Years ago I read William Greider's excellent book published in 1987 on how
the US Federal Reserve System works. It was detailed and explicit and makes
wonderful and informative reading, except for the solution he suggests to a
huge problem. His was far too timid. This article proposes a much different
one. Greider called his book Secrets of the Temple with a sub-title: How the
Federal Reserve Runs the Country. A better sub-title might have been how the
Fed (and other key central bankers) runs the world. This article attempts to
summarize what it does, how it does it, for whose benefit and at whose expense.
For those who don't know, prepare for some stunning information and commentary.
Let's be clear at the outset. The US Federal Reserve, Bank of England, Bank
of Japan and the European Central Bank (for the 12 European countries that adopted
the single euro currency in 1999) are institutions with enormous power far beyond
what most people everywhere can imagine. These most dominant of all central
banks, as well as most others, have a powerful influence on the financial conditions
in virtually all countries including their own, of course, in an increasingly
borderless financial world where a significant economic event in one nation
can affect most others for better or worse.
One other powerful bank is also part of today's financial world. It needs mentioning
because of its importance, even though it requires a separate article to explain
how it works more fully. It's the secretive, inviolable and accountable to no
one Bank of International Settlements (BIS) founded in 1930 and based in Basle,
Switzerland. This bank most people never heard of is the central banker to its
member central banks - a sort of banking "boss of bosses" equivalent
to what apparently exists in the shadowy world of Mafia dons. Like most other
central banks, including the Federal Reserve (explained below), it's privately
owned by its members.
It's believed by some academicians and others who've studied the BIS that the
ruling elite of financial capitalism established this bank of banks to be the
apex of power to exercise authority over a world financial system owned and
controlled by them. It's thought their plan was to use this bank to dominate
the political system of every country and control the world economy in a feudalistic
fashion. In a word, the thinking goes that these super-elite want to rule the
world by controlling its money, and they set up this supranational all-powerful
bank of banks to do it. As important as that is, that discussion remains for
another time as the intent of this article is to focus solely on the US Federal
The dominant central banks and BIS, together with most others, wield their
influence in cartel-like alliance with each other to assure they all benefit
more than they otherwise would without such a cozy arrangement. With their immense
power it's no play on words to say these financial institutions do indeed rule
the world. Because they're able to create money, they fund the needs of their
governments, their militaries and all business activity that couldn't function
without a ready supply of that most needed of all commodities. It's money, not
love, that makes the world go round, and central bankers have the power to create
or remove from circulation as much or little of it as they choose and for whatever
purpose they have in mind. That kind of power can move mountains or destroy
No nation's central bank is more powerful today than the US Federal Reserve,
but it wasn't always that way, and it now has competition for the top spot it
hasn't known since WW II. The Fed, as it's called, has existed since it was
first established by an act of Congress in 1913. But the Bank of England has
been around since Britannia ruled the waves beginning in 1694 when King William
III needed help funding the kind of escapade that takes lots of ready cash -
war. Back then it was with France, and the king needed a friendly banker to
print it up for him to help him fight it. He also needed financial help to facilitate
trade and manage the country's debt that always mounts up when wars are fought.
The Bank of England wasn't the first central bank, but it was the modern world's
first privately owned one in a powerful country. It was called the Bank of England
to keep the public from knowing that it, like our Federal Reserve, was and still
is privately owned and not part of the government. It was also the model used
in the formation of our own central bank and most others.
The Brits may have had a 219 year head start on the Fed, but central bankers
are only as powerful as the countries they represent and their economies. Today
the former dominant Brits must settle for a far lesser role as being just one
of many junior partners to a US hegemon that emerged post WW II as the world's
dominant economic power. It still is today, even though some credible experts
believe this country may have seen and past its peak and is now in decline.
Some go further and claim our decline has been accelerated by the disastrous
policies of the Bush administration that irrationally believes waging war on
the world without end is the way to rule it, promote endless economic growth
and dominance, and thus preserve the nation's preeminent position as the reigning
It's easy to challenge that view and think that champ has climbed into the
ring a few times too many, has endless plans for more return engagements, and
is likely to meet the same fate many a former human one did who didn't know
when to quit and ended up with chronic brain damage known as dementia. The lesson
from history is always the same. The price for reckless behavior is high, painful
and inevitable. It's true for countries as well as individuals, but too often
neither one sees it until it's too late. The biggest difference between the
US today and other nations in the past that paid dearly for not yielding when
their day had passed is that we have an all-powerful arsenal others never did.
