Overseeing the OverseersPolicy

rp-cpacWhat a difference being a minority makes. This year the speeches at CPAC were generally on target and it was refreshing not having to listen to a lot of Neocon saber rattling, McCain amnesty, and “compassionate” conservatism. One man who did not change his message with the political winds is of course Dr. Ron Paul. During his speech on Friday he reiterated his concerns over the unsound monetary policy dictated by the Federal Reserve with no recourse or oversight. Earlier this week he introduced HR 1207 also known as the Federal Reserve Transparency Act of 2009 which requires an audit of the Federal Reserve to be made available to members of the Senate and the House. Currently the GAO has the responsibility to audit the Fed but due to interesting exemptions is prohibited from auditing:

(1) transactions conducted on behalf of or with foreign central banks, foreign governments, and nonprivate international financing organizations;
(2) deliberations, decisions, and actions on monetary policy matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, and open market operations;
(3) transactions made under the direction of the Federal Open Market Committee including transactions of the Federal Reserve System Open Market Account; and
(4) those portions of oral, written, telegraphic, or telephonic discussions and communications among or between Members of the Board of Governors, and officers and employees of the Federal Reserve System

So far the bill is getting bi-partisan support with 3 Democrat co-sponsors along with 8 Republicans so maybe I will have some luck getting my VA-8 Congressman to support the bill in this era of expected govt transparency.

  • http://www.littledavidobermark.blogspot.com/ LittleDavid

    Perhaps I can learn something here.

    Ron Paul is in favor of a commodity backed currency. He wants to return to backing our currency with commodities like gold and silver again.

    Isn’t the problem that there is not enough additional mining of these precious metals to deal with increases in the global economy?

    Wasn’t the reason for the gold standard being abandoned because everyone had the right to demand an exchange of their paper currency for gold, and that is what was increasingly happening? What would stop China and Japan from demanding an exchange of their dollar holdings for much of the gold in Fort Knox for example?

  • http://www.amit-singh.com Amit

    I’m sure there are all sorts of theories of why the gold standard was abandoned but the real gist of the argument is that we cannot have a fiat monetary system which allows the govt to inflate the currency at will to appease their insatiable appetite to spend. although gold and silver are Constitutionally mandated to back the currency I personally think we could use other forms of precious metals (i.e. platinum), etc as well. during the Civil War, the Confederacy used cotton to back their bonds sold to Europe. if we had offshore drilling we could use oil or perhaps pics of Scarlett Johansson ;-)

  • http://bearingdrift.com Brian Kirwin

    Even better, David. Additional mining does what to the price of gold?

    No nation backs currency with gold, which means us reverting back to it would create the same problem that staying on it long after other countries abandoned it did.

  • http://www.amit-singh.com Amit

    kirwin, which specific problems are you referring to? granted no monetary system is perfect but I believe one that allows for uncontrolled spending is far worse than one that limits large credit

  • http://bearingdrift.com Brian Kirwin

    Amit, surely you understand the international monetary issues that were alive while we continued to cling to a currency standard that no one else used, and those countries demanding debt repayment in gold from America while holding no gold backing for their own currencies.

  • http://thethinkingheads.blogspot.com/ EJ

    The reason why breton woods (the last remnants of the gold standard) fell in 1971 was because we started printing money faster then gold was being produced in order to pay for Vietnam and LBJ’s great society. This was causing the “export of inflation” to other countries that tied their currencies to the dollar (which was how the agreement was supposed to work). Other countries then started demanding payments of gold for their dollar holdings in which we did not have enough gold to back the amount of dollars in existence. The system collapsed because we stopped adhering to the agreement.

    Now, it would be impossible to go back to a gold standard because there is not enough gold in existence to back the total amount of dollars outstanding at the current spot price. Either the money supply would have to be greatly reduced, creating a deflationary spiral which would be damaging, or the dollar/ gold peg would have to be set at a much higher level, say $10,000 per oz or whatever it might be.

