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The Constitution vs:
Understanding the Amendments:
What They REALLY Mean

Federal Reserve - Is the Fed, instituted by Woodrow Wilson and opposed by Ron Paul, constitutional?



Despite nearly 100 years in an ever-growing role managing monetary policy in the United States, the Federal Reserve is not a constitutional component of the federal government. The Fed is unconstitutional -- a fact often discussed by Republican and libertarian crusader Ron Paul. In fact, The Federal Reserve provides an interesting case study of abdication of responsibility by Congress, a punting of responsibility assigned to Congress by the Constitution.

Article 1, Section 8 of the Constitution assigns (18) enumerated powers to the Congress of the United States. Among these powers:

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures

The Constitution puts the powers to coin money and to regulate its value squarely on the shoulders of Congress. Starting in 1913, when it passed the Federal Reserve Act of 1913, Congress reassigned this responsibility, creating the Fed as an unaccountable, fourth branch of the federal government. The Fed acts as a central bank and as a single point of controlling authority, setting interest rates for inter-bank lending and regulating the supply of money in circulation -- the two biggest influencers of the value of the money we all spend, save, and invest.

Over the last few years, riding the coattails of the market collapse of 2008, Congress expanded The Federal Reserve's role into bailouts and seizures of private banks and oversight of various new financial regulations.

Congress does not have the power to assign these responsibilities -- nor does it have the power to establish a fourth branch of government unaccountable to the other three. A few in Congress have made a full audit of the Fed a goal, and both Ron Paul and Rand Paul, among others, have proposed legislation to authorize a full audit of the Federal Reserve as soon as possible. Ron Paul has even discussed his goal to abolish the Federal Reserve.

Would Congress set interest rates and regulate the money supply in the absence of the Federal Reserve?
It could. Alternatively, Congress could find other ways to set and regulate the value of money -- open markets against other currencies and a return to the gold standard being two such examples, both also championed by Ron Paul over many years as part of his desire to abolish the Fed.

Would Congress oversee the printing and coining of money in the absence of The Fed?
Yes. Congress can establish, by legislation, how much money should exist in circulation to maintain steady valuations. Congress would then retain direct oversight of the U.S. Mint.

Didn't The Fed, and Chairman Alan Greenspan, deliver the "good old days" of the 1990's up through 2006?
The Federal Reserve brought interest rates down to record low levels, creating a policy of easy money and credit that led to record borrowing, excess spending, and minimal saving as Americans boosted their standard of living above and beyond the money they were actually earning. Record home ownership drove the expansion of a real estate bubble, resulting in rapid housing price increases, while cheap energy, at least earlier in the period, fueled a push for bigger, gaudier vehicles that were also more expensive. The U.S., along with much of the world, enjoyed the benefits of the economic bubble for years based on the Federal Reserve's loose monetary policy and the easy access to housing and credit that resulted.

As all bubbles do, this one began to deflate in 2007 and popped altogether in 2008, leaving Americans and much of the world with collapsing investments, a dried-up job market, and a reality check regarding the buy-now-pay-never philosophy that defined the previous 10-15 years. The Fed is as much to blame for the economic turmoil of today as it is to thank for the care-free days of the past.

Ron Paul, as a member of Congress and as a presidential candidate in 2008 and 2012, has called for a full audit of the Federal Reserve, and his son, U.S. Senator Rand Paul, has pushed for the same and has helped make a Fed audit a campaign issue in 2012. Ron Paul continues to fight to abolish the Federal Reserve.

Read more about it:

A History of the Federal Reserve, Volume 1: 1913-1951

End the Fed