http://www.marketwatch.com/story/ron-paul-brings-the-energy-and-the...


The former presidential candidate and 11-term Republican congressman from Galveston, Texas, seems to be doing what few have succeeded at: rallying support for radical change in Washington, on Wall Street and in the world.

Paul, who rattled the Republican base with a strong showing in several primaries and caucuses last year, is upping the ante. He has a new and timely book, "End the Fed," and has been making a big media tour, including a stop on The Daily Show with Jon Stewart last Tuesday.

Reuters
U.S. Rep. Ron Paul

"It's hard to enforce the laws when the government participates in fraud," Paul told Stewart.

It's hard not to get excited or encouraged about the way Paul gets people fired up about politics. It's not just the politics, though, it's the kind of politics Paul is talking about: strict lawmaking derived from the constitution, ending trade agreements and national monetary policy.

Anyone would be challenged to get young Americans to care about matters so complex and dull, but Paul does it in the same way Stewart sells world affairs to college stoners: he makes it entertaining -- and he offers hope things can change.
Dead Fed?

Like many charismatic politicians who plateau without reaching a position of potency, Paul's strength is ultimately his greatest weakness. One of his ideas in particular is just too scary, too radical, too naive and just plain stupid that it turns off people who are serious about reform, especially reform on Wall Street.

Eliminating the Federal Reserve in an idealist vacuum is a compelling idea. In today's world, however, eliminating the Fed would be tantamount to handing over the keys of our financial system to the European Union, China or any foreign economic power with a strong central bank. Yet, that's exactly what Paul wants.

"Nothing good can come from the Federal Reserve," Paul writes, saying it's "immoral, unconstitutional, impractical, promotes bad economics and undermines liberty."

Paul can argue that the Fed has been dead wrong in its policymaking. He can say it has too much power. It's too secretive. He can say it caused bubbles. He can argue that it's unconstitutional, though it's never been a cut-and-dried issue, and even the founding fathers were divided on a central bank. He can rant and rant some more.

Consider the Fed's response to the financial crisis. Under Chairman Ben Bernanke, the Fed has taken the opposite tack from what Paul suggests. It's tried to inflate the money supply by pouring cash into the markets. It's printed money to get more dollars floating in the economy.

Along the way, Fed policy rewarded greed and nefarious behavior on Wall Street. It reinforced the lobbyist politics of Washington. It limited impact in getting its subordinate banks to lend. The threat of inflation looms large over the dollar, and we find ourselves working harder to keep current on our debt.
Real hunger in America

But if you're a student of economics or old enough to remember the last time the Fed didn't lift a finger to help in a recession, you might remember the time that gross domestic product fell 30% and unemployment topped 20%. During the Great Depression, real Americans went hungry and by the time help arrived, it was mostly too late. It took a world war to shake off the damage. Even then it left lasting scars.

Reuters
Federal Reserve Board Chairman Ben Bernanke

Many argue that World War II was a backlash against economic upheaval in the decade before. Even if you don't subscribe to the idea that the Fed is helping mitigate the crisis, consider the current global landscape.

In today's world a central bank is an essential economic tool. Without the Fed's power to lend, to pump in and pull money from the banking system, to control the commercial paper market and inflation, and to influence the currency, this nation would be at a serious disadvantage.

We live in a global economy. Even in a recession, the United States imports more than $150 billion in goods a month and exports close to $125 billion, according to the International Trade Administration. Foreign countries owned $2.35 trillion of U.S. debt at the end of July and we own trillions in foreign assets.

Imagine the EU, Japan or China raising and lowering their interest rates, and buying and selling U.S. currencies and debt without something in the U.S. to act in our nation's behalf. How does a collapse of the U.S. mortgage market grab you and the home equity you worked so hard to build?

Contrast a world in which the U.S. is powerless with the one envisioned by Paul, who finds inspiration from the Austrian school of economics. His America is that of a landlocked nation in the Alps. He thinks business would function best if left on its own, that it's the government that ruins everything.

Paul is winning converts with his thinking. His book is doing a brisk business. It held the No. 14 spot on the Amazon sales list at the end of last week and its central idea may be the main reason Congress is now balking at handing the central bank more regulatory power.

Paul's is an impressive movement, but it won't go any further. For an idea to take hold these days, it takes the world. For as much as Americans hunger for the kind of world Paul preaches, they're not willing to go hungry to make it happen. And given the choice, they shouldn't.