15% Of Democrats Believe Economic News Is Bad ( Archived) (7)

The Federal Reserve, that private organization that determines interest rates and the availability of money in America, is going to be examined by a congressional committee whose chairman is worried it is setting the nation up “for a much larger crash in future.”

The plans for a review of Fed actions were announced today by U.S. Rep. Ron Paul, who heads the Domestic Monetary Policy and Technology Subcommittee.



The hearing will focus on the Fed’s recent practice of essentially loaning money to large banks and others for no interest at all.

“The Federal Reserve is relentless in pursuing a policy of zero interest rates, as manifest by their decision last week to engage in another round of quantitative easing and keep the federal funds rate at zero for another three years,” Paul said.
Paul for years has advocated a full audit of the Federal Reserve, which routinely shrouds its actions in secrecy. Just last week, the U.S. House on a 327-98 vote adopted a bill that would set an audit process in motion. It now is going to the Senate, where Sen. Harry Reid previously has been receptive to the idea, although there’s no word whether he’ll take time for it now.

“The Fed is intent on ignoring that their policy of low interest rates in the past brought us the financial crisis of 2008 and their zero interest rate policy of today is prolonging the agony while sowing the seeds for a much larger crash in future,” Paul said today.
Their manipulation of interest rates – essentially price setting – can only ever have destructive effects on the American economy. Artificially low interest rates continue to cause malinvestment and misallocation of resources throughout the economy. Savers and investors suffer from negative real interest rates, while the federal government takes advantage of the Fed’s zero interest rate policy to run up gargantuan fiscal deficits.

“These problems cannot and will not be remedied until the Fed stops manipulating the price of money,” he said.

There was a time when I thought the Fed was a necessary fiscal watchdog and guardian against inflation. But Since Greenspan, the Feb has become embroiled in politically manipulating monetary policy. If the Fed guesses wrong on their monetary decisions, the economy suffers and for the last 10 years it seems it's easier to count the times they were correct.
I've noticed a pecuilier pattern. Almost every time Ben Brenanke goes on camera, the markets go on the toilet.
Like the Supreme Court, the Fed is supposed to be apolitical, but I suspect that may not be totally true. The Fed is also supposed to be unaffiliated with Wall Street, this may not be totally true either.