Ron Paul Terrifies Ben Bernanke
Politics / Central Banks Dec 15, 2010 - 05:56 AM GMTBy: Gary_North
I have good news and bad news for Ben Bernanke.
First, the good news.
I AM OUT OF THE OFFICIAL LOOP
I am no longer Dr. Paul's research assistant. If I were, I would be working at least half of my time on compiling questions for Dr. Paul to ask Dr. Bernanke.
I would be actively cultivating leakers from inside all 12 regional Federal Reserve Banks (private), as well as staffers working for the Board of Governors (government). There is always some disgruntled employee ready to open locked closets. I would be encouraging every one to become the equivalent of Bradley Manning. "Purloined documents R us!"
Thirty-four years ago, I held that position. Dr. Paul was then the Congressman with the least amount of seniority in Congress. His term came to an end only eight months after it began. He was elected to fill an interim position, due to a resignation, and he lost by 268 votes out of about 180,000 in November. He came back two years later, but by then, I was off to greener pastures.
In those days, the Chairman of the Federal Reserve System was Arthur Burns. He had been inflating like mad, trying to pull the economy out of Nixon's 1970–71 recession, then Ford's recession in 1975. Gold bottomed in the summer of 1976 at $105. It would never again get anywhere near that price.
Dr. Paul was already becoming Dr. No – voting no on most spending bills. He opposed the extension of funding of the International Monetary Fund. I wrote the dissenting paper on my first full day on the job – a Saturday. Back then, staffers could come into the Capitol office buildings without police checkpoints of any kind, at any hour. Those were the good old days.
Dr. Paul was not in a position to give much trouble to Dr. Burns. A year before, the head of the House Banking Committee had been Wright Patman, an anti-FED Congressman from east Texas. He had been giving the FED trouble for 25 years. It was Patman who, along with fellow Greenbacker Jerry Voorhis, got the law changed in the early 1940s to force the FED to return to the Treasury all money above expenses. That was the greatest single victory Congress ever had in dealing with the FED. But Patman had been ousted in a coup by younger Democrats in 1975. They revolted against the old seniority system in the aftermath of Watergate. The new chairman, Henry Reuss [ROYCE], was pro-FED. There was no way that there would be any confrontations allowed under Reuss.
Ben Bernanke was 23 years old.
That was then. This is now. That's the bad news for Dr. Bernanke.
"QUESTIONS! WE'VE GOT QUESTIONS!"
Today, as never before in American history, the voters know about the Federal Reserve System. The veil of secrecy has been rent inside the temple's walls. The public wants to have a look inside.
Dr. Paul will be chairman of the Monetary Policy Subcommittee. Not since Patman has any chairman of an oversight committee been this hostile to the FED. But things are different today. The public knows that Bernanke and Hank Paulson pulled the wool over Congress's already half-closed eyes in late 2008. They know about the big bank bailouts. They now know who got their hands on the billions. This was not home owners facing foreclosure. This was not the taxpayers, who could have used the money at a zero interest rate. The banks at the very top of the banking system got the money. Then they kept handing out fat bonuses.
That policy of help at the top had also been true in 1930–33, but only a handful of specialists of American banking history are aware of this. The only New York City bank that the FED allowed to go under was the Bank of the United States, which took small deposits from immigrants, mostly Jews, and made loans to local small businessmen. The WASPS who ran the FED allowed it to go bust. Milton Friedman talked about that event 35 years ago.
Dr. Bernanke now has a huge public relations problem, which is why the FED hired a public relations specialist in 2009.
Barney Frank was able to de-fuse Dr. Paul's bill to audit the FED, but he is not going to be in charge next year. The FED has lots of allies on Capitol Hill, as well as in the White House, but it cannot control one man in Congress: Ron Paul. That is the man who will be asking questions.
In the spirit of bipartisanship – "Let's just get the facts" – I suggest the following questions. They will have to be submitted in advance, so that Dr. Bernanke will not be convincing when he once again goes into his world- famous "I don't know" routine. For a video, go here.
1. "WHERE IS THE ACCOUNTING FOR $3.3 TRILLION?"
The Federal Reserve finally admitted that it lent $3.3 trillion to banks and other large corporations in late 2008.
The FED had previously released data about the adjusted monetary base. It climbed from $900 billion to $2.4 trillion overnight.
Now we are told that this was just the tip of the iceberg. Where did the other money go? How was it released into the population with no trace?
The answers need to be in writing, accompanied with the evidence. This evidence needs to be looked at by accountants. This policy of making loans that are unrecorded as entries in the FED's balance sheet violates all known banking theory. How was this done?
2. "DID YOU PROVIDE THE ACCOUNTING FIRM WITH THIS INFORMATION?"
The Federal Reserve hires the private accounting firms that do the accounting. The FED does not allow the same firm to audit the FED every year. Always, new teams do the work. They need time to get up to speed. That is the whole strategy of the FED.
The FED decides what data these firms are allowed to have access to. There is no full accounting. There never has been.
