Ron Paul: Hello everybody and thank you for joining us for this special report. Today we have a lousy jobs report, which has excited the markets and we want to talk about that a little bit and with me to talk about that is Chris Rossini. Chris, welcome to this special report.
Chris Rossini: Yes, hello Dr. Paul. Let’s get started. It was actually the worst report in approximately 5 to 6 years, only 38,000 jobs were added and there was a 158,000 expected, so it’s a big miss. So, what are your thoughts Dr. Paul on the big picture with this report?
Ron Paul: My first reaction is that why should anybody be surprised because many of us have been predicting that there is a lot of problems out there and sometimes the government hides these problems, then it gets very bad and then they have to confess up to it. So, it shouldn’t be a surprise that the report was negative. I happen to think that a large portion of our economy has been in recession and even a depression after the last 8 years and that the numbers that we get from the government are always fictitious and always painting a better picture and they worry form minute to minute about what the interest rate should be and what adjustments they have in.
It is pretty amazing that so much attention is paid on this, but certainly the reaction to this is an indication that the people who deal with large sums of money have an important role in what happens. But, this is very, very negative and they are confessing that it’s negative. Even though there is only 38,000 jobs this month, they adjusted in March and April sharply down, so the economy has been in the doldrums and I think the American people know that and they shouldn’t be surprised.
But, this is the type of thing that Austrian economists are never surprised about, because these corrections, these problems, these recessions and downturns are inevitable. It was said that Obama had this terrible economy and that it wasn’t he that created the bursting of the bubble in ’07 and ’08, it had to do with the Republicans, but it really didn’t have to do with Republicans, it had to do with the monetary policy and that it was a predictable event. And even today there was an announcement that there is a downturn in the economy, you can’t just say that it is all Obama’s fault, it isn’t. it is the philosophy of economics that this has been endorsed by Republicans and Democrats for a long, long time, it has to do with the Federal Reserve distorting the markets, getting over capacity, malinvestment, too much debt and this pretense that you can do central economic planning through the Federal Reserve.
So, nobody should be surprised at this, but the market certainly was annoyed by this, because they believe the propaganda and now they have to adjust the investments and that is why we saw significant changes in the various markets today and I don’t think this goes well for the economy or for the markets.
Chris Rossini: Yes and a few of the internal statistics that I saw this morning are pretty bad as well. For example, full-time employees fell 60,000 jobs, while part-time employees rose 139,000. What does that tell us about what is happening in the economy Dr. Paul?
Ron Paul: The good jobs aren’t coming back and that is the big problem and of course some people would say all the good jobs are going overseas and nobody takes responsibility for a lousy economy here the way we run things, whether it’s taxing, more regulations, monetary policy, government spending and this sort of thing. But, the jobs, sometimes go into the wrong places. The government employees went up and that certainly doesn’t add up to the economy, which means that even the GDP figures, which everybody followed, are fictitious too, because if the government spends more money, the GDP goes up. If you buy more missiles and bombs and you go and waste them in some war someplace, that spending here is considered part of the GDP and it doesn’t help the average person.
A lot of people left the workforce, it’s around 600,604 left and now there is over a 102 million people who are unemployed or are no longer looking for work. This is huge and this is the reason we saw some very sharp reactions today. We saw the stocks are down sharply and by the end of the day sometimes they are revived and they can be talked into something, but right now it should be a natural response that stocks are way overpriced, because that is part of the malinvestment and the inflation that now is built into the system.
But, the biggest thing is the entertainment, if you want to call it that, what is it going to do, it is conditioned everybody in the market, we are going to nudge up interest rates a little bit, because they need a little room with the recession that is coming, we have to have something to do and that is lower interest rates. So, they are going to be talking right now with this announcement, it is almost like nobody believes they will raise interest rates in June and from their viewpoint as managing the economy, it would be crazy for them to do it.
Of course, free market individuals would argue the case that they shouldn’t even be in the business of fixing rate, there is no right rate that they can fix, but what they should do is move in the direction or totally eliminate the fixing of prices, the prices of money and interest rates. Nobody would think if there is a problem in the manufacturing of bread, the best thing we could do is have a board in Washington fixing the price of loafs of bread, I mean that is insane. But, everybody tolerates this business of the Federal Reserve fixing interest rates sort if in secret and everybody is anticipating theirs and for the moment people make a lot of money and lose a lot of money. Today, I imagine there were a few people who lost some money. So, it is pretty amazing how they anticipate that.
