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Ron Paul: Stocks are in a bubble and will crash

Ron Paul, the former U.S. representative from Texas and perhaps America's most popular libertarian voice, has long said that the nation's monetary and fiscal policies would result in massive inflation. According to the common measures of inflation, this has not yet occurred. But Paul maintains that the inflation he has warned of has indeed come to fruition in asset prices, and that once it unravels, a market crash will ensue.

"I think there's plenty of inflation, but my definition of inflation is a little different than the rest, because I think prices going up in the different areas is a consequence of inflation," Paul said on Tuesday's "Futures Now." "There's a lot of inflation in the stock market. I think there's a bubble there."

He says that what's occurring asset prices simply don't comport with what's happening in the economy.

"The growth isn't there. The only thing that grows is the debt, and just think about how much money they have to create value in the stock market," he said. "The unemployment is very, very bad, despite some of the optimism that is expressed with Wall Street, but that's all deception. I think you still have to see a healthy economy and people aren't complaining about structural employment, which is really insidious."

But he says that thanks to the low interest rates fostered by the Federal Reserve's stimulative policies, people are buying stocks regardless.

"One thing we have to remember is that when you get false information from artificially low interest rates, that mistakes are made, they're inevitable. You make mistakes even when you have market rates of interest. But when the market rate of interest is so low for everybody, there's a lot of mistakes, and that's why you have the bubbles, and that's why you go through the catastrophe we had in '08 and '09, and I think the conditions are every bit as bad as they were in '08 and '09."

Former Rep. Ron Paul
Adam Jeffery | CNBC
Former Rep. Ron Paul

So if Paul is reminded of 2008 and 2009, does he think the market will crash once again?

"Well, yes. The market has to correct, and who's going to call it a crash until it happens? We're in for a major correction, I think. I think we're very, very vulnerable," he said. "When it's artificial, it's distorted, it's vulnerable, and it's just looking for the correction."

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While that's his view of the market, for Paul it ultimately comes back to politics. Ron Paul has long said America should "end the Fed," and he made that case once again on Tuesday.

"One thing you have to do is get rid of the Fed, because, you know, we're anticipating what word, what phrase, what hyphen is going to be said, so that they can spin, you know, spin that, and the markets will go one way or the other, shifting values of tens of billions of dollars within minutes. That is just a very, very inefficient way to operate a market, to have one individual make one statement, and put so much weight on it. In short term, it's very, very real, because people are going to make it or break it, you know, on this interpretation. But that has nothing to do with the free market, nothing to do with building capitalism, and savings, and the things necessary to have a growing economy."

—By CNBC's Alex Rosenberg.

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