Financial Armageddon

Paul grew up in the western Pennsylvania town of Green Tree. His father, the son of a German immigrant, ran a small dairy company. Sports were big around there — one of the customers on the milk route Paul worked as a teenager was the retired baseball Hall of Famer Honus Wagner — and Paul was a terrific athlete, winning a state track meet in the 220 and excelling at football and baseball. But knee injuries had ended his sports career by the time he went off to Gettysburg College in 1953. After medical school at Duke, Paul joined the Air Force, where he served as a flight surgeon, tending to the ear, nose and throat ailments of pilots, and traveling to Iran, Ethiopia and elsewhere. “I recall doing a lot of physicals on Army warrant officers who wanted to become helicopter pilots and go to Vietnam,” he told me. “They were gung-ho. I’ve often thought about how many of those people never came back.”

Paul is given to mulling things over morally. His family was pious and Lutheran; two of his brothers became ministers. Paul’s five children were baptized in the Episcopal church, but he now attends a Baptist one. He doesn’t travel alone with women and once dressed down an aide for using the expression “red-light district” in front of a female colleague. As a young man, though, he did not protest the Vietnam War, which he now calls “totally unnecessary” and “illegal.” Much later, after the United States invaded Iraq in 2003, he began reading St. Augustine. “I was annoyed by the evangelicals’ being so supportive of pre-emptive war, which seems to contradict everything that I was taught as a Christian,” he recalls. “The religion is based on somebody who’s referred to as the Prince of Peace.”

In 1968, Paul settled in southern Texas, where he had been stationed. He recalls that he was for a while the only obstetrician — “a very delightful part of medicine,” he says — in Brazoria County. He was already immersed in reading the economics books that would change his life. Americans know the “Austrian school,” if at all, from the work of Friedrich Hayek and Ludwig von Mises, two economists who fled the Nazis in the 1930s and whose free-market doctrines helped inspire the conservative movement in the 1950s. The laws of economics don’t admit exceptions, say the Austrians. You cannot fake out markets, no matter how surreptitiously you expand the money supply. Spend more than you earn, and you are on the road to inflation and tyranny.

Such views are not always Republican orthodoxy. Paul is a harsh critic of the Federal Reserve, both for its policies and its unaccountability. “We first bonded,” recalls Barney Frank, the Massachusetts Democrat, “because we were both conspicuous nonworshipers at the Temple of the Fed and of the High Priest Greenspan.” In recent weeks, Paul’s airport reading has been a book called “Financial Armageddon.” He is obsessed with sound money, which he considers — along with the related phenomena of credit excess, bubbles and uncollateralized assets of all kinds — a “sleeper issue.” The United States ought to link its currency to gold or silver again, Paul says. He puts his money where his mouth is. According to Federal Election Commission documents, most of his investments are in gold and silver and are worth between $1.5 and $3.5 million. It’s a modest sum by the standards of major presidential candidates but impressive for someone who put five children through college on a doctor’s (and later a congressman’s) earnings.

For Paul, everything comes back to money, including Iraq. “No matter how much you love the empire,” he says, “it’s unaffordable.” Wars are expensive, and there has been a tendency throughout history to pay for them by borrowing. A day of reckoning always comes, says Paul, and one will come for us. Speaking this spring before the libertarian Future of Freedom Foundation in Reston, Va., he warned of a dollar crisis. “That’s usually the way empires end,” he said. “It wasn’t us forcing the Soviets to build missiles that brought them down. It was the fact that socialism doesn’t work. Our system doesn’t work much better.”

Under the banner of “Freedom, Honesty and Sound Money,” Paul ran for Congress in 1974. He lost — but took the seat in a special election in April 1976. He lost again in November of that year, then won in 1978. On two big issues, he stood on principle and was vindicated: He was one of very few Republicans in Congress to back Ronald Reagan against Gerald Ford for the 1976 Republican nomination. He was also one of the representatives who warned against the rewriting of banking rules that laid the groundwork for the savings-and-loan collapse of the 1980s. Paul served three terms before losing to Phil Gramm in the Republican primary for Senate in 1984. Tom DeLay took over his seat.

Paul would not come back to Washington for another dozen years. But in the time he could spare from delivering babies in Brazoria County, he remained a mighty presence in the out-of-the-limelight world of those old-line libertarians who had never made their peace with the steady growth of federal power in the 20th century. Paul got the Libertarian Party nomination for president in 1988, defeating the Indian activist Russell Means in a tough race. He finished third behind Bush and Dukakis, winning nearly half a million votes. He tended his own Foundation for Rational Economics and Education (FREE) and kept up his contacts with other market-oriented organizations. What resulted was a network of true believers who would be his political base in one of the stranger Congressional elections of modern times.