6 economists on why Ron Paul’s Fed audit idea is wrong

August 3, 2009

I asked a half dozen economists who are very concerned about Federal Reserve independence what they thought about Rep. Ron Paul’s bill to audit the Fed. This was my specific question: “Given that Congress can already grill the Fed chairman during Humphrey-Hawkins (and occasional other congressional appearances), how would a GAO audit really threaten Fed independence in practical terms?”

Here is what they told me:

Robert Schiller, Yale University:

The GAO audit proposal is from Ron Paul, who has advocated abolishing the Fed and returning to the gold standard. Maybe people think that this is his foot in the door, a first step in the plan. When King Louis 16 called for a meeting of the Estates General in France, it led to a chain of events that resulted in his beheading!

Lee Ohanian, UCLA

My view is that there is a major difference between general economic questions from Congress to a Fed that isn’t open to a GAO audit and that doesn’t get its budget from Congress, versus a detailed audit by the GAO, which would create an explicit Congressional assessment of Fed operating procedures. An important reason why so many economists argue for independence is because there is substantial cross-country evidence that Central Banks which are more closely tied to the legislature have much higher inflation rates than in highly independent Central Banks. I do think Congress should be able to ask questions of the Fed during regular testimony, and Chairman Bernanke has certainly done more than his predecessors to explain what the Fed is doing and why.

James Hamilton, UC-San Diego

My own concern is not about a specific step such as a proposed audit but rather is a response to what I see as a changing political climate in which I fear it will be more difficult for the Fed to withstand pressure to monetize the deficit.

You ask, why should we be concerned about an audit if we’re not concerned about Congress grilling representatives of the Fed?  My answer is, I am concerned about the manner in which Congress has been grilling representatives of the Fed.

Anil Kashyap, University of Chicago

An audit suggests that they can force them to supply all the background information in real time that goes into a decision and presumably compel all members of the FOMC to share their thinking on any issue in real time.  This information is disclosed after 5 years, with good reason.

The spirit of the Paul bill seems to be that having FOMC meetings live on C-SPAN would be best way to make monetary policy.  That would be a disaster.  (Akin not just to having Supreme Court arguments on TV but also the process of them writing the decisions being televised.)

You want people to be able to change their mind and to be able to vigorously debate all sides of an issue.  If you put all this in public and subject to immediate second guessing it will shut down the give and take that is critical to reaching good decisions.

Michael Woodford, Columbia University

The level of intrusiveness of the GAO would surely be significantly greater — indeed, there would be no point to this proposal, given Humphrey-Hawkins, if it were not the intention of the bill’s proponents to exert Congressional control of monetary policy decisions in a way that the Humphrey-Hawkins testimony alone does not allow them to.

It is important to remember that the GAO already has the authority to audit the Fed, and does, except that the bill giving the GAO this authority in 1978 specifically excluded certain aspects of the Fed’s activities from GAO audits — essentially, decisions about monetary policy. The only purpose of the new bill is therefore to decrease the Fed’s independence with regard to monetary policy decisions.
Considerable historical experience suggests that political interference with monetary policy decisions can lead to regrettable outcomes — which is why Congress itself decided to forswear such interference. The dangers are especially great at a moment like the present one, when the prospect of large government deficits for years to come could easily make short-sighted decisions to use monetary policy to facilitate the financing of those deficits all too tempting. It is ironic that many of the proponents of reining in the Fed claim that their concern is preventing the Fed from further weakening the value of the currency, when the opposite would almost certainly be the consequence of their bill if passed.

Michael Feroli, JPMorgan

That’s a fair question. At H-H the Chairman is accountable for the Fed’s decisions. But I do think there is a distinction between asking questions and having all the conversations audited. For one, that could stifle the openness of the debate: to take an example, the Chairman always has to dance around the issue of NAIRU because it can be misperceived by economically illiterate members of Congress as meaning the Fed wants to engineer a certain amount of unemployment.

With audited conversations, the debate could become stilted. I think a GAO audit would also risk appearing as an official verdict on Fed decisions, as opposed to twenty different Congressmen questioning the Fed, which is much more clearly the opinions of some politicians. Finally, even if the step isn’t a major one, it’s a move in the wrong direction: if the markets and foreign investors perceive it that way, it could immediately push up borrowing costs even if theaudit are only a symbolic increasing of Congressional oversight of monetary policy.


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“An audit suggests that they”

Anil Kashyap determines what the bill “suggests”?

This is pure speculation.

