Century of Enslavement: The History of The Federal Reserve
TRANSCRIPT:
Part One: The Origins of
the Fed
“The
real truth of the matter is, as you and I know, that a financial element in the
larger centers has owned the Government ever since the days of Andrew Jackson.”
– FDR letter to Colonel Edward House, Nov. 21
1933
All our
lives we’ve been told that economics is boring. It’s dull. It’s not worth the
time it takes to understand it. And all our lives, we’ve been lied to.
War.
Poverty. Revolution. They all hinge on economics. And economics all rests on
one key concept: money.
Money. It
is the economic water in which we live our lives. We even call it ‘currency’;
it flows around us, carries us in its wake. Drowns those who are not careful.
We use it
every day in nearly every transaction we conduct. We spend our lives working
for it, worrying about it, saving it, spending it, pinching it. It defines our
social status. It compromises our morals. People are willing to fight, die and
kill for it.
But what is
it? Where does it come from? How is it created? Who controls it? It is a
remarkable fact that, given its central importance in our lives, not one person
in a hundred could answer such basic questions about money as these.
Interviewer: So if you were planning a family, you’d want to know
where babies come from. And this is a lot about banking. So let me ask you:
where does money come from?
Interviewee 1: Where does the money come from? The government
prints it. It’s printed off.
Interviewee 2: By labor. People work and produce wealth, and
the money is supposed to match that wealth.
Interviewee: Where does money come from?
Interviewee 3: Well I have a pretty different outlook on money.
It actually comes from, like, trees, right?
But why is
this? How could we be so ignorant about a topic of such importance? “Where does
money come from?” is a basic, childlike question. So why is our only response
the childlike answer, meant as a joke: “It grows on trees”?
Such a
profound state of ignorance could not come about naturally. From the time we
are children, we are curious about the world and eager to learn about the way
it works. And what could lead to a better understanding of the way the world
works than a knowledge of money, its creation and destruction? Yet discussion
of this topic is fastidiously avoided in our school years and ignored in our
daily life. Our monetary ignorance is artificial, a smokescreen that has been
erected on purpose and perpetrated with the help of complicated systems and
insufferable economic jargon.
But it
doesn’t take an economist to understand the importance of money. Deep down we
all know that the wars, the poverty, the violence we see around us hinges on
this question of money. It seems like a thousand piece jigsaw puzzle just
waiting to be solved. And it is.
The puzzle
pieces, taken together, create an image of the Federal Reserve, America’s
central bank and the heart of the country’s banking system. Despite its central
importance to the economy, relatively few have heard of it, and fewer still
know what it is, despite the bank’s attempts at self-description:
Our economy
runs on a complex system of exchange of goods and services in which money plays
a key part. Coin, currency, savings, and checking accounts; the overall supply
of money is managed by the Federal Reserve. Money is the medium through which
economic exchanges take place, and money as a standard of value helps us to set
prices for goods and services. The job of managing money–monetary policy–is to
preserve the purchasing power of the dollar while ensuring that a sufficient amount
of money is available to promote economic growth.
The Federal
Reserve also promotes the safety and soundness of the institutions where we do
our banking. It ensures that the mechanisms by which we make payments, whether
by cash, cheque, or electronic means, operates smoothly and efficiently.
And in its
fiscal role acts as the banker for the United States government.
Now these
duties comprise the major responsibilities of our central bank.
But in
order to understand the Federal Reserve, we must first understand its origins
and context. We must deconstruct the puzzle.
The first
piece of that puzzle lies here, in the White House. This is where the Federal
Reserve Act, then known as the Currency Bill, was signed into law after passing
the House and Senate in late December, 1913.
The New York
Times of Christmas Eve, 1913, described
the festive scene:
“The
Christmas spirit pervaded the gathering. While the ceremony was a little less
impressive than that of the signing of the Tarriff act on Oct. 3 last in the
same room, the spectators were much more enthusiastic and seized every occasion
to applaud.”
There in
the White House that fateful December evening, President Wilson signed away the
last veneer of control over the American money supply to a cartel; a
well-organized gang of crooks so successful, so cunning, so well-hidden that
even now, a century later, few know of its existence, let alone the details of
its operations. But those details have been openly admitted for decades.
Of course,
just as we have been taught to find economics boring, we have been taught that
this story is boring. This is the way the Federal Reserve itself tells it:
The United
States was facing severe financial problems. At the turn of the century, most
banks were issuing their own currency called “bank notes.” The trouble was,
currency that was good in one state was sometimes worthless in another. People
began to lose confidence in their money, since it was only as sound as the bank
that issued it. Fearful that their bank might go out of business, they rushed to
exchange their bank notes for gold or silver. By attempting to do so, they
created the panic of 1907.
SOURCE: Where The Bankers Bank
During the
panic, people streamed to the banks and demanded their deposits. The banks
could not meet the demand; they simply did not have enough gold and silver coin
available. Many banks went under. People lost millions of dollars, businesses
suffered, unemployment rose, and the stability of our economic system was again
threatened.
Well, this
couldn’t go on. If the country was going to grow and prosper, some means would
have to be found to achieve financial and economic stability.
To prevent
financial panics like the one in 1907, President Woodrow Wilson signed The
Federal Reserve Act into law in 1913.
SOURCE: Too Much, Too Little
But this is
history as told by the victors: a revisionist vision in which the creation of a
central bank to control the nation’s money supply is merely a boring historical
footnote, about as important as the invention of the zipper or an early 20th
century hoola-hoop craze. The truth is that the story of the secret banking
conclave that gave birth to that Federal Reserve Act is as exciting and
dramatic as any Hollywood screenplay or detective novel yarn, and all the more
remarkable for the fact that it is all true.
We pick up
the story, appropriately enough, under cover of darkness. It was the night of
November 22, 1910, and a group of the richest and most powerful men in America
were boarding a private rail car at an unassuming railroad station in Hoboken,
New Jersey. The car, waiting with shades drawn to keep onlookers from seeing
inside, belonged to Senator Nelson Aldrich, the father-in-law of billionaire
heir to the Rockefeller dynasty, John D. Rockefeller, Jr. A central figure on
the influential Senate Finance Committee where he oversaw the nation’s monetary
policy, Aldrich was referred to in the press as the “General Manager of the
Nation.” Joining him that evening was his private secretary, Shelton, and a
who’s who of the nation’s banking and financial elite: A. Piatt Andrew, the
Assistant Treasury Secretary; Frank Vanderlip, President of the National City
Bank of New York; Henry P. Davison, a senior partner of J.P. Morgan Company;
Benjamin Strong, Jr., an associate of J.P. Morgan and President of Bankers
Trust Co., and Paul Warburg, heir of the Warburg banking family and son-in-law
of Solomon Loeb of the famed New York investment firm, Kuhn, Loeb &
Company.
The men had
been told to arrive one by one after sunset to attract as little attention as
possible. Indeed, secrecy was so important to their mission that the group did
not use anything but their first names throughout the journey so as to keep
their true identities secret even from their own servants and wait staff. The
movements of any one of them would have been reason enough to attract the
attention of New York’s voracious press, especially in an era where banking and
monetary reform was seen as a key issue for the future of the nation; a meeting
of all of them, now that would surely have been the story of the century. And
it was.
Their destination?
