Representative Ron Paul, a Texas Republican who next month will take control of the House subcommittee that oversees the Federal Reserve, said he’s concerned the central bank won’t be able to prevent an outbreak of inflation.
Fed Chairman Ben S. Bernanke said during an interview broadcast Dec. 5 on CBS Corp.’s “60 Minutes” he was “100 percent” confident the Fed could keep inflation below 2 percent and reverse its accommodative monetary policy when necessary. Policy makers “could raise interest rates in 15 minutes,” if needed, he said.
“This optimism of Bernanke who says that when the prices start to go up, he can turn that off in 15 minutes, I don’t think he fully understands the subjective theory of value and how prices have a psychological reason for going up, too,” Paul said today on Bloomberg Radio’s “The Hays Advantage” with Kathleen Hays. “When people lose confidence, prices go up, and you can’t turn that psychology off in a minute”
The Fed’s preferred gauge of inflation, the personal consumption expenditures index excluding food and energy, rose 0.9 percent in October from a year earlier. Including all items, the index increased 1.3 percent.
Paul said he believes prices are increasing at a faster pace.
“If you look at private sources that measure prices with the old consumer price index, it’s more like 5 percent,” he said. Paul did not provide further details on the 5 percent inflation estimate.
The 75-year old congressman, who wrote the 2009 book “End the Fed,” said the odds of a weak dollar “bringing the Fed down are much greater than me bringing the Fed down.”
Earlier today, in an interview on Bloomberg Television, Paul said that he will “not really, not right up front” push for an end to the U.S. central bank.
“But obviously that’s the implication,” Paul said.
House Financial Services chairman-elect Spencer Bachus, an Alabama Republican, selected Paul to lead the panel’s domestic monetary policy subcommittee when their party takes the House majority next month.
As chairman of the Fed oversight committee, Paul said he will “push for debating” whether the central bank should focus solely on policies that promote price stability, foregoing the dual mandate by Congress that it also pursue maximum employment.