Representative Ron Paul, a persistent critic of the Federal Reserve, on Thursday renewed his uphill fight to abolish the U.S. central bank, warning it is on track to create an inflation that will hit lower-income Americans especially hard.
The Texas lawmaker has long championed dismantling the Fed, but at a hearing on Thursday slammed its $600 billion bond buying program, which he said was creating inflation and undercutting the dollar. This week he introduced legislation abolishing the Fed.
"Frugality is virtuous only when it results from free choice, not when it is forced upon the citizenry by the Fed's ruinous monetary policy," Paul said at a hearing of a House subcommittee that he chairs.
With Congress split between a Democrat-controlled Senate and a Republican-led House, and with a Democrat in the White House, Paul's legislative push to eliminate the central bank is unlikely to gain traction.
Razing the Fed is not a cause embraced by most Democrats, who are focused on putting into effect consumer protections mandated by recently passed financial reform legislation and who have been more sympathetic to the central bank's efforts to lower the unemployment rate.
Even so, Paul's questioning of the Fed has gained resonance with political conservatives who see the central bank's aggressive efforts to boost growth as big government intervention.
While some credit the central bank with preventing the deep 2007-2009 financial crisis from triggering a full-blown depression, others believe the Fed went too far in bailing out the financial sector.
Congress considered curbing Fed regulatory powers in legislation passed last year but backed away, ultimately delegating more authority to the central bank to police the financial system.
Paul's criticism of the Fed and its bond buying program has struck a chord with Republicans, particularly Tea Party activists.
Other GOP lawmakers have introduced a measure that would strip the Fed of its full employment mandate and require it to concentrate exclusively on inflation.
Rising energy and commodity prices have stirred inflation worries around the world and criticism that the Fed's vast expansion of bank reserves to buy Treasuries has stoked price rises.
Paul argued at the hearing that inflation hits low- and middle-income wage earners harder than affluent people.
"If you destroy a currency you will destroy the middle class," said Paul, whose long-standing antipathy to the Fed had found little support until the recent crisis.
No Democrats attended the hearing, at which three witnesses criticized the Fed and Fed policy, and some called for a return to the gold standard, a foundation for the currency that Paul has long endorsed.
"A dollar that is as good as gold is the way out," said Lewis Lehrman, a historian and investor.
The office of the ranking Democrat on the subcommittee, William Lacy Clay, was unable to immediately explain why he did not attend.
The Fed argues its bond buying is necessary to support a weak recovery and is justified under its congressional mandate to promote full employment. Policymakers said in a recent statement they are watching inflation closely, but contend that inflation has been at historically low levels until recently and that they have the tools to control price rises. (Reporting by Mark Felsenthal; Editing by Andrea Ricci)
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