Forbes: Rand Paul is 100% Correct About Fed Audit

[AuH20]

http://www.forbes.com/sites/johntam...s-rand-paul-is-100-correct-about-a-fed-audit/

Yet arguably the biggest reason that our central bank needs babysitting is one that is perhaps least often mentioned. To be blunt, recessions, despite the near-term pain they bring, are in fact beautiful. Recessions are a wondrous sign that an economy is fixing itself, that it’s starving theglobe.com so that Google can attain more funding, that the Mike Shulas of the world are being replaced by their betters in Nick Saban. Without recessions there is no growth simply because recessions ensure that the myriad Webvans in our midst are put out of their misery so that they’re no longer consuming the economy’s always limited resources. Despite this truth, our Fed thinks its job is to shield us from recession, and it attempted to do just that in 2008. We to a high degree have a slow recovery due to the Fed’s hubris; the latter having robbed us of what would have been a staggering rebound.

In short, Rand Paul is right that the Fed needs a constant audit. He may not even know just how right he is on this one. If we ignore the certain truth that the Fed has never been non-political or independent, we can’t ignore just how dangerous are its doings.

Fisher’s surely right about the incompetence that defines Congress, but what he seems to miss is that it very much extends to our central bank. Big time. So while most in Congress are surely clueless about the ongoing economic damage that is the Fed, accountability has to mean something. Congress must audit the Fed simply because someone somewhere must be on the hook for the Fed’s actions. Senator Paul is right about the need for a Fed audit, perhaps far more than he realizes.

 

[r3volution 3.0]

The author eventually comes to the right conclusion (pro audit), but that's a miracle, because his reasoning is FUBAR. Incidentally, he's also got a douche face aching for a punch...Looks like many an MBS student I've known who unnecessarily wears a suit and tie to class and thinks he understands economics.

Still, what’s too often forgotten is that the dollar’s exchange value versus other floating currencies, or in a more sane world its value in terms of gold, is not a Fed function. It’s a Treasury thing, and more specifically U.S. presidents generally get the dollar they want. So while the dollar certainly has lost a sickening amount of value since 1913, and has done so to the U.S. economy’s major detriment (odd here again is that most Fed officials think devalued money a good thing), this truth is not the fault of the Fed. In fact it was FDR who devalued the dollar from 1/20[SUP]th[/SUP] of an ounce of gold to 1/35[SUP]th [/SUP]in 1933, it was Richard Nixon and John Connally at the U.S. Treasury who delinked the dollar from gold (much to then Fed Chairman Arthur Burn’s dismay) in 1971 on the way to further declines, and while Presidents Reagan and Clinton pursued strong dollar policies in the ‘80s and ‘90s, it was President George W. Bush who reversed our dollar course in the early 2000s.

The only reason Roosevelt devalued the dollar against gold was to allow the Fed to inflation-finance the government. And the only reason that Nixon was pressured to close the gold window was that the Fed had been inflation-financing the government through the 60s. As for Reagan and Clinton, that makes no sense at all - post Nixon Treasury had no control over the dollar at all, it was purely a function of the Fed's policies. Reagan's strong dollar was a result of Volker raising rates. Clinton's weak dollar was a result of Greenspan lowering interest rates.

Implicit in the silly notion that the Fed caused the dollar’s decline is the view that the Fed “prints money,” only to force it into circulation, thus driving down the dollar’s value. The obvious problem with such a view is that “money printing” by its very name leads to reduced money supply, by definition. Simply put, good money (there’s a reason the Swiss franc is strong despite its plentiful supply) is heavily demanded by producers and traders, while devalued, unstable money is anathema to them. Even if the Fed could print money in the way that some presume, the act of doing so would actually lead to a reduction of dollars in circulation, not an increase

LOL, what? Increasing the supply of money....decreases the supply of money?

What about “money printing”? Well, the Fed hasn’t been printing money in pursuing the most adolescent of monetary policies (quantitative easing), but to foist QE on the economy the Fed has been borrowing enormous sums of money from the banks. Put more bluntly, the Fed’s QE amounted to it borrowing $4 trillion from banks that it turned around and allocated across the economy. Precisely because members of the Fed think Ben Bernanke a better allocator of the economy’s resources than you, me, Paul Tudor Jones, and Warren Buffett, the Fed most definitely needs audit-like oversight.

ROFLMAO, what?!?!

So when the Fed credits $1 billion to JPM, and obtains a mortgage-backed security in exchange, the Fed is borrowing from JPM?

Apparently Harvard Business School no longer teaches the distinction between a purchase and a loan.

 

[YesI'mALiberal]

The author eventually comes to the right conclusion (pro audit), but that's a miracle, because his reasoning is FUBAR. Incidentally, he's also got a douche face aching for a punch...Looks like many an MBS student I've known who unnecessarily wears a suit and tie to class and thinks he understands economics. ... ... .........

You covered a lot of ground, but you left out two mega-FUBARS that are right there quoted in the OP. No, we don't need recessions to flush out bad companies - a strong economy will do it just fine, thank you. And the author seems to think funneling more marketshare to megalithic monopoly-wannabes like GOOGLE is somehow efficient. That's not Keynesianism, it's not Monetarism, and it's not Austrian. I think he's from the school of Crapulancism.