Is he a impartial, objective source, to use?

There seems to a major conflict of interest here, between objective journalism and the organization that pays you money.

http://www.chicagobooth.edu/faculty/bio. aspx?person_id=12825159680

“Prior to joining the Chicago Booth faculty in 1991, Kashyap spent three years as an economist for the Board of Governors for the Federal Reserve System. He currently works as a consultant for the Federal Reserve Bank of Chicago, and serves as a member of the Economic Advisory Panel of the Federal Reserve Bank of New York, and as a Research Associate for the National Bureau of Economic Research (NBER).”

Posted by Devin | Report as abusive

Robert Schiller’s response is utterly vacant and worthless. Paul’s stated goal is indeed to end the fed, but an economist should be able to come up with a better reason for denying an audit than an ad hominem attack.

Some of the other economists seem to think that Paul’s goal is realtime monitoring of Fed deliberations, though Paul has specifically stated otherwise. He believes that a 5-year delay is too long, and I agree. Five months, his suggested alternative, is much more reasonable.

He also stresses that he’s not after increased congressional control–and if you know his character you will readily believe him–but that the American people ought to know about the Fed’s monetary policy decisions, since it is the people’s money that they’re playing with. The Fed within the past 8 months has created over $10 trillion dollars, $2 trillion on its balance sheets and $8 trillion off. Questions were asked during a congressional hearing, and the Fed’s people claimed to have no idea where it went. It’s things like this that require the Fed to be audited.

Posted by Thom D. | Report as abusive

To Robert Schiller, Yale University: You are correct, a GAO audit of the Fed may lead to abolishing the Fed. Perhaps the audit will show that abolishing the Fed is in the best interests of the people.

To Lee Ohanian, UCLA: Since when did we start equating independence with secrecy?

To James Hamilton, UC-San Diego: Are you suggesting that Congress no longer even be allowed to question the Fed?

To Michael Woodford, Columbia University: Here is another one equating independence with secrecy, plus some fear mongering about potential monetary inflation, as if that isn’t happening today.

To Michael Feroli, JPMorgan: Perhaps you can point me to the where in the text of HR 1207 you see auditing of conversations; I don’t see it.

Posted by yoikes | Report as abusive

Reuters owned by Rothchilds, Fed owned by Rothchilds, enough said.

Posted by Brad | Report as abusive

Some wanna be economists paid by the same people who are fighting an Audit!
Their “arguments” are weak, it is propaganda indeed.
Are these the same economists who told us there was no recession im Horizon when it was under their nose? Are these the same pseudo economists who told us the US economy fundamentals are strong? Seriously, you gys are too stupid to find an argument against auditing the fed.
Let me help you out: There can’t be any valid argument against the right of the American people to know who gets their hard earned money!
Pethokukis: we know on which payroll you are

Posted by James | Report as abusive

The above economists’ arguments are ridiculous. The American people deserve to know the inner-workings of the Federal Reserve, a private organization that has more control over our economy and the value of the dollar than any other entity. Recently, Congressman Grayson asked Bernanke, “Where did the $500 Billion go?” Bernanke’s response? “I don’t know”> You don’t know, Ben? Or you don’t want to say? That alone deserves an immediate audit of the Fed – they are creating money by monetizing our debt, providing hundreds of billions to FOREIGN central banks, and have no accountability. I’ll respond to that the same way an officer would respond during a suspicious traffic stop: “If you don’t have anything to hide, then surely you don’t mind me looking!” :)

Posted by Brian | Report as abusive

“Independence” is a buzz word for secrecy when it’s used by quasi-government entity.
Now, go ask the American taxpayers, who can be audited by the IRS, if they think the government agencies or Federal Reserve should be held to the same standard.

Posted by S Englert | Report as abusive

You asked JP Morgan if the Fed should be audited? Bwahahaha! Their founder helped found the Federal Reserve and they and Goldman Sach benefit greatly from its actions (especially within the last 12 months). Think JP might be just SLIGHTLY biased?

Posted by Ed | Report as abusive

who says beheading Bernake is a bad thing?

Posted by bob barker | Report as abusive

You should have asked those economists what think they think about Ponzi schemes. The Federal Reserve is operating the nation’s largest, according to former New York Gov. Eliot Spitzer.
Bernie Madoff recently was sentenced to 150 years in prison for running a $50 billion Ponzi scheme. No wonder Ben Bernanke and the Federal Reserve want to keep their trillion-dollar criminal operation a secret.

