Op-Ed: Auditing the Federal Reserve would keep them honest | Opinion
“True patriotism is a willingness to challenge the government when it does wrong.” –RonPaul
Many people have the illusion that the Federal Reserve is a federal agency that controls our money. Yet the Federal Reserve is a private corporation run by bankers. And it operates in the best interests of the bankers, not the American people. The age-old question is, why isn’t the corporation that controls our money, run by bankers appointed by a president, accountable to Congress or the people?
The United States did not have a central bank until the 19th century. Our founders were opposed to central banks ever since the British tried to force the colonies to let the Bank of England manage their money. Therefore, they gave the Treasury Department the power to manage our money supply.
Ever since Jesus drove the Moneychangers out of the Temple, the effectiveness of central banks has been put to the test. They were created to protect a nation’s money from politicians when the value of currency was tied to precious metals. The fault of the system will always be to isolate them from the politicians.
In response to the panic of 1907, JP Morgan asked Congress to pass the Federal Reserve Act and establish a central bank for America. But the caveat was that its chairman would be chosen by the president. And the Fed’s fiscal policies now reflect the policies of the party that controls Washington.
During World War I, countries threw caution to the wind and abandoned the “gold standard” to print more money to fight the war. And in doing so, it devalued and inflated the currency.
“Without the gold standard, there is no way to protect savings from being confiscated by inflation.” –Alan Greenspan
Once politicians learned to use central banks to fund their political wish lists, banks became fiscal policy whips for aggressive politicians. When Franklin Roosevelt needed money to fund his New Deal, he turned to the Federal Reserve. At the end of World War II, the Federal Reserve became dependent and reactionary on political influence instead of being the steadfast guardian of the money supply.
This was blatant in 2013 when Barack Obama chose Janet Yellen as Fed chair. Yellen supported liberal economic policies funded by low interest rates. With his recovery in reverse, Obama needed a president who would keep interest rates artificially low until he left office.
I give myself an “A-” for the economic decisions I made in my first four years.” – Barack Obama
By keeping interest rates too low for too long, Yellen devalued the US dollar against those of countries like China and Japan. This increased our trade deficit and made it less easy for foreign nations to do business with us. Yellen kept Obama’s economy on life support for four long years.
President Donald Trump replaced Janet Yellen with Jerome Powell at the end of his term. With a robust economy, high wages and the lowest unemployment rate in 60 years, for the first time in a decade the Fed abandoned its politically motivated low interest rate policy, raising rates four times under Trump.
Early in the pandemic, without help from the Fed, Trump passed legislation to keep the economy afloat. Powell stayed out of sight and out of mind when he was needed most.
“The Fed can destroy the economy just because they don’t like the president.” –Donald Trump
Biden inherited a recovering economy, and all he had to do was count his blessings. Instead, he appointed progressive Janet Yellen to lead the Treasury and influence Powell to return the United States to Obama’s “easy money” years. This allowed Biden to expand the government without raising taxes.
After a year in office, with the Fed funding its out-of-control spending, Biden has painted himself into an economic wedge. The Fed has stood idly by while America has a Jimmy Carter inflation rate of 9.2%. Energy prices have doubled since Biden took office. Consumer goods, if you can find them, are up 44%. Biden has also created a labor shortage, which makes it more profitable not to work at all.
When currencies were pegged to precious metals, there was little inflation since politicians could not print money. This protected a country’s currency from dishonest politicians and allowed consumers and markets to control the country’s money supply by matching supply and demand.
“Politicians are never satisfied with simply allowing supply to meet demand.” –David Graeber
As evolution progressed, a central banking system that once protected the people’s money from greedy politicians turned into a financial vehicle to regulate the economy to satisfy political economic policies. Today, central bankers act more like politicians than watchdogs watching over our currency.
After the financial meltdown of 2008, the Government Accountability Office (GAO) had a rare opportunity to peek behind the Federal Reserve’s iron curtain. Although the review was limited, the GAO was able to audit the agency’s emergency loan programs. And what GAO auditors found was troubling.
He revealed that the Fed lent $16 trillion in bailouts to businesses and banks without any contribution from Congress. As soon as the GAO report was released, the Fed refused to allow a scheduled audit of how it makes interest rate decisions. They claimed that the audits would be politically motivated.
Brad Lumas wrote, “Money is a politician’s best friend.” Politicians have proven themselves addicted to money long before they file papers to run for office. If the purpose of the Federal Reserve is to protect our money supply from political influence, then why are its chairman and members chosen by the president? Which employee will ultimately risk being “P-Oed” by their boss?
President Powell says he is walking a tightrope between low unemployment, a boiling economy and inflation. But he stood idly by while Biden spent our country on double-digit inflation and did nothing.
“This inflation is transitory. It will get better as the economy improves, just wait and see.” – Joe Biden
The way to limit political influence on the Fed is to conduct annual GAO audits. The Fed’s objection that this would compromise its independence and subject its actions to political scrutiny is ludicrous. The Fed was created by Congress and its charter is governed by Congress. The Fed must prove that it acts independently and that its decisions are based on factual data without political influence.
Any company that does business with the government is audited by the GAO to ensure its integrity. Why is the Fed treated differently? Annual GAO audits of the Fed would help Congress and the people understand what decisions the Fed makes and what they don’t. It would also help the public understand why the Fed is doing nothing while Biden is destroying the value of our currency.
“Corruption and fraud are characteristics that exist everywhere. Unfortunately, that’s how human nature works. What successful economies do is minimize it.” –Allen Greenspan