Paul's Questions for Ben Bernanke
by Gary North: Ben
Bernanke: Juggler of Digits
I have good
news and bad news for Ben Bernanke.
OUT OF THE OFFICIAL LOOP
I am no longer
Dr. Paul's research assistant. If I were, I would be working at
least half of my time on compiling questions for Dr. Paul to ask
I would be
actively cultivating leakers from inside all 12 regional Federal
Reserve Banks (private), as well as staffers working for the Board
of Governors (government). There is always some disgruntled employee
ready to open locked closets. I would be encouraging every one to
become the equivalent of Bradley Manning. "Purloined documents R
years ago, I held that position. Dr. Paul was then the Congressman
with the least amount of seniority in Congress. His term came to
an end only eight months after it began. He was elected to fill
an interim position, due to a resignation, and he lost by 268 votes
out of about 180,000 in November. He came back two years later,
but by then, I was off to greener pastures.
In those days,
the Chairman of the Federal Reserve System was Arthur Burns. He
had been inflating like mad, trying to pull the economy out of Nixon's
1970–71 recession, then Ford's recession in 1975. Gold bottomed
in the summer of 1976 at $105. It would never again get anywhere
near that price.
Dr. Paul was
already becoming Dr. No – voting no on most spending bills. He opposed
the extension of funding of the International Monetary Fund. I wrote
the dissenting paper on my first full day on the job – a Saturday.
Back then, staffers could come into the Capitol office buildings
without police checkpoints of any kind, at any hour. Those were
the good old days.
Dr. Paul was
not in a position to give much trouble to Dr. Burns. A year before,
the head of the House Banking Committee had been Wright Patman,
an anti-FED Congressman from east Texas. He had been giving the
FED trouble for 25 years. It was Patman who, along with fellow Greenbacker
Jerry Voorhis, got the law changed in the early 1940s to force the
FED to return to the Treasury all money above expenses. That was
the greatest single victory Congress ever had in dealing with the
FED. But Patman had been ousted in a coup by younger Democrats in
1975. They revolted against the old seniority system in the aftermath
of Watergate. The new chairman, Henry Reuss [ROYCE], was pro-FED.
There was no way that there would be any confrontations allowed
was 23 years old.
That was then.
This is now. That's the bad news for Dr. Bernanke.
WE'VE GOT QUESTIONS!"
Today, as never
before in American history, the voters know about the Federal Reserve
System. The veil of secrecy has been rent inside the temple's walls.
The public wants to have a look inside.
Dr. Paul will
be chairman of the Monetary Policy Subcommittee. Not since Patman
has any chairman of an oversight committee been this hostile to
the FED. But things are different today. The public knows that Bernanke
and Hank Paulson pulled the wool over Congress's already half-closed
eyes in late 2008. They know about the big bank bailouts. They now
know who got their hands on the billions. This was not home owners
facing foreclosure. This was not the taxpayers, who could have used
the money at a zero interest rate. The banks at the very top of
the banking system got the money. Then they kept handing out fat
of help at the top had also been true in 1930–33, but only a handful
of specialists of American banking history are aware of this. The
only New York City bank that the FED allowed to go under was the
Bank of the United States, which took small deposits from immigrants,
mostly Jews, and made loans to local small businessmen. The WASPS
who ran the FED allowed it to go bust. Milton Friedman talked about
that event 35 years ago.
now has a huge public relations problem, which is why the
FED hired a public relations specialist in 2009.
was able to de-fuse Dr. Paul's bill to audit the FED, but he is
not going to be in charge next year. The FED has lots of allies
on Capitol Hill, as well as in the White House, but it cannot control
one man in Congress: Ron Paul. That is the man who will be asking
In the spirit
of bipartisanship – "Let's just get the facts" – I suggest the following
questions. They will have to be submitted in advance, so that Dr.
Bernanke will not be convincing when he once again goes into his
world- famous "I don't know" routine. For
a video, go here.
IS THE ACCOUNTING FOR $3.3 TRILLION?"
Reserve finally admitted that it lent $3.3 trillion to banks and
other large corporations in late 2008.
The FED had
previously released data about the adjusted monetary base. It climbed
from $900 billion to $2.4 trillion overnight.
Now we are
told that this was just the tip of the iceberg. Where did the other
money go? How was it released into the population with no trace?
need to be in writing, accompanied with the evidence. This evidence
needs to be looked at by accountants. This policy of making loans
that are unrecorded as entries in the FED's balance sheet violates
all known banking theory. How was this done?
YOU PROVIDE THE ACCOUNTING FIRM WITH THIS INFORMATION?"
Reserve hires the private accounting firms that do the accounting.
The FED does not allow the same firm to audit the FED every year.
Always, new teams do the work. They need time to get up to speed.
That is the whole strategy of the FED.
The FED decides
what data these firms are allowed to have access to. There is no
full accounting. There never has been.
