James Pethokoukis

Politics and policy from inside Washington

Ron Paul’s Fed audit idea: Are there any economists in favor?

August 4, 2009

I have taken a lot of heat about my coverage of Ron Paul’s idea to audit the Federal Reserve.  I would love to do a piece on economists in favor of the bill. So I am looking for names.  Now these have to be professional economists, people making a living from teaching or consulting. No self-taugt experts. Please leave names in the comment section below. And here is a bit from the good doctor himself on his bill:

The big guns have lined up against HR 1207, the bill to audit the Federal Reserve. What is it that they are so concerned about? What information are they hiding from the American people? The screed is: transparency is okay except for those things they don’t want to be transparent.

Federal Reserve Chairman Ben Bernanke, argues that HR 1207, the legislation to audit the Federal Reserve, would politicize monetary policy. He claims that monetary policy must remain independent, that is; secret. He ignores history because chairmen of the Federal Reserve in the past, especially when up for reappointment, do their best to accommodate the president with politically driven low interest rates and a bubble economy.

Bernanke argues that the knowledge that their discussions and decisions will one day be scrutinized will compromise the freedom of the Open Market Committee to pursue sound policy. If it is sound and honest and serves no special interest, what’s the problem?

He claims that HR 1207 would give power to Congress to affect monetary policy. He dreamt this up to instill fear, an old statist trick to justify government power. HR 1207 does nothing of the sort. He suggested that the day after an FOMC meeting, Congress could send in the GAO to demand an audit of everything said and done. This is hardly the case. The FOMC function under HR 1207 would not change.

The detailed transcripts of the FOMC meetings are released every 5 years, so why would this be so different and what is it that they don’t want the American people to know? Is there something about the transcripts that need to be kept secret, or are the transcripts actually not verbatim?

Fed sycophants argue that an audit would destroy the financial markets’ faith in the Fed. They say this in the midst of the greatest financial crisis in history brought on by none other than the Federal Reserve. In fact, Chairman Bernanke stated on November 14th 2007, “A considerable amount of evidence indicates that Central Bank transparency increases the effectiveness of monetary policy and enhances economic and financial performance”.

They also argue that an audit would hurt the value of the U.S. dollar. In fact, the Fed, in less than a 100 years of its existence, has reduced the value of the 1914 dollar by 96%.

They claim HR 1207 would raise interest rates. How could it? The Fed sets interest rates and the bill doesn’t interfere with monetary policy. Congress would have no say in the matter and besides, Congress likes low interest rates.

It is argued that the Fed wouldn’t be free to raise interest rates if they thought it necessary. But Bernanke has already assured the Congress that rates are going to stay low for the foreseeable future. And again, this bill does nothing to allow Congress to interfere with interest rate setting.

Fed supporters claim that they want to protect the public’s interest with their secrecy. But the banks and Wall Streets are the opponents of HR 1207, and the people are for it. Just who best represents the public’s interest?

The real question is: why are Wall Street and the Fed so hysterically opposed to HR 1207? Just what information are they so anxious to keep secret? Only an audit of the Federal Reserve will answer these questions.

Comments

Just to make James Pethokoukis’ job easier, I’m going to list 5 professional economists in favour of the Fed audit, and then provide a link to a commentary that outlines their reasoning.1. Professor George Selgin, University of Georgiahttp://www.csmonitor.com/2009/080 3/p09s01-coop.html2. Professor Robert Higgs, formerly of the University of Washington (now with the Independent Institute)http://www.mcclatchydc.com/opi nion/story/73090.html3. Professor Tom DiLorenzo, Loyola Collegehttp://www.thefreemanonline.org/f eatured/the-myth-of-the-independent-fed/ 4. Dean Baker, Center for Economic Policy Researchhttp://www.youtube.com/watch?v=H lzziYs_ZoU5. Professor Sinclair Davidson, RMIT Universityhttp://www.catallaxyfiles.com/ blog/?p=5736

 

Sadly, I am not an economist. I’m merely a knuckledragging Ph.D. astrophysicist who supports HR1207.I look forward to your next paid hatchet job/hit piece.Not.

Posted by Michael P. Owen | Report as abusive
 

We the people need to finally audit the fed after 100 yrs, I mean a complete and independent audit from the inception unto this present day. The truth will be out that is why they are avoiding it like a ‘plague’. Do the people really want to know where and what their money was funding? I foresee a revolution either way, if they get away without an audit, or they do get audited. If they get away without an audit, then By God We the People should be exempt from the same! When the truth is out about who has been funding what, there will be hell to pay. May God the Almighty have mercy on us ALL. Do people even realize what they have done in the last century, all under the guise of freedom, security, and happiness? I know there are some who know the truth, the victims of which most have been silenced through various means. Let no guilty man escape, if it can be avoided…No personal considerations should stand in the way of performing a public duty.

Posted by swansend | Report as abusive
 

Jesus Huerta de Soto is a world class economist at Juan Carlos University, Madrid (Spain) who endorses ending central banking.

Posted by Friedrich Hayek | Report as abusive
 

Economist Judy Shelton supports returning to the gold standard (read her Wall Street Journal article : http://online.wsj.com/article/SB12344059 3696275773.html)

Posted by Friedrich Hayek | Report as abusive
 

All fiat money fails.Did anyone happen to pay an attention to the last 2000 years of history as it went by?

