Notes on
Revelation--Creature of
[This is a transcription of a two
tape set provided for free by Firefighters for Christ of a talk about the
Federal Reserve System. Place and person names will probably be incorrect but
the overall gist of what is going on is fascinating enough so that you will
hopefully be able to overlook my errors. This work has been edited to make it
more readable.--Moza]
Creature of
Edward Griffin
Introduction:
Mr. Griffin is a graduate of the
Nevertheless, I thought,
accidentally perhaps, Epictetus had given me a track
to run on so-to-speak. Actually it could be the theme since if there's anything
in the world that is deceiving it is the Federal Reserve System. In fact, it is
one of those appearances of the fourth kind which are those appearances which
are not and yet appear to be. I'm going to use that as sort of a hook on the
topic. We'll come back to it from time-to-time and punctuate it if I can
remember to do that because it tells us something at the most fundamental level
about the Federal Reserve System and that is that appearances can be deceiving.
When I did my research on this topic I came to the startling conclusion that
the Federal Reserve System does not need to be audited, it needs to be
abolished. This is very intriguing to think we should audit the Fed but I
discovered that probably if they audited the Fed it would get a clean bill
because it's undoubtedly doing exactly what it's supposed to do according to
the law. What it is supposed to do according to the law is justification for
abolishing it so all we have to do is understand what the Federal Reserve
System is supposed to do and we'll be pretty upset about it. The fact of the
matter is that most people haven't the foggiest idea of what it is in fact
supposed to do.
I came to the conclusion that the
Federal Reserve needed to be abolished for seven reasons. I'd like to read them
to you now just so that you get an idea of where I'm coming from, as they say.
I put these into the most concise phrasing that I can to make them somewhat
shocking and maybe you'll remember them.
1. The Federal
Reserve is incapable of accomplishing its stated objectives.
2. It is a cartel operating against the public interest.
3. It's the supreme instrument of usury.
4. It generates our most unfair tax.
6. It destabilizes the economy.
7. It is an instrument of totalitarianism.
I don't know what you think about
those seven points. I know a lot of you folks agree with them right off the
bat, but I presume that there are some skeptics here tonight and I hope there
are otherwise I am the minister talking to the choir. I know in fact that there
are always quite a few skeptics that come to these meetings and frankly you are
the folks I'm talking to tonight because once, not too long ago, I was in that
same frame of mind. I would've thought to myself those are rather extreme
statements, I don't think they can be supported by fact. Though time doesn't
permit me to cover all of those seven points here tonight, I would like to
splash around on the first four topics for a little while and show you that
there is in fact quite a bit of reason for a rational person to conclude that
those statements are true.
I think the best place to begin is
with the formation of the "creature from
Back in 1910,
The clubhouse is where the Federal Reserve System
was created. Let's retell that story in detail and see how it came about. The
year was 1910, that was three years before the Federal Reserve Act was finally
passed into law. It was November of that year when Senator Nelson Aldrich sent
his private railroad car to the railroad station in
Once they got on board the private
railroad car this pattern continued. They were told to use first names only,
not to use their last names at all. A couple of the men even adopted code-names. The reason for that is so that the servants on
board the train would not know who these people were. They were afraid that if
the servants would talk about it then the word would leak out and it might get
into the press. They traveled for two nights and a day on board this car and
they arrived after a 1,000 mile journey to
For quite a few years thereafter
these men denied that any such meeting took place. It wasn't until after the
Federal Reserve System was firmly established that they then began to talk
openly about their journey and what they accomplished. Several of them wrote
books on the topic, one of them wrote a magazine article and they gave
interviews to newspaper reporters so now it's possible to go into the public
record and document quite clearly and in detail what happened there.
Who were these seven men? The first
one I have already mentioned, Senator Nelson Aldrich was the Republican whip in
the Senate, he was the chairman of the National Monetary Commission which was
the special committee of Congress created for the purpose of making a
recommendation to Congress for proposed legislation to reform banking. The
public was quite concerned in those days over what was going on in the banking
industry; a lot of banks were folding, people were losing their investments in
banks, they had broken their promise to guard the depositors assets, there were
runs on the bank, banks couldn't give the people their money back. In
particular they were concerned over the concentration of wealth in the hands of
a few large banks in
That was one of the purposes of the
National Monetary Commission which was to propose legislation to break the grip
of the money trust and Aldrich was chairman of that committee. He was also the
very important business associate of J. P. Morgan. He was the father-in-law of
John D. Rockefeller, Jr. which means that eventually he became the grandfather
of Nelson Rockefeller, our former vice-president. You remember his full name
was Nelson Aldrich Rockefeller; his middle name being derived from his famous
grandfather.
The second important person there
was Abraham Andrew who was Assistant Secretary of the Treasury. He later became
a Congressman and he was very important in banking circles.
Frank Vanderlip
was there. He was the President of the National City Bank of
Henry Davison was there, the senior
partner of the J. P. Morgan Company. Charles Norton was
there; he was the President of the First National Bank of
These were the seven men aboard that
railroad car who were at
How do we know? For example, Frank Vanderlip who was at the meeting wrote an article that
appeared in the Saturday Evening Post on
That was the reason for the secrecy
at the meeting. Now we know something very important about the Federal Reserve
that we didn't know before, but there's much more to it than that. Consider the
composition of this group. Here we had the Morgans, the Rockefellers, Kuhn, Loeb & Company, the
Rothschilds and the Warburgs. Anything strange about that mixture? These were competitors.
These were the major competitors in the field of investment and banking in
those days; these were the giants. Prior to this period they were beating their
heads against each other, blood all over the battlefield fighting for dominance
in the financial markets of the world. Not only in
This is extremely significant
because it happened precisely at that point in American history where business
was undergoing a major and fundamental change in ideology. Prior to this point,
American business had been operating under the principles of private
enterprise--free enterprise competition is what made American great, what
caused it to surpass all of the other nations of the world. Once we had
achieved that pinnacle of performance, however, this was the point in history
where the shift was going away from competition toward monopoly. This has been
described in many textbooks as the dawning of the era of the cartel and this
was what was happening. For the fifteen year period prior to the meeting on
Jekyll Island, the very investment groups about which we are speaking were
coming together more and more and engaging in joint ventures rather than
competing with each other. The meeting on
I need to define that word so that
you will know what I mean when I use the word cartel. It is a group of
independently owned businesses which come together for the purpose of reducing
or eliminating competition between themselves to enhance their profit margin or
to secure their positions in the market. They do this by various means one of
which is price fixing--no competition on price. There are other means. If we
were forming a cartel here I might insist that I get the north and you can have
the south and we won't compete. Or I would say I'll produce the gizmo and you
can have the widget and we won't compete or we'll share patents and processes
and whatever we do we agree to eliminate competition between ourselves. The
more layers of agreement that we put one on top of the other, the more we
become encased in this cartel structure and we become as one insofar as the
market is concerned even though within that grouping we are separately owned.
This is just as true with a banking
cartel as it is with any other industry. We come to the conclusion when we
analyze the nature of the Federal Reserve System how it operates, read the
Federal Reserve Act, place it against the context of the historical background
and we come smack to the realization that the Federal Reserve System although
it parades around looking as though it's a government operation of some kind,
is merely a cartel of banks right under our noses and it is protected by law. I
sometimes get the impression that it's been there dangerously operating all
these years and we didn't even know it. I saw a video some years ago about the
lava tubes in
Conclusion number 2 about the
Federal Reserve System, a very important thing that we didn't know is the
cartel. There's even more to it than that. Perhaps the third ingredient is the
most important of all and that is the realization that this cartel went into
partnership with the government. Now we have hold of something extremely
significant. Cartels often go into partnership with governments because they
need the force of law to enforce their cartel agreement but in this case they
did it in spades.
Whenever a partnership is formed
there has to be a benefit to the partners otherwise they don't form it. So we
need to ask the question what is the benefit, the payoff, for these two
partners? Why did they go into it? Why did the government go into a partnership
like this and why does the banking cartel? In answering those questions we
finally come to grips with the reality of what this creature from
Let's take a look at it and see how
they create money through the Mandrake Mechanism. I am going to do this in a
very simplified form. I want to warn you that it's going to sound like it's too
simple. It's not. I'm going to strip out all the banking terminology, all the
banker language, all the accounting phrases that need to be defined and speak
in very plain English that anybody can understand. It may sound to you as
though I've simplified it too much and I want to assure you that in spite of
the simple language everything I'm going to tell you is absolutely 100%
technically accurate. The other thing I want to warn you about is don't try and
make sense out of this because it can't be done; this does not make sense and
you'll blow a fuse trying to make it make sense. Just remember that it is a
scam and if you keep that fact in mind then you'll have no trouble
comprehending what's going on.
Here's how it works. It starts with
the government side of the partnership, it starts in
Congress which is spending money like crazy. It spends far more money than it
takes in. It is spending way beyond its income. How can it do that? Basically
this is what happens. Let's say Congress needs an extra billion dollars today
so it goes to the treasury and says "we want a billion dollars" and
the treasury official says "you guys have got to be kidding, we don't have
any money here, you spent it all a long time ago, everything that we've taken
in taxes you fellows have spent by March." Congress says "we thought
that was true but we thought we'd stop by just in case somebody sent some more
in." They get together and they go down the street and they get the idea
that we'll borrow the money. So they stop at the printing office and they don't
print money at the printing office, they print certificates and they're very
fancy things with borders on the edge with an eagle across the top and a seal
at the bottom and it says "US Government Bond" or "Note" or
"Bill" depending on the length of the maturity of it. If you hold it
up to the light it really says "IOU" because that's what it is.
They print these things up and it
looks very impressive and then they offer them to the private sector; they're
hoping that people will come up and loan money to the federal government and a
lot of people do and are anxious to lend money to their government. Why?
Because they've been told by their investment advisors that that's the most
sound investment that you can make. Why? We've all heard that these loans are
backed by the full faith and credit of the
Plenty of money is loaned to the
government but never enough. Congress needs more money than that. They say not
to worry. They go further down the street to the Federal Reserve building. The
Fed has been waiting for them, that's one of the
reasons it was created. By the time they get inside the Federal Reserve
building the officer of the Fed is opening his desk drawer. He knows they're
going to be there and he's ready and he pulls out his checkbook and he writes a
check to the
That means they just wrote a check,
a big rubber check. If you and I were to do that we would go to jail but they
can do it because Congress wants them to do it. In fact, this is the payoff,
this is the benefit to the government side of this partnership, this is how the government gets its instant access to any
amount of money at any time without having to go to the taxpayer directly and
justify it or ask for it. Otherwise, they would have to come to the taxpayer
and say we're going to raise your taxes another $3,000 this year and of course
if they did that, they would be voted out of office real fast. They like the
Mandrake Mechanism because it's a no questions asked source of money. You may
have noticed that it's been many years since Congress has even discussed what
anything costs, it's not an issue. It doesn't make any difference what the cost
is because regardless of the overrun they know they can go down the street to
the Federal Reserve and by law the officer has to write that big check and give
it to them and they're off and running.
There in a nutshell is the reason
the government likes the Mandrake Mechanism--easy instant access to any amount
of money of any kind without the taxpayer being involved directly in the loop. But what about the banking side? This is where it really
gets interesting. Let's go back to that billion dollar check. The treasury
official deposits the check into the government's checking account and all of a
sudden the computers start to click and it shows that the government has a
billion dollar deposit meaning that it can now write a billion dollars in
checks against that deposit which it starts to do real fast. For the sake of
our analysis, let's just follow $100 out of that billion in a check that for
some reason they write to the fellow that delivers the mail to our door. The
postal worker gets a check for $100 and he looks at this thing and he can't
imagine in his wildest dreams that that money didn't exist two days ago
anywhere in the universe. It's spendable so he
wouldn't even care if you told him. He deposits it now into his personal
checking account. Now we're finally out of the Federal Reserve and out of the
government's check and we're into the private banking system. We're in finally
to that part of the partnership which is involved in the cartel.
A $100 deposit has now been made in
the local bank and the banker sees that and runs over to the loan window and
opens it up and says "attention, everybody, we have money to loan, someone
just deposited $100." Everyone is overjoyed at that because that's one of
the reasons they come to the bank, they come to borrow money. That's a sign of
national health if you're in debt so they're anxious to know that the bank has
money to loan, they line up for these loans. They heard the banker and they say
$100 that's not very much and he says not to worry we can loan up to $900 based
on that $100 deposit. How can that be done? It gets complicated the way they do
it and I'll tell you in very simple terms. The Federal Reserve System requires
that the banks hold no less than 10% of their deposits in reserve. The bank
holds 10% of that $100 in reserve, $10, and it loans this first fellow in line
$90. What does he do with it? He wants to spend it so he puts it into his
checking account. In fact it probably goes directly into his checking account.
Let's assume that they gave it to him and he puts it back, when he puts it back
it's a deposit isn't it?
Only a $100 deposit but $900 in
loans and that deposit is still there. Where did the $900 come from and the
answer is the same--there was no money. This springs into existence precisely
at the point at which the loan is made. Notice the difference, an important
distinction is when the money is created out of nothing for the government it
is spent by the government. On the banking side, however, when it's created out
of nothing it's not spent by the banks it is loaned by the banks to you and to me and we spend it. Notice that when they loan it to us we
have to pay them interest on it. Think about this for a minute. This money was
created out of nothing and yet they collect interest on it which means that
they collect interest on nothing. Not too shabby! What a concept, why didn't I
think of that! I wish I had a magic checkbook like that where I could just
write checks all day long and didn't have to have any money any place just
checks, loan it to you folks and you're silly enough to pay me interest on it.
