and they have shown that interest rates on bonds and borrowing has gone up systematically.
And if you look at what Jim Grant's been writing, this is just not a one-day, one-week, or one-year deal.
This may be ushering in a 40-year deal of steadily rising interest rates like we've lived through a couple of times before.
40-year cycles they're in.
And this is, I believe Jim Grant is right on there.
This is the beginning of this, and you're going to see this consistently.
So that's the dilemma.
The Fed doesn't know what to do because they say if we keep raising interest rates, the stock market's going to get upset.
Oh, we'll ignore them.
Yeah, they're going to ignore it because a lot of people who have the stocks and are the insiders are very much in charge.
Interest Rates Rise?00:04:14
It gets to the point where they don't have a solution.
And that is why I believe the biggest threat is continued and worsening financial chaos.
That's right, Dr. Paul.
That's what they create.
You know, the government does it with their regulations, their rules, their mandates.
They create chaos.
And the central banks do the same thing by manipulating the currency and interest rates.
The fatal conceit, as Frederick Hayek called it, is that they believe that they can control the uncontrollable.
They believe that they can stay on top of all the effects.
And even Jamie Dimon said, banks will go under, but that's not necessarily bad.
Yeah, that's true.
Bad banks should go under in a marketplace.
They just don't want it to be systemic.
This is what they always all say.
They want to stay on top of all the chaos as long as it doesn't get out of hand.
But that is their fate.
It will get out of hand at some point because that's what has always happened.
This isn't anything new.
You know, they create so many problems, so many complex problems, that their ability to stay on top of it fails.
They fail.
And this goes back to Alexander the Great, the Roman Empire, Napoleon.
They keep pushing, pushing, pushing, pushing, and eventually they reach that point where they lose total control.
And that is what is going to end up happening.
And that's what happens with all big consolidations of power.
It finally reaches the point where they really have nothing that they can do to fix what they have caused.
And it's a shame it has to get to that point.
But they're very, very, very good at convincing the public that we need them and they have to do these things, otherwise the entire world is going to fall apart.
It's actually the exact opposite.
Very good.
You know, the markets watch very closely, you know, commodity prices and people are trading, and they change instantaneously.
It's not like it takes a week for them to absorb some information or news or plans.
It's instantaneously.
Sometimes it's just a hint of what's going to happen or imagining what the Fed's going to do, and that's the big problem they have.
And they're just trying to read into what they're saying and whatever.
But as soon as they hear about the rates going up, most people in the marketplace work on the short run.
They say, oh, rates are going up.
That means that people will take money out of gold and buy something where they earn interest.
We'll worry about gold later on.
So they might shift or buy less gold, even though it might be the smart thing to do.
But on the instantaneous response to somebody indicating that interest rates are going to go up, they immediately change attitude or they factor that in.
And that is something that makes shifts in the market very rapid.
You know, I remember the 1970s real well because people said, well, interest rates go up and it's going to destroy gold.
Today, you know, you hear about it not infrequently.
Interest rates are going up or they're going to do more.
And the stock market goes down and people buy something other than gold and gold goes down.
But in the 1970s, interest rates were going up steadily, you know, without with dips up and down.
But throughout the decade, interest rates went up to 21%.
I helped one of my kids get a mortgage rate at 16%.
And I thought, why did I do that?
But that's where it was right there.
So that is what happens.
But gold went up.
Gold went from $35 an ounce to over $800 temporarily.
But that sort of makes people stop and think about it.
If you hear one little comment, interest rates are going to go up a half a percent.
Role Of Government In Protection00:04:56
Oh, this is a good way.
Well, let's sell gold today.
Well, that's up to them what they want to do.
But it doesn't mean that higher interest rates will always hurt gold, especially when the inflation gets really bad.
When you think of runaway inflation, Zimbabwe and Venezuela, do you think in their currency, because interest rates are going up, that it's going to drive the prices down of some commodities?
It's not the way it worked.
It's the chaos, and I think if you want to narrow down the chaos count by not having a unit of account, you can define.
Of course, our unit of account from the very beginning was based on the weight of silver and then merged together with a weight in gold up until 1971.
And if you want to look for patterns of chaos, just take a look at the financial markets since 1971, and it's not over yet.
It's really, as far as I'm concerned, just barely getting started, the chaos that we can expect.
And it will drift over into the political system.
And one of the explanations on why there's chaos in the Congress, you know, they're talking about saving a couple billion dollars in a deficit with 33 trillion dollars, and it's chaotic.
And then they have to scare the people.
If we don't straighten out, we have to do this.
You know, we're going to have a real, real chaotic situation.
So therefore, we're going to close down the government.
Of course, that's just talk because government is going to go on.
Nobody is going to be without a check that needs it or wants it or demands it until they get a check.
They'll always get the checks.
Social Security will always send the checks.
The big question, without a unit of account definition, what will it be buying in six months or a year from now?
Very good, Dr. Paul.
I will finish up with my closing statements.
It's more on the role of government.
It's something that we try to mention as often as we can.
We believe that the role of government should be, as our founders believe, to protect our liberty.
Once you veer away from that and you open a door to where government is a billy club that can be used for one person against another person, now you open the door for what we have today.
