Economics

Ron Paul’s farewell address to Ben Bernanke – saving the very best for last

In what might possibly be the Congressman’s last ever Congressional face-off with Federal Reserve head, Ben Bernanke, Ron Paul gave possibly his finest challenge to Ben Bernanke and the entire central banking system to date.

Over the years there have been some almost legendary exchanges with the current Fed Chair – like “is gold money” or “Ron Paul schooling Bernanke on currency devaluation”.

To be fair almost all of Ron Paul’s questions to the Fed Chair, be it Greenspan or Bernanke, over the years have been ‘must watch’ moments (just watch Ron Paul recommend back in 2000 that Greenspan look for new employment as an example).

Why have these moments been so gripping? Because Ron Paul seems for decades to be the only person to actually call the Fed Chairs on their faith in what will surely be remembered in history as a ‘pseudo-religion’ – namely ‘monetarism’.

In essence Ron Paul has been the only guy calling ‘BS’ on the entire system and has done it with such grace, humility, fearlessness and intellect that it has been impossible to ignore.

And Wednesday’s exchange was no exception – in fact, of all the Ron Paul encounters with the Federal Reserve over the years, this was his finest moment. Ron Paul managed to succinctly (5 minutes) call total ‘BS’ on the inflation data, proved that petrol prices are lower when priced in silver, say that inflation is theft and he then topped it off with a compromise solution that is brilliant in its simplicity and impossible to legitimately refuse.

Moments of genius:

  • Ron Paul kicks off by asking “do you do your own shopping at the grocery store”? Bernanke simply replies “yes” – to which Ron Paul flashes back “so you’re aware of the prices”. The manner in which this question was asked was genius because it implies that the price rises in shops are so obvious that if Bernanke does shop there is no way he would have failed to notice what everyone else has – that prices have risen dramatically. Also note that Paul doesn’t say ‘price rises’ he just says ‘prices’ – implying that everyone knows which way the prices have moved that he doesn’t even need to say it.
  • Ron Paul goes on to say that “nobody believes the 2% CPI inflation number” and that by using the same methodology of just a few years back to calculate the CPI it is running somewhere nearer 9%.
  • Ron Paul adds “the people on fixed income are really hurting, the middle class is really hurting” because their inflation rate is very much higher than what the government tells them.
  • Paying back money with devalued money is ‘theft’ – “somebody is stealing wealth and it’s very upsetting”.
  • Where do people put their money if they don’t want it to be stolen by inflation?
  • Ron Paul then reaches into his pocket and pulls out a silver ounce – back in 2006 (when Bernanke took charge of the Fed) and said that it would buy 4 gallons of petrol. Today it will buy 11 gallons of petrol – that’s preservation of value – in others words petrol when measured in a currency that isn’t being printed into oblivion has actually gone down in cost.
  • But rather than leave it there Ron Paul offers up a solution – one that is a compromise, something that Ron Paul has spent his entire political life avoiding. He asks “why don’t we just allow currencies to run parallel… why don’t we legalise competing currencies?”.
  • He then warns Bernanke that if he continues his path the “Fed will self destruct” – meaning that they will not stop until the paper money stops working and they will “End the Fed” themselves.
  • Bernanke’s come back? “Good to see you again too”!
  • On the matter of CPI 2% inflation numbers he just says that their done in a “serious and thoughtful manner” – he simply ignores the point that other indicators show inflation at 9% – very telling that he didn’t challenge that important point.
  • Bernanke then tries to say that nobody prevents you from using gold and silver – missing the entire point. Because of legal tender laws gold and silver is taxed (sales tax and capital gains) and can’t be used to pay taxes. Simply put gold and silver are deliberately hindered from competing against fiat money because their are not competing equally – Ron Paul simply calls for removing this impediment and letting people decide what to use.

For lovers of people who don’t want their hard earned wealth stolen by inflation, for lovers of ‘real’ statistics and not government fudged numbers, for lovers of real, logical, intelligent economics and for lovers of people who demand freedom of choice in their money as much as their freedom of choice in the sandwich they buy, then thank goodness Ron Paul has been there all these years calling them out on this nonsense.

This clip is for you:

Whilst this very maybe the last time that you see Bernanke and Paul go head-to-head Ron Paul is still running for president – with the election coming in November.

There is plenty of time for the economic conditions to change by such an extent that the idea of President Paul is a very real one – After all Ron Paul is the only guy out of all the Republican candidates that nationally beats the incumbent  Obama if the elections were held today – sorry, who’s that you say is unelectable again?

So was this the last time we’ll hear the Fed really challenged? From the looks of it Ron Paul is just getting started – and he’ll make sure he’s about when the Fed ends itself.

This article was previously published at Gold Made Simple News.

