Ron Paul's Misguided Views on the Federal Reserve bank

Ron Paul's Misguided Views on the Federal Reserve bank

Presidential Candidate Ron Paul has become the quirky candidate embraced by the fringe groups. He campaigns as a stop the war libertarian. What rankles me about his position is his view that the Fed should be abolished. Take a listen at the video below:

There is so much to disagree with here. His biggest argument is that because the Fed is an independent institution, it lacks the proper transparency and oversight to properly function. Well, that was the whole idea. The Fed needed to be removed from politics so that Fed Chairmen didn't succumb to political pressure to print money and help politicians stay in office. Independence is essential. George H Bush wanted Greenspan to lower interest rates in 1991 so that he could stay in office. Imagine what would happen if Presidents and Congress had more influence.

They do by the way have influence. Every four years the President chooses a Fed Chairman who must be approved by the Senate. If a Chairman isn't doing well or lacks the public trust, he can be removed after his four year term expires. This is unlike a Supreme Court justice who serves for life.

In the video he also says that the United States has only grown via a $800 billion yearly accounts deficit. This is wrong. The United States enjoys one of the highest rates of productivity growth in the world and this, more than anything has contributed to the country's growth in wealth.

He also makes the point that the wealthy were the main beneficiaries of the Fed's low rate policy from 2000-2007. This ignores the millions of middle and lower class consumers who benefited from lower rates on mortgages, credit cards, etc. The rate of home ownership in the country has soared. While some took on more debt than they could afford, whose fault is this. As a libertarian, Paul should realize that responsibility rests with the individual.

I realize its fun and a bit hip to get on the Ron Paul bandwagon. But remember what happened the last time we didn't have a Federal Reserve - The Great Depression. Things may sometimes get a bit off-kilter with the Fed, but they can sure get a whole lot worse without it.

Sol Nasisi
Sol Nasisi: Sol Nasisi is the co-founder and a past president of BestCashCow, an online resource for comprehensive bank rate information. In this capacity, he closely followed rate trends for all savings-related and loan products and the impact of rate fluctuations on the economy. He specifically focused on how rates impact consumers' ability to borrow and save. He also has authored a wee


Comments

  • Mick Russom

    September 28, 2007

    Sept 27 2007
    http://www.economist.com/images/20070929/TAB3.gif

    Sept 24 2005
    http://www.economist.com/images/20050924/TAB3.gif


    It was 100 in the year 2000.

    QED.

  • Sam Cass

    September 28, 2007

    Actually, the one area I do agree with Paul is on inflation. I think the definition of core inflation employed by the Fed is flawed. But there is nothing blackbox or shrouded about it. Everyone knows how the Fed calculated inflation. We can agree that it is wrong and debate changing it. That doesn't mean the Fed should be abolished.

  • sbb

    September 28, 2007

    You need to educate yourself a bit more about the Federal Reserve that was enacted in 1913 (16 years before the 29 crash) and was complicit in the Depression by contracting the money supply.

  • dooglio

    September 28, 2007

    Thanks sbb for setting the record straight. Milton Friedman reported that the chairman of the Fed at the time of the depression confessed to him on his deathbed that indeed, the Fed had actually *caused* the depression. We would so be better off without the Fed and a hard currency.

  • Anonymous

    September 28, 2007

    From Wikipedia:
    http://en.wikipedia.org/wiki/Causes_of_the_Great_Depression

    "Ben Bernanke, Chairman of the Federal Reserve, later acknowledged that Friedman was right to blame the Federal Reserve for the Great Depression"

  • dooglio

    September 28, 2007

    From wikipedia:
    http://en.wikipedia.org/wiki/Causes_of_the_Great_Depression

    Even the current Chairman agrees:

    "Ben Bernanke, Chairman of the Federal Reserve, later acknowledged that Friedman was right to blame the Federal Reserve for the Great Depression."

  • Sam Cass

    September 28, 2007

    I thought I read that the Fed was enacted after but you appear to be right. It doesn't change my opinion that Paul is wrong about abolishing it. At the very least he is wrong in his reasons for wanting to abolish it.

  • Sam Cass

    September 28, 2007

    @ dooglio - I'm curious. What would you put in place of the Fed and a hard currency. What would you replace a "hard currency" with?

    By the way their are plenty of countries that lack a strong Federal Reserve system or a system at all and their records for inflation and steady economic growth are pretty poor. Look at South America and Africa as an example.

  • Mickey

    September 28, 2007

    "But remember what happened the last time we didn't have a Federal Reserve - The Great Depression."

    What in the... look, I'm not very good at recognizing satire, but this is absurd. The Fed was very much in existence during TGD and helped *cause* it, along with serious blunders on the fiscal policy side. Ben Bernanke actually apologized for TGD.

    Like I said, I'm not good at recognizing satire, but that statement is not at all funny to me. You have no idea how much the Fed has hurt people.

  • Andrew

    September 28, 2007

    Sam, can you tell me where the President gets the list of candidates to select from? Oh, that's right, the Federal Reserver supplies the list.

    You also need to realize that even though the Federal Reserve returns a portion of the interest to the treasury as specified in their charter, the Fed still makes a huge profit off a function our own government is responsible for and could do for free.

    Most of all, the US Constitution does not grant the federal gov't the power to transfer it's authority to "coin and print money" to anyone else. For the federal reserve to be Constitutional, an Amendment would need to be passed.

    Take a look at this chart:
    http://mwhodges.home.att.net/cpi-1800.gif

    Approx 125 years of zero inflation and prior to 1913, a period of pretty stable prices, there was no Federal Reserve Bank. This chart calls into question the stated purpose of creating a Federal Reserve in 1913 to assure price stability, when thereafter prices soared instead of becoming more stable. This chart makes it seem that the Federal Reserve was created for the purpose of generating inflation. Just since 1950 alone, the dollar has lost about 90% of it's purchasing power. If you're wondering, this data comes from the Minneapolis Federal Reserve Bank and includes data from the U.S. Bureau of Labor Statistics.

    "If the American people ever allow the banks to control the issuance of their currency, first by inflation, and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property, until their children wake up homeless on the continent their fathers conquered. The issuing power of money should be taken from banks and restored to Congress and the people to whom it belongs. I sincerely believe the banking institutions having the issuing power of money, are more dangerous to liberty than standing armies." ~ Thomas Jefferson

Add your Comment

or use your BestCashCow account

or