But last year Paul had what may be his greatest triumph as a legislator. He and other members of Congress successfully placed a provision to perform an audit of the Federal Reserve into the Dodd-Frank law, against the strong opposition of both the Fed and the Obama administration. The bill also forced the bank to release the details of 21,000 loans granted to financial firms during the credit crunch. Now Paul is in charge of the House subcommittee that actually oversees the Fed. That might cause some awkward moments, to say the least. The title of his book is not misleading. The central bank "is immoral, unconstitutional, impractical, promotes bad economics, and undermines liberty," he writes.
That's part of the reason he supports reinstating the gold standard, which would obviate the need for a monetary policymaking apparatus as well as rein in government spending and end inflation. Talk of a return to a gold (or silver) standard for the dollar has moved from the fringe toward the mainstream, if not into it. A dozen state legislators have proposed locally instating gold standards or, at least, commodity payment systems.
"I believe that freedom itself is at stake in this struggle," Paul says in End the Fed. Just a few years ago, he reiterated the point to the New York Times: "We will go back to the gold standard, even if it takes the near-destruction of the dollar to get there."
The financial crisis and ensuing recession brought about an enormous wave of anti-Fed sentiment. In 2009 a poll found the Fed less popular than any other federal entity, including the Internal Revenue Service. "In the minds of the public, the Fed was the great enabler of this huge catastrophe that we've had since the panic of 2008," says Steve Hanke, a professor at Johns Hopkins University and senior fellow at the Cato Institute. "And I think the general consensus is that they remain the source of a lot of the problems we're facing right now as well."
In the sweep of the Fed's history, such criticism is hardly unusual, says Sarah Binder, a George Washington University professor and fellow at the Brookings Institution. "There is always Fed-bashing that ebbs and flows, coming from the strange bedfellows, from the far left and the far right," Binder says. (This remains true: Paul joins politicians like social democrat Sen. Bernie Sanders in his Fed-bashing.) "When the economy sours, we hear more criticism."
Still, there is a case to be made that this time is different. The severity of the recession prompted the Fed to take truly extraordinary measures to stabilize the banking sector during the credit crunch—measures that even Fed officials admit might not have been totally legal. It accepted more than $1 trillion in junk-rated assets as collateral, something it never had never done before the crisis. And it was not just Goldman Sachs and Lehman Bros. availing themselves of the Fed's largesse—it was Caterpillar and the Korean Development Bank.
"It was a little surprising, in the scope of the data dump, seeing just how impaired some assets were," says Vincent Reinhart, a fellow at the American Enterprise Institute and former Fed official, referring to the 21,000 released transactions. "The Fed did overstate the quality of loans."
Binder also acknowledges that the Fed might have overstepped far enough to generate some real headaches. "The independence of the Fed has really been compromised by what happened during the financial crisis," she says. The bank "went far [beyond] what we think of as traditional monetary policy. And the Fed's independence, which it could always fall back on—they don't have that cushion of comfort anymore. There is aggressive and ambitious criticism coming from a lot of fronts."
The Fed has noticed and is taking steps to respond. Bernanke himself has deigned to appear on 60 Minutes, going so far as to give a tour ofhis childhood home in Dillon, S.C. He has visited college campuses, explaining the crisis in clear if professorial terms. He has courted members of Congress and journalists. More overt pandering comes from the St. Louis Federal Reserve Bank, which is hosting a $1,000 competition for the best YouTube video stressing the importance of an independent central bank. "What makes independence for a nation's central bank important?" the promo asks. "Let us know through your video creation!"
But Paul's adversary is not only the Federal Reserve. It is also mainstream monetary economics itself. As a devotee of the Austrian school, whose luminaries include Friedrich Hayek and Ludwig von Mises, Paul stands firmly outside current policymaking and academic circles, a point he enthusiastically admits. (The Austrian economists also often quibble with other libertarians, like those at Cato.) His beef is not with how central bankers do their jobs; it's with central banking itself.
"The Fed, rightly so, criticizes Congress for spending too much—but they make the money available to us!" he told me. "It buys debt, keeps interest rates low, and sticks it to the people who want to save and make money. It is so unfair. And I think it is the first time in the history of the Fed that people realize it is not their friend. It just gives us booms and busts."
Many economists disagree, with varying degrees of vehemence. One of the gentler responses comes from Reinhart, the former Fed official and current AEI scholar: "There is tremendous complexity in the monetary and banking systems now, and Ron Paul is basically saying: 'Let's make everything simple again. If we could make market discipline effective, we wouldn't need such complicated regulation. If we had the gold standard, we wouldn't need complex monetary policy. But the issue is: How do we get from here to there? There might not be a way. And at some point, it is just nostalgia for a time that never really existed."
Indeed, many economists point to evidence that banking crises and recessions were much, much more severe leading up to the Great Depression and the advent of modern monetary policymaking. They also note that the Fed's extraordinary monetary policy in 2008 and 2009 did stabilize the banking sector, boost GDP, and keep up employment.
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