Texas congressman wants to 'End the Fed'

— -- "The Federal Reserve should be abolished," writes Ron Paul, "because it is immoral, unconstitutional, impractical, promotes bad economics, and undermines liberty."

This is the thesis of Paul's End the Fed (Grand Central Publishing, $21.99, 224 pages), the Texas congressman's case against the Federal Reserve. The title was taken from a slogan that Paul heard chanted at various rallies and conventions, filling him with hope that monetary policy has become a subject worthy of popular protest.

Many people consider the Fed an "indispensable institution," but few know what the central bank actually does. For example, the Fed "can create trillions of dollars and distribute them to its cronies without congressional oversight," writes Paul, a former GOP presidential candidate.

Creating an endless supply of money is the worst offense of the Fed, an institution that Paul believes is the root of many of the nation's problems, including:

•A monetary policy that benefits bankers, rather than the common man. The 1910 meeting where the idea for the Federal Reserve was drafted involved bankers and government officials working in secrecy on Jekyll Island off the Georgia coast.

•Giving too-big-to-fail banks little reason to pursue efforts toward efficiency because the Fed is there to save them in a crisis.

•Giving government a blank check with which to wage war. When governments have to finance wars without central bank cash infusions, they're forced to economize on resources and end the conflict as soon as possible. Instead, Paul argues, our government, backed by the Fed, is like "an irresponsible teenager with an unlimited line of credit."

•Interfering with the ability of the free market to give accurate feedback to borrowers and lenders. Artificially low interest rates can distort signals that borrowers use to assess risk, which can lead to false confidence in the economy and excessive use of capital.

•Creating "moral hazard" through market rescue of companies. The sense of responsibility for one's own actions is removed, conditioning business people to believe they can enjoy the rewards of the market, yet pass on the penalties to others.