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Oct. 31, 2025 - Ron Paul Liberty Report
29:40
Fed’s Rate Cut What It Means for Everyday Americans” - With Guest Phillip Patrick

The Federal Reserve just lowered interest rates — but what does that really mean for everyday Americans? In this episode, financial expert Phillip Patrick from Birch Gold Group joins us to break down the impact of the Fed’s decision on inflation, savings, mortgages, and the broader U.S. economy.

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Fed's Rate Dilemma 00:15:23
Hello, everybody, and thank you for tuning into the Liberty Report.
Today, Friday, we frequently have a special guest.
And what's more, we do, the economists from our friends at Birch Gold.
And that's Philip Patrick.
He's here once again.
And Philip, welcome to the program.
Thank you for having me, Dr. Ball.
Well, Philip, we should have a few things to make, you know, comment on about the Fed meeting.
And they're solving all the problems and sometimes contradictions that were pointed out this week.
One policy is doing this to push rates up, the other one's pushing it down.
And I always like to make the point that in a true sense of the word, they're trying to rig the price of interest rates, which is impossible.
And therefore, there's confusion.
And I think it'd be safe to say there's confusion with the Fed going on these days.
But I saw something today, Philip, in the news that affects prices.
And people are concerned about prices.
And they might not think about exactly where does the price increases come from.
But there's an article on Zero Hedge today.
It said oil spikes on reports of U.S. military on the Venezuelan Infinite.
And those prices going up is significant.
It may cause the consumer to be hurt.
But that's a little bit different.
There's a lot of things that make prices go up, droughts, floods, storms, and whatever.
But the main thing that I've been interested in over time has been the way the value of the dollar goes down.
Yes, it affects secondary prices.
But I want to concentrate, you know, and have concentrated for years about how disruptive the Federal Reserve is by pretending they know how to fix a price.
And I don't like price fixing of anything, let alone the money.
And not many people are taught in college why, you know, the price fixing by a central bank can be very deadly and cause a lot of harm for our consumer.
So, Patrick, you were, I'm sure you were paying attention to the Fed this week.
And the markets had nothing major to react to because everybody knew they were going to lower rates.
And that means less inflation.
You know, they're involved in supply and demand of money.
And it is important.
But I still think the biggest product of all that they've done for a long time is just chaos in the marketplaces.
And it's a wonder that people do so well.
But unfortunately, under a system like that, some people do a lot better than others.
Some people get richer and say, hey, this is a good deal.
And other people do poorly.
And I think, Philip, we have already seen some signs that employment problems exist out there.
And a lot of things that they don't want to talk about because they'd rather emphasize, and that's the way politics work, emphasize that thing they can talk about in a positive way.
Did you have any strong reaction to what the Fed did this week?
Look, it was no surprise.
I don't think they had too much choice, but it's interesting, right?
The Fed's flying blind at the moment.
Obviously, with the government shutdown, they didn't have the data they needed to make decisions.
So they were working on ADP data for employment numbers.
Was there really a catalyst for the Fed to lower rates?
I would say not, right?
Inflation's 3%, it's 50% above the Fed's target.
Even employment data that we had wasn't terrible, right?
It was coming in the mid-4% range.
For some clarity, or for some context, rather, since 1945, inflation's unemployment average, sorry, about 5.7%.
So, you know, based on the Fed's dual mandate, I didn't really see a catalyst or a rationale to lower rates.
I think what we're seeing, though, is fiscal dominance in real time.
And this is where it's debt that drives policy more so than data.
We've got to remember, Washington added a trillion dollars of new debt in the last 79 days, right?
The interest bill alone on that is going to be over $1.2 trillion this year, more than defense.
And I think that ultimately is why the rate cut was inevitable, not because inflation's beaten, but because the government just can't afford normal rates anymore.
In fact, I saw even the editors of Bloomberg, who are usually the most enthusiastic, easy money advocates, are warning the Fed to pause, saying that the case for cutting was weak this week.
And they aren't wrong.
I think the Fed right now is trapped.
Lower rates are obviously necessary to keep Washington solvent.
Higher rates, I think, would just expose the full cost of our borrowing binge.
So I think we're seeing fiscal dominance in action more so than the Fed responding to employment or inflation.
