Mishkin Calls Ron Paul Fed-Audit Bill ‘Incredibly Dangerous’

[D-Mack]

Mishkin Calls Ron Paul Fed-Audit Bill ‘Incredibly Dangerous’

Dec. 1 (Bloomberg) -- U.S. Representative Ron Paul’s proposal to allow audits of the Federal Reserve’s monetary policy is “incredibly dangerous” and could stoke inflation, said Frederic Mishkin, a former Fed governor.

“The Ron Paul bill is incredibly dangerous,” said Mishkin, who is now a Columbia University professor, in a Bloomberg Radio interview. “It is remarkable the kind of attacks that are occurring on Fed independence.”

Fed Chairman Ben S. Bernanke has opposed the proposal by Paul, a Texas Republican, saying it might open the door to interference in monetary policy. A separate proposal in the Senate backed by Banking Committee Chairman Christopher Dodd would strip the Fed of authority to supervise banks.

Paul’s bill “would be very dangerous in terms of promoting inflation,” Mishkin said. “If you make the central bank beholden to politicians on a short-run basis, you get very bad outcomes: high inflation and less of the ability to deal with shocks like the ones we had recently.”

http://www.bloomberg.com/apps/news?p...LCJcZ7Ow&pos=6

I bet the Fed is able to produce high inflation without an audit

[oddlots]

Re: Mishkin Calls Ron Paul Fed-Audit Bill ‘Incredibly Dangerous’

Is this the same Mishkin who said...

Some pearls of wisdom from Mishkin's extensive understanding of the (soon to be bankrupt) Icelandic economy:

• Fiscal imbalances are not a problem in Iceland: quite the opposite, with Iceland having an excellent fiscal position with low government net debt (less that 10% of GDP) and a fully funded pension system (with assets amounting to more than 120% of GDP).
• Monetary policy has also been successful in keeping inflation low and near the inflation target, particularly when housing prices are excluded from the inflation measure, as is the case in the United States and the eurozone.
• Research on multiple equilibria suggests that self-fulfilling prophecies are unlikely to occur when fundamentals are strong, as they are in Iceland.
• The analysis in our study suggests that although Iceland's economy does have some imbalances that will eventually be reversed, financial fragility is currently not a problem, and the likelihood of a financial meltdown is low.
• Iceland is an advanced country with high-quality institutions. GDP per capita (adjusted for PPP) ranks fifth highest in the world; longevity is the highest for females and second highest for males; unemployment is almost non-existent and way below the natural rate; net government debt is almost nil, labor force participation among older workers the highest in the world, and of women the highest in the OECD (almost 80%, compared with 56% on average in the OECD).
• Noteworthy among Iceland's country rankings for quality of institutions is that Iceland ranks fifth in economic freedom, firs in terms of the lowest corruption, seventh in terms of competitiveness, first in the percentage of population connected to the Internet (ADSL or ISDN), and the first in terms of
  freedom of the press, compared with number 113 for Turkey and 59 for Thailand [and 666th for America].

These rankings are of course sometimes arbitrary, but they clearly illustrate that Iceland is a well run, advanced Nordic country that has little in common with emerging market countries, a fact important to recognize when we start discussing financial stability in the next section.

http://www.zerohedge.com/article/mis...-fed-here-dude

As for Fed independance, here's Martin Mayer:

