Fed Independence or Fed Secrecy?

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Last
week I was very pleased that hearings were held on the independence
of the Federal Reserve System. My bill HR 1207, known as the Federal
Reserve Transparency Act, was discussed at length, as well as the
general question of whether or not the Federal Reserve should continue
to operate independently.

The public
is demanding transparency in government like never before. A majority
of the House has cosponsored HR 1207. Yet, Senator Jim DeMint’s
heroic efforts to attach it to another piece of legislation elicited
intense opposition by the Senate leadership.

The hearings
on Capitol Hill provided us with a great deal of information about
the types of arguments that will be levied against meaningful transparency
and how the secretive central bankers will defend the status quo
that is so beneficial to them.

Claims are
made that auditing the Fed would compromise its independence. However,
by independence, they really mean secrecy. The Fed clearly cherishes
its vast power to create and spend trillions of dollars, diluting
the value of every other dollar in circulation, making deals with
other central banks, and bailing out cronies, all to the detriment
of the taxpayer, and to the enrichment of themselves. I am happy
to challenge this type of “independence.”

They
claim the Fed is endowed with special intellectual abilities with
which to control the market and that central bankers magically know
what the market needs. We should just trust them. This is patently
ridiculous. The market is a complex and intricate thing. No one
knows what the market needs other than the market itself. It sends
signals, such as prices, that should be reacted to and respected,
not thwarted and controlled. Bankers are not all-knowing and cannot
ignore the rules of supply and demand. They might act as if they
are, but their manipulation of the market just ends up throwing
it wildly off balance, which gives us the boom and bust cycles.

They claim
the Fed must remain apolitical. No organization is apolitical that
relies on the President to appoint the Chairman. In fact, it is
subject to the worst sort of politics — power to create trillions
of dollars and affect the value of every dollar in the country without
the accountability of direct elections or meaningful oversight!
The Fed typically enacts monetary policy that is favorable to particular
administrations close to elections, to the detriment of long-term
considerations. They do this partly because of the political appointee
process for the Chairmanship.

The only accountability
the Federal Reserve has is ultimately to Congress, which granted
its charter and can revoke it at any time. It is Congress’s
constitutional duty to protect the value of the money, and they
have abdicated this responsibility for far too long. This was the
issue that got me involved in politics 35 years ago. It is very
encouraging to finally see the issue getting some needed exposure
and traction. It is regrettable that it took a crisis of this magnitude
to get a serious debate on this issue.

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July
14, 2009

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

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