« BACK  |  PRINT

RS

MEMBER DIARY

Will the Senate save us from the House, Ron Paul, and the idiocy that is trying to ‘Audit’ the FED?

By: Dave_A (Diary)  |  July 26th, 2012 at 03:07 AM  | 

RESIZE: AAA

Some bills just need to die… Every time they’re brought up, by any legal means available…

One such bill, is Ron Paul’s ‘Audit the Fed’ proposal.

Unfortunately, the House has managed to pass it… Which means we’re reliant now on Harry Reid’s common sense (God help us) to pigeonhole this rubbish until the end of the session…
So, what’s WRONG with the Paul bill?

Quite simply, Mr Paul wants to destroy our monetary system. He’s made no bones about this, and the ‘Audit the Fed’ bill isn’t about an honest audit (which isn’t needed, anyway) but rather about moving us closer to a world where Congress can <b>control</b> the FED.

Congress never asks a question unless they already have a presumed answer, and never conducts an audit or investigation unless they have already come to a conclusion.

In this case, the ‘conclusion’ is that the original principles of the FED’s design – namely it’s independence from the political process -need to be reconsidered, and Congress needs more power over monetary policy…

Which is just as WRONG as claiming that the independence of the Supreme Court needs to be reduced, and Congress needs more power over the judiciary.

The FED is independent simply because politicians cannot be trusted to craft monetary policy – the constraints of ideology & the need to produce immediate results for the next election would result in abject monetary insanity… When you look at all the nutty economic ideologies on both sides of the iasle – pro-deflation/anti-credit freshmen from the 2010 rout, various Keynsian progressives, and so on… It should be obvious that Congress needs to keep their hands off our money.

Ron’s bill needs to die, and the FED needs to be LEFT ALONE. Politicians ranting about hyperinflation need to revisit Econ 101/102, and stay the hell away from our money supply until they realize how nutty their views are….

COMMENTS

POSTING RULES  |  LOGIN TO COMMENT  |  REGISTER TODAY
  • expanding_man

    Just as you hope Harry Reid will never allow the bill to come up for a vote. If he did it would likely pass.

    God forbid the US taxpayers are given an honest picture of what the Fed is doing. There’s a reason the Federal Reserve folks don’t want us to know what they are doing. They know that people will be very angry if people get to see what is happening. That will bring calls for change.

    There is nothing wrong with finding out the truth. If they have nothing to hide, then what’s the problem?

    • Dave_A

      1) The American people do not understand macroeconomics, and thus will believe whatever rubbish Congress feeds them.

      Since the agenda of the ‘Auditor’ faction is to sieze power from the FED and ultimately destroy it, they WILL present ‘results’ that appear to show a ‘problem’ that Congress needs to ‘solve’. This is a foregone conclusion.

      2) Since the FED is not a traditional bank, the concept of an ‘audit’ is somewhat amusingly pointless… By it’s nature, most of the requirements that apply to normal banks in terms of reserves and loan-to-assets do NOT apply to the FED. Therefore, unless you think FED employees are hirihg hookers or taking jaunts to Vegas with the FED’s money, there’s nothing for an audit to discover.

      3) Since the FED is not taxpayer-financed, there is no reason for Congress to even have the power to audit them.

      That’s why Congress has no business auditing the FED.

      • http://impudent.edublogs.org/ kyle8

        The Fed is not really independent, that is a fiction. it is entirely a creature of congress, and congress can audit, bend, fold, spindle, and mutilate to their hearts content.

        As for an expansionary monetary policy. You might be right at this particular moment in time. But when are the signals to switch to another policy?. Greenspan got the signals wrong and that helped create the bubble.

        I am not a big fan of ad hoc monetary policy. The Central Bank should follow rules for money growth based on productivity increases. Maybe not hard rules, but at least soft rules.

        That would go a long way to creating certainty in markets.

        • Dave_A

          Monetary policy is something best managed by ‘elites’ (specifically individuals who have held leadership positions at major wall street firms) – especially in a nation where the overwhelming majority of the public has NO formal economics education.

          And the FED is by law completely independent – save for the confirmation of appointed officers (who are not subject to mid-term recall once appointed), with the caveat that Congress can amend the Federal Reserve Act to take said independence away if they can find a President short-sighted enough to sign said bill into law…

          As for monetary policy and the bubble, the entire fault for the bubble lies with Congress…

          There is no such thing as ‘too much credit’ so long as that easy credit is available to QUALIFIED BORROWERS.

          The one break that broke the system, was the government’s coercing and incentivizing lending to UNQUALIFIED BORROWERS.

          That right there is the one and only flaw that brought the whole house down… Without that mistake – without polluting the market with unquaified borrowers – all of the things people ‘blame’ for the crash (derivatives, low interest rates, mortgage-backed securities, 3rd-party backed mortgages) would NOT have been a problem at all… But once you crap in the well, so to speak… It’s over…

          • http://impudent.edublogs.org/ kyle8

            That is certainly a unique Economic opinion.

