I.O.U.S.A. (42 page)

Q:
You and former Fed Chairman Alan Greenspan have famously
knocked heads over the years. Can you tell me a little
about that? Why it is that you seemed to be at times the only
person that seemed to be keeping a very close eye on the
goings - on at the Federal Reserve?

Ron Paul :
Alan Greenspan from ‘ 87 up to over a year ago was the Chairman of the Federal Reserve Board, the U.S. central bank. I see the central bank and the Federal Reserve System as unconstitutional in that they have this tremendous power and a monopoly control over money and credit, which is an ominous power. Greenspan, or any chairman of the Federal Reserve, is more powerful than even our president because he has so much control over the economy. But the interesting thing about Alan Greenspan was that he was a true believer in Austrian economics and in the gold standard. So in a private conversation I had with him I told him that I followed what he taught. In the 1960s he was very clear on his position on gold, that he liked gold and rejected the fi at monetary system, because if you have fi at money it leads to defi cits and to the expansion of government — all of which he opposed.

So it ’ s rather ironic that now that Dr. Greenspan accepts the paper monetary system (which is a fi at system). He literally was the participant in these defi cits, and I would bring this up to him c11.indd 152

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in the committee because the Federal Reserve Board ’ s chairman always condemn defi cits; it ’ s always Congress ’ s fault. But my point was Congress couldn ’ t do it if they weren ’ t complicit: If we don ’ t want a tax and we can ’ t borrow and then they have to print the money in order to accommodate the big spenders. If the Federal Reserve couldn ’ t do that, interest rates would go up and there would be restrain on spending. So he literally became one who once believed in the restraints of the gold standard to one who was converted into becoming the Federal Reserve Board Chairman — the one that ran this whole system of fi at money and central economic control. I would chastise him quite frequently about how can he be for a free market when he endorses a system of central economic planning by controlling the money? And when you think about it, the monetary unit is used in every single transaction, so if you can control one half of every single transaction you have a lot of power, and a lot of control.

Q:
There is a story you are asked to tell often, about having Alan
Greenspan sign a copy of a book called
Gold and Economic

Freedom.
What happened there?

Ron Paul :
In the 1960s, I was studying and reading Austrian economics and I received the
Objectivist
newsletter that Ayn Rand put out. Alan Greenspan had a piece in the newsletter and it was a delightful article — it said all the things I believed in.

One day, we had a personal meeting with Greenspan just to get our pictures taken and chat for a few minutes, and we knew that was coming up. So I dug out my original copy, and I took that with me, so when we were getting ready to get our picture, I fl ipped it open to his article and said, “ Do you remember this? ”

and he said he did. Then I asked him to autograph it, so he got out his pen and he was signing it, and I said, “ Do you want to write a disclaimer on this article? ” He said, “ No, I wouldn ’ t do that. I just read this recently and I fully support everything I wrote. ”

Which is interesting because you don ’ t know exactly what he means.

If he fully supports what he wrote, why was he managing a monetary system that was exactly opposite of what he wrote in 1966?

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Q:
David Walker says in his talks that he thinks we ’ ve lost our way,
that the idea of what America was a long time ago and what it
could be is somehow getting away from us. Is this something
that rings true to you?

Ron Paul :
Oh yeah, we ’ ve lost our way because the majority of people — certainly in Washington — really don ’ t care about the Constitution. The Constitution restrains government power and enhances personal liberty. We ’ ve lost our way because we ’ ve given up on our faith and our conviction and our understanding how freedom works. We don ’ t believe free markets will take care of people. Everybody has to have a safety net. Big businesses have a safety net, small businesses have a safety net, and poor people have safety nets. Medical care can ’ t be delivered by the marketplace and housing has to be delivered by government, and they never look at the problems: whether there ’ s going to be a housing bubble and whether medical care is not only getting too costly but it ’ s not improving, and whether the military industrial complex takes over the system.

Now we ’ ve lost our way; we don ’ t believe in what made America great, and that was individual liberty. We ’ ve become too dependent on government, and yet, in spite of all those negative things I ’ ve just said and how bad Washington is and how bad the fi nancial system is, in my travels around the country I ’ m really encouraged. Because so many young people today understand this and they ’ re getting information off the Internet and different sources. A lot of them get bored with this silly Keynesian economics, which is very hard to understand and impossible to get fascinated with for the average college student. So the fact that there ’ s so much information on the Internet is remarkable, to stimulate and arouse a whole new generation. In the ‘ 50s, when I was interested in fi nding this information, there was one group in the whole country and that was the Foundation for Economic Education in New York. They produced literature and you had to search for a book. There was no Internet, nothing on television that your schools didn ’ t produce. Today everything is so much better.

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So I think the undercurrent is very, very favorable and I think the next generation is not as tolerant for this acceptance of big government, and there ’ s probably two reasons for that. I think they ’ re attracted to the ideas and the principles of liberty, but also I think they sense that we have problems and they don ’ t know how they ’ re going to pay these huge debts and these entitlement burdens that are coming. They ’ re sick and tired of the foreign policy, so in some way the problems are arousing a lot of people.

As long as we do our job in spreading the ideas of freedom and emphasizing the rule of law and the restraint of government, there ’ s reason to be hopeful.

Q:
How would you characterize a generation of people who live
beyond their means and pass that debt along to their children?

