Ron Paul is a well-versed student of Austrian Economics, a school which believes that the economy cannot be viewed as a set of mathematical equations in which a change to X will cause a corresponding change in Y and Z. The economy consists of the sum of individual sales and purchases, and individuals generally act in their own self-interest, meaning that economics is a closer relative to sociology than to physics. Austrian economists have been relegated to the fringe for much of the 20th century due to the adoption of Keynesian economics, which rests on the idea that the private sector is inefficient and that government must step in through spending (fiscal policy) while a central bank controls the money supply (monetary policy).
I won't dig any deeper than that into the two schools because reading about Keynesianism, as I must to make sure I'm not lying to you, only makes me angry. Suffice it to say that the Keynesians failed to see the housing crisis coming while the Austrian economists have been predicting something like it for decades, and even tried to call attention to the inflated housing market before prices began to plummet.
Needless to say, in many circles the Austrian school is being re-examined. One of the stances it takes is that a central bank is a bad thing to have, because its method of creating money is and cannot help but be the cause of boom/bust cycles. In short, when the Federal Reserve, America's quasi-governmental central bank, decides that interest rates on debt should be lower than they are, it floods the market with new money which lowers the interest rate on debt. This new money devalues all of the currency that previously existed, but it does not do so immediately. What ends up happening is that those who get the money first, the already rich and well-connected, can purchase real assets (land, yachts, farms, etc.) at current rates. By the time all that new money works its way down to John Q. Public, prices have risen to compensate for the decreased value of the currency. Similarly, the artificially lowered rates result in investments being made that would not be made under higher rates because they are not profitable, see for example the housing boom.
Today, the federal funds rate is as low as it has ever been, "between 0 and one quarter of one percent." We're told that this is to kick-start the economy, but what we're really doing is putting a band-aid over a bullet entry wound. In addition, the Federal Reserve has taken on $2,000,000,000,000 on its balance sheets, and another $9,000,000,000,000 in off-balance sheet transactions. This is a huge expansion of the money supply, and--get this--no one outside the Fed knows where this money went.
Which brings me, in a meandering fashion, to Ron Paul's Federal Reserve Transparency Act of 2009. This bill would give the Government Accounting Office the authority to perform a full audit of the Fed and find out what it's doing with its power to create money, and it would require a report on it by the end of 2010. The really interesting part is that people are fed up with bailouts, and when the Fed's inner workings are explained, most are a little disgusted. Consequently, the bill has overwhelming popular support even among followers of mainstream economics, who to their credit acknowledge that a poorly-run or dishonest central bank can do as much harm as good.
Legislation like this has been introduced by Paul before, but it never got anywhere. It seems that now the time is right: shortly after its introduction, Ron Paul's Campaign for Liberty and other organizations mobilized to get the word out and get people to call their congressmen. Because of the action taken and the receptiveness of the American people, Congress has received an overwhelming number of messages telling them to support this legislation. As of right now, there are 275 co-sponsors in the House, including all of the House Republicans and 38% of the House Democrats; and 17 co-sponsors in the Senate, three of them Democrats.
This is the biggest show of bipartisan support seen in years, and it came not from either political party but from the American people asserting their right to representation. The fight is far from over (witness the recent parliamentary trick performed by the Senate to keep the bill from being added as a rider), but we're out of the gate with a strong start. If public pressure is kept up, the politicans have no choice but to comply with our wishes. And this is an important point.
There is much talk of the two-party system being corrupt, inefficient, and stagnant, which is all true. It is said that we need new political parties, which we do. It is said that the only way to get real change is to vote out all the incumbent politicians and put our own people into power, and this is dead wrong. The fact is that Washington corrupts people because power corrupts people. There are a few shining lights who remain pretty clean, but they are and will always remain the exception.
It takes a lot of time and resources and popular support to vet and run a candidate, much less to form a political party. You're looking at a 5-10 year delay before your guy gets into the arena, and then what? You're going to watch his slow decline as he changes from paladin to imp, with lobbyists whispering in his ear and tying strings to money they put in his pockets. It's much easier and much, much more effective to keep whoever is currently in office accountable. The phone call remains the single most important thing you can do to ensure that you are accurately represented, with talking to other people and convincing them to call a close second.
Before the bailouts went through, while they were still being debated, I heard lots of people say, "They're going to pass this thing, and there's nothing we can do to stop them." That is true only if you let it become a self-fulfilling prophecy by doing nothing. It is not enough to get out and vote, you must bend the ear of your congressman harder than the lobbyists and the insiders. When enough people do that, they realize that their backs are against the wall and that they'll lose their job if they don't listen to you. This engagement with representatives is how American politics is supposed to work. WIthout continued conversation it becomes just another oligarchy.
