Next month, Rep. Ron Paul (R., Tex.) will strengthen his place as a thorn in the side of the Federal Reserve when he becomes chairman of a House subcommittee that oversees U.S. monetary policy. That will give the longtime critic of the central bank an opportunity to question the Fed more aggressively about its role in the U.S. and the global economy.
In an interview, Paul said he plans to use the position to gain more support for his movement to audit the Fed’s monetary-policy operations. A version of his measure made it into the financial overhaul-legislation last year, leading to recent details about the Fed’s emergency lending programs (with more to come down the road about who borrows from the Fed). But Paul calls the audit provision and the Fed’s releases “incomplete.” We talked with the author of “End the Fed” about his new role. (Read a previous Q&A on Mr. Paul’s views)
Here are excerpts:
What will be your first priority in leading the subcommittee?
You don’t think the Fed will ever pull that money back?
Yeah, some of that goes back and forth. But even if that’s the case it still means that’s the amount of money you’re playing with. Every time they do something it has a consequence. The monetary effect is still there whether or not they end up with anything of value [in the Fed's holdings]. But ultimately it won’t be of value whether you hold Treasury bills or derivatives.
The panel you’ll be leading hasn’t gotten much attention in the past. What can a subcommittee chairman really do?
I think it’s more calling attention and getting information and acting as oversight. There will be legislation that we can talk about. We can talk about auditing the Fed. Even in the other committees, everything is a reflection of popular demand. There’s getting to be a bigger demand now for more information. I’d certainly like to have competition with the Fed to legalize competing currencies. That’s not going to happen, but we sure can talk about it. Most people recognize that the dollar reserve standard, there’s nothing permanent about it. Even the international bankers are talking about a new currency or using gold even. The big question is should we move further away from national sovereignty and our constitution and give it to an international body and try some crazy Bretton Woods standard again, which is doomed to fail. Or should we look to our traditions and have sound money.
Over the past year, we’ve seen a lot more information about the Fed coming to both Congress and the public. Do you think it’s made a difference?
It hasn’t changed policy. I think it’s made the difference that we understand it a little bit better. And it hasn’t gone well for the Fed. The popularity of the Fed has changed. They’re being challenged from all angles right now. … It isn’t so much what I will do. It’s going to be that these policies are doomed to fail. They always want me to attack Bernanke. It isn’t the individuals. It’s not Greenspan, it’s not Bernanke, it’s the system and it’s not viable. They cannot practice central economic planning through the Federal Reserve. They cannot have stable prices, whatever that means. They cannot prevent prices from going up when the time comes for prices to go up. The perfect example of their ineptness is their mandate to have full employment.
A number of Republicans want to change the Fed’s dual mandate to focus on inflation. What effect do you think it would have?
Probably not a whole lot. But I like the subject because it does go after the Fed. They assume too much responsibility. It brings up the subject of unemployment. Since they have totally failed on that this is a great time to talk about, what good is a mandate?
What percentage of Congress do you think supports your view of wanting to end the Fed? Are you concerned that your views would differ from a lot of Republicans?
Oh it wouldn’t be very many. As a matter of fact, I don’t even take the position that tomorrow I’m going to end the Fed. I want competition. In my book, “End the Fed,” I talk about just allowing competition in currencies. … I think things are shifting. I did it for 25 years and nobody even cared. And now with every Republican supporting my audit bill last year, I would say that’s a reason for me to be encouraged.