Right.
You know, a few years back, there was a historic change in policy, and it was meant to get us out of what appeared to be a very, very weak economy.
And that was quantitative easing.
And that means that they would take rates to zero.
And I thought, zero, that's a pretty good deal for some people.
And so that has existed.
But now, now this week, it's been announced that the quantitative easing would be stopped.
There's not going to have zero rates.
And even though they lowered rates a little bit this week, they're somewhat different than they were back when they were terrified about what was happening at the economy.
But so right now, in the last year or so, they've been following a rule of quantitative tightening.
When they have to renew their notes and things, they don't renew it.
They just hang on to it.
So they're more or less tightening their balance sheet.
So that's in conflict with what they're trying to do with setting interest rates.
But the quantitative tightening, you know, is getting rid of that.
I think that means that there's going to be maybe not, well, I think it's possible that they would have quantitative easing.
Yeah.
I don't put anything past them.
So, but it leans in that direction that some people, you know, what is it going to do?
And that's the whole thing, whether or not you're in the precious metals market or whatever you're doing.
Every consumer and every business person has to anticipate this.
So even though there's a lot of predictions and you can have a pretty good idea of the trends, you just don't know how much it's going to affect it and when will it end.
So right now, they said shortly they will cancel quantitative tightening.
And therefore, that means I think the money supply is going to have more free reign on what they're going to end up doing.
I tend to agree.
Look, I think the Fed are backed into a corner.
Now there's quantitative typing.
They're trying to pull some things out.
They may be forced to ease again.
But the reality is we're stuck in a trap.
And as you know well, unless we're willing to cut spending significantly, and I don't see any politicians that are willing to do that, we're going to continue to run deficits and we're going to continue to have to long-term increase the money supply to meet that.
And I don't see anybody in Washington willing to address that.
To fix the problem that we have, we would have to cut spending 25% across the board.
That means Social Security, Medicare, Medicaid.
There's nobody out there willing to do it.
President Trump is the one president who's not afraid to offend anyone.
Even he's not willing to make the tough choices necessary to get this fiscal house in order, if you will.
So the reality is simple.
We're going to continue to run deficits, continue to amass debt.
Debt service is increasing, and it's looking increasingly like an unsolvable problem.
You know, people try to anticipate what they're going to do, and we listen to the reports.
But over the years, I've learned to not take too much stock in what they're saying that they're going to do and what the results are.
Take, for instance, the CPI.
There's all kinds of ways they can fudget those things.
Sometimes they can just withhold reports until a special time so it'll have less effect.
So it's just very difficult to depend on what the reports are.
But there are now reports and indications that at least they're leaking out that the unemployment rates have started to sneak up.
And that might be the reason why Powell finally came around to going along with Trump and saying start lowering interest rates.
But it's already, you know, I think I observed the markets fairly well this week that they said, well, we're going to announce we're lowering the interest rates.
But if I looked at what is really still in the market rate, the market rates are actually creeping up a little bit in spite of what the Fed said.
It looks like it wasn't really an effect.
And that was probably because it was discounted, you know, for so long on what the Fed was going to do.
It sort of was the people are assuming that the acute argument between the Fed between Powell and Trump has sort of been on hold for now.
But I think this anticipation, I'm amazed the markets work as well as they do, but they do work to one degree.
But I think the one thing they can't eliminate is in a process like this, when money supply and the money manipulation is such that there are certain groups that are going to understand it, anticipate it, maybe be protected by the policy, and they do a lot better than others because I think the statistics are out there and I don't think that they can fudge them.
And that is the middle class to get stuck with the inflationary pressure on prices.
And also that is what really counts.
And those numbers aren't getting that much better.
And yet, if you just go by the reports, especially from the government, especially with this administration, everything is fine and dandy.
But I suspect that in time, people are going to realize that the system that we hear is very shaky.
I couldn't agree with that more.
And you're correct.
The government will manipulate numbers in their favor.
Look at what happened in the 80s and 90s with the CPI metric on the back of a bout of inflation, growing Social Security.
The government just changed the CPI metric to manipulate it down.
So they'll manipulate the data, but Americans aren't fooled.
We feel the reality of it.
