All Episodes
Previous Next
Oct. 27, 2023 - Ron Paul Liberty Report
26:29
Federal Deficit on The Rise, Will The New House Speaker Help? - With Guest Phillip Patrick

The Federal Deficit is on the rise, can we stop it, or slow it down? Dr. Paul discuses with special guest Phillip Patrick.

|

Time Text
Economic Pressure Points 00:14:54
Hello, everybody, and thank you for tuning in to the Liberty Report.
Today, we have a special guest, and he's been with us before.
He's the Birch Economist, Philip Patrick, and he has been well received by our audience in the past, and I'm sure they're anxious to hear his assessment about what's going on.
First off, Philip, welcome back to our program.
Thank you so much for having me, Dr. Paul.
Very good.
I'd like to start off with something that's been in the news, a little bit here and there, you know, for the Republicans trying to get a speaker.
They set all kinds of records.
I think they set the record of the longest period of time when we didn't have a real speaker.
And people worried about that.
But quite frankly, Philip, I wasn't too worried about that.
Maybe that would just slow the government down.
But anyway, we have our speaker back, a speaker back, and he sounds like a very decent person.
But of course, I want to think more about how things are going to change and what he's facing and which direction are we likely to go.
So this, I think the big question is, will he move us toward runaway inflation or do you think he will lead us to a balanced budget?
But just what are your thoughts economically about what's going on and what it might be like with the new speaker?
I think the situation is very tough regardless of who holds the position of speaker.
Johnson's proposed taking up individual bills between now and November 17th.
That's when the current funding expires.
He said another stockgap measure known as a continuing resolution might be needed to prevent the Senate from jamming the House with a Christmas omnibus, referring essentially to a consolidated spending bill.
He said a continuing resolution could have a deadline of January 15th or April 15th, depending on the consensus in the GOP.
But a continuing resolution is just more of the same at the end of the day.
Maybe a continuing resolution is better than an omnibus bill.
But either way, I think it's time to start getting back to the way government budgets are supposed to be crafted.
You know, it's that simple and we're still not there yet.
So I think it's more of the same.
We've got to start focusing on a plan for sustainable debt reduction, just not overspending.
And we're a long way away from that.
You know, with the new speaker, I generally feel good about it compared to total chaos or runaway socialism and spending.
But I think you bring up the question, what can he do?
Can he turn all the switches and turn it off?
So I was a little bit disappointed with the first bill he dealt with.
It had to do with foreign policy and talking about money, more money into the Middle East and this sort of thing.
I thought, well, you know, the pressure is there.
And I always talk about, you know, appetite for government.
Why do they do these things?
Why do they keep doing it?
Most of them know that we can't run the world.
We can't have this police state.
We can't have the empire.
And they do.
But the pressure comes from the grassroots, believe it or not.
We talk about the military-industrial complex and the banking system and all of these things.
But basically, there's an overall appetite for big government.
So as soon as somebody wants to cut, you know, people get pretty annoyed.
And that's why I was thinking, you know, that first bill he brought up dealing with the Middle East, it was a little bit of disappointment, which means that that's high on the priority.
And it wasn't meant to cut any spending.
It was to endorse the idea that we have to keep the spending.
But so I'm not comfortable by going and making criticisms at this early stage, but I think what that represents, maybe the fact that our government is really bankrupt and there's a lot of pressure to keep spending.
And it's real hard because I think we're addicted to the system that we have today.
I mean, it's absolutely spot on.
Obviously, I couldn't say it any better myself, but this has been the case for a long, long time now, and we're getting to the point of no return.
And we talk about the costs of spending and the cost of spending are real.
In fact, debt service costs rose 33% this year from last.
Now, just the interest payments on our debt alone are similar to our defense budget, which dwarfs that of every other nation combined in the top 10 for some context.
So it's becoming problematic and it's starting to compound.
We borrowed $2 trillion last year.
$700 billion of that was just for debt service payments.
It's obscene.
You know, there's getting back to the Fed, because I can't think of deficits or how big government is and why they're doing it without talking about the Fed, because that's really the engine that keeps this and perpetuates it.
And as long as there's belief in the Fed and fiat, you know, things will limp along and we're doing actually better than I would have predicted if we could print all this money that we have.
But I think most of us realize that this can't last.
Even the Fed has said that, oh, well, this can't last.
And there was an article here that I clipped and the headline is, what can the Fed do about the deficit?
And the conclusion was nothing.
They can't do anything about it.
And the longer I was in Congress, I got the same message from the Fed because I was always on the banking committee.
And when I present a question to them about the spending, they say, oh, even this week, the chairman said, oh, we don't talk about finances and spending.
We separate ourselves.
And what I want to suggest that there's a reason for this and see if I can get your opinion on this.
And that is that they're worrying about the loss of independence.
They talk about independence.
And the other one on Zero Head says, dollars' fate is sealed as the Fed's independence is eroded.
And, well, maybe credibility is being eroded, but independence isn't there.
They're always saying, the Fed's over here are independent.
And they always, anytime I ask them this question, they always say it's Congress's fault.
They spend too much money.
They put the pressure on us to do this.
And I wonder about the theory, Philip, about maybe this is not exactly that way.
Maybe they know exactly what they're doing.
Maybe they work together.
Maybe they're in collusion and saying, spend and go ahead and support the empire.
We'll take care of it.
Where do you come down on that theory?
Yeah, I mean, there's no question about it that the Federal Reserve, the Federal Reserve at times, has certainly acted in a political manner.
And it seems to be the case that they sort of cry independence when people look at collusion.
And it's clear to others that I think there are elements of that.
But the Federal Reserve, I think, in on itself is a big problem.
And I think that he's gone.
Yes, sir.
Keep it going.
Oh, keep talking.
Okay.
Well, when Wednesday comes back, what I'm going to be talking about, you know, the theory that the Fed can't do anything.
That's their defense.
We can't do anything about it because it's the Congress that spends the money.
But I suggest that they can, or we can't, or the people in charge can, and the Congress can, and the people can't.
But they have to do one thing, eliminate the ability and the authority for the Fed to monetize government debt.
The fact that they can spend, spend, spend and have no responsibility for it, and the Fed is working with them because things would get out of hand if you just created all that.
So I would think if, well, the founders tried to attend to this because what they did was, you know, they said no fiat money.
They didn't like paper money.
They didn't have a central bank.
But things are different now.
But the rule that they should have put in if they even wanted to work a little bit better is that they can't buy government debt.
But that's the whole purpose is to take care of the deficit and then pay for it through the inflation and the devaluation of the currency.
And they've managed to, you know, from their side, from their point of view, actually they've accomplished a lot of mysterious things and kept this thing together.
But what I think is going to happen is that this thing finally gets out of hand and there will be total collapse of the system.
But because they're not going to come along and say to the Fed, you know, you can't buy government debt because even just the debate on that would cause havoc in the markets.
Interest rates would soar and all.
But that can happen otherwise.
So Philip, I don't know if you have an opinion on that or you got to hear a little bit of that.
Are you there now?
I am here now.
I missed the first half of that.
I'm having tech technological issues here today, unfortunately.
But look, agree very much in terms of the Federal Reserve in general, in terms of accountability.
So yeah, I think a lot of the problem lies with the Fed today.
Yes.
And you know, the statistics on inflation right now, they're not real good.
Even this morning, it came out from the Michigan study, and it was much higher than expected.
So at times, the government fudges those figures too.
Those nominal figures aren't reliable.
And have you sensed that people sort of look away from there?
They have to deal with what they'll do to the market, but they really don't believe that we get accurate information from the government, even on economic statistics.
I think everybody I speak to at least is fully aware of that.
I mean, the government are suggesting headline inflation is at 3.7%.
Anybody who goes to a grocery store understands it.
It's not our reality.
And I tell people, if you just calculate inflation in the same way the government did in the 80s, it would put it closer to 13% today.
So the public aren't fooled.
And the reality is we're feeling it, right?
Wage inflation is trailing actual inflation.
We're seeing credit card debt spiral.
We're now starting to see defaults.
The American people can't be fooled by numbers because we feel the reality.
Yes, and here's another clip from Zero Hedge.
It came out just this morning.
University of Michigan inflation expectations exploded in October.
Consumer frustration appeared everywhere.
And this consumer frustration, I think, is very, very significant.
If you look at the problems we have with lockdown, you know, and COVID, it was the frustration and anger and all the problems from that, the violation of our civil liberty, finally got the people awake and the parents awake and something happened.
So this is, it's sometimes just basic war, you know, when the war lingers too long, which is finance as far as I'm concerned with the Fed, you know, finally the people wake up and in the 60s it was, how do you stop the Vietnam War?
We have, right now there's a reaction, you know, to the war going on in Ukraine, and that is changing.
But the frustration that we want to talk about today is the frustration that the people have.
But what I see, Philip, is that the hurdle we have is the understanding of the people.
If they knew exactly what was happening, they wouldn't endorse this.
But it's so tempting to believe that the solution comes.
Well, the price is going up and we're out of money.
Send me more money.
And they keep putting gasoline on the fire.
So that to me is, I just think, do you sense or have evidence that the people are more frustrated and getting a little bit angry about what's happening?
Because many times in the past, when that happened, that led to turmoil domestically.
Look, it definitely feels that way.
