 Ladies and gentlemen, please join me in welcoming what I know will come as a bright refreshing and thought-provoking look at America and its future as we hear from the honorable Dr. Ron Paul Thank you very much Thank you. It is indeed a real pleasure to be here today Mr. Johnson, it's a delight to meet you. It's a delight to be at the Detroit economic club It's a delight to see such a nice head table and I feel very honored I'm here today to talk about economics and what I think are some of the problems that we face as a nation and We face in our political system and I don't see good things ahead I think we are having a lot of problems. I'd like to explain why I think that's the case I've been doing a lot of campaigning across the country. My nomination occurred last September as was mentioned in the introduction It came a little early because we have to have a name to apply for access to the state ballots But a lot of the campaigning is done on radio is because we can get on a lot of radio talk shows and not too long ago I was on a major radio talk show up in Chicago and it was at night time and it was reaching 20-30 states and the call-ins were very good as usual On the radio shows that I've been on for so many months now I would say 85% are favorable call-ins people call in and say that I endorse everything you say I haven't heard it before but it sounds good The system's out of control something has to be done and what you have to say makes a lot of sense This particular night. I had probably approximately 12 calls and every one very favorable than the next one. I guess because it was number 13 he called in and they said You know what he says I don't I don't agree with anything you say I says not one single thing. He says no everything is fine His business was doing fine and he didn't worry about a thing and he didn't he didn't see any reason Why I should be worried about anything either And I said you know worried about interest rates or deficits Spending size of government the internal revenue service invasion of our privacy foreign policy No, he says everything was fine and besides he said he had already decided for whom he was going to vote He said he had decided to vote for a Dukakis and quail anyway There's a lot of confusion out there and and it doesn't really matter For whom you vote if you vote Republican and Democrat you get the same policy and that certainly is a theme of our campaign I had worked with Republicans. I thought there would be a difference, but You know the deficits really never change just think of what's happened It took us 204 years to get our first trillion dollar net debt Well, it took four years after that not with the Democrats in the administration But when the Republicans in the administration, so there's something seriously wrong No one individual is to blame, but there's something wrong with the economic and the political system that encourages the Accumulation of debt at that rate and we'll have to face up to it one of the major problems that we complain about as libertarians is that frequently those members that go to Washington and their staff people are taught in the Universities which quite often teach the same type of economic policy and although we Campaign a whole lot on can't college campuses and we get good receptions We're challenged there very rather frequently as well Almost every time if I speak to young people who are then currently taking political science and economic courses will challenge some of the Old cliches and they will come back and want to know about anti-trust laws and Certainly about the horrors of capitalism of the 19th century many of the things taught in school and quite frankly I believe erroneously But this one particular time at the University of Pittsburgh a young man got up and asked the usual question. He said What about anti-trust laws? Don't you have to have government to make sure business doesn't get too big and you libertarians aren't for anti-trust laws? I said well, there's good reason for that because all all monopolies really Become monopolies with government protection and there's no such thing as a free market monopoly And besides if a company is big in a free market It comes about Because the company serves the consumer the consumer becomes king and as long as a company gets big because the consumer's happy And the consumer votes that confidence by buying those goods Bigness is not necessarily bad if bigness occurs because of government protections or government contracts or a government Protection so that they can have a guaranteed monopoly. That's a different story. I said beside the laws can't be interpreted He says, what do you mean? They can't be interpreted. I said, you know if if a group of companies Are doing business and one company undersells everybody else they can be accused of undermining the competition And if somebody spent charges too much they say you have too much control and you're gouging the customers And then if all the bank of all the business people are charging the same price then they say there is collusion So there's really no way for the businessman to interpret the anti-trust laws this prompted a young man after the After the session to come up and he identified himself as a Russian he had been in this country for approximately 10 years and he says your explanation of the anti-trust laws Reminded him of a joke that went around the Soviet Union when he was still living there. There were three men in prison And the one man said they started asking each