The Federal Reserve is “self-destructing” through of its efforts to jump-start the US economy with more monetary easing, Rep. Ron Paul, (R-Texas), told CNBC Monday.
Paul said the Fed’s decision last Wednesday to spend an additional $600 billion in quantitative easing—buying Treasurys to lower interest rates—won't work and will destroy the dollar's value around the world.
“They (the Fed) can’t manage a dollar like this,” said Paul. “People are going to desert the dollar. I think the Chinese are hinting that already: They’re not wanting our dollars as much as they want raw materials and other things."
Paul, a frequent critic of the Fed, is likely to become chairman of a subcommittee that oversees monetary policy when the new Congress takes over in January.
In an interview last week with CNBC.com's NetNet, Paul said his first priority will be to open up the books of the Fed.
“I will approach that committee like no one has ever approached it because we’re living in times like no one has ever seen,” Paul said.
In the CNBC interview Monday, Paul was particularly critical of Fed Chairman Ben Bernanke.
"Bernanke is very clear at what he's going to do," said Paul. "He's going to create money until he gets economic growth, and there's no evidence creating money creates economic growth."
About Bernanke's statement that he wants four percent inflation, Paul said: "When he gets to four and decides to go to eight, there's no way they can stop it. If they withdraw, it might make things worse. They think they have control. They don't."
Paul said the Fed would "disappear" if it had competition.
"What I would do is legalize competition," he explained. "You have competition on the international markets: When China gets fed up with our dollar, they start buying hard assets.
"So the American people should have the right to do this," he added. "We should...allow gold and silver to be legal tender, allow us to carry out transactions in another currency and have it go back and forth. And then I think the the Fed would just disappear eventually, because nobody will want to deal in dollars. Competition to the Fed will make the Fed be more cautious."
Pauls comments came as World Bank President Robert Zoelick, a former member of the Bush cabinet, said leading economies should consider "employing gold as an international reference point of market expectations about inflation, deflation and future currency values.”