Audit the Fed, Then End It!

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I
have been very pleased with the progress of my legislation, HR 1207,
which calls for a complete audit of the Federal Reserve and removes
many significant barriers towards transparency of our monetary system.
This bill now has nearly 170 cosponsors, with support from both
Republicans and Democrats. Senator Bernie Sanders has introduced
a companion bill in the Senate S 604, which will hopefully begin
to gain momentum as well. I am very encouraged to see so many of
my colleagues in Congress stand with me for greater transparency
in government.

Some have begun
to push back against this bill, and I am very happy to address their
concerns.

The main argument
seems to be that Congressional oversight over the Fed is government
interference in the free market. This argument shows a misunderstanding
of what a free market really is. Fundamentally, you cannot defend
the Federal Reserve and the free market at the same time. The Fed
negates the very foundation of a free market by artificially manipulating
the price and supply of money — the lifeblood of the economy.
In a free market, interest rates, like the price of any other consumer
good, are decentralized and set by the market. The only legitimate,
Constitutional role of government in monetary policy is to protect
the integrity of the monetary unit and defend against counterfeiters.

Instead, Congress
has abdicated this responsibility to a cabal of elite, quasi-governmental
banks who, instead of stabilizing the economy, have destabilized
it. It took less than two decades for the Federal Reserve to bring
on the Great Depression of the 1930′s. It has also inflated
away the value of our currency by over 96 percent since its inception.
It has invisibly stolen from the poor and given to the rich through
this controlled inflation, and now openly stolen through recent
bank bailouts. It has predictably exacerbated the very problems
it was meant to solve.

Detractors
have also argued that the Fed must remain immune from the political
process, and that that more congressional oversight would distort
their very important decisions. On the contrary, the Federal Reserve
is already heavily entrenched in the political process, as the Fed
chairman is a political appointee. High-level officials routinely
make the rounds between positions at the Fed, member banks, Treasury
and back again, taking care of friends and each other along the
way.

As far as the
foolishness of placing complex monetary policy decisions in the
hands of politicians — I couldn’t agree more. No politician
or central banker, no matter how brilliant, is smart enough to know
more than the market itself. The failure of central economic planning
has been witnessed over and over. It is frankly beyond me why we
ever agreed to try it again.

To understand
how unwise it is to have the Federal Reserve, one must first understand
the magnitude of the privileges they have. They have been given
the power to create money, by the trillions, and to give it to their
friends, under any terms they wish, with little or no meaningful
oversight or accountability. Thus the loudest arguments against
greater transparency are likely to come from those friends, and
understandably so.

However, it
is the responsibility of every member of Congress to represent the
interests of the people that sent them to Washington and find out
what has been happening with our money. As the branch of government
with the power of the purse, we really have no other reasonable
choice when the economy is in the shape it is in.

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May
19, 2009

Dr. Ron
Paul is a Republican member of Congress from Texas.

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