Ron Paul’s Hour of Power
The decades-long campaign of Ron Paul to have the Government Accountability Office do a full audit of the Federal Reserve now has 313 sponsors in the House.
Sometimes perseverance does pay off.
If not derailed by the establishment, the audit may happen.
Yet, many columnists and commentators are aghast.
An auditors' probe, they wail, would imperil the Fed's independence and expose it to pressure from Congress to keep interest rates low and money flowing when the need of the nation and economy might call for tightening.
They cite Paul Volcker, who to squeeze double-digit inflation out of the economy in the late Carter and early Reagan years, drove the prime rate to 21 percent, causing the worst recession since the Depression. Volcker, they claim, prepared the ground for the Reagan tax cuts and seven fat years of prosperity.
That decade, America created 20 million jobs—and another 22 million in the Clinton era. Without Volcker putting the economy through the wringer, it could not have happened. And had he been forced to explain his decisions, Congress would have broken his policy.
Such is the cast for Fed independence.
But if true, what does this say about our republic?
Is it not an admission that, though Congress was created by the Constitution, and the Fed is a creation of Congress, our elected representatives cannot be trusted with the money supply, cannot be trusted with control of the nation's central bank? To have decisions made in the national interest, we need folks who do not have to answer to voters.
If this be true, the republic is closer to its end than its beginning, when Thomas Jefferson said, "In questions of power, let us hear no more of trust in men, but rather bind them down from mischief with the chains of the Constitution."
Others contend that were it not for the independence and vision of Fed Chair Ben Bernanke, the economy might have gone over the cliff and into the abyss after the Lehman Brothers collapse in October 2008.
What opponents of Paul's audit are thus saying is that elected legislators must be kept out of the temple where the great decisions about the economy are made, that these decisions must rest with bankers and economists answerable, as is the Supreme Court, to themselves and no one else.
But has the performance of the Fed been so brilliant any intrusion upon its privacy is sacrilege?
Among the failures of the Fed is the Great Depression. As Milton Friedman related in his "Monetary History of the United States," for which he won a Nobel Prize for Economics, the Fed hugely expanded the money supply in the mid-to-late 1920s.
Following a path of least resistance, the money flowed into the equity markets, where stocks could be bought on 10 percent margin. The market soared, and a huge bubble was created. When it popped, scores of thousands of investors conducted a run on the banks to get their money out to meet their margin calls.
Thousands of banks, short on cash, closed. One-third of the money supply was wiped out, and the Fed failed to replenish the lost blood. Thus did the Fed cause the Great Depression.
Smoot and Hawley were framed.
Moreover, every bubble from the dot-com of the late 1990s to housing this decade is a result of Fed policy. For unless there is an excess of money sloshing around, funds that surge into one market, be it housing, stocks or Third World loans, have to come out of another.
Moreover, if the Fed has not failed dismally in its duty to keep prices stable, how come candy bars and Cokes that cost a nickel in the 1950s cost 50 or 75 cents today, and new Cadillacs that sold for $3,200 in the late 1940s cost $55,000 or $60,000 now? Who is responsible for inflation, if not the Fed?
Moreover, it is now conceded that the Fed, in the early years of this 21st century, kept interest rates near 1 percent for too long, and created the bubble that popped in 2008 and almost brought down our own and the global economies.
Because the Fed can create money out of thin air, we have been able to wage wars on credit, shovel out trillions in foreign aid, World Bank and International Monetary Fund loans, and run humongous budget and trade deficits that have brought our country to the brink of ruin.
And if Bernanke is a genius, how is it he didn't see the train wreck coming and had to double-time it to the Hill with Hank Paulson to plead for $700 billion to bail out AIG, Fannie and Freddie, and buy all that rotten paper on the books of Citibank & Co.?
The greatest economy the world had ever seen has been horribly mismanaged and virtually ruined by the decisions of presidents, Congress and the Federal Reserve. Main Street has been wiped as Wall Street was bailed out. Why?
Bring on the auditors!
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"The greatest economy the world had ever seen has been horribly mismanaged and virtually ruined by the decisions of presidents, Congress and the Federal Reserve. Main Street has been wiped as Wall Street was bailed out. Why?"