          • conservativelibertarianrepublican

            Most economists have stupid positions like that.

            It is also completely false.

            Prime loans as well as sub-prime loans increased dramatically at the same time during the bubble. The trouble was adjustable rate mortgages, and prime adjustable rate mortgages increased at a higher rate than sub-prime.

            When the Fed pushes interest rates down it increases long term projects above their normal rate. It caused more production than the demand warranted. It drew resources from legitimate projects to these artificial projects. Prices are driven up, but people can’t afford these houses, so the prices fall, and there is a bust.

          • http://impudent.edublogs.org/ kyle8

            they are all a part of market psychology. When things are going well then some portion of the economy will garner a heavier than usual interest from investors.

            As the bull market continues business expand at a rapid rate and this causes inefficiencies.

            All of this would not be a problem but often the overheating is made worse by easy credit policies. That is when the problems start. Either business, or consumers, or most often both begin to borrow in order to invest.

            The Housing bubble was no different, much of the lending was so that people could “invest” in their homes and then turn them over for a profit.

            Of course Dave is correct in saying that a big part of the problem was the Government pushing sub prime mortgages, but that was not the only problem

            I have yet to see any new fancy economic theories which are a substitute for sound lending practices and a sound currency.

          • gekster

            nt

          • http://impudent.edublogs.org/ kyle8

            During an expansion a firm will try and take advantage of the good markets.

            They will hire new workers, maybe in order to fill orders they settle for less than optimum employees.

            They are expanding and seek capital, but in a boom capital is more expensive, so perhaps they take out loans at a higher interest rate than they want to.

            In order to meet deadlines they might even cut some corners on quality, All of these things are the inefficiencies of a boom.

            That is why we need the downside in order to clean out the inefficiencies. During a contraction, the firm will get rid of unproductive workers, will change wasteful procedures. And will pay off debts.

            That is why it is so harmful when the government steps in and “bails out” an inefficient industry. They never get better.

          • Cornholio

            “Monetary policy is something best managed by

      • aesthete

        if they set consistent, rule-based targets and presented them to the Congress and general public, and had actions which lined up with their stated goals and targets. Then there would be a context for what you rightly note are rather meaningless data which would be revealed in an audit. People may not have liked what the Volcker Fed was doing, but it was at least clearly explained and documented by the Fed itself. Today, we are treated to the spectacle of Bernanke giving lectures on the Fed, but having more concrete things to say about the past Fed decisions than the current Fed under his administration and direction. Ben Bernanke is a smart man who understands markets; of that I have no doubt. That does not entitle him to run a shop with closed blinds and where the paperwork and notes are tucked away and hidden from the public.

        Transparent, predictable government with an informed rule of law framework are hallmarks and necessary preconditions for democracy, conservatism, and markets to operate effectively. Ad-hoc policymaking on the scale that Bernanke is engaging in is alluring and sometimes effective, but prone to epistemological problems which are best addressed in a transparent framework.

        • Dave_A

          And base all monetary policy on that figure…

          It would be easy to understand, and it would actually authorize them to do essentially everything they’ve been doing to-date without need for secrecy….

          ‘We have 2%/yr inflation, so interest rates are going down’
          ‘We have 1%/yr inflation, so we’re doing zero-rate interest’
          ‘We have >1%/yr inflation (this was 08-09, btw) so we’re doing QE’

          It works.

          It also accomplishes the ‘dual mandates’ just fine (Prices increase at a stable 3% rate per year, and an ample money supply (with the low interest rates required to maintain it) is conductive to low unemployment)…

      • Cornholio

        “1) The American people do not understand macroeconomics, and thus will believe whatever rubbish Congress feeds them.”

        - So we’re all just a bunch of yokels that need elites like Obama’s colleagues at the University of Chicago to step in as the central planners of our economy? Puh-lease. This isn’t China. If you are looking for a place where people trust their dear leader and his cronies, I would suggest the Daily Kos.

        “Since the agenda of the

        • aesthete

          would be a tremendous improvement on the lot that he usually appoints — the U of Chicago is one of the most free market schools in the country.

          Unfortunately he seems to prefer Harvard activist types in his appointments.

          • Cornholio

            Chicago would be an improvement.

            n/t

      • expanding_man

        I think that your first “problem” listed above has a kernel of truth to it. Americans don’t have the time/ability to fully understand the results of an audit. They will have to rely upon someone else to interpret it for them. However, this is true of many complicated political and economic issues. I think there is concensus that allowing the truth to come out and having folks decide who’s interpretation of that truth is valid, is much better than not allowing the truth to come out.

        Your second “problem” is that because the Fed is not a traditional bank, there is no point to an audit. Noone will be auditing the Fed to see if they complied with specific banking regulations. They want to see what the Fed is doing. Where is the money/debt going? How much is going to whom? There is plenty for an audit to discover.

