Audit the Fed is coming up for a vote in July!
Originally posted at FreedomWorks.org.
Speculation has risen that Fed chairman Ben Bernanke may announce yet around round of quantitative easing or QE3 on Friday. As economist Thomas Sowell says, “when people in Washington start creating fancy new phrases, instead of using plain English, you know they are doing something they don’t want us to understand.” The term quantitative easing in layman’s terms just means that the Fed will print more money out of thin air. What could possibly go wrong? Well, for starters, the value of the U.S. dollar will continue to decline and it could set the stage for hyper-inflation.
Of course, the first two rounds of quantitative easing have failed miserably to stabilize the economy. This should have signaled that pumping new money into the economy is just not the solution. But Fed officials who have refused to accept reality continue to run the printing processes on overtime. After QE3 fails—and it will—we might as well expect to see QE4, QE5 and so on until the dollar is literally worthless.
The actions of the Federal Reserve have a dramatic impact on the lives of every single American. The central bank essentially controls the value of the money that we have in our pockets. QE1 and QE2 can be blamed in large part for the skyrocketing price of food at the grocery store. The same supply and demand rules apply to money. The more dollars we have in the circulation, the less valuable the money becomes. The Fed is a main reason why it’s costing us more dollars to fill up our gas tank nowadays.
For decades, Rep. Ron Paul (R-Texas) was the lone voice in Washington speaking out against the Federal Reserve. He writes that “the inflation tax, while largely ignored, hurts middle-class and low-income Americans the most. Simply put, printing money… dilutes the value of the dollar, which causes higher prices for goods and services. Inflation may be an indirect tax, but it is very real — the individuals who suffer most from cost of living increases certainly pay a ‘tax.’” QE1, QE2 and QE3 are nothing more than stealing wealth from the people through the hidden tax of inflation.
Our Founding Fathers would surely be outraged by the existence of the Fed. These great men believed in a limited government that was held accountable to the people. The Federal Reserve, which is generally regarded as a quasi-governmental entity, has less oversight than even the Central Intelligence Agency (CIA). The most powerful central bank in the world makes all of its decisions without even a single vote from our elected representatives in Congress.
You can bet that the Fed is up to no good behind closed doors. Due to a provision under the misguided Dodd-Frank financial overhaul law, the Government Accountability Office (GAO) conducted a one-time, watered-down audit of the central bank back in July. It gave the American people their first peek into the central bank’s books but prevented investigators from peering into their deliberations on interest rates and the most crucial transactions of the Fed. We still need to pass a true audit the Fed bill like Ron Paul’s Federal Reserve Transparency Act of 2011 that would require comprehensive audits on a regular basis.
The first ever audit revealed that the central bank “loaned” out $16 trillion at a zero percent interest rate to corporations and banks around the world during the height of the financial crisis. To put that number into perspective, the Gross Domestic Product (GDP)—the value of all economic activity within a country— of the United States is only $14.12 trillion. It’s no wonder that the Fed is desperately trying to protect their privileged secrecy.
The Fed used to be the giant elephant in the room that nearly everyone ignored. We can see the political tide shifting since it has suddenly become popular to criticize the Fed. I have a strong feeling that the rise of the Ron Paul phenomenon has something to do with it. The author of the book End the Fed just might be onto something. A true audit is the first step to letting the American people know what’s going on with their money. The next step is to abolish the Federal Reserve System.
Originally posted at FreedomWorks.org. The anniversary was yesterday August 15th, this post is a day late.
On this day 40 years ago, former President Richard Nixon suspended the convertibility of the U.S. dollar into gold. The decision, which radically changed the global monetary system, still holds enormous ramifications for every single American today. The money in our pockets would be worth more if Nixon hadn’t cut the link between U.S. dollars and gold.
The correct history of the gold standard is generally avoided in the typical history classroom. It’s important to note that we never had a free market gold standard in the nineteenth or early twentieth century. As economist Gary North notes, “what Nixon destroyed was called the gold-exchange standard.” A free market gold standard, which I personally advocate, would mean a separation of money from state. While the gold-exchange standard was far from that, it is still preferable to our current fiat monetary system.
During the aftermath of WWII, the Bretton Woods system was established, tying international finance to the gold-backed U.S. dollar. The unconstitutional International Monetary Fund (IMF) was then created as a source of funds for countries having a balance of payments problem. By the early 1970s, the United States was running a balance-of-payments deficit due to a massive surge in government spending. The U.S. government couldn’t afford to pay for the costly Vietnam War and President Johnson’s Great Society Programs. The gold in Fort Knox was quickly disappearing as government spending rose to then unprecedented levels.
