http://www.forbes.com/2009/05/15/au...s-ron-paul.html Commentary Fed Up Ron Paul, 05.15.09, 07:10 PM EDT Audit the Federal Reserve. The Federal Reserve’s recent and unprecedented actions in the realm of monetary policy have provoked a backlash among the American people. Trillions of dollars worth of loans and guarantees have been provided to Wall Street firms, while Main Street Americans suffocate under harsh taxation, the prospect of higher debt levels and increasing inflation. These events have awakened many Americans to problems with the Fed’s loose monetary policy, the bubbles it has created in the past and the potential hyperinflation it might cause in the future. One of the fallacies of modern economics is the idea that a central bank is required in order to keep inflation low and promote economic growth. In reality, it is the central bank’s monetary policy that causes inflation and depresses economic growth. Inflation is an increase in the supply of money, which in our day and age is directly caused or initiated by central banks. All other things being equal, inflation results in a rise in prices. A so-called “mild” rate of inflation of 3% per year leads to a 56% rise in prices over a 15-year period. Even a “low” rate of inflation of 2% per year leads to a 35% rise over that same period. How is that conducive to long-term growth? A common misconception is that the Fed is completely independent of political pressures. While the Fed has far too much authority to make agreements with foreign governments and central banks, or create temporary liquidity facilities, the governors and–more important–the chairman, are appointed by the president. The chairman is the dominant figure within the Board of Governors and the Federal Open Market Committee, the public face of the Fed, and he must be reappointed by the president every four years, with the advice and consent of the Senate. Thus, his job security as chairman is dependent on keeping the president and the Senate pleased. Every time the chairman acts, it is with the knowledge that within four years he will be called to the carpet to account for his actions. This necessarily leads to a focus on short-term economic growth, reflected in the Fed’s attempt to manage and publicize certain statistical economic indicators. While I am a proponent of eliminating the Federal Reserve System altogether, I believe that as long as the Federal Reserve exists it should be fully audited. According to current federal law, the Fed’s agreements with foreign governments and central banks–and, more important, its open market and monetary policy operations–are exempt from an audit by the General Accounting Office. As the GAO observed in the 1970s, the last time the issue of an audit really came to the fore, “We do not see how we can satisfactorily audit the Federal Reserve System without authority to examine the largest single category of financial transactions and assets that it has.” The Fed has such broad power to intervene in the economy and to engage in agreements with foreign governments and central banks that it is unconscionable that such actions are exempt from oversight. The Fed’s open market operations are not at all neutral in allocating credit. The Fed creates new balances out of thin air and uses those new balances to purchase Treasury bills from banks. Thus the banking sector is the first to get the use of the new money created in these bank balances. As this new money circulates through the economy, prices rise, and individuals further down the chain experience a higher cost of living before their salaries rise. The fact that a single entity, the Federal Reserve, engages in and has a monopoly on monetary policy has detrimental effects on the economy. As long as we try to keep up this fiction, that the Federal Reserve has a long-term focus, that attempting to fix interest rates will not distort the economy, and that the Fed can end a recession by injecting liquidity, we will never free ourselves from the booms and busts of the business cycle. The necessary first step to restoring economic stability in this country is to audit the Fed, to find out the multitude of sectors in which it has involved itself and, once the audit has been completed, to analyze the results and determine how the Fed should be reined in. Proposals to push the Fed back into the shadows, or to give it an even greater role as a guarantor of systemic stability, are as misguided as they are harmful. If Congress fails to scrutinize the Fed and the actions of its unelected bureaucrats, it will only have itself to blame as this country’s economy crashes and burns. U.S. Congressman Ron Paul represents the 14th district in Texas.
I always love when RP blasts inflation, saying how prices are raising, or the dollar is falling, yet fails to mention that long-term wages, income, and assets, grow with inflation. It is probably the #1 hole in his arguments and is very disingenuous and intellectually bankrupt. The Fed does get audited and that audit is usually pretty thorough, the results of which can be found all over the internet. While I would agree that more transparency is needed, I disagree it should be done publicly, as there are many policies, procedures, results, and actions, that we do not want seeing the light of day for foreign governments to act upon. There is not one central bank in the world that has open-kimono policies, if ours were the first we’d be shooting ourselves in the wang.