And that's exactly what it is.
It's just this big power center that people fight to get in control of to use for their own benefit.
And the power centers are usually very far removed.
They're not part, you know, like the World Economic Forum, the Fed.
It's a cartel of bankers.
You know, the European Union was set up.
It's terrible how that was set up.
You know, those who make the decisions are very sheltered and far removed from the people.
But that's, you know, people that want power, they want that.
They don't want to have any type of public mandate against them.
So they're very far removed.
Many times you don't even know who they are.
And they pursue goals for themselves, not for the country.
Think about our wars, you know, from Vietnam to Korea to Iraq and Afghanistan and Syria and now Ukraine.
These have, there's no benefit to us.
And there's not even any distant benefit.
It's not like our armies go out and they bring back trillions of dollars and we're like, oh, wow, look what they did.
That would still be wrong.
But we get nothing.
We get nothing but debts, higher prices.
We just pay for it.
That's it.
There's no benefit for us.
Same thing with the border.
You know, with just letting anybody in.
This is not for our benefit.
This is being done by people that are doing it for their benefit.
So it all comes back down to what the role of government should be.
And it has slipped from our hands and it is out of our hands.
And we're paying a big price for it.
Now, the good thing is all these power centers they fight with one another.
So to think that they're all going to come together and have some kind of world government, I think, is delusional because they all want power for themselves.
But the American people need to realize that we have to go backwards to go forwards.
You know, they had good ideas that the U.S. government should be there to protect our liberty.
And the sooner we go even in that direction, forget about even getting there, in that direction, the better off we'll be.
Very good, Chris.
You know, the markets are always trying to sort it out, anticipate the future, and it's very difficult, like I say, if you don't even have a unit of account and you have unlimited spending and all these problems that they don't want to address, which will have to be addressed.
Predicting Oil Prices00:03:03
And the market will force us to, you know, in the midst of a bankruptcy and a real challenge to the dollar.
So that will come.
But, you know, in the 70s, one of the most important, well, the important commodities were the precious metals, gold and silver, because everybody was watching that and the money supply.
And, you know, it was a steady climb through the 70s until then the pressure of pushing those prices up finally settled down a bit.
But something else was going on in the 70s.
There was tremendous price inflation for oil.
And Saudi Arabia was involved.
There were boycotts.
And so we had the inflation.
And it really pushed up, which was adding fuel to the fire.
And it was called black gold.
Oil is very, very important.
It has a lot of market benefit significance, but it's not going to ever become money per se because it doesn't fit all the characteristics necessary.
But it's an important commodity.
And right now, it's pushing up toward $100 again.
And that is very significant.
They did a poll recently among some financial people who were involved in investment, especially in gold and other commodities.
And the interesting thing was that there was one group that said that they're predicting that gold will be between $12 and $65 a barrel.
Well, now it's right at $90 a barrel.
So that person's a deflationist, and he thinks, I don't know what his explanation is or their explanation is, but that's really negative.
It would just, I think, automatically go against the grain that some of us who are predicting continued spending, continued deficits, continued printing of money, that we're not going to see $12 a barrel oil.
You know, that's sort of like one individual in the Congress when we were doing the gold commission said, this is terrible.
You want to talk about gold in the monetary system.
If they ever legalize gold, see, it was illegal at the time.
If we ever legalize gold, gold would go down to $5 an ounce.
There's no good use for gold.
Well, it didn't happen.
That's when gold became legal and went to $800.
But there was another group that was polled on this oil price.
And this group said, no, they're predicting a price between $150 at $380.
And if you look at, so if you took it all together, the people, the so-called experts, claimed to be between $12 and $12 a barrel or $380 a barrel, which means nobody knows exactly where the prices will be because there's a lot of variations on what is looked into it.
Gold And Inflation Chaos00:01:58
And the timing, the timing is very, very difficult.
If we go to a crack up boom where people panic and they just want to get not have anything that's designed at dollars, it's unlimited.
It's infinitesimal.
And so that I don't see that nearby.
And I hope it never comes because that would really be chaotic.
It would be something that would be very difficult to handle politically and financially.
But it tells you that's what they're thinking about.
But it makes our point that there's chaos out there, and it's not going to get fixed by any policy that we see evolving in Washington, D.C. If you have 12 people there wanting to cut out, you know, millions and billions of more dollars, even the smaller amount of more money going into that hole in Ukraine, getting us involved in something that is only going to get worse.
You can't predict and say, oh, yeah, we're going to have a tight monetary policy.
We're going to handle the deficit.
Sure, we are.
We're not going to.
It's going to continue.
It's going to get more chaotic.
The wonderful thing is, if we had proper policy for our concept of liberty and for monetary policy, this could be ended in a year.
You just have to do it, but they're not going to because somebody's going to say, my check isn't coming.
They've cut my money.
So we are destined to continue to move in the direction of more spending, more printing of money, more inflation, and more chaos.
And it's a shame because if we would start by just bringing all our troops home, minding our own business, take care of our borders, and a few things like that, and all of a sudden the psychology would be changed and we could work our way back to a society that honors peace and prosperity.