Prices are still higher across the board.
So, like I said, they're not fooling anybody.
Yeah, so I think we've got tough times to get through ultimately.
Even the numbers the Fed are working on today are questionable.
I agree with you.
I think that the catalyst for the Fed to lower rate was the employment numbers creeping up.
But like I said, they're not really high enough with inflation burning in the background to warrant a rate cut.
So I still think they're playing ball with the Treasury to try and ease borrowing costs.
But as you mentioned, it's not even working, right?
We had two rate cuts this year.
Debt service isn't reducing.
In fact, it increased marginally on the back of the last rate cut.
That's a very dangerous sign for us because it means globally people are viewing us as not necessarily the safe investment that they once did or the safe borrower.
And they're starting to look for alternatives.
And with a $38 trillion debt pile, that can become untenable very quickly.
You know, basically, the way I understand what the Fed does is they respond and believe they can handle and they have a great deal of confidence in themselves.
That's what I sensed when I was in Washington and they come before the banking committee.
But basically, there's a rule that most people adhere to, but there's a lot of variable.
Generally speaking, in a weak economy, what they want to do is decrease rates to stimulate the economy.
And yet, when they do that, they have to inflate the currency and they cause other problems.
But if there's price inflation, which they cause and create, how do they handle price inflation like they had to in the 70s?
They have to increase rates to try to protect the currency.
And I was very observant because that's when I got interested in economics and the Federal Reserve, that they did that and they ushered in this age of that.
The 70s were very, very hectic.
And that's when there was some interest rates and mortgage rate up around 20%.
But the whole goal was to turn off the economy.
Now, one thing I'd like to remind people, you know, if you have a market working, there will be variables and you want the market to create it.
But never would a free market economy say, well, we need to hold back.
We need to be involved.
What we need to do is crash this economy and that will lower prices.
And that's how you correct the problem.
So they purposely, you know, increase the rates to create a recession.
Under a free market, no matter what, if the market is doing very, very well today, they might say, oh, we better watch out.
The market's getting too hot.
We better turn this off.
So they purposely bring on a recession by raising interest rate.
You don't have that kind of silly stuff, which if you have a free market economy.
Yeah, I agree.
And it's a reflection, I think, of the very tough position that the Fed is in.
You know, we can sit here, I can sit here and criticize and say they responded too late.
But it's a very tough position to be in.
They're stuck between a rock and a hard place, right?
If they want to get a handle on inflation, they need to raise rates, cool the economy, but that will put a squeeze on the economy and lead to recession.
So if they want to stimulate economic growth, obviously they have to lower rates to do that, which can fuel inflation.
So it's a really tough situation that they're in.
But I think ultimately today, they are forced to lower rates, right?
Even if it means persistent inflation moving forward.
Fed's Dilemma 00:03:22
And like I said, I think it's debt service that's really driving that, right?
And I think it was pretty evident with the last meeting.
The Fed is flying blind.
They don't have data, yet they're still easing.
And I think that alone is very telling.
Fed policy is no longer guided by inflation or employment.
I think it's guided by debt service pressure.
Look, once the debt burden gets too big, the central bank has two choices.
You raise rates, send the economy into a deep freeze, or you cut rates and you dilute the currency.
That's the route countries typically always go in this sort of debt situation.
And it's the route we're taking today.
And I'm not sure there's another viable path.
It appears to be the lesser of two evils.
You know, there's a lot of people who have been informed about monetary policy and gold standards and whatever.
And early on, they would prepare themselves for this by investing in certain things that would, you know, correct the problems that the Federal Reserve has created.
And we've listened to all this and these discussions.
You know, to be an advisor, what I do quickly is I don't pretend to be an advisor because I don't know the timing.
And you might lead somebody into something that will mislead them.
But can you think of how it affects the advisor this week listening to in a serious manner everything they heard from the Fed, what they hear from the government, you know, on the budget and what they hear on foreign policy and how many wars are we doing and what's the deficit like?
Do you think there's a sensible, easy answer to tell somebody that's very sincere, they might not be very young and have a long time to test some of these tests.
Somebody that has the income, how difficult do you think that is to advise a consumer at this particular time?
It's really difficult.
I mean, this is a very tough climate.
