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| ' Ron Paul Is Indeed Correct ', Says The Article in a Canadian Newspaper:http://z4.invisionfree.com/The_Great_Decep...?showtopic=7716Operation Audit: Fed up with a rogue central bank http://www.theglobeandmail.com/report-on-b...t-rail-business
|How can the independence of a central bank be evaluated when no one knows what it actually does? |
Last updated on Friday, Dec. 11, 2009 6:36AM EST
Like all central banks, the U.S. Federal Reserve operates in secrecy and, since it has more to hide, understandably so. Paul Volcker, chairman of the Fed from 1979 to 1987, once described the Fed's policy this way: "We did what we did, we didn't do what we didn't do and the result was what happened." The inscrutable Alan Greenspan, chairman of the Fed from 1987 to 2006, made Mr. Volcker look loose-lipped.
With the global meltdown of 2008, however, the Fed went further into the shadows than ever - and looked like a rogue agency more than ever. In November, a key congressional committee approved the most radical reform of the Federal Reserve System since it was founded 96 years ago. By a vote of 43-26, the legislators opted to audit the Fed.
For Congressman Ron Paul, the lonely libertarian from Texas who first championed an audit of the Fed, the committee vote was, in itself, a revolutionary declaration. First elected as a Republican to the House of Representatives in 1976, Mr. Paul has since drafted innumerable bills to audit the Fed - all of which his colleagues greeted either with indifference or disdain. This time round, it was different. In the 435-seat House, Mr. Paul signed on 320 co-sponsors, a remarkably bipartisan alliance with enough pledged votes to approve the proposed Federal Reserve Transparency Act.
Mr. Paul was right. Although only a single legislative step in a complicated process, the committee vote was inherently revolutionary, which explains why current Fed chairman Ben Bernanke rushed into print with an op-ed column (expeditiously posted on The Washington Post website) to denounce the bill as an insidious assault on the independence of the Fed.
But how can the independence of a central bank be evaluated when no one knows what it actually does?
By U.S. law, the Government Accountability Office (GAO) cannot investigate the operations of the Federal Reserve. Mr. Paul's bill would end this restriction. It would oblige the GAO to conduct a comprehensive audit of the Fed - to investigate and report back on the Fed's extension of credit to Wall Street firms. It would oblige the GAO to check out the Fed's secret purchase of securities. It would oblige the GAO to probe every act of market manipulation by the Fed, whether domestic or international. "There is no reason," Mr. Paul has argued, "why America - and, indeed, the world - cannot know what the Fed does."
Mr. Paul is an authentic American revolutionary. His book The Revolution: A Manifesto, published last year after his idiosyncratic campaign for the presidency, was a New York Times bestseller. His End the Fed, published this year, set the stage for his Operation Audit. In End the Fed, he expressed his goal succinctly: "to end the Fed's arbitrary power to create money and credit out of thin air, behind closed doors, for the benefit of special interests." Congress, he says, should prohibit the Fed's bailout of financially troubled corporations. Further, it should prohibit all government subsidies to corporations.
Mr. Paul anticipated the legislative alliance that he thought might take shape as a result of the Fed's market manipulation during the meltdown. "Principled people," he wrote, "[will be] strongly inclined to challenge the power of the Fed. This includes liberals, conservatives, libertarians, progressives and populists. Such a broad-based alliance can bring about change." Perhaps he was right. Mr. Paul's bill will easily pass the House. A comparable bill, with 30 co-sponsors, is making its way through the Senate.
It's about time. It is odd that Western democracies have permitted their central banks to operate in the shadows for so long. The primary responsibility of a parliament, after all, is the power of the purse, the power to decide government spending. How can a democracy responsibly delegate this precious power to an unelected agency that operates in almost absolute secrecy?
In many ways, the Fed operates as price-fixer in chief, using its authority over short-term interest rates to determine the price of money, using its regulatory authority to determine which financial companies survive. It was entirely predictable that Mr. Bernanke, when he appeared last week before a Senate committee, would attribute the Fed's failure to prevent the meltdown to a lack of authority. In the Fed's usual Delphic way, he explained that the Fed needed greater "macroprudential responsibility." But then the Fed has apparently never had enough power to do its job of protecting the dollar. As Mr. Paul observes, the U.S. dollar has lost more than 95 per cent of its worth since the Fed was established in 1913.
In fact, Ron Paul is indeed correct - and it isn't only the money. It's the principle. Freedom and central banking are incompatible. Ultimately, one of them has to go.