Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

How Ron Paul's Election Campaign Could End the Fed

Politics / US Politics Jan 27, 2012 - 07:32 AM GMT

By: Money_Morning


Best Financial Markets Analysis ArticleDavid Zeiler writes: Led by presidential candidate Ron Paul's "end the Fed" mantra, Republicans have made their attacks on the U.S. Federal Reserve into an election year rallying cry.

It's one that could turn ugly in November if the GOP manages to score big.

Where Paul has been the lone voice in the wilderness criticizing the central bank for years, others in the GOP recently adopted the Fed as a scapegoat for the financial crisis of 2008.

Many of the Republican attacks include calls to fire Fed Chairman Ben S. Bernanke and to scale back the Fed's mandate - or in Paul's case, eradicate it altogether.

And while Paul - who actually wrote a book called "End the Fed" in 2008 - has little chance of becoming the nominee, his campaign does have a larger philosophical objective.

"It is Paul's goal to permanently establish within the Republican Party a group that is dead set on not having the Fed," Douglas Holtz-Eakin, chief economic adviser to Sen. John McCain, R-AZ, during his 2008 run for the presidency,told MarketWatch. "This is not going away."

Ron Paul Scores Big With Younger Voters
Although Paul's overall support generally hovers in the low double digits, his message is very popular among younger Republican voters.

Paul won 48% of the under-30 vote in Iowa, 47% of the under-30 vote in New Hampshire and 31% in South Carolina. It's a demographic every candidate covets.

Paul's resonance with young voters, combined with the public's dim view of the Fed has set off an all-out GOP assault on the central bank.

For added juice, Republicans in general have sought to tie their criticisms of the Fed to U.S. President Barack Obama and the Democrats.

"If you are a [Republican] running for Congress - those freshmen in the House - they thought that Bernanke was walking around talking about buying assets for Obama to make it easier for him to spend," Holtz-Eakin told MarketWatch. "It lit the fuse."

Following Ron Paul's Lead
Gingrich, whose presidential campaign has been on an upswing of late, has come the closest to Paul's radical positions. The former Speaker of the House has said he would eliminate the unemployment mandate of the Federal Reserve, forcing it to focus on inflation alone.

Gingrich also has vowed to seek Bernanke's resignation if elected president.

Meanwhile, former Massachusetts governor Mitt Romney has now moved from qualified support for Bernanke and the Fed early in the campaign to a more negative position. He would seek Bernanke's removal, as well.

"I'd be looking for somebody new," Romney said in one of the many debates. "I think Bernanke has over-inflated the amount of currency he's created. QE2 did not work."

Only Rick Santorum, the former Pennsylvania senator, has avoided discussing the Fed, although he has said that it should have its mandate reduced to include only inflation.

Most of the Republican candidates who have dropped out also took shots at the Fed, with Texas Governor Rick Perry going so far as to label Bernanke "treasonous" for his easy money policies.

With such vitriol increasingly becoming part of mainstream GOP thinking, a Republican in the White House - and possibly control of both houses of Congress - could set the stage for more than just fiery anti-Fed talk.

Can They Really End the Fed?
Regardless how eager Republicans are to make changes at the Federal Reserve, they're sure to find it's not as easy to pull off as they'd like their campaign audiences to believe.

Just last fall, GOP congressional leaders sent a letter to the Federal Open Market Committee (FOMC) to dissuade them from following through on a plan, known as "Operation Twist," to sell short-term Treasuries while buying longer-term Treasuries.

The FOMC ignored the letter and voted to approve the measure.

In fact, Congress created the Federal Reserve in 1913 to be an apolitical, independent central bank. The seven members of the Board of Governors, which comprise the majority of the policy-making FOMC, are appointed by the president and confirmed by the Senate, but getting rid of them is not so easy.

Fed governors (including the chairman) serve 14-year terms that expire in January of even-numbered years. According to law they "may not be removed from office for their policy views," which could complicate GOP plans to remove Bernanke.

President Richard Nixon discovered just that in late 1968 when he sought to replace Chairman William McChesney Martin Jr. with Arthur Burns. President Nixon offered Martin the position of Secretary of the Treasury to open up the Fed chairmanship to Burns.

But Martin, seeing through the ruse, turned down the offer and served out his term. President Nixon was forced to wait until Martin's term expired in 1970 to appoint Burns to the post.

Chinks in the Fed's Armor
Of course, that doesn't mean Republicans are entirely without options. They could conceivably pass legislation changing the Fed's mandate if they control both Congress and the White House.

Although it's unclear how the markets would react, Wall Street would probably balk at such a fundamental change to the body that sets the nation's monetary policy.

However, Paul proved two years ago that the Fed is not invulnerable when he successfully added a provision to the Dodd-Frank law that allowed for an audit of the central bank.

And as long as Paul's "end the Fed" message is gaining traction among rank-and-file Republicans - especially the younger set -attacks on the Fed are unlikely to stop.

"In the minds of the public, the Fed was the great enabler of this huge catastrophe that we've had since the panic of 2008," Steve Hanke, a professor at Johns Hopkins University and senior fellow at the Cato Institute, told Slate magazine. "And I think the general consensus is that they remain the source of a lot of the problems we're facing right now as well."


Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules