The Federal Reserve
by Stephen Lendman
www.zmag.org/, June 29, 2006
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 Reserve.
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 them.
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 economic champion.
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. Madison said:
"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 simple terms:
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 and clarity.
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 account.
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 time.
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 lendmanstephen@sbcglobal.net. Also visit his blog
site at sjlendman.blogspot.com.
Stephen
Lendman page
Home Page