Bag the Fed!
By Jerry Mazza
Online Journal Associate Editor
Dec 8, 2008, 00:22
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Despite its name, the Federal Reserve System is not owned by the federal government. It is actually a private company of bankers with 12 branches or central banks that expand and contract our money supply as they have doing for nearly 100 years.
And, even though the Fed is not part of the US government, the Fed’s Board of seven governors is appointed by the president and confirmed by the Senate for 14-year terms.
As we look at the Federal Reserve System, we should remember banker Meyer Rothschild’s apocalyptic warning “Let me issue and control a nation’s money and I care not who writes its laws.” Really? That’s pretty cocky. But let’s go back to the beginning, the first central bank in America.
Dubious thanks go to that scoundrel Alexander Hamilton who lobbied for the first private central Bank. Despite protests from many, including Thomas Jefferson who said, “I sincerely believe the banking institutions having the issuing power of money are more dangerous to liberty than standing armies,” Hamilton got his way. In 1791, Congress chartered the First Bank of the United States for 20 years and George Washington signed off on it. Hamilton also got to be the first Secretary of the Treasury. Yet Jefferson’s knock was right on the money.
When the charter expired in 1811, Madison, desperate to stabilize the currency, revived it in 1816 as the Second Bank of the United States. Both banks were private companies. For that and other reasons (like there was no mention in the Constitution of national banks), President Andrew Jackson hated the bank and wanted it gone. He commented that, “The bold efforts the present bank had made to control the government are but premonitions of the fate that await the American people should they be deluded into a perpetuation of the institution or the establishment of another like it.” Jackson had to replace two Secretaries to the Treasury who refused to remove the government’s funds and call on former Attorney General Roger Taney to do his bidding. This caused the Second Bank of the United States to lose its charter in 1836 and cease operations in 1841.
In 1863, the National Banking Act created a system of national banks. They managed to create a series of panics in 1873, 1893, and 1907, which led to a demand for a third central banking system. And thus, in meetings veiled in secrecy at Georgia’s Jekyll Island, the Federal Reserve System was born in 1913, spurred on by GOP Senator Nelson Aldrich.
Aldrich’s other players included A. Piatt Andrew, Assistant Secretary of the Treasury and Special Assistant of the National Monetary Commission; Frank Vanderlip, president of the National City Bank of New York; Henry P. Davison, senior partner of J.P. Morgan Company, and generally regarded as Morgan’s personal emissary; and Charles D. Norton, president of the Morgan-dominated First National Bank of New York.
Joining the group just before the secret train left New Jersey’s Hoboken station were Benjamin Strong, also known as a lieutenant of J.P. Morgan; and Paul Warburg, a recent immigrant from Germany who had joined the banking house of Kuhn, Loeb. Warburg was considered the architect of the plan devised in secret.
Six years later, a financial writer named Bertie Charles Forbes who later founded Forbes Magazine (the present editor, Malcolm Forbes, is his son) wrote: “Picture a party of the nation’s greatest bankers stealing out of New York on a private railroad car under cover of darkness, stealthily hiding hundred of miles South, embarking on a mysterious launch, sneaking onto an island deserted by all but a few servants, living there a full week under such rigid secrecy that the names of not one of them was once mentioned lest the servants learn the identity and disclose to the world this strangest, most secret expedition in the history of American finance. I am not romancing; I am giving to the world, for the first time, the real story of how the famous Aldrich currency report, the foundation of our new currency system, was written. . . .”
Aldrich’s daughter, Abby, later married John D. Rockefeller, Jr. and their son Nelson Aldrich Rockefeller, brother of John D. III, Winthrop, Laurence and David, became governor of New York and later vice president under Gerald Ford. Eek. Bottom line, this was the crème de la crème of the financial system creating the Federal Reserve System? The name purposely omitted the words “Central” or “bank” or Wall Street. It is also a curiously random fact that the dollar of 1907 is now worth about four cents.
How the Fed controls our money
Since its inception, Wiki tells us, the Fed has controlled the interest rates on lending money. Then, by increasing or decreasing the money supply, it regulates the value of money. The more of it around, the lower its values, sort of a hidden inflation. You could say the Fed actually produces one thing: debt. Every single buck the Fed issues is loaned at interest, with an inherent debt amount. The Fed has a monopoly on issuing money.
