Dr. Ron Paul believes that we are in the biggest financial bubble in history. He also said that when it pops, it will be very violent.
In a recent interview with Kitco News, Paul covered a wide range of topics. Some of these topics include the Federal Reserve, interest rates, and the economy.
He was asked about the Federal Reserve’s dual mandate of full employment and inflation control. To this, Paul said the Fed shouldn’t even be in the business of worrying about either.
“They shouldn’t even be in the business of pretending that if they want a good, healthy economy, and they want as best the employment possible, and the most balanced pricing system, you have to get rid of the system. You can’t have this artificial system from the Federal Reserve,” he said.
Free Market Should Set Interest Rates
Paul said the free market should be the one setting interest rates. Additionally, when the Fed thinks it has control over things is when problems start.
“You have to have a market rate of interest, and you have to have a money supply that’s determined by the market rather than by the politicians, because we are seeing the results of many, many years of this, especially since 1971 with what is happening now, it’s the runaway spending, we can’t have the runaway spending, if we continue to do this, and the fact that they pretend that they can control things, every time they think they have control then there’s a major correction, which we are in the midst of.”
He said the big event was when the Fed realized last fall that the bubble was starting to pop. He also mentioned that it began doing everything it could to keep it going. This meant cutting rates to zero.
“The big event that turned this whole thing on was in the fall when it was realized that the financial bubble was collapsing and they have destroyed for many, many years the most important function of the market, in the money supply are the interest rates. So we destroyed the pricing structure and that’s why we have so many mistakes, malinvestment, too much debt, too much government, and it wouldn’t happen if you didn’t have a Federal Reserve system that thinks they can manage the economy through monetary manipulation.”
Gold and the Market
Paul said the Fed can print as much money as it wants, but ultimately gold is what underpins the markets.
“I remember when gold was legalized in the 70’s, everybody thought the gold price would soar up, but it had already gone up, but at the time, our Treasury Department and the IMF (International Monetary Fund) dumped a lot of gold just to try and punish the people who knew that gold was a haven. So there’s a lot of monetary and gold manipulations, but ultimately the markets are determined by metals, not by paper money.”
He said we are getting close to a “cataclysmic” end to the bubble. The unfortunate result is that a lot of people will be wiped out financially.
“We are coming desperately close to a cataclysmic end to the current monetary system. I happen to believe it’s the biggest financial bubble in the history of monetary policy for the whole world. And the correction is going to be very violent, and it’s already pretty bad. People are going to get a lot poorer.”
“The bills have to be paid, the economy is going to turn down, and a lot of people have already gotten a lot poorer, but it’s going to get a lot worse unless we wake up and return to some sound economic and monetary policies.”