    Though is sounds crazy now a days to be talking about the gold standard, it really shouldn’t be. It was only in the 70s that we still had a system. We don;y think about the money supply because for so many years it has been controlled by an independent authority (the fed) which is outside the political process and no one really understands it. But this was not always true. Int he late 1800′s debates over the gold standards vs the bi-metalic standard were huge issues. It was understood that the monetary system was one of the most important things regarding economic growth. People don’y realize that the fed chairman has more power over the economy then any other single political office including the president, and yet we give all blame and credit for the economy tot he president. Just as people in countries with monarchs and dictators who know nothing else have lived to not even think about questioning authority, so to we have become accustom to just assuming the fed system is and always will be and there are no alternatives. Anyone who challenges that fact is immediately dismissed.

    I personally am not advocating a gold standard return, but the current monetary system has many flaws and was one of the, major reasons why we had the housing bubble and financial breakdown. We should be making this an issue again instead of bitching over bush or obama as if they have a magic wand for good or bad. Unfortunately, Paul is the only one even bringing attention to this, and for that I give his a lot of credit.

  • http://www.littledavidobermark.blogspot.com/ LittleDavid

    So it seems to me that I have learned that not only does Ron Paul want to legalize recreational drug use, legalize prostitution and destroy Social Security, he also wants to enable the Chinese to loot all of our gold from Fort Knox. Sure sounds like the type of candidate I want to support. (Sarcasm intended.)

    I did not get to watch all of the CPAC speakers. I did get to watch Rush Limbaugh’s address. Did you hear how Rush started off his speech noting how God wished He was Rush Limbaugh? This point was made in a joke. But what was the point of the joke? Did Rush Limbaugh belittle the influence of God?

    Just how many of you God fearing Republicans found the joke to be acceptable?

    Evidently Rush Limbaugh thinks his talents are not only “borrowed from God” (from his radio program) he thinks God envies him for his power of persuasion or something (taken from his CPAC address).

  • http://www.amit-singh.com Amit

    LD, I am missing the point of the Rush comments to this topic but regardless going back to the Chinese “looting” our gold, what would that matter if our currency has no relation to it?

    Kirwin, see EJ’s comments, he can typically articulate my points better than I

    EJ, download Firefox and when you type something that is underlined in red it means it is misspelled!!!!!!! you can even right-click to replace it with the correct spelling.

  • http://www.littledavidobermark.blogspot.com/ LittleDavid

    Amit,

    Why did I bring up Rush? OK, let me quote you:

    “This year the speeches at CPAC were generally on target…”.

    Rush was one of the most, if not THE most, prominent speakers at CPAC. In fact he was presented an award at the conference and spoke for nearly 1 1/2 hours.

    You’re the one who praised the speakers (note plural) before you went on to praise Ron Paul individually.

    As for the gold standard, if Ron Paul gets his way, we would go back to a commodity based currency. If you are going to point out how Ron Paul is carrying the water for you back in Washington, you have to look at the water in the bucket he’s carrying in his other hand.

  • http://www.bearingdrift.com Brian Kirwin

    David, it’s a joke. Ya know, like the media watchdog becoming Obama’s lapdog. Like when Rush said newspapers are a business where they think the customer is always wrong.

    Unclench and smile once in a while, or else you’ll start liking Ron Paul.

    Amit, I’ve long noticed how other people are better at articulating your views than you are. Thanks for pointing it out.

    EJ, bubbles have repeatedly occurred in economies whether a currency was commodity-based or not.

  • http://www.amit-singh.com Amit

    LD, gotcha. I didn’t go to CPAC on Sat so I missed Rush’s speech

    kirwin, as usual you’re …

  • http://www.littledavidobermark.blogspot.com/ LittleDavid

    Pretty offensive joke wasn’t it?

    Imagine what Rush would have had to say if Representative Conyers or somebody like that told such a joke.

    But I forget. Rush holds himself to a different standard then he would hold the rest of us. Like what did he say should happen to drug abusers prior to he himself being caught abusing drugs?

  • http://www.amit-singh.com Amit

    I’m not particularly offended when someone like Limbaugh makes an ass of himself. Guess when you babble for 3 hours a day and come up with stupid crap like “Barack the Magic Negro”, then talking for 90 minutes at CPAC is like a walk in the park. glad I missed that one.

  • http://www.bearingdrift.com Brian Kirwin

    David, I don’t waste time being offended.

  • EJ

    “bubbles have repeatedly occurred in economies whether a currency was commodity-based or not.”