Posted by S Englert | Report as abusive

My question to James – what makes you think that the Fed is impartial? It isn’t. It makes purely political decisions masquerading as impartial judgement. Every economist agreed that the bailout was a bad idea. Only politicians and Ben Bernanke thought it was a good idea. Every economist dreads about the moral hazard cost that has been introduced through bailouts and “too big to fail” mentality. Only Ben Bernanke and politicians think moral hazard is just fine. Why don’t you think for a change?

Posted by DH | Report as abusive

There is a huge economic literature on information uncertainty that shows that more uncertain information content is higher the economic costs that come out of economic decision making. The idea of more transparency is to get rid of that economic cost which is based on pure speculation of “what will the Fed do.” Granted, that means economic reporters have to find more content to fill their rag, but it will be huge savings in economic costs for the rest of the economy.

Posted by DH | Report as abusive

“the Chairman always has to dance around the issue of NAIRU because it can be misperceived by economically illiterate members of Congress as meaning the Fed wants to engineer a certain amount of unemployment.”

It is offensive to me that these economists are comfortable with the notion of the Chair of the Fed telling half-truths and perhaps outright lies to congress (and therefore to the American people) because of concern that we are too ‘financially illiterate’ to handle the truth.

How about we get the pure, unfiltered truth, and we let the markets work out for themselves what is or is not being engineered?

As to the scare-mongering re: rampant inflation as a result of the Fed audit – someone please explain to this ‘financially illiterate’ citizen what long-term detriment can come from an audit [and eventual abolishment?] of the Fed that does not pale next to the harm caused by the current system of hard leverage and financial asset inflation.

Posted by hariolor | Report as abusive

I always have to smile a little when I take the time to research any person that tries to argue that more clarity from the people who control the money for a large economy like the U.S. is not needed.

Strange how so few of them actually realize that you cannot keep the masses ignorant forever. The bottom line is that in today’s world of easily gathered information, the people will now begin to demand accountability from their gov’ts and with good reason.

The last few decades have been rife with legalized theft by greedy gov’t & even the greedier financial sector and I think that the people are now waking up, much to the detriment of those very people who have profited so much.

It’s about time.

It seems to me that in nearly all cases, there is a connection somewhere in the past or in the present with opponents of anything that gives the people a break.

Either these opponents have worked for or with or advised the FED, or have been involved in some capacity with Central Banks or other Banking institutions. It’s so obvious what is happening here.

Like someone up above mentioned: “The Rothschilds own it all, ’nuff said.”

It is difficult not to agree with the simplicity and the truth of that statement.

Posted by D. Bosch | Report as abusive

Maybe your question should have been worded a bit differently. Maybe something like:

“The Fed was created to keep inflation in check and the economy stable. Given the fact that the US dollar has lost 95% of its value and we have suffered chain bubbles since the feds creation, should not Congress have audited the Fed decades ago?”

Perhaps you could have asked something that had to do with the current economic times. Maybe Something like:

“We have suffered one of the most massive bubbles of all time. So called journalists are too busy fawning over Bernake and interviewing him about his home town to actually question him about his disastrous policies and economic predictions leading up to this crash. Fortunately independent citizens have chronicled some of the fed’s economic insight as they drove this country off a cliff in videos such as http://www.youtube.com/watch?v=9QpD64GUo Xw.

Given that Ron Paul precisely predicted the current bubble and crash on Sep 10, 2003 when Addressing the House Financial services cmte., should we start listening to him rather than to those who have been 100% wrong in their predictions?”

Perhaps these types of questions might have received different answers but maybe not. Maybe you should question the 1% of economists who accurately and precisely predicted the current ecomonic crises rather than some of the 99% who did not. How about this guy http://www.youtube.com/watch?v=2I0QN-FYk pw.

Posted by Jack | Report as abusive

How many economists did you ask in total before you cherry picked the responses you posted? Anyone with an IQ over 7 can see an agenda ridden “reporter” like you for what you are. Unfortunately most Americans don’t have an IQ that high. When you first got into the business did you think you would end up a media pawn? Is this what you aspired to? The length the controlled media goes to in order to spew out is both pathetic and scary.

Posted by Ed Page | Report as abusive

It seems that anyone would be able to take apart these awful arguments. I won’t bother to do so as your insightful readers already have.

What I find disturbing is even though the above arguments are fallacious, the writer still thought it important to title this “6 economists on why Ron Paul’s Fed Audit is wrong.”

