Ron Paul Knows "The Longer QE Lasts, The Worse It Will End"

Tyler Durden's picture

In this exclusive interview with Birch Gold Group, former Congressman Ron Paul shares his opinions on a number of topics, including investing in physical gold and silver, the future of the U.S. dollar and the role of the Federal Reserve.


Full audio if the following interview is available here.


Rachel Mills for Birch Gold Group (BGG): This is Rachel Mills for Birch Gold Group. I am speaking with Ron Paul today. How are you, Ron Paul?

Ron Paul (RP): I am doing very well. Nice to talk to you Rachel.

BGG: It’s good to talk to you again, and by the way of information for Birch’s audience, I was your last press secretary on Capitol Hill in Congress and I worked for you for the 5 years. So I may be cheating a little bit because a lot of your answers to my questions I maybe have a pretty good guess at what you might say.

RP: Okay!

BGG: But, just really quick – today with you I’d like to go over several things. But I’d like to ask your opinion on things like Janet Yellen as the next Fed Chair, about debt ceiling and shutdown issues. I want to get into, briefly, if you are still a buyer of gold even though it is so “expensive”. But first I wanted to introduce Birch Gold’s listeners to your background a little bit because I think it’s fascinating. In 1971, Nixon closed the gold window which led to the end of the Bretton Woods agreement. That was very important event for you, I know for sure, because you knew at the time that it would eventually destroy the currency, which we are still experiencing. And you said that that was what got you into politics to begin with. Had you been reading Austrian economists before that?

RP: Yes, for a good while. As a matter of fact, it was 1971, there was confirmation of the Austrian economic writers who had been predicting that would happen as early as Henry Hazlitt said when the IMF was set up in 1945. He said it wouldn’t work and Bretton Woods would break down. And by the 50′s and the 60′s people were rejecting it and it was so artificial and it was fragile. So people did know that it was coming, and mainly it was coming because the governments pretended that the dollar would be as good as gold at $35 an ounce forever, yet they kept printing dollars and it was pretty simple logic to figure out there’ll be a limit. The governments worked real hard to convince the people that there was no problem, that the dollar would always be valued at $35 an ounce.

But finally the market overwhelmed. The politicians and Congresses, and Central Banks can manipulate things for a while but eventually if they are out of sync with the market, the market will overwhelm. And even if the government won’t permit it legally to do it, it just drives the whole system into the underground economy. So fixed exchange rates and different things don’t work, they just hide the fact. But in 1971, it was confirmation that everything that the Austrians were saying as far back as the beginning of the Bretton Woods, that was true. And of course we’ve been suffering the consequences from that ever since.

BGG: Yeah and I’ve heard people argue that the dollar is doing well against other currencies. But I know for Austrians and for people who understand gold, like you and me, that’s not much solace because it’s all on a race to the bottom.

RP: Right and the ultimate measure of the value of the currency is what it purchases, so gold is a good indicator long term, I don’t think it’s a good indicator short term, because there are a lot of factors, just like in the 50′s and 60′s, they were able to hold gold at $35 an ounce when it should have been $235 an ounce! But anyway, overall in the long term it’s what the dollar will purchase. And even though our government tells us today there is no inflation, they are trying to get prices to rise at at least 2% a year, yet there are some things in our economy, the prices are soaring: the price of a bond, the price of education, the price of medical care – all of these things are going up.

So there is a lot of price inflation, but that’s the ultimate tests. You can measure one currency against another, gold is a long-term indicator. But if none of the prices were affected by printing money, it would be no big deal. But they are and of course the major problem is not only the price increases, it’s the malinvestment, the overinvestment, the bubbles that form and the corrections that have to come. That’s where the real problem is, in addition to the cost of living going up and hurting the poor and the middle class, much more so than it will the wealthy.

BGG: Right, which leads nicely to Janet Yellen as the next Fed Chair, as recently has been announced. What do you think of Janet Yellen? Do you think she’s going to solve all our problems?

RP: No, she’ll make them worse. She’s inherited a mess, although she was a participant in the mess and she always argued for more inflation. One thing I find a little bit interesting is that she has a reputation for transparency. She wants to tell the markets exactly what their decisions are early on and let the markets know what they are doing. But if it comes true transparency, like allowing an audit of the Federal Reserve, and letting us know who they bail out and when they bail out and what they did in ’09 with their trillions of dollars, and all the international transactions, there’s no way that’s going to be permissible. Because that’s where all the power and control is accomplished, it’s behind the scenes with the Fed on international transactions.

“The longer [Quantitative Easing] lasts, the worse the correction will be when eventually people give up on our dollar and give up on our debt.”

But if anything, she takes a position, not only did she endorse what Bernanke was doing, she was always much more dovish on trying to prevent prices from going up and having, you know, price inflation. She was arguing the case for even more, so the odds of her having the guts or the wisdom to start backing off the purchase of debt, it’s slim to none. So that will certainly continue and it’s still working on the surface. The longer it lasts, the worse the correction will be when eventually people give up on our dollar and give up on our debt.

BGG: So do you think Larry Summers would have been any better? He was rumored to be Obama’s preferred choice. What do you think?

RP: No, the policies wouldn’t be all that different, even if he had been slightly more reserved in credit creation. He was also a person that would… there is a subjective factor in markets too – and he would have added as another subjective factor because people didn’t like him. And he might be just, you know, annoying the marketplaces because that is a factor, they might trust him less. But overall they’re very much the same – both of them. Anybody who can even be considered to be Chairman of the Federal Reserve will be an endorser of Keynesian economics, that the lender of last resort is crucial for the banks and all the currencies and Central Banks of the world.

And they believe, though of course, the most important role for the Fed – and Congress never talks about it, but they secretly acknowledge it – without the Fed, who would buy the debt? And if somebody didn’t buy the debt, interest rates would soar. So even this big talk about all the arguments in Washington on the issues of war and spending and welfare and debt, they’re in total agreement with each other, and they all support the Fed’s role in being not only the lender but the printer of the last resort. Print what you need… but just common sense tells you that this can’t last.

“Since they will not work out of [Quantitative Easing] gracefully and deliberately, we will probably go on to having a major crash of the dollar.”

BGG: Who would’ve you picked?

RP: I would’ve picked nobody. I don’t think we should have a Fed, so I wouldn’t pick a Chairman. But even though in the Presidential campaign when they pushed me – “well, you’ll have to pick someone to unwind it” or something like that – I always threw out Jim Grant’s name. Because I’ve known him, he’s an Austrian economist, he knows that monetizing the debt is bad and if they were trying to work on a transition, somebody like that, you know, would move us in the right direction. But he wouldn’t last either because if he decided right now to only buy $75 billion worth of government debt per month, the markets would crash probably and then they would want to throw him out. So it’s a system that is very friable and unworkable and since they will not work out of it gracefully and deliberately, you know, we will probably go on to having a major crash of the dollar – that’s what I see happening.

BGG: Yeah, scary. Moving on, I wanted to ask you about the debt ceiling. We are up against the debt ceiling again, as we always find ourselves every few months it seems. And so, we’ve had an impending crisis if they don’t raise the debt ceiling, which everyone expects they will find a way to raise it. But then, before you know it, we will be right up against it again. So what is the point of the debt ceiling anymore?

RP: Well, it was intended to restrain government but some people don’t even like it, they want to get rid of it, just so the government never has to be hesitant in spending as much as they want. But you’re right: Once they raise it, they just go back to doing the same thing. The debt ceiling isn’t as necessary – this October 17th day isn’t as crucial as they pretend, because that’s an arbitrary date. They could have picked the 16th or the 20th or any date they wanted.

Besides, the national debt hasn’t moved since May because they’re always taking money elsewhere and spending it and paying all the bills. So they can continue to do that for a week or a month or a year if they really wanted to. Just pay the bills as the money comes in and they could always pay the interest rates. And the other thing… if, say, we were in charge and we wanted to change things to work our way out of it and we wanted to deal with this national debt, just eliminate the debt we owe to the Federal Reserve. We pay a lot of interest to the Federal Reserve and they turn this money and they use this money for all kinds of things, so I would just wipe that debt off the books. But if we did that today, that means they would have a lot of room for more debt – that would lower the national debt by $2 trillion.