Should we decide to use it, there likely wouldn't be much left behind for a
successor. Not a pleasant thought, but a very real one.
It All Began in 1910 On Jekll Island
It sounds like the title of a horror movie, but the real life events that happened
at this privately owned island off the coast of Georgia in 1910 would have challenged
even the Hollywood bad dream factory to come up with.
It was here that seven very rich and powerful men met in secret for nine days
and created the Federal Reserve System that came into being three years later
on December 23, 1913 by an act of Congress. Since that time, the nation and
world would never be the same, but only the rich and powerful were the beneficiaries.
That was the whole idea, and it worked as planned.
The Federal Reserve Act that began it all must surely rank as one of the most
disastrous and outrageous pieces of legislation to the public welfare ever to
come out of any legislative body. It may have also have been and still is illegal
according to Article 1, Section 8 of the Constitution which happens to be the
inviolable law of the land. The article states that Congress shall have the
power to coin (create) money and regulate the value thereof. In 1935, the US
Supreme Court ruled the Congress cannot constitutionally delegate its power
to another group or body. The Congress thus acted in violation of the Constitution
it's sworn to uphold and in so doing created the Federal Reserve System that,
as will be explained below, is a private for-profit corporation operating at
the expense of the public welfare. By its action, our lawmakers committed fraud
against the people of the country and so far have gotten away with it without
the public even knowing about the harm done.
The shameful result is that what should have arrived stillborn is now the most
dominant institution on earth, and all because of what began on a privately
owned island with a scary name. But had the Congress acted responsibly, the
act of Fed creation might never have happened. The legislation establishing
it was so harmful to the public interest, it likely never would have passed
if it hadn't been shepherded through a carefully prepared Congressional Conference
Committee meeting scheduled for between 1:30 - 4:30 AM (when most members of
Congress were asleep) on December 22, 1913. The Act was then voted on the next
day and passed although many members of the body had left for the Christmas
holidays and most others who stayed behind hadn't had time to read it or know
its contents. Sound familiar? Still it passed (like a thief in the night) and
was signed into law by an unwitting or complicit Woodrow Wilson who later admitted
he made a terrible mistake saying "I unwittingly ruined my country."
But it was too late for postmortems, and the American people have paid dearly
ever since. It's about time the public understood that and began to demand an
end to over 90 years of damage done.
It almost happened 43 years ago when one president decided to act on behalf
of the people who elected him. That man was John Kennedy, who before his death
planned to end the Federal Reserve System to eliminate the national debt a central
bank creates by printing money and loaning it to the government. That debt has
now risen to over $8,400,000,000,000 ($8.4 trillion) which every taxpayer must
pay for and has done so in the amount of nearly $174,000,000,000 ($174 billion)
in just the first three months of 2006. This debt service is now an annualized
amount exceeding two-thirds of a trillion dollars. It's made the bankers rich
(which was the whole idea) and the public poorer because we're taxed to pay
the tab. It's no exaggeration to call this the greatest financial scam in world
history and one that gets greater every day.
The debt was less onerous 40 years ago, but Kennedy understood its danger to
the country and the burden it placed on the public. Thus, on June 4, 1963, he
issued presidential order EO 11110 giving the president authority to issue currency.
He then ordered the US Treasury to print over $4 billion worth of "United
States Notes" to replace Federal Reserve Notes. He intended to replace
them all when enough of the new currency was in circulation so he could end
the Federal Reserve System and the control it gave the international bankers
over the US government and the public. Just months after the Kennedy plan went
into effect, he was assassinated in Dallas in what was surely a coup d'etat
disguised to look otherwise and may well have been carried out at least in part
to save the Fed System and concentration of power it created that was so profitable
for the powerful bankers in the country. Those benefitting from it had good
reason to be involved in the plot to save the special privilege they weren't
willing to give up without a fight. It's a plausible explanation that may explain
who may have been behind the assassination and for what reason. Whatever the
truth is, the banking cartel was only in distress a short time. Once Lyndon
Johnson took office, he rescinded Kennedy's presidential order and restored
the cartel's former power. It's kept it ever since and is now, of course, more
powerful than ever. Even presidents are unable to stop it and those who would
try have a lesson from history to give them pause.
