"We cannot think straight about money, banking, or the Federal Reserve until this fraudulent legend has been exposed and demolished." - Murray N. Rothbard.

Rep. Ron Paul's bill HR 1207 to audit the Federal Reserve has 190 co-sponsors! More than 40% of the House of Representatives are now c0-sponsoring the bill, so it has a real chance of passing. But ... "we the people" still need to rally more support!

The argument against the bill revolves around the idea of an "independent" Federal Reserve.  Thomas F. Cooley, writing in Forbes says:

Congress is now clamoring to audit the Fed, and some of the policy proposals currently under discussion at the Federal Reserve will only increase the threat to its independence.

Before we deconstruct these issues, let's focus on why it is important to have an independent central bank ... An independent central bank can focus on monetary policies for the long term--that is, policies targeting low and stable inflation and a monetary climate that promotes long-term economic growth. Political cycles, alas, are considerably shorter. Without independence, the political cycle would subject the central bank to political pressures that, in turn, would impart an inflationary bias to monetary policy.

A variant of the argument for central bank independence is that control of monetary policy is far too important to put in the hands of politicians.

Ah, the "independent Fed" mythology.  Those pesky elections held every 2 years in the House, coupled with the publics supposed lust for inflation, would cause a disaster. Or so says the myth anyway.  You see, only the Federal Reserve system, made up of "the world's fiercest inflation hawks," have the temerity to "tame" inflation.

Here's how well they've done.


Obviously, the "inflation hawks" failed miserably! Besides, how would the public go about achieving this inflation they supposedly clamor for? In other words ... How can the public create (print) more money?

There's only one institution legally allowed to print money. If anyone else tries to print money, they are involved in the crime of "counterfeiting," which the federal government takes very seriously. The counterfeiter is hunted down and imprisoned for a long, long time. And if there's one thing the government doesn't tolerate, interference with their revenue makes the top of the list ... the monopoly power to print money enjoyed by the Federal Reserve.

Defending the Federal Reserve, Cooley continues:

As Ron Paul writes on his Web site: "Auditing the Fed is only the first step towards exposing this antiquated insider-run creature to the powerful forces of free-market competition. Once there are viable alternatives to the monopolistic fiat dollar, the Federal Reserve will have to become honest and transparent if it wants to remain in business."

Great! Obviously, monetary policy is so falling-off-a-log simple that your elected representatives can insert themselves via the demand for transparency into decisions of true complexity and subtlety. Why am I not feeling reassured?

"Monetary policy" is code for inflation. In our economy, "money" is pieces of paper issued by the Federal Reserve on which the following is engraved: "This Note is Legal Tender for all Debts, Private, and Public." This "Federal Reserve Note," and nothing else, is money, and all vendors and creditors must accept these notes, like it or not.

Inflation is caused by the continuing creation (printing) of new money (pieces of paper). The sole monopoly source and creator of all money is the Federal Reserve. Who then is responsible, if not the very institution that is solely empowered to create money (the Federal Reserve) itself?

The Federal Reserve, in total control of the nation's vital monetary system, is accountable to no one. It has no budget, it is subject to no audit, and no Congressional committee even knows of its operations, let alone has the authority to supervise its operations.  This is also the Federal Reserve who cannot account for $9 trillion of your money!

The Central Intelligence Agency (CIA) and the Defense Intelligence Agency (DIA) are both subject to the authority of Congress. You would think these agencies would be some of the most secret, but they're an open-book compared to the Federal Reserve. Surely the people's representatives in Washington have the right (and duty) to overlook the Federal Reserves unique monopoly.

An "independent" Fed sounds nice, but it's one thing to say that private activities should be free of government control, and another to claim government agencies and operations should be "independent." Unlike private industry, the government is accountable to no one. They have no stockholders nor customers. Government can only be accountable to the public and it's representatives in Washington.

So, if government itself becomes "independent of politics" it can only mean that the sphere of government has become an absolute, self-perpetuating tyranny, accountable to no one, and never subject to change or public cries to "throw the rascals out." And if nobody, whether stockholders, customers, or representatives can expel the ruling elite, then said elite is more of a dictatorship than a free, representative democracy.

Hold the Federal Reserve accountable!  Support HR 1207 and bring transparency to the Fed!