Heffern: Do you feel that today's economic situation is new and never before seen? Col.

Macgregor: Debt destroyed governments and countries in ancient Egypt, in ancient Greece, in the Roman Empire, and in modern times, since the fall of the Roman Empire, many, many times. The French, the Spaniards, the Holy Roman Empire of the German Nation, the Polish Lithuanian Confederation, and even the British Empire. There seems to be this notion that you can simply spend and borrow money without interference. And, of course, this notion that we can artificially suppress interest rates indefinitely is equally misguided. Heffern: In your opinion, what should be the first step to right the wrongs? Col. Macgregor: Well, Ron Paul has said and with some accuracy in my judgment that there are enormous savings to be extracted from the defense and foreign policy budgets. And those are really inextricably intertwined as they are, also, with the intelligence budget. Heffern: Do you think the numbers are accurate that are being reported? Col. Macgregor: So people talk about, "Well, the future defense budget's been reduced to $550 billion or something." The truth is, about $1 trillion a year is spent on maintaining our large military structure and all of the supporting agencies that go with it, largely because of our overseas commitments. And that's why Ron Paul has repeatedly talked about "the empire." And whenever he brings this up, the neocons and the others, who want to keep us permanently mired in a state of perpetual war with someone somewhere, don't like this. They also realize something else that Ron Paul has always understood, which is the large amorphous government that has emerged in the last 50 years to manage this enormous military, industrial, foreign policy establishment. Well, that needs to shrink in order for us here at home to maintain our liberties, our rights, our personal freedoms, and ultimately, our prosperity. That means only spend on the military that you need to ensure a couple of things. Not only being able to defend yourself, but that you can make it abundantly clear that if anyone is foolish enough to challenge you or attack you, that the consequences for them are unthinkable. That doesn't require $1 trillion a year. You could do that for less than $500 million, and frankly, you could drive the defense budget to about $300 billion, which is, incidentally, where it was when George W. Bush took over in 2001. Heffern: So are you saying our defense strategy, like everything else, needs to evolve given today's circumstances? Col. Macgregor: We've been mired in the mud of the Cold War. We tried to transform the Cold War military establishment, defense establishment, and foreign policy establishment. There is an undisclosed future military, industrial, foreign policy establishment to deal with.

We don't live in a world of threats where the entire world is arrayed against us. On the contrary, most of our problems are right here at home or south of the border. We don't face an existential military threat, nor are we likely to in the near future. There are far too many Americans they're very patriotic, they mean well, but they unfortunately think that when we are killing people in remote places on the face of the earth, that somehow or another, America's greatness is demonstrated. Well, the exact opposite is the case. And they forget that for every action there is a reaction. There are consequences in the future for what we've been doing, and we need to look very carefully at those consequences. Heffern: After World War II, Europe was able to cut back their defense spending because of their protection by America's presence. Col. Macgregor: And that definitely made sense for about 20 years. We're going on to 60 years. This is ridiculous. We've lost our minds. It needs to end. And again, Ron Paul is the only man saying this. As an aside, remember that you've got all these people running for office... Gingrich, Santorum, Romney, and Obama... The only man who served in the Armed Forces is Ron Paul. I've always found that very strange. Heffern: So will things change again over time? Or do you think we are stuck spending? Col. Macgregor: Well, the first thing I would tell you is that there's some bad news. And the bad news is it could hit rock-bottom. It could take some time for people to see and understand where we are headed. Thomas Paine wrote Common Sense, which was probably the greatest bestseller of all-time in political terms. And the outset of Thomas Paine's work, he wrote, "Time makes more converts than reason." Heffern: So time will tell in defense spending... Is the same true for the U.S. dollar? Col. Macgregor: In time, people will come around to the understanding that paper money, fiat money, independent of any backing of any kind, has dubious value. But that's not going to be realized until the crisis strikes. And it's coming. We are headed into a very, very dangerous period in 2013, 2014. We are going to end up much like Greece, Spain, Portugal, and Ireland in that between now and then we're going to watch the rest of the Europeans go under, and then, ultimately Great Britain. It doesn't make any difference what you do in the short run. And part of the problem, as Ron Paul has pointed out, is that it's not just the gold standard issue. The fact that, ultimately, when confidence collapses and people realize the money is worth nothing, that's when the runs on the banks begin, that's when the banks fold, that's when chaos in the streets breaks out. And that's when the government can no longer simply print money. It can't sell its Treasuries. No one will take it. Heffern: Because they don't want to? Col. Macgregor: It's beyond their comprehension. They have lived in a country, which, in their minds, is the center of the universe with the highest standard of

living, the most prosperous economy. When you try to explain to them that in 1982, when we began to recover from the recession we were in at that point, more than 21 percent of the American workforce was in the manufacturing base. Today, less than 11 percent of America's workforce is actually involved in manufacturing. And when you lose your manufacturing base, you also lose your capacity for innovation, invention, and new developments. Your research and development, effectively, begins to collapse. And remember that one of the things that Ron Paul points out is that if you raise taxes, the government doesn't cut spending. It just spends more. And he's right. There's no evidence that if you raised revenue and paid more yet more money into the bottomless pit that is Washington D.C., that you would suddenly improve your position. On the contrary, the borrowing would continue, the big programs would continue. And Senator Coburn from Oklahoma has pointed to hundreds of programs that we continue to fund to the tune of billions of dollars every year that, as far as we can tell, have no effect whatsoever. There are too many people out there that think that we are doing good things overseas when we intervene militarily, and in truth, we do more harm than good. And Ron Paul has tried to make that point. And that is not an anti-military statement. Because remember, the veterans of Ron Paul will tell you, the soldier, sailor, airman, and marine shows up. He does the best he can. He makes the best of bad circumstances. But he is not the person shaping policy or the execution of policy. Those are the generals. Those are the politicians, and they've turned out to be abysmal. And the lesson is... We need to stop. We don't need to repeat the folly of Vietnam, Afghanistan, or Iraq. Heffern: Yeah, and coming from someone like yourself that is a decorated combat vet, there's no one else with more insight on this topic. I'm glad we had the chance to talk... Thank you so much for your time. Col. Macgregor: OK. Thanks for having me.