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Maybe Elections Do Matter

by John Rubino on November 17, 2010 · 20 comments

It’s been easy to tune out the chatter of the past couple of elections because the outcome seemed irrelevant. Whoever wins, their hands are tied by unmanageable debt and the limited spectrum of politically-feasible policy options. In fact, since whichever party is in office when the world falls apart will get the blame, it’s tempting to hope the worst of today’s hacks and clowns win, just to see them branded forever as this generation’s Herbert Hoover.

But just when I’ve almost completely left politics, Ron Paul pulls me back in. It seems that after years as an alternately patronized and ignored member of the congressional subcommittee that oversees the Fed, he’s built up enough seniority to run the subcommittee next year.

So the one guy who truly understands the abominations of fiat currency and central banking will be able to call hearings, interview witnesses on television, and generally force the predators to answer for their actions. He’ll be able to demand audits of Fed activities and US gold reserves, and make the rest of congress explain their opposition. He might not produce any substantive legislation, since the vast majority of both parties are still happily riding the paper money gravy train. But he’ll provide endless entertainment for folks who enjoy watching central bankers and their minions squirm. And he’ll generate a whole library of YouTube clips for the sound money blogosphere.

Here’s an excerpt from today’s Wall Street Journal on Dr. Paul’s ascendency:

Ron Paul’s Golden Opportunity

Who better to host the debate over sound money in Congress than the Fed’s most persistent critic?

By Seth Lipsky

One of the most exciting features of the new Congress is the prospect that the chairmanship of a House subcommittee that oversees the Federal Reserve will go to Ron Paul. Final assignments are still being worked out, and the leadership may yet shy away from giving the position to a congressman who doesn’t believe the Fed should exist. But Dr. Paul, an obstetrician, has been the ranking Republican of the Domestic Monetary Policy and Technology subcommittee, and tradition suggests he will be the next chairman.

This couldn’t come at a more timely moment, though Dr. Paul has been working his way up to the assignment for more than a generation.

I first met the congressman nearly 30 years ago, back when the physician-turned-legislator was emerging on the national scene as a member of the United States Gold Commission. The commission had been formed at the start of the Reagan administration to consider whether America, in the wake of the collapse of Bretton Woods, should move to sound money.
In the event, the committee recoiled from reform. But Dr. Paul wrote a dissent that made the case for gold and is still being read today.

At the time, the value of the dollar had recently plunged to less than 1/800th of an ounce of gold. The collapse was reversed by the pro-growth policies of President Reagan and by a Fed chairman, in Paul Volcker, of uncommon vision and courage. Momentum for a gold standard was hard to sustain when inflation was being brought down, if not conquered, by other means.

Right now we are experiencing an even more dramatic collapse of the greenback—this time to little more than 1/1,400th of an ounce of gold—and the issue has returned with a vengeance. The Fed is reacting to the dollar’s collapse with a campaign of quantitative easing. The plan is to cascade hundreds of billions of additional dollars into the economy on the theory that we need inflation. No doubt this kind of thing will, if Dr. Paul accedes to the chairmanship, come in for a good deal more focused oversight than the committee has provided under Democratic leadership.

Heretofore, the subcommittee has “basically been a committee that’s dealt with commemorative coins,” as Dr. Paul has put it. In a conversation with me on Monday, the congressman said that he intends to get into the question of monetary policy itself. He would start by bringing in to testify to the committee not only the Fed chairman, but some of the leading officers and economists of some of the regional banks in the Federal Reserve system.

More far-reaching still is the prospect that Dr. Paul might use the committee to open up the deepest monetary issues, pressing for audits of America’s gold holdings and of the Fed itself. At one point this week, the congressman’s book, “End the Fed,” ranked No. 2 on Amazon’s list of the best-selling business books dealing with money and monetary policy, ahead of volumes by such luminaries of the right and left as Milton Friedman, George Soros and John Maynard Keynes himself.

Most exciting is the prospect that Dr. Paul will be able to bring into the national conversation such figures as, say, Edwin Vieira Jr., the visionary lawyer who has become the sage of the idea of constitutional money. That’s a reference to the unit of account to which the Founders were referring when they twice used the word “dollars” in the Constitution, and which they codified in the Coinage Act of 1792 as 371¼ grains of pure silver, the same as in a then-ubiquitous coin known as the Spanish Milled Dollar, or its free-market equivalent in gold.

