Ron Paul’s bill to audit the Federal Reserve (HR.1207) has over 300 cosponsors, well above 2/3rds of the House, including every single House Republican. A few days ago an opinion piece appeared in the Wall Street Journal arguing that the Federal Reserve is already transparent enough and that a full audit would be overkill and dangerous. They write:
Economic theory and massive amounts of empirical evidence make a strong case for maintaining the Fed’s independence. When central banks are subjected to political pressure, authorities often pursue excessively expansionary monetary policy in order to lower unemployment in the short run. This produces higher inflation and higher interest rates without lowering unemployment in the long term. This has happened over and over again in the past, not only in the United States but in many other countries throughout the world.
The Fed’s independence is critical to its credibility. During the financial crisis, this credibility allowed the Fed to take extraordinary action to prevent a possible depression without triggering inflation. But eventually the Fed will have to scale back its unprecedented monetary accommodation. When it does move to tighten monetary conditions, it must be allowed to do so without political interference.
This is a tired argument at this point. The bottom line, once again, is that the Fed cannot “maintain its independence” when it is not independent to begin with. It is politicized already and it is plainly obvious to most observers without an axe to grind. The fact that this opinion piece appears in the WSJ at all is evidence in itself of this. It’s always important to consider the sources. The authors of the piece are both “in bed with the Fed”, so to speak.
Anil Kashyup was “an economist for the Board of Governors for the Federal Reserve System. He currently works as a consultant for the Federal Reserve Bank of Chicago, and serves as a member of the Economic Advisory Panel of the Federal Reserve Bank of New York, and as a Research Associate for the National Bureau of Economic Research (NBER).” His faculty bio page is here.
Frederic Mishkin is a former member of the board of governors of the Federal Reserve (2006-2008). Perhaps more telling is the following juicy bit:
In 2006, Mishkin co-authored a report called “Financial Stability in Iceland”. The report maintained that Iceland’s economic fundamentals were strong. The report was commissioned by the Icelandic Chamber of Commerce in response to critical coverage of the Icelandic economy and certain Icelandic companies in the international business media.
Iceland subsequently experienced a spectacular collapse within a year of Mishkin’s good report.
So, considering the sources, this WSJ opinion piece should be ignored and ostracized as the comments on the article are already showing.
Yesterday I gave a fast-paced lecture on constitutional money and the Federal Reserve to the Lehigh Valley Tea Party. The playlist can be found below, and the PDF of the presentation here. I am also available to present this material at a much slower rate, with plenty of time for Q&A to groups. Monetary economics is very crucial to understand as it underlies EVERYTHING that is going on with the economy.
Ron Paul appeared on MSNBC this morning to discuss the latest developments on his Federal Reserve Audit bill, which now has 310 cosponsors in the House and 30 in the Senate.
Ron Paul appeared on Fox Business News tonight with David Asman on the “Nightly Scoreboard”. They discussed several topics in a nearly 10 minute segment. As usual, Ron Paul just delivers the truth.
In defense of Rep. Watt, however, it’s not totally his fault. His district is the most obviously gerrymandered in North Carolina, following I-85 like a snake from Charlotte to Winston Salem. It is overwhelmingly Democratic, and his re-election has never been seriously challenged. Why should he represent the people when he is electorally invincible?
While we may not be able to hold Rep. Watt accountable, we can fight back. His attempt to eviscerate HR 1207 must be approved by the full Financial Services committee.
We can block that approval, and restore the original bill. It is especially important that each member of the Financial Services committee hear from their constituents the clear message that Rep. Watt’s proposed changes are unacceptable. And you must act now because . . .
Ron Paul questioned Treasury Secretary Timothy Geithner today on Capitol Hill. Both men seemed to be talking past each other a bit. Geithner reminds me of a friend who never gives you a concrete answer; thus, he is perfect for his position as tax collector. I cannot resist asking the question… what is going on with his hair? Did it always look like that or is it just due to poor video quality?
by John Browne – Senior Market Strategist, Euro Pacific Capital
Over the past two years, the federal government and the Federal Reserve have dispersed trillions of public dollars, run up enormous deficits, and kept interest rates at zero. In just about any economic textbook, this combination of policies would be described as the perfect recipe for inflation. Yet, with the exception of the usual increases in health care and education, prices by and large are not rising. Many have concluded that our economic leadership has simply outsmarted the textbooks.
