Tuesday, May 11, 2010

Opening Up the Books

It appears the Bernie Sanders amendment to audit the Federal Reserve will get a vote in the Senate today. There may also be a vote on a more stringent amendment introduced by David Vitter, which mirrors the original Paul-Grayson bill in the House. Vitter introduced his version late last week after Sanders appeared to water down his amendment in various ways.

It's true that the current Sanders amendment is a bit weaker than its original version. (The tell was when Chuck Schumer, grinning, put his arm around Sanders on the Senate floor after Sanders announced "changes" to his amendment.) It's essentially a one-off disclosure of the recipients of various Fed lending programs since December 2007. If this is to be an "audit" in any true sense, it needs to be both recurring and comprehensive. Under the current Sanders amendment, the Fed could tidy up its files and indulge the GAO for a few months, then go back to business as usual knowing that the current unlikely coalition of audit supporters would have to come together again in the future to marshal support for another congressional vote. The main benefit of any regular audit is deterrence, which a one-time disclosure lacks. If the Sanders amendment passes, the extent to which it can be strengthened later on -- either in conference or as a result of what the disclosure eventually reveals -- will be key.

But it's important not to lose sight of the big picture and how historic all this is. The audit issue has attracted a lot of passionate supporters among the public, many of whom are new to the issue of monetary policy. Few of them probably remember when the Fed would meet to set rates and not even announce what it had decided. Everyone would have to watch what the big banks did afterwards and wait desperately for Salomon's Henry Kaufman to interpret it all for the masses. Despite some superficial nods to modernity in recent years -- only in the context of Fed history could releasing FOMC transcripts after six years be considered "transparent" -- secrecy and lack of accountability have always defined the most important parts of the Fed's work. For those with perspective, it is extraordinary that the audit's prospects have advanced this far.

While the conditions for that obviously have been favorable, the real credit belongs to a fairly small group in Congress that has either pushed the audit specifically or brought needed attention to the Fed and monetary policy in general. Some of the names are Bunning, DeMint, and of course Sanders, Paul, and Grayson. These are patriots -- did I just say that about Bernie Sanders? -- who in some cases, like Bunning and Paul, have focused on these issues for many years when no one else cared. They are doing work that in the past would have been considered not only futile but perilous. Especially for members like Grayson, who is in a tough district, their constituents should know that at least on issues of financial reform and monetary policy they are extremely well-represented. If the audit reveals what some suspect, it will be a career-maker for its fresher supporters including Grayson and a fitting coda for warriors like Bunning and Paul.

14 Comments:

Anonymous KAIMU said...

ALOHA!!

During his Presidential Campaign Ron Paul had a platform that included not just "auditing", but eliminating the US FED. Wow ... talk about "real" CHANGE!

Since 1913 the value, purchasing power, of the US Dollar has collapsed. If this is any indicator of anything it is confirmation that the US FED should be eliminated. It would be like hiring a gardner who steals from you every day and never mows the lawn! How long would you keep him around? The US FED has had nearly 100 years to "get it right" and here we sit in virtual bankruptcy, not just in the USA, but globally, where all central banks follow cues from the US FED.

The US FED is a monetary middleman, no different than the Mafia skimming profits for its members at the Vegas casinos. In fact the Mafia is green with envy that they too did not think of that sooner! A few Harvard degrees, an expensive suit, buy off Congress and you're set!

Christmas Eve no less ...

5/11/2010 12:23 PM  
Blogger Robert said...

The fed is the worst way to run a monetary system except for all the alternatives. Sure transparency is a good idea, but the public ever discovers that the Feds balance sheet does not (and is not supposed to) balance, I think there's gonna be trouble. This could get extremely interesting!

5/11/2010 1:23 PM  
Anonymous KAIMU said...

ALOHA!!

Robert ... Define "alternatives" ...

What is the alternative to "middleman" and "bankruptcy"?

5/11/2010 5:04 PM  
Anonymous Goldhorder said...

Omg... Robert... Your comments indicate that you know yourself what got us here. You are basically saying that if we shine a light on our rotting foundation... Nobody will want to buy our house!!!!! I mean God... Its not like people were using the gold standard for 6 thousand years to do commerce! But how could the snakeoil salesmen get their cut without a fiat currency?

5/11/2010 9:13 PM  
Anonymous goldhorder said...

Oh... And Robert... What do you do for a living? Lol

5/11/2010 9:36 PM  
Anonymous Goldhorder said...

I could care less about this bill at this point. It is meaningless. The fact that no senators voted against it is all I need to know. The script has been written for the American public. They will swallow it hook line and sinker like they always do. Public school education at its finest. I thought the Grayson red roof inn video i linked to yesterday is basically a small scale sample of the real corruption involved at the fed. Can we just sit the Fed Chairmen down in front of congress and get them to explain their actions? Just explain why this was needed. Was the entire economy going to go down as a result of the red roof inn crashing and burning? I just want them to explain in detail this one little case. Is it possible to justify their actions. If the answer is no.... Then what have we become as a country? Should we just end the farce? Do away with the three branches of government and declare Bernanke emperor for life?

5/11/2010 9:49 PM  
Anonymous Chad said...

Yes, let's mock the guy with a real name instead of the guy who uses his belief system as his name, and desperately wants society to fall apart, so he can finally say, "I told you so."

Of course, the "I told you so" was probably 40 years after he first advocated his end of the world investment philosophy. Follow anything long enough and you are bound to be right at some point.

5/13/2010 12:35 PM  
Anonymous Anonymous said...

How exactly do you buy gold? From the local coin shop downtown? They are charging a 30% markup from spot prices and close to double what they paid your neighbor who brought in a krugerrand last week.

5/14/2010 2:19 PM  
Anonymous Goldhorder said...

Lol...anon. There are different prices for "paper" gold and taking possesion of the real thing. The real thing is at a premium because... Well... During these times you can't trust anybody. Me, i want the real thing. I have been buying a good deal of silver from the nwtm (auburn, wa....google if u want to know) because of the reasons u mention and the fact that silver has lagged the price rise of gold.
Very funny... The person's post above yours. Please keep in mind that the US has only been on a fiat currency since 1971. That is what gave wall street control of the money supply and allowed them to borrow from the fed at virtually 0 percent. From 1971 to 1980 the gold bugs were right. Volcker came in and made it very difficult for wall street to get free money from the fed... They had to get it from US savers. That is why they paid 6 to 8 percent interest in your savings account during this period. Wall street beat gold from 1980 to 2000. At the end of 2000 we had gotten back to our free money for wall street philosophy. From 2000 to present gold beats wall street (meaning the average american worker is better off buying a yellow shiny metal and burying it in the ground then investing in his 401k plan after any matching contribution he receives). What has DC done to counter this trend? Why... they have left interest rates at zero and bailed out a bunch of idiotic over leveraged bets wall street made knowing they could get the governmentto bail them out if they lost. Wall street... Not content with making a guaranteed profit with free money to loan fom the fed ... Had to invent a modern ponzi sceme to get even more wealthy! So you are wrong. Since 1971 when we left the gold standard you r better off buying gold 50 percent of the time. We turned over our money supply to the banks and the temptation to abuse that power has been to great.

5/14/2010 8:17 PM  
Anonymous Kilfarsnar said...

Goldhorder said:

"Wall street... Not content with making a guaranteed profit with free money to loan fom the fed ... Had to invent a modern ponzi sceme to get even more wealthy!"

This is the part that really kills me about this whole situation. These Fed banks literally have a money machine. But they decided that it just didn't make money fast enough!

5/17/2010 1:53 PM  
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