Today a significant development occurred in the fight to audit the Federal Reserve. A Republican-led committee approved a congressional audit that would examine the Federal Reserves monopoly on monetary policy. Democrats of the House of Representatives Committee on Oversight and Government Reform suggested that the Fed should stay independent to not be influenced by politics. They claim that political influence would force the Fed to raise interest rates to curb growth and inflation. The Atlanta Fed just lowered the GDP expectation to .9% the same day the Fed raised interest rates. While raising interest rates does control growth and inflation, this makes no sense when we have historically low growth. Sound monetary policy would place normalization to 2010 or 2011 when growth was near historical averages. Asset bubbles are here because of a decade long stand on the zero bound.
Auditing the Fed would have to go to a floor vote by the House as the next step in he approval process. Previous versions of the bill have passed the House in 2012 and 2014 with Democrats support only to be shot down in the Senate. Democrats that previously voted for those bills, are now on the fence for this bill saying this would interfere with the Fed’s ability to independently govern monetary policy. Kentucky Rep. Thomas Massie (R), who has pushed this bill for several years, stated “It is ironic that the arsonists that caused the financial collapse are now being given credit for putting out the fire. Almost every macroeconomist concedes in retrospect that [the Fed’s] extended period of easy money led to the financial crisis.” The arsonists have been spraying lighter fluid on the dollar for a decade and the next crisis will be orders of magnitude greater.
“We need to take away the government’s money power. The banking industry needs it’s welfare check ended. The dollar’s soundness depends on it’s being untied from the machine that can make an infinite number of copies of dollars and reduce that value to zero.”-Ron Paul