June 3, 2009 – 3:50 pm

On the face of it, you might be persuaded that Ron Paul had finally sunk some sense into Ben Bernanke, as the Fed’s chief speaker said today that the United States needs to develop a plan to restore fiscal balance. I actually believe Bernanke was sincere when he said “plan to restore fiscal balance,” but I also believe he sincerely wouldn’t want to implement that plan. No cynicism here. It’s just that years of listening to Allan Greenspan have taught me to look for the subtleties, for there lay the lies. Mixing lies with obvious truths, and taking public positions in furtherance of private, unpopular ventures designed to mislead is the nature of the beast. The Fed was born of a lie and so too shall it remain.

So, to hear Bernanke say we must control the deficit, while he has gleefully swelled the it to nearly $2 trillion, is to recognize it’s in perfect keeping with history.

Federal Reserve Chairman Ben S. Bernanke said large U.S. budget deficits threaten financial stability and the government can’t continue indefinitely to borrow at the current rate to finance the shortfall.

The budget deficit this year is projected to reach $1.85 trillion, equivalent to 13 percent of the nation’s economy, according to the nonpartisan Congressional Budget Office.

“Either cuts in spending or increases in taxes will be necessary to stabilize the fiscal situation,”Bernanke said in response to a question. “The Federal Reserve will not monetize the debt.”

Does he mean anymore?

Morgan and Rockefeller had at least the luxury of lying publicly, while acting secretly to push their agenda, but while Ben blatantly lies, he is almost simultaneously acting in plain view, demonstrating that he is none less than a despicable lying scoundrel.
Not that you could expect him care, but you do have to wonder how can he get away with it. Of course, there are the legions of congressional leaches, more than eager to genuflect on one knee or both.
House Majority Leader Steny Hoyer told reporters that Bernanke “is absolutely right, we need to be very concerned about incurring additional indebtedness.” The House plans to pass legislation before its July 4 recess to cut spending in one category before increasing it in another, he said. In addition, “we need to address entitlements.”
WOW! You can hear the smack of Hoyers lips to Ben-butt all the way from Capitol Hill, repulsive but not nearly so dangerous as this. Witness:

Wisconsin Representative Paul Ryan, the ranking Republican on the committee, said in opening remarks that the Treasury’s debt issuance and the Fed’s monetary stimulus, including purchases of government bonds, “can be a dangerous policy mix” and risks “runaway inflation” in the longer term.

Ryan said he’s concerned about “substantial” political pressure on the Fed to delay plans to tighten credit should unemployment remain high.

“The Fed’s political independence is critical and essential for safeguarding its commitment to price stability,” Ryan said. “We policy makers should realize that our most challenging policy period is going to be ahead of us.”

Ryan needn’t be concerned about any pressure applied to the Fed as I’m sure he knows too well that the pressure, like feces, flows from the Fed. The Fed is far removed from the political process of the United States anyway. The Fed is secretive and out of control.

According to current federal law, the Fed’s agreements with foreign governments and central banks–and, more important, its open market and monetary policy operations–are exempt from an audit by the General Accounting Office. As the GAO observed in the 1970s, the last time the issue of an audit really came to the fore, “We do not see how we can satisfactorily audit the Federal Reserve System without authority to examine the largest single category of financial transactions and assets that it has.” The Fed has such broad power to intervene in the economy and to engage in agreements with foreign governments and central banks that it is unconscionable that such actions are exempt from oversight.

And as Ryan frets, the Fed rules our lives.

The Fed’s open market operations are not at all neutral in allocating credit. The Fed creates new balances out of thin air and uses those new balances to purchase Treasury bills from banks. Thus the banking sector is the first to get the use of the new money created in these bank balances. As this new money circulates through the economy, prices rise, and individuals further down the chain experience a higher cost of living before their salaries rise.   

The fact that a single entity, the Federal Reserve, engages in and has a monopoly on monetary policy has detrimental effects on the economy. As long as we try to keep up this fiction, that the Federal Reserve has a long-term focus, that attempting to fix interest rates will not distort the economy, and that the Fed can end a recession by injecting liquidity, we will never free ourselves from the booms and busts of the business cycle.

Screw Joe DiMaggio, we want Ron Paul! Outside of him, you have to go all the way to Europe to find a politician who will speak ill of the Ryan’s precious Fed.

In Europe, German Chancellor Angela Merkel said yesterday she views “with great skepticism what authority the Fed has and the leeway the Bank of England has created for itself,” to purchase a range of assets in their efforts to end the crisis. She urged central banks to return to a “policy of reason.”

Asked by a lawmaker about Merkel’s comments, Bernanke said, “I respectfully disagree with her views.”

“I am comfortable with the policy actions that the Federal Reserve has taken,” he said. “We are comfortable that we can exit from those policies at the appropriate time without inflationary consequences.”

Oh, what a relief! Ben is comfortable, thank goodness! I was losing sleep! He wants you to be comfortable too. Comfortable with the public policy actions that the Federal Reserve has taken, in secret. Also that we can exit from those policies at the appropriate time without inflationary consequences. But we wouldn’t know Ben, because your policy meetings are in secret.

Well ok, Ben and Ron wont be knockin back a cold one together anytime soon, but let’s hear what Ron would say if they did.

The necessary first step to restoring economic stability in this country is to audit the Fed, to find out the multitude of sectors in which it has involved itself and, once the audit has been completed, to analyze the results and determine how the Fed should be reined in. Proposals to push the Fed back into the shadows, or to give it an even greater role as a guarantor of systemic stability, are as misguided as they are harmful.