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The movement to audit the Fed won a huge victory last night. Representative Ron Paul (R-TX) who has been a leading critic of the Federal Reserve for decades will lead the Monetary Policy Subcommittee. In other words, the author of the book “End the Fed” will be overseeing the central bank. Look out Fed chairman Ben Bernanke.
It has suddenly become mainstream to question the Federal Reserve’s actions. A new poll shows that the majority of Americans want the Fed reined in or abolished. These polls have struck fear into the central bank. Fed supporter Senator Gregg (R-NH) even showed up for a meeting at the central bank with a box of End the Fed books. It has been reported that he told the gathering that “it would be worth reading to see what the other side is plotting.”
Over the last month, the movement has gained a significant amount of traction. The Fed’s decision to announce yet another round of quantitative easing or QE2 is largely to blame. YouTube has been full of viral videos poking fun at the reckless policy. In plain English, QE2 means that the Fed will fire up their printing presses to create more money. This will only make things worse.
Even Comedy Central Daily Show host Jon Stewart joined in on criticizing the Fed. On his show last night, he played two different clips of Ben Bernanke. The first clip showed a recent 60 Minute interview where he said “One myth that’s out there is that what we’re doing is printing money. We’re not printing money.”
As Stewart noted, the “myth” that the Fed is printing money is true. Just take Ben Bernanke’s word from about two years ago. On March 15, 2009, on the exact same program he said:
Bernanke: To lend to a bank…it’s much more akin, although not exactly the same, as printing money than it is to borrowing.
Q: You’ve been printing money?
Bernanke: Well, effectively.
Stewart’s jokes weren’t so funny. He commented that the Fed should “go ahead, print money! Aside from Zimbabwe’s hyperinflation, what could go wrong?"
Could we be following in Zimbabwe’s footsteps? It’s hard to imagine that in 1980, the Zimbabwe dollar was valued 25 percent higher than the US dollar. Beginning in the early 2000’s, the Reserve Bank of Zimbabwe fired up their printing presses to pump massive amounts of new Zimbabwean dollars into their economy to pay off debts to the International Monetary Fund.
It was an utter disaster. In November 2008, Zimbabwe’s annual inflation rate was 89.7 sextillion percent. No, that’s not a made up number. For future reference, it goes trillion, quadrillion, quintillion and then finally sextillion. Zimbabwe chief statistician Moffat Nyoni announced that it had become impossible to even figure out the nation’s inflation rate.
Zimbabwe could not print money fast enough. In 2008, The Los Angeles Times reported that “Zimbabwe is about to run out of the paper to print money on.” In early 2009, Zimbabwe printed their first 100 trillion banknote worth only 30 US dollars. It was common to see children walking out with wheelbarrows full of billions of dollars. The wheelbarrow was worth more than their pile of practicably worthless cash.
Not surprisingly, the Zimbabwe dollar officially collapsed in April 2009. In the same month, the New York Times reported that the “Zimbabwe’s currency has been essentially worthless in-country for months. Now the Zimbabwe dollar is officially worth more on eBay, where collectors can snap up a few trillion-dollar notes for less than $25.” We may not be experiencing a devaluation of currency that rivals Zimbabwe yet. But it’s foolish to forget the lesson of Zimbabwe’s flawed monetary policy that left their dollar virtually worthless. Printing excessive amounts of money out of thin air has harsh consequences.
With the announcement that Ron Paul is to head the Monetary Policy Subcommittee, there is great hope that he may be able to rein in the excessive power of the Fed. As Ron Paul often cites, the dollar has lost 97 percent of its purchasing power since the invention of the Fed. Ron Paul will set us in the right direction to restore sound money.
For more information on sound money, please see the PDF of a Guide to Sound Money written by Dr. Judy Shelton and co-published by FreedomWorks and Atlas Economic Research Foundation.