Rep. Ron Paul's feelings about America's central bank are a matter of public record. An extensive public record: In dozens of congressional hearings over the past four decades, he has ribbed, cajoled, harassed or annoyed any representative or defender of the Federal Reserve brave or unlucky enough to appear before him.
Normally, his interrogations concern America's profligate money printing, Congress's unnecessary spending, the Fed's secrecy and, especially, gold, which he believes should underpin the currency to render it sound. But his distrust runs wide and deep. Consider this comment from a 2007 hearing: "This whole notion that a central bank somehow has the wisdom to know what interest rates should be is, to me, rather bizarre. And also the source of so much mischief."
That first sentence is a neat encapsulation of his economic worldview. And the second could well apply to Paul himself. His career in and out of public office has been devoted to two propositions: 1) The Fed is bad. 2) The gold standard is good. His consistency has been impressive-which is not to say he has been influential. He rarely gets satisfactory answers in hearings, and he'll probably never get satisfaction in his long crusade to radically alter America's monetary policy.
But if you tilt at windmills long enough, sometimes you hit. And Wednesday, Paul did: He held his first hearing as chairman of the House Financial Services Committee's subcommittee on monetary policy, inviting two Austrian-school economists and one lonely representative from the left-leaning Economic Policy Institute to debate how Fed policy affects the unemployment rate.
This may be Ron Paul's moment. The question now is what he does with it.
Paul had his monetary-policy epiphany on Aug. 15, 1971 - the day the Federal Reserve shut its "gold window," meaning foreign governments could no longer trade gold for dollars at the fixed rate of $35 an ounce. The Bretton Woods system officially ended and the dollar became fully "fiat currency," backed by nothing but the promise of the federal government. It shocked Paul, then a successful Texas obstetrician. "That's why I ran for Congress," Paul said. He was elected to the House in 1976, running as a Republican on a limited-government platform.
Now Paul is in charge of the House subcommittee that oversees the Fed. That might cause some awkward moments. The title of his book "End The Fed" is not misleading. The central bank "is immoral, unconstitutional, impractical, promotes bad economics, and undermines liberty," he writes.
The Austrian school
But Paul's adversary is not only the Federal Reserve. It is also mainstream monetary economics itself. As a devotee of the Austrian school, whose luminaries include Friedrich Hayek and Ludwig von Mises, Paul stands firmly outside policymaking and academic circles, a point he enthusiastically admits. (The Austrian economists also often quibble with other libertarians, such as those at Cato.) His beef is not with how central bankers do their jobs; it's with central banking itself.
"The Fed, rightly so, criticizes Congress for spending too much - but they make the money available to us!" he said. "It buys debt, keeps interest rates low, and sticks it to the people who want to save and make money. It is so unfair. And I think it is the first time in the history of the Fed that people realize it is not their friend. It just gives us booms and busts."
Continue reading - Ron Paul, opponent of the Fed and fan of the gold standard, a lone wolf no more
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