The Federal Reserve, that private organization that determines interest rates and the availability of money in America, is going to be examined by a congressional committee whose chairman is worried it is setting the nation up “for a much larger crash in future.” The plans for a review of Fed actions were announced today by U.S. Rep. Ron Paul, who heads the Domestic Monetary Policy and Technology Subcommittee. The hearing will focus on the Fed’s recent practice of essentially loaning money to large banks and others for no interest at all. “The Federal Reserve is relentless in pursuing a policy of zero interest rates, as manifest by their decision last week to engage in another round of quantitative easing and keep the federal funds rate at zero for another three years,” Paul said.
Fed Chairman Ben Bernanke announced just days ago another round of money printing by the U.S. government. The Fed’s third attempt at such a maneuver will involve having the government buy $40 billion in mortgage-backed securities per month, with no set end date. There is a petition process set up to urge members of Congress to act on plans to audit the Fed. The central bank’s objective is to keep interest rates low, and thus trigger more spending and more hiring. The Fed has been trying to impact the economy for the duration of Barack Obama’s tenure in the White House, but its usual tool – lowering interest rates – is ineffective now since those rates have been approaching zero for most of that time.
Paul for years has advocated a full audit of the Federal Reserve, which routinely shrouds its actions in secrecy. Just last week, the U.S. House on a 327-98 vote adopted a bill that would set an audit process in motion. It now is going to the Senate, where Sen. Harry Reid previously has been receptive to the idea, although there’s no word whether he’ll take time for it now. “The Fed is intent on ignoring that their policy of low interest rates in the past brought us the financial crisis of 2008 and their zero interest rate policy of today is prolonging the agony while sowing the seeds for a much larger crash in future,” Paul said today. “Their manipulation of interest rates – essentially price setting – can only ever have destructive effects on the American economy. Artificially low interest rates continue to cause malinvestment and misallocation of resources throughout the economy. Savers and investors suffer from negative real interest rates, while the federal government takes advantage of the Fed’s zero interest rate policy to run up gargantuan fiscal deficits. “These problems cannot and will not be remedied until the Fed stops manipulating the price of money,” he said.
The hearing is called, “The Price of Money: Consequences of the Federal Reserve’s Zero Interest Rate Policy,” and will be held on Sept. 21st, at 9:30 a.m. in room 2128 of the Rayburn House Office Building in Washington. Among those expected to testify are James Grant, editor of Grant’s Interest Rate Observer, and Lewis E. Lehrman, senior partner, L.E. Lehrman & Co. Paul long has argued that the Federal Reserve simply is illegal. Some of his concerns have revolved around Article 1, Section 8 of the Constitution, which assigns to Congress the right to coin money. There is no mention in the Constitution of a central bank, and it wasn’t until the Federal Reserve Act of 1913 that the Fed was created. Paul previously has said, “Throughout its nearly 100-year history, the Federal Reserve has presided over the near-complete destruction of the United States dollar. Since 1913 the dollar has lost over 95 percent of its purchasing power, aided and abetted by the Federal Reserve’s loose monetary policy.” And he’s proposed repeatedly the idea of auditing the Fed to determine exactly what it has been doing and then begin making corrections. With a book titled “End the Fed,” he’s made no secret of his ultimate goal. That the Fed is at least partly to blame for the financial problems that have developed in the U.S. seems not to be in dispute.
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Federal Reserve accused of setting U.S. up for ‘crash’