The secluded Jekyll Island off the coast of Georgia, home to the prestigious
Jekyll Island Club whose members included the Morgans, Rockefellers, Warburgs
and Rothschilds. Their purpose? Davison told intrepid local newspaper reporters
who had caught wind of the meeting that they were going duck hunting. But in
reality, they were going to draft a reform of the nation’s banking industry in
complete secrecy.
G. Edward
Griffin, the author of the bestselling The Creature from Jekyll Island and a long-time Federal Reserve researcher,
explains:
G. Edward Griffin: What happened is the banks decided that since there
was going to be legislation anyway to control their industry, that they
wouldn’t just sit back and wait and see what happened and cross their fingers
that it would be OK. They decided to do what so many cartels do today: they
decided to take the lead. And they would be the ones calling for regulations
and reform.
They like
the word “reform.” The American people are suckers for the word “reform.” You
just put that into any corrupt piece of legislation, call it “reform” and
people say “Oh, I’m all for ‘reform’,” and so they vote for it or accept it.
So that’s
what they were doing. They decided, “We will ‘reform’ our own industry.” In
other words, “We will create a cartel and we will give the cartel the power of
government. We’ll take our cartel agreement so we can self-regulate to our
advantage and we’ll call it ‘The Federal Reserve Act.’ And then we’ll take this
cartel agreement to Washington and convince those idiots there to pass it into
law.”
And that
basically was the strategy. It was a brilliant strategy. Of course we see it
happening all the time, certainly in our own day today we see the same thing
happened in other cartelized industries. Right now we’re watching it unfold in
the field of healthcare, but at that time it was banking, alright?
And so the
banking cartel wrote their own rules and regulations, called it “The Federal
Reserve Act,” got it passed into law, and it was very much to their liking
because they wrote it. And in essence what they had created was a set of rules
that made it possible for themselves to regulate their industry, but they went
even beyond that. In fact, it’s clear to me when I was reading their letters
and their conversation at the time, and the debates, that they never dreamed
that Congress would go along and also give them the right to issue the nation’s
money supply. Not only were they now going to regulate their own industry,
which is what they started out as wanting to do, but they got this incredible
gift that they didn’t dream would be given to them (although they were
negotiating for it), and that was that Congress gave them the authority to
issue the nation’s money. Congress gave away the sovereign right to issue the
nation’s money to the private banks.
And so all
of this was in The Federal Reserve Act, and the American people were joyous
because they were told, and they were convinced, that this was finally a means
of controlling this big creature from Jekyll Island.
SOURCE: Interview with G. Edward Griffin
Amazingly
enough, they were successful, not just in conspiring to write the legislation
that would eventually become the Federal Reserve Act, but in keeping that
conspiracy a secret from the public for decades. It was first reported on in
1916 by Bertie Charles Forbes, the financial writer who would later go on to
found Forbes magazine, but it was never fully admitted until a full quarter
century later when Frank Vanderlip wrote a casual admission of the meeting in
theFebruary 9, 1935 edition of The Saturday Evening Post:
“I was as
secretive—indeed, as furtive—as any conspirator.[…]I do not feel it is any
exaggeration to speak of our secret expedition to Jekyll Island as the occasion
of the actual conception of what eventually became the Federal Reserve System.”
Over the
course of their nine days of deliberation at the Jekyll Island club, they
devised a plan so overarching, so ambitious, that even they could scarcely
imagine that it would ever be passed by congress. As Vanderlip put it,
“Discovery
[of our plan], we knew, simply must not happen, or else all our time and effort
would be wasted. If it were to be exposed publicly that our particular group
had got together and written a banking bill, that bill would have no chance
whatever of passage by Congress.”
So what,
precisely, did this conclave of conspirators devise at their Jekyll Island
meeting? A plan for a central banking system to be owned by the banks
themselves, a system which would organize the nation’s banks into a private
cartel that would have sole control over the money supply itself. At the end of
their nine day meeting, the bankers and financiers went back to their
respective offices content in what they had accomplished. The details of the plan
changed between its 1910 drafting and the eventual passage of the Federal Reserve Act, but the essential ideas were there.
But
ultimately, this scene on Jekyll Island, too, is just one piece of a larger
puzzle. And like any other puzzle piece, it has to be seen in its wider context
for the bigger picture to become visible. To understand the other pieces of the
puzzle and their importance in the creation of the Federal Reserve, we have to
travel backward in time.
The story
begins in late 17th century Europe. The Nine Years’ War is raging across the
continent as Louis XIV of France finds himself pitted against much of the rest
of the continent over his territorial and dynastic claims. King William III of
England, devastated by a stunning naval defeat, commits his court to rebuilding
the English navy. There’s only one problem: money. The government’s coffers
have been exhausted by the waging of the war and William’s credit is drying up.
A Scottish
banker, William Paterson, has a banker’s solution: a proposal “to form a
company to lend a million pounds to the Government at six percent (plus 5,000
“management fee”) with the right of note issue.” By 1694 the idea has been
slightly revised (a 1.2 million pound loan at 8 percent plus 4000 for
management expenses), but it goes ahead: the magnanimously titled Bank of
England is created.
The name is
a carefully constructed lie, designed to make the bank appear to be a
government entity. But it is not. It is a private bank owned by private
shareholders for their private profit with a charter from the king that allows
them to print the public’s money out of thin air and lend it to the crown. What
happens here at the birth of the Bank of England in 1694 is the creation of a
template that will be repeated in country after country around the world: a
privately controlled central bank lending money to the government at interest,
money that it prints out of nothing. And the jewel in the crown for the international
bankers that creates this system is the future economic powerhouse of the
world, the United States.
In many
important respects, the history of the United States is the history of the
struggle of the American people against the bankers that wish to control their
money. By the 1780s, with colonies still fighting for independence from the
crown, the bankers will get their wish.
In 1781 the
United States is in financial turmoil. The Continental, the paper currency
issued by the Continental Congress to pay for the war, has collapsed from
overissue and British counterfeiting. Desperate to find a way to finance the end stages of
the war, Congress turns to Robert Morris, a wealthy shipping merchant who
was investigated for war profiteering just two years earlier. Now as “Superintendent
of Finance” of the United States from 1781 to 1784 he is regarded as the most
powerful man in America next to General Washington.
In his
capacity as Superintendent of Finance, Morris argues for the creation of a
privately-owned central bank deliberately modeled on the Bank of England that
the colonies were supposedly fighting against. Congress, backed into a corner
by war obligations and forced to do business with the bankers just like King
William in the 1690s, acquiesces and charters the Bank of North America as the nation’s first central bank. And exactly
as the Bank of England came into existence loaning the British crown 1.2
million pounds, the B.N.A. started business by loaning $1.2 million to
Congress.
By the end
of the war, Morris has fallen out of political favor and the Bank of North
America’s currency has failed to win over a skeptical public. The B.N.A. is
downgraded from a national central bank to a private commercial bank chartered
by the State of Pennsylvania.
But the
bankers have not given up yet. Before the ink is even dry on the constitution,
a group led by Alexander Hamilton is already working on the next
privately-owned central bank for the newly formed United States of America.
So brazen
is Hamilton in the forwarding of this agenda that he makes no attempt to hide his aims or those of the banking interests he
serves:
“A national
debt, if it is not excessive, will be to us a national blessing,” he wrote in a
letter to James Duane in 1781. “It will be a powerful cement of our Union. It
will also create a necessity for keeping up taxation to a degree which, without
being oppressive, will be a spur to industry.”
Opposition
to Hamilton and his debt-based system for establishing the finances of the US
is fierce. Led by Jefferson and Madison, the bankers and their system of
debt-enslavement is called out for the force of destruction that it is. As
Thomas Jefferson wrote:
“[T]he
spirit of war and indictment, […] since the modern theory of the perpetuation
of debt, has drenched the earth with blood, and crushed its inhabitants under
burdens ever accumulating.”
Still,
Hamilton proves victorious. The First Bank of the United States is chartered in
1791 and follows the pattern of the Bank of England and the Bank of North America
almost exactly; a privately-owned central bank with the authority to loan money
that it creates out of nothing to the government. In fact, it is the very same
people behind the new bank as were behind the old Bank of North America. It was
Alexander Hamilton, Robert Morris’ former aide, who first proposed Morris for
the position of Financial Superintendent, and the director of the old Bank of
North America, Thomas Willing, is brought in to serve as the first director of
the First Bank of the United States. Meet the new banking bosses, same as the
old banking bosses.
In the
first five years of the banks’ existence, the US government borrows 8.2 million
dollars from the bank and prices rise 72%. By 1795, when Hamilton leaves
office, the incoming Treasury Secretary announces that the government needs
even more money and sells off the government’s meager 20% share in the bank,
making it a fully private corporation. Once again, the US economy is plundered
while the private banking cartel laughs all the way to the bank that they
created.
By the time
the bank’s charter comes due for renewal in 1811, the tide has changed for the
money interests behind the bank. Hamilton is dead, shot to death in a duel with
Aaron Burr. The bank-supporting Federalist party is out of power. The public
are wary of foreign ownership of the central bank, and what’s more don’t see
the point of a central bank in time of peace. Accordingly, the charter renewal
is voted down in the Senate and the bank is closed in 1811.
Less than a
year later, the US is once again at war with England. After 2 years of bitter
struggle the public debt of the US has nearly tripled from $45.2 million to $119.2 million. With trade
at a standstill, prices soaring, inflation rising and debt mounting, President
Madison signs the charter for the creation of another central bank, the Second
Bank of the United States, in 1816. Just like the two central banks before it,
it is majority privately-owned and is granted the power to loan money that it
creates out of thin air to the government.
The 20 year
bank charter is due to expire in 1836, but President Jackson has already vowed
to let it die prior to renewal. Believing that Jackson won’t risk his chance
for reelection in 1832 on the issue, the bankers forward a bill to renew the
bank’s charter in July of that year, 4 years ahead of schedule. Remarkably,
Jackson vetoes the renewal charter and stakes his reelection on the people’s
support of his move. In his veto message, Jackson writes in no uncertain terms about his
opposition to the bank:
“Whatever
interest or influence, whether public or private, has given birth to this act,
it can not be found either in the wishes or necessities of the executive
department, by which present action is deemed premature, and the powers
conferred upon its agent not only unnecessary, but dangerous to the Government
and country. It is to be regretted that the rich and powerful too often bend
the acts of government to their selfish purposes.[…]If we can not at once, in
justice to interests vested under improvident legislation, make our Government
what it ought to be, we can at least take a stand against all new grants of
monopolies and exclusive privileges, against any prostitution of our Government
to the advancement of the few at the expense of the many, and in favor of
compromise and gradual reform in our code of laws and system of political
economy.”
The people
side with Jackson and he’s reelected on the back of his slogan, “Jackson and No
Bank!” The President makes good on his pledge. In 1833 he announces that the
government will stop using the bank and will pay off its debt. The bankers
retaliate in 1834 by staging a financial crisis and attempting to pin the blame
on Jackson, but it’s no use. On January 8, 1835, President Jackson succeeds
in paying off the debt, and for the first and only time in its history the
United States is free from the debt chain of the bankers. In 1836 the Second
Bank of the United States’ charter expires and the bank loses its status as
America’s central bank.
It is 77
years before the bankers can regain the jewel in their crown. But it is not for
lack of trying. Immediately upon the death of the bank, the banking oligarchs in England react by contracting trade, removing capital from the
U.S., demanding payment in hard currency for all exports, and tightening
credit. This results in a financial crisis known as the Panic of 1837, and once
again Jackson’s campaign to kill the bank is blamed for the crisis.
Throughout
the late 19th century the United States is rocked by banking panics brought
about by wild banking speculation and sharp contractions in credit. By the dawn
of the 20th century, the bulk of the money in the American economy has been
centralized in the hands of a small clique of industrial magnates, each with a
near monopoly on a sector of the economy. There are the Astors in real estate,
the Carnegies and the Schwabs in steel, the Harrimans, Stanfords and
Vanderbilts in railroads, the Mellons and the Rockefellers in oil. As all of
these families start to consolidate their fortunes, they gravitate naturally to
the banking sector. And in this capacity, they form a network of financial
interests and institutions that centered largely around one man, banking scion
and increasingly America’s informal central banker in the absence of a central
bank, John Pierpont Morgan.
John
Pierpont Morgan, or “Pierpont” as he prefers to be called, is born in Hartford,
Connecticut in 1837 to Junius Spencer Morgan, a successful banker and
financier. Morgan rides his father’s coattails into the banking business and by
1871 is partnered in his own firm, the firm that was eventually to become J.P.
Morgan and Company.
It is
Morgan who finances Cornelius Vanderbilt’s New York Central Railroad. It is Morgan that finances the launch of nearly
every major corporation of the period, from AT&T to General Electric to
General Motors to Dupont. It is Morgan who buys out Carnegie and creates the United States Steel Corporation, America’s
first billion dollar company. It is Morgan who brokers a deal with President Grover Cleveland to “save” the
nation’s gold reserves by selling 62 million dollars worth of gold to the
Treasury in return for government bonds. And it is Morgan, who, in 1907, sets
in motion the crisis that leads to the creation of the Federal Reserve.
That year,
Morgan begins spreading rumors about the precarious finances of the
Knickerbocker Trust Company, a Morgan competitor and one of the largest financial institutions in
the United States at the time. The resulting crisis, dubbed the Panic of 1907,
shakes the U.S. financial system to its core. Morgan puts himself forward as a
hero, boldly offering to help underwrite some of the faltering banks and
brokerage houses to keep them from going under. After a bout of hand-wringing
over the nation’s finances, a Congressional Committee is assembled to investigate the “money trust,”
the bankers and financiers who brought the nation so close to financial ruin
and that wield such power over the nation’s finances. The public follows the
issue closely, and in the end a handful of bankers are identified as key
players in the money trust’s operations, including Paul Warburg, Benjamin
Strong, Jr., and J.P. Morgan.
Andrew
Gavin Marshall, editor of The People’s Book Project, explains:
Andrew Gavin Marshall: At the beginning of the 20th century there was an
investigation following the greatest of these financial panics, which was in
1907, and this investigation was on “the money trust.” It found that three
banking interests–J.P. Morgan, National City Bank, and the City Bank of New
York–basically controlled the entire financial system. Three banks. The public
hatred toward these institutions was unprecedented. There was an overwhelming
consensus in the country for establishing a central bank, but there were many
different interests in pushing this and everyone had their own purpose behind
advocating for a central bank.
So to
represent most people, you had farmer interests, populists, progressives, who were
advocating a central bank because they couldn’t take the recurring panics, but
they wanted government control of the central bank. They wanted it to be
exclusively under the public control because they despised and feared the New
York banks as wielding too much influence, so for them a central bank would be
a way to curb the power of these private financial interests.
