"It is that not only have we had a subprime market in housing; the whole economic system is sub prime," Paul railed. "We artificially lower interest rates. And it wasn't under your tenure in office; it's been going on for 10 years and longer and now we're bearing the fruits of that policy."
Paul argued the government shouldn't be concerning itself with deceptive lending practices but with its deceptive monetary policy.
"The real deception is when we distort the value of money, when we create money out of thin air. We have no savings. Yet there's so-called capital. There's money available. But it comes from what you have to do and the pressures put on you.
Several minutes into his questioning, Paul got to a question for Bernanke, though it was more of an entree to a larger debate: "How in the world can we expect to solve the problems of inflation, that is, the increase in the supply of money, with more inflation?"
Bernanke answered saying, in the parlance of an average economist, he's just doing what Congress created the Fed to do.
"What we're trying to do is follow the mandate that Congress gave us," Bernanke said. "And the mandate that Congress gave us is to look at employment and inflation as measured by domestic price growth. And as I talked about today, and I think you would agree that we do see risk to inflation and we are taking those into account and we want to make sure that prices remain as stable as possible in the United States."
Paul countered that by putting more money on the market, Bernanke and the Federal Reserve are devaluing the dollar and robbing from Americans.
"There's a dollar crisis out there and people's money is being stolen; people who have saved, they're being robbed. I mean, if you have a devaluation of the dollar at 10 percent, people have been robbed at 10 percent. But how can you pursue this policy without addressing the subject that somebody's losing their wealth because of a weaker dollar? And it's going to lead to higher interest rates and a weaker economy."
Bernanke argued that since Americans use dollars to buy their goods here in America, a devalued dollar will make imported goods more expensive.
Paul shot back, rounding out his five minutes of questions, "Yes, but not if you're retired and elderly and you have CDs and their cost of living is going up no matter what your CPI says. Their cost of living is going up and they are hurting."
It was an interesting exercise in theory, but Paul, even if he were to be elected president, probably would not have the votes in Congress to revamp the financial system, much less abolish the Fed.
A reason perhaps why none of this made wire or newspaper accounts of the hearing, all of which focused on Bernanke's contention that despite an intensifying slump in the housing market, slower than expected growth and higher inflation, he does not believe the country is headed for a recession and tried to divine where Bernanke's testimony signaled another interest rate cut.