I kinda likes RP until I heard his shpiel on swine flu. it wasnt the content but the delivery confirmed that he is a bit loose in the head.
Would you say that staunch libertarian views are looked at as a joke by most credible individuals?
nocareer Wrote: ------------------------------------------------------- > Would you say that staunch libertarian views are > looked at as a joke by most credible individuals? I certainly would. The problem with libertarian views is that they are just way too unbelievable.
, yet fails to mention that long-term wages, income, and assets, grow with inflation. It is probably the #1 hole in his arguments and is very disingenuous and intellectually bankrupt. spierce is always enlightening .just like his idol paul krugman. pathetic
Wait, there’s a difference between nominal and real returns. Who knew?
Some of the comments on this thread are astounding.
Dsylexic Wrote: ------------------------------------------------------- > , yet fails to mention that long-term wages, > income, and assets, grow with inflation. It is > probably the #1 hole in his arguments and is very > disingenuous and intellectually bankrupt. > > spierce is always enlightening .just like his idol > paul krugman. pathetic Any back up to refute my points? I also laugh at RP’s lame attempt at “auditing the Fed”. Sorry, moron, the Fed can already be audited fully by Congress. The only thing that currently can’t happen is a full public audit by the GAO. GAO is not Congress even though it is an office of investigation for Congress. Full public audits of your most influential agencies is a foolish move. What’s next? Full public audits of the CIA/FBI/NSA? Do people just want to give the keys to our competors and enemies?
I thought it was great, cause I take all my financial advice from OB/GYNs with no training or experience in business or finance. This way their pure beliefs are not corrupted by that pesky knowledge and experience.
bernie_m Wrote: ------------------------------------------------------- > I thought it was great, cause I take all my > financial advice from OB/GYNs with no training or > experience in business or finance. This way their > pure beliefs are not corrupted by that pesky > knowledge and experience. Don’t forget that his 2nd career is a career politician.
spierce Wrote: ------------------------------------------------------- > > > I also laugh at RP’s lame attempt at “auditing the > Fed”. Sorry, moron, the Fed can already be > audited fully by Congress. > You’re kidding right? Do you think the democratic congress will pressure the fed if Obama doesn’t want them to? Thats not anti-dem - it would work the same with republicans
buyicide Wrote: ------------------------------------------------------- > spierce Wrote: > -------------------------------------------------- > ----- > > > > > I also laugh at RP’s lame attempt at “auditing > the > > Fed”. Sorry, moron, the Fed can already be > > audited fully by Congress. > > > > You’re kidding right? Do you think the democratic > congress will pressure the fed if Obama doesn’t > want them to? Thats not anti-dem - it would work > the same with republicans And do you think that if the American people projected enough will, feeling screwed by the Fed, that Obama (who cares a lot about his connectedness to the people) would not do something? Isn’t that the point of our government? I don’t have a problem with Congress auditing the Fed, but do it in committee, not an open and fully public audit done by the GAO. Furthermore, even then, Congress should be responsible in what is done, so as not to influence the monetary system politically speaking. That is just stupid, reckless, and very naive. All three of which fit into the typical libertopian viewpoint of the world. At the end of the day the most important aspect of the Fed is the balance sheet. That is already fully audited by the GAO. The remainder is important, but not nearly as. Additionally, RP’s “crusade” to audit the Fed is really smoke and mirrors. He is using it as a spring board for further his own libertopian agenda. Congress DOES have the authority to audit the Fed at any point, the GAO does not. Congress can rescind the Fed’s charter at any point, the GAO cannot. Congress can call any of the Fed employees to testimony at any time, the GAO, directly, can, but it doesn’t carry the same weight of a Congressional subpoena. Denying this very fact is intellectually bankrupt. People keep pointing to the FRA and saying “See, Congress can’t audit the Fed!!!ONE”, but they always miss the point that the FRA points to GAO audits, not Congressional audits (two very distinctly different things).
