Jim Cramer Interviews Congressman Ron Paul on "Mad Money w/Jim Cramer"

DATE: Friday, December 14th at 6PM ET
PROGRAM: "Mad Money w/Jim Cramer"

The following is the unofficial transcript of a CNBC interview with Congressman Ron Paul on CNBC's "Mad Money w/Jim Cramer" today at 6 PM ET. All references must be sourced to CNBC.

In the interview, Paul discusses his position on the Fed and being a YouTube sensation, his presidential campaign and mortgage issues, among other topics.

JIM CRAMER, host: You know I am no fan of the Federal Reserve these days. You know that I think the Fed has hurt this stock market and this US economy. Frankly, I think the Federal Reserve has run amok. It's become totally unaccountable. Tonight, I think I've found a fellow traveler, Congressman Ron Paul, who's running for president as a Republican and has been highly critical of the Federal Reserve. I'm inviting all the candidates to swing through MAD MONEY to talk about your money. Congressman Paul's position is so important on the Fed and his method of spreading his message for his campaign is so different from everyone else's that we're thrilled to have him on the show tonight.

Welcome, Congressman Paul.

Congressman RON PAUL: Thank you very much. Nice to be with you.

CRAMER: Great to have you. Look, one of the things that's changed, and you're changing it, caucuses and kissing babies, they don't cut it anymore on the campaign trail. This is 2007. YouTube is king in so many ways. I never thought we would have so much in common, Congressman Paul, but you and I have struck a chord and become YouTube sensations. And it's about an unlikely topic. It's about the Federal Reserve, and we know even the younger people--younger people--are into it. Why is it that your message, my message, somewhat critical--absolutely critical of the Fed, is just reaching home to so many young people and actually everyone throughout the country?

Mr. PAUL: Well, to me it's utterly amazing, when I go to the college campuses, I get the loudest applause when I criticize the Fed and indicate that I don't even like the Fed and think we should talk about getting rid of it. So it is an important issue and I think this is the first time in over 100 years that it's become an issue in a presidential campaign. So I'm really excited about it because the monetary issue is something that has driven me to get involved in politics for a long time.

CRAMER: Now, you have been, I think, spot on in saying that the Federal Reserve created the stock bubble with low margin rates and it created the housing bubble with low mortgage rates, yet I never hear about anyone talking about investigating the Fed in Congress. It's a creature of Congress. Why don't we do it?

Mr. PAUL: You're absolutely right. That's why I introduced a bill constantly to audit the Federal Reserve. We've created the Federal Reserve and it has no oversight. We don't even know if they have the goals here anymore, and it's so important, yet there's no oversight. I think it's even more secret than the CIA. So to me, it ought to be open and the American people ought to know, but unfortunately, the members of Congress don't have much interest or concern or understanding of how the Fed works, so they are totally neglectful.

CRAMER: All right, when you screw up, you get voted out of office. When I screw up, my--they pull my show. When the Federal Reserve screws up, what happens?

Mr. PAUL: What they do is they just go back to doing the same thing again and you never hear. They hide from the public and they talk about wonderful things and they blame somebody else. I mean, even Greenspan now is taking very little responsibility for the contribution that he has made to these financial bubbles, and they're not held accountable. That's why I don't like this monetary system that we have.

CRAMER: All right, the Federal Reserve's current chairman, Ben Bernanke, started his job in January of 2006. That's exactly when the worst mortgages began to be propagated. Why has our Federal Reserve chairman never addressed--why did he not see this coming? Why didn't he help us as a country?

Mr. PAUL: Well, he didn't see it coming and he didn't do anything about it. It was coming a long time before that. You know, we had interest rates down to 1 percent. The overnight rates were down to 1 percent early in this decade and that started the ball rolling. That's when the inflation really started. That was creating the bubble, and it just got worse and it climaxed after six and seven and then, of course, it ended in--you know, during this year. The last year there's been total chaos.

CRAMER: Do you think they do enough homework? I'm sitting here watching a country where people are--it's possible that seven million people could lose their homes and yet they seem to be consumed by tinkering with the Libor rate, with three-month treasuries up. Do they not see the bigger picture that you and I see?

Mr. PAUL: Well, I think they believe in themselves too much. I don't have that much confidence that any central bank can do what a lot of people expect to do. How do they know what the interest rates would be? The one thing I always hear about the people who critique the Fed is the Fed is--it has too low interest rates or they're too high. But I think the market should be involved. If you believe in free enterprise and capitalism, you should have the market forces determining interest rates. It's the distortion of interest rates by manipulating the money supply that causes these bubbles to form.

CRAMER: Why is it that the message that you just talked about, which frankly is a message that I try to get across--but I'm always afraid that no one will listen because, well, let's be honest, a lot of people think it's boring. Why is it that people are turning on to YouTube to see you talk about something that everybody else thinks is too boring?

Mr. PAUL: Because they're waking up. Because they know there's a lot of inflation. People's standard of living is going down and we have a world crisis building over the dollar. The dollar is going down in value and we're dependent on borrowing money that we've created and sent overseas. So we're dependent on borrowing money from China now, and the people are waking up and the young people realize it and they understand what they're inheriting and they understand the monetary system a lot more than a lot of people in Washington believe.

CRAMER: Can we have just actual hearings about what went wrong with this issue of mortgages, call not just the Fed chairman, but other Fed important presidents and governors, whom I think have been oblivious on this issue, and actually just hold them accountable in front of the American people so we can get to the bottom of what is the worst crisis we've seen since the S&L crisis in 1990?

Mr. PAUL: You know, I think we have a pretty good chance. I think Barney Frank, our chairman of the banking committee, he's very open to this. He has done more than any other previous chairman has in the last several decades. So I'm optimistic that he's willing to do this, and I've continued to work with him and I think we can get more hearings, but you just can't accomplish it overnight.

CRAMER: Do you think you're changing the debate in this country? Do you think your fellow candidates are now realizing because you're up there talking about it that we have a large domestic problem which is in--a run-amok, unregulated group of people who, frankly, are not responsive or held accountable to anybody?

Mr. PAUL: You know, I don't think they've quite heard the message. I think the people at the grassroots level hear it and understand it, but I don't think the other candidates quite get it. I don't think they have an understanding of monetary policy, and if they do, they like the status quo and they like the benefits that come from it. But the members of Congress and our candidates on the platform I work with, I'm not so sure that they have an interest or an understanding of how the monetary system works.

CRAMER: Well, sir, I think you are changing the debate. I think you are creating an atmosphere where we can finally begin to even talk--I'm always afraid--you know why? I'm always--I'm telling you, you've given me cover, sir. I always feel like I'm out there by myself criticizing this institution that everybody thinks is like a holy temple, when the reality is these are just men and women like you and me except for they're making policy with no checks and balances. I wish you the best of luck, sir, with your campaign. You are changing things with what you're saying.

Mr. PAUL: Thank you very much. I'm glad I was with you today.

CRAMER: Absolutely. Congressman Ron Paul, good luck to you, sir. We are stuck, everyone. We are stuck in an era where only this man and a few of--a few of the rest of us are willing to tell the truth about an institution that is not doing its job and a group of people who must be held accountable that are just able to do whatever the heck they want, the Federal Reserve.

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