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“Whose responsibility is it under the Constitution to manage monetary policy?” he asked.
“Congress has the authority and it's delegated to the Federal Reserve. That’s a policy decision that you’ve made,” Bernanke replied.
Paul was unimpressed.
“But [Congress] can’t transfer authority. You can’t amend the Constitution by just by saying ‘We’re going to create some secret group of individuals and banks.’ That’s amending the Constitution. You can’t do that, and then all of a sudden allow this to exist in secrecy,” Paul fumed.
Bernanke parried by saying Congress has given that authority and they could decide to take it away. He wouldn’t recommend it, as he argued independent central banks have delivered better economic results than nonindependent ones. But Congress could do so.
“Congress ought to get a backbone, we have a right to know, we have an obligation to defend our currency,” he said.
And that launched a soliloquy that was picture-perfect Paul.
“It’s the destruction of the currency that destroys the middle class. There’s a principle of free market thinking that says destroying the value of the currency through inflation, you transfer the wealth from the middle class and it gravitates to the very wealth. The bankers, the government, the politicians – they all love this. It is the fact that the Federal Reserve is the facilitator. If you like big government, love the Fed. They can finance the wars and all the welfare you want ... but your country ends up in a crisis. It’s a solvency crisis, and it can’t be solved by printing a whole lot of money,” he concluded.
Paul, whose warnings about debt, deficits, and inflation have been his calling card during some 20 years in public service, later offered another line of argument that could stand in as an essential statement of his critics during his time in Congress.
“We’re in deep doldrums and we never change policy. We never challenge anything. We just keep doing the same thing. Congress keeps spending the money, welfare expands exponentially, wars never end, and deficits don’t matter,” Paul said.
Burnished by double a member’s usual time allotment – fellow libertarian Rep. Walter Jones (R) of North Carolina gave up his time so Paul could speak at greater length – Paul uncorked one of his standard diatribes about the Federal Reserve’s secret deliberations over monetary moves.
“I have over the years obviously been critical about what goes on in monetary policy, but it hasn’t been so much the chairman of the Federal Reserve, whether it was Paul Volcker or Alan Greenspan or the current chairman, it’s always been the system,” Paul said. “I think they have a job that they can’t do because it’s an unmanageable job, it’s a fallacy, it’s a flawed system, and therefore we shouldn’t expect good results.