Why are you so offended bu this piece? quote: The chairman is the dominant figure within the Board of Governors and the Federal Open Market Committee, the public face of the Fed, and he must be reappointed by the president every four years, with the advice and consent of the Senate. Thus, his job security as chairman is dependent on keeping the president and the Senate pleased. Every time the chairman acts, it is with the knowledge that within four years he will be called to the carpet to account for his actions. This necessarily leads to a focus on short-term economic growth, reflected in the Fed’s attempt to manage and publicize certain statistical economic indicators. endquote This criticism was lobbed at Bush and Greenspan all the time by dems. I don’t know how many times I heard the argument that Greenspan was being pressured by Bush to lower rates in the early 2000s. This is not some “crazy Libertarian” viewpoint. Neither is his view that Fed monetary policy was a contributing factor in the crisis.
Ya, lets get rid of the fed reserve system so there won’t be any inflation!!! weee!!
buyicide Wrote: ------------------------------------------------------- > Why are you so offended bu this piece? > > quote: > The chairman is the dominant figure within the > Board of Governors and the Federal Open Market > Committee, the public face of the Fed, and he must > be reappointed by the president every four years, > with the advice and consent of the Senate. Thus, > his job security as chairman is dependent on > keeping the president and the Senate pleased. > Every time the chairman acts, it is with the > knowledge that within four years he will be called > to the carpet to account for his actions. This > necessarily leads to a focus on short-term > economic growth, reflected in the Fed’s attempt to > manage and publicize certain statistical economic > indicators. > endquote > > This criticism was lobbed at Bush and Greenspan > all the time by dems. I don’t know how many times > I heard the argument that Greenspan was being > pressured by Bush to lower rates in the early > 2000s. > > This is not some “crazy Libertarian” viewpoint. > Neither is his view that Fed monetary policy was a > contributing factor in the crisis. The Fed cannot completely escape the government, no monetary system can. This is what is funny about Anti-Fed people. They claim that if the “market” sets rates (which it already does, except the overnight window) and that the “market” sets FX (which it already does), then the system will suddenly be better. However, they forget that in the mid 1800’s, this monetary system, being an asset backed one, was completely f’d. We were the world’s deadbeat debtors, we still had rapid growth and contraction, we still had massive inflation and deflation, and everything was chaotic. Capital allocation wasn’t efficient, nor was foreign investment. Several times our monetary system was near collapse, whether from intentional foreign attack, or just through mis-management. They say that the Fed shouldn’t have controll over the monetary system. But would Congress be any better? Honestly? Asset backed systems don’t prevent debt either, as was seen many times in history. Frankly, asset backed systems prevent none of the current problems we have and present even more (chaos). Additionally, the claims of the asset based system being superior is silly. It is only superior because you place value on a good rather than on a paper, but the good still only has value to the extent the market thinks it has value (like gold, worthless and only market driven through momentum). So, this comes down to one single question. Why do you want to audit the Fed? Is it because you think they are hiding bad transactions? In which case the GAO limit needs to be audited through Congressional committee. Or is it because you think they are hiding a problematic balance sheet? In which cause the GAO problem isn’t a problem. Either way, Ron Paul is making a mountain out of a molehill.
tsk. the rant of the sheep
Dsylexic Wrote: ------------------------------------------------------- > tsk. the rant of the sheep And the reply of a dolt.
The last thing this economy and the world needs is an isolationalist President (and an anti-semite) who will plunge us into the Greatest Depression followed by WW3. I’ll take the crooked Repubs and Dems over that anyday.
marcus phoenix Wrote: ------------------------------------------------------- > The last thing this economy and the world needs is > an isolationalist President (and an anti-semite) > who will plunge us into the Greatest Depression > followed by WW3. I’ll take the crooked Repubs and > Dems over that anyday. what makes you think he is an anti-semite? is it because he doesn’t want to send welfare checks to Israel anymore? like the $2 trillion the US has given them during the last 35 years?