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Questions and Answers with Ron Paul

Not since 1833 have there been calls to abolish a United States bank. At the time, it was President Andrew Jackson who succeeded in abolishing The Second Bank of the United States. Today it is Congressman Ron Paul of Texas who is calling for an end to the Federal Reserve.

Paul lays out his thesis in his new book, End the Fed, in which he calls for an audit, and then an end to the Federal Reserve. I recently interviewed Rep. Paul about ending the Fed, his thoughts on the dollar, and financial regulatory reform.

Paul thinks the Fed is the root cause of the financial crisis and what permitted exorbitant risk-taking by companies ranging from Bank of America(NYSE: BAC) to Citigroup (NYSE: C) and from Morgan Stanley (NYSE: MS) to AIG (NYSE: AIG). He believes abolishing the Fed would spur people to save more and become more prudent with their finances because free market forces, instead of a central bank, would set interest rates, limiting the amount of credit in the economy.

He is in favor of returning to the gold standard and believes an end to the Fed will put an end to the dollar's long trending depreciation. Paul also calls for more regulation on the government and not the markets.

What follows is an edited transcript of the interview.

Jennifer Schonberger: In the wake of the financial crisis, some in Congress want to give even greater power to the Fed. You want to abolish the Fed. Why?

Congressman Ron Paul: Because they caused all the trouble. A monetary policy of easy credit and artificially low interest rates was the main source of the financial bubble, and the correction is always trying to fix what the Federal Reserve has done. The only way you can address the business cycle and prevent wild swings in the business cycle is by addressing the Federal Reserve and how they cause nothing but mischief.

Schonberger: Would you put something else in place of the Fed, or revert to a laissez-faire approach and let the free market forces play out?

Paul: Yes, I believe in free markets. We don't have free markets and haven't had them. So it's convenient for people to blame the free market for the problems, but that's a fallacy. In a free market, capital would come from savings. People put their money in a savings account or something of real value, and that determines the interest rates.

When people don't save, like we as a nation have not saved for many decades, there is this illusion that there is still so-called capital, or money made for investments. [In reality] that capital came from a computer at the Federal Reserve. Therefore it sent the wrong information to businesses and savers, claiming that there was a lot of savings out there. Based on that, people overinvested and built too many houses. It's the Federal Reserve that sends out the incorrect information.

Schonberger: So this would be a world with less credit, would it not?

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