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History

Audit The Federal Reserve

One of the biggest frauds pushed on the American people was the creation of the Federal Reserve System of banks.

The purpose of the Fed, as it’s popularly called, was to alleviate the burden of recessions that overtook the American economy every so often. But since the Fed was created the US has experienced the Great Depression, which was the worst economic calamity in American history. And more recently the Great Recession of 2008 was the worst economic downturn since the Great Depression. So much for softening the blow of economic hardship.

The Fed was created in 1913, when President Woodrow Wilson signed the Federal Reserve Act on December 23. Conspiracy theorists use the timing of the passage and signing of this bill to say that it was passed stealthily since most of the House and Senate were away on Christmas recess. But this was debunked. The Federal Reserve Act wasn’t passed illegally. What we don’t know is whether House and Senate members at the time were bribed, manipulated, or were just simply naïve in their knowledge of banking.

One of the things we do know is that, since the last recession, the money supply has increased. The Fed has the power to expand or contract the amount of money in circulation. And after the 2008 recession, the Fed began its quantitative easing policy (QE). It does this by buying government bonds or other assets to stimulate the economy. From 2008 to 2014 the Fed pumped $4 trillion into the economy with its QE monetary policy.

The problem this creates is that, with more money circulating in our economy, it lowers the value of the money we hold in our hands, save in a bank, and invest. This leads to rising prices, or inflation, as there are more dollars chasing the goods and services available.

That the Fed can inject money into the economy through QE is actually in violation of the US Constitution. Article I, Section 8 states that only congress has the power “To coin Money, [and] regulate the value thereof…’’

And since 1971 it has been easier for the Fed to create money. That was when President Nixon removed the US dollar from the gold standard. It was bad enough that only a small percentage of American dollars were backed by gold by the early 1970s, but by being taken off the gold standard, even more money can be created by the Fed. So, not only does quantitative easing lower the value of our money, but no precious metal backing devalues it, too.

Former House member and presidential candidate, Dr. Ron Paul, submitted a bill – the Federal Reserve Transparency Act — to congress to audit the Federal Reserve in 2010, but the bill never made it through the senate as the Dodd-Frank Bill took its place.

In 2016, Dr. Paul’s son, Kentucky Senator Rand Paul, tried again by introducing an audit bill, and it was shot down. Even Senator Bernie Sanders wants to see the Fed audited. “The Federal Reserve must be reformed to serve the needs of working families, not just CEOs on Wall Street,’’ he said.

Does anyone smell something strange yet? Two recent attempts to make the Federal Reserve more transparent were met with failure. This should show us that rule of law doesn’t apply to the people at the top.

What do you think of the Fed and its monetary policy? There are a lot of interpretations. Some economic experts praised QE for helping to bring the last recession to an end. But others have said it was the slowest recovery of any recession in recent history.

Maybe the next recession will change people’s minds about the practices of the Federal Reserve.

About pm

Teacher, writer, and freedom lover.

Discussion

6 thoughts on “Audit The Federal Reserve

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