Steve G.

Bob Barr on the Fed: Not encouraging

In Libertarian Party-US, Libertarian Politics on June 13, 2008 at 2:44 pm

Here’s what Bob Barr said on the Glenn Beck radio show in response to a question about the Fed:

If I could wave a magic wand and the Federal Reserve Bank would disappear tomorrow, I would do so. It’s a group of unelected governors that are not answerable to or accountable to the people of this country and yet they wield considerable influence over the economy by basically setting rates at which banks and other financial institutions can loan money. And they have built up, you know, huge reserves themselves that they can then dole out as they’re doing — as they did recently with Bear Stearns to prop up as failing, what they see as failing investment houses, for example.

What we’re on the verge of right now, Glenn, through this federal government monkeying around with the mortgage business, both directly and indirectly, is to have the federal government now set a “One size fits all” mortgage criteria for the country. That would be disastrous. It would stifle risk-taking, it would stifle the independence of small mortgage houses and mortgage banks and would simply create further problems down the road. What we need to be doing is tackling government spending. That is the root of all evil, so to speak. We need to get a handle on federal spending, we need to start reducing the economic footprint and, you know, all the other footprints of the federal government if we want to talk about them, and get the federal government out of running our economy. It was never intended to be the job of the federal government to run the economy.

Let’s take a look at the statement:

“If I could wave a magic wand and the Federal Reserve Bank would disappear tomorrow, I would do so.”

You don’t need a “magic wand.” You just need Congress to pass a law repealing the Federal Reserve Act of 1913, and then you, as president, need to sign it. What’s with the “magic wand” talk? You’re much more likely to need a “magic wand” to repeal the 16th amendment, which would not take away Congress’s ability to assess an income tax, contrary to Barr’s understanding. In fact, only a “magic wand” could do that.

This one sentence basically tells me all I need to know about Barr, RE: the Fed, but I’ll continue.

“It’s a group of unelected governors that are not answerable to or accountable to the people of this country and yet they wield considerable influence over the economy by basically setting rates at which banks and other financial institutions can loan money.”

This “unelected governors” talk — as if it would be okay to have a fiat-money issuing central bank cartel if only its governors were elected by the people — is B.S. In fact, the central bank’s “independence” is actually better than the alternative. What is Barr saying here, that he thinks the government, instead of its proxies at the Fed, should have even more control over the money supply?

And what does he mean that they “basically” set the rates at which banks and other financial institutions can loan money? The Fed sets the discount rate and if they really want to set the federal funds rate, they can do that too. There’s really no “basically” about it.

“And they have built up, you know, huge reserves themselves that they can then dole out as they’re doing — as they did recently with Bear Stearns to prop up as failing, what they see as failing investment houses, for example.”

The Fed doesn’t need to have “reserves” — it has the legal authority to create money out of thin air! To the extent that they have “build up reserves,” I guess that’s good, since at least they’re not inflating by creating more money.

“What we’re on the verge of right now, Glenn, through this federal government monkeying around with the mortgage business, both directly and indirectly, is to have the federal government now set a ‘One size fits all’ mortgage criteria for the country. It would stifle risk-taking, it would stifle the independence of small mortgage houses and mortgage banks and would simply create further problems down the road.

This reminds me of the embarrassing LP press release saying that “for the first time” the government was enacting price controls on food. The government has been “monkeying around” with the mortgage business towards “one size fits all” since the creation of the FHA, Fannie Mae, Freddie Mac, etc. This is nothing new.

“What we need to be doing is tackling government spending…”

Yes, change the subject. Mr. Beck’s question was about the one institution that makes all of that government spending possible. If you want to curb government spending, then look to the Fed! Don’t divert the question about monetary policy to an answer involving fiscal policy — that’s like saying “we need to do something about this heat!” when asked about fixing the air conditioner.

  1. I generally agree with you, but I do remember Ron Paul on many occasions saying that the Fed wasn’t accountable to the citizens, and that due to the secrecy of the Fed’s meetings, congress’s banking committee also wasn’t privy to this secrecy.

    The problem, I suppose is that in a true free market in banking, the government wouldn’t intervene in the private markets of banking, financing, money creation, and capital and debt markets. How do we get there? Ron Paul suggested that the easiest way was to eliminate legal tender laws, which would likely spur competing currencies. Remember, the Federal Reserve DOES provide the valuable clearing of payment instruments (checks, etc) so complete elimination would require the picking up of those functions (certainly likely to be accomplished even in the Fed’s demise).

    What it appears to me is that Barr is trying to sound like Ron Paul, without the firm knowledge of Austrian economics which Ron Paul has, and maybe to a slightly lesser extent, Mary Ruwart has as well. (Remember, Dr. Walter Block, an Austrian economist and LP delegate supported Mary Ruwart, at least after Kubby was eliminated)

    So, the real disturbing thing about this (for me) is that Barr is emulating W.A.R., in trying to sound libertarian, without actually being libertarian. But I am also reminded of the proverbial question, “if you had an ‘eliminate the government’ button in your possession, would you press it?” This is not unlike Barr’s “magic wand”.

  2. Steve – This is Jason, with whom you worked in Denver. You know that, right?

    Anyhow, Ron Paul and even Murray Rothbard complained about the Fed’s unaccountability, but more or less in passing. “The Case Against the Fed,” by Rothbard, might devote two pages to this, and the other 170 to why fiat-money central banking is bad. Barr, by not offering a free-market or even a gold alternative, is implicitly, to me at least, saying that central banking isn’t the problem, the problem is the semi-private nature of the Fed.

    Thanks for commenting.

  3. Baldwin still remains the most anti-Fed, pro-gold candidate running.

  4. I have to agree, Jass. I’m debating a vote for him if Barr can’t get his act together (which I’m not too hopeful about). That is assuming the CA AIP gets their act together.

    I still wish Jesse would have run. As a true independent, I wouldn’t be breaking any Riverside Clauses to help him either. He’s not exactly perfect either but he is really good on several of my hottest buttons. Besides, it would have been priceless to see the Presidential Inaguration turn into a Royal Rumble.

  5. Yes I know Jason, that you are “G.E.”. Send me an email sometime . . . I’d be very interested in chatting.

  6. Lidia, if I vote at all, I’ll either write in Ron Paul or Mary Ruwart. A vote for Barr/W.A.R. is still a vote for the lesser of three evils.

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