We have problems in every single direction.
We have inflation.
We have bubbles all over the economy, fueled predominantly by Fed policy.
We have a world, you know, central banks dumping U.S. dollars.
There's definitely structural shifts happening.
And it's hard to navigate in these climates.
What I would say, though, is history provides a lot of lessons, right?
It's not a crystal ball.
It doesn't dictate the future, but it teaches us a lot.
And like I said, structural shifts are happening.
There's been a belief since the 1980s that government debt and specifically U.S. government debt was risk-free.
And we saw a transition away from gold towards debt.
Look at Western governments now.
Debt to GDP averages over 110%.
I think that illusion has been shattered.
And I think we're seeing a reversion back, at least internationally, towards sound money and away from debt.
And I think there are some trades there.
You know, I always tell people, very difficult to predict, but the best thing to do is watch the smart money, right?
And there's no smarter money than central bank money.
Shifts in Monetary Trust 00:08:14
They are moving into gold in their droves.
There's a lot of warning signs.
Like I said, $38 trillion of debt, $2 trillion annual deficit, inability to curb spending, borrowing rates increasing in a climate where rates are decreasing.
These things don't bode well.
Debt service, almost 50% above defense spending, right?
Any student history has to understand this is the death knell for currency and it bodes very well for gold.
So watch the big trends is what I'd say, but I don't envy an advisor trying to navigate this short-term climate for sure.
But it's easy to understand why people would get a little bit frightened about it all if they're Not wealthy enough to think about the price of gold and buying some gold.
Because if you suggest, even now, in my own mind, I wonder if gold's going to quickly double itself.
And you say, $4,000 is going to go to 8,000 when in six months, which is all right now.
I believe that's a possibility.
But I remember in the 70s, you know, $35 when it started, and then it went up to $800.
Just think how many fold that is in an increase.
And my point being that even though the gold is very expensive to some people, the metals are still an important principle to follow.
And I happen to have a personal, you know, affection for silver.
And I like the idea of silver.
And that offers, you know, a precious metal.
And even that is hard to understand because when I sort of was enlightened with what was going on a few years back, when I started, even as delivering papers as a kid, I did look at the coins all the time.
And the silver, a silver an ounce at that time that they put into the money was $1.29 an ounce.
And that was $50 an amount.
But once again, there's a lot of adjustment.
A lot of people, you know, can catch up.
But the real criminality of all this is that many people, most of the people in the middle class and the poor, you know, suffer the most because they suffer from the bad effects of inflation.
They don't get to buy gold at $35.
What they do is they end up paying for the high prices.
So I don't like to think solely about the increase in the price of gold, which is a reality.
I like to think of the ratio between gold and honest money.
And it's that.
It's a dollar.
When a dollar goes down in value, you have to use a lot more dollars to buy something.
And guess what?
The middle class still like to eat.
And I see statistics on there.
I don't even want to believe them.
That there's people in the United States that have to curtail some of their eating habits and all because the prices are too high.
So that's the real tax, the tax on the middle class and poor.
And the real worry I have, Philip, on this is that it leads to a lot of violence.
People get very angry over this.
And if you think of the stalemate going on in Washington, D.C. now and the anger and all the misstatements made, you know, even compared when I was in Congress and I was there a couple of years, there was a little bit of that going on.
But I don't think it was anything from my viewpoint today.
I don't think it was ever that bad.
You know, I kidded when I left Congress.
I said the only decent thing coming out of this place was when the Republicans played baseball against the Democrats.
And I sure wish they'd play more baseball than legislating.
So I give a quick summation of what you might tell the people to do where they might get some additional advice on investing in these tough times.
Of course, so you made a couple of very good points.
So first of all, with regards to gold's price, you know, we feel that, right?
When it went through $1,000, we said, can it go to two?
It feels high.
Went through two, went through three, went through four.
Well, people have to understand, and you mentioned it yourself, gold is just a reflection of the value of currency.
And gold will go as high as currency goes low.
And I'll give a very extreme example of that.
World War I, Germany, an ounce of gold, 142 German Reichmarks.
Germans lose World War I, Treaty of Versailles says they have to pay to rebuild Europe.
They go through quantitative easing.