Posted by Rusty Shackleford | Report as abusive
 

Michael “Mish” Shedlock.MikeShedlock@gmail.comMike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management.http://globaleconomicanalysis .blogspot.com/

 

Holy Frijoles, Batman! Seems like we have strong consensus. Actually, abolishing the Fed would be a great start. Then abolish the IRS, CIA, Homeland Security, Dept. of Public Education and replace the entire U.S. Senate. Then, overhaul the entire DoJ. That would be a start. Simultaneously, shrink federal government to 1/10 current size (for starters) and military by 2/3 (what in the hell are we doing in 100 foreign nations?)… yeah man! Revolution, baby!

Posted by Jim McDougall | Report as abusive
 

I would love to see this bill pass. Everyone is talking about transparency in Washington, well, this is one way to do it. We give them billions and trillions of dollars of our hard earned money every year and no one can seem to explain where it is going?! Try doing that with you expense account at work and see how well that goes over. Just as we are required to submit taxes to the IRS every April, we the people should be able to audit our government as well. I work as a tax preparer and bookkeeper and also serve on a few town boards int he town that I live in and I can safely say that if we ever tried that here in New England, we would be hung up by our jibblies and hung out to dry. The Fed should be responsible just like every American to follow the law. Why should they be so special!

Posted by Greg | Report as abusive
 

It’s so incredibly obvious if you look at the bill that it won’t interfere with present monetary policy decisions. It’s just auditing their practices with taxpayer money. Every American should be behind this – why would you NOT audit the Fed?? I get audited for my paltry income, why should the Fed be exempt from an audit of trillions of dollars? This is the only worthwhile bill that should pass through Congress – instead we get all the sunshine and rainbow ‘anti-pain’ bills that just make things worse.

Posted by Landon | Report as abusive
 

What about people who live within their means, never spend more than they can afford, balance their checkbooks, save for a rainy day, and pay back debts promptly?Not “economist” enough for you, or too common-sense?End the Fed.Monetary policy by an exclusive club of private bankers done in secrecy?How can any person with more than a dozen brain cells see logic in this?Absolute insanity.

Posted by Idaho | Report as abusive
 

I favor auditing the Fed when it strays, as it dramatically has, from holding a portfolio of only Treasury paper and loans to commercial banks. The independence of monetary policy is not compromised by auditing the Fed’s fiscal/bailout actions.I’m a professional academic economist, Ph.D. from UCLA. Job history: New York University, University of Georgia, University of Missouri – St. Louis. In the fall I’ll be professor of economics at George Mason University.–Lawrence H. White

 

I looked at your other blog entries, but on each one, I only saw a couple of comments. However, this thread currently has 102, and I think you probably know why.It is because you have written a series of hit pieces full of falsehoods on a very popular piece of legislation, HR 1207, The Federal Reserve Transparency Act of 2009.Now, in your current hit piece, you pretend to be the expert on experts, and declare that you cannot find any experts that support the bill.With your self aggrandizing expert eyes, you blatantly ignore not only the founding fathers, but the scores of economists who have come out for an audit on the news and in print.Now that we, the people, have provided you with hundreds of references to economists and geniuses, alive and dead who would support HR 1207, will you write a follow up to publish their views and support?Will you tell how Jefferson said that “the central bank is an institution of the most deadly hostility existing against the principles and form of our Constitution?”I dare you.Unfortunately, I suspect you’ll issue and misspell a follow up article that ignores the evidence and declares all of the experts we’ve listed in these comments, along with our founding fathers, as “self-taugt.”You are yet to fulfill your quota in “shilling” for the bank, but we won’t stop commenting and representing the truth.Bring it on.Thanks at least for posting Ron Paul’s speech.

Posted by freedom of health | Report as abusive
 

Thomas Woods, Mises InstituteRoderick T. Long, Auburn UniversityHans-Hermann Hoppe, UNLVState University College – BuffaloThomas DiLorenzo, Loyola UJeffrey Herbener, Grove City CollegePeter G. Klein, University of Missouri

Posted by Dave Williams | Report as abusive
 

Peter Schiff, is an economist. President of Euro-Pacific Capital. He is an extremely well known economist that runs a successful investment firm. He supports HR1207.

Posted by Curtis | Report as abusive
 

chris chriscz and debbie -you are hateful people who dont understand tolerance. i was typing fast i was in a hurry and i didnt have time to do a spell chekc so give me a break. i have a right to free speach just like you do. i’m not hateful or bigoted to you like you people are to me. your only hirting your cause by acting like tha to me. you still havent provedt o me that those ‘economists’ really know what there talking about. as i said before and james said if they agree with paul tehen that makesme suspicous. im not going to beleive everything i read on interenet like you do. i actually have to reserch things unlike you and ive read enough about paul and his bill and ill tell you it wont work.

Posted by Dan Phillips | Report as abusive
 

There are many economists that are not in favor of auditing the Federal Reserve. These same economists are could also cannot pass simple tests on physics and thermodynamics. Due to this, they unfortunately cannot understand that our current economy has become unstable due to energy and resource issues. If we want to keep this project that we can the United States going, we eventually will have to issues US dollars without debt, as debt based monetary system becomes increasingly unstable. Learn more by watching the “Crash Course” by Chris Martenson PhD/MBA. http://www.chrismartenson.com

Posted by Daniel J Swanson | Report as abusive
 

pwn3d!

Posted by dvictr | Report as abusive
 

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