If Dr. Paul does accede to the chairmanship of the monetary subcommittee, he will, in but a few months, gavel it to order on the 40th anniversary of the summer in which President Nixon closed the gold window and brought an end to Bretton Woods. Yet a few weeks ago, former Fed Chairman Alan Greenspan himself, speaking at the Council on Foreign Relations, warned that “fiat money has no place to go but gold.” Even the president of the World Bank, Robert Zoellick, has just called for restoring a role for gold in the monetary system.

The great debate is finally starting up again. Who better to host it in Congress than the diminutive doctor who, more faithfully than anyone else on the Hill, has for more than a generation stood for the concept of sound money?

 

  • Bruce C.

    The irony is that people like Ron Paul need to do what they do – fight the good fight – so that there is some sane memory left during the aftermath upon which to start anew. “Unfundable” (a new word in the English lexicon) liabilities will force deflationary discipline despite the rhetoric, however high-minded. Ron Paul probably knows this, along with knowing that the torch must be kept lit. History often glosses over the nitty gritty of change, seeking to jump from one state of affairs to another.

    What’s interesting to me is how any such transition to a gold standard could occur. It seems to me that any one who doesn’t have gold during that transition will necessarily be screwed. Another ironic twist to the Ron’s populist efforts.

  • Rachael

    I think we should wait until final assignments are made before we start celebrating. I don’t have a lot of faith in the Republican leadership…..if they can mess a good thing up, they probably will.

  • http://GreatRedDragon.com Edward Ulysses Cate

    I certainly wish Ron and Rand Paul the best, but I think Warren Buffett’s daddy Howard summed it up back in 1948:

    Because an economy Congressman under our printing press
    money system is in the position of a fireman
    running into a burning building with a hose that is not
    connected with the water plug. His courage may be
    commendable, but he is not hooked up right at the other
    end of the line.

    Maybe this time will be different.

    Link: http://www.fame.org/pdf/buffet3.pdf

  • http://chaosandconspiracy.wordpress.com TheHopefulSpider

    No doubt any hearings held by Chairman Paul will be highly instructive. Effective? Not likely. The only way we are going to get hard money, and a thousand other institutional changes we need, is through System Change. And that, of course, will not happen via rational argumentation and politics.

  • Paul

    I wish both Paul Snr & Jnr all the best in their endeavour to return sanity to money, God knows we need it. However, one fears that the interests of the banksters would much favour the low cost of a well placed assassins’ bullet than to ever concede a return to any kind of gold/silver standard.

    One piece of advice I hope the Paul’s heed is to avoid driving any open top cars past any kind of Grassy Knoll???

  • Lee

    My greatest worry is that the powerful planetary elites will do just about anything to maintain the economic status quo, for they have much to lose. Scrutiny of the monetary system could tank the whole thing. This is going to be an interesting National discourse….If it is allowed to happen.

  • foldenrev

    I agree with Paul (above) pertaining to the possibility of assassination of Dr. Paul by the banksters. Time to start praying for the good doctor’s protection and health.

  • Elle

    That’s exactly what I was thinking reading this article. The only way to stop Dr Paul is not to have to deal with Dr Paul. I hope he takes extra precautions to ensure that he is not in any car ‘accidents’ or the like… Be safe Dr Paul!

  • brutlstrudl

    We’ve come a long way since 1963. See the number of views on youtube.com for Quantitative Easing Explained. Not to say that their end game paranoia won’t cause some kind of incident but too many tin foil hat guys are being listened to these days

  • PeteCA

    The only thing we’re guaranteed … is more political gridlock. Jim Kunstler got it right when he said that our system of government is “sleepwalking into the future”. I expect little progress from Congress, even though a few souls may have noble causes. Gridlock could make it difficult for them to pass a second TARP bailout, but I’m not even confident that will be ruled out.

    Squabbles over pension money, health care, Social Security and Medicaid – are just the anguished cries of people whose heads have not been soaked in reality. Most of that future money does NOT exist. The delusion is over for America.

    What’s needed from average Americans now … is some shirt sleeves rolled up, and some honest hard work. We will never see that from the folks in Washington DC. They will be fumbling the football – until the whole financial game goes down into a toxic waste dump.

  • Scotty

    Pete, they don’t need to pass a second TARP. QE2 is essentially a backdoor TARP.

  • Brad Thrasher

    To paraphrase sports reporter Red Fisher, The USA must be a hell of a country to have survived the a-holes running it.