BGG: Yeah but it wouldn’t solve the spending problems…

RP: This government would spend more money if we got this freebie! But I would only think that would be worthwhile thinking about it is, you know, to tide this over and work our way out of it. But when the reforms are necessary when a crash comes and if we have to pay off the debt, you don’t have to pay the debt to the Federal Reserve if you are going to eliminate it or restore confidence and quit printing and quit monetizing debt – you could eliminate that. There is no moral obligation, there is really no legal obligation either because the institution isn’t even constitutional, you know…

BGG: …institution to begin with, yeah. It seems like debt ceiling, the only purpose anymore is just to create an artificial crisis which Washington seems to thrive on.

RP: Yeah they do and then they argue which authoritarian is going to run they show. And they don’t argue over the issue, it’s just the matter of which one, and then they are always talking about compromise, but they’re never talking about compromise between two authoritarians who want to manage the economy in different ways. They always want those who believe in limited government, the Constitution and freedom to give up so much of it, and then they call it, you know, a “good” thing to sacrifice liberty for the benefit of the authoritarians. But the authoritarians are in charge and I don’t think that people who don’t believe in that system should yield anything.

I think that we all should stick to our guns and say that the rule of law is important, our privacy is important, our First Amendment is important, the way we go to war is important, and never give in. But right now these battles that we have when it comes down to shutting down government as a political stunt or the debt limit, it’s another stunt for the two variations of compulsion, you know, by government. They’re fighting over who has the power. And I think the American people are sick and tired of it, and rightfully so, but I don’t think they fully understand that it’s actually where the divisions are. They keep thinking that, you know, if those of us who believed in limited government would just give in and say, “Okay, go ahead and increase the national debt instead of by $1 trillion, increase it by $500 billion and worry about it next week”, and that’s supposed to be a good type of compromise. It solves nothing and makes our problems worse.

“I would think people who are in it for the long term, it looks to me like this would be a very good time to buy gold.”

BGG: Yeah, and that’s why I appreciate Birch Gold trying to educate people and win on that front, I know it’s important to you. But I wanted to ask you: Are you still a buyer of gold? It has gotten so “expensive”, some people even say there is a gold bubble. Is it possible for gold to be in a bubble?

RP: Well, it can get out of whack, people can buy… right now, of course gold is in a bit of a correction. So it’s different than a bubble that occurs when the interest rates are very low in the dollar system and then people overdo things and they overbuy. But markets aren’t always smooth, and the gold market isn’t smooth, so it goes up, it might go up too much, and at times too fast and then it makes a correction because the traders are in there and they have all kinds of motivation. If people look at it long-term, you know, from when the Fed started when it was $20 an ounce up to the time it went up $1,900 an ounce, you know, that’s more of the trend. Of course now it’s down. Instead of people arguing that it’s too “expensive”, I would think people who are in it for the long term, it looks to me like this would be a very good time to buy.

BGG: I would think so.

RP: So some people might say, “Oh well no, it’s too expensive, because it used to be $1,000 or $500 and I’ll wait for that.” No, I think this is a good time. I personally don’t get too much involved because I bought my insurance a few years ago at a different price. I look at gold as insurance and others will, you know, others might be just at a time where they can start buying their insurance against the dollar fiasco, and I would say this is as good time as any.

BGG: Yeah, I have a family member, I won’t get too specific who, but a family member who is inquiring about gold. It’s interesting to me because this person is not someone who is typically into economics and the things that I talk about. But now she’s looking around and getting a little bit nervous and thinking that gold might be a good investment, but wondering if it’s too late to jump in. So…

RP: Certainly if they thought it was too late that means that they must trust the government to balance the budget, and trust the Fed not to print any more money and that you’ll never see prices going up. And most people don’t buy into the government’s argument that the cost of living isn’t going up. People on fixed incomes… and this is one thing that conservatives and libertarians don’t give much credibility to, because we don’t like the setting of wages, you know, and pushing up minimum wages with the law… but the truth is, the cost of living has gone up much faster than the minimum wage.

