STAFF NEWS & ANALYSIS
Republican Candidates Rip the Fed … Again
By Daily Bell Staff - November 11, 2015

Chris Christie calls for Federal Reserve to be audited during GOP candidate debate … Several Republican presidential candidates on Tuesday accused the Federal Reserve of keeping U.S. interest rates low for political reasons, and one called for replacing Fed Chair Janet Yellen. "The Fed should be audited and the Fed should stop playing politics with our money supply," New Jersey Governor Chris Christie said in the "undercard" Republican debate hosted by Fox Business Network. – Raw Story

Dominant Social Theme: Let's not talk about the Fed. It's boring and even irrelevant.

Free-Market Analysis: Ordinarily we would post something on a different topic given that our first article examined central banking. However, this report (see above) on the Republic debate is important to note, as it provides further evidence of opposition to a central Fed meme – namely that the Fed is neither competent nor providing a necessary service.

Almost a half-decade ago, we announced the Federal Reserve as a credible monetary facility was in significant difficulty and was losing support of the citizenry it was supposed to serve. Since then we've seen nothing to change that conclusion. The Fed as an institution is certainly in trouble and continues to lose credibility.

The Fed came in for significant criticism last night. During the Republican "undercard" debate – as in a previous late October debate – the Fed was targeted by national politicians, and its strategies and even right to exist were questioned. Most prominently, New Jersey Governor Chris Christie came out for a Fed audit, supporting a bill introduced by libertarian senator Rand Paul that has some 30 cosponsors.

Former US Senator Rick Santorum pointed out that low rates are harming the finances of senior citizens. Seniors traditionally have lived off interest on savings but with rates so low the proceeds derived from savings and investments are increasingly modest.

Former Arkansas Governor Mike Huckabee reportedly supported Santorum on the issue and then in a somewhat astonishing statement seemed to call for a return to some sort of gold standard. "The Fed has manipulated the dollar, so it doesn't have a standard. Tie the dollar to something fixed and if it's not going to be gold, make it the commodity basket." Huckabee added that if elected he would replace the current Fed chairman Janet Yellen.

These sentiments reinforced points made at the previous Republican debate and described in October 29th post by The Wall Street Journal:

In GOP Debate, Ted Cruz and Rand Paul Tear at Fundamentals of the Fed … The senators called for new operating regimes that would limit the central bank's influence … Sen. Ted Cruz of Texas and Sen. Rand Paul of Kentucky criticized the Fed's impact on the economy and called for new operating regimes that would limit the central bank's influence.

Mr. Cruz lambasted what he saw as a "star chamber" of central bankers implementing radical policies with little democratic accountability. He was particularly concerned with the now-ended campaigns of long-term bond purchases the Fed employed to provide stimulus

Fed officials must be increasingly alarmed by the anti-Fed political stances of the candidates. Even before the debates, the Fed had targeted Rand Paul and his bill. This did not deter Paul, who has reintroduced the bill, predictably provoking further responses from the Fed. Here, from The Pulse 2016:

Federal Reserve Doesn't Like Paul's "Audit the Fed" Bill

In a shocking twist … Federal Reserve Vice-Chair Stanley Fischer decided that the Fed really shouldn't be audited by Congress. Strangely, Fischer made his impassioned plea for the political immunity of America's central bank…to Canada. Speaking at the Canadian embassy in Washington, Fischer criticized the audit the Fed legislation backed most prominently by presidential candidate Sen. Rand Paul, R-Ky.

Paul's Fed audit, and separate legislation backed by Republicans on the House Financial Services Committee, would "reflect an effort by the Congress to influence the Fed's policy decisions," Fischer warned. He did not mention Paul or any other lawmakers by name. In text prepared for the speech, Fischer said the bills would subject the Fed "to the very sort of political pressure from which experience suggests central banks should be independent."

Leaving aside the strange choice of venue, Fischer's assertion that the Federal Reserve should not be accountable to elected representatives of the people displays a level of hubris not seen since his 1999 prediction that the Fed could manage the economy better without even the modest restraint of a monetary rule like gold.

The trouble with the Fed's responses is that they do not take place in a vacuum. The Fed has had a full century to establish a track record and any objective scrutiny would surely conclude that it is not a very good one.

Fischer wants people to believe that congressional oversight would impede the Fed and have a deleterious effect on its performance. But that ship has sailed, hasn't it? How many US citizens who have any understanding of monetary policy would answer in the affirmative when asked if the Fed was doing a "good job"?

Ultimately, the only significant response that the Fed can make – as absurd as it sounds – is to make sotto voce threats to damage the economy in the hopes that politicians will cease provoking a confrontation. The last time a central bank tried something like this was during President Andrew Jackson's term of office. He shut down that version of a US central bank, nonetheless, and the US was not the recipient of another one until 1913.

The current Fed criticism is not yet at a fever pitch, but it is trending in that direction. The Fed has gone from not being able to provide certain information to congressional overseers to trying to fend off legislative demands for a broad array of data that could prove potentially damaging if not fatal to whatever shreds of credibility the Fed has left.