I spend my days on the phone to the American people, quite frankly, and I'm feeling frustration across the board, frustration about being lied to from a numbers standpoint, frustrated at a government that's spending money at a time when debt is probably our biggest problem and spending money wastefully as well without generating economic activity.
Yeah, I mean, people are frustrated across the board, and we can feel it bubbling up day on, day on day.
You know, one of the arguments made now is the fate of the dollar, the destiny.
And we've talked about it, but I also recognize when I say, you know, this is very damaging, a dollar, and you're going to have runaway inflation, the dollar will be destroyed, even though technically I think the dollar is going to probably exist like the British pound has existed in spite of when they lost their reserve, their reserve status.
But that means that this can linger, you know, for a long time.
But the Fed has always argued that this was why they would never accept and was very annoyed when I accepted.
Well, we need to know more about it.
We need an audit of the Fed.
And, you know, surprisingly, Patrick Philip, I was able to get a lot of Democrats.
We had all the Republicans, a lot of Democrats supported.
So the principle of clarity and knowing what's going on is very popular.
But I think that's necessary for them to understand because if they don't understand, then it's just a penalty.
Oh, they're cutting spending here.
They're doing this.
They won't fight the wars I want them to fight.
But I think it starts way back.
I know I remember my college days and the early years I spent studying economics.
Fed Accountability Push 00:07:40
And they never heard of sound money and they didn't emphasize the Constitution.
Do you put a little bit of blame on our universities?
How about where you had gone to school over the years and you probably had a different experience?
But did you see that some of these false ideas were ingrained in your education?
Yeah, I think absolutely.
Obviously, I was educated in the UK, so it was a little bit different, but absolutely, I think it starts at our universities and sort of runs all the way through.
Something else that you mentioned as well, which is obviously a very obvious point when we talk about the Federal Reserve, is accountability.
This is an institution that has huge power over policy.
The fact that they're not really held accountable by the people or by the government is in and of itself a frightening concept.
And I think it's very difficult to argue against that.
So that in on itself is concerning.
But absolutely, Dr. Paul, 100% agreement.
Could you give us a couple of words about your assessment of Bidenism?
You know, you put a fancy word.
It must be fancy program.
And, you know, it came out with a burst, but I think even those who proposed it aren't bragging so much anymore.
But give us your opinion about what all that is.
What really were they aiming for?
And where do you think it's going to end?
Did you say Bidenism?
I misheard.
Sorry.
Bidenism.
You know, Biden's programs.
He came out and had all his program.
And because it was a fancy word on there, it was a solution to our problem.
You know, deficits don't hurt.
You know, that kind of stuff.
Yeah, no, I mean, I think it's nonsense.
For me, it's a cynical attempt to buy votes.
I think we're overspending at a time when we clearly shouldn't be overspending.
As I mentioned before, you know, the spending itself in large part has been very wasteful, right?
Biden was pushing to pay off student loans, right?
Think about that as a concept.
We're carrying more debt today than any nation has ever held in history.
And we think it's a priority to start paying off student loans.
I mean, the whole concept is counterintuitive.
And that's why I say the cynic in me thinks this is just a desperate attempt.
We're in debt.
Why not just rack up more debt and try and buy ourselves another four years?
It feels literally like that.
You know, before 1971, there was very little interest in talk about gold.
We weren't even allowed to own gold.
That has changed a lot.
And gold went from $35 an ounce up to $2,000 an ounce.
And so it's significant.
Do you see the gold market continuing that process?
Or how do you think they work it?
To me, it's pretty amazing that you could see trillions of new money coming into circulation.
And long term, I can see the curves, you know, doing this.
And, you know, the price is doing this and the effect of it doing this.
But to me, sometimes it's pretty amazing that it limps along as well as it does.
And what do you expect?
Let's say we continue and the new administration doesn't can't get a hold of the things and the spending instead of being cut it goes up.
What would you anticipate is going to happen to gold?
I mean, you would expect gold prices to move quite significantly in that sort of climate.
And, you know, what's really interesting, I would say for most of the 20th century, for the 1900s, really gold was about preservation.
You wouldn't consider it a growth asset next to other things.
This century, the picture is very different.
Gold has outperformed many other asset classes quite significantly since the turn of the century, since the first day of the year 2000.
And what's interesting is what started to change then.
That's when we really started to increase the money supply significantly in the US.
Obviously, that's escalated dramatically since the pandemic and 08, but it really started in the year 2000.
So to me, no coincidence, right?
The more dollars in circulation, gold starts to move into or turn into a growth asset.
So of course, if that continues, I think the sky's the limit for precious metals.
And central governments around the world buying more gold last year and this than any other years in history, I think is probably the most telling statistic.