We actually have Hamilton again to thank (not) for proposing to establish the initial funding for the First Bank of the United States through the sale of $10 million in stock, of which the US government would buy the first $2 million in shares. Since the government didn’t have the $2 million, Hamilton suggested that it make the stock purchase using money loaned to it by the bank; a very contemporary paradigm. He proposed that the loan be paid back in 10 annual equal installments. The remaining $8 million in stock could be bought by the public in the US and overseas, a sample of how Hamilton’s mind worked and could to this day on Wall Street with great success.
But I digress. The Fed always increases the money supply to increase the money owed to it. That money is also loaned out, as said earlier, at interest, creating more debt, which equals a kind of economic slavery because it’s impossible for the government to ever free itself from this self-generating debt-load. The Fed also issues bonds at interest to the public and banks and foreigners. When the Fed wants to create more money, it buys bonds with a simple bookkeeping entry, thereby not paying for them.
This leads us to the Fed’s other major cancer: fractional lending, i.e. for every actual dollar in reserve, they can lend 10 to-x-number of dollars in fractional reserve. Thus banks can create deposits by creating money with fractional lending, billions of free money each year, less interest to depositors. It’s no wonder that banks create and are responsible for the lion’s share of inflation. In fact, the Fed was faulted that during the 1920s, it experimented with alternatively creating and destroying money. The notable Milton Friedman, among many other scholars, said the Fed helped to create the late 1920s inflated stock market bubble which burst in 1929, after which money was tightened, adding greatly to the pain.
The only relatively stable period in our history, an expert friend of mine notes, came out of the New Deal’s banking reforms, the last of which Clinton signed away. As wikipedia reports, it was the Gramm-Leach-Bliley Financial Services Modernization Act . . . enacted November 12, 1999, by the United States Congress. It repealed the Glass-Steagall Act of 1933, “opening up competition among banks, securities companies and insurance companies. The Glass-Steagall Act prohibited a bank from offering investment, commercial banking, and insurance services.” Now, we have one big disastrous muddle.
“The Gramm-Leach-Bliley Act (GLBA) allowed commercial and investment banks to consolidate. For example, Citibank merged with Travelers Group, an insurance company, and in 1998 formed the conglomerate Citigroup, a corporation combining banking and insurance underwriting services under brands including Smith-Barney, Shearson, Primerica and Traveler Insurance Corporation. This combination, announced in 1993 and finalized in 1994, would have violated the Glass-Steagall Act and the Bank Holding Company Act by combining insurance and securities companies, if not for a temporary waiver process. The law was passed to legalize these mergers on a permanent basis. Historically, the combined industry has been known as the financial services industry,” which fundamentally and first serves itself your bucks.
The Fed’s never been audited by Congress
Yes, in the near century it has existed, the Fed has never had the pleasure of being audited by Congress, yet it should audit and control the Federal Reserve for it to be a legal institution conforming to the Constitution of the United States. Not. A 1982 Supreme Court case determined that the Fed is an independent entity with no oversight by government. The Reserve does issue a weekly public balance sheet, although it has been criticized for its “culture of secrecy” in terms of obtaining other information. Some critics have claimed that the Federal Reserve System is a scheme to enrich a few wealthy bankers at the expense of the public. Could that possibly be? My god, remember that 1907 dollar worth four 2008 cents.
In fact, to my knowledge the Fed hasn’t paid income tax on trillions of dollars taken from taxpayers. Yet the Congressional record claims the US government can buy the Fed back at any time for $450 million, about half the money we pay them every day. Are you wondering why the Congress doesn’t do just that: buy them back or better flat out nationalize them into the Treasury, under complete surveillance, with total transparency?
One good reason is that Congress loves the Fed because it allows them to spend all they want without restraints, except, of course, for that mangy national debt piling up in the background that our kids will have to eat for Christmas. In fact, the Constitution does say, “The Congress shall have the power . . . To coin Money, regulate the value thereof,” yet nowhere does it give Congress the authority to hand over this responsibility to a bunch of private bankers. Yet, there are the basics for your perusal.
