Topic: THE FEDERAL RESERVE
Ron Paul Wastes Chance to Deliver KO Punch to FED Ron Paul failed to wipe the floor with Bernanke in the last Congressional Hearing. Here's why. Shift tactics next time!by Jake, the Champion of the Constitution
(libertarian)
Thursday, November 20, 2008
Although I greatly admire Ron Paul's ideas, as I watched the latest RP vs. the FED battle, I was quite disappointed. The FED is gasping for air. They caused the mother of all bubbles, and it'll finally pop next year. Dr. Paul took over 4 minutes of his precious 5 minutes pontificating about the glory of Austrian economics and the horror of the FED instead of pressing home an attack. Art of War 101: "Cut off his head before waxing eloquent."
Don't get me wrong. There was a time for pontificating, such as his famous "They're being ROBBED!" speech, but that was back pre-crisis when very few people recognized the Congressman from Texas. Ron Paul is a brilliant economist in his own right, and there is enough horsepower in his brain to help change the world. What if Paul had instead unleashed a blizzard of questions, and enveloped Bernanke in an actual conversation? As Chris Powell of the Gold Anti-Trust Action Committee (www.GATA.org) wrote here, Paul could have asked:
1) Are the Fed or the Treasury intervening or encouraging or subsidizing certain actions by others in the precious metals and general equities markets, just as the Fed and Treasury commonly intervene in the currency and bond markets?
2) Does the U.S. government have any connection to the derivative positions in gold, silver, and interest rates built up at JPMorganChase and other financial houses?
3) Why is the Federal Reserve refusing to disclose all its records involving the U.S. gold reserve?
4) How often does the President's Working Group on Financial Markets meet? What does it do? Does it intervene in the stock market or encourage certain actions in the market by third parties? Does it keep records of its proceedings? Are those records available to the public? If not, why not?
5) Do the Fed and the Treasury convey to certain financial houses information that is not simultaneously available to all other market participants? Exactly what private communications do Fed and Treasury officials have with financial houses? What is the necessity of that privacy? How does that privacy not confer a favoritism that is potentially very lucrative?
Surely Paul himself could frame all these questions and many better ones without any help. Instead he always digresses and then at the last minute tiptoes up to a big issue only to have time run out with the Fed and the Treasury witnesses saved by the bell. Even as Paul knows better than nearly everyone else in Washington, it is hard not to wonder if he is afraid of being the one to prompt the answers he very well might get."
Granted, Dr. Paul did bring up the gold price and a new global currency, but we are not dealing with just any other bureaucrat, it's the head of the vaunted FED. Dr. Paul has a chance that none of the rest of us do, which is to give Bernanke more rope to hang himself and his ilk, obtain more information, and he failed to do so. The Chairman of the Federal Reserve is equivalent to REX, as ex-Chairman Greenspan bluntly answered in September 2007:
JIM LEHRER: What is the proper relationship, what should be the proper relationship between a chairman of the Fed and a president of the United States?
ALAN GREENSPAN: Well, first of all, the Federal Reserve is an independent agency, and that means, basically, that there is no other agency of government which can overrule actions that we take. So long as that is in place and there is no evidence that the administration or the Congress or anybody else is requesting that we do things other than what we think is the appropriate thing, then what the relationships are don't, frankly, matter. And I've had very good relationships with presidents.
JIM LEHRER: But you don't feel any responsibility for keeping interest rates low?
ALAN GREENSPAN: Well, let me tell you. We had no choice. I mean, we're the vaunted Federal Reserve.
In fact, if I had to choose who did more good for the American people on this week, it would be this Wall Street Journal article from ex-FED, ex-Vice President of the Federal Reserve Bank of Dallas Gerald O'Driscoll, where he writes about reinstating a gold standard (my italics):
The economy now confronts deflationary forces. If past is prologue the Fed will concentrate on those deflationary forces for too long and rekindle an asset boom of some kind. The fiscal "stimulus" being contemplated by Congress could be another economic accelerant. If both the fiscal and money stimulus efforts kick in just as market forces also kick in, we're likely to see another unsustainable boom that will be followed by a bust.
The incoming administration must think about that possibility because the timing of boom and bust cycles seems to be shortening. The next bust could come five or six years from now -- or about in the middle of an Obama second term. Should that happen, Mr. Obama would be unable to blame Republicans for the mess and would be tagged as the second coming of Jimmy Carter.
To avoid such a fate, Mr. Obama needs to stop the next asset bubble from being inflated by imposing a commodity standard on the Fed. A commodity standard (such as a gold standard) imposes discipline on a central bank because it forces it to acquire commodity reserves in order to increase the money supply. Today the government can inflate asset bubbles without paying a cost for it because the currency isn't linked to the price of a commodity.
