Yesterday, Ron Paul took part in the House Financial Services hearings, starring Fed chairman Ben Bernanke. Observing the continuing trends of growing deficits and high unemployment, the free-market Congressman questioned the effectiveness of the very same policies which caused the problem to begin with. He asked Bernanke, “Is there a point where you might say maybe my theories are wrong and I have to change my course? Or will you pursue this five more years, or ten more years? What would it take to make you reassess your basic fundamental beliefs?”
Bernanke artfully navigated around the brunt of the question: “Pursue what? I believe it’s not practical to go to a gold standard; I believe we have to stay with a central bank. But certainly we’re modifying our views on the financial system and on monetary policy reflecting what’s happened the last few years, and I certainly believe as Keynes once said, ‘When the facts change, I change my mind.’”
“When the facts change,” is a mere rhetorical rejoinder. What facts must change? Are the stats on national debt, deficits, and unemployment not “facts” enough? And how must they change for the Keynesian to change his mind? Must they all get worse? And then what?
I’ll tell you what. If the facts grow substantially worse, Bernanke would face a loss of confidence and he would resign. He would then either retire and publish a memoir or return to academia and write academic papers in the style of rhetoric he used while Fed chairman. Academic-legalese garble works well for both classic bureaucracies, government and academia. The Fed would get a new chairman who would follow the same old practice: fiat money and fractional reserve banking to help government continue spending and big banks profit from government spending. Neither Bernanke, the Fed, nor the new chairman would ever admit to failure of their Keynesian theory, never admit wrong-doing, and would make no change in policy or institution.
This is why the change must come from outside. Congress created the Fed, it can End the Fed. It could also force the Fed back to sound money and banking practices. But Congress has cleverly, long since, resolved itself of responsibility in regard to the Fed. It has illegally transferred its sovereignty to a small group of unelected officials who represent big banks and other interests in the name of national monetary policy.
Meanwhile, Congress holds token “hearings” where only one truly informed and concerned Congressman asks pointed questions, and the Fed’s hot-shot du jure evades pointed questions with academic jargon and quotations from, as Keynes said, “some defunct economist.” These “hearings” are hearings only in the literal sense that Bernanke is indeed “heard” talking.
The important issue, rarely discussed, is the illegal transfer of sovereignty in which Congress delegates authority over the nation’s financial cartel to a small group of unelected people. The issue of whether the Fed is a private bank or government body makes less difference. The real issue is whether Congress has the legal right to transfer its own authority so.
Paul addressed this very concern a couple days earlier during a financial services hearing on hard coinage. Paul began his comments: “It is unconstitutional to delegate the content of the metal coinage to the Secretary of the Treasury.” Bingo. It is also unconstitutional for Congress to delegate decisions over monetary policy to anyone else, either.
This has always been the secret and unconfronted Constitutional issue with all of “our” national banks, and remains an issue now with the Fed. The landmark case McCulloch v. Maryland involved the argument while determining whether the State of Maryland could impose taxes on the federal bank branch installed within its jurisdiction, but it got ignored and suppressed. During oral arguments, Hopkinson, for Maryland, argued:
This power to establish branches, by the directors of the bank, must be maintained and justified, by the same necessity which supports the bank itself, or it cannot exist. The power derived from a given necessity, must be coextensive with it, and no more.… It is undoubtedly true, that these branches are established with a single view to trading, and the profit of the stockholders, and not for the convenience or use of the government; and therefore, they are located at the will of the directors, who represent and regard the interests of the stockholders, and are such themselves. If this is the case, can it be contended, that the state rights of territory and taxation are to yield for the gains of a money-trading corporation; to be prostrated at the will of a set of men who have no concern, and no duty but to increase their profits?… It is true, that, by the charter, the government may require a branch in any place it may designate, but if this power is given only for the uses or necessities of the government, then the government only should have the power to order it. In truth, the directors have exercised the power, and they hold it, without any control from the government of the United States; and, as is now contended, without any control of the state governments. A most extravagant power to be vested in a body of men, chosen annually by a very small portion of our citizens, for the purpose of loaning and trading with their money to the best advantage!
