AUDIT WILL EXPOSE FED
Top official at Fed says U.S. economy will crash if central bank audited
By Christopher J. Petherick
During a hearing on Capitol Hill in early July, a top official at the Federal Reserve warned Congress to stay out of the bankers’ business and not force the privately owned and operated central bank to submit to a public audit.
On July 9 The Financial Times reported on Texas Republican Rep. Ron Paul’s landmark “Audit the Fed” legislation (H.R. 1207), which would remove any remaining proscriptions on federal authorities investigating the Federal Reserve Bank, which serves not only as the U.S. central bank but is increasingly acting as the top banker to the world. So far Paul’s bill has picked up 261 co-sponsors, well over half the membership in the House.
Since the collapse of economies around the world in the summer of 2008—brought about by Wall Street greed—the Fed, through its various funding arms, has had the printing presses running day and night, churning out dollars. The Fed publicly claims that its balance sheet stands at just under $2 trillion, largely composed of loans to private banks, mortgage holdings and Treasury bills (U.S. taxpayer debt). But some honest economists believe the Fed is not telling the whole truth about its assets and liabilities, fudging the facts to keep U.S. taxpayers in the dark about the state of the central bank. But the truth is few know just how much money is even in circulation today.
For the past three years, the Fed has only been reporting two out of three monetary aggregates. The first is M1, the narrowest measure of money supply, which includes currency held by consumers and private corporations, money held in checking accounts and travelers checks.
The second is M2, the figure most commonly cited to describe the country’s money supply. This includes M1 plus any savings that are in relatively liquid holdings like money market mutual funds.
The third, which is no longer released to the public, is called M3. It is made up of M2 plus large liquid assets including some money market funds and certificates of deposit held by massive financial corporations and other large institutions.
In 2006, the Fed announced it would stop publishing statistics for M3, which is considered the broadest accounting of the country’s money supply. The Fed claimed M3 did not provide any additional information on
currency trends beyond what was contained in M2. But the reality is, M3 gives Americans the best sense of the dollar’s value by revealing how much money is out there.
In the past year, M1 has risen by an incredible 16.3 percent to $1.669 trillion. M2’s growth has been less dramatic at 8.7 percent, for a total of $8.369 trillion. But the growth of M3—which the Fed no longer discloses—over the past few years is especially troubling, according to figures compiled by economist John Williams of Shadow Government Statistics. Williams pieces together government reports to provide readers with what he contends is a more accurate accounting of key statistics for the country.
Williams reports that M3’s growth in 2009 was 18 percent. That means in the past decade M3 has more than doubled in from $5 trillion in 2000 to $14.5 trillion. The dramatic growth of currency in circulation in the past few years lends ammunition to those seeking a full and open accounting of the practices of the central bank. That could explain why the Fed has been going on the offensive, using fear-mongering to scare legislators into backpedaling on these landmark measures in the House and Senate that would open up the Fed to public scrutiny.
At the hearing on July 9 before the House Financial Services Subcommittee, Donald Kohn, the vice chairman of the Federal Reserve, told Congress that any interference in the affairs of bankers would “negatively affect markets.”
Said Kuhn: “[E]rosion of the Federal Reserve’s monetary independence would lead to higher long-term interest rates as investors begin to fear future inflation.”
Translation: Our current system of debt would likely collapse should the world learn the truth about our money —and just how bad off the banking system really is. The next day, in an interview with Reuters, Rep. Paul said: “The dollar is worth four cents [compared to] what it was worth in 1913 when the Fed was established. . . . That tells you they’re not very good at protecting the value of our money. They’re the counterfeiters of the world, protected by this secrecy. That has to end.”
And, since AFP reported in the July 6 edition on the list of congressmen who have sponsored Texas Republican Rep. Ron Paul’s Audit the Fed bill (H.R. 1207), an additional 20 legislators have signed on to sponsor the landmark measure for a total of 261 cosponsors. The latest additions include Rep. Betsy Markey (D-Colo.), Rep. Danny K. Davis (D-Ill.), Rep. Zoe Lofgren (D-Calif.), Rep. Ben Chandler (D-Ky.), Rep. Jane Harman (D-Calif.), Rep. Christopher S. Murphy (D-Conn.), Rep. Elton Gallegly (R-Calif.), Rep. John Sullivan (D-Okla.), Rep. Joe Courtney (DConn.), Rep. Mazie K. Hirono (D-Hawaii), Rep. Sam Farr (D-Calif.), Rep. Scott Murphy (D-N.Y.), Rep. Marcia L. Fudge (D-Ohio), Rep. Charlie Melancon (DLa.), Rep. Brian Baird (D-Wash.), Rep. Timothy H. Bishop (D-N.Y.), Rep. Lincoln Diaz-Balart (R-Fla.) and Rep. DavidWu (D-Oreg.).
Christopher Petherick is a journalist and publisher based in Maryland. For more information, see his website at www.brandywinehouse.us or write directly to BRANDYWINE HOUSE BOOKS AND MEDIA, P.O. Box 638, Cheltenham, MD 20623. Petherick encourages all readers with Internet access to sign up for AFP’s free weekly email newsletter. It’s loaded with house news and special offers available only to newsletter recipients and AFP web site users. See AmericanFreePress.net.
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(Issue # 30, July 27, 2009)