With a commodity standard in place, the government would also have price signals that would alert it to the formation of a bubble. Why? Because the price of the commodity would be continuously traded in spot and futures markets. Excessive easing by the Fed would be signaled by rising prices for the commodity. In recent years, Fed officials have claimed that they cannot know when an asset bubble is developing. With a commodity standard in place, it would be clear to anyone watching spot markets whether a bubble is forming. What's more, if Fed officials ignored price signals, outflows of commodity reserves would force them to act against the bubble.
The point is not to deflate asset bubbles, but to avoid them in the first place. Imposing a commodity standard is a practical response to the repeated failures of central banks to maintain sound money and financial stability. What would be impractical is to believe that the next time central banks will get it right on their own."
Deflationary and inflationary forces are running amok. The dollar is heading into what could possibly be a terminal crisis. The FED has chosen "The Japanese Special," a monetary policy of printing paper, or the Gamble of Qualitative Easing. Nearly 100 years after its birth, the all-knowing and powerful FED has still not learned how to rule as REX and centrally plan the economy. I am not even sure if they are trying. Central banks have been an anchor on the people of this caged world for long enough. It's time to cast off for a new ocean.
END THE FED! Protest to take place on Saturday, 11/22/08 Published: November 16, 2008 "Scenes are now to take place as will open the eyes of credulity and of insanity itself, to the dangers of a paper medium abandoned to the discretion of avarice and of swindlers." -Thomas Jefferson to Thomas Cooper, 1814
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
As always, unlike the NFL, the author grants full permission to allow any accounts of, rebroadcasts, retransmissions, repostings in part or full of this article to your blog or anywhere else in order to promote the Restoration of our Republic.
Veritas numquam perit. Veritas odit moras. Veritas vincit. Truth never perishes. Truth hates delay. Truth conquers.
"Whenever the legislators endeavor to take away and destroy the property of the people, or reduce them to slavery under an arbitrary power, they put themselves into a state of war with the people, who are thereupon absolved from further obedience, and are left to the common refuge which god hath provided for all men against force and violence." – John Locke
Bank and Credit Union 2008 Body Count at 32 Published: November 9, 2008 "I believe that banking institutions are more dangerous to our liberties than standing armies." - Thomas Jefferson
The Drones Did It! Published: November 8, 2008 "The catch-all phrase - The War on Terror. In all honesty, has no more meaning than if you want to wage a War on criminal Gangsterism. Terrorism is a Tactic. You can't have a War against a Tactic. It's deliberately vague and nondefinable in order to justify and permit perpetual War anywhere and under any circumstances." - Dr. Ron Paul. Pakistan's Chaos Continues.
Was the Paulson Plan a 'SHAM' of a 'SCAM'? Published: November 4, 2008 Sure looks that way! Here's how We the People got shafted! And the FED hires Bear Stearns' ex-Chief of Risk to "assess the safety and soundness of domestic banking institutions"
Iraq Demands US Troops Leave by 2011 Published: November 2, 2008 The unending Global War of Terror occupation in Iraq hits a minor roadbump. What if the Iraqis have fully recovered from Shock and Awe and want their country back?
Police State Stomps on Iraq Veteran's Face as McBama Sanctions Attack on Freedom of Speech: The Story of the Hempstead 15 (Part 1/3) Published: October 25, 2008 What? Yet another event the media completely missed? After multiple attempts to engage McBama to answer their questions, the Iraq Veterans Against the War (IVAW) led a peaceful march on the last McCain-Obama Presidential Debate and were met with 30 mounted police and a horde of others in riot gear. The mounted police stamped on an Iraq war veteran's face and attacked the crowd. Ron Paul supporter and veteran Adam Kokesh was arrested as well.
An Anti-Ron Paul Deflationary Economic Theory Published: October 21, 2008 Can you prove me wrong? A simple idea about how the bailout could lead to a deflationary, rather than inflationary environment, proving Ron Paul dead wrong.
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Dr. Paul is an educator and was bringing those in the room who were wholly ignorant up to speed. You are right though that the much bigger audience is outside of the room, and he might be able to pack more into his time if he once or twice wrote off comprehension in the forum he is in, and just gave us the tools to blanket youtube and the web. We have his background information to edit in. I'd love to see even more of his hard hitting questions and Bernanke's responses.
However, Dr. Paul knows who is voting on policy, and that those people to this day mostly have no clue about monetary policy. I'm sure trying to influence his collegues he has rarely seen at these hearings had something to do with how he used his time.
