Christie Slams Fed for Zero Interest Rates, Calls for Audit

New Jersey Governor Chris Christie sat down with Fox Business’ Maria Bartiromo this week, where he condemned U.S. monetary policy under the Obama administration.  Christie said the Federal Reserve’s zero interest rate policy has left America with “nothing in the toolbox” in case of another U.S. recession, and criticized the President for pressuring the Fed to continue it.  He also called for an audit of the Federal Reserve to restore the trust that has been strained after “several rounds of Quantitative Easing.”

You can watch the interview below (Christie’s Fed comments start around 3:50):

CHRISTIE: What I think we’re going to see coming out of this is the Fed, who has kept interest rates at zero, now have nothing in the toolbox in case we do go into recession.  Where are we going to go from here?  They should have been raising rates appropriately before, now they’ve got no tools left in the toolbox.  We could face a real big problem and soon.

BARTIROMO: You’re not the first person to criticize the Federal Reserve.  Let’s say you do become President of this great country…what do you do with the Federal Reserve?

CHRISTIE: Well, you want the Federal Reserve to be independent, and you want them to make decisions not based on politics, but upon sound monetary policy.

BARTIROMO: So can you affect that at President?

CHRISTIE: Well you affect it by the people you appoint, absolutely.  And you try to affect it by your rhetoric.  You don’t wind up trying to send signals to the Fed, you know, winking at them and saying “hey, maybe you should do this, and do that.”  Because you should let them control monetary policy in the country. 

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Ted Cruz Hits a Grand Slam: The Dollar Should Be “Ideally Tied to Gold”

Financial reporter Rick Santelli — who triggered the Tea Party movement — put a profound question to Sens. Ted Cruz and Rand Paul in the CNBC presidential economic debate. Santelli’s key question was about the impact of the Fed on job creation and economic growth.

His question and the answers were a highlight of a very fine, informative debate.

Sen. Cruz hit a grand slam:

Senator Cruz, in his answer, featured his original co-sponsorship of Audit the Fed. Even more impressively, Cruz featured his original co-sponsorship of the Centennial Monetary Commission, a crucially important piece of legislation to restore high integrity monetary policy.

Then … Sen. Cruz upped the ante with an unprompted observation that the dollar should be “ideally tied to gold.”  “Ideally” is exactly right.

The American Principles Project has long been at the forefront of advocating defining the dollar as a fixed weight of gold, legally convertible thereto, as fundamental to restoring equitable prosperity: sizzling job creation and economic growth for workers at least as much, perhaps even more, than for business.

The gold standard was advocated by the iconic Rep. Jack Kemp — the quarterback behind Reaganomics with its dramatic growth in jobs and the economy, especially for workers, and later HUD Secretary and Republican Vice Presidential nominee.

Kemp — closely advised by APP’s policy director Jeff Bell, among others — was the key figure of our era in restoring America’s economic growth.  Kemp’s gold standard — of which Bell was an essential advocate — remains the most important unfulfilled part of Jack Kemp’s “Unfinished Symphony.”  The gold standard means growth. Continue Reading

“It’s The Economy, Stupid!” Time For CNBC To Grill Candidates On Monetary, Tax, Trade Policy

Photo credit: Teresa via Flickr (CC BY-ND 2.0)

At last, we mere voters might get to watch a debate that will focus on the two top issues that virtually every poll places at the top of our concerns: jobs and the economy.  Earlier debates have only lightly brushed on these matters. This is a great pity. Time for CNBC to give us a gold standard presidential debate with questions that matter.

As I wrote in my column “Here’s What’s Likely To Hurt the Republicans in 2016” last April:

“It’s the economy, stupid!”  The weirdest thing about the onrushing 2016 presidential cycle is the scarcity of a GOP economic growth theme. Missing, too, is a serious growth agenda. That gap — not demographics, nor electoral college math — is the GOP’s most serious deficiency in its quest to regain the White House.

Democratic campaign consultant Bob Shrum wrote in his compelling political memoir No Excuses:

“Carville was obsessed with keeping the Clinton Campaign on message. That was easier with the ads than the candidate. A pledge to “end welfare as we know it” reassured voters in the middle. The point of the lance was economic: Clinton had an economic plan, a health care plan; Bush didn’t and you couldn’t trust what he said anyway. But it was hard to channel a candidate who was a policy prodigy. Clinton’s broad reading and interests sometimes led him to break out of the message box of his own campaign. I was on the phone with Carville one day when he said he had to hang up; the road was calling in.