On the
other hand, those same financial interests were advocating for a central bank
to serve as a source of stability for their control of the system, and also to
act as a lender of last resort to them so they would never have to face
collapse. But also, in order to exert more control through a central bank, the
private New York banking community wanted a central bank under the exclusive control
of them. There’s a shocker.
So you had
all these various interests which converged. Of course, the most influential
happened to be the New York financial houses which were more aligned with the
European financial houses than they were with any other element in American
society. The main individual behind the founding of the Federal Reserve was
Paul Warburg, who was a partner with Kuhn, Loeb and Company, a European banking
house. His brothers were prominent bankers in Germany at that time, and he had of
course close connections with every major financial and industrial firm in the
United States and most of those existing in Europe. And he was discussing all
of these ideas with his fellow compatriots in advocating for a central bank. In
1910, Warburg got the support of a Senator named Nelson Aldrich, whose family
later married into the Rockefeller family (again, I’m sure just a coincidence).
Aldrich invited Warburg and a number of other bankers to a private, secret
meeting on Jekyll Island just off the coast of Georgia where they met in 1910
to discuss the construction of a central bank in the United States, but one
which would of course be owned by and serve the interests of the private bank.
Aldrich then presented this in 1911 as the “Aldrich Plan” in the U.S. Congress,
but it was actually voted out.
The public,
suspicious of Senator Aldrich’s banking connections, ultimately reject the
Jekyll Island cabal’s “Aldrich Plan.” The cabal does not give up, however. They
simply revise and rename their plan, giving it a new public face, that of
Representative Carter Glass and Senator Robert Owen.
In the end,
the money trust that was behind the Panic of 1907 uses the public’s own outrage
against them to complete their consolidation of control over the banking
system. The newly-retitled Federal Reserve Act is signed into law on December
23, 1913 and the Fed begins operations the next year.
Part Two: How the Scam
Works
“The
study of money, above all other fields in economics, is one in which complexity
is used to disguise truth or to evade truth, not to reveal it.” –John Kenneth Galbraith
So how does
the Federal Reserve system work? What does it do? Who owns and controls it?
These are the basic questions that would get to the heart of the fundamental
question: ‘what is money?’ And that is why the answer to these questions have
been shrouded in impenetrable economic jargon.
Even the
Federal Reserve’s own educational propaganda, which has an unusual tendency
toward cutesy animation and talking down to its audience, has a difficult time
summarizing the Fed’s mission and responsibilities. According to the Fed:
To achieve
[its] goals, the Fed, then and now, combines centralized national authority
through the Board of Governors with a healthy dose of regional independence
through the reserve banks. A third entity, the Federal Open Market Committee,
brings together the first two in setting the nation’s monetary policy.
SOURCE: In Plain
English
Precisely
what imaginary gaggle of schoolchildren is this economic gibberish aimed at?
The simple
truth, hidden behind the sleight of hand of economic jargon and magisterial
titles, is that a banking cartel has monopolized the most important item in our
entire economy: money itself.
We are
taught to think of money as the pieces of paper printed in government printing
presses or coins minted by government mints. While this is partially true, in
this day and age the actual notes and coins circulating in the economy
represent only a tiny fraction of the money in existence. Over 90% of the money
supply is in fact created by private banks as loans that are payable back to
the banks at interest.
Although
this simple fact is obscured by the wizards of Wall Street and gods of money
who want to make the money creation process into some special art of alchemy
carefully overseen by the government, the truth is not hidden from the public.
In December
1977, the Federal Reserve Bank of New York published another of its dumbed-down
cartoon-ridden information pamphlets for the general public attempting to explain the
functions of the Federal Reserve System. There in black and white they carefully
explain the money creation process:
“Commercial
banks create checkbook money whenever they grant a loan, simply by adding new
deposit dollars to accounts on their books in exchange for a borrower’s
IOU.[…]Banks create money by ‘monetizing’ the private debts of businesses and
individuals. That is, they create amounts of money against the value of those
IOUs.”
There it
is, in plain English: the vast majority of money in the economy, the
“checkbook” money in our accounts at the bank and that we use in our electronic
transfers and digital payments, is created not by a government printing press,
but by the bank itself. It is created out of thin air as debt, owed back to the
bank that created it at interest. This means that bank loans are not money
taken from other bank depositors, but new money simply conjured into existence
and placed into your account. And the bank is able to create much more money
than it has cash to back up those deposits.
The Fed
claims to be the entity overseeing and backing up the banking industry. It was
established, according to its own propaganda, to stabilize the system and
prevent bank runs like the Panic of 1907 from happening again:
Throughout
much of the 1800s, almost any organization that wanted could print its own
money. As a result, many states, banks, and even one New York druggist, did
just that. In fact at one time there were over 30,000 different varieties of
currency in circulation. Imagine the confusion.
Not only
were there multitudes of currencies, some were redeemable in gold and silver,
others were backed by bonds issued by regional governments. It was not unusual
for people to lose faith both in the value of their currency and in the entire
financial system. With many people trying to withdraw their deposits at once, sometimes
the banks didn’t have enough money on hand to pay their depositors. Then when
the funds ran out the banks suspended payment temporarily and some even closed.
People lost their entire savings. Sometimes regional economies suffered.
Obviously
something had to be done. And in 1913, something was. In that year, President
Woodrow Wilson signed into effect the Federal Reserve Act. This act created the
Federal Reserve system to provide a safer and more stable monetary and banking
system.
SOURCE: The Fed Today
If that was
indeed its aim, it signally failed to do so in running up one of the greatest
bubbles in American history to that point in the 1920s, just a decade after its
creation. The popping of that bubble, of course, led directly into the Great
Depression and one of the greatest periods of mass poverty in American history.
Economists have long argued that the Fed itself was the cause of the depression
by its complete mismanagement of the money supply. As former Federal Reserve
Chairman Ben Bernanke admitted in a speech commemorating Fed critic Milton
Friedman’s 90th birthday: “Regarding the Great Depression. You’re right, we did
it. We’re very sorry. But thanks to you, we won’t do it again.”
“Price
stability” is another cited tenet of the Federal Reserve’s mandate. But here,
too, the Fed has completely failed to live up to its own standards:
Aside from
the banking system, the Federal Reserve has another responsibility that’s
probably even more important. It’s in charge of something called “monetary
policy.” Basically, it means trying to keep prices stable to avoid inflation.
Say you buy a CD today for $14. But what if next year the price of the CD
jumped to $20 or $50, not because of a change in supply or demand, but because
all prices were going up. That’s inflation.
There are a
lot of different causes of inflation, but one of the most important is too much
money. The Fed can adjust the money supply by injecting money into the system
electronically, or by withdrawing money from the economy.
Think of
it: the Federal Reserve has the ability to create money, or make it disappear.
What’s most important is what happens as a result. Any time the supply of money
is altered, the effects are felt throughout the economy.
The Fed’s
methods have changed over time to take advantage of the latest computers and
electronics, but its mission remains the same: to aim for stable prices, full
employment and a growing economy.
SOURCE: Inside The Fed
100 years
ago, in 1913, the Fed was created, and we’ve marked it with a vertical line
there. Consumer prices now are about 30 times higher than they were when the
Fed was created in 1913.
