The Federal Reserve is currently under the heaviest scrutiny it has faced in its 96-year history. For the first time ever, the private central bank is facing a full independent audit.
Congressman Ron Paul’s H.R. 1207 seeks to have the Government Accountability Office (GAO) conduct a full scale audit of the Federal Reserve by the end of 2010, revealing all details of agreements between the Federal Reserve and foreign governments and central banks, and showing which banks and firms received taxpayer money from the Fed’s TARP program. The Inspector general for the TARP program, Neil Barofsky, stated on July 20 that taxpayers are on the hook for an estimated $23.7 trillion. Paul’s bill currently has 311 co-sponsors, indicating wide bipartisan support. A full three-quarters of Americans, according to Rasmussen Reports, support an audit of the central bank.
Recent disclosure regarding the Federal Reserve’s active monetary policies should have Americans interested in the results of such an audit. A recently uncovered memo from former Fed Chairman Arthur Burns to then-President Ford was published by financial market analyst Geoffrey Batt of Zero Hedge. Burns’ seven-page letter to the president, written June 3, 1975, stated that remaining market ties between gold and the dollar could ‘easily frustrate our efforts to control world liquidity” as well as ‘dangerously prejudge the shape of the future monetary system.”
The silly problem with gold was that countries such as France wanted to redeem their Federal Reserve notes for gold before the value of their paper inflated away, thus interfering with the Fed’s ability to control credit markets. In fact, that was the primary reason Nixon ended the gold standard. If gold were allowed to be bought and sold between central banks at a free market price, it ‘could result in the addition of up to $150 billion to the nominal value of countries’ reserves.” In other words, there would be massive inflation. The solution? Establish secret agreements with other central banks to not purchase gold above the Fed-approved ‘official” price of $42.22 per oz to keep prices artificially low.
GATA, the Gold Anti-Trust Action Committee, says this recent admission by the Federal Reserve of being involved in central bank gold-swaps is just the latest documentation of a decades-long price suppression scheme that has replaced free markets in gold. GATA has been gathering and documenting the collusion by central bankers in gold markets since 1999. In 2003, the organization sued Barrick Gold, the world’s largest gold producer, to force disclosure on loan arrangements between Barrick and the Fed. Barrick confessed in court to gold price-fixing when the company made motion to dismiss the suit. They argued that by acting as an agent of the Federal Reserve, the company had sovereign immunity in regards to disclosing gold loans from central banks. GATA is involved in ongoing legal battles against the Federal Reserve and fully supports Congressman Paul’s efforts for an audit. Paul has stated a primary goal of an audit would be to explicitly determine the details of any and all gold-swaps or loans made by the Federal Reserve to foreign banks, which thus far the Fed refuses to disclose.
Why is it that with a political climate so focused on the question of capitalism versus socialism, we still wrongly identify central banking authoritarian control over currency and credit as a free market system? Everyone today seems to know that ‘capitalism” is what caused this recession.
However, the Federal Reserve System is anything but a free market system: It is corporatist monopoly. So as Michael Moore pretends he’s preaching against capitalism and as the Federal Reserve pretends it’s saving capitalism with socialism, how long will it take for Americans to define words correctly and recognize that we haven’t even had capitalism?
Sukenik is a member of the class of 2010.