Ron Paul: Thank you, Mr. Speaker. Federal Reserve Chairman, Ben Bernanke, does not want us to know any of the details of the Fed’s secret operations. This position is not surprising and has been typical of all central bank chairmen. Bernanke’s stated goal is, “To design a system of financial oversight that would provide a robust framework for preventing future crises”.
During its 96 years of existence, the Federal Reserve has played havoc with our economy and brought great suffering to millions through unemployment and price escalation. And it has achieved what only a central bank can – a steady depreciation of our currency. Today’s dollar is now worth 4 cents compared to the dollar entrusted to the Federal Reserve in 1913. 96 years should have been plenty of time for the Fed to come up with a plan for preventing economic crises.
Since the Fed is the source of all economic downturns, it’s impossible for any central banker to regulate in such a manner to prevent the problems that are predictable consequences of his own monetary management. The Federal Reserve fixes interest rates at levels inevitably lower than those demanded by the market. This manipulation is a form of price control through credit expansion and is the ultimate cause of business cycles and so many of our economic problems, generating the mal-investment, excessive debt, stock, bond, commodity and housing bubbles.
The Federal Reserve’s monetary inflation indeed does push the CPI upward, but concentrating on the government’s reports of the CPI and the PPI is nothing more than a distraction from the other harm done by the Federal Reserve’s effort at central economic planning through secret monetary policy operations.
Real inflation, the expansion of our money supply is greatly undercounted by these indices. In response to our latest financial crisis the Federal Reserve turned on its printing press and literally doubled the monetary base. This staggering creation of dollars has yet to be reflected in many consumer prices, but will ultimately hit the middle class and poor with a cruel devaluation of their savings and real earnings.
The Fed has clearly failed on its mandate to maintain full employment and price stability. It’s time to find out what’s going on. Instead of assuming responsibility for the Fed’s role in the crisis, Bernanke brags about “arresting” the crisis. I would suggest to Mr. Bernanke that it’s too early to brag. Bernanke decries any effort to gain transparency of the Fed’s actions to find out just who gets bailed out and who is left to fail. Instead, he proposes giving even more power to the Fed to regulate the entire financial system.
What he doesn’t recognize, nor does he want to admit, is that he is talking about symptom while ignoring the source of the crisis: the Federal Reserve itself. More regulations will never compensate for all the distortion and excesses caused by monetary inflation and artificially low interest rates. Regulation distracts from the real cause while further interfering with the market forces, thus guaranteeing that the recession will become much deeper and prolonged.
Chairman Bernanke’s argument for Fed secrecy is a red herring. It serves to distract so the special interests that benefit from the Fed’s policy never become known to the public. Who can possibly buy this argument that this secrecy is required to protect the people from political influence?
My bill, HR 1207, has nothing to do with interferences in monetary policy. This was explicitly stated in the amendment voted on in the Financial Services Committee. Bernanke’s argument for protecting the independence of the Fed is his argument for protecting the secrecy of the Fed.
Chairman Bernanke concludes that “America needs a strong (think cartel) non-political (think Goldman Sachs) and independent (think secret) central bank with the tools to promote financial stability in the midst of a horrendous financial crisis and to help steer our economy to recovery without inflation.”
This belief is a dream that one day will become a nightmare for all Americans unless we come to our sense, stop our wild spending, runaway deficits, printing-press money, massive bureaucratic regulations and our unnecessary world empire.
A crucial step towards fixing these problems will be transparency of the Federal Reserve.