Kudlow: All right. We welcome back to the show Ron Paul, Republican Congressman from Texas, former presidential candidate who had some tough words for Ben Bernanke. Take a listen to this please.
[Video of Congressman Paul’s comments during Bernanke testimony: “Inflation is a tax. And if the Federal Reserve, and you as chairman, have this authority to increase the money supply arbitrarily, you’re probably the biggest taxer in the country.]
Kudlow: Oh, Mr. Paul, I heard that this morning, I got so excited sir. I just had to have you on. I’m so glad you’re around today. I say almost nightly that inflation is the cruelest tax of all. And the consumer price index, I’m sure you know this, but I didn’t hear Bernanke reference it today, 1.1 increase in June, 7.9 percent at an annual rate over the past three months, and 5 percent over the last 12 months. Did Bernanke understand what you were getting at sir?
Rep. Paul: Well I was hoping he did. You know, I did bring up the CPI very briefly. But I thought he did concede half of the message that I gave because he did say that inflation was a tax. He did acknowledge that, but he didn’t acknowledge that he had anything to do with it. And you know, I did make the concession to him that he himself didn’t create every bit of inflation that we have today, because it does add up. It’s been over a period of time and we’ve been inflating for a long time. Every time we’ve had a crisis we have sort of arrested that crisis by more inflation, exactly what we’re doing now. But ultimately, people pay for it in higher prices. So if we look at the higher energy prices, and you and I would agree we need free markets and capitalism and more drilling and all this, but if there’s an inflated price there due to the depreciation of money that won’t solve that part of the problem.
Kudlow: Well that’s the deal. Let me go with you on this. The Federal Reserve is accumulating more and more authority now in our financial system. They may well be the so-called “financial stabilizer” of last resort. They now have new regulatory power over Wall Street investment banks. And of course, they’re supposed to balance unemployment and inflation. Mr. Paul, with all these new missions, it seems to me what’s gonna get sacrificed? Inflation and the dollar, isn’t that the way this is going to wind up?
Paul: Absolutely, but also our freedoms. And just that litany of what you listed there is central economic planning. We don’t believe in central economic planning. At least I don’t. But that’s central economic planning through the monetary system. And now the regulatory system, not only does the Fed have the power over the supply of money and the interest rates, but now they want the regulatory function over more than just the banks, all the financial industries. I tell you, I think it’s a bad sign for free market capitalism.
Kudlow: I’ve been talking sir, a little bit, just in recent days and weeks, this funny story, I’m calling it the new socialism. Nobody can fail in America. If something fails, then government’s gonna come in and bail them out. Now the latest of course is Fannie and Freddie. There’s a huge housing bailout bill out there. Who knows? Maybe we may [bail out] the airlines, the automobile companies, I don’t know. You know, Phil Gramm may have had a point. We are a nation of whiners. Nobody wants to lose. Capitalism, you’re supposed to have the great opportunity and freedom to succeed, but you also have the freedom to fail. What’s happened to the freedom to fail?
Paul: Well you know a lot of consumers and people who are losing their jobs, they have a right to be angry and complaining and I sympathize with them. And you talk about socialism, and we do have a form of socialism creeping in, but it sort of is of the fascist type, because we have business and big government, you know, working together. It’s not the old-fashioned type of socialism where government owns everything. But they do control a lot of the financial markets for the benefit of certain industries, whether it’s the banks or other industries. And they do want bailout. And they are socializing their failures and that certainly shouldn’t be what we’re working for.
Kudlow: Mr. Paul, can you stay with us and work with our panel for a moment or two?
Paul: I think so.
Kudlow: All right we’d love to have you. Jerry Bowyer what did you just hear? What’s the way out? And let me ask you too Jerry, I mean once again today, Bernanke, you get this big inflation number in the CPI. Yesterday it was the Producer Price Index. So far as I can tell Bernanke has thrown the dollar overboard. He’s thrown the dollar under the bus.
He’s saying we have to worry about financial stability, a weak economy, high inflation. If you try to be everything to all people you get nothing done. I’ve kind of lost hope on the dollar Jerry. You heard Ron Paul. What’s your take?
Jerry Bowyer [chief economist Benchmark Financial]: Well don’t lose hope on the dollar because Bernanke will learn I think from experience. I think Ron Paul is right on the policy side, where he says that the Fed has been far too loose and we are devaluing our coinage. I don’t think he’s right in saying that there shouldn’t be a Fed, that there shouldn’t be a national bank, that it’s unconstitutional. I think that’s an overstatement. I want a Fed that does its job well. I want a lender of last resort, with a good strong money policy, a good strong dollar policy. So at least on that policy, I agree with Congressman Paul.
Kudlow: Mr. Paul, can we have a Fed that does its job well?
Paul: I don’t think so. I think it’s the system that by nature will fail. Because of, you know, the character of the human beings, whether they’re in the Congress or in the Federal Reserve. The temptation is – you know, even Milton Friedman said that you could have a type of Federal Reserve, or a computer, increase the money at 3 percent. But if you understand human nature, 3.5 percent might be better than 3 percent. And the Congress loves this because they can spend money, they don’t have to tax directly, and they can always resort to the Fed. So whether it’s the Fed deliberately doing this or the pressure from the political side and the Congress, no, I don’t think so. It’s the monetary system. You have to have the consumer in charge and only a gold coin standard can do that. Because if you mistrust the system, you can always say, “Hey, are they printing too much money? Let me see if they have the gold in the bank.” And that’s the only real test of money.
Kudlow: Gold, gold…
Bowyer: We didn’t have a gold standard in the 1980s and we had great money.
Kudlow: Yeah gold is definitely my favorite four-letter word. I mean it is, look, we basically had the equivalent of $300 dollar gold for almost twenty years. I mean it worked beautifully. It all broke down at the beginning of the new century. I mean that’s the interesting thing. It just completely broke down. Joe Battipaglia, you’ve heard Congressman Paul. You’ve heard Jerry Bowyer and others. Joe, if you buy into it, I don’t know if you do or not, what do you do as an investor, if you’re faced with this problem, the breakdown in Federal Reserve and monetary discipline. Inflation is the cruelest tax of all. As an investor Joe, what do you do about it?
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Originally Posted by Brian4Liberty
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