SOURCE: Bloomberg
Paper
money, too, is the responsibility of the Federal Reserve. Hence the dollars in
circulation are not Treasury notes, not bills of credit, but Federal Reserve
Notes, debt-based notes backed up ultimately by the government’s own promise to
pay, its “sovereign bonds” secured by the taxpayers themselves. At one time,
the Federal Reserve Banks were legally required to keep large stockpiles of
gold in reserve to back up these notes, but that requirement was abandoned and today
the notes are backed up mostly by government securities. The Fed no longer keeps any actual gold on its books, but gold “certificates” issued by
the treasury and valued not at the spot price of $1300 per troy ounce, but an
arbitrarily fixed “statutory price” of $42 2/9 per ounce.
Ron Paul: But I do have one question: During the crisis or at
any time that you’re aware of, has the Federal Reserve or the Treasury
participated in any gold swap arrangements?
Scott Alvarez: The Federal Reserve does not own any gold at all. We
have not owned gold since 1934 so we have not engaged in any gold swaps.
Ron Paul: But it appears on your balance sheet that you hold
gold.
Scott Alvarez: What appears on our balance sheet is gold
certificates. When we turned in…before 1934, we did…the Federal Reserve did own
gold. We turned that over by law to the Treasury and received in return for
that gold certificates.
Ron Paul: If the Treasury entered into…because under the
Exchange Stabilization Fund I would assume they probably have the legal
authority to do it…they wouldn’t be able to do it then because you have the
securities for essentially all the gold?
Scott Alvarez: No, we have no interest in the gold that is owned by
the Treasury. We have simply an accounting document that is called “gold
certificates” that represents the value at a statutory rate that we gave to the
Treasury in 1934.
Ron Paul: And still measured at $42 an ounce which makes no
sense whatsoever.
Clearly,
there is a discrepancy between what we are led to believe is motivating the Fed
and what it actually does. To understand what the Fed is actually intended to
do, it’s first important to understand that the Federal Reserve is not a bank,
per se, but a system. This system codifies, institutionalizes, oversees and
undergirds a form of banking called fractional reserve banking, in which banks
are allowed to lend out more money than they actually have in their vaults.
G. Edward GriffinThe process of decay and corruption starts with
something called “fractional reserve banking.” That’s the technical name for it.
And what that really means is that as the banking institution developed over
several centuries, starting of course in Europe, it developed a practice of
legalizing a certain dishonest accounting procedure.
In other
words, in the very, very beginning (if you want to go all the way back), people
would bring their gold or silver to the banks for safe keeping. And they said,
“give us a paper receipt, we don’t want to guard our silver and our gold
because people could come in in the middle of the night and they could kill us
or threaten us and they’ll get our gold and silver so we can ‘t really guard it
so we’ll take it to the bank and have them guard it and we just want a paper
receipt. And we’ll take our receipt back and get our gold anytime we want.” So
in the beginning money was receipt money. Then, instead of changing or
exchanging the gold coins, they could exchange the receipts, and people would
accept the receipts just as well as the gold, knowing that they could get gold.
And so these paper receipts being circulated were in essence the very first
examples of paper money.
Well the
banks learned early on in that game that here they were sitting on this pile of
gold and all these paper receipts out there. People weren’t bringing in the
receipts anymore, very few of them, maybe five percent maybe seven percent of
the people would bring in their paper receipts and ask for the gold. So they
said, “Ah ha! Why don’t we just sort of give more receipts out then we have
gold? They’ll never know because they only ask for, at the best, seven percent
of it. So we can create more receipts for gold then we have. And we can collect
interest on that because we’ll loan that into the economy. We’ll charge
interest on this money that we don’t really have. And it’s a pretty good
gimmick don’t ya think?” And they go, “Well, yeah, of course.” And so that’s
how fractional reserve banking started.
And now
it’s institutionalized and they teach it in school. No one ever questions the
integrity of it or the ethics of it. They say, “Well, that’s the way banking
works, and isn’t it wonderful that we now have this flexible currency and we
have prosperity” and all these sorts of things. So it all starts with this
concept of fractional reserve banking.
The trouble
with that is that it works most of the time. But every once and a while there
are a few ripples that come along that are a little bit bigger than the other
ripples. Maybe one of them is a wave. And more than seven percent will come in
and ask for their gold. Maybe twenty percent or thirty percent. And well, now
the banks are embarrassed because the fraud is exposed. They say, “well we
don’t have your gold” “What do you mean you don’t have my gold!! I gave it to
you and put it on deposit and you said you’d safe guard it.” “Well we don’t
have it, we loaned it out.” So then the word gets out and everyone and their
uncle comes out and lines up for their gold. And of course they don’t have it,
the banks are closed, and they have bank holidays. Banks are embarrassed,
people lose their savings. You have these terrible banking crashes that were
ricocheting all over the world prior to this time. And that is what caused the
concern of the American people. They didn’t want that anymore. They wanted to
put a stop to that.
And that
was the whole purpose, supposedly, of the Federal Reserve system. Was to put a
stop to that. But since the people who designed the plan to put a stop to it
were the very ones who were doing it in the first place, you can not be
surprised that their solution was not a very good one so far as the American
people were concerned. Their solution was to expand it. Not to control it, to
expand it. See, prior to that time, this little game of fractional reserve
banking was localized at the state level. Each state was doing its own little
fractional reserve banking system. Each state, in essence, had its own Federal
Reserve. Central banks were authorized by state law to do this sort of thing.
And that was causing all this problem. So the Federal Reserve came along and
said, “No no, we’re not going to do this at the state level anymore, because
look at all the problem it’s causing. We’re going to consolidate it all
together and we’re going to do it at the national level.”
SOURCE: Interview with G. Edward Griffin
The key to
the system, of course, is who controls this incredible power to “regulate” the
economy by setting reserve requirements and targeting interest rates. The
answer to this question, too, has been deliberately obscured.
The Federal
Reserve system is a deliberately confusing mish-mash of public and private
interests, reserve banks, boards and committees, centralized in Washington and
spread out across the United States.
Andrew Gavin Marshall: So you have the Federal Reserve Board in Washington
appointed by the President. That’s the only part of this system that is
directly dependent on the government for input that’s the “federal” part: that
the government–the president specifically–gets to choose a few select
governors. The twelve regional banks–the most influential of which is the
Federal Reserve Bank of New York which is essentially based in Wall Street to
represent Wall Street–is a representative of the major Wall Street banks who
own shares in the private, not federal, but private Federal Reserve Bank of New
York. All of the other regional banks are also private banks. They vary
according to how much influence they wield but the Kansas City fed is influential,
the St. Louis fed, the Dallas fed, but the New York Fed is really the center of
this system and precisely because it represents the Wall Street banks who
appoint the leadership of the New York fed.
So the New
York fed has a lot of public power, but no public accountability or oversight.
It does not answer to Congress the way that the chairman of the Federal Reserve
Board of Governors does and even the chairman of the Federal Reserve board who
is appointed by the President, does not answer to the President, does not
answer to Congress. He goes to Congress to testify but the policy that they set
is independent. So they have no input from the government. The government can’t
tell them what to do legally speaking, and of course they don’t.
Rep. John Duncan: Do you think it would cause problems for the Fed or
for the economy if that legislation was to pass?
Ben Bernanke: My concern about the legislation is that if the GAO
is auditing not only the operational aspects of our programs and the details of
the programs, but is making judgements about our policy decisions, that would
effectively be a takeover of monetary policy by the Congress, a repudiation of
the independence of the Federal Reserve which would be highly destructive to
the stability of the financial system, the dollar, and our national economic
situation.