That's how it works.
Now you see what the benefit is to
the banking cartel for being involved in this Federal Reserve System, interest
on nothing. The process doesn't end there, however. It has consequences to you
and to me. I've heard some people say "isn't that interesting, these
fellows are sure smart, I guess they deserve to be rich." It's as though
we're out of the loop, it doesn't affect us any, they got rich but we're ok.
Well no, they got rich alright but they got it by taking it from us. How does
that work? Let's follow this.
This newly created money goes out into
the economy and it dilutes down the value of the dollars that were already out
there. It's like pouring water into a pot of soup, it dilutes the soup. So by
throwing more and more money into the economic soup out there the money gets
weaker and weaker and weaker and we have the phenomenon called inflation which
is the appearance of rising prices. I emphasis the word
"appearance" because in reality prices are not rising at all.
What we're seeing is that the value of the dollar is going down, that's the real
side of the equation. If we had real money based on gold or silver or anything
tangible that couldn't just be created out of thin air, it could be based on
microphones, that they couldn't just create with the stroke of a pen, you would
see then that prices would remain stable over a long period of time.
To illustrate that point, it's
interesting to know that if we had lived in ancient
The ones that got the money first
gained because they had full purchasing power at that instant when the money
was created. By the time they spent it and gave it to you and you spent it on
something and gave it to him and by the time that it got out to the edge of the
pot where most of us are it's diluted. The ones that were right up at the
nozzle got our lost purchasing power. Who are they? Obviously the government
was up there first. Remember the billion dollar check, the very beginning of
this process went to the government and they spent it instantly and that money
went out into the economy and that was the beginning of this ripple effect. Who
else? The next ones were the people who were up at the loan window. They got
the money that was freshly created by the banking system because they were the
borrowers. We all know that in times of inflation borrowers
gain, this is no mystery. We've been told and advised to borrow money and stay
up to the hilt in debt because you borrow in dollars but because of inflation
you can pay back with 50 cent pieces.
So everybody knows about this part
of it. What they forget is that the alleged benefits of doing this are
surrendered to the bank in the form of interest payments. They're really not
gaining that much. The gain that they are getting through the inflation process
they're having to give to the bank in the form of
interest on nothing. And it seems that they're gaining because they have these
paper profits. The value of this real estate is going up and up and up or the
value of my stock is going up and up and up but it's all paper. As far as
purchasing power is concerned it's not going up, up, up at all. Nevertheless they're still having to pay for that illusion in the form of
interest payments on nothing.
Then comes
the inevitable contraction of the economy. People don't realize that the
economy moves traditionally like a sawtooth--it goes
up gradually for a long period of time and seems like forever it's going to go up, you can plan on it forever and don't worry about it and
then clunk! it falls down very quickly and then it
starts the next long climb and people forget that every once in a while it
comes down very abruptly. When it contracts people are extended out there and
they can't service their debt and make the payments and they lose their assets.
Another interesting thing about this is that when the bank loans you money
which it created out of nothing, it costed nothing to
make it, it wants something from you. It wants you to sign on the dotted line
and pledge your house, your car, your inventory, your assets so that in case
for any reason you cannot continue to make your payments they get your marbles,
they get all of your assets. They're not going to lose anything on this.
Whether it's expansion or contraction, inflation or deflation the banks are
covered and we like sheep go right along with it because we haven't figured it
out, we don't know that this is a scam. Of course we have no choice either
right now because it's all enforced by law. We have no escape. We have no
choice but it's even better that we don't understand it because we can't
complain about it either. There you have it.
The two groups that got our lost
purchasing power--is anyone surprised?--the two members of the partnership, the
government and the banking cartel. The two groups that
comprise the Federal Reserve System.
This lost purchasing power which is
going from us to them is a tax. We don't think of it as a tax but it is. We
have no escape from it. In fact, it's more a tax than the income tax or the
excise tax which you can escape in one way or another. You can't escape this
one. There are no deductions, no exemptions, everyone pays it and it is the
most cruel, unfair tax of all because it falls most heavily on those who can
least afford to pay it. It falls on those on fixed incomes, those who are
retired. Anyone who has saved their money is paying this tax in direct
proportion to the degree to which they have been frugal. It's a tax even though
we don't think of it as that and it's time to think of it as that. It's a tax
that goes from us to the government and to the banking cartel. Let's summarize.