The benign CPI figures are serving as a rallying point behind which the financial talking-heads are forming a parade of optimism. The low CPI is their ‘proof’ that inflation is not a pressing concern. This view is two dimensional.
Inflation is classically described simply as an increase in the money supply. Although these changes will impact price levels, it doesn’t necessarily follow that prices will rise when inflation is high. Instead, inflation may merely result in stable prices at a time when prices would otherwise be falling.
In the popular mentality, however, inflation is simply defined as prices rising. After decades of steadily rising prices, people seem to have forgotten that prices sometimes fall. In light of the bursting of a number of record-breaking, government-fueled asset bubbles, prices should be declining across the board (as they did in the Great Depression). The fact that prices are stable, or have even rallied in some sectors, indicates that inflation is already spreading across the economy.
You can use my letter to Congress as a guide to your own . . .
I want my Senators to oppose S 1803, and support S 604 instead. I also want my House Rep. to reject any attempt to foster a bill similar to S 1803 in that chamber.
S 604 would perform a real audit of the Federal Reserve, but S 1803, the so-called Federal Reserve Accountability Act, would actually help the Fed avoid accountability! It would . . .
* Severely limit the scope of any audit,
* Set unreasonable time-frames that will delay or postpone certain audits indefinitely,
* Permit some audits to be performed only one year after a program has been terminated.
Give me a break!
It should be perfectly obvious to any reasonable person that active Federal Reserve programs need the most accountability. And what about programs that are never terminated? Focusing audits on terminated programs is like closing the proverbial barn door after the cow is gone, while giving on-going programs a permanent pass.
Frankly, it seems to me that S 1803 is a fraud designed to preserve the status quo while fooling some Americans into thinking you’ve enacted a real reform. Where did this idea come from anyway? The banking lobby?
You politicians constantly claim that citizens who aren’t doing anything wrong have nothing to fear from their government. Well, if the Federal Reserve isn’t doing anything wrong then it too has nothing to fear. S 1803 actually enhances my suspicion that the Federal Reserve is probably doing lots of bad things!
The cure for this is transparency.
The self-serving political claim that Federal Reserve transparency would disrupt the financial markets is simply wrong. Financial markets require honesty and transparency for the efficient allocation of capital, and for systemic stability. The lack of transparency for Federal Reserve actions is actually the source of market disruption, and creates constant chaos in our international financial relationships.
Please audit the Fed! And make sure it’s a real audit, not a fake one.
Believe me, I’m paying close attention to how you represent me.
Ron Paul was interviewed by Tavis Smiley on his PBS show last night. I remember really enjoying Smiley’s questioning and demeanor throughout his questioning during one of the GOP primary debates during the campaign of 2008. A debate that some of us here at Liberty Maven attended.
In this interview they discuss the U.S. foreign policy in Afghanistan, Ron Paul’s new book “End the Fed“, and how the Fed can be audited and eventually abolished.
Well, it was only a matter of time before this happened. Actions such as these are the reason the word “cynic” was created. Ron Paul’s HR.1207 (S.604 in the Senate) which would require a complete audit of the Federal Reserve has 303 cosponsors in the House and 30 in the Senate. Yesterday, a new bill was introduced by obviously bought and paid for lawmakers that is a “waterboarded” version of Ron Paul’s bill.
“The Federal Reserve Accountability Act” was introduced by Democrat Jeff Merkley and Republican Bob Corker yesterday. The bill takes the cake out of Paul’s bill and leaves nothing but the frosting.
The bill avoids review of the Fed’s regular lending programs, such as the longstanding discount window, and its interest-rate decisions.
So, it excludes the fundamentals, the very actions 75% of the American people say they want to know about. The attitude of these so-called representatives is reprehensible.
I’m willing to bet that Merkley and Corker have some large donors in the banking industry.
This may be expected, but it doesn’t mean those of us that support a full audit as outlined in Ron Paul’s bill should just lay down. If anything, the fight has just begun. Please call your representatives and make sure they understand the difference between the full audit and the waterboarded audit introduced yesterday. Tell them that you will not accept anything other than a full audit. It is time to take off the gloves and fight. It’s going to get dirty in DC. Well, more dirty than it already is.
Liberty Maven
by John Browne – Senior Market Strategist, Euro Pacific Capital
We’re pleased to welcome 
“, and how the Fed can be audited and eventually abolished.
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