 Before recognizing Dr. Paul for his statement, I want to note that this may be his last committee meeting with the chairman of the Federal Reserve. Throughout his time in office, Dr. Paul has been a consistent and strong advocate for sound monetary policy. His leadership on the committee, especially during these hearings when we've had the Federal Reserve chairman appear before us, have certainly made the hearings more interesting and provided several memorable YouTube moments. Mr. Chairman, just to say that having served a long time with Ron Paul, with whom I agree on a number of issues, I am very pleased that I was able to serve one term with him as chairman because there were times during our joint service when, despite his seniority, I thought he'd never get to it. So I'm glad that he finally achieved that chairmanship that he should have had long ago. Thank you. Your comments, Chairman, and the ranking member. But I am delighted to be here today, but I just want to refresh a few people's memory. I was first elected to Congress in 1976 in April in a special election, and the biggest bill on docket at that time was the revamping of the IMF. There was a major crisis going on from the breakdown of the Bretton Woods Agreement, and they had to rewrite the laws. They wanted to conform the laws with what they had been doing for five years, and that was a major piece of legislation. But it was only a consequence of what was predicted in 1945, because when 1945 established the Bretton Woods, it was predicted by the free market economists. It wouldn't work. It would fail. And this whole idea that they could regulate exchange rates and deal with a balance of payments, it totally failed. And so they had to come up with something new in 1971, 1976 is that transition period. And those same economists at that time said this was an unworkable system too, and it would lead to a major crisis of too much debt, too much malinvestment. It would be worldwide, it would be worse than anything, because it would be based on the fiat dollar globally, and that many of the problems that we have domestically would be worldwide. And that certainly has been confirmed with the crisis that we're in and has not been resolved yet. We're still floundering around and we still have a long way to go. I have over the years obviously been critical of what goes on on monetary policy, but it hasn't been so much the chairman of the Federal Reserve, whether it was Paul Volcker or Alan Greenspan or the current chairman. It's always been the system. I think they have a job that they can't do because it's an unmanageable job and it's a fallacy. It's a flawed system and therefore we shouldn't expect good results and generally we are not getting results. Policies never change. We stay the same thing, no matter what crisis is, we still do more of the same. If spending and debt was the problem, spending more and in greater debt and have the Fed just buy more debt doesn't seem to help at all. And here we are doing the same thing. We don't talk about the work ethic and true productions and true savings and why this excessive debt is so bad for us. We talk about solving a worldwide problem of insolvency of nations including our own by just printing money, creating credit. And now the Fed in the last four years tripled the monetary base and it has a trillion dollars more money sitting there. The banks are sitting with trillions of dollars and just the creation of money doesn't restore the confidence that is necessary. Until we get to the bottom of this and restore the confidence, I don't think we're going to see economic growth. This whole idea that you have the job of managing money and we can't even define the dollar. Nobody has a definition of the dollar. It's an impossible task. So I have hoped in the past to try to contribute to the discussion on monetary policy, the business cycle and why it benefits the rich over the poor. And so far my views have not prevailed. But I've appreciated the opportunity and I appreciate this opportunity to have served on the bank committee. Thank you. Thank you, Dr. Paul. The gentleman from Missouri, Mr. Clay, is recognized for three minutes. Thank you, Mr. Chairman. And let me thank Chairman Bernanke for appearing at today's hearing. Let me also publicly thank our Chairman, Dr. Paul, for his honorable service in Congress and to his country. Dr. Paul, for five minutes. Thank you, Mr. Chairman. I had a question prepared, but I think I better follow up on the question you asked Chairman Bernanke dealing with the audit of the Fed. Because when the Fed talks about independence, what they're really talking about is secrecy, not transparency. And it's the secrecy that I don't like and that we have a right to know about. What the GAO cannot audit, and I believe it would be the position of the chairman, is it cannot audit monetary policy and you express yourself on monetary policy. But it would not be able to look at agreements and operations with foreign central banks and governments and other banks or transactions made under direction of the FOMC. Discussions or communications between the board and the Federal Reserve system related to all those items. So it really, it's really not an audit without this. It's still secrecy. And why this is important is because of what happened four years ago. It's estimated that the amount of money that went in and out of the Fed for the bailing out overseas was $15 trillion. How did we ever get into this situation where Congress has nothing to say about trillions and trillions of dollars of bailing out certain banks and governments through these currency swaps? And the chairman has publicly announced that he's available. There's a crisis going on in Europe. Part of this dollar crisis going on that's been building, it's unique to the history of the world and monetary policy. And we stand ready. Who stands ready? The American taxpayer because we're just going to print up the money. As long as they take our dollars, we'll print the money and we'll bail them all out and we're going to destroy the middle class. The middle class is shrinking. The banks get richer. The middle class gets shrink. They shrink. They lose their houses. They lose their mortgages. This system is biased against the middle class and the poor. So I would say that this is, if we protect this amount of secrecy, it is not good policy and it's not good economics at all. It's very unfair. But my question is, Mr. Chairman, whose responsibility is it under the Constitution to manage monetary policy? Which branch of government has the absolute authority to manage monetary policy? The Congress has the authority and it's delegated to the Federal Reserve. That's a policy decision that you made. Yeah, but they can't transfer authority. You can't amend the Constitution by just saying we're going to create some secret group of individuals and banks. That's amending the Constitution. You can't do that. And all of a sudden allow this to exist in secrecy. And whose responsibility is it for oversight? Which branch of government has the right of oversight? Congress has the right of