In today’s world many people do nothing more than peruse headlines. This misleading title makes it sound as if the arguments presented in this piece are reasonable.

Worse, it seems the writer himself has been snowed by these pathetic reasons. The real story is that this writer asked 6 “economists” about Ron Paul’s bill and every single one of them is against it – why? Well, they cannot articulate a real reason so they have resorted to scare tactics, ad hominem (attack the person not the ideas)attacks, straw men (pretending something bad will happen that there is no evidence supporting) and finally lying about what this plan entails.

Wouldn’t a better title have been “Ron Paul’s Audit the Fed bill is scaring economists so much that they have had to resort to lies to attack it”

If we can’t even get truth when so called economists discuss this bill, how are we going to get truth in auditing the Fed?

Posted by Alex | Report as abusive

In re-reading Mr. Shiller’s argument, it appears the writer of this piece unfairly characterized the comment as a reason why Ron Paul’s audit bill is flawed. I don’t think that was what the comment was saying at all.

The question put to Mr. Shiller was how would a GAO audit threaten the fed?

It seems that Mr. Shiller is trying to suggest that if we all knew what the Fed was doing we might revolt! (At least that is what happened to Louis 16. Read about the Estates General).

Giving Mr. Shiller the benefit of the doubt, I would say that he is on Ron Paul’s side, thinks that the Fed is an awful entity and if we all knew the real facts we would go after them with proverbial pitchforks. (Which would indeed be a reason why the Fed would be nervous about an audit.)

Posted by Alex | Report as abusive

Fed Independance? ha! Good one.

Posted by Steve | Report as abusive

6 idiot economists VS 75% of the American public that supports the Bill HR 1207 and an Audit of the Ferderal Reserve. Gee I wonder who’s opinion matters here?

James Pethokoukis, get bent. Schill.

Posted by Jeff | Report as abusive

Can you tell the different between;
a friend and a snake-oil salesperson?


Posted by Liberty for Life | Report as abusive

Who cares what six economists think. Im sure non of the six predicted we would be in financial ruin right now sinking trillions and trillions each year in debt while the fed rights out blank checks to the big banks sinking us even further into debt.

The sad thing is people are talking about the recession being over because the stock market went up some now were somehow out of this mess. Ask California if its over?

All I see is more trillions of debt added in, with more coming with national health care, energy plans etc…. And guess who’s printing the money to put us futher into debt? The FED…. An audit is needed, and I would trust peoples opinion who have been predicting the economic collapse for years now, some for a decade or more over some Professor’s personal opinion on the matter.

Its revolting hearing some of the comments on youtube video’s where they are asking Bernanke where 500 Billion dollars went and he cant even answer them, hasnt a clue.

Posted by Rob | Report as abusive

ANYBODY against Auditing the Fereral Reserve is CLEARLY ON THE PAYROLL!!!! They stole/lost $24 trillion dollars!!!!

Posted by David Kearns | Report as abusive

The US Private Federal Reserve is part of an international banking cartel that is stealing the wealth of the world for themselves. Since the Private Federal Reserve was created in 1913 the USD has LOST 96% of it’s purchasing power. I think Americans deserve to see everything the Private Federal Reserve does. We need a full Audit of the Private Federal Reserve.

Posted by Tim | Report as abusive

Give me control of a nation’s money and I care not who makes the laws – Mayer Amschel Rothschild

Posted by Tim | Report as abusive

I am worried about the political independence of the Fed. It appears that the Fed unfairly favors Goldman Sachs/JP Morgan and otheer primary dealers at the expense of politically unconnected taxpayers like myself. That is why I would like a audit. We need to see who (and how much) they are lending all the money to and we need to uncover the political favovitism that is happening right now.

The information leakage that occurs with primary dealers alone is a hugely unfair advantage that gives big banks a head start over the small investor. Of course the JP Morgan economist is not favor of a audit…IS this article a joke?

Posted by gabe | Report as abusive

The economic illiteracy of the majority of commenters here is astonishing. Abolishing the fed might make you the Ron Paul supporters feel good, but do you have any grasp of how the Fed currently operates and its effects on the economy? Feroli’s comments are fairly accurate as to the effects of perceived lack of Fed independence on the real side of the economy. Perhaps you guys deserve what you ask for when the economy tanks, then you might learn a lesson or two. Please educate yourself before exposing your ignorance, dusting off your macro textbook from college shouldn’t take more than few minutes.