Also, creating what is a fiat currency causes inflation and savers are hit the hardest by this. Some who try to beat inflation become investors in the stock market. But look how the Federal Reserve lending practices caused the price of stock to tank in the recent economic crisis, nearly wiping out people’s life savings. Inflation and mismanaged policies are felt by everyone and are reason enough to oppose the Federal Reserve. In the words of Thomas Jefferson “‘A government big enough to give you everything you want, is strong enough to take everything you have . . .”
How to put the brakes on
Besides today’s government issuing its own US Notes as the currency, they can take it over making it replenish the reserves. This can be done so that banks can be at 100 percent reserve banking, not fractional reserve banking. Central banks would be needed as clearing houses and vaults for US notes. The Federal Reserve Act would be no longer necessary and should be repealed. If this sounds a little Ron Paulish, it is. It allows for monetary power to be transferred back to the Treasury Department, disallowing further creation of money by central banks.
The national debt, despite its staggering $12.3 trillion could be reversed, and with a little help from our friends, be reversed in a matter of several years. Getting rid of fractional lending along with the Fed would help avoid bankruptcies, governmental and personal inflation, deflation, and/or total financial collapse.
The Monetary Reform Act
This is as Paul advocates propose it and I understand how it would work . . .
1. Pay off the debt with debt-free US notes. Amen.
2. Abolish Fractional Reserve banking. As the debt is paid off, the reserve requirements of all banks and financial institutions would be raised proportionately at the same time to absorb the new US notes, which would be deposited and become the banks’ increased reserves. Towards the end of the first year of transition, remaining liability of financial institutions would be acquired by the US government in a one-time operation.
They too would be paid off with US money notes to keep US money supply stable. At the end of the first years, all debt one hopes could be paid, and we can enjoy the benefits of full reserve banking. The Fed would be obsolete, oh guzzling dinosaur that it is.
3. Repeal the Federal Reserve Act and the National Banking Act of 1864. The acts delegate money power to private organizations. Hand back the powers to the Department of Treasury as they were under President Lincoln, when he created bank notes, Greenbacks, to pay for Civil War expenses. No banker affiliated with financial institutions should be allowed to regulate banking. After the first two years of reform, these acts would serve no useful purpose.
4. Withdraw the US from the IMF (International Money Fund), the World Bank and the BIS (the Bank of Internal Settlements). They further concentrate interests and powers of private banking over the world’s economy and the US’s. We must withdraw from them. The harmless functions they perform like currency exchanges can be accomplished by newer organizations limited to those functions.
Such a Monetary Reform Act would guarantee that the amount of money in circulation stay stable, causing neither inflation nor deflation. In the last three decades alone, the FED has doubled the US money supply every 10 years. That fact and fractional reserve lending are the real causes of inflation and the reduction in our buying power.
The money supply should increase slowly to keep prices stable and in proportion to population growth, roughly around 3 percent a year, and not at the whim of a group of bankers meeting in secret. In fact, all future decisions about how much money must be in the US economy must be made on statistics of population and the price-level index. The new monetary regulators and the Treasury Departments (in the past called the Monetary Committee) would have zero discretion in this matter except in times of declared war.
This would insure a steady stream of stable money growth, 3 percent a year, and result in stable prices and no sharp changes in money supply. To make sure the process is completely open and honest, all deliberations would be public not secret as meetings of the Fed Board of Governors are today. How do we know this will work? Because these steps remove the two causes of economic instability: the Fed-interest-bled dollar and fractional (fictional) reserve banking -- and the newest one as well, the Bank of Internal Settlements (BIS) mentioned above. Most important, the danger of depression would be eliminated.
No matter how we cut it, the Fed needs to be bagged. It has bound and gagged our financial system for too long and the damage has been savage. There is a movement called THE FED IS DEAD, basically putting forth these ideas which are definitely worth considering, otherwise we all drown down the money hole while the rich and greedy sail away with everything we own. It’s that simple. Act now. This offer will be repeated. That is, until everyone gets it.
Jerry Mazza is a freelance writer living in New York City. Reach him at email@example.com. read his new book, “State Of Shock: Poems from 9/11 on” at www.jerrymazza.com, Amazon or Barnesandnoble.com.
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