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The shutdown is not a real problem: Ron Paul

The government shutdown and debt ceiling are not the real problems with the U.S. economy.

That's according to former congressman and Republican presidential candidate Ron Paul.

"I think that the shutdown is not a real problem," Paul said on CNBC's "Squawk on the Street." "I think the real worry should be the breakdown of the entire system. As far as default goes, we're always going to pay the interest. That's just a fake argument. I'm concerned about the continuation of the default by paying off our bills with money that has less value. That's where the real problem is, and they're not even talking about it."

Paul brushed off the implications for thousands of furloughed federal workers, calling the time a "paid vacation."

(Read more: Business groups see loss of sway over House GOP)

"I don't know how people can believe this stuff as being serious," he said. "The government isn't shut down and the few people who have been let go, half of them have been put back on. And they're all guaranteed their wages."

Paul also dismissed Secretary Lew's quickly approaching October deadline for when the United States is expected to default on its debt.

"Oct. 17 is pure fiction," Paul said. "Nothing really changes. The debt limit went over in May, and they continue to illegally fund all these programs."

The former congressman from Texas faulted both Republicans and Democrats, saying that neither side is "serious about cutting back" on spending.

(Read more: Speaker Boehner: Debt ceiling increase in return for talks)

"Both parties are doing the same thing," Paul said. "They're grandstanding. They're politicizing this. They talk about a shutdown which really isn't a shutdown. It's all a political game. It's a blame game."

Americans rightfully have lost all faith in the federal government, according to Paul.

"The government is not credible in foreign policy, they're not credible in Federal Reserve policy, they're not credible with bailing out the economy," he said. "They American people better blame the whole system, the philosophy, Keynesian economic, interventionism and foreign policy, our violations of our civil liberties. That's where are problems are."

Paul, an outspoken advocate of returning to the gold standard, said markets are not worried near term, but the long term is another story.

Ron Paul
Adam Jeffery | CNBC
Ron Paul

"I'm always looking at the long run: the destruction of the dollar, the default that we're in the middle of, the bond bubble which is about to burst," Paul said. "If anybody thinks the economy is booming, they have another thought coming."

The Federal Reserve is only exacerbating the economy's long-term problems, Paul added.

"We continue the process of big government domestically and internationally, and depend on the Federal Reserve to monetize the debt," he said. "Whether you have Summers or Yellen, you're going to have the same old policy of print the money until doomsday. They're going to get doomsday because you just can't print money forever."

(Read more: Here are 7 debt-default doomsday scenarios)

Ultimately, Paul said, Americans will have to redefine the role of government to resolve the country's fiscal issues.

"People have to eventually ask the question: Do we want the role of government to be that of being the policeman of the world and have runaway welfare spending and print money when you need it?"

—By Elizabeth Schulze, CNBC desk producer. Follow her on Twitter: @eschulze9

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