        Your third “problem” with an audit is that because the Fed is not taxpayer financed there is no reason for an audit. I would suggest that the Fed has vast control over the US economy and banking system. This is reason enough to do an audit.

        All of that said, I think you display an impressive knowledge of macro economics as compared to most of the posters here. I respect your opinion because you appear to be informed. Keep up the posts.

  • Pingback: hier

  • Pingback: Edmond Beran

  • Pingback: Dale Gehman

  • http://llphsecondrevolution.wordpress.com/ spoasteph97

    I FULLY SUPPORT AUDITING THE FED!

    Why? I think I will let Senators Jim Demint and Rand Paul explain why. Read here: http://paul.senate.gov/?p=press_release&id=585

    Look at Senator Demint’s quote: “At the same time that the Federal Reserve has played an unprecedented role in our economy, it has also shown an unprecedented resistance to transparency,” Sen. DeMint said. “The Fed should no longer be allowed to conceal the full story on the depth of its interventions surrounding the financial crisis, on how it formulates the easy money policy that is damaging to our economy, and on the deliberations it’s making over implementing many of the hundreds of regulations required by the sweeping Dodd-Frank law. The only way to achieve these goals is a full audit of the Federal Reserve, and I applaud the House of Representatives for approving legislation that would do just that.”

    People opposing the audit: Senator Harry Reid, Minority Whip of the House Steny Hoyer

    Who do you stand with? Jim Demint or Harry Reid? I stand with Jim Demint!

  • commonsenseobserver

    In exchange for its independence in implementing monetary policy, consistent with its twin goals of price stability and maximum employment.

  • Dave_A

    Think about it…

    What auditing metrics apply to an institution that exists to create and destroy money as it sees fit, for the purpose of maintaining an appropriately sized money-supply?

    The more you think about it, the more it becomes obvious that Ron’s ‘Audit’ is a political AMBUSH, designed to serve as ‘evidence’ behind a campaign of misinformation directed at an ignorant and easily influenced public…

    Especially since Ron intends to use this campaign to trick the American People into voting AGAINST their own interest (low-to-moderate inflation, generally, is a positive thing for the average debt-laden American)….

    It has to be stopped….

  • Dave_A

    I also automatically oppose any act that will increase Congress’ power to meddle in the economy – ESPECIALLY on monetary policy…

    And especially when it’s sponsored by the mother-of-all ‘Strong Dollar’ nuts (Paul)….

  • Dave_A

    In fact, it’s the only monetary policy that won’t destroy our economy.

    Record levels of private sector debt MANDATE a loose monetary policy, there is simply no way around that.

    Tight money = Eternal recession, with no upside….

  • Viet71

    Economics, I believe, is based on supply and demand.

    There’s no great demand for dollars relative to other currencies. Hence, no inflation due to Fed policy.

    Coming food price rises have nothing to do with Fed policy.

  • Viet71

    n/t

  • aesthete

    that the members of the Board of Governors have with members of the financial industry, publishing the notes of all meetings with more than one member of the Board present, and a quarterly presentation from the Chair to the Congress regarding inflation and other economic targets and the direction of the Fed.

    For goodness’ sakes, this isn’t rocket science — similar courtesies, policies, and customs were in place as recently as the Volcker Fed.

  • Dave_A

    That doesn’t increase Congress’ power, nor does it subvert their ability to make monetary policy independent of politics.

    I will never support any sort of Congressional ‘investigation’ (Eg witch-hunt) of the FED…

  • Viet71

    Why not transparency?

    You are a fan of the FED, fine.

    The FED controls the U.S. economy. Let’s see what it does and why.

  • conservativelibertarianrepublican

    As an “independent” institution, the Federal Reserve has failed miserably.

    You are to have us believe that we should trust an oligarchy to control the nation’s money and credit. Come now, we have progressed from the serfdom of Europe.

    While I can tell we disagree strongly on money and banking, with you taking the pro-government position and I taking the free market position, this thread is about the Federal Reserve Audit.

    The truth is, Congress is mandated to be in charge of monetary policy, per the Constitution. The Federal Reserve isn’t even Constitutional, if you take a strict constructionist view. Obviously, Congress isn’t worthy of deciding what to do on its own, thus a Friedman style rule or as I prefer as a student of Lewis Lehrman, a commodity(specifically gold) standard it what is needed.

    Because Congress is in charge of monetary policy, it is the DUTY of Congress to take a responsible approach of making the Federal Reserve transparent. Secrecy is never a virtue, especially in the arena of government.

    The Federal Reserve is already audited, but this one goes further and exposes committee deliberations, transactions with foreign banks, etc.

    In short, you’re complaints about independence hold no water when compared to what is truly right-the truth for the American citizen.

    FreedomWorks and Campaign for Liberty are taking charge in contacting the most important Senators in order for this to pass. I urge everybody to contact Harry Reid, who used to propose auditing the Fed every year but is apparently bought off. Most importantly we must put pressure on Sen. Timothy Johnson, so that as chairman of the banking committee he will bring up the bill for a vote.