Two weeks ago the House Banking Committee voted to authorize periodic audits of the Federal Reserve System by the Government Accountability Office, and outrage spread through the media about the Congress usurping the authority of the Fed.
The fact of the matter is that oversight of the Federal Reserve is part of the job description of the Congress. The Constitution of the United States empowers the Congress "to coin money [and] regulate the value thereof." When he was chairman of the House Bankng Committee in the 1950s, Wright Patman liked to say that the Constitution gave the Congress full power over money, "but we have farmed it out to the Federal Open Market Committee" in the Federal Reserve System.
Not everything said by Representative Ron Paul (R, TX) need be taken seriously, but on this subject he is right on the money. The much touted "independence" of the Fed is an independence from the executive, not the legislative branch.
The Fed can write its own budget without dictation from anyone for the practical reason that printing money is profitable and the central bank always shows a surplus. But under our system of government, the Congress can no more give the Fed full policy independence than the President can resign as commander-in-chief of the Army and Navy. The legally mandated twice-yearly "Humphrey/Hawkins" reports that the chairman of the Fed makes to the Congress are an expression of ultimate Congressional responsibility for monetary policy.
In this context, one probably should note that the Fed's oft-repeated concern about populist pressures for cheap money has always been eyewash. As Bray Hammond demonstrated in his Pulitzer Prize history of Banks and Money in the United States From the Revolution to the Civil War, it's the merchant class, the builders, the shadow bankers and the government who want inflation, while the farmers and workers want stable values for their earnings.
And right now more than monetary policy is involved. Over the course of the last year and a half, the Federal Reserve has created hundreds of billions of dollars and turned them over to the big banks and the big brokerage houses and the big insurance companies of American International Group. Some of the losses that have been and will be associated with these activities-especially those associated with AIG, Lehman Brothers and the government-sponsored enterprise Fannie Mae--are expenditures of the kind the Constitution says can be made only "in consequence of appropriations." The public defense of these activities is essentially an assertion that "we were right to panic."
Even those who approve the actions doubt the process. The Fed can no longer interpose its standard claim that secrecy is a necessary part of the mystique of central banking. The American people deserve to know the details of how these decisions were made. The Congress has not just the right but the obligation to audit them.

http://us1.institutionalriskanalytic...ub/IRAMain.asp

[LorenS]

Re: Mishkin Calls Ron Paul Fed-Audit Bill ‘Incredibly Dangerous’

Whatever happened to "If you've done nothing wrong you have nothing to be afraid of?" Why is the Fed afraid people might be allowed to see what they're up to?

The whole rationale for the existence of the Fed is that Congress has the right to delegate authority to another body. It's not delegation if you don't keep track of it, that's called abdication.

Congress still has the authority to "coin money and regulate it's value". The Fed exists only at the whim of Congress, it's about time they remember that little fact.

[WildspitzE]

Re: Mishkin Calls Ron Paul Fed-Audit Bill ‘Incredibly Dangerous’

Interesting article by Gary North, thought you all would find it interesting.

He is an Austrian, so he'd like to get rid of the Fed.

But in the following article, he talks about how certain people are taking advantage of the support the audit bill has so that the Fed is nationalized.

Barney Frank in charge of the currency? Buy Gold @ $2500/oz!

Link: http://www.garynorth.com/public/5762.cfm

"... Gause specifically says that he is trying to convince Ron Paul's followers to leave the entire central banking system intact -- just nationalize it. That's right: he calls for the nationalization of the Federal Reserve.


He calls for the Treasury to issue fiat money. He says that the government can create money, and this will let the government stop all taxation.

In other words, there really are free lunches in life. There really is no scarcity. Government can take something of low value -- paper and ink -- and create wealth: money.

Ludwig von Mises had a phrase for this outlook: stones into bread.

The greenbackers have been pitching this inflationary Party Line ever since 1863, when Lincoln and Congress started printing fiat money not backed by gold; hence the term greenbacks. I suggest a slogan: "If you like wartime emergency measures that centralize political power and then become permant policy, you'll love greenbacks."
Greenbackers never change. They never learn basic economics.
..."

[shiny!]

Re: Mishkin Calls Ron Paul Fed-Audit Bill ‘Incredibly Dangerous’

Hmmm... I've been a fan of Andrew Gause since reading his little book "The Secret World of Money". I've always been a fan of Ron Paul, as well. I've heard of dollars being called greenbacks, but never knew anything about the history of them or that there even was a thing called "the Greenback Movement" until last week when I watched a movie made by Bill Still called "The Secret of Oz".

FWIW, this video has won numerous awards at film festivals. Yet three days after being offered on Amazon.com it was banned and Bill's account was closed for no reason. At the same time, a film festival that had accepted the film suddenly revoked their invitation. Seems that TPTB didn't want it seen. Bill started selling it directly from his own website and I bought a copy to see what all the fuss was about.