You may have this one backwards, Mr. Buchanan. Wall Street bailouts were designed to maintain the "elected" political class' power and tenure in office. Remember that the current regime maintains its members in office by virtue of its ability to spend money on transfer payments ("entitlements") to the beneficiary classes. Since it cannot raise enough money to do so by taxation, despite considerable efforts to do so via tax increases over the years, it must borrow or otherwise commit chicanery with the financial system.
When Bear Stearns went under, this was an open signal that the central government's borrowing ability was in peril. Since this would affect both Republicans' and Democrats' ability to borrow, politicians of both factions stepped up to play whatever games they could to keep the borrowing going and keep those SocSec/Medicare/Medicaid/public pension payments going. If those were to stop, the regime's hold on power would be endangered. (We saw that with the Pepper Riots in the 80s.)
One significant thing raising suspicions that it was the State, rather than the banks, at the root of the problem is that several of the large banks were forced---not cajoled, persuaded, but forced---to take TARP money, and the central-government control that goes with it. The people running those banks didn't want the money ! I even seem to recall that at least one bank was advised by counsel to not accept bailout money under penalty of risking "breach of fiduciary duty". "Breach of fiduciary duty" is the kiss of death for a banker. It gets people fired, and if done in a large enough quantity, often sent to jail.
Yet the State got the banks to take the money. Entitlement payments continued to be made. Geithner and (more importantly, from his perspective) President Obama got to keep their jobs.
THEY are the culprits (along with George W. Bush) in this nefarious little scheme.
The fees and bonuses that banking firms paid out were simply the boodle that the politicians paid to their bagmen.
It's great that Pat is backing Ron. Both are true mavericks and populists, unlike "maverick" John McCain (R-Keating Five).
As Jack Hunter pointed out, it was stupid for libertarians not to back Pat in his 3 runs for the presidency, just because they disagreed with him on a couple of issues, as I did on protectionism. So? No candidate is going to agree with you 100%. Every libertarian or conservative should have been shouting, Go, Pat, Go!
Same with Ron. Why don't conservatives back him wholeheartedly? How embarrassing it was for "conservatives" to back Giuliani, Romney, or McCain over Ron in last year's primaries. Mainly it was conservative support for Bush's wars, of course. Now that Obama has become the American Mars, things are changing a little.
And with the Bush Depression digging deeper, with no end in sight, affecting every family, Americans are starting to heed Ron's call for ending the Fed, returning to gold, ending the Bush-Obama Wars (the Iraq War now has cost $7 trillion, according to Stiglitz), ending the welfare state, and restoring the Constitution.
Go, Ron, Go!
Pat was talking about "government accountability." How about accountability for federal salaries almost almost double those in the private sector -- with massive pay raises even during the Depression, thanks to President Bush, Mr. "Compassionate Conservative"? Here's a story from USA Today:
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The number of federal workers earning six-figure salaries has exploded during the recession, according to a USA TODAY analysis of federal salary data.
Federal employees making salaries of $100,000 or more jumped from 14% to 19% of civil servants during the recession's first 18 months — and that's before overtime pay and bonuses are counted.
Federal workers are enjoying an extraordinary boom time — in pay and hiring — during a recession that has cost 7.3 million jobs in the private sector.
The highest-paid federal employees are doing best of all on salary increases. Defense Department civilian employees earning $150,000 or more increased from 1,868 in December 2007 to 10,100 in June 2009, the most recent figure available.
When the recession started, the Transportation Department had only one person earning a salary of $170,000 or more. Eighteen months later, 1,690 employees had salaries above $170,000....
The growth in six-figure salaries has pushed the average federal worker's pay to $71,206, compared with $40,331 in the private sector.
"Is it not an admission that, though Congress was created by the Constitution, and the Fed is a creation of Congress"
Is Pat ignorant or is he playing the game? The Fed is a creation of the Congress? Was it not created in 1912 by several men on Jekyll Island, GA for the sole purpose of the London banks to get their hands on this country and to enslave the American???
This is unbelievable but predictable stuff coming from this politico.
Tarkin writes:
"Is Pat ignorant or is he playing the game? The Fed is a creation of the Congress? Was it not created in 1912 by several men on Jekyll Island, GA for the sole purpose of the London banks to get their hands on this country and to enslave the American???"