SOURCE: Bernanke Threatens Congress
The Federal
Open Market Committee is responsible for setting interest rates. Now this committee,
which is enormously powerful, has as its membership the Governor and Vice Chair
of the Federal Reserve Board, but on the Federal Open Market Committee most of
the membership is the presidents of the regional Federal Reserve Banks
representing private interests. So they have significant input into setting the
interest rates. Interest rates are not set by a public body, they’re set by
private financial and corporate interests. And that’s whose interests they
serve, of course.
The reason
that the Federal Reserve goes to such great lengths to make its organizational
structure as confusing as possible is to cover up the massive conflicts of
interest that are at the heart of that system. The fact is that the Federal
Reserve system is comprised of a Board of Governors, 12 regional banks, and an
open market committee. The privately-owned member banks of each Federal Reserve
Bank vote on the majority of the Reserve Bank’s directors, and the directors
vote on members to serve on the Federal Open Market Committee which determines
monetary policy. What’s more, Wall Street is given a prime seat at the table,
with tradition holding that the President of the powerful New York Federal
Reserve Bank be given the Vice Chairmanship of the FOMC and be made a permanent
committee member. In effect, the private banks are the key determinants in the
composition of the FOMC which regulates the entire economy.
According to the Fed “its monetary policy decisions do not have to be
approved by the President or anyone else in the executive or legislative
branches of government, it does not receive funding appropriated by the
Congress, and the terms of the members of the Board of Governors span multiple
presidential and congressional terms.”
Or, in
the words of Alan Greenspan: “The Federal Reserve is an independent agency and
that means there is no other agency of government that can overrule actions
that we take.”
The Fed
goes on in its self-mythologization to state that it is “not a private,
profit-making institution.” This characterization is dishonest at best, and an
outright lie at worst.
The
regional banks are themselves private corporations, as noted in a 1928 Supreme Court ruling: “Instrumentalities like the national banks or the
federal reserve banks, in which there are private interests, are not
departments of the government. They are private corporations in which the
government has an interest.” This point is even admitted by the Federal Reserve’s own senior counsel.
Yvonne Mizusawa: Our regulations do specify overall terms for the
lending, but the day to day operation of the banking activities are conducted
by the Federal Reserve Banks. They are banks, and indeed they do lend…
Peter W. Hall: So they’re their own agency, then, essentially,
in that regard.
Yvonne Mizusawa: They are not agencies, your honor, they are
“persons” under FOIA. Each Federal Reserve Bank, the stock is owned by the
member banks in the district, 100% privately held, they are private boards of
directors. The majority of those boards are appointed by the independent banks,
private banks in the district. They are not agencies.
SOURCE: Freedom of
Information Cases
These private
corporations issue shares that are held by the member banks that make up the
system, making the banks the ultimate owners of the Federal Reserve Banks.
Although the Fed’s profits are returned to the Treasury each year, the member
banks’ shares of the Fed do earn them a 6% dividend. According to the Fed, the fixed nature of these
returns mean that they are not being held for profit.
Despite the
dishonest nature of this description, however, it is important to understand
that the bankers who own the Federal Reserve indeed do not make their money
from the Fed directly. Instead, the benefits are much less obvious, and much
more insidious. The simplest way that this can be understood is that, as a
century of history and the specific example of the last financial crisis shows,
the Fed was used as a vehicle to bail out the very bankers who own the Fed
banks in the most obvious example of fascistic collusion imaginable.
Michel Chossudovsky A handful of financial institutions have
enriched themselves as a result of institutional speculation on a large scale,
as well as manipulation of the market. And secondly what they have done is that
they have then gone to their governments and said, “Well, we are now in a very
difficult situation and you need to lend us…you need togive us
money so that we can retain the stability of the financial system.”
And who
actually lends the money, or brokers the public debt? The same financial
institutions that are the recipients of the bailout. And so what you have is a
circular process. It’s a diabolical process. You’re lending money…no, you’re
not lending money, you’re handing money to the large financial instutions, and then
this is leading up to mounting public debt in the trillions. And then you say
to the financial institutions “We need to establish a new set of treasury bills
and government bonds, etc.” which of course are sold to the public, but they
are always brokered through the financial institutions which establish their
viability and so on and so forth. And the financial institutions will probably
buy part of this public debt so that in effect what the government is doing is
financing its own indebtedness through the bailouts. It hands money to the
banks, but to hand money to the banks, it becomes indebted to those same
financial institutions, and then it says “We now have to emit large amounts of
public debt. Please can you help us?” And then the banks will say: “Well, your
books are not quite in order.” And then the government will say: “Obviously
they’re not in order because we’ve just handed you 1.4 trillion dollars of
bailout money and we’re now in a very difficult situation. So we need to borrow
money from the people who are in fact the recipients of the bailout.”
So this is
really what we’re dealing with. We’re dealing with a circular process.
SOURCE: The Banker Bailouts
The 2008
crisis and subsequent bailouts are merely the latest and most brazen examples
of the fundamental conflicts of interest at the heart of America’s
privately-owned central banking system.
Beginning
with the collapse of Lehman Bros. in September of that year, the Federal
Reserve embarked on an unprecedented program of bailouts and special zero
interest lending facilities for the very banks that had caused the subprime
meltdown in the first place. By the cartelization of the Federal Reserve
structure, and thus not by accident, it was the very bank presidents who had
overseen their banks’ lending practices that ended up in the director positions
of the Federal Reserve Banks that voted on where to direct the trillions of
dollars in bailout money. And unsurprisingly, they directed it toward their own
banks.
A
stunning 2011 Government Accountability
Office report examined $16 trillion
of bailout facilities extended by the Fed in the wake of the crisis and exposed
numerous examples of blatant conflicts of interest. Jeffrey Immelt, chief executive of General Electric
served as a director on the board of the Federal Reserve Bank of New York at
the same time the Fed provided $16 billion in financing to General Electric. JP
Morgan Chase chief executive, Jamie Dimon, meanwhile, was also a member of the
board of the New York Fed during the period that saw $391 billion in Fed
emergency lending directed to his own bank. In all, Federal Reserve board
members were tied to $4 trillion in loans to their own banks. These funds were
not simply used to keep these banks afloat, but actually to return these
Fed-connected banks to a period of record profits in the same period that the
average worker saw their real wages actually decrease and the economy on main
street slow to a standstill.
Then Fed
Chairman Ben Bernanke was confronted about these conflicts of interest by Senator
Bernie Sanders upon the release of the GAO report in June 2012.
Ben Bernanke: Senator, you raised an important point, which is
that this is not something the Federal Reserve created. This is in the statute.
Congress in the Federal Reserve Act said “This is the governance of the Federal
Reserve.” And more specifically that bankers would be on the board…
Bernie Sanders: 6 out of 9.
Ben Bernanke: Sorry?
Bernie Sanders: 6 out of 9 in the regional banks are from the
banking industry.
Ben Bernanke: That’s correct. And that is in the law. I’ll answer
your question, though. The answer to your question is that Congress set this
up, I think we’ve made it into something useful and valuable. We do get
information from it. But if Congress wants to change it, of course we will work
with you to find alternatives.
SOURCE: Conflicts at the Fed
Bernanke is
completely right. These conflicts are in fact a part of the institution itself.