11 comments to Ron Paul’s farewell address to Ben Bernanke – saving the very best for last

  • Olivier Braun

    Very good, I have just one quibble : in french you don’t say “tete et tete” but “tête à tête” and that involves some intimacy. But I am not sure it is quite the same meaning as “head to head”. That would be “face à face”.

    • Ed

      Thanks for catching that egregious double error. Now edited to ‘face-off’ (suitably American).

  • John

    Your comment that the Fed believes in “monetarism” is very fair.

    Monetarism in its original form focus on the money supply. This is not what the Fed does – most central banks have instead adopted inflation-targeting. The problem is that inflation-targeting is not quite the same as targeting money supply growth, due to the peculiarity of inflation dynamics and monetary transmission mechanisms.

    Monetarism isn’t quite as bad for those Austrians who believe that the role of the central bank is to control the money supply so that it meets money demand. It is mainly the Rothbardians who disagree – while I owe Rothbard an intellectual debt of sorts, he was wrong on many things.

  • Toby Baxendale

    Evening John,

    I think you will find that those people who think money supply should be adjusted to meet any changes in money demand are Austrian influenced , but not Austrians. I am not aware of any of them claiming they are Austrians.

    Austrians hold that if money demand changes , the prices change up and or down accordingly to the new level of demand and supply , just as in any other situation . Hayek did suggest that you could adjust money supply in certain extreme circumstances in theory , but so many times he pointed out the impossibility of money neutrality , in fact even devoting a full chapter calling it a myth in the denationalisation of money.

    I know of know Austrian who holds the view that money supply should be anything other than determined by market participants . To be anything otherwise makes you a central planner by default . You may be a marginally better central planner than the current bunch, but still a central planner. So in theory it is not Austrian and in practise it is not Austrian to think this.

    • John

      It is not very charitable to label some as ‘non-Austrian’ just because they don’t agree with certain Rothbardian views.

      Rothbard had his views, and so did Hayek – and their views clashed on some points. So it is difficult to determine if there is indeed a consensus among Austrians on certain issues. At the end of the day, the aim is to pursue the truth in economic matters – and sometimes these ‘Austrian’/’non-Austrian’ labels can be inimical to this endeavour.

      Returning to the discussion, the question is what should the role of the central bank be. Many among Austrian circles do not favour the existence of a central bank – but that’s not what the question is about. Our circumstance today is that we do have a central bank regime, and the question is what should it do under these circumstances.

      The Rothbardians would say hands-off the money supply. In some way this is a bit like Monetarism.

      Others would say that it is not only money supply which matters, but money demand too – just like for other goods/markets. In which case, when a central bank does have monopolistic control over the money supply, under this scenario it should adjust the money supply to meet money demand. This link gives the best argument for such a policy:

      http://www.coordinationproblem.org/2009/10/192021-and-the-great-depression.html

      The danger is to assume that a policy for a non-central-bank regime, would work as good as for a central-bank regime. That is not true.

  • Paul Marks

    Austrian school people believe that Central Banks (such as the Federal Reserve and the Bank of England) should manipulate things so that the money supply “meets money demand” (whatever that is supposed to mean).

    Let us leave aside Rothbard for the moment.

    And let us leave aside Keynes.

    Let us go back to the basic dispute between economist such as Fisher and economists such as Ludwig Von Mises back in the 1920s. The time when the Austrian School first started to be seen as in opposition to the new “mainstream”.

    Well what was the argument about?

    The argument was about whether the money supply should be increased to maintain a stable “price level” or not.

    The Austrian position was NO IT SHOULD NOT.

    So you may be many good things John – but if by “meets money demand” you are talking about increasing the money supply, “Austrian School” you are not.

  • Toby Baxendale

    “Taking an Advil when you have the flu doesn’t stop your body from fighting off the infection but it does relieve needless pain. Maintaining MV during a recession is analogous.”

    Steve H is a curious blend of Austrian and Monetarist (dis equilib / equilib) Thoery , and certainly not Austrian only. He has weaved a strong micro economic foundation to this aspect of monetarism . I believe he describes himself as Austrian influenced. Note the name of his blog does dropped the name Austrian. As his teacher, George Selgin has said to me many times, he is on the side of the angles and we all are, but lets be clear , if you do have a central bank, he argues for an accommodation policy – an Advil not a no nothing . Thus he ceases to be a advocate of the free market in money, the only solution. Being a better central planner is fine, but not something any Austrians would advocate. Would I rather have him as a central planner over our current MPC motley crew , yes.

    • John

      Selgin would of course say that he prefers to abolish central banking – but well… good luck in making headway on that count.

  • George Selgin

    Well, John: I have suggested a few other things we might do other than “abolish” central banking. Indeed, I don’t even know what it would mean to “just” abolish central banking!

    And while I regret that we have central banks, I don’t believe it is meaningful to pretend that recommending that they not change the money stock is equivalent to arguing for doing away with central planning of the money stock. On the contrary: one is simply asking them to implement one’s own favorite monetary central plan.