What is the benefit to the members of the partnership?
The government benefits because it
is able to tax the American people any amount it wishes through a process which
the people do not understand called inflation. They don't realize they're being
taxed which makes it real handy when you're going for re-election. On the
banking side they're able to earn perpetual interest on nothing. I emphasis the
word "perpetual" because remember when the loan is paid back it's
turned around and loaned out to somebody else. Once that money is created the
object of the bank is to stay "loaned up" as they say. In reality the
banks can never stay 100% loaned up and that ratio varies a lot but the
objective is to stay loaned up to whatever extent is possible. Generally
speaking once this money is created in the loan process it is out there in the
economy forever, perpetually earning interest for one of the members of the
banking cartel which created that money.
There you have in a condensed form a
crash course on the Federal Reserve System and I can assure you that you know
more about the Federal Reserve than you would probably if you enrolled in a
four year course in economics because they don't teach this reality in school.
So what, they say? Can you imagine
that? I knew when I wrote this book and it got out that there would be some
objection to it but I never dreamed what it would be. I couldn't think of any
objection to it, I thought what are they going to say, what are the defenders
of the Federal Reserve System going to say to me? I figured they were going to
try and pick some error that I had made in some technical issue and try and
make me look like a buffoon. But I never dreamed that the only opposition, at
least that I've run into so far, is the question "so what"?
I was on the Pat Buchanan radio show
about a month ago and they have a cohost which is
usually a representative of the opposing point of view and this day they had a
fellow by the name of Barry Lind(?) who was an ACLU type high-powered
intellectual and I was kind of nervous thinking here it comes, I'm going to get
it now and I'm going to be made a fool of right in front of all these millions
of people out there in radio land. I was really worried. It's kind of hard on
these radio shows to get your point across as they don't let you speak like you
folks let me do here. The lion's share of the time goes to Buchanan and then
the cohost gets his shot and then the commercials
come in and you've got three minutes to say your whole thing and they're always
interrupting you. I made my little shot as best I could and it was Barry Lind's
turn and he looked at me and he said: "Well, what you say is true, but so
what?" I couldn't believe it. And then he capped it with, which is the
real argument: "We're living well aren't we?"
This is an interesting question and
I have run into that repeatedly since then. What are you complaining about? we're living well aren't we? And the implication is that
without this scam we couldn't be living well, without this scam somehow we'd be
still crawling around in caves. We wouldn't have society with a high standard
of living, we wouldn't have any of the things that we
cherish without this scam, that's the whole implication. So how do you answer
that? So what? First of all, we are not living that well.
People like Barry Lind are
undoubtedly living very well and there are plenty of people in the system who are living very well. Generally those are the ones who
are up at the nozzle where this new money is coming into the system or they're
involved in the government or they have government subsidies of they're close
to the nozzle. For most people, away from the nozzle, it's not going so well,
we're not living that well. It is a matter of fact that the only reason that
America has been able to maintain the appearance of a high standard of living
since the Federal Reserve System has gotten into full swing, especially after
WWII, is because of the shift towards two family incomes. It now takes two
working people to just maintain the semblance of where we used to be with one
person working in the family. And in spite of the two family income
real wages are down for the common man today, real wages in terms of the number
of hours a person must work in order to acquire the necessities of life.
Young couples who are living on a
single income now have a lower standard of living than their parents did. The
net worth of the average household is falling. The leisure time for the average
American is shrinking. The percentage of families who own their own homes is
dropping. The age at which a family acquires its first home is rising. The
number of families that are counted in the middle class is falling. The number of
people below the poverty line is rising. Personal bankruptcies today are about
three times what they were in the 1960s and over 90% of Americans are broke at
the age of 65. So we're not living well at all as a result of this creature.
Furthermore, there's another thing
wrong with it. That is that when you have a money supply based upon thin air it
not only expands but it contracts. If it were based on gold or silver or
microphones, the money supply couldn't expand and contract because there they
are but when it's politically motivated it can contract and that is the core
cause of all of the booms and busts that have plagued America for so many
years. In other words, this is the concept behind the recession and the
depression and that is another thing that's wrong with it.
The third thing that's wrong with it
is that it is dishonest. You don't really need anything more than that do you? Even if it were the element that was creating our
prosperity, even if it didn't cause recessions and depressions the fact that it
is fraud, the fact that it is deception, it's dishonest and theft is really a
good enough reason in my opinion to get rid of it. That's what's wrong with
this scam.