A structural feature of the Federal Reserve that was baked into the Federal
Reserve Act itself over 100 years ago by the bankers who conspired to cartelize
the nation’s money supply. You could not ask for a more succinct reason why the
Federal Reserve itself, this admitted cartel of banking interests, needs to be
abolished…but you could get one.
Part Three: End the Fed
“They
who control the credit of a nation, direct the policy of Governments and hold
in the hollow of their hands the destiny of the people.” – Reginald McKenna
We now know
that for centuries the people of the United States have been at war with the
international banking oligarchs. That war was lost, seemingly for good, in
1913, with the creation of the Federal Reserve. With the passage of the Federal
Reserve Act, President Woodrow Wilson consigned the American population to a
century in which the money supply itself has depended on the whims of the
banking cabal. A century of booms and busts, bubbles and depressions, has led
to a wholesale redistribution of wealth toward those at the very top of the
system. At the bottom, the masses toil in relative poverty, single-income
households becoming double-income households out of necessity, their quality of
life being slowly eroded as the Federal Reserve Notes that pass for dollars are
themselves devalued.
Worse yet,
the fraud itself perpetuates Alexander Hamilton’s persistent myth that a
national debt is necessary at all. The US is now locked into a system whereby
the government issues bonds to generate the funds for their operations, bonds
that are backed up by the taxation of the public’s own labor.
The
perpetrators of this fraud, meanwhile, remain in the shadows, largely ignored
by a general public that could instantly recognise the latest Hollywood
heartthrob or pop idol, but have no clue what the head of Goldman Sachs or the
New York Fed does, let alone who they are. This cabal bear allegiance to no
nationality, no philosophy or creed, no code of ethics. They are not even
motivated by greed, but power. The power that the control of the money supply
inevitably brings with it.
It did not
take long for this lust for power to rear its head. In 1921, just 7 years after
the Fed began operations, the same J.P.
Morgan-connected banking elite that
founded the Federal Reserve incorporated an organization called The Council on
Foreign Relations with the goal of taking over the foreign policy apparatus of
the United States, including the State Department. In this quest, it was
remarkably successful. Although there are only about 4000 members in the organization today, its membership has
included 21 Secretaries of Defense, 18 Treasury Secretaries, 18 Secretaries of
State, 16 CIA directors and many other high-ranking government officials,
military officers, business elite, and, of course, bankers. The first Director
of the CFR was John W. Davis, J.P. Morgan’s personal lawyer and a millionaire
in his own right.
Together
with its sister organizations in Britain and elsewhere around the world, these
groups would work together toward what they called a “New World Order” of total
financial and political control directed by the bankers themselves. As Carroll
Quigley, noted Georgetown historian and mentor of Bill Clinton, wrote in his
1966 work, Tragedy and Hope: A History of The World In Our Time:
“The powers
of financial capitalism had [a] far-reaching aim, nothing less than to create a
world system of financial control in private hands able to dominate the
political system of each country and the economy of the world as a whole. This
system was to be controlled in a feudalist fashion by the central banks of the
world acting in concert, by secret agreements arrived at in frequent private
meetings and conferences. The apex of the system was to be the Bank for
International Settlements in Basel, Switzerland, a private bank owned and
controlled by the world’s central banks which were themselves private
corporations.”
This is why
the bankers and their partners in government and business conspired to bring
about the 2008 crisis. Not for the pursuit of money, but power. In the same way
the bankers used the Panic of 1907 to consolidate their control over the money
supply, they hope to use the 2008 crisis and subsequent panics, which they themselves
have created, to consolidate their political control.
The
inevitable conclusion, one that flows necessarily from the true understanding
of this situation, is that the Federal Reserve system needs to be consigned to
the dustbin of history. After a century of enslavement, it is time for the
American public to finally throw off the bankers’ debt chains.
Andrew Gavin Marshall: If there was ever a point in human history to start
questioning alternatives, this would be it. And to think that where we are…and
simply say “Oh, well this is the best of our options,” how many of the best
options lead to self-destruction? Doesn’t sound like a best option.
I think
that with a world of seven billion people we can probably come up with
something better than a system in which a few thousand people benefit so much
at the expense of everything else on this world and at the expense of the
potential for the future of mankind. They’re leveraging our future and so long
as we accept this way of thinking, so long as we accept these institutions as
having dominance, that’s the direction we’ll be going.
So I think
reform is a good way to try and stall and to push back directly against the
expanding and evolving power structures, but radical change is what’s really
needed and that has to be built from the bottom up. But I think that these two
processes can and should go together in parallel.
If you’ve
made it this far, congratulations. You are now better informed on the economic
history of the United States and the truth about the Federal Reserve than 99%
of the population. If you do nothing else, then just working to get those
around you educated on this information alone will have a profound effect. Once
they learn of the scam, many are motivated to do something about it, and they,
in turn, inform others. This is the viral nature of suppressed truth, and it is
the reason that more people are aware of and energized by the issue of the
Federal Reserve and the nature of money than ever before.
Perhaps
even more amazingly, this movement is spreading to other parts of the globe.
Recognizing the interlocking nature of the modern global economy, and the
international nature of the banking oligarchy, movements to abolish the Federal
Reserve have sprung up in Europe, where protests against the cartelized central
banking system are taking place in over 100 cities attracting 20,000 people on
a weekly basis.
Lars Maehrholz: I started this movement because I realized that the
Federal Reserve Act, in my opinion, is one of the worst laws in the whole
world. So a private banking company is lending America the money, and in my
opinion is not democratic anymore. The Federal Reserve tells the government
what to do, and that’s the problem.
Luke Rudkowski: It’s a very big problem, especially in the U.S.
Why is it a global issue, and why are people doing it here in Germany?
Lars Maehrholz: Because when you realize that this finance system,
it’s a global system, you have to go really to the beginning of the system. And
in my opinion it’s also the World Bank and the International Monetary Fund and
stuff like this, but at the beginning of all this is a law from 1913. Woodrow
Wilson signed it, and this is the beginning of all this hardcore capitalism we
are now suffering from. And the only way to stop this is maybe to break this
law.
But what if
the burgeoning movement to End The Fed is successful? What system do people
propose as the answer? There have been several proposals along different lines
by various researchers. Some argue for a return to America’s colonial roots of
debt-free money issued by state run banks, pointing to the Bank of North Dakota
as one already functioning, successful model of this approach.
Ellen Brown: We’ve had two banking systems ever since the 1860’s
with the state bank system and the federal bank system, and the federal bank
system are the big Wall Street banks particularly. They dominate the federal
system. So, they’re taking over right now. In California we don’t even have any
local banks where I am. We had two and I had accounts in both of them and now
one of them is Chase Bank and the other is U.S. Bank. So they’re both big Wall
Street banks now that have been taken over.
So it’s the
local banks that have an interest in serving the local business. The big banks
have no interest in making loans to local businesses; it’s too risky, why
should they bother? They’ve got this virtually free money they can get from the
Fed and from each other and it’s much more lucrative to them either to
speculate in commodities or other thing abroad, or what works very well for
them is to buy long-term government bonds at 3% because these have no capital
requirement. The capital requirements for government bonds are zero. So they
can buy all of those that they want. Whereas if they make loans for mortgages
or they make loans to businesses then they have to worry about the capital
requirement and as soon as they’ve used up all their capital–in other words
eight dollars in capital will get you a hundred dollars of loans–then they
can’t make any more loans they have to wait for thirty years for the loans to
get paid off. So what they if they do if they do buy mortgages is sell them off
too investors and so that’s the whole mortgage backed security scam that we’ve
seen. They had no motivation to make sure that these borrowers were actually
sound borrowers; they just wanted to make a sale. So they sold the stuff to the
unwary investors who might be somebody in Iceland or Sweden or pension funds.