But that’s characteristic: Cost of living goes up much faster than Social Security benefits. But the fault there is the currency, not the fault of laws not matching up with the system and compelling businesspeople to pay a certain amount. But no, I think the cost of living – which isn’t inflation in the ordinary sense – is very, very serious and that’s why people are saying, “I need more money, send me more money on my Social Security check” or “Send me more money by another law, the minimum wage law.” And this misses the point because it really is the nature of money and deficits and what the Fed does.

BGG: Right. Well, how is retirement treating you? Are you retired?

RP: Not really. I’m retired from Congress and that is good. Not that I didn’t enjoy working there with my staff but…

BGG: You have to say that!

RP: I’m just glad I’m not going back and forth on airplanes, on John Boehner’s schedule. But I have a lot of activities going on: I’m working hard on homeschooling, I have a curriculum on homeschooling, which I like, and the Internet programming, I do some radio broadcasting and write a book now and then, so I’m very happy with my schedule.

BGG: Yeah, I’ve looked into your homeschooling curriculum and I’m a subscriber to the Ron Paul Channel, so it’s all very exciting.

RP: Wonderful. Hey,

BGG: Good! Well thank you so much for joining me today. I really enjoy talking to you. Again, my old boss, Congressman Ron Paul. Thank you so much.

RP: Thank you Rachel.

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knukles's picture

Some day when I'm bouncing the unwashed undernourished grand children in rags upon my knees and reminding myself that I'm one of the fortunates, I'll be telling them of this great time blown away way back when, when Humerikans had the chance to elect this guy Ron Paul to have set things right, so we'd still have a reasonable level of material, mental, social and spiritual experience.  Instead, a bunch of greedy people allowed them selves to be bought off by another bunch of greedy people, the politicians and the bankers, and it all went to hell.

And in answer to why it happened, I'll merely mention that the moneychangers were allowed back into the temple

highly debtful's picture

I fully agree. You Americans have made a terrible mistake in disregarding this man, who admittedly would have been forced to make extremely difficult choices for his country and his fellow Americans, but I believe he would have been your shepherd in very troublesome times. 

Headbanger's picture

No doubt!  Ron Paul for President 2016!  Versus The Ahhhhhnold Ventura team!  And fuck the rest!

knukles's picture

As a mere casual observer of the human condition, I'm afraid to report that at this point in time it sure as hell looks like Hillbillary's our next Fearless Leader.  Unless of course the Democrats manage to find a quadriplegic illegal alien fortune teller or Martian to claim Messianic powers....

Headbanger's picture

Granted there are many facets of the human condition including the passive sheeple syndrome of the modern era. However there lurks beneath thousands of years of sheer survival genetic memory in people that can erupt violently when threatened. Witness the Third Reich for such reflexive reactions. Or is this what power craving lunatic such as Hitlery are counting on!?

SafelyGraze's picture

"The Longer QE Lasts, The Worse It Will End"

and this is why it's so important that QE last indefinitely

and *increase*

the other paul 

markmotive's picture

QE is buying food stamps for millions. Just try and take that away.

The coming food stamp riots:

Miffed Microbiologist's picture

I'm hoping Hitlery and Yellen are at the helm when this finally catches fire. A Femocalypse Now!


Bendromeda Strain's picture

You actually have said a mouthful there, and that is not a nasty carpet joke. A nation that was granted such exorbitant privilege, that would declare itself practically ungovernable and give its two most powerful positions to an unscrupulous and an unwitting woman respectively, will indeed "catch fire" literally and figuratively.

Miffed Microbiologist's picture

Yes BS (cute... I almost said "absolutely"and that may have altered my meaning ;-))

You have taken what I stated exactly as I meant it. Double entendre and all. This country deserves these two "women" and I take no joy in saying that. I am weary of the elitism, the arrogance and the perpetually willfully ignorant. I'm done and await the flames.


Running On Bingo Fuel's picture

First order of business, 24/7 popemobile even when he sleeps.

Too many Oswalds.

rationaldemocracy's picture

Let's hope he doesn't live that long...

Dick Buttkiss's picture

Had he been elected, Ron Paul would have been taken out, before he even took office, by any number of powers (welfare, warfare, bureaucratic) threatened by his attempt to dismantle Leviathan. Nor could he have been elected in the first place, as the American people are far too addicted to government largesse to wean themselves of it.

