PR.com (Allison Kugel): What does this bailout mean for the economy, tax payers, and for the future of the U.S. Dollar?

Ron Paul: Well, for the economy it’s bad news, but this has been building for a long time and this is something that many of us had predicted would come, and now we are seeing it. It’s going to be very bad for the tax payer because taxes won’t go down. They’ll try to raise taxes but they won’t be able to so they will just use the tool of the deficit financing and inflation; that is creation of new money and credit which they are doing in wholesale right now. Which is easily translated into a weaker dollar, although that might not occur immediately and sometimes when the Fed comes up with a new program of injecting tens if not hundreds of billions of dollars into the economy this should send a signal to everybody that its going to be devastating to the dollar. Inflation will become much worse, but you might see a temporary reaction where they say “Oh this might strengthen the market and maybe the economy will heal and the dollar will be stronger.” I think everything we are doing now is very, very detrimental to the dollar which doesn’t mean to me that an alternative currency is immediately the answer. The Europeans and the Japanese all have their problems, and they’re all Fiat currencies, too (currency that is not backed by gold, but where the value is instead enforced by the government). So, just because the dollar is week doesn’t mean that it will be weak in terms of all the other currencies immediately. I think it will be weak in terms of purchasing power. That means prices will go up, I believe, in all currencies, and eventually translate into much higher gold prices.

PR.com: Barack Obama compared this financial crisis to a house on fire, and that the fire needs to be put out before we can address the problem and the guilty parties involved. Do you think the bailout package effectively puts out the fire?

Ron Paul: No. It’s pouring kerosene on the fire because the problem was created by government meddling, government regulations, government dictating, government inflation, government spending… and that’s all we’re doing. We’re spending more, running up more deficits, printing more money and trying to regulate away the bad effects of all these policies. So, yes it would be good to put out the fire, but you’ve got to know where the fire is coming from and what caused it all. But, what they’re doing is not putting out the fire. They’re just making it worse.

PR.com: In your book (The Revolution) you mentioned the concept of “legal plunder” and it just seems to apply so perfectly right now. You define legal plunder as “any use of government that enriched one group of people at the expense of another, and which would be illegal if private individuals tried to carry it out themselves.” Do you define this bailout package as legal plunder?

Ron Paul: Oh absolutely, but that’s been around for a long time. I wish I could claim [to be] the originator of that concept. But, that’s something that’s been talked about for years. Bastiat talked about it in the 1850s and he was a Frenchmen worried about the same thing back then. Yes, it is legalized plunder if you and I can’t do it. You can’t steal from your neighbor. We would still go to jail for that. But, if we send the politician to your neighbor with IRS Agents and a bunch of guns they would pretend this was moral, ethical and constitutional, and it’s none of those. So, we’re involved in that, but that’s how we got here because of this assumption that the government has the right to redistribute wealth and regulate and serve special interests. And now they’re doing it wholesale, they’re doing it to try to bail out the people who had benefited for so many years by this system. Now they’re in trouble, and now they want to really get bailed out and dump out all the bad debts on the innocent people. Those many who benefited over the years on Wall Street and in these financial areas now want the average person to buy up all this bad debt. So, we could start off, and I said this on the House floor, it’s an immoral act, it’s an unconstitutional act that makes no economic sense either.

PR.com: You obviously speak a lot about the U.S. dollar and about it no longer being backed by the gold standard as a source of our problems. But, wasn’t the gold standard done away with in the 1970’s?

Ron Paul: Well, that was the last nail in the coffin of the gold standard. The gold standard was relatively good in the 19th century but it was abused a lot then. So, we had booms and busts then because they abused it. One of the worst episodes was during the civil war period when they went off the gold standard completely. The gold standard was undermined systematically since 1913 with the introduction of the Federal Reserve System. They kept lowering requirements, and then when we had the Bretton Woods [system] after World War II, we couldn’t own gold since the depression time, but foreigners could turn in 35 dollars and get an ounce of gold from us. So, we were on a gold exchange standard. The dollar was supposed to be as good as gold and foreigners could hold us in check by every once in a while sending their dollars back demanding gold. In the 1960s we got furious with [French President Charles] de Gaulle because that’s what he was doing. After foreigners realized we were printing so much money and we didn’t have that much gold, there was a run on our gold and we had sold off almost 500 million ounces of gold at a price that was below the market, at 35 dollars an ounce. In 1971 is when Nixon declared that in a couple of days we’re not going to have an ounce of gold left. That’s when he closed the gold window and didn’t even pretend to limit the number of dollars printed since 1971. That’s why the big bubble that I talk about has been developing since 1971. And if you look at all the debt charts and the spending charts and the inflation charts, everything just sky rockets after 1971. So, this has been a tremendous bubble built on the inflation of the dollar since that time. Time was just waiting for this thing to burst and that’s what has happened.

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