Former Texas Congressman Ron Paul has issued his strongest warning to date, arguing that the U.S. financial system is sounding a red alert louder, faster, and harder to ignore than ever before. In a recent interview, Paul claimed that decades of unchecked government spending and monetary expansion are leading to a crisis of confidence in the dollar. On Tuesday (February 3), the dollar index traded in a narrow range around 97.50 in early Asian trading.

Paul points out that the current environment is fundamentally different from past debt panics. He believes that the United States has not only consumed a great deal of wealth but has also squandered its credibility through reckless fiscal and foreign policies.

Core issue: The $38 trillion debt spiral

Paul's core concern lies in the dramatic expansion of the U.S. federal debt, which has now exceeded $38 trillion. He believes this is not a simple accounting problem, but a deep-seated structural failure. In his view, the government is no longer fulfilling its obligations through actual savings, but instead relies on continuous money creation.

Paul stated, "They have no money," explaining that the system operates by stealing the purchasing power of the dollar through increasing the money supply . He believes this process is essentially a quiet transfer of wealth from ordinary people to the state .

How inflation exacerbates the wealth gap

Paul argues that this continuous creation of new money is a major driver of income inequality . Those who first receive the new money—large financial institutions and politically connected entities—profit before prices rise. Meanwhile, the wages and savings of low- and middle-income earners are eroded by subsequent inflation.

Paul describes inflation as a hidden and destructive tax. He notes that "the poor suffer the most," implying that this "inflation tax" is more damaging than a direct income tax.

Gold prices surge: A verdict on fiat currency

Paul directly linked these systemic pressures to the recent sharp fluctuations in gold prices. He believes that the volatility in gold prices clearly demonstrates a collapse in confidence in government-issued fiat currencies .

He said, "When you see gold prices rise by more than $100 a day... that's a different story," and admitted that the speed of the market's recent reaction surprised him, despite his decades of warnings about such an outcome.

When asked if the fiat currency system was nearing its end, Paul's answer was unequivocal. He said, "Yes, it's dying," echoing recent comments by investor Ray Dalio about the current monetary order crumbling. Paul emphasized that the debt trajectory alone makes the system mathematically unsustainable.

He also reiterated his long-held prediction that gold prices could reach $20,000 per ounce, positioning this as a reaction to a potential collapse of the dollar rather than a bullish forecast. He said, "Gold has gone from $20 to $200, then to $2,000, and in our lifetime, gold will have another zero added to its price."

However, Paul added a crucial warning: the system might not even last to see such prices. He explained that in the event of a complete collapse of the monetary system, pricing in dollars would become meaningless .

Beyond the Market: The Social and Political Aftermath

Paul warned that the consequences of this instability extend far beyond financial markets. He pointed out that civil liberties are often the first to be affected as governments struggle to cope with the ensuing chaos. He cited the increasing restrictions on freedom of speech as an example of how economic pressure makes authoritarian responses more likely.

This financial vulnerability also has geopolitical implications. Paul points out that if the dollar loses its global dominance, alliances like NATO could become ineffective. He says, "If you run out of money, you have to change your mindset," noting that it is often fiscal exhaustion, rather than diplomacy, that ends wars.

A glimmer of hope?

Despite the bleak outlook, Paul expressed cautious optimism about the shift in public consciousness. He observed that the younger generation seemed more receptive to the ideas of Austrian economics and increasingly skeptical of centralized monetary control. He credited the internet for helping to spread these alternative perspectives.

Now leading the Ron Paul Freedom Report, he continues to argue that debt liquidation and monetary reform are inevitable. However, he emphasizes that the road ahead will not be smooth. Paul concludes, "This transition...is very, very dangerous," warning that the longer policymakers avoid confronting the fundamental issues, the greater the risk of social unrest.

US Dollar Outlook

The United States' long-term reliance on debt monetization (money printing) and fiscal deficits has damaged the dollar's credibility and reduced its purchasing power, potentially triggering a crisis in the fiat currency system. He believes this is not only an economic problem, but also the root of social and political risks.

In the short term, the US dollar may still be supported by safe-haven demand, but in the long term, if fiscal discipline is lacking, the risks of dollar value dilution and monetary system restructuring will increase significantly.



(US Dollar Index Daily Chart, Source: FX678)

At 8:33 AM Beijing time, the US dollar index is currently at 97.50.