oversight and we certainly fully accept that and we fully accept the need for transparency and accountability. But it is a well-established fact that an independent central bank will provide better outcomes. If you want to go, there's no constitutional reason why Congress couldn't just take over monetary policy. If you want to do that, I guess that's your right to do it. But I'm advising you that it wouldn't be very good from an economic policy point of view. Yeah, but if it's allowed to be done in secret, this is the reason why I want to work within the system. What I want to say is Congress ought to get a backbone. They ought to say we deserve to know, we have a right to know, we have an obligation to know, because we have an obligation to defend our currency. It's the destruction of the currency that destroys the middle class. There is a principle in pre-market banking that says if you destroy the value of currency through inflation, you transfer the wealth of the middle class and it gravitates to the very wealthy. The bankers, the government, the politicians, they all love this. It is the fact that the Federal Reserve is the facilitator, but you couldn't have big government. If everybody loves big government, love the Fed, because they can finance the wars and all the welfare you want, but it doesn't work. It eventually ends up in a crisis, and it's a solvency crisis, and it can't be solved by printing a whole lot of money. So I think the very first step is transparency, and for us to know, we have a right to know, and you may be correct in your assumption, at least I'm sure you believe this, but maybe I should be talking to the Congress that we should stand up and say yes, we demand to know. Trillions and trillions of dollars being printed out of thin air and bailing out their friends, they stand ready to do it. The crisis is just as far as I'm concerned. My opinion is it's in the early stages. It's far from over. We're in deep doldrums, and we never change policy. We never challenge anything. We just keep doing the same thing. Commerce keeps spending the money. Welfare expands exponentially. Wars never end. In deficits, it don't matter. And when it comes to cutting spending, Republicans and Democrats, they get together and say, oh no, we can't really cut, and if we do cut, we just cut proposed increases. It's in the regular order. Use the in there. Use the in there. Regular order, Mr. Chairman. And facilitate it all. Thank you, Dr. Fowle. Thank you, Mr. Jones. Mr. Chairman, thank you very much. Mr. Bernanke, thank you for being here. I want to say two of my worst votes in 18 years, the Iraq war. We didn't have to go to Iraq. And the second, the repeal of Glass-Steagall. And if I was not going to yield my time, I would ask you about reinstating Glass-Steagall. I think I will write your letter with that question, sir. But at this time, because he's one of my dearest friends, I supported him for the Republican nomination to be President of the United States. I yield my time to Dr. Ron Paul. I thank the gentleman from North Carolina. I wanted to make a very brief statement about our previous discussion about the audit, the Fed bill. That bill has nothing to do with transferring who does monetary policy. This was, it's strictly a transparency bill. Monetary policy reform, I believe, will come, but that's another subject. This is just to know more about what the Federal Reserve is doing. Mr. Chairman, one of your key points that you've made through your academic career as well as being a defendant has been the need to prevent deflation. Would you agree with that? That is generally yes, sir. Right. And that you argue that the Depression was prolonged by the Federal Reserve not being able to reinflate. So in that sense, I think you really have achieved, you've had the chance, you were put in a situation that you alone didn't create. As far as I'm concerned, the system created and other managers helped create this. And there was this, what I see as a natural tendency to deflate and liquidate and clear the market and under your philosophy, you say, we can't allow this to happen. We have to prevent it. And I would say you've done a pretty good job. The monetary base has been tripled and in the last 12 months, like M1 has grown about 16%, M2 at over 9%. So it seems to be like a monetary system, the monetary numbers are still growing. But the pricing houses, everybody knows there's a bubble. I like to believe that the free market economists knew about it and predicted it. Others did not. But the prices soared up. Everybody knows there was a bubble and then they collapsed. The prices of houses collapsed. Do you call that deflation? No. Deflation is prices of current goods and services. So inflation doesn't capture house prices. It includes the house of the rental. Okay. And I think one of the problems, even getting a full-fledged discussion out is sometimes a definition of words about what inflation and deflation means because as far as I'm concerned, deflation is when the money supply shrinks and inflation is when the money supply expands. But just about everybody in the country, especially the financial markets and the way I think the conventional use of inflation is the CPI. And I think it's, you know, a lousy measurement because if it's the money supply increase, if prices going down, of houses is not deflation, I wonder why it is that inflation is measured by the CPI going up and the money supply going up. Our argument is that once you distort interest rates and increase the supply of money, you end up with this gross distortion that is demanding some correction. So I've worked on this for years and we're not going to solve it today. The definitions would be much better if prices of houses going down is not deflation and the CPI going up shouldn't be inflation. But we've had trouble five years. The monetary system, you say this is not all and all, you can't solve every problem with monetary system and monetary policy. We've had this for five years and we're still in a mess. Is there ever a time, let's say we go five more years and we have the same problems but much worse, is there ever a time you might say, I have to reassess my philosophy on monetary policy or do you think it'll be the same no matter what kind of crisis? Can you foresee any kind of problem that we would have that you would reassess your assumptions? I can't conjecture what specifically, but of course, yeah, I'm evidence-based. I look at see what happens and try to draw conclusions from that. Certainly. The definitions, obviously, to me are very, very important and if we don't come to this conclusion and we use these terms, inflation demands corrections and the market wants to correct. So this is why we believe that we're going to have perpetual doldrums and finally have a big one. Do you consider this recession that we're facing today something that is significantly different since 1945? Much worse and different in any way? Yes, because of the financial crisis, yes. Thank you. Thank you. Thank you, Dr. Paul. That was a double dose you got. That was pleasantly unexpected, I guess.