As the incoming chairman of the House monetary policy subcommittee, Rep. Ron Paul (R-TX) will hold the bully pulpit when it comes to the nation’s money woes.
He’s not wasting any time getting right to the heart of the matter.
The libertarian-leaning conservative has long been a critic of the US Federal Reserve and central banking as a whole, but this may be a new one: speaking with CNBC recently, Paul said he views the Fed as a “monopoly” that could benefit from the introduction of competition.
“We should start ending the Fed by allowing competition,” he said. “I don’t like the fact that they have monopoly control. It’s a cartel: they print the money. The Constitution really doesn’t give them that authority. The Constitution said that only gold and silver can be legal tender. I want to legalize competition and allow individual Americans to use gold and silver in competition, as money. Today if you do that, you can go to jail.
“I don’t like the idea that the power gravitates to the Federal Reserve. They literally can have a yearly budget bigger than the whole Congress, then what they do is kept secret. We don’t know where they spend the money. We’re just starting to crack that nut in order to get some of this information and we should continue to do it.”
An Indiana-based firm called Liberty Dollar — which produced “Ron Paul dollar” coins during his campaign for the Republican presidential nomination — was raided by federal authorities in 2007 and the company was shut down. The coins, sold for $25 apiece, were made of silver, and part of the proceeds from their sales were donated to Paul’s campaign.
The use of gold as money is not the same as reimplementing the gold standard for dollar valuations, which Paul has supported in the past. The US dollar was once backed by the price of gold, but President Richard Nixon decoupled the dollar’s value from gold markets in 1971. The move sparked a global financial panic until the rest of the industrialized world followed suit in implementing fiat currencies.
Gold is largely viewed as an archaic store of value, but Paul is not alone in seeing it as a potentially viable alternative to the dollar. World Bank President Robert Zoellick argued recently that in reforming the global financial markets, a debate should be held on returning to a gold standard.
Gold, he wrote in an editorial published by The Financial Times, could be “employed as an international reference point of market expectations about inflation, deflation and future currency values. Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today.”
“My personal beliefs is, I’d like the market to determine [where to store value],” Paul told CNBC. “… Markets are pretty smart. Right now markets are getting smart because they’re rejecting the idea of a fiat standard and they’re starting to realize it’s this fiat standard, manipulation of the money supply and interests rates by the Fed that gave us the bubbles and now has given us this financial crisis that we’re in.
“I don’t believe we’re anywhere near the end of this. I believe we’re about to see the collapse of the bond bubble and you’re going to see skyrocketing interest rates and price inflation coming back and that will be a whole new ballgame for us to face.”
In his push for greater transparency in the nation’s central bank, Paul added that he wants a physical audit of America’s gold reserves to ensure the Fed didn’t “loan out” or “sell” it. The US Mint is regularly subjected to audits which includes the gold and silver at Fort Knox, but the most recent audit did not disclose how much was still there.
The Congressman’s take on the Fed could cause serious divisions between Republicans, who’ve often defended the nation’s central bank. “I think you’re going to see a significant dispute within the Republican Party,” Rep. Barney Frank (D-MA) recently told Bloomberg. Frank is the senior Democrat on the House Financial Services Committee who allied with Paul to push an audit of the Fed.
“I do not believe that Ron Paul’s views on the Fed represent the views of most Republicans,” he added.
House Resolution 1207, Paul’s “Audit the Fed” bill, cleared the lower chamber of Congress but was side-tracked into committee and its language was stripped out of the Senate’s financial reform legislation. The bill would have put the Fed’s complete balance sheet under the US Comptroller General’s microscope, but leading Senate Democrats bucked Paul’s bipartisan alliance and effectively let the bank “keep its secrets,” the Texas Rep. said.
Paul’s son Rand was elected last November to become the next Republican US Senator from Kentucky.
This video is from CNBC, broadcast Dec. 14, 2010.