Let's go back to
From the Bank of
It was a nifty arrangement for these
governments. It was at that point in history that governments' wars began to
heat up. They always had wars but they were relatively small things because
wars are expensive and the people won't pay more than 40% for everything
including wars. But now that they had a way to tax higher than that, they could
engage in very expensive wars. It's at that point in history that
So when it came time to transplant
this concept to America these seven men on Jekyll Island knew very well that
they were creating a central bank; that was the reason that Paul Warburg was so
valuable because he was the man with the intense knowledge, the detailed
technical knowledge of how central banks operate. But they had a problem. How
could they conceal that from the American people because Congress was already
on record as saying they did not want a central bank in
The problem before these men on
The next thing was to sell this
creature to the public. The first draft of the Federal Reserve Act as it was
presented to Congress was called the Aldrich Bill named after the sponsor,
Senator Nelson Aldrich. This was against the good advice of Paul Warburg. He
said: "Nelson, don't put your name on that bill because you are so
identified with big business interests that Congress will vote it down; the
people will not accept it." And apparently Aldrich's ego was too big. He
must've said: "Well no, after all I'm highly respected in the Senate and I
am the Chairman of the National Monetary Commission" and for whatever
reason he insisted that his name be on the bill. It appears that he wanted to
go down in history as the originator of the Federal Reserve System. Warburg was
right. When the bill was introduced Congress put thumbs-down on it. "The Bill of Big Business."
They took the bill back for it was
just a minor setback, they scrambled the paragraphs around a little bit, took
Aldrich's name off real fast and they found a couple of Democrats to sponsor
the bill. This was different. Everybody knew that the Republicans represented
big business but they also knew that Democrats represented the common man, the
little guy, the fellow on the assembly line (like Ted Kennedy). They found a
couple of millionaire Democrats to sponsor the bill. They found Carter Glass in
the House and Senator Robert Owen who himself was a banker. Now it was the
Glass-Owen bill and it was totally different and acceptable.
The next thing, Aldrich and Vanderlip began to give speeches and interviews to
newspaper reporters condemning the bill. They said: "This bill will be
ruinous to banking. It will be terrible for the country." By the time the
common man read that in his newspaper he said: "Oh golly, I guess these
big bankers don't like the bill very much so it must be pretty good."
These fellows were not stupid. You
have to give them credit. They didn't get to be where they were by being
country bumpkins. They understood politics, they understood mass psychology and
they played their cards exceedingly well. Meanwhile these same individuals out
of their own pockets were paying the price for the costs of bringing up what
they called grassroots study clubs all over the country. They sponsored these
clubs and they held public meetings and printed brochures and pamphlets
extolling the virtues of the Federal Reserve System. They gave large amounts of
money to some of the better known universities in America; they created newly
formed departments of economics with that money; they hand picked their own
people to be the professors to head up those departments and then those
professors with all of their academic credentials gave speeches and wrote
scholarly essays extolling the virtues of the Federal Reserve System.
And then at the insistence of Paul
Warburg who was forever the master strategist, they added several very sound
provisions to the Federal Reserve Bill. By that I mean they added some provisions
which seriously restricted the ability of the Federal Reserve to create money
out of nothing. Warburg's associates said, "Paul, what are you doing? We
don't want those in there this is our bill." And his response was this, he
said, "Relax fellas, don't you get it? Our
object is to get the bill passed. We can fix it up later." Those were his
exact words. "We can fix it up later." He was so right. It was
because of those provisions that they won over the support of William
Warburg was right and they fixed it
up later. The Federal Reserve Act since it was passed has been amended over 100
times. Every one of those provisions were long ago
removed and many more have been added which greatly expand the power and reach
of the Federal Reserve System to create money out of nothing. With this kind of
professional strategy and deception these people were real professionals and
the public didn't stand a chance. It is no surprise that popular support was
finally gained for the bill and on December 22, 1913 the bill was passed by
Congress and the following day was signed into law by President Wilson and the
creature from Jekyll Island finally moved into Washington, DC.
Let's stand back from the creature a
few paces and take a look at its general form and shape and see what it is we
got. We got a corporation chartered by Congress which was given an exclusive
franchise to create our nation's money supply. We got a mechanism whereby
Congress has been able to raise unlimited taxes from the American people
without them even knowing that they're paying a tax and we got a mechanism
whereby the banks can earn perpetual interest on nothing. That is the shape and
form of the creature from
First of all it is a half-truth and
it is a non-solution. Let's deal with the half-truth first. It is true that the
Federal Reserve System is not an agency of the federal government in any shape
or form. As I mentioned before, it is a corporation that is chartered by
Congress and like all corporations it has stock certificates and those stock
certificates in this case are held by the banks within the Federal Reserve
System. Every bank that's in the system is an owner of the Federal
Reserve--remember this is a cartel.
