Announcer: Welcome to Sprott Money's "The Scoop," with Kam Hesari.
Kam: Welcome to another edition of Sprott Money's "The Scoop." I'm Kam Hesari. And this month's guest is Ron Paul, the doctor, former Congressman, founder of The Ron Paul Institute, and host of "The Liberty Report." Thanks for joining me today, Ron.
Ron: Good to be with you.
Kam: Before we begin, I wanna thank all our listeners for sending in their questions. As always, I'll try to get through as many of them as I can. And remember, if you have a question for one of our special guests, you can send them to firstname.lastname@example.org. Lastly, if you enjoy today's podcast, please like, share, and subscribe to the channel you're listening to. Ron, it's been over 50 years since President Richard Nixon closed the gold window, effectively turning the dollar fully into a fiat currency. What effect did it have on the dollar's value and the average American standard of living?
Ron: Well, it had a lot of effect on the dollar. The dollar went down sharply. And if you measured in terms of gold, at that time, theoretically, the gold exchange rate with $1 was $35 an ounce, at least they were trying to honor that. But everybody knew it was gonna fail, so, that's the reason the gold window got closed. But within a short period of time, probably in say 8, 9 years, gold went up to over $800, that's a tremendous increase in this ratio. And so, the dollar was devalued tremendously eventually. And even now we measure that the dollar lost probably 97%, 98% of its value in terms of gold, and that pushes prices up, it disturbs the economy, and it was devastating. The '70s were a very, very bad period of time. It was so devastating and I was so upset about the whole thing, when I heard Nixon's speech, it motivated me to speak out and that's how I got involved in politics.
Kam: While we're talking about former U.S. presidents, what did Ronald Reagan tell you about gold?
Ron: His statement to me, which was something I remember very clearly, he said that he was aware of the fact that any great country that ever went off the gold standard would no longer remain great. And he might have nailed it, depends on how you measure greatness, when it looks to what's happening to us now as an economic power and a political power, that is being diminished, and it's going to get a lot worse. And it's related, but not the next day, it takes a while for these events to pan out. So, I thought at that time that Reagan knew what he was talking about.
Kam: Ron, U.S. non-farm payrolls unexpectedly plunged in August as the U.S. economy only added 235,000 jobs. The forecast was for around 733,000 jobs, the unemployment rate came in at 5.2%, and the total payrolls is about 5.3 million below pre-COVID levels. With unemployment higher than normal and inflation, on a 6-month basis, higher than it's been since 1983, is it fair to say that stagflation is here?
Ron: Oh, I think so. I think it's been around and they try to hide from that, because you can't believe the statistics. The fact that nobody believes much of what the government tells us what's going on, whether it's monetary policy or COVID, I think it's good that people are questioning what they hear. So, yes, they would deny it. But I think John Williams, who writes, you know, economics in the real sense, and not by what the government statistics show, says that we're at a much higher rate, you know, for inflation. Ask a housewife, it's much higher. It's not 1%, 2%, 3%, 4%, it might be 6% or 8%. Depends on, really, where you live, how old you are, and what your living patterns are like.
But I do definitely think the economy is weakening. And it's totally bizarre, because we've lost completely the information that we need from free market interest rates. So, we have people not working, they're not out of work, there's these places where they need to work, and they won't take the job, so that's grossly distorted. And this is something that represents, you know, a weakening economy. So, I think that when you pass out money to the tune of tens of billions of dollars, it sort of is saying, as Bernanke said, "If need be, we'll drop it out of helicopters," and they are essentially doing that.
Well, if you're on the receiving end of that, and it tides you over, but it doesn't go into investment, it doesn't restore, you know, the market rate of interest, it's not gonna do any good on the long run, but on the short run, you know, it looks pretty good. But it is inflationary, there's no doubt about it. The statistics will be canned, they'll be controlled. At the same time, there's some things you get you don't even pay anything for because we're still living off past wealth, we're consuming wealth. I think the economy in the country is getting poorer all the time and the inflation is going up. And the problems that we face are very, very much involved with the currency. At the same time, the whole system of freedom for the individual has been diminished. And all that has added up, I think, to us living in very dangerous times.
Kam: Ron, the 1970s stagflation was defeated by Paul Volcker by raising rates to around 20% in the early '80s to fight inflation. Given the sovereign debt, corporate debt, and consumer debt levels, is that a viable option today?
Ron: I would consider it zero. Because I work or think under the assumption that we're at negative interest rate, because, you know, they're very, very low. But since the price inflation is much higher than they say, and even if you take their numbers, it's negative rate. They say, "Oh, no, it's not quite negative because we're maintaining it where it is." No, it's really, really negative. So, no. And they can't even stand it, whatever they say, "Well, you know, maybe if we had the market deciding, this interest rates would be 7.5%," which is possible, or even higher, but they would never let that happen. If they went to, say, "Well, no, we're gonna let..." If they announced tomorrow that all overnight rates, all the rates that they deal with, we're gonna move them up to 2%, it could not be accepted by the marketplace. The stocks would just disintegrate and the people who put the most pressure on the Fed would yell and scream. So, they're gonna go all the way until they totally destroy the value of the dollar where people will have to do something like rushing out of the dollar into goods and services. I do believe that will happen.