They don't have the money, so they print money to do it.
We know how that ended.
Hyperinflation, Weimar Republic.
10 years after it was 142 German Reichmarks for an ounce of gold.
87 trillion German Reichmarks for an ounce of gold, right?
Obviously, that is an extreme historical example, but it demonstrates a point very clearly.
Gold's price is just a reflection of the value of currency.
So I bring us back now to our fiscal situation.
$38 trillion of debt, $2 trillion annual deficits, printing money to meet it.
Look back at history.
That's what I say.
It's a tough climate to navigate, but history teaches us some lessons, right?
Whenever empires have gotten into this position, it's led to a collapse of currency.
There are no exceptions for that ever in human history.
I think it's the reason central banks around the world are setting records for gold buying.
I think it's the reason that they're going to continue.
I mentioned earlier, what I think we're seeing is a reversion back.
In the 80s, gold was about 70% of global reserve.
Even with all the uptick today, it's about 20%.
I think we're heading back towards that.
The final point to make was just about the middle class.
Listen, I think the Fed are complicit in sort of driving inequality.
And it's these policies that we're talking about.
Really, since the turn of the century, they have taken extraordinary measures way beyond their legal mandate, zero interest rates for 14 years.
And what that's done is massively increased the wealth divide.
People have to understand quantitative easing is not all bad, right?
The first place the money printing or the printed money goes is through the banking system.
So the first thing that happens when a central bank stimulates is asset prices increase.
Then what happens is the inflation bleeds through into the broader economy and then bread, eggs and milk get more expensive.
Well, the problem in America, 90% of stocks and assets are owned by the top 10% of the population.
So what happens is the top 10%, they get much wealthier, then they've got to pay a bit more for eggs, bread and milk.
Well, the problem is the bottom 90%, they get no benefit from asset inflation.
They just have to bear the cost of higher prices.
The Fed are complicit in this.
Since the 70s, $50 trillion of wealth has disappeared from the bottom 50% in the US, gone up to the top 10.
That's policy.
So anyway, my two comments on your two points.
Very good.
And could you tell our viewers what they might be able to do to get a little bit more information if they're thinking about getting involved and trying to protect themselves?
Where can they get this information?
Yeah, information is key.
That's what we focus on at Birch is providing information.
So I would suggest all of them to contact us.
You can text Ron to 989898.
And that will get them access to free information on how and why to invest in precious metals.
So text Ron to 989898 and they'll get access to free information.
Very good.
Understanding Money's Role 00:02:38
You know, I got interested in the money issue mainly because it was interesting to me.
And I started off as a coin collector at a young age.
But as time went on, I found it fascinating, the history of money.
And I came around to the conclusion that the currency is the lifeblood of an economy.
So whether you're talking about foreign policy, printing money to fight wars that we should be fighting, whether it's the welfare state that maybe the motivations are good, but it always lends up to problems of bankruptcy and ruining a system so the good intentions don't survive.
So I see this as a fascinating subject, and yet it is still really a much more important subject, economically speaking, than I ever imagined as a younger person because I didn't understand exactly what was going on or what the Fed.
But I did come to the conclusion, and there's a lot of people that believe this way because I've been on the political stand around the world or around the United States talking about this.
And guess what?
They don't have a warm feeling for the Federal Reserve.
And right now, they don't have a warm feeling for the Congress spending all the money.
And I think they're coming to believe exactly the problems that we see.
But understanding the difficulty is another thing.
So I think there's going to be chaos.
But I think the biggest question is that what's going to replace it and when?
I don't think we're going to have a change in the Congress next go around to the point where they will, you know, vote common sense.
I think the political system, I think it's too far gone.
But I'm very optimistic about more and more people waking up and realizing it, and they know the difference.
And when it comes to a rebuilding, we have to be able to compete with the Marxists who want the chaos.
That's their goal is to have chaos.
And out of the chaos, they want to deliver to us, you know, radical socialism and fascism.
So I think there's every reason.
And I always found it fascinating and interesting.
And I enjoyed very much talking to young people on the college campuses because they were sometimes much more interested in a subject and understanding it than there were some of the business people who have learned to live with all this government mismanagement.
I want to thank everybody for tuning in today to the Liberty Report.
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