Judd Gregg: A recipe for chaos

The idea at its heart was effectively summed up by its title; not much else needed to be written. The book was not a bestseller but it did have following, as did the then-Congressman. He still does, though he retired from Congress after the 2012 elections.

Ending the Fed was, and is, one of those ideas whose time has not come and probably never should come. But the fact that the concept was so scorned by so many people only served to make it even more attractive to those who espouse “camp” economics and conspiracy theories.

Now comes Sen. Rand Paul (R-Ky.), Ron’s son. The senator from Kentucky does not want to “end the Fed.” He wants to become the Fed.  

{mosads}He has introduced a bill to allegedly open the deliberations and activities of the Federal Reserve to more review and “transparency” through expanded audits by the Congress.  

The practical effect and real purpose of the bill, however, is to have the Congress insert itself into the development and implementation of monetary policy, including the printing of money.

The Fed is already subject to significant audit oversight, much of it put in place under the Dodd-Frank regulations. Audits, of course, are historically undertaken to confirm the integrity of the balance sheet and the activities of an organization. This is already done — and comprehensively so — by the present audits that cover the Fed.

The audit activity that the Paul bill envisions, however, is not for the purpose of confirming the accuracy and integrity of the Fed’s activities or balance sheet. It is aimed at determining — and, eventually, trying to influence — how the Fed makes decisions regarding monetary policy. 

Its purpose is to get into the actual operation of the Open Market Committee of the Fed, which is at the center of the printing of money, and equally crucial to the management of the money-supply and the market activities of the Fed.  

In other words, Rand Paul and the members of Congress who have signed on to his bill want a say in running the printing presses that determine the value of the currency.

Think Argentina.

When elected officials get access to the printing of money, really, really bad things happen to economies, and to the nations that cede them such power.   

Rand Paul, like his father, probably does not believe there should be a Fed at all. It seems apparent that he would prefer the amount of money in a nation to be determined by some outside ascertainable standard, such as the gold standard or a basket of definable goods as set by himself and others in Congress. 

This approach has been tried in times past. It has proven to be a painful failure.   

Without the flexibility and integrity inherent in having an independent and strong central bank to determine the amount of funds in a system, a nation can become victim to the stagnation of a fixed money supply or the profligates of the political class. 

Either way, bad times follow when those who are working and trying to make ends meet do not have a viable or reliable dollar to depend upon for their savings and their income.

In addition, it is difficult to understand how a Congress which has so grossly mismanaged its true areas of responsibility, specifically fiscal policy, spending and the debt, could have any credibility in laying claim to determining monetary policy. 

Two wrongs certainly do not make in a right. In this case, they probably create a multiplier effect in the wrong direction.

Conspiracy theorists, who now seem to abound on the Internet, have always found the Fed to be fertile ground. This is because, by their very nature, many of the Fed’s deliberations must be held behind closed doors. 

It is both sensible and important that their debates as to the best policies should not roil the markets, and that people should not be able to gain privileged information that would allow the markets to be gamed.  

In the end, however, the Fed’s decisions are transparent and in recent years even the general direction the board has been headed in has been transparent.  

There is no conspiracy here, just a real attempt to have a sound and constructive monetary policy in the face of many conflicting market forces and elected-government forces.

Were it not for the Fed and the stability it brings to monetary policy, this nation and the world would be suffering a great deal more economic dismay. Its independence is critical to its purpose and job.

This clearly is not a place where we need to have Congress stick its rather sticky hands. Sen. Paul’s proposal is a bit of soundbite politics that needs to be rejected.  

To do otherwise would almost guarantee that over time —  and probably a rather short period of time —  Americans would suffer serious economic uncertainty and even monetary chaos.

Judd Gregg (R) is a former governor and three-term senator from New Hampshire who served as chairman and ranking member of the Senate Budget Committee and as ranking member of the Senate Appropriations Foreign Operations subcommittee.