So that didn’t work out so well.
So a state
bank partnering with the local banks can provide the capital. It can help them
with capital. In North Dakota the state bank guarantees the loans of the local
banks, allowing them to make much bigger loans than they could otherwise. The
state bank provides liquidity to the small banks. That’s why the local banks
aren’t making loans to small business right now, because they don’t know that
they can get money from the other banks as needed. The way banking works is
they make the loan first. I mean, if you have credit lines to many different
businesses and if they all hit up their credit lines at once you are going to
run out of money. So you don’t dare do that unless you know that you can get
short-term loans from the other banks. And so what’s happening right now, even
though there’s $1.6 trillion is excess reserves sitting on the books of the big
banks, they’re not available to the little banks and the reason is because the
Fed is paying 0.25% interest on those reserves. So the banks have no incentive
to lend them to the little banks. Why let go of them when you can make just as
much keeping them and then you still have your reserves and you can use them as
collateral to buy bonds or something that’ll make you more money?
So the
whole system is messed up and in North Dakota, the bank of North Dakota
provides liquidity for these local banks.
Others advocate a decentralized system of alternative and
competing currencies that greatly reduce or even eliminate altogether the need
for a central bank.
Paul Glover: Well, 22 years ago in Ithaca, New York I noticed
there were a lot of people, friends particularly, that had skills and time that
were not being employed or respected by the prevailing economy. While we had
much desire to create things and trade them with each other and many services
we could provide to each other, we didn’t have the money. So since I have a
background in graphic design, journalism and arrogance I went to my computer
and designed paper money for Ithaca, New York. I designed pretty colourful
money with pictures of children, waterfalls and trolley cars denominated in
hours of labor. One-hour note, half-hour, quarter, eight-hour notes and
two-hour notes. I then began to issue to each of those pioneer traders who had
agreed to being listed in the directory a specific starter amount, and the game
began. An hour has been worth basically $10 U.S. dollars which at that time 20
years ago was double the minimum wage. People who usually expect more than $10
per hour of their service can charge multiple hours per hour but the
denomination puts between us as residents of our community, that reminds us
that we are fellow citizens, not merely winners or losers scrambling for
dollars. It introduces us to each other on the basis of these skills and
services that we have, that we are more proud to provide for each other than
often is the case with a conventional job. Just the stuff we have to do to get
the money to pay the bills.
So through
that trading process, that more intimate scale process within the community,
we’re more easily able to become friends and lovers and political allies.
James Corbett: It’s an inspiring story and tell people about how
much money has circulated through this community. I mean, it’s important for people
to understand just how successful this has been.
Paul Glover: Because we are not a
computer system we don’t have a specific volume of trading recorded but by the
grapevine, by phone surveys and over the years watching the money move we were
able to guess very reliably that several million dollars equivalent of this
money has transacted over those years. Making loans without charging interest
up to $30,000 value, which is the fundamental monetary revolution in our
system. Then as well, making grants of the money to over a hundred community
organizations.
Some argue for
currencies whose mathematical nature prevent them from being merely conjured
into existence whenever a federal government wants to wage another war of
aggression or forge another link in the seemingly endless train of governmental
tyranny and abuse.
Roger Ver: What people have to
understand about Bitcoin is that it’s a completely decentralized network.
There’s no central server, there’s no controlling company, there’s no office,
it’s just free software that anyone can download and start running on their
computer anywhere in the world. And that the Bitcoins themselves can be
transferred to or from anyone, anywhere in the world and it’s impossible for
any bank or government or entity to block you from sending or receiving those
Bitcoins. There’s a limited supply of those Bitcoins, there will never ever be
anymore than 21 million Bitcoins. So, like everything the price is set based on
supply and demand. Because the supply of Bitcoins is limited and the demand is
increasing as more and more people start to use them and more and more websites
start to accept them, the price of Bitcoins in terms of dollars is going to
have to increase, even a lot more than the $500 per Bitcoin that it is today.
James Corbett: Are there any
drawbacks at all to the idea of using a crypto-currency?
Roger Ver: If you’re part of
the current power elite that can just print money at will to spend on whatever
you feel like then yeah, the world switching over to Bitcoin is probably not
going to benefit you. But if your one of the normal people that aren’t working
for the Federal Reserve or any central bank that’s printing money to pay to
your friends and that sort of thing, then a Bitcoin world is a wonderful thing
for you.
Sound money. Cryptocurrencies.
State banks. LETS programs. Self-issued credit. These and many other solutions
have all been proposed and many of them are in use in different localities
today. Information on all of these ideas and how they are being applied in
various parts of the world are widely available online today. The point is that
the question of what money is and how it should be created is perhaps the
single greatest question facing humanity as a whole, and yet it is one that has
been almost completely eliminated from the national conversation…until
recently.
For the first time in living memory,
people are once again rallying around the monetary issue, and American politics
stands on the threshold of a transformation almost unimaginable just two
decades ago.
And so the rest of the story
is now in our hands. Once we understand the scam that has taken place, the
gradual consolidation of wealth and power in the hands of an elite few banking
oligarchs and the growing impoverishment of the masses, all in the name of
banking funny money created out of nothing and loaned to the public at interest,
we can choose to get active or to do nothing at all.
For those who choose to get
active, there are some steps that you can take to help change the course of
this system:
1) Follow
the links and resources from the transcript of this documentary atcorbettreport.com/federalreserve to familiarize yourself with the history, the
connections and the functions of the Federal Reserve system. If you can’t
explain this material to yourself then you will never be able to teach it to
others.
2) Begin
reaching out to others to bring them up to speed on the issue. It can be as
simple as broaching this conversation in the Monday morning water cooler talk
or passing out a copy of this documentary or sending out links to this
information to your email list. Insert this topic into your conversations. When
people start talking about the national debt or the state of the economy or
other political talking points, get them to question the roots of these issues,
and why there is a national debt at all.
3) When you
are able to find or create a group of like-minded people in your area who are
engaged with the issue, start a study group on the issue and its solutions. The
study group can help source alternative or complementary currencies in the
local area, or, if none exist already, the group can form the basis for a
community of local businesses and customers who are willing to start
experimenting with ways to wean themselves off of the Federal Reserve notes.
4) Use the
resources at corbettreport.com, including the Federal Reserve information
flyer, or hold DVD screenings, to attract interest in your group and draw
others into studying the true nature of the monetary system.
The work of
building up an alternative to the current system can seem daunting, even at
times overwhelming. But it’s important to keep in mind that the Federal Reserve
system that seems so monolithic today has only been around for one century.
Central banks have been defeated in America before and they can be defeated
again.
The
question of how we decide to change this system is not rhetorical; it will
either be answered by an informed, engaged, active population working together
to create viable alternatives and to dismantle the current system, or it will
be answered by the same banking oligarchy that has been controlling the money
supply, and indeed the lifeblood of the country, for generations.
Now, one
century after the creation of the Federal Reserve system, we have a choice to
make: whether the next century, like the one before it, will be a century of
enslavement, or, transformed by the actions and choices that we make in the
light of this knowledge, a century of empowerment.
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