I learned that the American colonies had issued Colonial scrip at no interest and during those years enjoyed great prosperity and growth. The British Stamp Act put an end to that by ordering that transactions take place in gold. This caused such a decrease in the money supply that widespread poverty ensued, and landowners had to sell their lands not only to pay their taxes- but just to eat. Who got the land? The banks, of course. This switch from Colonial scrip to a Gold standard is what brought on the American Revolution.

Throughout history (since Ancient Rome) there have been periods when governments issued money at no interest. During those periods people enjoyed prosperity and a high standard of living. When governments started authorizing Cental Banks to issue money (at interest), people suffered from high inflation. Whenever there have been Gold standards, since only a tiny percentage of the population owns gold, severe deflation has always ensued, and land and business get taken over by the banks. Gold standards have created depressions and plutocracies since Ancient Rome.

Anyway, this is what I took away from the movie. It makes a lot of sense to me, but I only know that I don't know anything! You folks here at iTulip are so much more educated about economics than I am. I would like it if some people here would watch this movie and discuss the idea of Greenbacks more. Who is right, who is wrong, and why?

You can learn more about it here:
www.secretofoz.com/index.php?option=com_content&view=article&id=60&Itemid=77

Also, so many people flooded Amazon with complaints about censoring this movie that it's been reinstated as of today.

[Slimprofits]

Re: Mishkin Calls Ron Paul Fed-Audit Bill ‘Incredibly Dangerous’

A few weeks back, Martin Armstrong released his short history of the banking system in the U.S.

Makes for a much deeper understanding of this topic.

http://www.martinarmstrong.org/files...dman-Sachs.pdf

[Jay]

Re: Mishkin Calls Ron Paul Fed-Audit Bill ‘Incredibly Dangerous’

A few weeks back, Martin Armstrong released his short history of the banking system in the U.S.

Makes for a much deeper understanding of this topic.

http://www.martinarmstrong.org/files...dman-Sachs.pdf

His banking history is full of facts, but doesn't have enough behind the scenes explanation for me. Plus he tends to ramble. That said I love his stuff in general.

[GRG55]

Re: Mishkin Calls Ron Paul Fed-Audit Bill ‘Incredibly Dangerous’

Mishkin Calls Ron Paul Fed-Audit Bill ‘Incredibly Dangerous’

...

When Miskin came out with this howler a couple of weeks back, that was it for me...:p

Not all bubbles present a risk to the economy

By Frederic Mishkin
Published: November 9 2009 20:08

There is increasing concern that we may be experiencing another round of asset-price bubbles that could pose great danger to the economy. Does this danger provide a case for the US Federal Reserve to exit from its zero-interest-rate policy sooner rather than later, as many commentators have suggested? The answer is no...

[Full article through the link above]

[Shakespear]

Re: Mishkin Calls Ron Paul Fed-Audit Bill ‘Incredibly Dangerous’

Thanks for the heads up on "The Secret of Oz". Looking some more I found this little gem.

http://www.youtube.com/watch?v=ezAvM...eature=related

[Rajiv]

Re: Mishkin Calls Ron Paul Fed-Audit Bill ‘Incredibly Dangerous’

Read Ellen Brown's Web of Debt

[MEDIA]http://www.webofdebt.com/media/WebofDebtintro.mp3[/MEDIA]

[oddlots]

Re: Mishkin Calls Ron Paul Fed-Audit Bill ‘Incredibly Dangerous’

Hey Rajiv,

I've been puzzling over a couple of core issues for awhile. First, it's always bothered me that A) I've never really understood why Jefferson and Franklin were so adamantly against allowing private banks to coin money. I've known that they were for ages but have never put nose to the grindstone to really understand the mechanics of the argument. B) I'm fascinated by the fact that Lincoln's original "greenback" was government issued money that was "spent into existence" I believe in the manner prescribed by the founding fathers. The fact that this is, in some sense possible kind of blows me away. They exited the civil war without any external debt to speak of as far as I understand it. How is that, even on its face, possible?