They own it in one sense of the
word, in the sense that they have stock certificates but up to that point it
looks as though it has all the attributes of a privately held corporation. But
that's as far as it goes because those stock certificates do not carry with
them any of the attributes of private ownership. For example, the holders of
these certificates cannot sell them. If you can't sell something then you don't
really own it, that's one of the tests of ownership, your ability to dispose of
it. You cannot sell it. Furthermore the larger banks put up more money than the
smaller banks, it's a ratio to their assets, so the larger banks have more
stock certificates in the system than the small ones and yet regardless of the
number that they hold, every bank has just one vote. There's another violation
of the principle of private ownership. Furthermore that vote doesn't buy them
anything. They can't vote for anything of substance; they cannot vote for their
national management which is the most important thing, isn't it? The board of
directors and chairman of the Federal Reserve System are appointed by the
President, they're not elected by the banks that are part of the system, the President does that.
All that the local banks can vote
for with their vote are the boards of directors of the regional banks,
so-called, which are subdivisions within the system. They can't even vote for
the leadership in their local subdivisions because the chairman and the
vice-chairman of those 12 regional banks are appointed by the national board.
They can vote for their officers at those regional banks, the president, the
vice-president and treasurer but guess what? Those are subject to veto by the
national board. Get the picture? All power has always been at the top of this
system. The only thing that the charter allows them to vote for, those boards of directors, of substance is to set the
interest rates within their regions. But this should come as no surprise to
anybody that even that is subject to veto by the national board. You see this
concept of diffusion of power throughout the regions of the
It is not a privately held
corporation in the traditional sense of the word. This idea of diffusion of
power over the 12 regional banks was just a necessity of 1913 to sell the
concept to the American people. If it hadn't been for this aversion against the
concentration of power in
Is it a solution to abolish the Fed
and turn it over to the Congress to run on behalf of the people? At least we
get the dirty bankers out of the loop, right? And that makes everybody feel
good...well, we're not paying interest to the banks anymore but what happens?
Now the government is running the whole thing by itself. Now that solves a lot
of problems doesn't it? Now they're creating money out of nothing all by
themselves. Well, they've always been able to do that. The government doesn't
want to do that, that's the reason they got into this partnership in the
beginning because when the government creates money directly it's too obvious.
That's why the kings and princes of
The government really doesn't want
to do it that way but even if they did it wouldn't make much difference because
it's not important who owns the Federal Reserve System. The important thing is
what it does and as long as it a central bank, which means as long as it has
the power and the mandate to create money out of nothing it will create money
out of nothing. That's what it will do and it will continue to do exactly the
same thing and be run no doubt by the same people as it is now and we would not
have solved anything. We must keep in mind that in
Let's talk briefly about what the
objectives of the Federal Reserve System are. We've been told over and over
again that the purpose of the Fed is to stabilize the economy. Right now with
the interest rates going up, up, up what are we told? why
are they doing that? Well, that's to stabilize the economy so we won't have
massive inflation right? It's being done for us folks! Don't you feel just warm
all over knowing that they're looking out for you? That's always the answer;
the purpose of the Fed is to look out for us and stabilize the economy, put an
end to banking anarchy and all that sort of thing. Right now the textbook that
is most commonly used in our school systems in economics is a book written by
Paul Samuelson and in that book here's what he says regarding the purpose of
the Fed: "The Federal Reserve sprang from the panic of 1907 with its
alarming epidemic of bank failures.
The country was fed-up once and for
all with the anarchy of unstable private banking." That's what the
students are learning. Let's let that go for the moment and say ok if that is
the purpose of the Fed, let's give it a report card and see how well it has
done in stabilizing the economy. Since it was created in 1913 the Federal
Reserve System has presided over the crashes of 1921 and 1929, the Great
Depression of 1929-1939, recessions in the years 1953, 1957, 1969, 1975 and
1981, and a stock market Black Monday in 1987. We all know that corporate debt
is soaring, personal debt is greater than ever before, both business and
personal bankruptcies are at an all-time high, banks and savings and loan
associations have failed in greater numbers than ever before in our history,
interest on the national debt now consumes half of all of our tax dollars,
heavy industry has all but been replaced by overseas competition, we're facing
an international trade deficit for the first time in our history, 75% of
downtown Los Angeles and other metropolitan areas are now owned by foreigners
and over half of the nation now officially is in a state of recession.