This is called "Madoff accounting" by skeptical critics of the FED – or if it isn't, it should be. Imagine if Bernie Madoff had been allowed to hire an accounting firm, restricting access to whatever he decided the firm did not need to see, and then hide behind the cover of the firm's prestige.
The question arises: "How did Madoff get away with it?" The question also arises: "How can accountants be deceived this easily?" So far, there is no answer.
If accounting firms cannot follow the money with a firm like Madoff's, which did not tell the accountants that they had to take his word for where the money went, why should anyone expect a firm to follow the FED's money, when the FED knowingly restricts access?
This leads to the next question.
3. "WHEN WAS THE LAST TIME AN INDEPENDENT AGENCY AUDITED THE NATION'S GOLD?"
If Bernie Madoff had been given complete control over approximately 23 million ounces of gold in 1953, and no one had audited it since then, how much gold would you imagine is still in the vault at Fort Knox and the vault at the New York Federal Reserve Bank?
People trusted Madoff. Look where it got them. Congress trusts the Federal Reserve System. Look where it got them.
Why should Congress trust a private bank, the New York Federal Reserve Bank, to store the government's gold? The Federal Reserve has always operated as if Congress would never inquire as to where the gold is, in what form, and in what quantities. So far, this assumption has been correct.
4. "WHERE IS THE MISSING $1.7 TRILLION?"
The monetary base was $900 billion in August 2008. We are now told that a total of $3.3 trillion in loans were made. The FED reported an increase from $900 billion to about $2.4 trillion. Where did the other $1.7 trillion go?
Where is there a record of this?
Why didn't this get reported?
What other loans did not get reported?
How can Congress know if the FED is telling the truth, if the government is not allowed to audit the FED?
5. "SINCE THE FED MADE A TOTAL OF $3.3 TRILLION IN LOANS IN 2008, WHY AREN'T PRICES RISING?"
Economists argue that there is a relationship between increases in the money supply and increased prices. All schools of opinion are agreed: if the money supply is doubled, prices will rise.
The monetary base officially went up by a factor of 1.6 to one. Yet we are now told that the FED made $3.3 trillion in loans. Why have prices not risen?
6. "IF PRICES HAVE NOT RISEN IN RESPONSE TO AN EXTRA $3.3 TRILLION IN LOANS, WHY SHOULD WE EXPECT PRICES TO RISE WITH THE NEXT $600 BILLION?"
This appears to be Bernanke's assumption: the newly created digital money will raise prices by no more than 2% a year. But what is the evidence that the FED's reported increases in the purchase of Treasury debt will raise prices? Economists need verified evidence of what the FED has actually done, what this has done to the monetary base, and how the Bureau of Labor Statistics calculates consumer prices.
What the FED has announced undermines all prevailing theories of cause and effect in pricing. It contradicts all prevailing theories of how central banking works. Congress needs verification that what the FED has said happened actually happened.
Congress needs to follow the money. Otherwise, it is flying blind.
7. "WHY DON'T YOU RELEASE A DIGITAL RECORDING OF THE FOMC MEETINGS WITHIN 24 HOURS AFTER THE MEETINGS?"
The Federal Reserve sets monetary policy. There is no reason why the FED should delay the release of a verified audio transcription of all discussions, other than the FED's concern that the information might create panic.
If this is the reason, will Bernanke henceforth meet in closed session with the members of the Subcommittee on Monetary Policy within 24 hours of every meeting of the FOMC whose audio transcripts are not released to the public?
In short, if the Board of Governors is a government agency, why should it be allowed any secrets? If the FOMC is private – then on what basis should Congress not retake control over the flow of information?
8. "IF THE FEDERAL RESERVE CLAIMS TO BE ENTITLED TO THE SAME SECRECY AS THE NSA, FBI, AND CIA ENJOY, WHY IS IT THAT THE FEDERAL RESERVE IS A PRIVATE AGENCY?"
The justification for security of spying agencies is that the information would jeopardize America's national security. But a majority of members of the FOMC are representatives of private organizations, the regional Federal Reserve Banks. No other privately owned organization is allowed secrecy claimed only by spying agencies and criminal investigation agencies. Only the central bank.
This has been great for private bankers, as 2008 proved to the voters. But has it been great for the voters? How can the voters know, since the information is secret?
The Federal Reserve says "Trust us." That was what Bernie Madoff also said.
CONCLUSION
These questions are only the beginning. There should be many more.
We can be sure that Dr. Bernanke will not answer them.
"I don't know."
"I do not have that information."
"I refuse to say."
"You can't make me say."
"Who does Congress think it is, anyway?"
"Monetary policy is too important not to be left to the bankers."
"Nyah, nyah, nyah – nanny, nanny, booboo."
This is what every Chairman of the FED has done to Congress. But, this time, there is a new kind of chairman in the oversight committee.
There are lots of Austrian School economists who will suggest more questions.
This will be fun to watch.
Gary North [send him mail ] is the author of Mises on Money . Visit http://www.garynorth.com . He is also the author of a free 20-volume series, An Economic Commentary on the Bible .
© 2010 Copyright Gary North / LewRockwell.com - All Rights Reserved
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