The predecessors of the possible Kennedy coup plotters were the men who met
on Jekyll Island in 1910. They represented some of the richest and most powerful
men in the world - the Morgans, Rockefellers, Rothschilds of Europe (who dominated
all European banking by the mid-1800s and became and still may be the wealthiest
and most powerful family of all) and others of great influence and power. Included
was a US senator, a high ranking Treasury official, the president of the largest
bank in the country at the time, a leading Wall Street figure and the man who
would later become the first chairman of the Federal Reserve System. It was
quite an assemblage, and they came to accomplish one thing. They wanted to change
the ideology and course of American business that up to then was based on marketplace
competition and replace it with monopoly. They also knew what Baron M.A. Rothschild
understood when he once said: "Give me control over a nation's currency
and I care not who makes its laws." They knew the wisdom of what's stated
in Proverbs 22:7 as well: "The rich rule over the poor, and the borrower
is servant to the lender."
This was the dawning of the age of powerful cartels when the seven financial
titans meeting secretly in the island's clubhouse decided no longer to compete
with each other and wanted the power to arrange it. They were already colluding
informally but knew it would all work better under a legally sanctioned cartel.
They wanted a banking cartel and got one that flourishes today below the public
radar with the tool they wanted most - the ability to control the nation's money
supply that gave them almost unlimited power. The cartel now works cooperatively
with their governments and all other powerful transnational corporations in
a dominant global alliance that allows them to control the world's markets,
resources, cheap labor and our lives.
The Federal Reserve System Is Not A Government Agency - It's A Privately
Owned Cartel of Powerful Banks Protected By Law
It's commonly but falsely believed the Federal Reserve System is a function
of government and subject to its control. False. It's often referred to as a
quasi-governmental, decentralized central bank, but that's just cover to disguise
what, in fact, it really is: a privately held and operated cartel made to look
like the government is in charge. The fact that it's headquartered in Washington
in the formidable and impressive-looking Eccles building (named after a former
Fed chairman) is just part of the clever subterfuge. Here's how it works:
The Fed is composed of a Board of Governors in Washington and 12 regional banks
in major cities throughout the country (including in my own city of Chicago
where anyone once but no longer could walk up to a teller's window and buy US
Treasury securities). The system also includes many and various member banks
including all national banks that are required to be part of the system. Other
banks were also allowed to join and many did. The Federal Reserve began operating
in November, 1914, almost one year after the Congressional act creating the
system the previous year as explained above. It was mandated by law to have
the greatest power of any institution in the country - the power to create and
control the nation's money supply.
Most people know little or nothing about money and banking, likely never think
about it, and have no idea how what the Fed and bankers do affect their lives.
Before writing this article, I had little more than the modest knowledge I learned
in a required course on the subject and basic accounting as part of my MBA curriculum
46 years ago. Those courses left out the most important parts of the story and
never hinted at anything sinister about how the banking system works in fact.
But no one should ever imagine banks were established or intended to be run
for our benefit. They surely are not, and anyone suggesting they are should
read on. They're about as beneficial to the public welfare as was the MX Peacekeeper
ICBM (the clever language is impressive) intended to carry nuclear warheads
back in the mid-80s that had the power to destroy all life on the planet and
one day may do it in its old or updated form.
The Federal Reserve Act of 1913 (the law of the land) stipulates that the Federal
Reserve Banks of each region are owned by the member banks in it. These Fed
banks are privately owned corporations that make a great effort to hide the
fact that they, in fact, own what the public largely thinks is part of the public
treasury and government. It's easy to think that as Fed chairmen and seven of
the twelve Governors are appointed by the President and approved by the Senate.
As such, the FRB is a sort of quasi-government entity, but the fact is the System
is a privately owned for profit enterprise just like any other business. It
has stockholders like other public corporations that are paid 6% risk free interest
every year on their equity holdings. The public doesn't know this, and it likely
wouldn't be good PR if it found out. People might be even more upset if they
learned some of the owners of our Federal Reserve are powerful foreign investors
in the UK, France, Germany, The Netherlands and Italy. They're partners with
giant US banks like JP Morgan Chase and Citibank as well as powerful Wall Street
firms like Goldman Sachs in a new world order banking cartel that influences
and affects business activity everywhere and our lives.