It's a bet against the dollar, and gold is the best way to hedge.
I certainly agree with that.
But, you know, when prices go up for various reasons, sometimes there are natural events and different races or threat of war, but no war.
But the spending hasn't occurred yet.
And there's, you know, the money is there in the bank, but not being spent.
But prices can come up.
And I think there's a carelessness.
I want to get your opinion on this.
There's a carelessness.
Let's say there's a really bad drought, which we know about those kind of things.
And the food prices go up and it bumps up a lot of other prices.
And all of a sudden, prices were going up.
And the term to use for prices are going up because of a drought.
It's inflation.
It says inflation.
It's inflation.
Or something goes up for other reasons.
But the money supply hasn't gone up.
So I think that one thing that we ought to be careful, and I think, you know, this is necessary.
I want to get your opinion.
That just because prices go up doesn't mean that that is the actual inflation.
If it eventually causes, you know, if there's a threat of war, prices may start to go up.
But the real inflation comes when the motivation from that is when they start printing the money.
And a lot of times people say prices are up.
Like, the reason I point this out is you can't blame the businessman's profits, or you can't blame labor costs going up and saying that's inflationary.
The labor price is going up and that's going to cause everything to go up.
And yet that is a price that has an effect on the monetary system and the monetary policy of our governments.
Yeah, look, that's absolutely right.
But inflation through money printing is a whole different ballgame, right?
The Fed have a 2% target for inflation annually.
And I think there's a certain amount of inflation that's needed.
Wage inflation, if it keeps pace, means it's not problematic for the people.
But like you said, it's when the government start printing money and fueling inflation that way, it becomes very problematic.
There was a guy called Alan Meltzer, and Meltzer was a Federal Reserve scholar at Carnegie Mellon.
And he stated very clearly, never in history has a country that financed big budget deficits with large amounts of central bank money avoided incredibly high levels of inflation.
It's very clear government spending leads to aggressive inflation and we're spending at a rate that has never been seen before in history.
And what's so concerning is those in Washington don't seem to understand the gravity of the actions.
And now we look at what's happening globally with the dollar.
We are incentivizing countries around the world to dump the dollar.
And this is where this stuff becomes very dangerous.
Look, at some point, we'll iron out this inflation.
Inflation And Global Finance 00:03:41
We'll deal with bubbles in the economy.
We lose a grip on global reserve currency.
You know, no nation has ever regained that in history.
And that's where a presidential term, in my mind, can become very dangerous.
Philip, I want to close by giving you a chance to talk a little bit about Birch Gold.
You're the economist for Birch.
I'm a partner in it because I promote the company for various reasons, because I believe that the more people that are protected, we don't want to get our little clique together and say, we're protected, we have gold, and when the world falls apart, our gold's going to be.
I think it's a very wrong thing to do.
We want to do what your investments are guided that way to get more people involved because their interests are there.
But if only 10 people out of 100 own gold, you need more people owning it and understanding it.
So gold and silver are the precious metals.
So tell us a little bit about how people might be able to follow up from this program, how they can get some more information and benefit from your expertise.
Yeah, so for us, information is key, right?
And that's what we specialize with at Birch.
We make sure that everybody has access to a free information kit, which will guide them through not only the process of purchasing gold, but the history of gold, why it's important, the history of the Federal Reserve.
So a lot of good information out there.
And, you know, we can help people to give a little bit more depth.
We can help those that have, you know, funds either sitting in cash, in a bank account that's losing to inflation, those that, you know, have retirement accounts, IRAs, 401ks that are exposed to the markets, they can roll over any portion of those accounts.
There are no tax implications and no penalties.
As you say a lot, and information is very important.
So that's the starting point for us.
And for people to get that information, it's very simple.
They just have to text Ron to 989898.
Again, it's Ron to 989898.
That's going to give them access to a free information kit.
And if they want to learn more, there's plenty of people like myself at Birch that can sort of hold people's hands and guide them through the process in a tailor-made way.
So Ron to 989898, and that'll get you the information, which is always the right place to start.
Very, very good, Philip.
And I want to just re-emphasize this, that it says information is very important, how to survive and preserve wealth and be prepared for bad times ahead.
But I like to go back one step further.
And the way I got introduced to this was not because I was buying gold.
We weren't even allowed to own gold.
And that is education, you know, the study of economics, the study of money.
So the more information you have about understanding that, and that's why I adhere to the Austrian School of Economics.
And, you know, the Constitution, which says that only gold and silver should be money, and understand why they argued about that.
So I think that you need information.
The founders had it.
They tried to get us into the right direction.
We did it for a while, but we've gone in the wrong direction.
That's why the information, Philip, that you're talking about is very necessary.
We have to follow up and I encourage people to check it out.
Export Selection