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Ron Paul’s proposal to audit the Fed sounds innocuous enough, but it is anything but.
I know from personal experience as president of the Dallas Fed that GAO auditors are only too eager to support the political agendas of their Congressional sponsors. Past efforts to have ongoing GAO audits have excluded monetary policy and promised financial audits only. The current bill specifically targets monetary policy.
I’ve enjoyed my brief encounters with Mr. Paul. I like him personally, but I can’t get around the fact that his agenda is nothing less than abolishing the Federal Reserve. Abolishing the Fed is not a hidden agenda on his part. In fact, End the Fed is the title of his latest book.
His book shows that he has given a lot of serious thought to his positions, including his lifelong study and admiration for Austrian economics, which longs for a gold standard. Unfortunately, in my opinion, he also praises the burning of dollar bills by young people at his campaign rallies. In fact, the title of his book, he says, came from the chants of students at a rally while holding up burning dollar bills. (Page 4 of End the Fed.) Burning dollar bills, to me, is almost as repugnant as burning the American flag–certainly not a source of pride.
Frankly, I’m flabbergasted at the attacks on the Fed in Congress. I think the Fed performed well in the financial crisis, pulling us back from the brink. The country and Congress owe it gratitude, not derision. I guess it’s true that no good deed goes unpunished.
6 Responses to “Auditing the Fed”
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Helium
November 20th, 2009 at 11:59 am
But this bill does not end the Fed; it audits the Fed. If you want to debate the bill, you need to discuss what is in the bill. The beliefs of one of its sponsors is irrelevant.
In rhetoric school, they would call your piece an ad hominem argument. Surely you can do better?
November 20th, 2009 at 7:02 pm
Is the Fed the latest victim of Keynsian economics? First rule for getting out of a hole is to stop digging which Treasury can’t seem to grasp. Attempting to support an increasinly unpopular Treasury Secretary makes the Fed vulnerable to the Populist movement.
November 22nd, 2009 at 11:19 am
Two of Freud’s perspectives may be helpful here.
1. My enemies I can handle, its my friends that do the most damage.
2. The well known “scape goat” myth going back to the bible. Blame everything on one bad goat that symbolizes all the denied problems present in the group, then drive that goat from the tribe and voila, no more problems.
I am hoping that as you clearly have a knack for distilling complex economic material into simple English, that you can enlighten us with a follow up piece as to what the Fed does, how an “audit” would work, and such things as what Alan Greenspan means when he says “sterilize” the Fed’s balance sheet eventually.
If we continue to punish those who serve us for minimal monetary gain with high IQs and integrity , we will be rewarded with the opposite. Those now rushing to crucify Geithner might think twice.
Thank you again for sharing your expertise.
November 24th, 2009 at 9:41 am
Burning dollar bills certainly seem unpatriotic, but those doing the deeds seem to be doing their fellow countrymen a favour. Doesn’t burning the dollar bills extinguish the Fed’s liabilities, thus increase its reserves and eventually increases revenue for the treasury?
November 24th, 2009 at 3:07 pm
Sergei:
Interesting point of view.
The Fed won’t know of the burning; so those liabilities will stay on its balance sheet.
Still, their fellow countrymen will probably benefit by a small amount since one person now has less purchasing power with which to purchase a given amount of goods, services, or assets (stuff). That will leave more stuff to be purchased by others with their existing money and assets convertible into money. I guess it’s sort of the opposite of the way counterfeiters harm others.
November 24th, 2009 at 3:10 pm
Nemo:
I don’t agree. It goes to motive and the slippery slope argument.
We tell children not to take candy from strangers, not because there is anything wrong with taking the candy. The problem is in what the stranger might have in mind as a follow-up.