Lies the government told you (21 page)

The list of passengers on that train reads like a Who’s Who of banking: Senator Nelson Aldrich, father-in-law of John D. Rockefeller; Frank Vanderlip, vice president of Rockefeller’s National City Bank of New York, the largest bank in America; Charles Norton, president of Morgan’s First National Bank of New York, America’s second-largest bank; Henry Davison, senior partner of J. P. Morgan Company; Benjamin Strong, head of J. P. Morgan’s Banker’s Trust Company; Paul Warburg, representative of the Rothschilds; and of course Abraham Andrew, the Assistant Secretary of the Treasury, ensuring that the federal government would have some say.

These men represented approximately one-quarter of the wealth of the entire world. Yet they were willing to create the Federal Reserve, an entity whose stated purpose was to wrest away
from them
the control of America’s money. These men were not the types who would willingly part with the power they had thus far attained. And, given that the names of Morgan, Rockefeller, and Rothschild are recognizable to this day, it is apparent that they did not.

Purportedly each other’s biggest competitors, having spent their lives fighting for dominance in banking and the financial markets, the men were able to come together for a week and agree on a draft of what was to become the Federal Reserve System. Their only debate was whether to choose partial or full centralization. With the knowledge that Congress would not approve an entirely banker-controlled central bank, they chose the politically astute partial centralization, realizing correctly that once legally passed, the Act could easily be revised in the future as people adapted to the idea.

They were not, as stated, preparing banking reform that was to ensure prosperity for the
American people. Rather, they were able to come together so as to form a partnership that would secure their positions in the market and enhance their bottom lines. In other words, these bankers that day formed a cartel, a cartel that would ensure their continued dominance and survival: a cartel with legitimacy granted by the federal government and sold by deception.

In order to ensure acceptance by the people, a fund of about $5 million was donated by the bankers to academics and scholars and created the National Citizen’s League for the Promotion of a Sound Banking System, whose sole task was expounding the importance of creating a Federal Reserve Bank.
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The league was tasked with issuing statements by expert economists stressing that Wall Street’s “control would be tempered by the influence of the Federal Government . . . which will be great.”
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One of the most outspoken supporters paid by the League was Professor J. Laurence Laughlin, from the University of Chicago, which had been endowed with nearly $50 million by Rockefeller.
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The public was easily swayed by “neutral” scholars, giving credence to what John Adams said 125 years earlier, “[a]ll the perplexities, confusion and distress in America arise, not from defects in the Constitution, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit and circulation.”

There was a final hindrance to their plan, the upcoming presidential elections. The bill had been written and would quickly pass the House and Senate, but the final step was the need for a President who would not veto the bill. President William Howard Taft, who had previously stated that he did not support the bill and would veto it the first chance he got, was running for reelection. At the time, his reelection was almost certain, as the Republicans were the popular party and Taft was not facing any campaign problems. But the bankers, in order to pass their bill through, needed their Democratic candidate, Woodrow Wilson, to take the presidency. This was the same man who had stated during the 1907 Panic that “[a]ll this trouble could be averted if we appointed a committee of six or seven public-spirited men like J. P. Morgan to handle the affairs of the country.”
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Wilson could not be a more perfect candidate.

It was soon apparent that Wilson would not be able to garner enough votes to overcome Taft. It was at this point that ex-president Theodore Roosevelt, a Republican, entered the race as an independent. The bankers had found a way to divide Republican votes and therefore ensure the election of their Democratic candidate. Naturally, the majority of Teddy Roosevelt’s campaign was funded by close allies of J. P. Morgan himself. Wilson won the election, though with only 45 percent of the popular vote. In a two-man race, without the Republican split, Taft was likely to have won, and the Federal Reserve Act would have lost. Instead, less than a year after his election, Wilson signed the Federal Reserve Act into law.

The Non-Federal, Non-Reserve, Federal Reserve

When signing it into law, President Wilson claimed that the Federal Reserve Act would “supplant the dictatorship of the private banking institutions” and “stabilize the inflexibility of the national bank note supplies.” As advertised, the Federal Reserve was to be a politically independent private entity, yet it was also to be controlled by Congress. It was to ensure economic stability and prevent future crises. Originally, the Act was only given a life of twenty years, but that time ran out when FDR was president.

The Federal Reserve is composed of three parts. The first is the Board of Governors, which is responsible for determining monetary policy. Seven people are appointed by the President and confirmed by the Senate for a term of fourteen years, and they decide how much money they will print, what the interest rate will be, and essentially control every aspect of our monetary system.

Then there are the Regional Reserve Banks, which hold the cash reserves of the system, supply currency to member banks, and act as the fiscal agents of the government; each is run by a regional president and regional bank boards elected by member banks.

Finally, there is the Open Market Committee, which implements the monetary policy provided by the Board of Governors. It does this through the manipulation of the money supply via the purchase or sale of government securities. In essence, when the Fed buys government securities, money is made and interest rates fall; when it sells government securities, the money supply is reduced and interest rates rise. The committee is made up of the board as well as five of the regional directors. Bond dealers who earn large commissions on every transaction handle the purchases and sales of the securities.

The most common claim about the Federal Reserve is that it is accountable to the federal government because it is required to report to Congress twice a year regarding its activities. But what the chairman reports and what actually occurs are very different. Because the government has no power over the Federal Reserve, under current law the Federal Reserve cannot be audited. As well, its decisions do not require ratification by anyone in the executive or legislative branches of the government. Each time Congress has requested that the Federal Reserve submit to a voluntary audit, only refusals have been received. The Chairman of the Fed is therefore free to say anything he wants to Congress, and there is no way to verify the truth of his statements.

