3. Outside the Monetary Box

“Well, Congressman, these specific allegations you’ve made I think are absolutely bizarre, and I have absolutely no knowledge of anything remotely like what you just described.”1 Federal Reserve Chairman Ben Bernanke was clearly taken aback by questioning from Texas Congressman Ron Paul. Paul had asked if Bernanke knew whether the Federal Reserve had provided funds to the Watergate burglars and illegally funneled billions of dollars in loans to Iraq’s Saddam Hussein.

The allegations were fantastical, but they came from a U.S. Congressman, who mustered significant support in his subsequent run for the Republican presidential nomination. Much of Paul’s stump speech focused on the Fed, and what he claimed was the central ...

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