In July 2009, Congress held hearings on the Federal Reserve System’s independence. Congress finally discussed Ron Paul’s bill, HR 1207, known as the Federal Reserve Transparency Act, as well as whether or not the Federal Reserve should even continue to operate independently.
Even though President Obama campaigned on and promised greater transparency in government, and even though the American people are also demanding greater transparency in government, and even though a majority of the House has cosponsored HR 1207, the Senate leadership continues to oppose Senator Jim DeMint’s efforts to attach it to another piece of legislation.
What is happening on Capitol Hill provides a clue to to the types of arguments against real transparency for the Fed and how the Federal Reserve System’s central bankers will defend their interests and the status quo that enriches them so well.
A major claim is against auditing the Federal Reserve System is that it would compromise its independence. Independence, however, means secrecy. The central bank does not want to loose it power to create and spend trillions of dollars. Nor does it want the public to realize that in so doing, it devalues every single dollar in circulation. The “independence” the central bankers defend is to make secret deals with other central banks and the “independence” to secretly bail out their cronies, to the detriment of each American citizen, and the “independence” to secretly enrich themselves. The American people and Congress must challenge this secret “independence.”
The banking elite claims that the Federal Reserve System has some kind of special intellectual power or ability to control the Market and that the central bankers somehow know what the Market needs, so we should just trust them. How can they know? The Market is too complex. No one can know what the Market needs except the Market. The Market sends signals, such as prices, that producers and consumers should react to and respect. No one should thwart or control price and production. Why should Americans believe that the bankers know all and can ignore the economic laws of supply and demand? They may pretend to be the economic gods of the world, but their manipulation of the Market, which continuously produces the boom and bust cycles we suffer from, shows them to be, in fact, dumb idols.
They claim the Federal Reserve System must remain outside of politics. However, no organization is apolitical when the President appoints the Federal Reserve Chairman. It is instead in danger of the worst kind of politics. The ability to counterfeit, I mean create, trillions of dollars and thus devalue every dollar without any accountability of direct elections or meaningful oversight is the best kind of political freedom, political freedom for the central bankers. With its immense power, the Fed typically enacts monetary policy favorable to a particular candidate near an election, ignoring the danger to the future economy. Why would they do this? The incentive is who gains the Chairmanship of the Federal Reserve. The Federal Reserve System may claim to serve the nation, but its first responsibility is to its stock holders and member banks, always.
Congress is ultimately responsible for the Federal Reserve System, which granted its charter in 1913 and can revoke it any time. Congress has the Constitutional duty to protect the value of the money. Hoping to get a free pass for deficit spending, Congress has relinquished its responsibilities. It must take back its Constitutional duty to coin money found in Article 1 Section 8 of the Constitution. That Congress is finally looking at the issue is encouraging; that it has taken so long and has had to take an economic disaster for Congress to do so, is disgraceful.
Born in Oklahoma, Raised in Texas, Studied in Mexico and Spain, Taught Spanish in Thailand, Living in Hawai’i, Orthodox Christian, Libertarian, World Traveler, Writer, Sovereign Individual, Sangría Drinker, A Psychologically Unemployable Vagabond you can read about at Libertas.ws or follow on Twitter.
If the Fed Has Nothing to Hide, It Has Nothing to Fear
by Ron Paul
Since the creation of the Federal Reserve in 1913, the dollar has lost over 97 percent of its purchasing power, the US economy has been subjected to a series of painful Federal Reserve-created recessions and depressions, and government has grown to dangerous levels thanks to the Fed’s policy of monetizing the debt. Yet the Federal Reserve still operates under a congressionally-created shroud of secrecy.
No wonder almost 75 percent of the American public supports legislation to audit the Federal Reserve.
The new Senate leadership has pledged to finally hold a vote on the audit bill this year, but, despite overwhelming public support, passage of this legislation is by no means assured.
The reason it may be difficult to pass this bill is that the 25 percent of Americans who oppose it represent some of the most powerful interests in American politics. These interests are working behind the scenes to kill the bill or replace it with a meaningless “compromise.” This “compromise” may provide limited transparency, but it would still keep the American people from learning the full truth about the Fed’s conduct of monetary policy.
Some opponents of the bill say an audit would somehow compromise the Fed’s independence. Those who make this claim cannot point to anything in the text of the bill giving Congress any new authority over the Fed’s conduct of monetary policy. More importantly, the idea that the Federal Reserve is somehow independent of political considerations is laughable. Economists often refer to the political business cycle, where the Fed adjusts its policies to help or hurt incumbent politicians. Former Federal Reserve Chairman Arthur Burns exposed the truth behind the propaganda regarding Federal Reserve independence when he said, if the chairman didn’t do what the president wanted, the Federal Reserve “would lose its independence.”
Perhaps the real reason the Fed opposes an audit can be found by looking at what has been revealed about the Fed’s operations in recent years. In 2010, as part of the Dodd-Frank bill, Congress authorized a one-time audit of the Federal Reserve’s activities during the financial crisis of 2008. The audit revealed that between 2007 and 2008 the Federal Reserve loaned over trillion — more than four times the annual budget of the United States — to foreign central banks and politically-influential private companies.
In 2013 former Federal Reserve official Andrew Huszar publicly apologized to the American people for his role in “the greatest backdoor Wall Street bailout of all time” — the Federal Reserve’s quantitative easing program. Can anyone doubt an audit would further confirm how the Fed acts to benefit economic elites?
Despite the improvements shown in the (government-manipulated) economic statistics, the average American has not benefited from the Fed’s quantitative easing program. The abysmal failure of quantitative easing in the US may be one reason Switzerland stopped pegging the value of the Swiss Franc to the Euro following reports that the European Central Bank is about to launch its own quantitative easing program.
Quantitative easing is just the latest chapter in the Federal Reserve’s hundred-year history of failure. Despite this poor track record, Fed apologists still claim the American people benefit from the Federal Reserve System. But, if that were the case, why wouldn’t they welcome the opportunity to let the American people know more about monetary policy? Why is the Fed acting like it has something to hide if it has nothing to fear from an audit?
The American people have suffered long enough under a monetary policy controlled by an unaccountable, secretive central bank. It is time to finally audit — and then end — the Fed.
Video Rating: 4 / 5
Find More Federal Reserve Prime Rate Articles