While the bankers and such political allies of their's as Senator Aldrich who met at Jekyll Island in 1910 thought up the basic idea of the Federal Reserve System, it was voted into existence by Congress in December 1913. Either one of these acts could be said, in the appropriate context, to be the creation of the Fed. Since Mr. Buchanan was speaking in the context of Constitutional accountability it makes for him to say the Fed was a creation of Congress. Had he been asking who should be assigned the ultimate moral blame for all the problems resulting from the Federal Reserve System it might have been more appropriate to refer to the Jekyll Island meeting.
#1 Mr. Schaeber. I think the answer is not to decide whether to blame the bankers or the government. The answer is to recognise that there is no difference---they are the same thing.
Now this is the great Pat Buchanan we know and love!
@6 Clyde Wilson,
Yes. That is precisely the point I felt inchoately about Mr. Schaeber's post but could not put my finger on.
And yes, this is Buchanan at his best.
Why do conservatives not wholeheartedly support Ron Paul? I was a supporter of Paul at my local GOP caucus in 2008. One after another, "conservatives" approached me and apologetically told me of how they liked Paul, agreed with his ideas, and really wanted to support him.... but, they couldn't, because he "has no chance to win."
One after another, “conservatives” approached me and apologetically told me of how they liked Paul, agreed with his ideas, and really wanted to support him…. but, they couldn’t, because he “has no chance to win.”
"No chance to win" is a very peculiar historical refrain. A whole story could be written about it but the most telling and riveting aspects of its truth are always in its exceptions --such as Marathon, Thermopylae, the four women at the crucifixion, the Battle of Lepanto, the breaking of Islam at Tours, the battle of Fredericksburg, the Alamo, and hundreds of other glorious moments for our civilization against great odds. One should never of course look for these causes or attempt to imitate them, but simply follow where the truth leads and hope in it to the death.
What's going on with the House vote last Friday--no Republican voted for much-needed regulation of the financial industry. Granted, we don't want too much big government. But regulation of the financial industry is a sheer necessity. In fact, I'm so disgusted that no Republicans in the House voted for minimal banking system regulations that I am on the verge of throwing in the towel and becoming an Independent. I admire Ron Paul, but I don't see how he can be serious about opposing Wall Street when he joins his colleagues in this thing.
I mean banking system reforms. The current regulations are clearly inadequate. I am repeatedly amazed to discover the multitude of ways in which we are being ripped off by Wall Street.
Mr. Zaretzke @ 11 and 12:
Ron Paul voted against the bill, even though it contained his own Audit the Fed amendment, which he has pushed for 20 years.
The reason: the overall bill is a centralizing monstrosity that would make matters even worse.
We should join all our efforts to Ron Paul's strategy. First, Audit the Fed -- without the baggage of being connected to a horrible bill.
Next, End the Fed. Give us honest money: Gold. The rest will take care of itself.
Last night (Dec. 14th) Russia Today gave Ron Paul at least 10 minutes of "face time" during which he was asked about the Audit the Fed bill -- it will pass although attached to an unsavory piece of legislation.
Indeed! What is going on behind those closed doors. I'd really like to know if the John Birch Society and other conspiracy afficionados are correct in their suspicions. Cops have busted criminals and sent them up for life on circumstantial evidence. Yes, let's find out if the gnomes have moved from Zurich to Washington, and also, where are these skunks sending us?
Mr. Seiler,
I'm open to the idea of abolishing the Fed, although it is likely to have unintended consequences. I would like to see discussion of the possible consequences before I can take the abolish-the-Fed idea more seriously.
I don't think the House bill is a "collectivizing monstrosity." It seems to be a reasonably good attempt to rebalance the power between ordinary citizens and the overwhelming power of a financial industry obsessed with short-term profit-making shenanigans. The principle of subsidiarity surely vindicates something like the House bill. But free-marketers reject the subsidiarity principle, or they honor it in the breach. We have to figure out what we think of that principle and how it works out in practice--something greatly neglected, especially by free-market fideists.
"The businessmen and the Wall Street speculators and their hired . . . commentators and newspaper columnists set up a clamor that the economy is slowing because the government doesn't balance the budget, and doesn't allow the businessmen to make enough profits to encourage business.
". . . the big corporations of the United States [have] increased their profits six times as much as the workers have managed to increase their wages . . . .
"But that isn't enough for Wall Street. That isn't what they call real prosperity. They must be allowed to . . . gamble on margin without interference by government commissions. They must be allowed to squeeze still further the purchasing power of the people. Our social body is perishing by strangulation--and their remedy is to draw the rope tighter."
--Upton Sinclair December 11, 1937