Kam: Ron, how long do you think markets will believe the Fed's transitory inflation narrative? And what effect do you think it'll have on the U.S. dollar and the price of gold when the truth comes out?
Ron: Well, there's no way to know when people panic and decide that there's a better way. I mean, the information is there, people should be, you know, very cautious and accept the fact that that's going to happen. But it's usually, the end is not by statistically adding up how much debt there is and what people are doing. Otherwise, if you would look at this, these are astronomical numbers that we're dealing with. It doesn't even deserve to be used right now, but there's still trust, and trust is a subjective factor. As long as there's that subjective support. And when you look at what's going on around the world, you know...but a lot of people thought when Bretton Woods would break down, you know, it would be the end of the dollar, no, tremendous trust in the dollar, even today, considering it.
But no, it will end, but whether it's gonna happen in a month or two years from now, nobody knows. The one thing is it won't be an event that is precisely predictable. You can't say, "Well, at this rate, I'm looking at the chart and see that spending is going up at this rate, and the purchasing of this debt is such. By this point, they're going to quit doing it and confidence will be lost." You can't do it. It could occur tomorrow, it could occur, you know, years off, I suspect it's still a couple years off, but eventually it will accelerate. And when it finally goes, that's it. It's something that you can't control, you can't put on wage and price controls or something like that, or you can't give somebody...somebody can't give a speech, a president or the Federal Reserve Board Chairman giving a speech to calm the markets. No, it will be overwhelming, and then we will be forced into monetary reform.
Kam: That's a valid point. Ron, a lot of the problems we have today are a direct result of the central bank's policies. Do you believe America would be better off ending the Fed?
Ron: Sure, absolutely. The sooner the better. We lived a good many years up to 1913 without a Federal Reserve, even though there were three attempts before that, but they always failed. The time I spent in Congress, I spent a lot of time in order to promote a bill to audit the Fed, believing that if the people ever knew how corrupt the system was and how they pander to special interests and bail out the powerful interests and why the Federal Reserve is the redistributor of wealth from the middle class to the wealthy, people would get rid of it. So, I was always for the audit for that purpose. But no, we should get rid of the Fed. And there's still some mild chance that started with my campaigning for the presidency, that when I go to meetings, usually I'm met with a cheer, "End the Fed." So, that gives me encouragement. But I think, especially after this calamity, becomes very apparent, you know, of the collapse of the system, people might do what they did with John Law, they ran him out on a rail, you know, when they realized what his inflation was all about.
Kam: Ron, many of the so-called smart money are very bullish on commodities and very bearish on the U.S. dollar. This includes Ray Dalio, Stanley Druckenmiller, John Paulson, Jeffrey Gundlach, Michael Burry, and Goldman Sachs to name a few. In fact, Michael Burry has been talking about hyperinflation coming to the U.S., do you believe we'll see hyperinflation in the U.S.?
Ron: Sure. I do. And I think there are probably some areas of the economy that that has happened. I mean, you see bits and pieces coming, like, there was rapid inflation of the price of lumber, you know, and then it backs off and all. If that is at the end stages and everything goes up, practically, it doesn't mean everything always will go up in price. But your basic statement there of those individuals you think that have influence on the Fed, you think they would get a little bit of attention from our money managers because I believe what they say.
Kam: Ron, what percent of one's net worth do you think one should put in gold and silver as an asset diversifier and insurance?
Ron: As a libertarian, I say whatever they want, whatever they can afford, how scared are you? And no, I would think just common sense would say that, you know, I lean toward having as much as you can, because it's difficult to handle Federal Reserve notes and find decent investments that, you know, are guaranteed to work as well. No, I think if I had to pick out a round number, I wouldn't...you know, if you said, if I took the position, or somebody takes the position, "Well, I want you to have 90% of everything you have in gold and silver," something like that. I'll say, "Well, you know, that sounds like a little hectic." But I would never say to you if you say, "Well, you know, Ron, I think I'm gonna have 10% of all my wealth in gold and silver." I wouldn't say, "Holy, man, why are you doing that? Why don't you put it into the stock market? Why don't you put it into crypto? Why don't you do this?" I would say, 10% sounds pretty reasonable to me, and if you're really scared, more.
Kam: Okay, Ron, time for some viewer-submitted questions. In 2011, you made a prediction on the House floor that if the U.S. didn't leave Afghanistan, it would be there for another 10 years. Your prediction came true and the video went viral. The war in Afghanistan cost America over $2 trillion. Do you believe America is any safer?