There is no reforming the system, in other words (as Albert Jay Nock said: "Sending good people in to reform the State is like sending in virgins to reform the whorehouse); there is only preparing for the day when it collapses under its own weight.

JustObserving's picture

Not to worry - QE will never end.  The stock and bond markets would collapse and the wealth effect with them.  That is only thing keeping USA afloat as labor participation drops to record lows.  Bernanke could not even taper by $5 billion a month from $85 billion a month lest bond rates go up.

QE forever.

Headbanger's picture

LA LA LA LA LA....  Shirley you jest.

LetThemEatRand's picture

But Alan Greenspan says the problem is that too many people expect to be paid the benefits they have been paying for in taxes for years (the money he and his banker friends spent on private islands).  Apparently -- according to Alan who actually cites to his friend Ayn Rand -- people aren't saving because of "entitlements."

Has nothing to do with zero percent interest rates, Fed induced inflation, globalization induced gutting of the middle class, and QE fueled bubbles.  Come on RP, get with the program.

EDIT:  It is truly scary that it is now becoming mainstream to come right and tell the middle class that the solution to the bankers stealing all of our money is that we need to get by with less.   Somehow missing from his book is the idea that we should take back what they stole as a good start.

knukles's picture

Hey, it's all part of what Paul McCulley coined the "New Normal"
No Shit.
Get over it.
The fox has beaten, raped, killed, eaten and skull-fucked the entire hen house... and that's just for starters.

LetThemEatRand's picture

+1 for skull fucking reference.   And yes, it is the new normal indeed.   Unfortunately, most people don't know who to be mad at and they keep electing the guys who are working for the people they should be mad at.  No end in sight on that one, so I'd say they've already won unless they completely overplay their hand which is possible.   They seem to have no fear these days.

HulkHogan's picture

The middle class used to join UNIONS to fight with a collective voice to ensure they were not receiving “less.” Now, of course, Union is a four-letter word.

LetThemEatRand's picture

Serfs don't have unions.  They have huts and they work for the basic necessities and the lucky ones have a pig or a goat and they'd better like it.  The burly ones go to war for the Kings and Lords when it pleases them.   And the Kings and Lords get to sleep with their daughters when they get married (if they're hot).

knukles's picture

I am not anti-union per se, but its fair to point out it's not like some of 'em haven't given good cause for that perception... a la, California's public employees, teachers, nurses, etc.

moneybots's picture

" Apparently -- according to Alan who actually cites to his friend Ayn Rand -- people aren't saving because of "entitlements." "


Liars and liars and liars.


What is the point in saving when the stock market crashes 50% or more and you lose what you have saved?

If the inflation adjusted minimum wage of 1968 is now 10.50 an hour and 43% earn no more than 10 an hour, how can one save for retirement or anything else?

It has been mentioned on Zero Hedge that 64% do not have 1,000 in case of an emergency.  It is laughable to say that is becase of entitlements.



One And Only's picture

More food stamps and gov contracts please. I want more central bank wealth effect. Get some real disequilibrium and chaos churning. I love trains colliding and people getting hurt. I have shadyfraud syndrome and love watching society collapse, you only get to read about this in history books... that will soon be burned.

Hughing's picture

The Printers are convinced that only stopping will cause failure.

frednash's picture

so the dollar falls


our exports get cheaper


that would be a good thing


interest rates will never go up


theres 10000 boomers retiring everyday


they would love the higher returns

LetThemEatRand's picture

"our exports get cheaper."

Think about that for a minute.  The only reason this is supposed to be a good thing is that we trade with countries that engage in virtual slave labor who are able to undercut our labor costs.  So the end game for this devalued dollar model is that our labor pays higher prices for everything (eroding dollar means the same wages buy less stuff) which is the same as getting reduced wages for Americans as the "solution" to the problem of hte middle class losing its status and becoming working poor.  Sounds great.  On the bright side the Chinese already figured out the effectiveness of worker safety nets around the labor camps so the multi-national corporation with a plant in America selling cheaper goods to someone won't have to pay someone to come up with that idea.

frednash's picture

cheaper exports mean more jobs


any job is better than no job


ask the millions of unemployed

LetThemEatRand's picture

So your solution to the gutting of our economy by globalization is the workers settle for lower wages for shittier jobs.  Thanks for confirming that.  Now go try selling that to anyone while being honest about it.  And be sure to mention that globalization has created the greatest increase in wealth of the top .01% in the history of mankind and that in your solution they get to keep the spoils.