The issue of private ownership of the Federal Reserve Banks has been challenged
several times in the federal courts to no avail. Each time the courts upheld
the current system under which each Federal Reserve Bank is a separate corporation
owned by commercial banks in its region. One such case was Lewis v. United States
that was decided by the 9th Circuit Court of Appeals that ruled the Reserve
Banks are independent, privately owned and locally controlled corporations.
Our Founding Fathers Had Different Ideas Than the Powerful Men who
Met on Jekll Island
Throughout our history, there was disagreement over who should control the
power of the nation's money supply and the right to issue it. The Founding Fathers
understood that the British Parliament was forced to levy unfair taxes on its
American colonies and its own citizens because the Bank of England had run up
so much debt the government needed revenue to reduce it. Benjamin Franklin,
in fact, believed that was the real cause of the American Revolution. Most of
the Founders also understood the danger that could result from bankers' accumulating
too much wealth and power. James Madison, the main drafter of our Constitution,
called them "Money Changers," referring to the Bible that said Jesus
twice drove the Money Changers from the Temple in Jerusalem 2,000 years ago.
"History records that the Money Changers have used every form of abuse,
intrigue, deceit and violent means possible to maintain their control over governments
by controlling money and its issuance."
Thomas Jefferson was just as strong in his condemnation when he said:
"I sincerely believe that banking institutions are more dangerous to our
liberties than standing armies. Already they have raised up a money aristocracy
that has set the government at defiance. The issuing power should be taken from
the banks and restored to the people to whom it properly belongs."
Jefferson and Madison understood the dangers of commercial monopolies of all
types and tried to assure they never would exist in the new nation. They, in
fact, wanted two additional amendments added to the "Bill of Rights"
in the Constitution but never got them. They believed to protect the liberty
of the people the nation should have "freedom from monopolies in commerce"
(what are now giant corporations including the big international banks and Wall
Street investment firms) and "freedom from a permanent military,"
or standing armies. Try to imagine what the country would be like today if Jefferson
and Madison had gotten their way - a country without giant predatory corporations
exploiting everyone for profit and without a rampaging military waging war on
the world, threatening to destroy it, and doing it so those corporate giants
could earn even greater profits.
They never did, of course, and the people have paid dearly ever since including
the great harm caused because the government relinquished its right to control
the nation's money supply. It gave it away secretly with the public none the
wiser, never knowing how greatly it's been harmed. It's been even worse since
the 1980s because the power of the Fed grew under a friendly Republican president,
and the corporate media led cheerleading for it hid the effect. For them, no
public demeaning of it, its giant member banks or Wall Street allies is allowed.
Things were especially out of hand during the tenure of Alan Greenspan - a
Fed chairman no one should have found much reason to cheer either before he
headed the Fed when he was a presidential advisor or during the time he did.
It was only after his economic consulting firm failed that he went into government
service likely because he needed a new line of work. There he managed to become
a larger than life seer of central banking who was elevated to near sainthood
by the business pundits who thought under his tenure the skies were only blue
and the few clouds in sight always had silver linings. Now Alan is retired to
the greener pastures of lucrative book contracts and speaking engagements, which
shows when you do your job well for the rich and powerful (at the expense of
the rest of us) who gave it to you, you'll be well rewarded in the end. It's
likely the new Fed chairman has taken note and will dutifully try to follow
in the tradition that preceded him.
But try imagining a different sort of Fed chairman, one who knew, believed
in and practiced the words and wisdom of another American president of some
note - Abraham Lincoln. In 1886 Lincoln said the following: "The money
powers prey upon the nation in times of peace and conspire against it in times
of adversity. It is more despotic than a monarch, more insolent than autocracy
and more selfish than a bureaucracy. It denounces, as public enemies, all who
question its methods or throw light upon its crimes. I have two great enemies,
the Southern Army in front of me and the bankers in the rear. Of the two, the
one at the rear is my greatest foe."
Lincoln also appears to have said (although some dispute it): "I see in
the near future a crisis approaching that unnerves me and causes me to tremble
for the safety of my country.....corporations have been enthroned and an era
of corruption in high places will follow, and the money power of the country
will endeavor to prolong its reign by working upon the prejudices of the people
until all wealth is aggregated in a few hands and the Republic is destroyed."