Ron: No. It made us less safe. And all our adventurism overseas has been that way. And I would probably just say, especially since World War II, those were special circumstances, but from then on, sacrificing the Constitution, going to war without a constitutional declaration of war, pretending that we're on the moral side of going to every place. Just think we went into Korea, that was a war that I well remember because our school teacher was redrafted from high school and went over there and got killed in Korea. And it makes no sense whatsoever.
We spent all that money, we undermined our Constitution. We're doing it with a pretense that we're on the moral side of doing this. And then subsequently, you know, we had Vietnam. I was drafted during the Vietnam period. I was growing very annoyed by that and that motivated me...one of the reasons why it motivated me to run for Congress, and then tried my very best to call attention. And that's why those speeches are there about, you know, if we don't change our mind, we're gonna be there, you know, we've been there 10, we'll be there another 10. And that was just a sort of a spontaneous reaction to the situation.
But no, we're poorer and less free, and I think we're much poorer and much less free because we decided that domestic enemy is a virus. And there's a gross distortion of what's really going on there and yet the people have followed the line of thinking of Dr. Fauci, he's their hero. And whether it's the domestic war against COVID, or the international wars against imagined enemies...you know, one of the things about 9/11 and why we went into bombing Iraq was because of Saddam Hussein participated in 9/11, which was completely fabricated. So, I think that's where we have a real starvation now and our government is finding people who will tell us the truth.
Kam: Speaking of the domestic war against COVID, do you believe COVID lockdowns are being used as a way to annihilate small business, which is the backbone of the economy, in order to get people dependent on the government?
Ron: Well, I'm sure there are some people that do that, and the real ringleaders, they want... Because a true Marxist believes that you have to destroy everything, you have to go back to zero and rebuild in a Marxist system. So, they would do it deliberately to try to destroy small businesses and big businesses and everything else. Some are probably well meaning and didn't realize what they were doing was so destructive. I mean, look at how many millions of people just bow down, and what they've done to our kids. They're all wearing these masks, and nobody has ever proven that they ever prevented any disease. So, yes, it's a real tragedy. It's overkill.
Kam: Is it fair to say that vaccine passports are taking us one step closer to a totalitarian state?
Ron: No doubt, I absolutely believe that. And I believe that there is a strong motivation of individuals, that's exactly what they want. But some people, they rationalize. I've talked to some people who are just progressive in their thinking and think, well, this is good, this is the way we can make sure that a bad person doesn't come to your store, you know, that kind of stuff. It's horrible how easily people can be converted to accepting that. But the passport, you know, is, I think, a real serious goal that they have been promoting and they made a lot of progress. But right now, though, there's a reaction to it. And some of the parents are sick and tired of it and they're standing up against it, and they're going to the meetings. And one thing that I'm getting a charge out of is the French people where I thought they would be too complacent, they're not as complacent as we are. So, it is something, they've been too complacent but I believe that people are waking up and I think, you know, in that area, maybe we can reverse a little bit of it. That problem is overwhelming but I think we can reverse a lot of that lockdown stuff easier than we can get monetary reform.
Kam: All right. We have time for one more submitted question. During your tenure at the House, were the issues of debt and currency debasement ever discussed? And were they even seen as detrimental to the economic wellbeing of the nation?
Ron: Not in a academic way, they didn't have a serious conversation. There were maybe one or two, but that was not in their interest. A lot of them didn't understand that and they didn't think it was important, and the ones who did thought it was necessary, because they were all big spender. And if you didn't have the facilitator of paying these bills, you didn't wanna raise taxes, you know, they weren't interested in a discussion of this.
One interesting thing that happened to me once is, we were having a meeting, a hearing or something, it was going on and this subject came up. And I, of course, talked about gold and all. And then afterwards, we had a luncheon that we went to and the Congresswoman that was sitting next to me, you know, she wanted to whisper to me, because she was curious. She had listened to the debate and the interview and she said, "Ron," she says, "Are we still on the gold standard?" "No, we're not on the gold standard anymore." But that's where it is. Members of Congress were not too aware of what was going on, let alone the shenanigans that go on with the Fed.
Kam: Ron, thanks for sharing your insights with us. Please let our viewers know where they can find your work.
Ron: Okay. Well, I put on a program every day, it's "The Ron Paul Liberty Report," and is live streamed at 11 a.m. every day of the week, 5 days of the week. And we'd love to have them join us. And that is one way with "The Ron Paul Liberty Report," you can reach me.
Kam: On a final note, if you're interested in purchasing precious metals or have some questions, Sprott Money is here to help. Just call us at 1-888-861-0775 and we'll be more than happy to answer your questions. Alternatively, you can shop directly online at sprottmoney.com. Well, that's it for this edition of Sprott Money's "The Scoop." I hope you found it of value. Please like, share, and subscribe, and see you on October 8th for the next edition.