The argument continued,
Assuredly, the same tribunal which judges of the original necessity on which the bank is created, should also judge of any subsequent necessity requiring the extension of the remedy [creating further branches]. Congress is that tribunal; the only one in which it may be safely trusted; the only one in which the states to be affected by the measure, are all fairly represented. If this power belongs to congress, it cannot be delegated to the directors of a bank, any more than any other legislative power may be transferred to any other body of citizens: if this doctrine of necessity is without any known limits, but such as those who defend themselves by it, may choose, for the time, to give it; and if the powers derived from it, are assignable by the congress to the directors of a bank; and by the directors of the bank to anybody else; we have really spent a great deal of labor and learning to very little purpose, in our attempt to establish a form of government in which the powers of those who govern shall be strictly defined and controlled; and the rights of the government secured from the usurpations of unlimited or unknown powers.… Such an exercise of sovereign power, should, at least, have the sanction of the sovereign legislature, to vouch that the good of the whole requires it, that the necessity exists which justifies it. But will it be tolerated, that twenty directors of a trading corporation, having no object but profit, shall, in the pursuit of it, tread upon the sovereignity of the state; enter it, without condescending to ask its leave; disregard, perhaps, the whole system of its policy; overthrow its institutions, and sacrifice its interests?
This was a passionate plea not only for the State’s rights, but for the limits of Congress’ power and the requirement that Congress and only Congress take responsibility for the powers it does have. No other body or official may obtain, usurp, or bear that power by any transfer or delegation.
Chief Justice Marshall decided against Maryland, and thus against States’ rights, that the State could not tax the government corporation within their jurisdiction—advancing his well know nationalist bias. But in arguing his decision over twenty single-spaced pages, he completely skipped over the issue of Congress’ transference of its sovereignty to unelected officials. He argued every point right up to it, then skipped over it, assumed it as valid, and then proceeded to the next point. Here’s his non-treatment of the issue:
The branches, proceeding from the same stock [as the national bank itself], and being conducive to the complete accomplishment of the object, are equally constitutional.… The great duties of the bank are prescribed; those duties require branches; and the bank itself [17 U.S. 316, 425] may, we think, be safely trusted with the selection of places where those branches shall be fixed; reserving always to the government the right to require that a branch shall be located where it may be deemed necessary.
It being the opinion of the court, that the act incorporating the bank is constitutional; and that the power of establishing a branch in the state of Maryland might be properly exercised by the bank itself, we proceed…
But the problem with Marshall’s assertion is that he never really addressed whether Congress’ transfer of power to the bank board members is constitutional. He never argued for it or proved it; he simply asserted and then assumed it valid. The same assumption rules with the Fed today.
As I said, Congress created the Bank, it could end it. But Congress is addicted to big outlays of fiat money with which its members buy off their constituents. They have no reason to end the Fed. And they have further absolved themselves of responsibility for the Fed by maintaining the illusion that an unelected board of banksters has legitimate authority to regulate money and its value—when this responsibility actually falls to Congress itself.
As I said earlier, the change must come from outside. Since Congress has no incentive to do it, it must come from the people. While a growing number of people are learning about the fraud that is the Fed, and the thieving practice of fiat money and fractional reserve banking (not to mention bailouts, etc.), those in the know still number far too few. We must spread the word, we must tell our Senators and Representatives all to study and mimic Ron Paul’s views on honest money (and really, the Bible’s, but they’d be more willing to listen to Paul, I suspect). This is a beginning effort.
There are many ways to get the word out. Post the videos of these hearings, post this wonderful production exposing the Fed, and I really like Josh Peiffer’s “End the Fed” coin project. Giving a friend or family member an ounce of silver with an educational message minted on it is a great way to raise awareness. And I’m sure there are many other ways. Please find them, and let me know about more.