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Audit the Fed Moves Forward! – Article by Ron Paul

Audit the Fed Moves Forward! – Article by Ron Paul

The New Renaissance Hat
Ron Paul
July 31, 2012
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Last week the House of Representatives overwhelmingly passed my legislation calling for a full and effective audit of the Federal Reserve.  Well over 300 of my Congressional colleagues supported the bill, each casting a landmark vote that marks the culmination of decades of work.  We have taken a big step toward bringing transparency to the most destructive financial institution in the world.

But in many ways our work is only beginning.  Despite the Senate Majority Leader’s past support for similar legislation, no vote has been scheduled on my bill this year in the Senate.  And only 29 Senators have cosponsored Senator Rand Paul’s version of my bill in the other body.  If your Senator is not listed at the link above, please contact them and ask for their support.  We need to push Senate leadership to hold a vote this year.

Understand that last week’s historic vote never would have taken place without the efforts of millions of Americans like you, ordinary citizens concerned about liberty and the integrity of our currency.  Political elites respond to political pressure, pure and simple.  They follow rather than lead.  If all 100 Senators feel enough grassroots pressure, they will respond and force Senate leadership to hold what will be a very popular vote.

In fact, “Audit the Fed” is so popular that 75% of all Americans support it according to this Rasmussen poll.  We are making progress.

Of course Fed apologists– including Mr. Bernanke– frequently insist that the Fed already is audited.  But this is true only in the sense that it produces annual financial statements.  It provides the public with its balance sheet as a fait accompli: we see only the net results of its financial transactions from the previous fiscal year in broad categories, and only after the fact.

We’re also told that the Dodd-Frank bill passed in 2010 mandates an audit.  But it provides for only a limited audit of certain Fed credit facilities surrounding the crisis period of 2008.  It is backward looking, which frankly is of limited benefit.

The Fed also claims it wants to be “independent” from Congress so that politics don’t interfere with monetary policy.  This is absurd for two reasons.

First, the Fed already is inherently and unavoidably political.  It made a political decision when it chose not to rescue Lehman Brothers in 2008, just as it made a political decision to provide liquidity for AIG in the same time period. These are just two obvious examples.  Also Fed member banks and the Treasury Department are full of former– and future– Goldman Sachs officials.  Are we really to believe that the interests of Goldman Sachs have absolutely no effect on Fed decisions? Clearly it’s naïve to think the Fed somehow is above political or financial influence.

Second, it’s important to remember that Congress created the Fed by statute.  Congress therefore has the full, inherent authority to regulate the Fed in any way– up to and including abolishing it altogether.

My bill provides for an ongoing, thorough audit of what the Fed really does in secret, which is make decisions about the money supply, interest rates, and bailouts of favored banks, financial firms, and companies.  In other words, I want the Government Accountability Office to examine the Fed’s actual monetary policy operations and make them public.

It is precisely this information that must be made public because it so profoundly affects everyone who holds, saves, or uses US dollars.

Representative Ron Paul (R – TX), MD, is a Republican candidate for U. S. President. See his Congressional webpage and his official campaign website

This article has been released by Dr. Paul into the public domain and may be republished by anyone in any manner.

Inflation is a Monetary Phenomenon – Article by Ron Paul

Inflation is a Monetary Phenomenon – Article by Ron Paul

The New Renaissance Hat
Ron Paul
July 18, 2012
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Later this month Congress will have an unprecedented opportunity to force the Federal Reserve to provide meaningful transparency to lawmakers and taxpayers. HR 459, my bill known as “Audit the Fed,” is scheduled for a vote before the full Congress in July. More than 270 of my colleagues cosponsored the bill, and it has the support of congressional leadership. But its passage in the House of Representatives is only the beginning of the battle, as many Senators and the President still don’t see the critical need to have a national discussion about monetary policy.

The American public now senses that the Fed’s actions, especially since 2008, are enormously inflationary and will cause great harm to the American economy in the long run. They are beginning to understand what so many economists still don’t understand, which is that inflation is a monetary phenomenon, and rising prices are merely a symptom of that phenomenon.  Prices eventually rise when the supply of US dollars (paper or electronic) grows faster than the available goods and services being chased by those dollars.

This fundamental truth has been thoroughly explained by Milton Friedman and many others, so today’s Keynesian economists have no excuse for their claims that “inflation is under control.”  Ordinary Americans don’t need a PhD simply to look at the Fed’s balance sheet and understand the staggering amount of money creation that has occurred in recent years. They know it will have harmful consequences for all of us eventually.

