Archive for the ‘Federal Reserve’ Category

Rare Exclusive: Rand Paul on why Bernie Sanders won’t support his Audit the Fed bill

Monday, January 11th, 2016

Originally published at Rare

Sen. Rand Paul hit the campaign trail this week promoting the latest version of his Audit the Fedbill, first pioneered by his father, former Congressman Ron Paul. The Pauls are longtime critics of the Federal Reserve, sounding the alarm that the semi-private bank artificially regulates interest rates and, according to Sen. Paul, exacerbates income inequality.

In an exclusive interview with Rare, Paul said he plans to make a floor speech just prior to his bill’s vote, scheduled for Tuesday at around 2 ET.

“The Fed makes income inequality worse by doling out money to the large commercial banks first, who get to use it before the money depreciates as it trickles out to the rest of us,” said Paul Monday, explaining why this bill is so important.

“There’s a lot of evidence income inequality has gotten worse because of the loss of purchasing power,” Paul noted. “Over the last fifteen years, we’ve lost about 10 percent of real household income, and prices have gone up,” added Paul, explaining that the cost of basic goods such as eggs and white bread have increased dramatically.

Paul said that he expects the vast majority of his Republican colleagues to support Audit the Fed, with some help from a minority of Democrats.

He observed that in the past, a version of this bill passed the House with the unanimous support of Republicans and 100 Democrats. Paul praised that outcome as a “truly bipartisan effort.”

We asked Paul why he believes that only some of his Democratic colleagues are on board with Audit the Fed, particularly when they speak so frequently about the perils of income inequality.

“It’s been disappointing, because people like Bernie Sanders and Elizabeth Warren, who rail against big banks, they have been more so protectors of the biggest bank in our country, which is the Federal Reserve,” said Paul.

“I’d hoped to get more support from Sanders and Warren,” said Paul. “It’s disappointing that they talk a good game, but when push comes to shove, they’re not willing to have increased regulation on the biggest bank in our country,” he added.

Pressed as to why progressives such as Sanders and Warren hold what seems to be a contradictory position on the Fed, Paul said he wasn’t sure, but suspects it might be partisan loyalty or a commitment to targeting only fully private banks.

“All of the Federal Reserve governors were appointed by President Obama,” Paul noted, adding that progressives could be acting as “apologists for a Democrat president.” But perhaps, as Paul said, it’s simply an ideological double standard.

“They want to rail against private banks but not against a public bank, even though the Fed is quasi public. It’s part private, part public, yet they don’t seem to have any criticism for it.”

Sen. Paul has spent the weeks leading up to this vote making the argument as to why the Federal Reserve ought to be audited, highlighting the economic anxiety felt by essentially all Americans who aren’t super wealthy.

Paul told Rare, “The top 1 percent have gone up greatly and the middle class is squeezed by the lack of purchasing power in their dollar, but also by their lack of ability to make interest on their savings.”

If Audit the Fed passes the Senate, it will need to go through the House before it gets to President Obama’s desk. Rep. Thomas Massie introduced legislation last year as a complement to the bill Paul is currently pushing in the Senate.

Whether the House will take up Audit the Fed immediately is not yet clear, but will likely depend on the results of this week’s vote.

UPDATE: Senior CNN political reporter Manu Raju reported after this piece’s original publication that Bernie Sanders intends to vote for Rand Paul’s Audit the Fed Bill. Sen. Paul did not seem to be aware of this at the time of our interview. Sanders has previously gutted attempts to bring about an audit of the Federal Reserve and was criticized by former Rep. Ron Paul for doing so. 

“Unsustainable Patterns of Economic Activity”

Saturday, September 29th, 2012

Originally posted at the Coalition to Reduce Spending

(Note: I am a member of the Board of Directors of the Coalition to Reduce Spending)

Congressman Ron Paul, who is perhaps most well known for his career-long quests to rein in the Federal Reserve, published an interesting commentary this past week in his “Texas Straight Talk” series entitled “Interest Rates Are Prices.” Here at the Coalition to Reduce Spending, we’ve made it a point to touch upon the rarely discussed but centrally important concept of how artificially low interest rates encourage economically unsustainable behavior from not only the federal government, but private citizens as well. (For more on this, please read Coalition to Reduce Spending advisory board member Peter Schiff’s Washington Times piece, “The Real Fiscal Cliff“).

Touching further upon the important interest rates issue, Congressman Paul says:

Because the interest rate is the price of money, manipulation of interest rates has the same effect in the market for loanable funds as price controls have in markets for goods and services. Since demand for funds has increased, but the supply is not being increased, the only way to match the shortfall is to continue to create new credit. But this process cannot continue indefinitely. At some point the capital projects funded by the new credit are completed. Houses must be sold, mines must begin to produce ore, factories must begin to operate and produce consumer goods.

Congressman Paul makes an interesting analogy when he compares interest rates to price controls for goods and services. Certainly, one could see where this might be problematic in a long-term context.

As Paul states:

Because the coordination between savings and consumption was severed through the artificial lowering of the interest rate, both savers and borrowers have been signaled into unsustainable patterns of economic activity.

What does Congressman Paul mean by “unsustainable patterns of economic activity?” As he goes on to explain, resources that would have been put to use in more productive ways in a less manipulated system are allocated toward projects that are later found to be unprofitable, and thus, unsustainable. Paul posists that the only way for an economy to recover from this kind of manipulation is that the resources that have been invested in unproductive sectors need to be liquidated, instead of consistently propped up. And the latter has been standard practice for some time – only prolonging recessions, as Paul notes.

Additionally, as Paul explains:

Another effect of the injections of credit into the system is that prices rise. More money chasing the same amount of goods results in a rise in prices. Wall Street and the banking system gain the use of the new credit before prices rise. Main Street, however, sees the prices rise before they are able to take advantage of the newly-created credit. The purchasing power of the dollar is eroded and the standard of living of the American people drops.

Certainly, there has been a correlation between rising prices and increased credit injection into the system, and there’s no doubt that with a stagnant economy and the purchasing price of the dollar decreased, that the American people are adversely impacted. At the Coalition to Reduce Spending, we’re very concerned about the fact that so much money is being reallocated from productive sectors of the economy to serve the interests of well-connected central planners at the expense of honest taxpayers.

Current economic conditions demonstrate that the central planning in Washington, which has unfortunately been promoted in large part by both major parties, is not only not working – it’s harming everyday Americans. It’s time to reduce spending and manipulation in DC, and to put more resources back in the hands of the American people. After all, our national debt already divides up at $51,000 per citizen and $140,000 per taxpayer – and will increase exponentially if Americans do not demand a serious change of course in Washington immediately.