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89 Democrats Vote to Audit the Fed, Passes House.

Updated on July 25, 2012

Illustrating that spilling across party lines is the unpopularity of the private central bank's bailout of banks for bad bets made in the derivatives markets and subprime markets, HR 459 Audit the Fed, an issue dear to disparate political constituencies ranging from Occupy Wall Street to moderate Republicans, passed the House this week. Reuters reported:

"the vote showed bipartisan support for greater scrutiny of the U.S. central bank's powers which were expanded to help it tackle the financial crisis."

Representative Dennis Kucinich said:

"It's time that we stood up to the Federal Reserve that right now acts like some kind of high, exalted priesthood, unaccountable to democracy,"

And Republican presidential candidate Ron Paul told Reuters:

""They're sick and tired of what happened in the bailout and where the wealthy got bailed out and the poor lost their jobs and they lost their homes," said Paul... "

David Lawdner of Reuters wrote:

"Many Republicans and some Democrats have criticized the Fed's extraordinary measures to rescue banks and buy mortgage and Treasury debt, saying the central bank has strayed into Congress' fiscal policy territory."

Lawdner notes that politicians of both parties say the Fed's actions to ease the 2007-2009 recession may have "planted the seeds of high inflation in the future."

Excuse me. In the future? I just paid four bucks for a juice at the Starbucks. I never paid much attention to the exact price before, but I know it wasn't four bucks.

The official inflation rate is low while more and more we hear people saying in alarm: "Everything is going up!" It depends what your "everything" is. A starter villa in the Adirondacks, or a box of diapers and a gallon of milk. The official inflation rate quoted most often in the media for the last ten years is about three percent. But everyone knows this isn't true.

Kathy Kristof, a financial analyst at CBS Money Watch, points out that a true consumer price index should be weighted toward a market basket of goods which comprise frequent purchases for average income families, which excludes houses, furniture, appliances, cars, or computers. This means food, child care, gasoline, prescription drugs, phone and television service, and other household products. Considering the American Institute for Economic Research as a better source than the U.S. Bureau of Labor Statistics, which is the source of the oft-quoted official figure, she says:

"Forget the modest 3.1 percent rise in the Consumer Price Index, the government's widely used measure of inflation. Everyday prices are up some 8 percent over the past year..."

And what drives inflation? One factor rarely mentioned in the media is the devaluation of the dollar by the printing of money by the Federal Reserve. To be precise, the Fed doesn't literally print money. It holds auctions to buy assets like bonds or mortgage-backed securities from banks. They pay for them by issuing a credit to the bank, creating money which the bank can spend but which the Fed got out of nowhere, out of thin air. This devalues the money that other people have earned by running a store or cleaning houses.

An anonymous blogger at one of the many thousands of rough and tumble, no holds barred forums for interest groups of all kinds, this one weight-lifting, writes, with not a bad Main Street understanding of the issue:

"It's real simple: the growing national debt, the wars, and the bank bailouts are being paid for by the printing of funny money which devalues every dollar you have in your pocket and causes inflation. The bankers behind the Fed who print it don't care because when the dollar crashes and there is a general collapse, they'll buy your 401K stocks and foreclosed homes for a fraction of what they are worth, and start the cycle all over again. Now the 1% will own half of all hard assets, instead of merely one-third. They'll deal with the fall-out by going offshore, then come back when we are firmly enslaved and back under control.

Abolishing the Fed and fractional reserve banking is the first step toward freedom and economic health. And auditing the Fed is the first step toward abolishing it. No way to pay for the wars without taxing, no wars. No way to pay for bailouts, no bailouts."

Audit the Fed goes to Senate next, contact senators.

"If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered." - Thomas Jefferson
"Banking establishments are more dangerous than standing armies." - Thomas Jefferson

Occupy Boston, Storming the Federal Reserve Bank of Boston, Sept. 2011


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