The Other McCain

"One should either write ruthlessly what one believes to be the truth, or else shut up." — Arthur Koestler

‘BumBumBum’ Drumbeat: End The Fed

Posted on | December 1, 2011 | 11 Comments

by Smitty

Freedom Works has a great piece on what is among the most crucial issues of our day: Ending the Fed. Couple of quick points, emphasis mine,

Fed Chairman Ben Bernanke is desperate to protect his privileged secrecy. Bloomberg writes that he “argued that revealing borrower details would create a stigma — investors and counterparties would shun firms that used the central bank as lender of last resort — and that needy institutions would be reluctant to borrow in the next crisis.” Helicopter Ben, a nickname he acquired by essentially stating that the government could “defeat” deflation by dropping money out of helicopter, cares more about protecting the reputation of his cronies than letting the American people know where their money is going.

Hey, get stuffed, Bernanke. As far as I can tell, you have just said that fair markets are bad. That transparency==stigma. That we cannot handle the truth. We may need to borrow Nigel Farage to ask the Who Are You? question.

An overwhelming 75% of Americans want a comprehensive audit of the Federal Reserve, according to a recent Rasmussen poll. The calls for a true audit are getting louder and stronger by the day. The fight for transparency is transcending party lines, with fiscal conservatives such as Ron Paul and self-identified Democratic socialist Senator Bernie Sanders working together to remove the Fed’s cloak of secrecy. More Republican presidential candidates are starting to echo Ron Paul’s long held beliefs on the Fed.

I think that an actual look at Bernanke’s shenanigans is going to drive the stake through the Federal Reserve heart. There is just no way under the sun that this bogus distinction for the Federal Reserve, such that “its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government” is thoroughly and completely wrong, as well as counter to the spirit of our Constitution.

More at Zero Hedge. Is there anything more painful than someone refusing to admit that it’s over?

Update: some post-Fed thoughts in U.S. News.


11 Responses to “‘BumBumBum’ Drumbeat: End The Fed”

  1. Jeff
    December 1st, 2011 @ 6:13 pm

    It’s not just counter to the spirit of the Constitution, it’s counter to the letter.

    Article I, Section 8: “To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”.Congress cannot delegate this authority, anymore than it can delegate its war declaration powers. The Fed is wholly unconstitutional.

  2. smitty
    December 1st, 2011 @ 6:43 pm

    Here is where you are feeding the Left, inadvertently, I assume, through being overly literal.
    The letter of that would imply that our various mints should be manned by Congressmen and Senators.
    Of course they can, and did, create the Federal Reserve, and, after a century, it’s not helpful to call it un-Constitutional — it’s settled law.
    ‘Counter to the spirit. . .’ is readily defensible, as the whole point of the Constitution is to have people wielding power be checked by others and stand for election.

  3. DaveO
    December 1st, 2011 @ 7:15 pm

    If the Fed gets audited, then what?

    Mass executions?

    Ronulans suddenly realizing the only item on their agenda has been crossed off?

    Auditing the Fed is necessary, but there’s a so what that isn’t being realistically answered. Bernanke and crew may have done wrong, but not have broken the law.

    Second point: what replaces the Fed?

  4. Landivar
    December 1st, 2011 @ 7:29 pm

    Hrm… wasn’t there some candidate that wrote a book about this?

  5. Landivar
    December 1st, 2011 @ 8:49 pm

    Hayek suggested Free Banking.
    Here’s George Selgin on free banking

  6. Adjoran
    December 1st, 2011 @ 10:23 pm

    I suppose there could be some alternate reality where when Ron Paul and Bernie Sanders agree on something it means it is a good idea, but that place would be far, far, from here.

    It is interesting that on the one necessary exercise of sovereign power which both the Congress and the Executive recognize they are structurally incapable of wielding properly, those who under other circumstances would mistrust both insist they should take it on.

    Congress simply cannot act fast enough to keep up with the monetary policy, and the Executive would inevitably use the power to suit its political needs before the actual currency needs of the economy.

    Before there was the FRB, our currency orders were placed by J. Pierpont Morgan, a private banker.  His death created the need for an independent mechanism to control the money supply.

  7. Adjoran
    December 1st, 2011 @ 10:26 pm

    Well, then, the solution is simple:  you and Ron Paul just take it to federal court, wherein lies the specified constitutional power to settle such disputes.

    Makes me wonder why you and Dr. Paul haven’t already done this.  Could the fact you would be ridiculed by the judges, the clerks,  and children attending court on a field trip have something to do with that?

  8. smitty
    December 1st, 2011 @ 10:50 pm

    His death created the need for an independent mechanism to control the money supply.

    Nothing in your discussion says anything about, you know, letting the market figure out what to do about the money supply.
    As with earthquakes, a series of smaller rattlings might be far less destructive than the mother of a shaking we appear to have coming now.

  9. Adjoran
    December 2nd, 2011 @ 6:29 am

    How the heck does “the market” do anything about the money supply?  The market certainly sets the need, but it can’t print money on its own, or adjust discount rates. 

    Someone has to measure the money in circulation in all its forms and compare this to the economy.  They need to roughly match up, or distortions in the form of inflation or deflation affect the entire system.  This is no easy task.  But someone must place regular currency orders, and those orders need to be very close to accurate within very narrow margins.

    In effect, the Fed’s job is to READ the market’s demand for currency and fill it as closely as possible (with a slight bias toward mild inflation, which can be readily absorbed by the economy, to avoid deflation, which cannot be).

    This function is necessary in any monetary system – even a gold standard requires currency management unless all transactions are in specie, and only the truly insane even dream that is feasible. 

    This is not to say all FRB policies will be good, or that oversight should not be applied.  But it’s not possible to delineate guidelines with specificity, because the M1, M2, and M3 figures aren’t the only factors to be considered, and it is impossible to predict what factors will be important in any future situation. 

    Modern financial management has enabled the worldwide growth experienced since WWII.  We have been leading the world into freer markets gradually.  Eliminating the mechanics of liquidity and monetary policy, which appears to be a consequence fully acceptable to the “end the Fed” crowd if not in fact its very goal, would require a global contraction of at least a third.  It would make the Great Depression look like a church picnic at the beach in late May.

    Economic disruptions are an intrinsic part of economies.  Monetary policy aims to lessen them insofar as they are related to money supply issues, but most of the earthquakes are caused by fiscal policies or events, not monetary policies.   Every bit of history, recent and ancient, proves this.

    The Ron Paul nonsense is the equivalent of dealing with a laptop freeze-up by taking an axe to it.  Maybe it feels good for a few moments, but that is immediately followed by the realization that you have done flocked up.

  10. smitty
    December 2nd, 2011 @ 7:22 am

    They need to roughly match up, or distortions in the form of inflation or deflation affect the entire system.

    Sure, and with the Federal Reserve, we’ve biased the system toward a slight inflation, as this seems the least worst of outcomes.

    Modern financial management has enabled the worldwide growth experienced
    since WWII.  We have been leading the world into freer markets

    I mean, it’s been a good buzz, sure: but don’t forget to own the hangover. They Hayekian point that a few pointy headed dudes who think They Know Much are really dangerous cannot be understated.

    The Ron Paul nonsense is the equivalent of dealing with a laptop freeze-up by taking an axe to it.

    Maybe a little overboard there. Ron Paul, to the extent the analogy pertains, may be saying that, instead of one proprietary vendor like Apple ruthlessly controlling the architecture, something a little more open would be better. But analogies are like something that sucks.

  11. Bob Belvedere
    December 2nd, 2011 @ 7:53 am

    When I glanced at the first three words of the title, I thought this was another posting about Bwarney Fwank!