It’s clear why politicians are no fan of the gold standard. As The Telegraph’s Edmund Conway writes “the main difference with fiat money is that whereas under the gold standard it was all too obvious when politicians were spending beyond their means (they would simply run out of gold reserves).” Richard Nixon who should have made an effort to dramatically cut government spending decided to make a colossal monetary error. When he cut the link between the U.S. dollar and gold on August 15, 1971, the Bretton Woods System officially ended and the U.S. dollar became a fully fiat currency backed by absolutely nothing. With the Bretton Woods System dead, there was no justification for the IMF to continue but it did. Today, it is merely an international bailout fund that should the United States should immediately withdraw from.
Our economy has been remarkably instable for the past 40 years. We’ve since experienced periods of stagflation and recessions. Jordi Franch writes at Mises.org that, “with the burial of the last vestiges of the gold — that “barbarous relic” of the past, in Keynes’s words — the annoying limitation on the creation of money and credit was broken.” Pegging the U.S. dollar to gold put a restraint on the government’s ability to create an infinite supply of money.
Just as our Founding Fathers understood, it’s dangerous to give government unchecked power. Detlev Schlichter writes in the Wall Street Journal Europe that “U.S. President Richard Nixon closed the gold window and ushered in the first time in human history, a global system of unconstrained paper money under full control of the state.” Unfortunately, unelected bureaucrats at the Federal Reserve now have the power to create as much money as they want out of thin air.
It’s surprising that we have managed to survive four decades with a currency backed by only the government’s promise. History has proved that all fiat currencies eventually fail, with an average life expectancy of just 27 years. As Detlev Schlichter explains, “complete paper money systems are always creations of the state, never the outcome of private initiative or the free market. All paper money systems in history have, after some time, experienced growing financial instabilities, economic volatility, and an accelerating decline in money’s purchasing power. All of them ultimately failed.”
It’s difficult to predict how much longer the dollar will survive but things aren’t looking too promising. The price of gold, which is essentially a reflection of the dollar’s weakness, has risen to all-time highs. It has risen from below $40 per ounce in the 1970s to a whopping $1,740 today. Today, the dollar is worth less than 20 cents compared to the stronger pre-Nixon dollar.
Our monetary policy is deeply flawed. The fiat dollar is what lies at the heart of our economic woes. The Federal Reserve is essentially the institution that makes all of the recent bailouts possible. It’s quite simple for them to print more money to bail out their friends. If history is any indication, our fiat money system will ultimately collapse. With inflation running rampant—it’s anyone’s guess how much longer it will last. We must return to sound money before it’s too late.
Originally posted at FreedomWorks.org.
Over the past few years, we have seen a renewed interest in the role of the Federal Reserve. Rep. Ron Paul’s (R-Texas) presidential runs, along with the financial meltdown have directed much needed attention to the central bank. The American people are finally waking up to the giant elephant in the room—the Fed—which bears significant responsibility for many of the financial crises over the past century.
Something big is happening. The Atlantic recently reported that “on college campuses, Obama’s not cool anymore.” Young people are instead flocking to the message of limited government, personal liberty and sound money. Ron Paul has been the loudest critic of the Fed in Washington for over thirty years. His multiple campus tours have been a resounding success. Many universities do not have auditoriums large enough to seat all the students wanting to hear Dr. Paul speak. Anyone who attended the 2011 Conservative Political Action Conference (CPAC), where Ron Paul won the presidential straw poll, can attest to his enthusiastic support, especially from young people.
Nearly everyone knows that the typical college campus is biased in favor of leftists. From personal experience, it is difficult being a liberty-minded student in a political science college course. That’s why it’s incredible that so many college students are rejecting the Keynesian policies espoused by their professors. Young Americans for Liberty (the continuation of Students for Ron Paul) now has a total of 222 chapters nationwide. These young people are educating themselves on ideas generally not taught in a college classroom. They’re instead picking up books by Ludwig von Mises, F.A. Hayek, Murray Rothbard and other Austrian economists.
These young Americans for liberty overwhelmingly support abolishing the Federal Reserve System. You can hear them chanting “end the Fed!” at rallies. Ron Paul dedicated his book End the Fed “to the young people… who are the heart of the anti-Fed movement.” Young people bring energy and enthusiasm to the message of sound money. It has suddenly become mainstream not just to criticize the Federal Reserve but to question its reason for existence.
The track record of the Federal Reserve has been a dismal failure. Defenders of the status quo might tell you that the Federal Reserve is necessary to maintain the stability of the financial system. The stated purpose of the Federal Reserve, taken by its own definition on its website, is to “conduct the nation’s monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices.” Not only did the Federal Reserve fail to prevent the Great Depression, the 1970s stagflation and the recent financial crisis, but it was the primary culprit behind these financial disasters. We would not experience such dramatic economic swings were it not for monetary policies that distort real prices and encourage improper investment decisions.