  • Doug

    The reason this election matters is that the Republicans may actually let California go bankrupt. They would eventually have to bail out all the states, but there is a significant chance of a deflationary credit collapse before hyperinflation. Stay away from state and municipal bonds; they are timebombs.

  • Working Class

    Ron Paul is despised by his party and by the corporate media as well. This is because he defends the constitution and he is not for sale. It will not be necessary to shoot him. Republican leadership will simply deny him this subcommittee. The mighty families that own the banking cartel will not have their managers hauled before the common peoples house to answer embarrassing questions.

  • PeteCA

    Scotty … does QE2 mean that the Fed now has “unlimited authority” to purchase any kind of asset it wants to? Who on earth gave them this type of power? Where is the Congressional oversight on what’s going on here?

    I didn’t look at all the announced aspects of QE2 in detail, but I was under the vague impression that Bernanke was talking about buying primarily US Treasuries, possibly stocks (DOW & S&P500 futures, bank stocks?), and conceivably even commodity-related investments. All to the tune of $600 billion. In addition, I think the Fed is also purchasing roughly $200-$300 billion in mortgage assets from Fannie & Freddie in a separate arrangement. So the total program may be valued around $800 billion. Not that many taxpayers seem to be paying attention to this (!!!).

    But I also noticed that the Fed just said they are going to run a new series of “stress tests” on the Wall St. banks. Which could imply that the Fed may buy more distressed assets from these banks in the future. So is that part of QE2, or would it be a new TARP program?

    And once again I ask …. where the heck is the Congressional oversight on all of this activity???

  • Ray

    The election will not change our fate. It would be nice if it started the change back to the US Constution. At best it will start the changing of the guard to whatever challenge we must face next. It will not be pretty or clean. The words are starting to get ugly.

  • Chris

    Why had US lost its way. Basically, the decision makers are overpaid. They make decisions to safe guard their job. Imagine bank CEOs sit down with their management team and dream up all kinds of devious schemes and know that they can make money even though they know it is morally wrong and the consumers have no choice. Imagine them laughing in the board room when they discuss these devious schemes. After the blow up they could say that nobody expected such a bad thing could happen. Imagine the bond market blow up and everyone say that nobody expected that to happen when so many people had been screaming about it. Sigh. Maybe there should be a law to limit CEO pay to US$1 million and that is it. Anyway they are only employees of a company and not entrepeneurs like Bill Gates oe Warren Buffet. Get the pay right and America will be in good hands.

  • PeteCA

    Chris … good idea. The salaries paid to high-level execs have reached the point of obscenity. Rather than limiting CEO and CFO pay to a fixed number, how about a rule that says this salary cannot exceed some multiple of the average worker e.g. not to exceed 15-20 times an average employee’s pay. Furthermore, this rule could be implemented into the tax code. CEO’s with excessive salaries could be taxed at much higher rates. And benefits like stock options would be included when counting the total salary.

    On a second note … exactly WHO decided that the Fed should be composed of entirely of bankers? Although the Fed is set up to govern and regulate the banking sector, in fact it’s policies now impact the economic well being of all Americans (in a deleterious way!). Since that is the case, we should either abolish the Fed as it currently stands (considering it has failed it’s own mandates egregiously), or we should pass a law stating that the composition of the Fed should be broadened to include a much wider group of people … e.g. people with backgrounds from finance, business, and management. Maybe if the Fed was comprised of a broader group of citizens then we might see policies that value the future of American citizens over the future of the banks.

    I also think that Mike Shedlock’s suggestion is an excellent one … allow the Fed funds rate to be determined by market forces and not the unilateral decree of a body like the Fed. Seems like a fair system for implementing interest rate “discovery” by free market forces could be arranged. BUT needless to say – at this stage a disaster would unfold for the US Gov’t. Because interest rates would surge and the financial position of the USA would rapidly crumble.

  • Brad Thrasher

    I wonder, does monetary policy constitute a taking under the 5th amendment? Are these Star Chamber style meetings and decisions by the Open Market Committee violations of the 4th amendment provision that we remain secure in our person and our effects? Is our money not among our effects? If not, who’s money is it?

    The state enjoys broad public policy immunity. Still, I think I will research this question. Not from the point of naively believing a lawsuit will fix the Fed; rather by discovering the limits, if any, of public policy immunity.

    In other words, there is certainly empirical evidence to suggest monetary policy impacts the value of the dollar. If congress or an agency, ngo or franchise acting on behalf of the People knowingly commits an act rising to a 5th amendment taking, is the government liable for the damages incurred or is it immune?

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