Ron Paul :
I don ’ t think people do it thinking, “ Let ’ s see, how many benefi ts can we get from government and stick it to the kid ’ s tab? ” But in a way, fi nancially, it looks like that. But they can rationalize and say, “ Well, I paid into these systems, I ’ ve been paying taxes, I just want to get some of my money back, ”

not admitting the truth to themselves that all their money ’ s been spent. I think it all came out of bad economic teaching of the Depression. In the early ’ 30s when we had our Depression it was taught that capitalism and the gold standard caused all the problems, and therefore, you had to have government bailout programs and safety nets and they ushered in the whole age of welfarism, Social Security, and the government had to take care of us. At the same time, they had been taught ever since World War I that it is our obligation and responsibility morally to spread our values around the world. We have to have a war to spread democracy throughout. This whole generation accepted this but it was fallacious. It ’ s based not on principles of liberty and self -

reliance. It ’ s based on the fact that, “ well, we do need government to take care of us, ” and they never ask the question, you know,

“ Who ’ s going to pay for it? ”

We have dropped this moral constitutional approach to what we do, and yet a whole generation if not two or three have c11.indd 155

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accepted this idea because we ’ ve been so wealthy and we ’ re still doing pretty well on the surface. People seem to be doing pretty well. The tragedy is, it is all on borrowed money now. The fi nances are in such disastrous shape because we can ’ t survive without borrowing $ 2.5 billion every day from overseas because of the current account defi cit, and a country can ’ t continue to do that. They can ’ t continue to borrow from overseas and print money. They will come up short, and they can ’ t just print the money — it just won ’ t work. Eventually that ends up in big economic problems.

Q:
Back in the mid - to late ‘ 90s, you were one of the only
people who was blowing the whistle and speaking up against
Dr. Greenspan and the Fed. What does it feel like personally
to be out there on your own? Do you ever feel that you wish
you weren ’ t sometimes the only person in Washington to vote
against the bill of “ Let ’ s save ” ?

Ron Paul :
It is a lonely position, but I came with full knowledge that I expected to be in that situation, and I guess I looked always to the positive if I ’ m lonely here in Washington. When I leave Washington, I ’ m not quite so lonely. When I ’ m back in my district or talking around the country, all of a sudden there ’ s a lot of support. There ’ s a lot of grassroots support for my position about getting rid of the income tax and privatizing Social Security and letting the young people get out of it. There ’ s a lot of support by a lot of people that understand the danger of a central bank, and they understand it when I say, “ Let ’ s just get rid of the central bank. We didn ’ t have it before 1913, we don ’ t have to have one. ”

I make up for it by looking for allies outside of Washington, but I also have a nucleus of people here in the Congress who would, behind the scenes, agree with me, and a lot of times they ’ ll say, “ Well, I would vote with you more often, except I ’ d have more trouble explaining it back home. ” They are afraid that the conventional wisdom at home is such that it might hinder their reelection. But I have found that it ’ s a political benefi t to try to talk about these diffi cult issues.

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Q:
Can you talk for a moment about your candidacy for president?

How would you defi ne a successful campaign? Would it be
winning the election, would it be winning a nomination, or
would it perhaps be that your ideas that you ’ re fi ghting for win
and take hold and take place?

Ron Paul :
If you enter a race and say, “ Well I ’ m not in it to win, and I ’ m just going to go out and make a couple points, ” it ’ s not a very good campaign, either for yourself or for your supporters. So you have to set a goal of getting the maximum number of votes and setting the goals should be to win. However, the fi rst time I ran for Congress I didn ’ t think much would happen — and not too much happened, but something came of it. I ’ m issue driven and I would think that others lose a lot when they lose a race; they lose everything, because all they want is political power, and that ’ s the least of my goals. So if I win a political race, win a Congressional seat, or win in another offi ce, that ’ s a plus, but I still end up with the satisfaction that I ’ ve introduced a lot of ideas to a group of people.

Q:
On a personal level, how is that you came to be a public
servant? Was there something that happened in your life?

Ron Paul :
It was mainly that I wanted to talk about economic policy. And I thought that after my study in hard money economics and free market economics in the ‘ 60s, and the confi rmation of the breakdown of the monetary system in 1971, that I just was motivated to talk about economic policy without much plans or expectations. A lot more has happened than I ever thought would.

Q:
If we don ’ t right this course that we ’ re on, reel in the defi cits,
and address this ever - expanding spending, what do you fear
could happen?

Ron Paul :
Well, the worst thing is that the dollar ’ s value is being eroded systematically every day, and that is since 1913. Since we ’ ve had the Federal Reserve, we have lost about 96 percent of the value of the dollar. If we don ’ t course - correct, we ’ re going to have a crash in the remaining value of the dollar, and you could lose c11.indd 157

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it quickly. When a currency gets up to end stages, it goes quickly.

A lot of people remember what happened in Germany when the German mark lost all its value. When that happens, there ’ s runaway infl ation, no controls, and economic breakdown. This usually invites a dictator — that ’ s what helped usher Hitler into power. So many countries have bitten the dust through infl ation, even in ancient times. They didn ’ t have printing presses, but they would dilute the metal or clip the coins and deceive and steal from the people — things the government shouldn ’ t be doing.

This is a very serious problem and the biggest reality that we have to come to grips with is that we can ’ t afford to pay all these bills, and if we just pay for these bills by printing money, then we ’ ll destroy the currency. And that will be a much, much more painful reaction than us just tightening our belts and living within our means.

Q:
Would you say that monetary policy is largely a disincentive
to save?

Ron Paul :
This system discourages people from saving, because if the money loses value they can ’ t keep up. So it ’ s better they spend the money and get something of value, and borrow the money, and this is what has happened. Too many people depend on borrowing instead of savings. But if you didn ’ t have a Federal Reserve System, it wouldn ’ t work that way because somebody has to produce the credit and the funds in order for people to borrow, and for businesses to borrow — and they create that out of thin air.