What do you make of Rand Paul’s new initiative to audit the Fed? Do you think this will gain traction in the new GOP
controlled Congress? Enough so that it can be passed over Obama’s veto?
I’m not sure that you are asking the right question.
A lot of readers might think differently Lee.
Lee: I work for my subscribers and totally respect them. The Federal Reserve is an ugly, destructive monster that has survived the test of time – so far. The premise of your question suggests that Congress can enact big changes by itself. Congress can do a few good things before Obama leaves office, but enacting things like Audit the Fed face more institutional resistance than you might suppose.
When he became Speaker in 1995, Newt Gingrich made a lot of promises that were unrealistic. Especially with Clinton in the White House. It eventually killed him politically. It also left the GOP in a defensive “snake-bit” crouch that lasts to this day.
In politics, over-selling expectations that anger true believers in the end – that is the worst outcome, especially in GOP circles.
That said, I think pushing for a Big Picture “Audit the Fed” campaign is a great idea. Getting the House and Senate to grind out transparency-creating bills together – complete with full-scale hearings – and sending them to Obama for a signature would be an awesome step for the new GOP Congress. Unfortunately, I predict it will be very difficult to get the GOP controlled Senate and House to send a common Audit the Fed bill to Mr. Obama’s desk – something his handpicked Fed chair Janet Yellen would insist he veto, veto, veto.
Why do you think the Fed will resist?
Lee: Because they already are, big time. This Audit the Fed movement scares the central bank. They are in the driver’s seat for the overall economy and everyone knows it. The way the Fed tells it, their bond-buying campaign of money creation is responsible for a 131-percent jump in the Standard & Poor’s 500-stock index since 2008. Of course, this form of asset inflation is quite popular on Capitol Hill so long as the inevitable train wreck is not happening in the near future.
How about some specifics on how the Fed presses
Congress to exempt the central bank from
Lee: It’s not widely known, but the Federal Reserve Board has an active lobbying arm installed inside Congress. It’s called the Congressional Liaison Office. The CLO does way more than communicate on issues. It is an active lobbying arm of the central bank. That, in and of itself, is a grave and revealing conflict of interest. Technically Congress oversees Federal Reserve Board operations. That the central bank uses public money to make an end run around its overseers in Congress shows just how blatant and contemptuous they are of anyone who wants to make them accountable.
Since the ground breaking GOP election rout last November, the CLO has been promoting and hiring former Republican Congressional staffers. It’s building the connections it needs to stop a new and improved Audit the Fed bill. This bill is based on the original plan put forth by Rep. Ron Paul, and is now championed by his son, Senator Rand Paul.
You mentioned that the House and Senate will not
send a unified Audit the Fed bill to Obama’s desk.
Why do you say that?
Lee: Within the Fed, there’s just one Republican governor. He’s already gone to work, scaring gullible Republican Senators. His goal is to keep them off the Fed’s back by warning them against taking responsibility for the Fed. Kate Davidson, a Wall Street Journal reporter, revealed in a February article that just two days after new GOP majority Senators were sworn in, Powell was already laying his groundwork. He held court with incoming Senate chiefs of staff and staff directors, warning them against transparency legislation. His argument is that such legislation would be a
Trojan horse for micromanaging the Fed.
So what does that translate into?
Lee: Fed Chairman Janet Yellen and many others in the Fed’s power structure are essentially telling Congress to back off Rand Paul’s bill, or risk being blamed for any future monetary crisis.
That’s the stick. The carrot is that these influential staffers are also being reassured by the CLO that the Fed stands ready to be more open to GOP policy ideas going forward. All the while they’re sweeping their past close allegiances to Senate Democrats under the rug. And there are many other rewards for playing along with the central bank when you wield power in Congress.
And you think shutting down action on auditing the Fed is going to work?
Lee: For now I do, yes. As recently as 2008, former Senate Majority Leader Harry Reid was on record as favoring a Federal Reserve Board audit. Once the Congressional Liaison Office went to work on Reid, he assumed his role as blocker against Fed audit transparency for the entire U.S. Senate.
I think and predict that the carrot and stick approach of the CLO will prevent the Senate from sending a unified House/Senate Audit the Fed bill to Mr. Obama’s desk. That takes a big political burden off the White House.
You implied that the Federal Reserve Board has
some pretty big carrots to shower over the new GOP
majority in Congress. What do you mean by that?
