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Rand Paul Draws Liberal Fire Over Audit the Fed, Part Two

Prof. Paul Krugman (photo credit: David Shankbone, CC BY 3.0)

Sen. Rand Paul is drawing liberal fire from many left wing commentators, now including Prof. Paul Krugman.  Many of the criticisms are badly off base. As noted in yesterday’s column there is so much simply factually incorrect about The New Republic‘s Danny Vinik recent Rand Paul Has the Most Dangerous Economic Views of Any 2016 Candidate— for example — that one hardly knows where to begin.

Vinik by no means is the only commentator to go into hyperbolic meltdown over Rand Paul. Nobel Prize economics laureate Paul Krugman, recently, in Money Makes Crazy:

Right now, the most obvious manifestation of money madness is Senator Rand Paul’s “Audit the Fed” campaign. Mr. Paul likes to warn that the Fed’s efforts to bolster the economy may lead to hyperinflation; he loves talking about the wheelbarrows of cash that people carted around in Weimar Germany.

Prof. Krugman, a polemicist, characteristically exaggerates. Mr. Paul “likes to warn?” The record demonstrates two brief statements of concern, made in obscure venues, by Dr. Paul. If there are any more they must be obiter dicta in venues even more obscure, showing these “likes” to be far less than a leitmotif of Paul’s rhetoric, much less agenda.

Krugman goes on to indict the Republicans as “monetary crazy” — based mostly on a few stray comments and some utterly irrelevant, outlying, positions such as one derived from Ayn Rand. Few of the positions he cites are any part of the real discourse now ongoing among the center right. Continue Reading

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Politico reports that Wall Street is sharpening its long knives for Rand Paul

Andrew Jackson Fighting the Bank, 1832 (photo via Wikimedia Commons)

Politico reports that:

Rand Paul traveled to Des Moines, Iowa, recently and delivered a sure-fire applause line. “Anybody here want to audit the Fed?” the Kentucky senator asked. “Anybody feel that the Fed’s out to get us?”

He followed it up with an op-ed comparing the Federal Reserve to Lehman Brothers and calling it essentially bankrupt. The bash-the-Fed routine, perfected by Paul’s father, former Texas congressman Ron Paul, is political gold with libertarian voters suspicious of all federal authority, especially a central bank with a $4.5 trillion balance sheet.

But Paul could face a significant challenge if he emerges from Iowa with a legitimate shot at the Republican nomination. … And the establishment wing of the GOP — backed by piles of Wall Street money — views Paul’s approach to the Fed as dangerous and irresponsible.

Politico is on to something.  But it’s not so much about some “libertarian” voters as it is with populist (small ‘r’) republicans.  They, as in some ways does Dr. Paul, represent a recurring political force whose roots go back at least to Thomas Jefferson and Andrew Jackson, two very successful presidents.

Jefferson mortally opposed to the Fed’s original predecessor, the First Bank of the United States, successfully pushed by Treasury Secretary Alexander Hamilton.  Jackson mortally opposed its successor, the Second Bank of the United States, and effectively closed it down. As noted in a publication by the Federal Reserve Bank of Philadelphia:

Secretary of State Thomas Jefferson…was afraid that a national bank would create a financial monopoly that would undermine state banks. 

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Rand Paul Draws Liberal Fire Over Audit the Fed, Part One

Sen. Rand Paul (photo credit: Gage Skidmore, CC BY-SA 2.0)

The New Republic, in its February 8th issue, carries an article by Danny Vinik entitled Rand Paul Has the Most Dangerous Economic Views of Any 2016 Candidate.  It appears that TNR’s fact checkers decamped along with its top journalists. Vinik:

Speaking in front of more than 150 Iowa activists, Paul ripped into the Federal Reserve and promoted his “Audit the Fed” bill, which he introduced earlier this week. “I think there needs to be some sunshine,” he said, according to reports of the event. …

Paul’s bill …would significantly damage the Fed’s independence, which exists so that politicians cannot influence the central bank for their own political purposes. In other words, “Audit the Fed” would lead legislators to interfere with monetary policy matters and put the entire economy at risk.

There is a certain irony. Sen. Paul might be counted as one of the great champions of protection of the Fed from abuse by the political authorities.  It is very probable that Sen. Paul’s motive is to rescue the Fed from having “unfortunately fallen into bad company.” Although the Fed, the Democrats, and leftish economic commentators may dispute his chosen means they may share a common ideal: high integrity monetary policy.

Fed independence from political meddling — which I support  — actually became crippled when Lyndon Johnson, in the wake of the Tet Offensive, closed the London gold pool.  It died when Richard Nixon closed “the gold window” in 1971. Continue Reading