I’ve spoken at length about inflation, and how Fed money creation is effectively a tax. Every dollar created out of thin air dilutes the value of the dollars in your pocket and your savings in the bank. But the truth is that we are only beginning to see the results of the Fed’s dramatic increase in the money supply. As former Fed Chair Alan Greenspan himself explained last week to Larry Kudlow, most of the dollar deposits created by the Fed via successive rounds of “quantitative easing” remain on the balance sheet of Fed member banks. Because of very rational economic fears, banks are not lending, businesses are not expanding, and individuals are shedding debt. So, the trillions of dollars created by the Fed since 2008 remained largely undeployed. When those dollars eventually make their way into the world economy, prices across all sectors of the economy are likely to rise dramatically.

The true evil of inflation is that newly created money benefits politically favored financial interests, especially banks, on the front end. Over time, however, the net result of monetary inflation is always the devaluation of savings and purchasing power. This devaluation discourages saving, which is the key to capital accumulation and investment in a healthy economy. Inflation also tends to hurt seniors and those living on fixed incomes the most.

For decades the Fed has operated without any meaningful oversight whatsoever, resulting in the loss of savings, loss of purchasing power, and loss of quality of life for all Americans. It causes individuals and businesses to make bad decisions, misallocating their capital because market signals have been distorted. It causes financial ruin by engineering the inevitable boom and bust cycles that so many erroneously blame on capitalism. And it does all this in secrecy, to the benefit of the financial and political classes. It is time to Audit the Fed, as a first step toward ending its unchecked power over our money and economic fortunes.

Representative Ron Paul (R – TX), MD, is a Republican candidate for U. S. President. See his Congressional webpage and his official campaign website

This article has been released by Dr. Paul into the public domain and may be republished by anyone in any manner.

Audit the Fed Headed for the House Floor! – Article by Ron Paul

Audit the Fed Headed for the House Floor! – Article by Ron Paul

The New Renaissance Hat
Ron Paul
July 4, 2012
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Last week supporters of Federal Reserve transparency had a major victory when the House Committee on Government Oversight and Reform passed my Audit the Fed bill, HR 459 unanimously with all major audit provisions intact.  This clears the way for a House floor vote expected sometime in late July, and with a whopping 263 cosponsors, the chances of it passing have never looked better!  This is an unprecedented opportunity for transparency into how the currency of the United States is handled, and mishandled by the Federal Reserve.  It is more important than ever that my colleagues in the House and Senate understand what this legislation does and why it is so important.

The Federal Reserve is an enormously destructive and unaccountable force in both the U.S. economy and the greater global economy. Federal Reserve policies affect average Americans far more than fiscal, spending, and tax policies legislated by Congress; indeed the Fed “spends” more than Congress when it creates trillions of new dollars on its balance sheet to bail out favored financial institutions.

For several decades the Fed has relentlessly increased the supply of U.S. dollars (both real and electronic) and kept interest rates artificially low. These monetary policies punish thrift, erode the value of savings, and harm older Americans living on fixed incomes and the poor. The Fed’s expansion of the money supply, combined with artificially low interest rates, creates destructive cycles of malinvestment. This results in housing, stock market, and employment booms and busts that destroy lives.

While the Fed was created by Congress, current law prohibits Congress from fully auditing the Fed’s monetary policy – the Fed actions that impact Americans the most. The Fed’s financial statements are audited annually, but the Fed’s monetary policy operations are exempt from audit. Congress’ investigative arm, the Government Accountability Office (GAO), currently is prohibited by law from examining discount window and open market operations; agreements with foreign governments and central banks; and Federal Open Market Committee (FOMC) directives. It is precisely this information that should be made public.

The audit mandated in the Dodd-Frank Act focused solely on emergency credit programs, and only on procedural issues rather than focusing on the substantive details of the lending transactions. Most of the data on its other activities, such as open market operations and discount window lending, have only been published as a result of lawsuits—not because of Congressional action.  Dodd-Frank requires this information to be disclosed going forward, but with a two year time lag and with GAO restricted to auditing only the procedural components of any programs. H.R. 459 grants GAO and Congress access without special exemptions and ensures that ALL of the Fed’s lending actions will be subject to oversight.

Also, given the Fed’s establishment of dollar swap agreements with foreign central banks (which lent up to $600 billion at a time in 2008), and the increasing economic uncertainty surrounding Spain, Greece and the European Union, the Fed’s continued financial assistance to Europe should not be exempt from public accountability and Congressional oversight. H.R. 459 brings transparency to the Fed’s agreements with the European Central Bank and other foreign entities.

H.R. 459 does not limit the focus of the audit, making a full audit finally possible. An entity that controls the value and purchasing power of the dollar should not be permitted to operate in the dark without oversight by Congress and accountability to the people. The Fed needs transparency and H.R. 459 would provide it. We now have this opportunity to ensure solid passage of HR 459 on the House floor, then the Senate floor and have it promptly signed into law.

Representative Ron Paul (R – TX), MD, is a Republican candidate for U. S. President. See his Congressional webpage and his official campaign website

This article has been released by Dr. Paul into the public domain and may be republished by anyone in any manner.