Former Texas Rep. Ron Paul told Newsmax TV on Tuesday that the Federal Reserve and Congress are "99 percent" responsible for the recent stock market losses, mainly because the Fed creates "bubbles" to try to help the economy and Congress hinders the market with too many regulations.

Black Monday's market meltdown occurred "because the Federal Reserve creates the bubbles, and many times on purpose," Paul, a staunch libertarian, said. "They go from NASDAQ bubbles to housing bubbles to whatever they need to bail out the economy."

While the Dow Jones was up 225 points in the early afternoon on Wednesday, financial experts worry it won't last for long, according to CNN. Many mainstream economists have suggested the market woes are a market correction due to China's devaluation of the yuan, however, Paul lays blame squarely back at home.

He suggested the Fed would have better luck if it would allow the market to correct itself and allow the liquidation of debt so prices can go back to normal.

"But no, we bail everybody out and it's temporary, but eventually the Big One comes, and they can't stop it," Paul continued.

And whatever aspect of the market manages to avoid destructive Fed policy is being hurt by lawmakers in Congress who overtax and over-regulate, Paul said.

"Socialism fails always because you have wage and price controls, but we in the West have control of the economy and economic planning by pricing money," he said. "So one-half of the economy, which is the money, is fixed so you have currency transactions and currency competition and then you have the supply of money and interest rates, and it's a gross distortion because people have been fooled into thinking they're saving."

Paul is the father of Sen. Rand Paul, R-Ky., who is seeking the Republican presidential nomination. Like his father, the younger Paul has made numerous unsuccessful legislative attempts to audit the Fed.

Paul also said he was "very concerned" about the "gross distortion" of the bond market, which has been occurring since the early 1980s.

"We're still at zero percent," he told Newsmax. "But eventually, the people will reject this and already you see some companies and debt like in Greece and some of our own municipalities turn sovereign debt, government debt, into junk and that eventually will happen."

Paul said that when the "Big One" happens, "we will lose the status maybe at the same time as the reserve currency of the world. That will play havoc not only with us but with China."

"It's the manipulation of the reserve currency of the world, where we had tremendous benefits for dozens and dozens of years," he said. "This is just a hint that there's disequilibrium there and the market is demanding a correction."

Paul said he believes one solution is to "get rid of the malinvestment and get rid of the debt."

Economist Peter Schiff of Euro Pacific Capital Inc. agreed with Paul's assessment, saying China is merely the "scapegoat."

"This is not about China," Schiff told RT. "This problem is made in America. It's all about the Fed. The Fed inflated this bubble and now they're threatening to prick it. Everybody expects the Fed to actually raise interest rates."

Schiff said he believes the Fed is bluffing about possibly raising rates, as doing so would precipitate another financial crisis.

"If the Fed takes away the zero percent interest rates, this market is going to implode and we're right back at recession... that is what is hurting markets around the world," Schiff said. "It's the fear of higher interest rates. That's propping up the dollar, that's depressing emerging markets, that's depressing commodity markets."

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