Alex Newman | The New American
December 1 2011
As central banks around the world unleashed a coordinated deluge of new money to deal with the economic crisis swamping Europe, critics expressed outrage that the Federal Reserve System — and all holders of U.S. dollars by extension — would be bailing out profligate European governments and the troubled euro currency. And furious American lawmakers are again demanding congressional oversight of the Fed and a restoration of sound money.
On November 30, the Fed announced in a press release that it was cutting the cost of temporary dollar liquidity swaps almost in half. The rate was slashed from about one percent to slightly over 0.5 percent, making it much cheaper for foreign central banks and the financial institutions they fund to borrow a practically unlimited supply of newly created U.S. dollars.
The news was met with outrage by Congressman Ron Paul, whose subcommittee deals with monetary policy and the central bank. Paul is once again calling for, among other measures, an audit of the Fed and the eventual restoration of honest money.
“The Fed’s latest actions in cooperating with foreign central banks to undertake liquidity swaps of dollars for foreign currencies is another reason why Congress needs enhanced power to oversee and audit the Fed,” said Rep. Ron Paul (R-Texas), the Chairman of the House Domestic Monetary Policy and Technology Subcommittee. “Under current law Congress cannot examine these types of agreements.”
President Obama promised this week that Americans were “ready to do our part” in dealing with the euro crisis. And so, according to Rep. Paul, the most recent bailout announced two days later shows the fallacy of arguments that auditing the Fed or its secret deals with foreign central banks would somehow harm the “independence” of monetary-policy bosses.
“Congress should not permit this type of open-ended commitment on the part of the Fed, a commitment which could easily run into the trillions of dollars,” Rep. Paul said in a statement. “These dollar swaps are purely inflationary and will harm American consumers as much as any form of quantitative easing.”
According to Paul, who predicted many of the economic problems plaguing the world today years before they became obvious, the Fed’s announcement illustrates how scared governments have become of the European financial crisis. But the new schemes will not solve the looming meltdown — they will simply delay the inevitable and make it worse.
“Central banks are grasping at straws, hoping that flooding the world with money created out of thin air will somehow resolve a crisis caused by uncontrolled government spending and irresponsible debt issuance,” the Texas Congressman said. “The Fed is behaving much as it did during the 2008 financial crisis, only this time instead of bailing out politically well-connected too-big-to-fail firms it is bailing out profligate government spending.”