TeamDepends's picture

Ask the millions of 12 year-olds in sweat shops, they're lovin' itTM!

LetThemEatRand's picture

If they don't like it, there are 10 and 11 year olds who would love the work.  

Professorlocknload's picture

"cheaper exports mean more jobs"


And a falling dollar means less purchasing power. And rising interest rates mean astronomical debt servicing costs. And all these things ultimately lead to higher unemployment.

If it's wage competition that we're after, would we be willing to cheapen the dollar to the point of parity with China? Like $6000 per capita GDP?

Jim Rickards wrote a book about that slippery slope.

Ain't no way out of this pickle but a major reckoning.

Marco's picture

You don't just trade with those countries, you compete with those countries for access to Saudi Arabian oil ... now the US has a leg up by having them by the balls militarily, but even that has it's limits. Western countries can't afford to keep their standard of living (ie. energy use per capita) unless they find a way to hugely reduce energy costs. As soon as energy stops distorting international trade we can kick globalism in the balls and stop the race to the bottom, until then we're fucked.

It's all about the oil and to a lesser extent gas.

SAT 800's picture

Think Pleae. There aren't any returns. No Returns. Get it straight. Numbers don't make "returns"; the gambler with the only gun in the house has just borrowed your money and you expect him to give you back more than you lent him? "Bonds are instruments of guaranteed confistication"; the "returns" must be, and will be, less in buying power according to the INFLATION. Wake up, please.

frednash's picture

you can worry till whenever


theres no inflation


deflation is more like it


ask the savers and soon to be retirees

LetThemEatRand's picture

Health care.


Housing prices (still hugely inflated from 20 years ago)



Farm land.



Good look retirees.  I assume you're referring to people who have public pensions or who are in the select few who still have private pensions (and whose companies are not going to wash out the private pension in Romney-style restructing via venture capitalists).  For the rest, their meager 401(K) savings will be wiped out by their first major health problem.  

frednash's picture

healthcare is cheaper now than ever universal would be better ask the rest of the world


energy costs are way down because of shale gas and renewables


housing is cheap look at interest rates


cars should  be replaced with mass transit (climate change)


education is underfunded compared to the rest of the world


farmland might be replaced by 3-d printers


everyone should be vegan


medicine is cheaper every else in the world were being ripped off



LetThemEatRand's picture

Health care is cheaper now?  Not sure what you're agenda is but clearly getting to the truth is not part of it.  Carry on.  

knukles's picture

you're fuckin' nuts, pal

g'kar's picture

After reading that BS I went out and bought a few more 20 pound bags of virtual rice.

LetThemEatRand's picture

I'm drinking virtual scotch.  At least their will be no hangover so maybe he's on to something.

g'kar's picture

Virtual bourbon for me. Now if I can figure out how to brew Sake with all that virtual rice I'll be in business.

Professorlocknload's picture

Deflation, freddy?

When that dos por quatro of truth hits you upside the head, it's going to hurt.

Urban Redneck's picture

With thinking like that, you never would have passed the old math test to be allowed to post that drivel in the first place.

The damn ferners are taking advantage of lax border controls.

Bring back the CAPTCHA!

Headbanger's picture

Dude...  Farms, stills, acupuncture, chiropractic, wind & solar and wood stoves,  chickens, some goats, reloading, good neighbor relations, faith & respect, sense of humor, good books, self reliance yet willingness to help, patience, resolve, love and respect of nature, joyful to awake a new day, humility with failure, honesty in dealings, listen well and speak thoughtfully, try, believe in self and others, earn trust.

Try printing all that out of thin air!

And we all better read up on how to proof good whiskey and the 13 virtues of Ben Franklin


Professorlocknload's picture

Sounds like the good 'ol days, banger. I'm on it, beginning next week in search of my Hidden Valley. Place is all that's lacking, some of the other skills are honed. Unloaded some RE this summer and am regrouping for the home stretch.