Fed supporters claim that our economy would be chaotic without the central bank manipulating our money supply. Think again. The United States has a long history without the Federal Reserve. From 1776 to 1912, the value of the dollar increased by 11 percent. During this time, we experienced a few financial panics, but they were far less severe and rare back then. Many Austrian economists place the blame for these crises on the policies of the First and Second Bank of the United States. It is hard to blame the free market because we’ve never had free market capitalism.
The U.S. economy has experienced far more ups and downs after the Federal Reserve came into existence in 1913. The value of the dollar has declined by roughly 95 percent in less than 100 years. The dollar buys 95 percent fewer goods in 2011 than it did in 1913. Inflation, the loss of value in the dollar, is created by the Federal Reserve manipulating the money supply behind closed doors.
It is inspiring that the youth in America are involved in exposing the truth about the Federal Reserve. We certainly face an uphill battle against powerful special interests. Yet, these dedicated young Americans show no signs of giving up. As Victor Hugo said, “no army can stop an idea whose time has come.”
Originally posted at FreedomWorks.org.
With longtime Federal Reserve critic Rep. Ron Paul (R-TX) the chairman of the House Subcommittee on Domestic Monetary Policy and Sen. Rand Paul (R-KY) willing to lead the fight in the Senate, this is our best opportunity to pass a real Audit of the Fed. On Wednesday, the father and son duo introduced companion legislation, H.R. 459 and S.202, in both congressional chambers to require a full and thorough audit of the Federal Reserve. In the last congressional session, Ron Paul’s Federal Reserve Act of 2009 gained a bipartisan group of 320 cosponsors. With an increased number of freedom fighters in both chambers, it has a better chance of passing this time around.
Since its inception in 1913, the Fed has never been audited. It has always operated under a certain veil of secrecy. For decades, few people have questioned the legitimacy of the Federal Reserve. The current economic crisis has changed everything. All of the sudden, grassroots activists across the nation are demanding transparency at the Fed. Without a comprehensive audit, the American people will never know how the Fed is manipulating our money behind closed doors.
One thing is clear: nearly all of our original Founding Fathers would be appalled at the power given to the central banking system. Fierce opposition arose to the concept of the Fed’s predecessor, The Bank of The United States. In 1791, Jefferson wrote a letter to George Washington stating that the contents of the bill to incorporate the Bank of the United States “have not, in my opinion, been delegated to the United States by the Constitution.” The powers of the Federal Reserve far exceed the first Bank of the United States.
He was joined in opposition by notable Founding Fathers such as James Madison and Thomas Paine. In Common Sense, Thomas Paine writes “as to assume authority of any assembly in making paper money, or paper of any kind, a legal tender, or in other language, a compulsive payment, it is a most presumption attempt at arbitrary power. There can be no such power in a republican government: the people have no freedom—and property no security—where this practice can be acted.” If such a system runs contrary to our founding principles, it’s a shame that we have turned our backs on the actions of the Fed for so long.
It is crucial to end the secrecy of the Fed. Rep. Ron Paul says that this is a necessary step to “stopping the business cycle, ending inflation, building prosperity for all Americans, and putting an end to the corrupt collaboration between government and banks that virtually defines the operations of public policy in the post-meltdown area.”
The Fed’s loose monetary policy is largely to blame for the current economic meltdown. Inevitably, the long period of unsustainable negative real interest rates gave individuals a tempting incentive to borrow from the banking system. Unfortunately, the artificially low interest rate misled millions of people to take out loans that they could not afford to pay back once the interest rates eventually rose. Government-established central banks tampering with the market provoked an artificial boom followed by the current inescapable bust or crash. We still haven’t recovered from the recession that officially began in December 2007.
We often hear horror stories of currency collapse in foreign countries. Just a few years ago, citizens in Zimbabwe walked around with wheelbarrows full of cash. With an annual inflation rate of 89.7 sextillion percent, the wheelbarrow was worth more than their pile of practically worthless cash. In the Weimar Republic of Germany, people used their worthless paper money as fuel to heat their homes. We are not immune to such disaster.
Our dollar has lost 97 percent of its value since the creation of the Fed. Many of us may not often think about who controls the value of our dollar but we ought to. We have trusted the secretive Federal Reserve with a monopoly on our money. History shows us that entire civilizations have risen and fallen based on the value of their currency. With sound money crucial to our future prosperity, we must push for an audit of the Fed to expose how the Fed is manipulating our money supply behind closed doors.