In his new book, End the Fed, the Republican congressman Ron Paul tells the story of a helicopter ride he took with Ronald Reagan when Reagan was president. The president told him, "Ron, no great nation that abandoned the gold standard has remained a great nation."
Writes Mr. Paul: "Despite his sympathy for the gold standard, Reagan did nothing about the issue. His advisers successfully kept him quiet on this issue, fearing that he would be seen as crazy or kooky."
Mr. Paul apparently has no such inhibitions, which makes this book, a no-holds-barred attack on the Federal Reserve, an entertaining read. The Federal Reserve Bank, he writes, is a "ninety-five-year-old failed scheme," that is "involved in a full-time counterfeiting operation to sustain monopolistic financial cartels."
"Think of the Soviet system applied to the banking industry and you have the Fed," Mr. Paul writes, blaming it for "our current financial crisis" and for "the century of total war." The Fed, he writes, "did more damage to American economic prosperity than the attacks of 9/11."
"Freedom and central banking are incompatible," he writes, predicting that if the Federal Reserve is allowed to continue, "we should be prepared for hyperinflation and a great deal of poverty with a depression and possibly street violence as well."
If, on the other hand, the Federal Reserve is abolished and replaced with "a competitive market in which the best monies would emerge over time to compete directly with the federal government's dollar," well, then, get ready for a veritable utopia: "People wonder what would happen in a world without the Federal Reserve. My answer is that you would enjoy all the privileges of modern economic life without the downside of business cycles, bubbles, inflation, unsustainable trade imbalances, and the explosive growth of government that the Fed has fostered. You would also disempower the secretive cartel of powerful money managers who exercise disproportionate influence over the conduct of public policy."
The whole tale – of a single, super-powerful villain, the elimination of which would lead to a kind of paradise — fits together a little too well, enough to sound familiar to many of those who share Mr. Paul's hostility to fascism and communism, enough perhaps even to make them a bit nervous. They are unlikely to be reassured by Mr. Paul's wan disavowal of conspiracy theorists.
"Some of our political allies charge that the powerful elites who run things and are found repeatedly in the Fed, the Treasury, and the presidency, plan and cause certain events like 9/11 and our current financial crisis. I don't believe that," Mr. Paul writes. "While I do not endorse the views of people who write of the conspiracy to control the world through the Fed, I understand what it is that motivates such concerns."
How broad-minded. Mr. Paul does pause from time to time to take aim at some targets other than the decision to create the Fed in 1913. The Supreme Court's 1819 decision in McCulloch v Maryland, allowing the creation of the Second Bank of the United States, is a particular sore point. "The failure of the giants of industry to defend free markets" is, in Mr. Paul's view, "abhorrent." As for the Treasury Department's Troubled Asset Relief Program, justified by President George W. Bush's "astounding and preposterous" claim that "I've abandoned free market principles to save the free market system," Mr. Paul writes, "As far as I am concerned, the nationalization of industry, while retaining private ownership in name only, is just another word for fascism."
As an alternative, Mr. Paul suggests, Goldman Sachs and AIG "could have been allowed to go bankrupt with no downside for the general population, just like Lehman Brothers was allowed to die. Yes, there would be pain, but at least it would be temporary."
Mr. Paul's views may seem shockingly out of the mainstream. But had you said two years ago that the federal government would take over Citigroup, Bank of America, General Motors, AIG, and Fannie Mae, people would have looked at you like you were crazy, too. One of the illuminating things about this book is that it shows how permeable is the boundary between what Mr. Paul says may be seen as "crazy or kooky" and the American establishment. Mr. Paul is seen in the book not only riding a helicopter with President Reagan, but also questioning various chairmen of the Federal Reserve in private meetings or at congressional hearings. At one meeting, he confronts Alan Greenspan with an article, "Gold and Economic Freedom," that Mr. Greenspan had written in 1966 for a newsletter published by Objectivists, followers of the philosophy of Ayn Rand.
Wrote Mr. Greenspan: "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation…This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."
Mr. Paul reports that he showed it to Fed Chairman Greenspan, who autographed it for him and said "that he had just recently reread it and wouldn't change a word of it."