other Why why were they were there and one person said well? I kept going to work too early You know looked like I was trying to get in good with my boss So they were suspicious and they put me in jail and somebody else said I kept getting to work too late And they said I was cheating the state So they put me in prison and the one other individual said I kept getting to work on time And they accused me of owning a Western watch So whether you're in the Soviet Union United States sometime laws are difficult to interpret We would like to make it so that there is not a difficulty interpreting law But we'd like to make it so that we understand what the role of government ought to be This is what's generally happened in the 20th century that we as a people have lost our way We have accepted some ideas about what the government should be doing and what the concept of freedom is all about To the point now where we have carelessly accepted the role of government as being an intervener One that plans the economy tells us what we should do with our private lives And also accepting blindly our role as interferer or intervener in the internal affairs of other nations We think that's wrong and we should be going in the wrong in another direction The real challenge is big government versus individual liberty Should the government be there as a planner or should the government be there for the protection of liberty? Well that answer was clearly defined by the founders of the country Our founders, our forefathers decided the British were too expressed too much control on us And they said we want less government There was a declaration of independence, a constitution, a war And we had guidelines for limited government Today those guidelines are no longer looked at One of the weakest arguments that can be used in the US Congress is a constitutional argument It isn't interesting to the other members of Congress Big government versus individual liberty is the question that we must ask What should the role of government be? Now there's a reason that government has gotten out of control It's a political reason, it's more than an economic reason A political reason is that we have allowed ourselves to accept the notion that government is to take care of special interests So they accept the philosophy of utilitarianism and pragmatism Therefore they can do what they want depending on the circumstances But it is a philosophy, it isn't pragmatism in the sense that they are avoiding the extremes of philosophy They accept an extreme form of government that says government power can be used to serve powerful special interests And look at the record Look at the number of lobbyists in Washington Look at the PAC committees, do the PAC committees donate their money to republicans or democrats? Powerful PACs always donate to both parties Because they want power and control Look at the way budgeting occurs with pork barreling The essential way of promoting special interests for everybody's district What happens to the politician? The politician has pressure put on him to vote a certain way And he comes to the belief that he cannot be reelected unless he votes a certain way for his district Voting for freedom for his district? No, voting to see what he can get in a materialistic way We are a materialistic obsessed society that says that government is in the business of redistributing wealth And therefore the pressure on the congressman is to get things and privileges for special groups Now what happens? Is he rewarded? Certainly is 98.5% of them are reelected so that people evidently have gone along with this for a good while But what has it done? Well the politician knows some of it has to be paid for so they do apply some taxes to us But it's getting to be popular to not be for taxes And that's a good plan. We're certainly not for taxes But the whole thing is, is you raise taxes, they don't have enough taxes Then what do they do? They devise a monetary system that accommodates the politician If they can't collect enough revenues from us What they do is they devise a system where they can sell the debt to the Federal Reserve system Where does the Federal Reserve get the money and credit so the Treasury can send out their checks? They get it out of thin air It's positively amazing They talk about us as libertarians having extreme ideas But isn't it rather extreme and bizarre to think a government should run up a $220 billion deficit per year And then print the money to make up the difference? That to me is bizarre and something that we ought to challenge And that's what we're doing The money supply is important to us in Austrian economics and libertarianism Is because Austrian economics teaches that the business cycle is explainable It's explainable because it is caused by the Federal Reserve system As there's creation of new money and credit, it creates the boom It creates the high prices, it causes the high interest rates And then the Fed is required then to cut off the credit and causes the crash And we've been going through this through violent cycles for the last 70 years or so And we're certainly on the verge of seeing some ramifications from a huge increase in the money supply Especially between 1982 and 1987 A lot of people say you shouldn't worry about inflation A lot of economists are saying this because they say prices aren't going up so fast That's exactly what they said in the 1920s But if you have a tremendous amount of production that can compensate and keep prices at a lower level Then would