Issue Position: Audit the Fed

Issue Position

The United States of America currently faces a plethora of economic challenges, but one of the most significant threats to our nation is the Federal Reserve's reckless monetary policy.

Before we get into the nuts and bolts of the Federal Reserve, let's acknowledge a more foundational problem: The Federal Reserve System is arguably the most powerful organization in the world, yet the vast majority of Americans do not have a sufficient understanding of why it exists and how it affects their daily lives. Even some of the most educated Americans cannot explain how monetary policy works or how it is executed.

Since its creation in 1913, the Federal Reserve has destroyed over 95% of our dollar's value. To understand what I mean, check out the table below:

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Since the passage of the Federal Reserve Act, Congress has foolishly given the Federal Reserve a "Dual Mandate": To promote full employment and stable prices.

What is full employment? Without being overly technical, full employment is the level of unemployment that the economy is capable of sustaining in the long run. Although economists do not agree about the exact percentage, most concede that "full employment" probably occurs at an unemployment rate between 4.0% and 5.5%.

How does the Federal Reserve pursue full employment? For the past two decades, Alan Greenspan and Ben Bernanke have pretented that the business cycle can be subdued indefinitely and that central bankers are critical to the success of world economies. They have incorrectly assumed that as long as the Federal Reserve holds interest rates artificially low, businesses will continue to expand their operations and hire new employees. So the Fed has continually created new money through fractional reserve banking and purchased bonds from banks any time the liquidity in the market began to dry up.

Unfortunately, the Fed's pursuit of full employment has lead to perpetually rising prices and massive asset bubbles like the recent housing crisis and stock market crash. Furthermore, the Federal Reserve has recently tried to hold interest rates artificially low by increasing the monetary base even further. As a result, we are in store for much higher prices in the future and the possible demise of the U.S. dollar. Allow me to explain using the chart below:

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For decades the Federal Reserve has been steadily increasing the monetary base. From 1985 to 2005, there was only one deviation from its consistent inflation strategy-when the Fed tried to calm the markets following the bust of the Tech Bubble it also created. But that injection of liquidity into the markets in they year 2000 looks completely meaningless to what the Fed has been doing for the past four years.

Since the year 2008, the Federal Reserve has increase the monetary base from approximately $800 Billion to around $2.7 Trillion. In other words, the Federal Reserve has more than tripled the amount of currency, coins, and bank deposits held at the Federal Reserve. (For a more detailed analysis of this topic, check out "Chard Reid explains the Fed" on my Videos page.)

The problem with this approach is very obvious. Congressman Ron Paul recently said, "As the world economy continues to falter in spite of -- or rather because of -- cheap money doled out by the Federal Reserve, its ability to deceive financial markets and American taxpayers is coming to an end. People are beginning to realize that when the Fed in effect doubles the worldwide supply of US dollars in a relatively short time, it has the effect of stealing half your money through reduced purchasing power. Rapid inflation will continue as trillions in new money and credit recently created by the Fed flood into the commodity markets. It is becoming more and more obvious that the Fed operates for the benefit of a few privileged banks, banks that never suffer for bad decisions they make."

When prices rise significantly in the near future, don't blame greedy businessmen. Don't blame foreign oil cartels. Blame the Federal Reserve's reckless monetary policy and your elected officials who have given the Federal Reserve virtually limitless power to destroy our currency.

According to the late Murray Rothbard, "The Federal Reserve System virtually controls the nation's monetary system, yet it is accountable to no one. It has no budget; it is subject to no audit; and no Congressional Committee knows of, or can truly supervise, its operations."

That's why I pledge to push for a full audit of the Federal Reserve the first month that I am in Washington. Dr. Paul's bill to audit the Fed has nearly 200 co-sponsors in the House of Representatives today. Unfortunately for America, he will be retiring from Congress at the end of this term, so it is critical that we send someone to Washington who is committed to making sure a new version of the Federal Reserve Transparency Act is introduced in 2013. If you haven't figured it out by now, allow me to remind you that I am the only candidate in this race who is going to vote to keep government out of your paycheck--and your savings!

Many Republicans will pledge to not raise your taxes, but they are willing to allow the Federal Reserve to secretly steal your wealth through inflation. This is intellectually dishonest, and it must be stopped immediately.

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