Friday, January 30, 2015

Say No to 'Audit the Fed'

By Robert Wenzel

I have never been a big fan of "Audit the Fed." In May 2009, I wrote:

I Smell A Trap

Ron Paul's House bill calling for an audit of the Fed is getting support from the strangest places.

Lew Rockwell today links to a column by Dean Baker who now supports an audit of the Fed.

The problem with Baker's column is that he doesn't quote Ron Paul. He doesn't even mention that Paul introduced the bill. He does, however, mention Elizabeth Warren, who heads a congressional oversight panel, dealing with bailout money.

I've discussed Warren before, her oversight committee went so out of bounds that two members of the five member panel dissented. She is a big time Obama operative. You don't want columnists using Warren as a signal flag to support Paul's bill.


This what Baker would like to see come from an audit:

The proposal for a GAO audit of the Fed is a first step towards reasserting democratic control over this institution...In a democracy, it is difficult to justify a situation in which the most important economic policy making body is, by design, more answerable to the banking industry than democratically elected officials.
I hope Congressman Paul knows what he is doing, to me it sounds like this may evolve into a power play over who controls Fed money rather than an investigation into whether the Fed should be printing money in the first place. If Democrats start signing on to the bill in heavier numbers, it may be a sign that an audit may come, but it will end with a restructured Fed controlled by left wing radicals, who believe money is for handing out and who have no fear of inflation.

In August 2009, I wrote:
One of the group's supporting Ron Paul's legislation to audit the Federal Reserve is the National People's Action Network (NAPAN). Their top target right now is the Fed. Their executive director, George Goehl, recently told me in a private conversation, when I asked him what he thought of Paul's bill to audit the Fed, without hesitating he said, "I think it's great."

Don't take his anti-Federal Reserve stance as an anti-big government stance, though. He is a big supporter of government nationalized healthcare, intervention to stop mortgage foreclosures and government heavy handed control interest rates. He is protesting the Fed because he wants more representation "by the people" at the Fed...[Ron] Paul better be very careful on his audit the Fed legislation as it is very vulnerable to being hijacked by the radical left. This needs to be shifted to an End the Fed program real fast.

I am certainly am no fan of the Fed (SEE: The Fed Flunks: My Speech at the New York Federal Reserve Bank), but I think to believe that the focus should be, as I wrote in 2009, on ending the Fed rather than who is controlling the Fed.

If it comes between the banksters continuing to control the Fed or Congress, there may actually be something to be said for letting control stay in the hands of the banksters. They most assuredly will use the Fed to line their own pockets, but there is no advantage for them to see  hyperinflation hit the economy. Remember, when inflation started to get somewhat out of control in the late 1970s-early 1980s, it was the banksters who brought Paul Volcker in at the Fed to slow the money printing and battle the price inflation.

It is not at all clear that the same thing would have occurred if Congress would have been in control, of the Fed at that time. There are a lot of very clueless and dangerous members of Congress, who have no idea how the economy works and would never call for a slow down in money printing. Whether these fools are in the majority in Congress, I have no idea.  But the thought that these nut jobs could control the money supply is very scary, and that's exactly where an audit the Fed bill would go.

I have talked this over with a serious bankster, who knows many of the members of Congress a lot better than I ever will, and the idea that such a group would control Fed policy scares him. I have to agree.

Thus, I have to oppose Rand Paul's re-launch of the Audit the Fed bill. I can't see any good coming from it.

I am not in favor of the special privileges that banksters get, but I am much more scared of the Elizabeth Warrens in Congress running Fed policy.

The focus should be on educating the public about the evils of the Fed and why it should be shutdown, rather than wasting time focusing on what criminal group should be running that great economic manipulating money manipulating machine called The Fed.

Robert Wenzel is Editor & Publisher at and at Target Liberty. He is also author of The Fed Flunks: My Speech at the New York Federal Reserve Bank. Follow him on twitter:@wenzeleconomics


  1. A Warren-controlled Fed would educate the public about the evils of the Fed and why it should be shut down pretty damn quick. We are long past the point where everybody who can figure out what's going on without a cataclysm has figured it out. On with the cataclysm.