be predicted by the monetarist theory of economics That is if you increase the supply of money 10% prices go up by 10% That is not the case But there are some other bad effects from inflation The inflation that originates by the Congress interfering by running up the deficit And the Fed creating the new credit What are the other serious problems that come from the inflation? One of the most serious is the accumulation of debt People can borrow because there's credit in the market and as it spreads through the banking system There is a high liquidity of credit and so there's over expansion Certainly there was over expansion in Texas when the prices were soaring in oil And then there had to be a correction And that's the way the whole country is operating Through over expansion and then a correction that must occur So we have this huge amount of debt that we have accumulated And this is no small amount National debt at $2.6 trillion Nearly twice as much debt accumulation during the Reagan administration Is all the other presidents put together Now those are some serious figures that we have to concern ourselves about But the other thing, the two things The accumulation of debt and the malinvestment Businessmen doing the wrong things because they get the wrong information From the manipulation of money and credit For that reason we as libertarians advocate a different monetary system One where it is not centrally controlled by a monopoly But one that comes from the marketplace One that was designed by the founders of this country who had gone through inflation And that said that Congress should be very limited in monetary policy And that is to the meaning of gold and silver coins But not to the artificial creation of credit out of thin air Now there are others than libertarians who are concerned about the economy One Felix Rohaton, a long way from being called a libertarian Had this to say about what he thinks the conditions are like He says people still don't realize today that last October 20th We came within a half an hour of really blowing up the western economic system I believe that was the case That was Tuesday morning when things were rough and tumble still in the marketplace They do have emergency powers available to take over the banking system in all industries Precisely because they know, those who are in charge know That we are on very shaky grounds with our economic and political system What holds it together? It's confidence But is it good confidence? Are we putting our head in the sand? Are we accepting this because we truly have a sound monetary economic system? This is one thing that Ronald Reagan deserves credit for He gives us a lot of confidence and he makes us feel good about ourselves But is that good? I mean what if I have a patient who has appendicitis and I hypnotize them And I make them feel good then they die the next day of a ruptured appendix I think we have to be willing to look at the hard cold facts About what's happening and do something about it And right now it's out of control Out of control is spending, inflating and the deficits are out of control Social security, you know the federal government just recently has spent many many dollars advertising how sound the system is How sound is the system? Will the social security system truly have more than a trillion dollars by the turn of the century in their coffers? Hardly What do they hold? Treasury bills How do you spend the treasury bill? You have to tax somebody to get the money to buy the treasury bill back Or you have to print the money So it's an all illusion They tell us the annual deficit is $150 billion a year But the national debt goes up at the rate of $240 billion a year If you count the off-budget items and the borrowing from the trust funds I think that's an interesting phenomenon or an interesting word You know government trust funds I think there's something illogical about that If insurance company ran their programs like the government ran the social security system that all be in prison Maybe we could rebuild our highways if the trust funds would have been left in the highway trust fund Because they certainly collected enough revenues but they were taken and spent elsewhere In 1957 it would have taken 22 years for us as a nation to double our wealth Today it would take 175 years Our productive capacity is down We do not compete We do not sell and build most of the cars for the country anymore And there's something wrong with our productive capacity During this administration, during the Reagan administration There were 800 bank failures and there are now 1600 on the endangered list Right now it's estimated that we need $100 billion to finally If even then to bail out FDIC and the shakiness of our savings and loan industry Between 1941 and 1970 when we were on a relative gold standard It certainly wasn't a domestic gold standard but it was an international gold standard under Bretton Woods During that period of time we had a deficit accumulation of $2.5 billion per year The Bretton Woods Agreement broke down in 1971 And if you look from 1971 up until 1986 We were accumulating national debt at the rate of $95 billion a year And obviously it's much higher right now So there's something to be said about what kind of a check the gold standard places on government Politicians can't spend money if they're not allowed to print it There's a limit, it's self-limiting The only thing that is self-limiting now since they can expand the money supply Is some of the economic laws that