Posted by MN taxpayer | Report as abusive

The prejudicial presupposition of your question is that that ‘a GAO audit threatens Fed independence’. You accomplish this deception or unthinking assumption by using the word ‘how’ in your question. If you REALLY want to be impartial (do you?) then you should give more thought to the formulation of your questions to ensure impartiality. Or is the truth something you are NOT looking for?

“DOES a GAO audit really threaten Fed independence in practical terms?”

I hope you will give more thought to the prejudices (conscious or unconscious) of the questions you are asking and re-formulate them into impartial questions without presuppostions.

Posted by James | Report as abusive

Before 1913 there was no fed to manipulate the economy. It worked well for the most part. Fractional reserve banking is always dangerous. When a bank only keeps a percentage of what they take in, because they are loaning out the money the public deposits. These economists are Kenyens Theorists while Paul is of the Austrian school. So if this writer wanted to get real ideas he would have looked for oppoaing views.

Posted by Michael Nenzoski | Report as abusive

[…] 6. Six economists on why we should not audit the Fed. […]

Posted by Etl World News | Assorted links | Report as abusive

Wow! Only 6 economists had a negative take on Dr. Paul’s bill to audit the FED? Friends, that speaks volumes. Did any of these 6 correctly predict the severity of the current economic downturn? No. Only Ron Paul and Peter Schiff were pointing accurately to our economic future.
I say audit the FED and you may identify me as an economist.

Posted by Clay Tanner II | Report as abusive

I think there is a little bit of conflict of interest with having someone from J.P. Morgan give their views of what should happen with the Fed. Nice little excerpt from Wikipedia below.

Jamie Dimon:
Chairman, President & CEO at
JP Morgan Chase & Co.; a Director of the New York Federal Reserve

And the guy from UC San Diego

“I fear it will be more difficult for the Fed to withstand pressure to monetize the deficit.” [if 1207 goes through]

But that is exactly what “we the people” want. Less inflation.

Posted by SC | Report as abusive

lol another article from this idiot?

Posted by Jarem Israel | Report as abusive

I think he means 6 Wall Street&Fed cronies on why Ron Paul’s Fed audit idea is wrong…. gee why would they be against auditing the FED lol

Posted by Max Power | Report as abusive

Equating secrecy with independence IS a valid point. The card check legislation in the Employee Free Choice Act abolished the secret ballot, and it was immediately pointed out that independent voting would be lost.

I do, however, believe that these economists are somewhat unrealistic given the fact that money was spent, and no accounting was done. Secondly, of course the Fed makes political decisions. How could it not? I think a 5 month time frame makes a lot of sense. Like Ron Paul said, if we looked at what it was, and the Fed could explain what they did after much debate, then what is the issue? But maybe it would cost us more to audit the Fed than the actual cost of the Fed doing business? That would be a net loss for us.

Posted by Patrick | Report as abusive

Sure Ron Paul’s a kook. Printing huge megga amounts of money out of thin air and bailing out criminal bankers is a good thing. Don’t worry about inflation either, becasue a bunch of college boy’s who work at Goldmann Sac’s, Wall St and K St. know otherwise. The jokes on you taxpaying American!

Posted by joe | Report as abusive

to me this still boils down to a world view issue. The world views are polar opposites, not dissimilar from reason vs faith based or folks that process everything via logic vs folks that filter using their “heart” …

…to me the split on the audit the FED is between either a collectivist or individualist … the Collectivists perspective think that Centralized planning is good and that decisions should be made for the greater good while the individualist strongly disagree seeing the individual as the smallest minority that must be protected and any form of Centralized planning is wrong.
To me what we are seeing are polar opposite perspectives … Ron Paul’s audit is what folks seeing the world through the individuals rights len wants … the FED independence folks are all for centralized planning.
No coincidence either that collectivist will sacrifice liberty for safety while individualists will never make such a compromise … To me this is the epic struggle that is going on in the world …
Collectivism vs Individualism. Look around you ..

Posted by LibertyMinded | Report as abusive

Look around you … are you Congressman doing what you want or are they acting in a way that they feel is in your best interest. Why dont they vote based on what the people request when contacted in their offices ? Why is it that protesters are characterized as small fringe groups … is the media manipulating the size of the dissent ?

Posted by LibertyMinded | Report as abusive

If they have nothing to hide, then they should welcome an audit.

Here is a book everyone should read: The Creature from Jekyll Island by G. Edward Griffen. It explains the giant fraud that is happening to us regarding the Federal Reserve. When gold and silver is money, government can’t create as much as they want. When debt is money, there is no limit as we are seeing today.