    But most bubbles have had a key ingredient… loose and easily obtainable credit (even when we had a gold standard). I’m not advocating a return to the gold standard. I’m making the point that the federal reserve and its loose monetary policy following the 2001 recession was one of the key ingredients to creating the housing bubble. There’s a reason why people like Friedman, who did NOT advocate a commodity based currency, also advocated the end of trying to manipulate short term interest rates by the Fed. Dick Armey had a piece in the WSJ recently blaming the fed for much of the bubble as well.

  • http://www.littledavidobermark.blogspot.com/ LittleDavid

    EJ,

    Hindsight sure is great isn’t it?

    Back during the Dubyah administration, when Greenspan insisted on the loosening of credit, where was your voice? (My own voice was absent.)

    Seems to me that what economic stimulus we got back during the Dubyah days is more explained by the real estate bubble caused by Greenspan then can be explained by Dubyah’s tax cuts.

  • EJ

    LD,

    I’m not quite sure what your point is. Anyone who thinks that an economy at any given point is controlled by one given factor is an idiot. The tax cuts were helpful and likely lessened the period of the 2001 recession, but are not a magical cure all. Not discovering this site until last, year, yeah “my voice” wasn’t literally “here,” but I have always critiqued the extreme supply-sider claims that are bastardized from the actual academic theory.

    The growth we did have in the 2000′s was largely due to a fed induced bubble. But then gain the growth we had in the late 90′s was also a bubble and unsustainable and partially caused by lose money as well. M2 was growing at double digit rates for years in the late 90’s. The problem was instead of allowing a moderate recession in 2001 where the excesses of the tech bubble could be liquidated allowing for new growth afterwards though better allocation of real resources, the Fed loosened monetary policy too sharply, and just shifted one bubble into another. We are now paying greatly in this recession because we essentially have 20 years of a bubble economy, driven by increasingly lower and lower interest rates, to adjust for. We have come to the end of the raod.

    I suppose this was the intention of my initial post on this thread. Voters are completely oblivious to what the fed does and instead we point at presidents, when we should be looking at the fed chairman instead.

  • http://www.littledavidobermark.blogspot.com/ LittleDavid

    EJ,

    My point is that it seems too many voices are being raised to point out how they saw the problems we now experience in advance. If that were true, each of these voices, if they were so certain what was going to happen, would be rich beyond our wildest imaginations because of the crystal ball they had available to allow them to peer into the future.

  • EJ

    LD,

    I don’t claim i saw this coming, but after looking back, it seems pretty clear. Everything that has happened is your classic bubble and it corrisponds with flagrent growth of the money supply and credit creation. There were some people who called this, but the fact that we had a bubble shows that most people didn’t. I work in an economics field and even within this world, most economists that don’t specialize in housing and/ or monetary theory really werent even paying much attention to this in the first place. Plus every time there is a bubble, just like in the late 90′s with the “new economy” everyone always thinks something has changed to fundimentally make things different then in the past. I myself am pretty young and have only observed this last one business cycle as an adult. Moving forward I am going to be paying much closer attention to bubble behavior of any kind.

  • PC

    “So far the bill is getting bi-partisan support with 3 Democrat co-sponsors along with 8 Republicans so maybe I will have some luck getting my VA-8 Congressman to support the bill in this era of expected govt transparency.”

    Only a moran would think that.

  • http://www.littledavidobermark.blogspot.com/ LittleDavid

    EJ,

    Good luck on seeing the next bubble coming. Every time one appears everyone (not really EVERY one, just most) claim this one is different from all the others. That is until the new bubble bursts.

    Actually I will credit Greenspan with pointing out the “irrational exuberance” of the tech bubble. Too bad we did not have someone pointing out the irrationality of the real estate bubble before the bubble grew so large that when it burst the sound was deafening. Of course there was more to the deflation of the real estate bubble then though wasn’t there?

  • http://www.amit-singh.com Amit

    PC, I wish Moran did think that. the key word in my statement was “maybe” I think it is pretty hard for a politician to justify what threat to national security there is by auditing the Fed. and the concern of the cost of the audit simply doesn’t hold water.

  • http://www.amit-singh.com Amit
  • http://www.myviagrastore.com/category/Pain_medicine Emma Foglesong

    While this makes sense and I don’t disagree, you have to wonder if Sarah Palin would support it if Rush said it and called it satire ;) haha