  2. The audit bill that was already passed was so watered down that it didn't tell us too much.

    But it did tell us that they had given $17 trillion in zero interest "emergency loans" to the primary dealers, including the ones that still went bankrupt, while Helicopter Ben was on TV telling everyone that sub-prime was contained. That is a great fact for, "educating the public about the evils of the Fed."

    And it was the office of radical leftist Bernie Sanders that dug through the GAO reports to publicize this.

    Even if the Fed were shut down, what is to stop the Treasury from being used as a literal printing press for buying votes? The Fed needs congress to pass astronomical deficits to really "print" at this point, as 7+ years of ZIRP has still led to credit creation rolling over, like every other business cycle.

    Point being, I don't follow this concern from any angle. The true radicals will come up with absurd schemes no matter what, but eventually, the people reject it. See: the Soviet Union.

  3. The horse has left the barn. The Fed is 100% political now. Ask Chuck "get to work, Mr. Chairman" Schumer or any of the Dems in the recent meeting with Yellen. The likes of Warren and Sanders want to do away with the facade of independence not the Fed or its mechanism for creating money out of thin air. The banksters would love to pass the buck before the inevitable cataclysm.

  4. RW... I have always thought that Ron Paul should have concentrated his efforts into auditing the gold in Fort Knox. Once the common man sees there is no gold RP would have been a populist hero and taking down the Fed would be a lot easier. There would be very powerful people blocking this but the same powerful people are blocking his true audit of the Fed.

  5. At least progressives gleefully printing money might finally make the public aware of DC's counterfeiting operation.

  6. This is confusing. But you are right - if leftist Democrats are in favor of auditing the Fed that means that it requires careful thinking if an when moving ahead with it. The Banksters, while crooked and self-dealing, are at least not idiots. You can't say the same about many of the leftist Democrats.

  7. The Modern Monetary Theory types are on a roll. You can listen Steve Keen, hero of "Lord Keynes" here at 2:15 explain his view of the Austrians….which leaves out any mention of economic calculation or miscalculation (surprise!). At 16:00, he explains his proposal for a “modern” debt jubilee where the central bank gives everyone a ton of new funny money and makes debtors pay off their debts with it.

    Steve Keen now blogs at Forbes (and we don't) and he says brilliant things iike this:

    For the non-bank public to finance the government surplus and to also have an increasing stock of money itself, this has to be bigger than NetGov. This expands the non-bank public’s holdings of money, which in turn allows economic growth to occur—since no economy has ever grown for any substantial period of time in real terms without also having a growing money supply.

  8. Further, Bernie Sanders has hired Stephanie Kelton:

  9. Really, Robert? The legislation isn't about Congress taking control of the Federal Reserve banking cartel and we should be encouraging our critters to support Rand Paul's bill S.264 and Thomas Massie's similar legislation, H.R. 24 to audit the Federal Reserve.
    "The common objection that a GAO Fed audit would “compromise” the Fed’s independence and subject its actions to political influence confuses the very nature of Fed independence as well. The Fed’s authority to regulate the value of money is one delegated to it from Congress. As Congress can, and has, legislated changes to the Fed, it should be clear beyond a doubt that the Fed is not “independent” of Congress. It is a creature of Congress.
    What needs to be understood is that the Fed’s independence, in an operational sense, is supposed to be from the executive branch. Yet in recent years the Fed has coordinated its actions quite closely with the Treasury Department, eroding any real independence. The revolving door, both at the political and career levels, between the Fed and the Treasury Department undermines the Fed’s operational independence more than a GAO audit. And the same could be said about the revolving door between Wall Street and the Fed. A GAO audit, rather the hampering independence, could shine a light on these relationships, helping to insulate the Fed from continued interference by the Treasury Department and undue influence from big banks."