Posted by Eric | Report as abusive

Interesting, but what these supposed experts fail to realize is the country is financially insolvent because of the Fed. I suggest these so-called experts watch IOUSA. All of the bubbles across the asset classes were artificially blown up by Fed policies that promoted borrowing and spending and misallocation of resources. Look at the silly cash for clunkers. Just another artificial boom that will result in diminished sales later on. We the people need to take back control, and tell the government no more leading us to financial ruin. They should have let everything that was insolvent go under so we could rebuild something viable.

Posted by Ben Straub | Report as abusive

James Pethokoukis cherry picked “expert” outliers to make it appear that all economists agree with him. Nevertheless, cherry picked economists or not, we will have transparency now.

Just look at the comments and you’ll see that we are all in universal agreement. We will pass this audit, and we will find out how the Federal Reserve has used its unchecked power as the fourth branch of government to influence world politics and create effective treaties without congressional approval or oversight.

The bank is a den of vipers, and if I have to run for president myself, we will rout them out.

Posted by Jacob Martin | Report as abusive

Dr. Paul is just waking us up to the “Reality” and telling us that “the system we currently have is flawed!”
We can’t print trillions with no backings and called capitals!

We began as a country, with the “written” rule of law. Although, it’s not perfect but it’s a sensible one adopted by the Founders with highest regards, wise views and visions dedicated to the American people. Not government and/or non-government, the Fed!

The effort to “Audit the Fed Reserve” is the Right thing and will be the greatest thing ever happen to every Americans, since the greed bankers took over in 1913.
A “Federal Reserve Act” bill pasted on a Christmas?

It is the Right of every Americans to question this “private, secretive & unconstitutional” institution, who has unlimited authority to free hand-outs and bail-outs to their Wall Street buddies, with American’s hard-earned dollars. Where does it get this authority from?

We first MUST understand how the money, banking and the Federal Reserve work!
Our dollars lost more than 95% of its value since the Fed was created 1913.

It is the first step to the heart of the issue “the Fed!”
If we believed in the Right to “Free Market Economy” then we should allow the Right of “The Market” to operate and adjust accordingly. Not the monopoly from the central banks or the Fed!

That’s why 75% of Americans now understood this fraud and will support HR 1207 & S 604 bills. The numbers of co-sponsors are growing and that’s from the demand of “We the People” through our representatives and not the (6) soulless economists!

Does that sounds sane or what?

Posted by Liberty for Life | Report as abusive

HR 1207: “Federal Reserve Transparency Act” Facts.

• The Federal Reserve, the unelected central bank of the U.S., enjoys a monopoly over the flow of our money and credit but has never been completely transparent and accountable to Congress since its creation in 1913.
• Since 1913, our dollar has lost more than 95% of its purchasing power.
• In addition to an over $11 trillion national debt (with each American’s share being more than $36,000), Congress, the Treasury, and the Federal Reserve have put us on the hook for almost $13 trillion in bailouts and loans.
• Yet, the Fed refuses to tell Congress which financial institutions have received these funds.
• On February 26, 2009, Congressman Ron Paul introduced HR 1207, the Federal Reserve Transparency Act, which would deliver answers to the American people about how our money is being used.
• HR 1207, which is currently in the House Financial Services Committee, has received the growing support of the House of Representatives within a few short months of its introduction.
• HR 1207 amends section 714 of Title 31 of the U.S. Code to remove the restrictions on how the Government Accountability Office (GAO) can audit the Federal Reserve.
• With these limitations gone, the Fed’s discount window operations, funding facilities, open market operations, and agreements with foreign central banks and governments would all finally be open to congressional oversight.
• The GAO would be required to audit the Fed by the end of 2010 and to report its findings to Congress.
• The Senate version is S 604, the Federal Reserve Sunshine Act.
• Call Congress at (202) 224-3121 and urge your representative and senators to support HR 1207 and S 604.

What are you waiting for, call NOW!!!

Posted by Liberty for Life | Report as abusive

The CEO of JP Morgan is a board member of the Fed and this blogger asks JP Morgan whether or not auditing the Fed is a good idea? Too rich!

Posted by EF | Report as abusive

Hey Feroli, lower asset prices will bankrupt your lend-long and borrow-short firm. If taxpayers did subsidize your company’s cost borrowing money prices would fall to levels that people can pay with little or no debt. Thus your firm has a clear need for the Federal Reserve’s artificially subsidized credit (that first benefits your company before any of the rest of us).

