Guest Editorial Week Of 7/18/2022

By William Haupt III | The Center Square contributor

Auditing the Federal Reserve might keep the system honest

"Real patriotism is a willingness to challenge the government when it is doing wrong." – Ron Paul
Many people have a delusion 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 bankers not the American people. The age old question is: Why is the corporation that controls our money, one run by bankers appointed by a president, not accountable to Congress or the people?
The U.S. did not have a central bank until the 19th century. Our founders were opposed to central banks since the British had tried to force the colonies to allow the Bank of England to manage their money. Therefore they gave the Treasury Department the authority to manage our money supply.
Since Jesus expelled the money changers from the Temple, the efficacy of central banks has been tested. They were created to protect a nation's money from politicians when the value of currency was tied to precious metals. The flaw with the system will always be isolating them from politicians.
In reaction to the panic of 1907, J.P. Morgan petitioned Congress to pass the Federal Reserve Act and establish a central bank for America. But the caveat was its chairman would be chosen by the president. And the Fed fiscal policies today reflect the policies of the party in control of Washington.
During WWI, countries threw caution to the wind and abandoned the "gold standard" to print more money to fight the war. And in doing so, this devalued and inflated the currency.
Once politicians learned to use central banks to finance their political wish-lists, the banks became fiscal political whips for aggressive politicians. When Franklin Roosevelt needed money to finance his New Deal, he turned to the Federal Reserve. By the end of WWII, the Federal Reserve became dependent and reactionary to political influence instead of steadfast guardians of money supplies.
This was blatantly obvious in 2013 when Barack Obama picked Janet Yellen as Chair of the Fed. Yellen supported liberal economic policies financed with low interest rates. With his recovery going in reverse, Obama needed a chairman who'd keep interest rates artificially low until he left office.
By keeping interest rates too low too long; Yellen devalued the U.S. dollar compared to those of nations like China and Japan. This increased our trade deficit and made it less feasible for foreign nations to do business with us. Yellen had the Obama economy on life support for four long years.
President Donald Trump replaced Janet Yellen with Jerome Powell when her term was up. With a robust economy, high wages and the lowest unemployment in 60 years, for the first time in a decade the Fed ditched their politically motivated low interest rate policy, raising rates four times under Trump.
During the onset of the pandemic, with no help from the Fed, Trump passed legislation to keep the economy afloat. Powell remained out of sight and out of mind when he was needed most.
Biden inherited an economy in recovery, and all he had to do was count his blessings. Instead, he appointed progressive Janet Yellen to run the Treasury and influence Powell to return the U.S. to the Obama "easy money" years. This enabled Biden to grow government without increasing taxes.
After a year in office, with the Fed financing his out of control spending, Biden has painted himself into an economic corner. The Fed has stood idly by while America has a 9.2 percent Jimmy Carter style inflation rate. Energy prices have doubled since Biden took office. Consumer goods, if you can find them, are up 44 percent.
Biden also created a labor shortage making 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 nation's currency from disingenuous politicians and it allowed consumers and the markets to control the nation's money supply through supply versus demand.
Through evolution, a central banking system that once protected the people's money from greedy politicians morphed into a financial vehicle to regulate the economy to satisfy political economic policies. Central bankers today act more like politicians than watchdogs monitoring our currency.
After the 2008 financial collapse, the Government Accountability Office (GAO) got a rare chance to peek behind the iron curtain at the Federal Reserve. Although the review was limited, the GAO was able to audit the agency’s emergency loan programs. And what GAO auditors found was troubling.
It revealed that the Fed loaned $16 trillion in bailouts to businesses and banks with zero input from Congress. As soon as the GAO report was released, the Fed refused to allow a scheduled audit on how they make 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 they are 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 president and members chosen by the president? What employee is going to ultimately risk getting their boss "P-Oed" at them?
Chairman Powell claims he walks a tight rope between low unemployment, and a hot economy and inflation. But he stood by as Biden spent our nation into double digit inflation and didn't do a thing.
The way to limit political influence on the Fed is with annual GAO audits. The Fed's objection that this would compromise their 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 they act independently and that their decisions are based on factual data with no political influence.
Any company that does business with the government is audited by the GAO to insure its integrity. Why is the Fed treated differently? Annual GAO audits of the Fed would help Congress and people understand the decisions the Fed makes and those that they don't make. This would also help the public understand why the Fed does nothing while Biden is destroying the value of our currency.


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