Imagine what Lincoln might say today.
Given Lincoln's sentiment about the bankers and money power of the country,
it would seem to beg the obvious question: did it play a role in, or was it
the reason for, his untimely death at the hands of John Wilkes Booth? The international
bankers clearly disliked Lincoln after he managed to get the Congress to pass
the Legal Tender Act in 1862 that empowered the US Treasury to issue paper money
called "greenbacks." Lincoln needed this legislation after he declined
to pay the bankers the usurious 24 - 36% interest rates they demanded on the
loans he needed to fund his war with the South. With the new banking law, Lincoln
was then able to print up the millions of dollars he needed which was debt and
interest free. Clearly this was not what the greedy bankers wanted as they can
only profit when they get their pound of flesh from financial transactions they
control. Right after the war ended Lincoln was assassinated, and shortly thereafter
the so-called Greenback law was rescinded, a new national banking act was passed,
and all money became interesting-bearing again.
How the Federal Reserve System Works
The Federal Reserve System is the result of the Congress and President having
agreed to privatize the nation's money system and relinquish the power that
should have remained the government's exclusive right. That act was so outrageous
the Fed had to be deliberately designed to look like a branch of the federal
government to hide the fact that it's really an all-powerful privately owned
banking cartel whose member banks (including all the national ones) share in
the vast profits earned from having the most important of all franchises governments
alone should have - the right to print money in any amount, control its supply
and price, and benefit hugely by loaning it out for a profit including to the
government itself that must pay interest on the money it should never have to
if it simply printed its own. Think of what happened as the government having
legalized the right to counterfeit the national currency for private gain. It's
no exaggeration to claim this is the greatest ever of all financial scams causing
incomprehensible harm with the public none the wiser. Here's how it works in
The Fed was given the authority to conduct the nation's monetary policy with
the power to control the supply and price of money. It has three ways to do
it - through open market operations, the discount rate it charges member banks,
and the reserve requirement percentage of member banks assets it requires them
to hold and not loan out. The Board of Governors is responsible for handling
the discount rate and reserve requirements while the Federal Open Market Committee
(FOMC) is in charge of the open market operations of buying or selling bonds
explained further below. Using these tools, the Fed is able to influence the
supply and demand for money and thus directly control the federal funds short-term
rate that's always fixed unless the Fed wishes to raise or lower it. Longer
rates are controlled by the powerful institutional traders in the bond market.
The FOMC and How It Works
The Federal Open Market Committee is really key to the whole process of money
creation or contraction. It consists of 12 members - seven members of the Board
of Fed Governors, the president of the New York Fed Bank (the most important
one of all) and four of the remaining 11 Reserve Bank presidents who serve one
year terms on a rotating basis. The FOMC holds eight regularly scheduled meetings
a year to assess economic conditions and decide how loose or tight it wants
monetary policy to be to further its stated goal of sustainable economic growth
and price stability.
The FOMC literally has the power to create money out of nothing. It does it
in a four step process:
Step 1 - The FOMC first approves the purchase of US government
bonds on the open market.
Step 2 - The New York Fed bank buys them from sellers (financial
markets always have an equal number of buyers and sellers).
Step 3 - The Fed pays for its purchases with electronic
credits to the sellers' banks, which, in turn, credit the sellers' bank accounts.
These credits are literally created out of nothing.
Step 4 - The banks receiving the credits can then use them
as reserves to enable them to loan out as much as 10 times their amount (if
their reserve requirement is 10%) through the magic (only banks have) of fractional
reserve banking and, of course, collect interest on all of it. What a business,
and it's all legal. Imagine how rich we might all be if we as private individuals
could do the same thing. Borrow a million from the Fed and like magic it becomes
10 times as much, and we get to collect interest on all but the 10% of it
we must hold in reserve. This is the magic of fractional reserve banking money
creation and explains how powerful an economic stimulus it is when the Fed
wants to enhance economic growth.
When the Fed wishes to contract the economy by reducing the money supply, it
simply reverses the above process. Instead of buying bonds, it sells them so
that money moves out of the buyers' bank accounts instead of into them. Bank
loans must then be reduced by 10 times if the reserve requirement is 10%.