they have no control over Some of those laws are that there's a limit to how far you can stretch the dollar If the dollar becomes too weak and since we are a reserve currency This causes international crises on the marketplace But how much more borrowing can we go through? We now owe $600 billion a year to foreigners And there's going to be a limit to how much borrowing And certainly there's going to be a limit to how much more consumption of wealth We don't have many more social security funds to consume the wealth of And certainly soon at the rate we're going The Japanese and others will own more land here than American citizens At the way we run our policies We have to seriously consider another option I thought that during the 1970s supporting Ronald Reagan would be the proper option I thought the government would be reduced I was disappointed, disheartened I thought the least he could have done was introduce a balanced budget Just one time Last year during the State of the Union message He promised, he made the American people promise He says if they ever do this again to me Pointing to the continuing resolution If they ever do this again to me I'm going to veto it Three weeks before he leaves office after eight years He's going to start vetoing continuing resolutions We need more than that, we need more than just talk We need some action if these problems are real If they're not real, fine We just continue spending We all may be continuing to spend And we do Just look at the consumer barring Look at the debt of corporations It's huge and it's unsustainable It will come to an end The total debt now Percentage of GNP is much greater now than it was in 1929 Therefore I think it has bad There's a bad omen For businessmen to protect against the International exchange of currency There's a half a trillion dollars worth of currencies Traded every single day Trying to outguess the value of money If you have an international gold standard There's no gambling, no risk taking Because money is universal and it is one unit But today we have nothing more than gambling That's what's going on Eventually the trust will be lost And my prediction is that As great as he was for making us feel good About ourselves has hidden The real problems that we face And at the time of this election this year Nearby, maybe before, maybe thereafter Confidence will be gradually lost And there will be a resumption of a financial crisis Because we're in the midst of the crisis already It's not brand new I'm not saying it's coming I'm saying that it's already here And when you hear people like Felix Rohate and the mentioning how serious it is I think we all ought to wake up And the solution is political The solution is political is that we need More determination in Washington To do a better job, to vote for less government People need to be less materialistic And say the purpose of government is to give me things The purpose of government is to give And protect and guarantee our liberty I find 1988 as very unique and special year It's unique and special for us as libertarians But it's unique and special for this country Because the majority of the American people today Are not Republicans or Democrats We already won the election If you include us with those who say None of the above, I've had it The majority of people either aren't voting Or aren't registered and they don't bother Because not because they're totally apathetic Although I'm sure there are some They're not doing it because they tell you It doesn't make any difference It doesn't matter But it should matter We still live in a free country It's a country that allows me to speak out To run for president And go to the Congress And we do have rights But if we sit and do nothing Then it may become too late There was a young man in 1930 By the name of Robert Robinson A black man who was employed here in Detroit In 1930, he was worried He'd lose his job And he read the papers And he read everything that he could And they said a bad depression was coming And it was all coming because of capitalism They blamed capitalism on the problems Not on the Federal Reserve system And not on the expansion of the malinvestment That was occurring in the 1920s And so he responded logically What he thought was logical He went to the Soviet Union Because the Soviet Union was said to be A great haven and a great place to go Within one year, he discovered That he had made a serious mistake And for 27 consecutive years He applied to get out of the Soviet Union And never got out After 44 years, he escaped And moved to Uganda And last year, during this year, matter of fact He came to this country and he gave us some advice He says, you Americans, you take all your freedoms For granted You cannot know the value of freedom Until you lose it I don't think we should wait until we lose it Our freedoms are being threatened Whether it's in the economy Or our personal liberties Or in our foreign policy It's being threatened Because government gets bigger And bigger and bigger Why is it that a president like Ronald Reagan Would hire 220,000 new bureaucrats And look at the speeches he's made There's something wrong It's out of control The solution is clear The solution is to redefine The purpose of government If we do not ask that question And we do not give the proper answer It doesn't matter what you do You can vote Dukakis You can vote Bush You can stay at home It won't matter Because the momentum is so great For getting the expansion of power in Washington Just look at what