Ron Paul, Herman Cain, and the Fed

Herman Cain may not have called Ron Paul “ignorant,” but he may as well have. It seems someone at every rally asks him about the Fed, and he is not happy about it. Cain was President of the Federal Reserve Bank in Kansas City in 1995 and 1996, prompting Ron Paul supporters to question his support of that institution.

Cain claims that he is not opposed to an audit of the Fed, but believes nothing will be found. In his view, everything the Federal Reserve does is above board and in the open, a claim belied by the fact that it had to be forced to reveal recipients of TARP money. Cain supported the Troubled Asset Relief Program, arguing that without it, the economy would have crashed.

Cain’s indignance at being questioned about the Fed is troubling. It is one thing to argue that it is a necessary institution. I do not believe that, but I can at least see the other side. Cain thinks anyone who questions the Fed’s necessity or modes of operation is ignorant, by implication if not direct statement.

This is no way to convince libertarians that he is a limited-government advocate. While Paul’s ideas may seem radical to established politicians and economists, they are far from kooky. Cain will get a rude awakening when it dawns on him that a wide swath of Americans are now finding the skunk under the porch, and it looks a lot like the Fed.

Before he reaches that point, here are some questions that Cain should answer if he expects any libertarian support:

1) Should there be any restrictions on the Fed’s ability to create money? If so, how should those restrictions be structured and enforced?

2) Should the Fed continue to have the dual responsibility of ensuring price stability and promoting full employment, which often are at odds?

3) Do you advocate a continuance of our fiat money system? Would you support Ron Paul’s proposed bill to allow people to use any form of money they wish in their transactions? If not, why not?

4) Since the Federal Reserve was formed in 1913, the dollar has lost roughly 97% of its value. Is this a problem and if so, what is the remedy?

Ron Paul is the principled candidate by a country mile. Even if he loses, his presence has made questions like these possible. Four years ago, they would have been thought absurd. Cain should stop belittling Paul supporters and get busy answering the legitimate questions they raise. Come to think of it, so should everyone in the Republican field.


About Terry Noel

I am an Associate Professor of Management and Quantitative Methods at Illinois State University. My specialty is entrepreneurship.
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2 Responses to Ron Paul, Herman Cain, and the Fed

  1. sector7 says:

    Terry, how can you question whether or not the devaluation of the dollar is a problem? It seems obvious that intentionally taking away our purchasing power is a huge injustice. Seems 40-50 years ago, a median-level job could easily support a family of 4, whereas nowadays both parents have to work full-time just to make ends meet for a family of 4. I read an article the other day (can’t seem to locate it) where it stated something that used to cost $1 now costs $7, and read an article after the debate where Paul stated you could buy a gallon of gas for a silver dime that stated the actual value of gas has gone down, except we pay more because our dollars are worth less. Also, do you think that last 3% can never go away?


    • Terry Noel says:

      Thanks for the comment, sector7. I already know the answer, but I want to hear Cain give his. As for the last 3%, I believe that if people were allowed to use anything they please for money, they would gravitate toward gold as a base and that prices would tend downward at a slow but steady rate.


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