How the Fed Harms the Public Interest
The Federal Reserve System exists only to serve its owners and member banks
and in doing so is hostile to the public interest. That's because it's a banking
cartel with the power to restrict competition for greater profits gained at
our expense. It goes from our pockets to theirs, and the public loses in at
least four ways:
One - Through the invisible tax of inflation that results
from the dilution of purchasing power caused by newly created money entering
the system reducing the value of dollars already there. The Greenspan Fed was
especially expansive, never was held to account for its excess and was able
to pass a serious problem it created on to a future Fed chairman and society
to deal with. The man we now lionize as a monetary magician began sensibly.
From 1982, before he arrived in 1987, until 1992, the money supply increased
on average by 8% a year. But from 1992 - 2002, the printing press worked overtime
in sync with the deregulation and growth of global markets expanding the currency
by more than 12% a year. It became even more extreme post 9/11 and since 2002
grew at a 15% rate. It now has more than doubled in less than a decade. It appears
that the new Fed chairman has taken note and has begun reducing the rate of
money expansion as he continues raising the federal funds rate to whatever level
he has in mind.
Currency traders as well apparently have taken note of the rate of money supply
expansion overall. Except for a respite in 2005, it's quite likely the dollar
weakness since 2002 is the result of the excess amount of them created for the
Bush administration's profligate spending to fund its endless wars and reckless
tax cuts for the rich. The problem is further compounded as from 1964 to the
present debt service has grown from 9% to 16.5% of the federal budget and rising;
the current account deficit has gone from a 1% surplus to an almost 7% deficit;
and federal indebtedness has grown by 40% just since 2001 and financed in large
part by "the kindness of (foreign) strangers" that may be growing
restive. Furthermore, since March, 2006, the Fed stopped publishing the M-3
aggregate of the total amount of dollars in circulation. With that transparency
gone, big buyers of US Treasuries now have to calculate the value of the dollar
based on speculation and uncertainty rather than hard data - not a way to inspire
trust in the financial markets that function best in an atmosphere of openness
Two - The public also loses because the banking cartel is
able to practice usury - from it's power over a flexible currency to artificially
move rates up or down to any level it chooses which many small lenders in a
truly free and open market can't do. In addition, the cartel's market dominance
forces most borrowers (especially smaller ones less able to issue their own
debt instruments) to come to them for loans which it's then able to make using
what should be the peoples' money available to them at the lowest possible cost
from many highly government regulated small lenders competing for customers.
Three - Through the taxes, we, the public, must pay to cover
the interest on the huge national debt (now over $8.4 trillion) accumulated
from the money the Fed printed and loaned to the government. As mentioned earlier,
that now totals an annualized amount exceeding two-thirds of a trillion dollars
and increasing daily. It's made the bankers rich, ordinary people poorer, and
the public none the wiser it's been fleeced big time.
Four - Compounding the above abuse, the cartel is able to
get the public to bail out the system with more of its tax dollars. It happens
whenever any of the too-big-to-fail banks need financial help to survive. The
same is true for big corporations like Chrysler or Lockheed, large investment
firms or hedge funds like Long-Term Capital Management or even countries like
Mexico. It's also true when a single bank goes out of business and depositors
must be compensated or more seriously in the wake of a systemic financial meltdown
like the one that wiped out many savings and loan banks in the 1980s. Whether
it's a single bank or many dozens at a time, public tax dollars are used to
save the system or just pick up the tab to repay depositors insured against
losses through government insurance protection up to a stipulated amount per
How Would Adam Smith Have Reacted to the Federal Reserve System
This concentration of banking cartel wealth and power is the opposite of what
Adam Smith, the ideological godfather of free market capitalism, advocated in
his writings including his seminal work The Wealth of Nations. Smith wrote about
an "invisible hand" that he said worked best in a free market with
many small businesses competing locally against each other. He strongly opposed
the concentrated mercantilism of his day (what there was of it) which now would
be the equivalent of today's giant transnational corporations and the banking
cartel with the power to restrict competition, maintain higher prices than otherwise
possible and earn greater profits as a result at the public's expense.
The kind of banking cartel that exists today is precisely what Smith would
have condemned. But having a central bank is not in itself a bad thing provided
the bank is government owned, controlled and operated for the public welfare.