Posted By: Jake, the champion of the constitution
Date: 2008-11-20 10:24:30
Yeah, I hear ya. I hold nothing against Dr. Paul, he can act however he wishes. Just constructive criticism - I am admittedly a little jealous of his opportunity to rack Bernanke, if I had 5 minutes, I would prepare so hard, and just slice that guy into little itty bitty ribbons. It is true its hard to get Bernanke or any politician to shut up after they start talking though. 5 questions in 5 minutes should be possible.
Yeah, this time even I, a Ron Paul fan through and through, was a little irritated that he didn't hang Bernanke.
It seems that Bernanke came prepared for Dr. Paul's question on gold. When asked by Dr. Paul whether he had recently had a conversation with anyone about gold, Bernanke jumped at the opportunity to slip in that he had only be in coversation regarding the Central Banks getting ready to sell gold.
Just the thing to help stop the gold market from rallying. I was furious. Bernanke is a real snake.
If only Dr. Paul had come with the above questions. Maybe next time.
Posted By: Jake, the champion of the constitution
Date: 2008-11-20 10:56:56
Dear Goobs -
Here ya. I don't think the gold market is going to listen to Bernanke. I also hope the gold price drops, so I can help bring an end to the freaking CRIMEX more effectively.
"Cut off his head before waxing eloquent." Is that really from the Art of War 101? It would seem that "carefully positioning your troops and amassing sufficient weapons" might actually come before that. Oooops! I forgot that Ron Paul represents an Army of less than 1% of the people! My bad!
Paul's inept questions and poor planning only spotlight the man's inability to engage, inspire, and overwhelm anyone! He's a pipsqueak and he knows it. Put him under pressure and he melts like an M&M melts in your hand.
"Central banks have been an anchor on the people of this caged world for long enough." Is that even a coherent metaphor?
Posted By: Jake, the champion of the constitution
Date: 2008-11-20 18:18:34
Dear MC -
hehe, thanks for replying. You are always welcome to your opinion, and I love you for doing so although we may never cease to disagree.
Try (oh no!) actually reading Sun Tzu's work. For instance, it's pretty obvious Bin Laden read it, but the Neocons and Democrats have not (at least in terms of "winning" the Iraq+Afghanistan Wars in the traditional sense). It is my hope they never open this book, since it shares the basic strategy for how to small-L libertarians can defeat them.
Amazing what some dude from 2500 years ago can tell you about guerilla warfare and the war for minds!!
MC: Ron Paul represents way MORE than 1% of the population. Most people were/are against the bailout when it was proposed and now even more, as it is clear that it did not even help and is a scam. And the to be appointed treasury secretary Tim Geithner is one of those working in favor of it!
Jake: there can be difference of opinion on tactics of course, but it is perhaps good that Paul change tactic with a hearing. He should surprise Bernanke at times, and not attack all the time. You have probably noticed that he has changed strategy from eliminating the Fed to regulating the Fed, which is a good idea. He will get a lot of bi-partisan support for this and accomplish more and hopefully congress can pass a new legislation that he is proposing. Regulating the Fed is also stragically wise to show the "left", that - falsely -see deregulation as the heart of the current financial problems - how inconsistent they are and persuade them to adopt a bill to regulate the Fed. I think Paul sees regulating the Fed as a steps towards ending the Fed, e.g. under regulation there will be more insight into their practises and restrain them to a certain extent. In this process, it is well possible that the majority of the members of congress may be persuaded to look for an alternative to the Fed and that ending the Fed is a wise move. But if you want to go straight on to end the Fed now, you are NOT going to get a majority of congress to support and 80% of them have no real understanding of monetary issues. Also as a "revolutionary", you have to take a step by step approach.
With new congressman Tom McClintock, Paul has an ally with economic knowledge and that would support also his urge for a commodity based currency. In 2010 more Ron Paul Republicans (and Independents?) can be elected.
Ron Paul inflicted the cut on Chairman Bernanke that will never heal. WE have to be the gangrene. It was funny how they cut Ron Paul off as he was getting to the really deep questions.
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JIM LEHRER: What is the proper relationship, what should be the proper relationship between a chairman of the Fed and a president of the United States?
To avoid such a fate, Mr. Obama needs to stop the next asset bubble from being inflated by imposing a commodity standard on the Fed. A commodity standard (such as a gold standard) imposes discipline on a central bank because it forces it to acquire commodity reserves in order to increase the money supply. Today the government can inflate asset bubbles without paying a cost for it because the currency isn't linked to the price of a commodity.