The above is enough to make me interested in the idea of monetary reform but I'm a little wary of the source you recommend.*

Seems a little ungrateful but, (cough) have any others?

* Perhaps this is sheer prejudice, but the author's other books regarding alternative medicine throw up a red-flag for me. This is a bit cheeky or unfair, but this skit always made me laugh:

http://www.youtube.com/watch?v=HMGIbOGu8q0

I don't mean to offend.

[oddlots]

Re: Mishkin Calls Ron Paul Fed-Audit Bill ‘Incredibly Dangerous’

In an effort to errrr... make more of an effort, has anyone heard of this initiative?:

http://challenge.bfi.org/application_summary/408#

[Fiat Currency]

Re: Mishkin Calls Ron Paul Fed-Audit Bill ‘Incredibly Dangerous’

The above is enough to make me interested in the idea of monetary reform but I'm a little wary of the source you recommend.*

If you haven't already ... I would read "The Creature From Jekyll Island" before the "Web of Debt".

I should think that both of those combined would answer your questions.

[oddlots]

Re: Mishkin Calls Ron Paul Fed-Audit Bill ‘Incredibly Dangerous’

Thanks for the reco...

By the by, while looking for other monetary histories I came upon this interview with Michael Hudson:

SS: You have described central banks as following the Washington Consensus. But there are those like Jack Kemp who argue that we need to return to the gold standard. Likewise, in "Gold and Economic Freedom," Alan Greenspan argued for central bank independence on the ground that the alternative is fiat currencies, which lead to hyperinflation and eventually to the collapse of financial systems. Does this logic hold water as solution to the financial regime you've described today?

MH: There is no historical basis for his ideology. It is basically an attempt to demonize public control of the monetary system. This prejudice has been sponsored by the financial sector hoping to elbow governments out of the picture. Rather than being based on economic history, it reflects Mr. Greenspan's mentor, Ayn Rand, and her passionate antipathy to government. The empirical evidence is just the opposite, which helps explain why the free-enterprise monetarists have excluded economic history from the academic curriculum.

A colleague of mine, Stephen Zarlenga, has just published a historical study, The Lost Science of Money (2002), showing that public-sector fiat money has a much better record than privately created fiat money. The best example is America's own greenbacks issued to finance the Civil War in the 1860s. Several of the colonial currencies also worked well, even the Continental Currency (the "continentals"), of which 200 million were authorized and printed. Their value collapsed when the British counterfeited billions of them in order to stifle the colonies becoming financially independent. But this wasn't a problem of the currency itself.

Zarlenga also demonstrates that Germany's hyperinflation of the 1920s was aggravated by the Reichsbank lending credit to private speculators betting against the German mark. He thus turns the tables on the privatizers by showing that their anti-government views rest on a false mythology.

What is most important to recognize about successful government financial policy is that control of the money supply historically has been accompanied by control over the economy's debt overhead, including the ability to write off debts that could not be paid. This is an area of study that is excluded by the Chicago Boys' economic curriculum. They talk about money as if it were something disembodied rather than part and parcel of the debt overhead--an overhead that is compounding exponentially.

http://michael-hudson.com/interviews/030711_counterpunch.html

Zarlenga's book is available through a group called the American Monetary Institute:

http://www.monetary.org/lostscienceofmoney.html

It's 736 pages. Yay!

Also noticed Martin Mayer cited this recently:

http://www.amazon.com/Banks-Politics.../dp/0691005532

[D-Mack]

Re: Mishkin Calls Ron Paul Fed-Audit Bill ‘Incredibly Dangerous’

A colleague of mine, Stephen Zarlenga, has just published a historical study, The Lost Science of Money (2002), showing that public-sector fiat money has a much better record than privately created fiat money. The best example is America's own greenbacks issued to finance the Civil War in the 1860s. Several of the colonial currencies also worked well, even the Continental Currency (the "continentals"), of which 200 million were authorized and printed. Their value collapsed when the British counterfeited billions of them in order to stifle the colonies becoming financially independent. But this wasn't a problem of the currency itself.

Hudson knows his history, I'm impressed.