[BRIGADE: PJB: Ron Paul's Hour of Power
Published: Fri, 12/11/09
Ron Paul's Hour of Power
By Patrick J. Buchanan
December 11th, 2009
The
decades-long campaign of Ron Paul to have the Government Accountability
Office do a full audit of the Federal Reserve now has 313 sponsors in
the House.Sometimes perseverance does pay off.
If not derailed by the establishment, the audit may happen.
Yet, many columnists and commentators are aghast.
An auditors' probe, they wail, would imperil the Fed's independence
and expose it to pressure from Congress to keep interest rates low and
money flowing when the need of the nation and economy might call for
tightening.
They cite Paul Volcker, who to squeeze double-digit inflation out
of the economy in the late Carter and early Reagan years, drove the
prime rate to 21 percent, causing the worst recession since the
Depression. Volcker, they claim, prepared the ground for the Reagan tax
cuts and seven fat years of prosperity.
That decade, America created 20 million jobs -- and another 22
million in the Clinton era. Without Volcker putting the economy through
the wringer, it could not have happened. And had he been forced to
explain his decisions, Congress would have broken his policy.
Such is the cast for Fed independence.
But if true, what does this say about our republic?
Is it not an admission that, though Congress was created by the
Constitution, and the Fed is a creation of Congress, our elected
representatives cannot be trusted with the money supply, cannot be
trusted with control of the nation's central bank? To have decisions
made in the national interest, we need folks who do not have to answer
to voters.
If this be true, the republic is closer to its end than its
beginning, when Thomas Jefferson said, "In questions of power, let us
hear no more of trust in men, but rather bind them down from mischief
with the chains of the Constitution."
Others contend that were it not for the independence and vision of
Fed Chair Ben Bernanke, the economy might have gone over the cliff and
into the abyss after the Lehman Brothers collapse in October 2008.
What opponents of Paul's audit are thus saying is that elected
legislators must be kept out of the temple where the great decisions
about the economy are made, that these decisions must rest with bankers
and economists answerable, as is the Supreme Court, to themselves and
no one else.
But has the performance of the Fed been so brilliant any intrusion upon its privacy is sacrilege?
Among the failures of the Fed is the Great Depression. As Milton
Friedman related in his Monetary History of the United States, for
which he won a Nobel Prize for Economics, the Fed hugely expanded the
money supply in the mid-to-late 1920s.
Following a path of least resistance, the money flowed into the
equity markets, where stocks could be bought on 10 percent margin. The
market soared, and a huge bubble was created.
When it popped, scores of
thousands of investors conducted a run on the banks to get their money
out to meet their margin calls.
Thousands of banks, short on cash, closed. One-third of the money
supply was wiped out, and the Fed failed to replenish the lost blood.
Thus did the Fed cause the Great Depression.
Smoot and Hawley were framed.
Moreover, every bubble from the dot-com of the late 1990s to
housing this decade is a result of Fed policy. For unless there is an
excess of money sloshing around, funds that surge into one market, be
it housing, stocks or Third World loans, have to come out of another.
Moreover, if the Fed has not failed dismally in its duty to keep
prices stable, how come candy bars and Cokes that cost a nickel in the
1950s cost 50 or 75 cents today, and new Cadillacs that sold for $3,200
in the late 1940s cost $55,000 or $60,000 now? Who is responsible for
inflation, if not the Fed?
Moreover, it is now conceded that the Fed, in the early years of
this 21st century, kept interest rates near 1 percent for too long, and
created the bubble that popped in 2008 and almost brought down our own
and the global economies.
Because the Fed can create money out of thin air, we have been able
to wage wars on credit, shovel out trillions in foreign aid, World Bank
and International Monetary Fund loans, and run humongous budget and
trade deficits that have brought our country to the brink of ruin.
And if Bernanke is a genius, how is it he didn't see the train
wreck coming and had to double-time it to the Hill with Hank Paulson to
plead for $700 billion to bail out AIG, Fannie and Freddie, and buy all
that rotten paper on the books of Citibank & Co.?
The greatest economy the world had ever seen has been horribly
mismanaged and virtually ruined by the decisions of presidents,
Congress and the Federal Reserve. Main Street has been wiped as Wall
Street was bailed out. Why?
Bring on the auditors!
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