The monetary policy decisions made by the Fed are made at secret meetings, and Congress, as well as the public, are only made privy to brief reports released weeks later. Any transcripts made of the deliberations are destroyed. Every other government agency, even the CIA and NSA, are required by law to maintain all documents and transcripts of their activities.
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Since the Federal Reserve is not a government agency, these laws do not apply.

I have said this many times on air and elsewhere, and even the Fed’s supporters agree with me on this: The job of the CIA is to steal and to keep secrets; yet, we know far more about the CIA than we do about the Federal Reserve
.

The Federal Reserve is a misnomer. As an initial matter, there is nothing “federal” about it. The government does not own a single share of stock in the Federal Reserve. A Chairman of the House Banking Committee (now known as the House Financial Services Committee) even once noted that whether the Federal Reserve worked with the government’s fiscal policy or chose another direction was based mainly on the Federal Reserve Chairman’s mood. Considering that the United States dollar is the currency of the world and the Federal Reserve controls the dollar, one could argue that the Chairman of the Federal Reserve is more powerful than the President. Money is power, and economic and political events around the world can be manipulated through U.S. monetary policy.

Not only is the word
Federal
in “Federal Reserve” a government lie, but so is the word
Reserve
. A reserve implies, and many people assume, that money is being stored away to use in a crisis, and that gold and other hard money are stored in order to ensure that all debts can be paid. This is not the case. Though original notes issued by the Federal Reserve stated, “This note is legal tender for all debts public and private, and is redeemable in lawful money at the United States treasury or at any Federal Reserve Bank,” this was changed by a 1963 amendment. At that time the Fed began to issue its first series of notes without the redemption promise, while taking notes with the redemption promise out of circulation.

The notes now read, “This note is legal tender for all debts public and private.” By removing the promise, “. . . and is redeemable in lawful money . . .” the Federal Reserve, with the support of the federal government, eliminated a constitutional monetary system and replaced it with paper and public debt.

Then, when some financial institutions attempted to privatize, the Monetary Control Act of 1980 granted to the Federal Reserve control of all national depository institutions, so that all financial institutions that offered deposits against which checks could be written were now under its control, whether or not they had ever been a part of the Federal Reserve System.
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Now the monopoly was also granted the ability to force cartelization on those who wanted to remain private.

The public debt continues to grow exponentially with no end in sight. While the cost to the Federal Reserve for printing a note of any denomination is four cents and the Federal Reserve prints money from air, it charges the federal government interest for the monetary
loans. As well, the Federal Reserve earns interest on the government securities in its ownership. Therefore, the Federal Reserve makes money each time it prints money, and thus it is encouraged to print more money, no matter whether it has any gold to back it up.

The term “reserve” is highly fallacious. The Fed does not want to reserve or save; it wants to spend, because the more it spends, the more interest it makes. The only president to issue an Executive Order beginning the process of abolishing the Fed was President John F. Kennedy, and he was dead three weeks later. His Executive Order Number 11110 returned to the Treasury Department its constitutional authority “to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury.”
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Essentially, the President intended to give back to the federal government the ability to introduce currency backed by silver, without any need for a Federal Reserve. Each ounce of silver, at that time totaling about $4 billion in the government’s possession, could back the new currency. The effect on the Federal Reserve would have been that the new silver-backed money would become preferred to Federal Reserve Notes, which were not backed by anything, and therefore the new currency would eventually end the need for the Federal Reserve and its monopoly money.
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As to the justification for the creation of such a financial behemoth that has come to control every aspect of our monetary policy, where is the economic stability and prosperity promised to us? Since the creation of the Federal Reserve, we have experienced the Great Depression, a recession in the early 1980s, the market crash of 1987, and finally, the economic crisis we find ourselves in today. And during all these events, there has also been the constant depreciation of the dollar. These are the result of the inflationary habits of the Federal Reserve, inflationary habits that no one can control or prevent, not without the abolition of the Fed. Rather than dethroning the moneyed elite, the Federal Reserve was their vehicle for a further power grab.

As F. A. Hayek, a noted Austrian economist, once said, “[t]o put it [money] in the hands of an institution which is protected against competition, which can force us to accept the money, which is subject to incessant political pressure, such an authority will never give us good money.”
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The American dollar today is worth just 7 percent of what it was worth in 1913, when the Fed was established to
stabilize
it
.

Money
Does
Grow on Trees

Those who argued for the Federal Reserve Act focused on the fact that we needed to ensure that our currency was “flexible.” They argued that this flexibility was crucial to ensuring that the federal government and the country did not run out of money. Where they criticized the gold standard for not being able to sustain the economy and allow for growth, they argued that this protection would ensure that we never ran out of money. In essence, the Federal Reserve Act brought into law the idea that money could come from nowhere. Not many people realize how the system works, or where our money comes from.

What supporters of the Federal Reserve Act further argued is that if state banks did not have someone to look out for them, they would in essence overissue their notes and reduce the amount of money they kept in reserve because of their need to make a profit. This action would lead to inflation and economic instability. One would think that if bankers were decentralized and could not depend on each other, then they would sink or swim on their own. In order to continue in prosperity, the bank would likely check itself and make sure that it was safe.

It is actually only when banks are able to cartelize, that is, form their own regulating partnerships so that they can protect themselves from the problem of a bust if they overextend, that they look to the Fed to “protect” them. In a cartel, they can make an agreement to warn each other when reserves are low and therefore not cash the checks from the deposits of banks whose reserves are low. In essence, this is central banking, and this is the Federal Reserve, federal sponsored cartelization, resulting in all of the same worries that purportedly brought the Federal Reserve as an option in the first place.