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Critique of Ron Paul End the Fed


Stephen Zarlenga writes:

Infrastructure repair would provide quality employment throughout the nation.  There is a pretense that government must either borrow or tax to get the money for such projects.  But it is a well enough known, that the government can directly create the money needed and spend it into circulation for such projects, without inflationary results.

First, incorporate the Federal Reserve System into the U.S. Treasury.

Second, halt the banks privilege to create money by ending the fractional reserve system.

Third, spend new money into circulation on infrastructure, including education and healthcare.

Ron Paul (2009, pp. 204-205) writes:

While a gold standard would be a wonderful thing, we shouldn’t wait for one before we end the Fed…  An end to the money-creating power and a transfer of remaining oversight authority from the Fed to the Treasury would be marvelous steps in the right direction.

So we see that Ron Paul’s proposal is essentially the same as that of Stephen Zarlenga and his man in Congress, Dennis Kucinich.  Like Paul, Zarlenga also believes that a gold standard is a wonderful thing, provided that it does not have to actually be implemented.  Since Paul has no concrete plans for implementing a gold standard, he and Zarlenga are united in their desire to incorporate the Federal Reserve System into the U.S. Treasury as quickly as possible.

The only difference is that, once the Federal Reserve System is incorporated into the U.S. Treasury, Paul vaguely hopes that Timothy Geithner will freeze the money stock while Zarlenga hopes that Geithner will spend new money into circulation on infrastructure.  If I had to guess, I would say that Geithner, once given this enormous power, is more likely to spend the money, though not necessarily on infrastructure, than to freeze the money stock.

Ron Paul (2009, 203) writes, “In an ideal world, the Fed would be abolished forthwith and the money stock frozen in place.”  Idyllic is the right word.  There is no reason for Paul to think that Geithner will do this for him.  The Secretary of the Treasury is appointed by the President and the President panders to the voters.  And they certainly do not want the stock of money frozen.  If infrastructure is the new word for pork, then they want nothing more than to get some.

"If there's anything worse than a secret Federal Reserve, it's Congress controlling it," says Sen. Jim DeMint, Republican of South Carolina.  I agree.  I dislike the United States having a central bank (I advocate free banking) but, given the existence of the Fed, I certainly would not put it in the hands of a bunch of squirrelly politicians.

Richard C. Cook writes:

I worked with Steve [Zarlenga] on his first draft of the American Monetary Act. The time came when Steve and I began to meet with Congressman Dennis Kucinich, briefing him and others in Washington on monetary ideas.

So much has happened since then. So many more people have become aware of the evils of the debt-based monetary system. We have seen Congressman Ron Paul ignite a national wave of revulsion against the Federal Reserve System. There is now even hope that the American Monetary Act might be introduced on the floor of Congress.

As for eliminating the Fed and giving the Treasury Department free rein to print money, I have already examined Zarlenga’s proposal in my 2008 paper and I specifically spoke of Cook here.  There is no need to duplicate that material here just because Ron Paul has joined them.



REFERENCES

Paul, Ron. 2009. End the Fed. New York, NY: Grand Central Publishing