Rep. Ron Paul (R-TX) is really fun to watch. That's why I've included a clip below from Reuters for you to enjoy. He hates, hates the Federal Reserve. In the clip, he makes that quite clear. I don't hate the Fed, but I do agree that the government should be able to audit the Fed. First, here's the clip, then some discussion. (By the way, if you watch past about 3 1/2 minutes, you also get the treat of seeing him go off on the horrors of regulation.)
I think Paul's most significant charge is that the Fed could be engaging in "political shenanigans." For example, the Fed might keep interest rates too low for too long because it's politically attractive, but ultimately bad for the dollar. How do you solve this?
I don't think you can forbid the Fed from being under any political pressure, because that's completely impossible. But I think Paul's right that transparency would help. If we knew precisely how the Fed was altering money supply on a regular basis, we could better gauge its affect on the dollar. That way, even though we couldn't determine if politics were driving its decisions, we could determine if those decisions were devaluing the dollar.
Given the recently expressed desire to give the Federal Reserve greater power in regulating systemic risk, greater oversight is more important than ever. The more power any body has, the more likely it is to abuse that power. The Fed has become far more powerful than it ever has been, and that power is growing. So should our understanding of everything it does.
But does Paul's bill have a shot? Unfortunately, I'm not convinced it does. Unless average Americans suddenly become outraged that we aren't paying enough attention to the Fed, then most politicans probably won't pay much attention either. Paul supposedly has 250 members of Congress supporting his measure, 80 of which are democrats. Yet, without the Fed doing something flagrantly wrong, like allowing double-digit inflation, it seems like a stretch to think the American people will demand greater oversight.