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Bernanke Blasts Rand Paul Back

Former Federal Reserve Chairman Ben Bernanke (photo credit: Medill DC via Flickr, CC BY 2.0)

The Fed is touchy these days.  No wonder, with economic growth lagging and the tools of monetary policy failing to do what the Fed probably can’t do: spur economic growth.

So Ben Bernanke, former Fed chief, is blasting Rand Paul in blistering terms (for the Federal Reserve) for proposing a minor “Audit the Fed” bill:

“This is very deceptive — this bill is very deceptively titled,” Bernanke said during a discussion at Nasdaq’s Times Square headquarters to promote his new book, “The Courage to Act.”

Bernanke suggested the bill wasn’t about increasing transparency so much as giving lawmakers more control over the Fed and its monetary policies.

“You’re basically saying that Congress should run monetary policy,” he said. “I always like to say, if you love the way they’re managing fiscal policy, let them run monetary policy.”

The average American working family hasn’t had a real raise in a decade, while the Fed-inspired bubble in stocks and real estates raises the net worth of the already well-to-do.

Honest debate about the failure of monetary policy to spur economic growth has to be part of the equation. Bad theories make bad policies.

Maggie Gallagher is a senior fellow at the American Principles Project. Continue Reading

High Praise for Rand Paul’s Challenge of Ben Bernanke to Debate

Sen. Rand Paul (R-KY) (photo credit: Gage Skidmore)

The Libertarian Republic has this to say about Senator and presidential candidate Rand Paul’s recent challenge of Ben Bernanke to debate:

Ben Bernanke, who recently called Senator Rand Paul and those like him “know-nothings” because they wish to audit the Federal Reserve and question the central bank’s manipulation of the price of money.

So let’s get this straight: seek more information, transparency, and discourse from one of the most powerful and privileged institutions in the world and you will be called ignorant and unwilling to learn.

It appears the former Federal Reserve Chairman prefers condescension over open debate. Who would have thought the former leader of a monopoly institution would think in such a way.

Dr. Bernanke may (or may not) have been alluding to the infamous and short-lived anti-Catholic “Know Nothing Movement” of the 19th century. Yet there is a distinguished pedigree to knowing nothing: that of Socrates of Athens. As recorded by Plato, in The Apology, Socrates said:

Well, Chaerephon … went to Delphi and boldly asked the oracle to tell him whether … there was anyone wiser than I was, and the Pythian prophetess answered that there was no man wiser. Chaerephon is dead himself, but his brother, who is in court, will confirm the truth of this story.


When I heard the answer, I said to myself, What can the god mean? and what is the interpretation of this riddle? for I know that I have no wisdom, small or great.

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Looking for Growth in All the Wrong Places

We’ve officially moved into the part of the campaign where candidates tell us their grand vision for America.  Donald Trump, moving on his promise to “make America great again,” challenged other Presidential candidates to put forward their ideas for helping workers and moving America forward.  Chris Christie and Jeb Bush obliged:

There’s a long way to go on the campaign trail — and many more policy details yet to emerge. Trump challenged his GOP competitors to lay out their job and business plans in a message on Facebook this week, although he himself has been thin on specifics, especially when it comes to the economy.

Bush has talked broadly about reforming regulation and taxes and enacting a balanced budget amendment.

Christie recently put out a 5-point plan to improve the economy. The factors include: lowering taxes, scaling back regulation, reforming energy (think: approving the Keystone XL pipeline and lifting the export ban on crude oil), making the R&D tax credit permanent and eliminate payroll taxes for those under 25 and over 62.

So far, it’s hard to make anyone’s math add up to 4%.

Yes, it is.  That’s because everyone’s proposals are missing a crucial component to get the economy moving again.  Taxes, regulations, and energy policy have all been done to death over the past 15 years, but that hasn’t stopped the economy from slowing to a 2 percent crawl, far less than the 3 to 4 percent we enjoyed in the ’80s and ’90s.  The only economic driver we haven’t tried yet is monetary policy. Continue Reading

Audit the Fed is Not Enough

The Marriner S. Eccles Federal Reserve Board Building (photo via Wikimedia Commons, CC BY-SA 3.0)

There’s a lot to admire in Alex Pollock’s Saturday piece in The Wall Street Journal, “It’s High Time to ‘Audit’ the Fed.”  Pollock, a longtime chief executive of the Federal Home Loan Bank of Chicago and currently a resident fellow at the American Enterprise Institute, attacks the faulty premise that the supposed “independence” of the Fed should lead Congress to forgo the wide-ranging audit called for in current legislation.