There's only a problem when through subterfuge the bank is set up to appear
government owned and run but is, in fact, for private profit the way ours is
and most others as well. And in the US, to make the arrangement work, a mostly
publicly appointed governing authority runs the System acting as a shill for
its private for-profit banking cartel members that wanted it in the first place
and got a corrupted Congress to give it to them. To work, the cartel needs the
cover it gets from its partnership with government, but it's through that arrangement
that it harms the public interest for its own private gain.
And that goes to the heart of the problem: that the Congress elected to serve
the people instead betrayed them by creating an all-powerful banking cartel
and gave it the authority to practice fractional reserve banking with the power
to get free money by creating it out of nothing. It then allowed its members
a near-monopoly right to set the rates of interest they wish to charge borrowers.
The whole process amounts to a legally sanctioned heist by the powerful banks
working in league with government for its own gain. It's also part of a more
extensive government arranged process to transfer wealth from the people to
the pockets of large corporations and the rich and doing it while those being
harmed are unaware it's even happening.
Another Way the Federal Reserve System Harms the Public
The Fed harms the public welfare in one other important way, and again most
people are none the wiser about it. Supposedly the Federal Reserve System was
established to stabilize the economy, smooth out the business cycle, maintain
a healthy rate of sustainable growth while holding prices steady and benefitting
everyone. So how well has it done its job? Since its creation in 1913, and with
them in charge, we had the crashes of 1921 and the most important and remembered
one in 1929. That was followed by The Great Depression that lasted until the
onset of WW II that noted conservative economist Milton Friedman explained was
caused and exacerbated because the Federal Reserve oddly decided to reduce the
money supply at a time of economic contraction instead of increasing it. We
then had recessions in 1953, 1957, 1969, 1975, 1981, 1990 and 2001. We also
had inflation beginning in the 1960s which became quite severe through much
of the 1970s and early 1980s. And we had a major banking crisis in the 1980s
at which time more banks and savings and loan associations failed than ever
before in our history. It happened in the wake of financial market deregulation
when banks were allowed to pursue their own interests without government oversight
to check their willingness to assume excess risk or stop them from trying to
get away with deliberate fraud.
Along with the economic stability the Fed never achieved, we've also had soaring
consumer debt; record high federal budget and trade deficits; a high level of
personal bankruptcies and rising mortgage loan delinquencies; interest on a
mounting national debt that's a large and rising percentage of the federal budget;
the loss of our manufacturing base and it's high-paying jobs with good benefits
because they're being exported to low wage countries; an economy in which services
now account for nearly 80% of all business that provide mostly lower paying,
less skilled jobs with few or no benefits; and a widening income and wealth
gap that continues to harm lower and middle income earners to benefit the rich
and well-off privileged few and a government that encourages it.
Sum it all up and the conclusion is clear. The one thing the Fed failed to
accomplish above all else was what it was established to do in the first place.
But it's much worse than that if we understand a cartel's real motives. It's
not to serve the public interest. It's to abuse it because that's how it benefits
most. It's able to do it with its legally sanctioned concentrated power and
a friendly government in league with it as partners or facilitators. It's from
that cozy hidden from view arrangement that it's able to get away with the grandest
of grand thefts.
A Needed Solution to A Huge Problem
From the information presented above, it's clear that the Federal Reserve System
was established through stealth and deceit by a handful of corrupted politicians
in service to their powerful banking and Wall Street allies. They did it to
defraud the public and without them being any the wiser about what, in fact,
had been done or how harmful it was to be to their welfare and interests. Those
in the Congress and President Wilson (a man trained in the law, one-time practicing
attorney, former esteemed academic and president of Princeton University) either
knew or should have known that the act he and they approved establishing the
Fed was in direct violation of the Constitution they were sworn to uphold. They
didn't, they broke the law, and the public paid dearly for their crime ever
since to this day.
So what recourse is left, and can people be mobilized to pursue it. There's
only one sensible and just solution to undo the damage done to so many for so
long - abolish the Federal Reserve System and restore the power it now has to
the federal government working for the public welfare. Take it back from the
powerful banking cartel working against it and never allow it to be in its hands
again. That alone is the only way. The great German poet and playwright Bertolt
Brecht would have agreed and once said it was "easier to rob by setting
up a bank than by holding up (one)."