That is the report card for the
Federal Reserve System after 80 years of stabilizing our economy. I don't even
think it's controversial to say that it has failed to meet its stated
objectives. The only controversial part is why has it failed? My answer is
because those have never been its real objectives at all.
What are its objectives? What are
the objectives of any cartel? To make money for the members
of the cartel, to improve the profit margins of the members of the cartel and
to stabilize themselves in the marketplace. That is the true objective
of the Federal Reserve System. Now if we hold that up as our guiding principle
and give the Federal Reserve a report card it gets a different grade. In
particular I'd like to have you look with me at three particular objectives which
were very well discussed in that period in which the Federal Reserve System was
created. We always have to go back to that because we can learn so much from
that period of history. There were three things that the bankers, particularly
the ones on
They were concerned that as the
nation was expanding westward and southward new banks were springing up all
along the frontier and every year a little bit more of the nation's capital
would drift away from
Objective number two was to reverse
the trend of what is called private capital formation. That's banker language for
a process in which an individual or a corporation uses their own savings to pay
for something instead of going to the bank and borrowing it, if you can imagine
that happening. It was happening at the turn of the century. The trend was that
businesses in particular were withholding some of their dividends each quarter
and putting that money into a sinking fund and then as the money accumulated or
as the capital formed, then they finally had enough that they could use their
own money to build that new factory or to launch a research & development
project or whatever instead of going to the banks and borrowing for it. The
banks were very concerned over this trend because this is their life-blood.
Loaning money is what they do so how do you loan money when people don't want
to borrow it? The answer they knew, and they talked a lot about this, was to
lower interest rates, get those rates down so that they were so attractive that
people would be crazy not to come to the banks and borrow money at those good
interest rates.
How do you lower interest rates?
Today it's easy when you've got the lever at the Federal Reserve you just throw
it up or down and interest rates go up or down; you have total control over it.
In 1913 there was no lever. The money in those days was backed by gold and
silver and they couldn't control it. They hated that. These guys hate gold and
silver behind money because under those conditions interest rates are the
result of the natural forces of supply and demand; they couldn't just create money
out of nothing. It was the result of the interaction of millions of people
bidding for products and services and digging money out of the ground,
literally gold and silver and converting into money. They were looking for a
way to artificially push the interest rates down. How do you do that?
They said the only way you can do
that is with a flexible currency. That was the cry that they put up in those
days. What the nation needs, they said, is a flexible currency to meet the
demands of industry and agriculture. You still hear that phrase
today--"flexible currency." What does that mean? You need a
dictionary sometimes to look these phrases up. Flexible currency does not mean
the paper stuff in our pockets that bends, it means money created out of nothing.
The trick here is not hard to figure out. If you can create money out of
nothing, you don't have to charge an awful lot of interest on it to show a
profit. It's that simple. If you have a flexible currency you can in fact lower
interest rates and still do pretty well, can't you? They wanted a flexible
currency so they could lower interest rates and entice people back into the
banks to borrow money and to reverse the trend toward private capital
formation. Objective number two.
The third objective was to pass on
the inevitable losses within the banking system on to the taxpayer in the name
of protecting the people. Those were three of the major objectives at the time
the Federal Reserve System was created. I say those are the true objectives of
the Fed. On that basis, let's give it a report card.
Did it keep control in
A few years ago there was a book
that was published by Simon & Schuster and it was called "Secrets of
the
On the subject of the concentration
of power in
The other thing that amazed me was Grider's conclusion. He proved that the Federal Reserve had
always acted against the public interest. He proved that it was designed to do
that from the very beginning so what do you suppose his conclusion was
regarding a solution? that we abolish the Fed? No, nothing that extreme. How about a major overhaul? No,
not necessary. What then? Grider said, you see it's
all so complicated, we're learning as we go, we've made a lot of mistakes but
don't worry folks we're on it now, relax, it's under control, all we need now is
wiser men.
That is the kind of powderpuff criticism it takes to be published by Simon
& Schuster or any of the other major publishing houses which are firmly
interlocked in the investment web on Wall Street. It doesn't make any
difference how accurate your history is; it doesn't make any difference how
much you point with alarm or how righteous you may sound if you have no
realistic solution to the problem then who cares? They
like that because it gives the people the impression that something's being done,
somebody is really calling attention to the problem. But they have no solution
or they're carefully selected so that the ones with the real solutions do not
get the media, do not get the major publishing houses.
This is a tactic which we have to better
understand especially in these critical days ahead. A tactic
of controlled opposition. It makes no difference how accurate you are
when you're pointing to the problems in
Back to the topic. The Federal Reserve System gets an A on its report card for maintaining
control over the financial markets in