Lee: You should ask Senator Chuck Schumer. Recently, Federal Reserve Board Chairman Janet Yellen gave Senate Democrats a private briefing on future Fed policy actions. In this case that an upcoming Fed announcement would reveal that there would be no immediate increases or changes to the Zero Interest Rate Policy (ZIRP) for the foreseeable future – despite widespread expectations that ZIRP would end. Keeping ZIRP in place would be a boon for the continued improvement in the nominal value of stocks. It’s widely suspected that Schumer told many in his top
donor base about the Yellen “briefing” before it became part of the public record.
Let’s face it. With this kind of hands-on cooperation, most seasoned Senate insiders are just going to take the money and run. That’s quite a carrot for the Fed to help its friends on the Hill. Especially when the alternative is to risk being tagged for the Fed’s disastrous policy mistakes.
So what is the main policy driver – meaning
greatest worry – that the Fed has now?
Lee: Yes, the other Fed scare tactic that works well on the political class is the specter of deflation. Recent drops in energy and other commodities have many Fed apologists calling for a more inflationary stance. In other words, more money creation. Politicians hate the idea of deflation because it would reduce their easy finance system for big government.
Against this backdrop, the Shanghai Gold Exchange is set to develop a Shanghai Free-Trade Zone that would include a physical gold exchange. If true, this step by China could pose a severe threat to the funny money politics and power of the Fed.
The other big surprise was the recent action of the Swiss National Bank. It abruptly ended its multi-year campaign to cap the franc in Euro terms. The result? A record-breaking upswing in the value of the Swiss franc ahead of the European Central Bank’s launch of its own massive Quantitative Easing money-creation scheme. The move further weakened the euro and caused a brief rush into gold-backed assets. Central bankers’ moves and strategies seem dangerously clueless.
The central bankers absolutely rely on credibility in order to keep the Ponzi nature of their operations going. And that credibility has suffered.
Okay Lee, so you want Congress to have hearings on all this. Do you see ABC, CBS, NBC or others giving these hearings the time of day?
Lee: Of course not. That’s why we only want to press for transparency at this stage. Transparency is something folks understand. When the Fed resists such a reasonable demand, it’s easier to paint it as the cover-up that it is.
Plus, Walter Cronkite’s total hold on the news message of the day is long gone. There is a substantial conservative and independent media out in America now to communicate key findings to grassroots voters who tend to pay more attention. The Fed will resist accountability and transparency, which finally will, under the right conditions, increase public interest.
How so? They have been around for a century.
Lee: Some political operatives say taking on an unbeatable foe like the Fed is a quixotic quest that wastes political resources for the GOP. And that’s one way to look at it.
Another is that pressing for simple transparency in Fed operations helps show voters how closely the central bank collaborates with Congress to screw the public with astronomical debt and heavy-handed government. Future financial shocks could well make this groundwork pay off when the day of reckoning comes. Meanwhile, the Fed is a good villain to focus voters on, since it has created broad sickness inside the economy for so long.
Do you have any other predictions to elaborate on?
Lee: I kind of talked about this in the last issue. President Obama lost at the polls in November. And it goes without saying he plans to bypass Congress with executive orders. Not too “original” a prediction, but I have one that goes deeper.
As his disputes with the GOP heat up, expect radical leftists to take to the streets in larger and larger numbers.
With so many people now out of work permanently and more on the dole than there are people to pay for it all, old fashioned street pressure will be Mr. Obama’s weapon of choice to rattle the new GOP Congressional majority.
With so many pitchforks and torches out in the streets fighting even the suggestion that their benefits might not keep going up, and with the Fed brandishing a proven carrot and stick approach with Congress, I see Obama and the Federal Reserve Board as capable of defying last November’s election results.
Central banks and the permanent federal establishment are old hands at frustrating the voters’ instructions. Maybe this time will be different but I would not count on it.
Your parting advice?
Lee: The same as always. Work hard to make your family, life and wealth as resilient to dangerous outside threats as you possibly can. You may not be able to change politics, but your own ability to control and improve your circumstances is the most important freedom that you have. Not nearly enough people step up for their own security and benefit, and instead fume about the injustice of politics.
Vote for freedom always. And hold those you vote for accountable. In the meantime, Independent Living stands ready to coach you on making your life safer from an evil elite bent on taking your freedoms from you.
There are lots of Do-It-Yourself suggestions on our website, www.IndependentLivingNews.com.
Thanks again one and all for being subscribers to Independent Living. It is a privilege to serve you.