This is significant. Something is going to change. The current attacks certainly call for increased investor vigilance. The issue is not so much whether the Fed's status will "evolve" as it is what supporters of the Fed will do if they grow increasingly desperate.

At the very top of the worldwide central banking hierarchy are doubtless those who have a vested interest in a Fed "takedown" because the resultant chaos might hasten the formation of a truly global currency. But there are also many with a good deal to lose: those who might not take kindly to certain sacrifices doubtless being contemplated.

After Thoughts

Again, the progression of this meme continues and is quite serious. It is not going away and eventually will have significant ramifications. Investors, in particular, need to take care. Please consider signing up for The Daily Bell Newswire, below, to receive additional information that may prove helpful as these extraordinarily important events continue to evolve.

Posted in STAFF NEWS & ANALYSIS
  • Liberty4ev

    What a difference 4 years makes. In the past, several of those folks rolled their eyes whenever Ron Paul brought up the Fed. Now they sound just like him. I’m happy they at least decided to educate themselves. Huckabee’s rant–and I’m not a fan–was the best, followed by Rand Paul. People need a simple explanation about how Fed policy affects them directly. They did that.

  • michaelrivero

    The FED is a system of debt enslavement. It deserves to be ripped. In fact it deserves a good ass-whupping!

    • Michael Rivero is founder of a leading alternative website whatreallyhappened.com

  • Centurian

    “But that ship has sailed, hasn’t it?” As we say in our house, “That ship has sunk!”

  • Samarami

    I’d say the Fed is doing an excellent job. Because “it” does not exist. But even libertarian writers all too often proceed as if “it” did.

    Individuals exist. Men and women involved in leadership rolls of that brainless abstraction called “The Fed” are highly skilled in obfuscatory intercourse. That is their function. In fact, it is virtually their ONLY function. They are fulfilling their rolls quite well. As are those individuals in another mindless distraction called “U S Congress”. And in central banking organizations and congresses encompassing the entire globe.

    The scary fact is that large numbers listen to those insane lunatics. And comment. And vote. And write letters. And form grave opinions regarding the discombobulations of those insane fools.

    The agenda is robbery. But none dare call it that. An American hero by the name of Irwin Schiff did. http://www.nytimes.com/2015/10/20/business/yourtaxes/irwin-schiff-fervent-opponent-of-federal-income-taxes-dies-at-87.html?_r=0 He died penniless, handcuffed to his bed in a federal penitentiary for his broadcasting of the truth.

    Karl Marx was a brilliant man. He transformed a concept called “reification” into a precise science. https://en.wikipedia.org/wiki/Reification_%28Marxism%29 The concept is merely another fallacy https://en.wikipedia.org/wiki/Reification_%28fallacy%29 that should be visible to all. But it is used brilliantly in the science of rulership.

    Cease.

    And abstain from beans: http://www.anarchism.net/anarchism_abstainfrombeans.htm

    Oh — and batten down the hatches, Mates! This blow is for real. Sam

  • Praetor

    As usual the politicos will pander to get a vote. Will they do anything, nah. We all know the only ones that have run for pres. calling for audit and banning the fed. from the beginning and what the party elites have done to them, all is smoke and mirrors. The fever pitch comes when negative interest rates cause deduction from savings accounts to have a savings account, that is when the fed. is dead. Till that day all is vote seeking, vote for me I’ll do away with the fed. Yah right!!!

  • Doski

    While the Republican Candidates have begun to see the light the true test of their convictions SHOULD BE measured by the number and length of Convictions of the Federal Reserve participants. In reality the whole mess will lead right back to CONgress which first Institutionalized it then Ignored the results of Zero Oversight for the last 100+ years.

    Belgium ? Really ? ? ? The Monetizing of U.S. Debt is in full force and being Routed through Belgium although once the veil has been lifted the world will have to face the reality that it has been done so via the “Fed”. Just another Temporary Illusion perpetrated by political class to hide their Ignorance and Incompetence. By comparison Bernie Maddoff is a piker at the Illusionary Arts (Ponzi Schemes).

    In retrospect it is the “Working Class” that ALWAYS get stuck with the Tab for the Incompetence of the Political Class. Until the Taxpayers, en mass, wake up and face that simple truth thing will only go from worse to worst. When the heads of the Fed’s are publicly displayed upon the end of a Pike the Political Class will know their gambling days are over.

  • 2prickit

    Usury: Supposedly not a person of Islam would do so, so why would ever a Christian enter into usury and dismiss its implications. It is just this way that US Treasury leads us taxpayers to perdition, encouraging usury with tax emption status. This “legality” offers a direct temptation against one’s pursuit of property through saving and investing profits. Now, being that the enforcement arm of this terrible system is the IRS, and that IRS preceded the Fed in its coming, it seems to me this repeated theme — a powerful POTUS need save us– is misdirected when disarming the IRS would seem one effective way of crippling the demon. Yes, was it not St. George that slew the dragon? Or is that just another fairy tale?