But, this was not good for the dollar today. The dollar was down sharply, it was down over one percent one and a half percent, which is a big drop and likewise gold was up as a reflection of that, up two and a half percent. But, the dollar going down is a mixed bag too, because the dollar going down when there is no other currency in the world is really amazing that people would move to Yuan or the Euro or something else in these conditions and therefore the dollar generally gets a free ride and it stays stronger than it deserves to be, but evidently today people were saying interest rates are even going to go down lower, which is practically impossible, negative now, it is really pretty amazing, so I think that this is a sign that things are going very, very bad, trouble and they are not going to solve it by tinkering with interest rates or tinkering with what we need is more spending by the government to stimulate the jobs market.
I think they are totally panicking. Let’s get the Plunge Protection Team in action, what do they know what to do and they are probably very active trying to smooth these markets out and buy and sell and ultimately the market is overwhelmingly more powerful and they won’t be able to control it. The average person doesn’t own much and they are not going to react too much to this, but after a while this will be reflected on more price inflation in this country, more unemployment and it really is catching up with what the people already know. The anger and the frustration by Democrats and Republicans that are in attendance and all of the fighting going on politically.
It’s a reflection of the fact that the people know there is something wrong, they don’t know what’s wrong, they are very upset and very annoyed and they are striking out and it looks like they are going to get more violent, but nobody is dealing with the real problem and that is that there is cancer in the land and you need to treat it and you can’t treat it with an aspirin and this is what they are trying to do, they are in total denial and that is why I expect the friction and the argument and the violence to get much worse and still we admit that this is a failure of an epic mismanagement of the economy by the interventionists, by the Keynesians planning everything, every little thing. I think this is a significant day and who knows what tomorrow will show, they may pump up and down, but this is a true reflection of how serious the problem is, it’s a wake up call, but I am afraid those who are in charge are not going to wake up and we are going to continue on the same path.
Chris Rossini: Yes, I agree. Only a few points that I would add more stress to build up on what you said. It is interesting that with such a pitiful jobs report that government employees went up, we have to remember that these are more bureaucrats that are being added to the hassle, the productive in our society, so that only adds the negativity. Also, with the Federal Reserve, they shouldn’t be setting interest rates at all, but they are boxing themselves in slowly, but surely and what are they going to do if someday they are forced to raise interest rates, due to price inflation. Then they are really going to be in trouble.
Ron Paul: You are right. On the government employees, you mentioned it’s not a bad, it’s a strong negative, because I think everything they do in that manner is a drain, we have got to subtract that, instead of adding that to the GDP, we have to subtract it from the GDP.
Chris Rossini: Exactly. One more question Dr. Paul and we will wrap this up. Gold was up strongly today, up over two percent the last time I checked, maybe it’s even more by now. What are your thoughts on that?
Ron Paul: People should go to gold when there is chaos in the markets and they did, it’s actually up the last time I looked, two and a half percent and it’s a reflection of the dollar being down, but it’s also a reflection of people going to safety and though I had been instructed while in Washington that gold is not money, the world still thinks it is, a lot of central banks, probably our government still thinks of it as gold, they still cling us to gold, so it is a haven. People go to gold.
But, what I find interesting is that they went to gold, because we get a very, very weak report, which means they won’t raise interest rates, they are going to lower interest rates, which means they are going to print more money and printing money, like when they did QE, every time they did a QE, it pumped gold up. So, it’s the idea that the economy is weak, government is going to print money and gold goes up. One thing that people don’t realize if they are protecting themselves with gold, you can protect yourself even if the economy is healthy, it isn’t healthy and this is not going to happen.
Let’s say this report would have been super, super positive, that we are completely wrong, that there is no weakness in the economy, we are going back to economic growth again, there is already so much money out there that they have already created, very healthy economy that is more booming. They said they would get what they wanted, two percent rise in prices, but believe me, gold is going to respond as it did in the 70s, even with a superficial benefit to the economy. That is not the case, people are going to gold because they fear weakness and more inflation, but nevertheless I think gold actually protects people, whether the economy gets very, very weak or the economy for some weird reason was a healthy economy and there was more productivity, because there is so much money out there anyway and they can’t withdraw that money, so it would be reflected.
Once again, I think people should pay attention to this report and hopefully more people will study Austrian economics and look especially at Murray Rothbard on what he has written about the depression and Hans Sennholz is not as well known, but he wrote magnificently about the depression and people should check it today and if they can’t find literature to read, they have to go to the Mises Institute to find their books.
Chris Rossini: I can’t agree more with that, that is what provides many of us with our real education in this world. So, thank you Dr. Paul.
Ron Paul: Chris thank you very much and I ask our visitors and listeners to come back soon to the Liberty Report.