they do In the name of the drug laws Just look at what they do In the name of taking care of the poor Just look at what they do In the name of spreading democracy Around the world It's totally out of control That suggests that government ought to be limited For the purpose of guaranteeing liberty The market ought to be free We certainly object strenuously To the harassment of the internal revenue service Founders of this country were very upset About the taxing authorities And the methods of the British And yet today, what do we do? We complacently accept the role of slave By keeping all the records Allowing the records to be used to incriminate us We assume that we're guilty until we prove Our innocence to the internal revenue service And if we don't do that quickly, our property Is confiscated without due process of law We think that should come to an end The sooner the better Isn't it rather amazing that there's a bill Floating around in the Congress And you might ask Senator Benson next week Why he made sure it didn't get Onto the agenda and get passed The taxpayers' bill of rights Because he as an individual kept it from coming off Up on the floor The taxpayers' bill of rights I took an effort to give the taxpayer protection It was a bill that I had originally co-sponsored But isn't it sad that we have gotten to the point Where we make the assumption that taxpayers Aren't citizens? Why aren't taxpayers protected under the Original bill of rights? That's where the problem is We have lost our understanding about What a free society is Determined to live as a materialistic society Is claimed that government Will take care of us in anything In everything that we do We think it's time for instance In foreign policy that Japan and Europe Pays for their own national defense Why should we sacrifice ourselves? You know we spent hundreds of billions of dollars Defending Europe over the last several decades Ronald Reagan didn't even have Flying rights when he decided to go to Libya It's not even a good investment It's morally wrong because we don't have Any moral authority to involve ourselves In the internal affairs and use our CIA To plan murders and overthrows Constitutionally there is no authority For that type of activity Where is it written in the constitution That we should devise a central intelligent Agents to go and trade weapons With the Ayatollah and terrorists And then fight secret wars The constitution doesn't defend it And militarily it makes no sense whatsoever There's no military advantage to our foreign policy Because it is precisely the policy That encourages the communist movement In so many countries Think about the Philippines and the Democrats And the Republican support for Marcos Or whether it was for Batista in Cuba Or whether it was for Somosa in Nicaragua Or whether it was for the Shah in Iran The people turn against us And turn toward radical forms of government So it's more practical to accept The position of the founders of this country Saying that the purpose of foreign policy Is to defend this country And to be neutral in the affairs of the world Rather than pretending that we're the policemen And that we know what's best for everybody else But there is one reason why it'll come to an end If they won't accept our moral argument If they don't accept the military argument If they don't accept the constitutional argument The American people must accept The economic argument we're broke And we can't afford anymore We can't afford a welfare state That doesn't work It doesn't get to poor people off the street It doesn't teach our kids any better in a public school Which by the way is run by a monopoly That I don't approve of The policies don't work And therefore the economic laws of the limitation Of debt will eventually bring it to an end When it comes to an end And we're in the midst of that The default is going on We have to have options Today it is very difficult for the libertarian party Or any other option to get their message out Since if you can come to the agreement That there is no difference between Democrats you don't have a choice So therefore we as a nation Are one of the most difficult nations To present alternative views to the people The laws are written so it's difficult to get on the ballots The funding occurs from the taxpayers To the one other party It is very difficult Will the debates occur with us on the debates So that the people have a choice not likely In spite of the obstacles We are determined we think the message is powerful The message is on our side We're speaking the truth I think it's very difficult to Candidates have difficulty pursuing Giving straight answers It's difficult because they don't Have the answers because they accept The notion of government Government should be doing all these things That's why you can't tell the difference Between economic policy of Bush or Dukakis You certainly can't tell now As the campaign goes on The difference between their foreign policy as well Or their weapons policy Because they don't ask the right questions They don't change Policies will change if we get the ideas And the questions of the libertarians out Because the American people will respond Thomas Payne said those who expect to reap The benefits of liberty must like men Undergo the fatigue of supporting it We as libertarians will use that fatigue In order to support these ideas We so dearly hold But we are inviting others to join us In our efforts to maintain freedom And prosperity in this country Thank you very much