The system suited everybody until the crisis hit – Ron Paul
8 Dec, 2010 08:15
The dollar was given the responsibility of being the world’s reserve currency, so nobody should be surprised that the US has to bailout some foreign banks, Congressman Ron Paul told RT in an exclusive interview.
There is great Federal Reserve involvement overseas and the American people have to indirectly pay for this.“Since 1971 [the dollar] was given much more power and privilege than it deserved,” believes the congressman.“At the time, after World War II, we had all the gold and we had the economic might and we were not beaten down, but eventually though, what happened, they started using dollars as if they were gold and they put it into reserves. And now, because they still trust the dollar to a large degree – why don’t we print the dollars – we can bail out anybody: we can bail out California, we can bail out GM, we can bail out all the banks, we can bail out Greece – now they are talking about helping the entire EU – but there is a limit, the market will limit it – politics won’t,” Paul said. He added that if politicians continue to think they can manage the situation, they will fail and people will lose confidence in the dollar.Ron Paul agreed that the US government’s unprecedented bailout program “was not completely wrong” and was introduced to evade depression of the American economy because industries were depressed. He said the companies that were accustomed to living off debt and living off easy credit and got themselves in trouble – they definitely had “depression” – the likes of GM and banks involved in a derivatives scheme.“Instead we printed the money and bailed them out, arguing ‘we don’t want anybody that had depression’. So what did they do? They transferred all that debt onto the taxpayer – but the little guy got stuck – who lost their jobs?” Paul pointed out.They refused to help small businesses or help people out of their mortgages because the current American financial system works for the benefit of big banks and big corporations, therefore everybody from the military-industrial complex to the banks and banking system likes the state of things, believes Paul.He said politicians also like the system because for decades congressmen could vote for whatever they thought was necessary. The deficits did not matter that much, being covered by raising taxes, borrowing money and the Fed manipulating interest rates, keeping them low and passing them out. “The system was indorsed by many people, even by the people who had houses and did well for a while – the average person on the street did benefit,” Paul said, but when the crisis came, “the big guys got bailout, making a lot of money, and the little guys got stuck with mortgages that they could not pay.”And after all the financial bubbles that were allowed to grow in the US, the final conclusion is that “The Fed should not be allowed to monetize debt,” he noted.