This is called
"Madoff accounting" by skeptical critics of the FED – or if it isn't,
it should be. Imagine if Bernie Madoff had been allowed to hire
an accounting firm, restricting access to whatever he decided the
firm did not need to see, and then hide behind the cover of the
arises: "How did Madoff get away with it?" The question also arises:
"How can accountants be deceived this easily?" So far, there is
firms cannot follow the money with a firm like Madoff's, which did
not tell the accountants that they had to take his word for where
the money went, why should anyone expect a firm to follow the FED's
money, when the FED knowingly restricts access?
to the next question.
WAS THE LAST TIME AN INDEPENDENT AGENCY AUDITED THE NATION'S GOLD?"
If Bernie Madoff
had been given complete control over approximately 23 million ounces
of gold in 1953, and no one had audited it since then, how much
gold would you imagine is still in the vault at Fort Knox and the
vault at the New York Federal Reserve Bank?
Madoff. Look where it got them. Congress trusts the Federal Reserve
System. Look where it got them.
Congress trust a private bank, the New York Federal Reserve Bank,
to store the government's gold? The Federal Reserve has always operated
as if Congress would never inquire as to where the gold is, in what
form, and in what quantities. So far, this assumption has been correct.
IS THE MISSING $1.7 TRILLION?"
base was $900 billion in August 2008. We are now told that a total
of $3.3 trillion in loans were made. The
FED reported an increase from $900 billion to about $2.4 trillion.
Where did the other $1.7 trillion go?
Where is there
a record of this?
this get reported?
loans did not get reported?
How can Congress
know if the FED is telling the truth, if the government is not allowed
to audit the FED?
THE FED MADE A TOTAL OF $3.3 TRILLION IN LOANS IN 2008, WHY AREN'T
argue that there is a relationship between increases in the money
supply and increased prices. All schools of opinion are agreed:
if the money supply is doubled, prices will rise.
base officially went up by a factor of 1.6 to one. Yet we are now
told that the FED made $3.3 trillion in loans. Why have prices not
PRICES HAVE NOT RISEN IN RESPONSE TO AN EXTRA $3.3 TRILLION IN LOANS,
WHY SHOULD WE EXPECT PRICES TO RISE WITH THE NEXT $600 BILLION?"
to be Bernanke's assumption: the newly created digital money will
raise prices by no more than 2% a year. But what is the evidence
that the FED's reported increases in the purchase of Treasury debt
will raise prices? Economists need verified evidence of what the
FED has actually done, what this has done to the monetary base,
and how the Bureau of Labor Statistics calculates consumer prices.
What the FED
has announced undermines all prevailing theories of cause and effect
in pricing. It contradicts all prevailing theories of how central
banking works. Congress needs verification that what the FED has
said happened actually happened.
to follow the money. Otherwise, it is flying blind.
DON'T YOU RELEASE A DIGITAL RECORDING OF THE FOMC MEETINGS WITHIN
24 HOURS AFTER THE MEETINGS?"
Reserve sets monetary policy. There is no reason why the FED should
delay the release of a verified audio transcription of all discussions,
other than the FED's concern that the information might create panic.
If this is
the reason, will Bernanke henceforth meet in closed session with
the members of the Subcommittee on Monetary Policy within 24 hours
of every meeting of the FOMC whose audio transcripts are not released
to the public?
In short, if
the Board of Governors is a government agency, why should it be
allowed any secrets? If the FOMC is private – then on what basis
should Congress not retake control over the flow of information?
8. "IF THE
FEDERAL RESERVE CLAIMS TO BE ENTITLED TO THE SAME SECRECY AS THE
NSA, FBI, AND CIA ENJOY, WHY IS IT THAT THE FEDERAL RESERVE IS A
for security of spying agencies is that the information would jeopardize
America's national security. But a majority of members of the FOMC
are representatives of private organizations, the regional Federal
Reserve Banks. No other privately owned organization is allowed
secrecy claimed only by spying agencies and criminal investigation
agencies. Only the central bank.
This has been
great for private bankers, as 2008 proved to the voters. But has
it been great for the voters? How can the voters know, since the
information is secret?
Reserve says "Trust us." That was what Bernie Madoff also said.
are only the beginning. There should be many more.
We can be sure
that Dr. Bernanke will not answer them.
"I don't know."
"I do not have
"I refuse to
can't make me say."
"Who does Congress
think it is, anyway?"
policy is too important not to be left to the bankers."
nyah – nanny, nanny, booboo."
This is what
every Chairman of the FED has done to Congress. But, this time,
there is a new kind of chairman in the oversight committee.
There are lots
of Austrian School economists who will suggest more questions.
This will be
fun to watch.
North [send him mail]
is the author of Mises
on Money. Visit http://www.garynorth.com.
He is also the author of a free 20-volume series, An
Economic Commentary on the Bible.
2010 Gary North
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