By Patrick J. Buchanan
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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GOOD for Congressman Paul! … But I can’t help but wonder how much further this scrutiny will be allowed to proceed before some obscure, hybrid facsimile of the State Secrets Privilege, the evidentiary rule used in the judicial branch, will be used by the executive branch to throw a cloak around this entire proceeding claiming that national security is imperiled.
Too bad it takes a crisis for folks to pay attention to sound advise and policy that people like Ron Paul espouse. Let’s hope this really takes place and is done in the right way. And then, as Ron Paul advocates, let’s end the Fed! Thanks Pat for this great article.
Milton Friedman is not a gold standard or precious metal supporter. Hence, Buchanan’s commentary is moot.
see: John Maynard Keynes: Lavender & Bolshevik
“Every effort has been made by the Fed to conceal its powers – but the truth is – the Fed has usurped the Government. It controls everything here and it controls all of our foreign relations. It makes and breaks governments at will.”
- Congressman Louis T. McFadden, 1934
“The eyes of our citizens are not sufficiently open to the true cause of our distress. They ascribe them to everything but their true cause, the banking system; a system which if it could do good in any form is yet so certain of leading to abuse as to be utterly incompatible with the public safety and prosperity. The Central Bank is an institution of the most deadly hostility existing against the principles and form of our Constitution.”
- Thomas Jefferson
“The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government’s greatest creative opportunity. By the adoption of these principles…the taxpayers will be saved immense sums of interest [by not having to borrow from privately-owned corporate banks]…Money will cease to be master and become the servant of humanity. Democracy will rise superior to the money power.”
- Abraham Lincoln
“Once a nation parts with the control of its currency and credit, it matters not who makes the nations laws. Usury, once in control, will wreck any nation. Until the control of the issue of currency and credit is restored to government and recognized as its most sacred responsibility, all talk of the sovereignty of parliament and of democracy is idle and futile.”
- William Lyon Mackenzie King, Prime Minister of Canada, 1935
“Let us disappoint the men who would raise themselves upon the ruin of our country.”
- John Adams
Once an audit of the Fed has determined that the international bankers have stolen the wealth of the American people, perhaps then the American military can be utilized to go forth and seize all assets of the international bankers.
“If not derailed by the establishment, the audit may happen.”
Patrick J. Buchanan
“The Council on Foreign Relations is “The Establishment”. Not only does it have influence and power in key decision-making positions at the highest levels of government to apply pressure from above, but it also announces and uses individuals and groups to bring pressure from below, to justify the high level decisions for converting the U.S. from a sovereign Constitutional Republic into a servile member state of a one-world dictatorship.”
- Former Congressman John Rarick, 1971
ChasVoice-
Perhaps you ought to see this: http://www.cato.org/pubs/journal/cj28n2/cj28n2-12.pdf
While true Friedman initially favored government monopoly of currency he later came to favor allowance of competing currencies.
The difference between a Gold Bug and a supporter of competing currencies is that a Gold Bug has a large investment in gold. A Gold Bug who favors an artificial gold as money monopoly is no different than a federal reserve note monopolist.
There is simply no authorization in Article 1 section 8, among the ENUMERATED POWERS, for the establishment of a central bank, no matter whether it is private or public. Thomas Jefferson abolished the first central bank and Andrew Jackson abolished the second one. THe economy did just fine with virtually no inflation nor severe recessions or depressions until the creation of the Federal Reserve System in 1913. Since its creation the purchasing power of the dollar has diminished over 95%.
Government interventions are responsible for the economic turmoil starting with Federal Reserve printing dollars with no sound backing, non redeemable currency, the Community Reinvestment Act of 1977 which enticed bankers to make loans to those who were not creditworthy with threats of poor ratings if they didn’t and good ratings if they did. Also Fannie Mae and Freddie Mac, Federal Housing Authority, HUD, hedge funds which bundled the bad loans with a few good ones to enhance their ratings etc.
Obama lied when he said in public that the government was not responsible for the crisis but that only the govt could resolve it. He was counting on the fact that most people are unaware of the details of the governments involvements and intrusions and the media does not challenge rather supports Obama’s endeavors.
Among other sources of the truth of such matters visit http://www.campaignforliberty.com where the archives enlighten rather than obfuscate. Also http://www.mises.org where whole books from the Austrian school of economics are available free. Murray Rothbard’s The Case Against The Fed is there.
The Campaign For Liberty hopes to grow its membership to the point where we can replace the politicians who fail to abide by the limits within the Constitution with men and women who will abide and keep their oath of office.
Revolutionary – The same folks behind the creation of the Fed are the same group that created the CFR.