In reality the Fed is a creature of Congress, which in turn is an elected institution specifically tasked in the Constitution (Article I, Section 8) with coining money and regulating its value. Congress deserves criticism for neglecting its role for so long, not for finally making tentative moves to reestablish that role.

Pollock also correctly notes that the Fed is making its decisions based on an economic model that has been wrong again and again (usually in the direction of excessive optimism about its own policies). He also notes that the Fed has repeatedly ignored or distorted the few guidelines recent Congresses have provided, such as fostering “moderate” (as opposed to zero) interest rates and interpreting price stability as a perpetual mild inflation.

Moreover, Pollock has no illusions about the faulty elitist design of the Fed, which he describes as “a prime example of the dream-world that President Woodrow Wilson imported from the theorists of the German Empire—the notion of government based on the superior knowledge of independent experts that bypasses the messy and undisciplined world of democratic politics.” This sounds great until experience teaches us that “the Fed has no superior economic knowledge. Continue Reading

Just Audit the Darn Thing

The Federal Reserve headquarters in Washington, DC (photo credit: Dan Smith, CC BY-SA 2.5)

It has $4 trillion in holdings…close to one quarter of the U.S. GDP.

The markets flip out anytime it even hints at making a move.

It enabled the housing bubble and, in large part, the Great Recession that followed its bust.

It has less oversight than a local pizza restaurant. (I’d know.)

It’s time to audit the Federal Reserve.

I don’t care what former real estate and development moguls like Tennessee Sen. Bob Corker say. We need transparency.

Opponents of auditing the Fed say that doing so will disrupt the economy and cause harm to the markets. What does that tell you about the state of operations at the Fed?

This makes the need for auditing the Fed all the more urgent. Can you imagine a taxpayer telling the IRS not to audit them because it would cause them harm? Further, can you imagine the IRS forgoing an audit of that person? I don’t think so.

If you’re running for President and don’t support oversight of arguably the most powerful financial institution in the world, then you don’t have the judgment or fortitude that it takes to lead the free world.

And if you just can’t find the courage to support auditing the Fed, the bare minimum should be to support holding a commission to analyze Fed policy over the past 100 years and give a recommendation for monetary policy going forward.

Terry Schilling is the executive director of American Principles in Action. Continue Reading

Bankers versus Rand Paul?

The Marriner S. Eccles Federal Reserve Board Building – Washington, DC (photo via Wikimedia Commons)

Five of twelve regional Fed presidents have formally opposed Audit the Fed, and now Reuters reports:

A Reuters survey of 24 state banking groups has found that four are actively opposed to Audit the Fed and five would probably take a stand against the bill if it gains more support, giving the central bank an influential ally as the Fed ramps up its own public opposition. . .[T]he Ohio Bankers League. . .is sending 82 members to Washington this week [to oppose the bill].

Meanwhile, as previously reported, Sen. Elizabeth Warren has flip-flopped, recanting her support for Audit the Fed. It is unusual for the Democrats to line up with the bankers, at least in mainstream media mythology.

Paul Dupont is a legislative assistant at American Principles in Action. Continue Reading

Will Paul Get Serious About the Federal Reserve?

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

This is not another in a long line of often vitriolic attacks on Senator Rand Paul for his temerity to propose “auditing the Fed.” As is by now well-recognized, his proposal (S. 264, “The Federal Reserve Transparency Act of 2015”) is not about auditing the fed, but about subjecting Federal Reserve monetary policy to critique by the Government Accountability Office.

The importance of Senator Paul’s proposal is that it is the beginning of a response to the principal economic concern of the American people:  their declining standard of living owing to the erosion of the purchasing power of the dollar.  This is a monetary phenomenon, and therefore requires a correction in monetary policy—which is unlikely to occur without Congressional scrutiny.

What’s more, there is a substantial body of economic opinion that recent monetary policy is responsible both for the recession of 2007 and the unprecedentedly slow pace of recovery from that recession.  For example, here’s economist Scott Sumner:

The Fed’s ultra-tight monetary policy has dramatically increased risk in three areas: policy fragility, balance sheet risk, and financial system fragility.

Who says Fed policy is ultra-tight?  Actually, Ben Bernanke said so in 2003, when he argued that the money supply and interest rates were misleading, and that the “only” way to determine the stance of monetary policy is by looking at NGDP growth and inflation.  If you average those two variables, the past 46 months have been the tightest money since Herbert Hoover…

Examples of the snarky journalistic reception of Paul, for the audacity of questioning current monetary policy, include CNBC’s Ben WhiteWaPo’s Matt O’Brien, and The New Republic‘s Danny Vinik.   Continue Reading