Freeing us from the these powerful "Money Changers" would have enormous
benefits for everyone. It would establish a prudent policy of money creation
that would minimize our most unfair tax - inflation which is caused by private
for-profit bankers manipulating the nation's money supply to enhance their profits.
It would stabilize the economy and smooth out the extremes in the business cycle
exacerbated by the cartel working for its benefit and against ours. It would
lower the cost of money for borrowers because it would end the monopoly power
the cartel now has to set the rates it chooses by opening the market to more
competition. It would reduce the growing and oppressive national debt freed
eventually from the extra money supply growth needed to pay it off. It would
lower the public's tax burden as less revenue would be needed for debt service.
It would be a momentous step toward reducing and hopefully one day eliminating
the overwhelming power of all predatory corporate giants preying on us so they
can grow and prosper. It might even discourage wars which are only fought for
wealth and power - never for glory or to make the world safe for democracy or
other false motives. Without a powerful corporate banking cartel and other industry
giants that feed on the human misery they create, there would be less of a reason
to pursue any. Try to imagine that kind of world and a government working for
the public welfare instead of harming it as it now must do in service to capital.
That world is possible, and responsible people need to work for it as the one
we now have has failed and must be changed before it's too late.
A View of the World Created by the Interests of Capital and Our Government
That Supports It
It's the ugly, corrupted world of neoliberal "free market" capitalism
controlled by giant corporations; that benefits the privileged few alone causing
great human misery and despair; a despotic world that can't endure nor must
we allow it to much longer; one with endless wars for power and profit; where
people are commodities to be used as needed and discarded like trash when they're
not; with no concern for preserving an ecology able to sustain us and won't
much longer because we're destroying it and ourselves for profit; where essential
human needs don't matter under an economic model only valuing private gain;
where democracy is incompatible with predatory capitalism; one no one should
want to live in or ever have to; one we must change or perish. In the language
of capital, that's the bottom line. Only a mass movement of committed people
can change that world. It must or we all will.
Unless we can move from our failed economic model to a better alternative,
it will end on its own one day by one means or other. But it may be a denouement
no one would wish for - it's own self-destruction taking all else with it either
by nuclear holocaust or an environment so inhospitable it won't support our
ability to live in it. Our only chance is to work for change while there's still
A Vision of A Different Kind of World
History proves a better world is possible when committed people work hard enough
for it. It's how slavery was ended; workers won the right to organize and bargain
collectively; women gained equal suffrage to men, control of their own bodies,
and more rights and status in the work force; blacks and other minorities won
important civil rights; and politicians once enacted important social legislation
if only out of fear of what might happen if they didn't.
Thomas Jefferson explained the "The price of liberty is eternal vigilance."
It's also the price to keep our hard won social gains. For the past generation
those gains have eroded while we weren't paying attention and only mass people
action can regain them. The goal should be for a world of caring and sharing;
where peoples' lives improve because we all work together for it; one at peace
and not with endless wars to benefit the rich and powerful at our expense; where
all essential human needs are met because governments work for the common good
to assure it; with real participatory democracy where the public and elected
officials work together to keep it strong and vibrant; with no oppressive corporate
giants or banking cartels because the law won't allow any; where ecological
nurturing and preservation are central; with clean air, water and soil and food
that's fit and safe to eat; a much simpler world, more locally based than today's
where notions like globalization aren't even in the vocabulary; one based on
social equity and justice for all with government, law enforcement and the courts
working to assure it stays that way; one we all want to live in and hope some
day we can; one we want to pass on to future generations; one we can't afford
not to have because the alternative may be no world at all.
We may now be at a key watershed moment where our fate hangs in the balance.
We can either work together for a better, sustainable world or likely become
the first species in it ever to destroy itself. If it happens, we'll likely
take most others with us and not leave much behind for the few hearty ones that
remain. We no longer have the luxury of debate for the kind of world we need
to survive. The giant banks and corporations won't give it to us nor will a
hostile government allied with them. It's up to us to go for it or likely perish
if we fail. A good beginning would be by driving the Federal Reserve "money
changers" out of our temple and the corporate giants with them. A better
world is possible if we remember and live by political theorist Antonio Gramsci's
inspirational words about "the optimism of the will." With it, organized
people can find a way to beat organized money.
Stephen Lendman lives in Chicago and can be reached at
firstname.lastname@example.org. Also visit his blog site at sjlendman.blogspot.com.