You have no business commenting on this without first outlining you and your firm’s clear conflict of interest.

Posted by EF | Report as abusive

More great “independent journalism” – not one dissenting view. Apparently no need to even give the appearance of evenhandedness. Keep pumping out your propaganda – it just pushes more people to learn the truth online.

Posted by lorax2013 | Report as abusive

James Pethokoukis 75% of the public support an audit! why do we have to put with people like this guy

Posted by antony | Report as abusive

Well if an exec from JP Morgan thinks it’s a bad idea it must be a GREAT idea. I am all for an audit!

Posted by Jeff | Report as abusive

[…] Economists On Why Ron Paul’s Fed Audit Idea Is Wrong (Reuters) James Pethokoukis asks, “How would a GAO audit really threaten Fed independence in practical […]

Posted by Daily Digest for August 4 » New Deal 2.0 | Report as abusive

Remove any and all usury attached to the Fed’s monetary policies – or better yet, put all usury back into american tax payer projects and I may consider an alternative to an outright audit. Otherwise a 3 to 6 month timeframe for congress and the public to know what the Fed did and why is totally reasonable.

Posted by truthseeker7 | Report as abusive

At least specify which type of economics these ‘economists’ study and represent. Keynesian economists are most definitly going to defend the fed because this system of fractional banking IS keynesian economics!

Next time, have one Austrian economist for every keynesian economist, and then we`ll see who makes more sense.

Right now politicians have a license to counterfeit, and it’s the average joe who gets the bill.
inflation doesn’t happen until AFTER the money is printed and introduced to the rest of the money supply through a purchase.
So basically, the first guy who spends the money is spending dollars that are worth more than the rest of our dollars because it has not yet been affected by the inflation that is about to be created (by spending the newly printed money).
example: Fed prints 1 trillion. Purchasing power of the dollar drops by let’s say 5 per cent, so now 1 dollar is equal to 95 cents in relation to it’s old value. The one trillion has caused the decrease in value of the dollar, but the 1 trillion must be spent before the value dropped, meaning it was worth $1, not 95 cents. in conclusion, the person who receives the counerfeit money gets a 5% greater purchasing power than the rest of us. what do we get? 5% less wealth.

Anyone who thinks we should not be in charge of the value of our own money is either corrupt, or confused.

Add to that the fractional banking system, and now you have banks borrowing these counterfeit dollars and selling them for foreign bonds (which are worthless until maturity) AND THEN using these worthless foreign bonds as assets to be used as collateral for what they lend out. THEY LEND OUT 10 times the value of the asset.

So let me get this straight. 100, 000 dollars can be lent out if they hold 10 000 in foreign bonds that haven’t even matured yet. The bonds were bought from money that didn’t exist, printed by the fed, plucked out of thin air by diluting the value of OUR WEALTH.

You guys thought the housing bubble was bad. Wait until this bubble bursts.

Posted by FtheFed | Report as abusive

this sytem might work if it was controlled by the rightful owners of the currency, not some foreign group of international bankers who don;t care about america and only see it as being one big private investment.

maybe then we can get the benefits that were intended, instead of the bankers soaking them up.

Posted by FtheFed | Report as abusive

Hah, these arguments are so frivolous and silly, I thought this was a piece from The Onion at first. This is why news reporting as we know it deserves to die. When Reuters supplies the news, and the news is factually wrong and without any merit whatsoever, is it any wonder people are turning to the Internet to find the truth?

Posted by Jason | Report as abusive

Where there is integrity an audit is always welcomed to prove the fact. Where there is a lack of integrity an audit is feared because the concealed thief will be exposed.

Posted by Capt. Fred | Report as abusive


Posted by GabeNTX | Report as abusive

These “economists” are nothing but a bunch of goddammed court economists – paid puppets of international financial oligarchy.

Go Ron Paul.

Bring back gold standard.

Central Bank is a communist trojan horse.

Posted by Lion F Batoosta | Report as abusive

James Pethokoukis cherry picks six economists that agree with his position – he’s as bad as those pharma ads that say “9 out of 10 doctors prescribe…” James – what is motivating you to engage in this smear campaign against HR 1207? Transparency is always a positive – the government should never lie to the people, nor manipulate the markets. Your stance against this audit is troubling and raises serious questions about your professional journalistic integrity.

Posted by Zack | Report as abusive

behold: the FRAUDits. i’m sure these economists don’t want an audit of the fed because they will be caught in insider trading. “hmm, so you say ‘this bank’ will be getting the money first, eh? better buy their stock quick then before the public knows about it!!”. you all deserve a kick in the teeth

Posted by Evan | Report as abusive

What about the fact that the constitution gives eplicit power of oversight of the creation of money( real money, not fiat currency) to congress but that power was wrestled away in 1913. Now we seek to take that power back and the control freak looters and plunderers don’t like that very much. Pethokoukis should do a story on how the fed was created in secret and against the will of the people. Higher interest rates should have been the policy a long time ago to be a part of the strategy to curtail out of control lending and borrowing and promote saving.

Posted by Roland | Report as abusive

More power to Dr. Ron Paul!! Fight the Creature from Jekyll Island! You certainly have my support.

How can the Fed be independent when it is owned by private corporations?

The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private 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 their Property until their Children will wake up homeless on the continent their Fathers conquered. -Jefferson

Posted by Dont tread on me! | Report as abusive

You are quite the little cheerleader for the Federal Reserve.
I wonder how anyone can defend this den of thieves and sleep at night.

Posted by Idaho | Report as abusive

[…] How Scientific Illiteracy Threatens Our Future — Chris Mooney’s new book — is now out. 6. Six economists on why we should not audit the Fed. VN:F [1.5.8_856]RATE THIS POSTplease wait… VN:RO [1.5.8_856]CURRENT RATING(1 […]

Posted by Assorted links « See the Invisible Hand | Report as abusive

Obviously there are economists out there that don’t think the FED should be audited. Of course there will be, because it is these same economists that believe that the FED is necessary and their jobs probably depend on it. There are also many thousands of economists who don’t believe that the FED is necessary. Not to mention most of the American taxpayers. It is unfair for you and Reuters to only force one side of the issue down the throats of the readers of this website.

I would like to see a political cartoon with James, Reuters, and his “what they say goes” economists and the FED all in bed together. Oh yeah.. Goldman Sachs should be in the bed too!

Posted by jMunny | Report as abusive

I didn’t find any of these arguments compelling. One argument was that auditing would influence decisions negatively, as if, somehow the bill proposes Congress participating in decisions. The bill does not propose this at all.
Another poor argument was that auditing the Fed would weaken the dollar. The Federal Reserve has already managed to drive the dollar to 5% of it value since the inception of the Federal Reserve in 1913. The dollar value is already being greatly debased by the Fed’s policy. I can’t imagine how an audit could make it any worse than it is and the argument didn’t provide any rationale for thsi. If anything, you’d think the Fed might be a little bit more thoughtful about debasing the currency and if it didn’t become more thoughtful, at least this would be exposed and all would understand the problems that the Fed causes by its central planning policies.

Posted by John Wheeler | Report as abusive

The central bank will be abolished. We will do whatever we want with our money. You banker oligarchs need to go back to Europe. You have been trying to control the world’s money for too long. Empire after empire. The buck stops here. Give me liberty or give me death !

Posted by End the Federal Reserve | Report as abusive

This is getting scary. I know us libertarians are prone to this sort of thing but saying “well reuters is owned by the Rothchilds so clearly I don’t need to think any more about this” is just crazy. I’m sure economics as a profession will easily ignore the part of the internet that is nuts and focus on people who really want to talk about how we maintain an independent central bank without sacrificing a necessary level of transparency required by a democratic society. But all the nonsensical commentary here makes it hard to filter the signal from the noise.

Posted by Will | Report as abusive

Ugh. Post rational, logical and fact-based arguments that clearly explain why Uncle Ron’s fan are psychotic fringers and they come out of the wood work. If you all truly want high inflation rates and larger lending fees then by all means, take full access of the Fed. I find it the height of hypocrisy that those who complain about the govt being too big and having too much power can simultaneously advocate for giving Congress control over monetary policy decisions.

Posted by captwasabi | Report as abusive

[…] 6 economists on why Ron Paul’s Fed audit idea is wrong… […]

Posted by » 6 economists on why Ron Paul’s Fed audit idea is wrong… | Report as abusive

[…] James. ”6 Economists on Why Ron Paul’s Fed Audit Idea is Wrong.” Reuters. 3 Aug. 2009. Web. 5 Aug. […]

Posted by Federal Reserve Independence and the Transparency Trojan Horse | Realizing Resonance – Philosophy Blog | Report as abusive