As reported by Politico and The Street, Ron Paul is in line to head the House Subcommittee on Domestic Monetary Policy and Technology on the House Financial Services Committee, the subcommittee that oversees the Federal Reserve, the U.S. Mint and the United States’ dealings with the World Bank, IMF, etc.. As The Street tersely reports:
Paul got some traction recently with legislation proposing to audit the notoriously secretive Fed. He also wants to re-establish the gold standard.
Auditing the Federal Reserve is a pretty good idea. The Fed is enormously powerful and should therefore be as transparent in its deliberations and decisions as possible. However, having any instrument or agency of the federal government auditing the Federal Reserve (including the Government Accountability Office which does not make government accountable and was more honestly named when it was the General Accounting Office) is a very bad idea. The Fed’s primary virtue is its nearly complete independence from the federal government. Having a committee drawn from all of the major accounting firms to perform the audit, on the other hand, might work.
A return to the gold standard, on the other hand, is simply nuts. As I recently wrote, I’d probably vote for Ron Paul if I bothered to vote and lived in his congressional district. Not that he’d need my vote, having garnered a 76% majority of the vote on Tuesday. And, mind you, if the gold standard (or, hell, the turnip standard) had the positive effects its advocates insist it would have without the negative effects they tend to discount if not ignore entirely, well and good. Here I must give the usual “I am not an economist or economic historian” disclaimer, but as I understand both the historical evidence (in, for example, the Great Depression) and the fundamental theoretical relationship between GDP and the money supply, the comparative dangers of inflation versus deflation, etc., the contemporary insistence on a return to the gold standard is tantamount to an irrational faith commitment.
On the other hand, it isn’t like bad economics is a rarity on Capitol Hill. And if we can’t have rational policy in Congress, shouldn’t we at least have entertaining programming on C-SPAN?