  • Blank Reg

    Something my grandfather paid 4 cents for in 1912 costs a dollar today. Something my father paid 13 cents for in 1965 costs a dollar today. Something I paid 44 cents for in 1985 costs a dollar today. This is the money-destroying legacy of 100+ years of the Fed. This is something that can be taught to even the lowest of low-information voters. That’s all one needs to really grasp.

  • windsor1

    So what is wrong with a private, closely held non public agency that pays no taxes, has no accountability and has no obligation to produce public financial information printing and charging interest on the nations money it produces as well as setting interest rate policy?? It is effectively a non public private corporation and as such it’s first obligation is to the shareholders and not it’s clients (US gov’t and public and anyone else who uses Federal Reserve notes). Considering the importance of currency to the operation of a society, does anyone see a problem with this picture? Are there problems when a private corporate does government business. Again the first order of business is to enrich shareholders. Take for example the private prison system in the US. The US as a result of privatizing prisons has the highest incarceration rate in the world and judges are pressured to impose prison terms wherever they can.
    The Fed argued at its formation that a politically controlled Treasury Department accountable directly to politicians in the creation of money was akin to having the fox manage the chicken coop. The argument was that the Fed could stabilize the banking system by offering financial assistance to failing banks and could stabilize the currency. This was after JP Morgan sent out a rumor that almost unravelled the banking system in 1907 so the experience was fresh in 1913 when the Fed was created. Well how has it worked out?. The full extent is unknown since there are no publicly available financial info on the fed. The evidence we do have is several financial crises, the best know being the 1929 great depression and major setbacks in 1974,1987, 2007. Since its formation the currency has lost 95% of its value and in the process was made non convertible into gold. Because a private defacto corporation controls the creation of money and sells the service to the government in the form of interest paying bonds Americans pay income tax. If the Treasury controlled money creation the gov’t could create interest free money and the need for income taxes would not exist and all Americans would enjoy a much higher standard of living.
    What useful purpose would a one time audit of the Fed serve? Would it not be better for politicians to call for the elimination of this parasitic institution that defrauds and bleeds out all American citizens. How could an organization that is staffed with Economic superstars like Geithner, Summers, Yellen, Bernake, Greenspan get the greatest nation on the planet into so many economic jackpots. It is blunder after blunder after blunder. The latest solution is to solve a debt based crisis by creating even more debt. The more debt that is created the more revenue the Fed takes in. From my vantage point the shareholder sure seems to come first, leaving the taxpayer to pick up the tab for the blunders.
    To go in and do a single audit in my opinion is a little like investigating an airplane crash, finding a structural member to be the cause of the crash and not fixing the flaw on all of the remaining planes with the same design. The push to audit the fed again validates my opinion that the bankers own the political apparatus. The politicians recognize the public pressure and negative sentiment towards the fed but are pressured on the other side by a fed who wants anonymity. The path of least resistance is to give lip service to public sentiment and follow up making gay rights an important election plank hoping the public will forget about the fed.
    Bottom line the Federal Reserve is an antiquated institution that has outlived its usefullness. My instincts tell me that it will soon crash and burn in the near term leaving no paper trail and a new and improved central bank of central banks will emerge that is managed by the same guys and gals that are now in control of the existing financial system. We will then be chipped and be using a single currency.

  • Philip

    Philip. From windsor1 down especially some wonderful comments. Having read the biography of WILLIAM COBBETT 1949 edition by W B Pemberton I can sympathize with all of you. Cobbett a farm boy taught to read by his father and from then on incredibly self educated became a member of parliament at age 71.He fought against government (s) for 50 years and they in turn used the justice system to give him a 2 year jail sentence. He never gave up ridiculing the National Debt, paper-money and its depreciation in purchasing power, along with taxation, pointing out that more than 50% of the farm workers wages went in taxes. Nothing has changed and this was the early 19th century.The moral standards of politicians then were just as heinous as they are today. Cobbett never brought about change and it wasn’t from want of trying. The problem of paper-money, wars and corruption he documented well, but it was the use of fiat money he decried throughout his later life. The same banking usurious scum were there then as they are today. If there is an answer to this day it’s not in my comprehension, but at least we have the DB and other networks for people educate themselves.

  • Pilgrim

    “There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.” John Adams 1826

  • Pilgrim

    The history of money is the history of government efforts to destroy money. – Ludwig Von Mises

    We have every reason to expect governments to exploit their positions as monopolists of the production of money in ways that increase their power and benefit favored constituencies. – Lew Rockwell

    There are two potential violators of man’s rights: the criminals and the government. The great achievement of the United States was to draw a distinction between the these two – by forbidding to the second [government] the legalized version of the activities of the first [private plunder].” – Ayn Rand in her essay, “Man’s Rights” (1963)

    “We hang the petty thieves and appoint the great ones to public office.” Aesop quotes

    By definition, thugs acquire power illegitimately. They keep it unlawfully. And they exercise it illegally — regardless of their professed concern for the “people”. – Victor Davis Hanson

    “A wise and frugal government…shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government”: Thomas Jefferson

    “The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.” — Lord Acton

loading
Sign up now and join our exclusive international network for free-market thinkers
Privacy Assured: We will NEVER share your personal information.