By signing the Federal Reserve Act, Woodrow Wilson was a tool of big money. Yet he belatedly expressed regret, said “I have unwittingly ruined my country,” and called America “one of the worst ruled….most completely controlled governments in the civilized world (run by) a small group of dominant men.”
Today our very freedom and futures are at stake as sinister forces aim to steal them by turning America into a Banana Republic and lock it down in a police state of repression.
The panics, recessions and depression – severe enough to establish a precedent of street protests, harken back in our history for one hundred fifty years. The result of the first ever march on Washington was Businessman/populist Jacob Coxey led his “Coxey’s Army (of around 500) from Massilon, Ohio (beginning March 25, 1893 Easter Sunday) to the nation’s capital to demand jobs and a return to debt and interest-free Greenbacks. Local police intervened. The marchers were disbanded. Coxey was arrested. He spent 20 days in jail for disturbing the peace and violating a local ordinance against walking on the grass. However, he was never charged, then released, and is now remembered for his heroics. He began a tradition later sparking suffragist marches; unemployed WW I veterans for their “Bonus Bill” money; numerous anti-war and earlier civil rights protests; in 2004, one million in the nation’s capital for women’s rights, and the previous day thousands protesting IMF-World Bank policies. Even to the Tea Party protests and Occupy Wall Street of recent years. Whether you agree or disagree with these protests and movements they all have the same common denominator; that is they are grass roots movements.
The late 19th century Populist movement was the last serious challenge to private bankers’ monopoly power over the nation’s money. Journalist William Hope Harvey wrote a popular book titled “Coin’s Financial School” that explained the problem in simple English – that restricting silver coinage was a conspiracy to enrich “London-controlled Eastern financiers at the expense of farmers and debtors.” He called England “a money power that can dictate the money of the world, and thereby create world misery.” He referred to the “Crime of 73″ that limited free silver coinage and replaced it with British gold. It forced America to pay England $200 million annually in gold in interest on its bonds and inspired William Jennings Bryan’s “Cross of Gold” speech. He nearly became president, but lost in a close (big-monied financed) race to William McKinley. The Morgans and Rockefeller’s dominated US banking, and arranged for friendly leaders to run the country.
Various presidents suggested the worst of what’s now clear. By signing the Federal Reserve Act, Woodrow Wilson was a tool of big money.
Franklin Roosevelt was as clear in saying “The real truth (is that) a financial element in the large centers has owned the government since the days of Andrew Jackson.” The wealthy elite sought monopolies for market dominance and trusts – concentrated wealth in a few hands to be manipulated for maximum profits and power. Beginning in the Gilded Age and continuing today the monied interests became strong enough to plant their own agents in the federal commissions, use government regulation for greater control and protect themselves from competition, while keeping prices high.
A cozy relationship between a wealthy elite and politicians has taken the risk out of democracy for these wealthy. The 20th century has been characterized the growth of democracy, corporate power, and propaganda as a means of protecting corporate. It came into its own during WW I, then grew, became dominant, and remains near-omnipotent today. In 1910, seven financial giants met secretly on a privately-owned island off the coast of Georgia and created the Federal Reserve. It became law three years later in 1913. Nominally, Congress and the president appoint Fed governors, but they operate secretly with no government oversight or control. As a privately owned banking cartel, they’re a power unto themselves. The chairman sits at its helm, but he’s a mere tool of the bankers who control him. The 1913 Federal Reserve Act “was a major coup” for them. The Fed exists to serve them, not the government or public interest. Therein lies its problem and why it must be abolished.
For a century, powerful international bankers wanted a private central bank giving them “the exclusive right to ‘monetize’ the government’s debt (that is, print their own money and exchange it for government securities or IOUs.)” The entire Act was written in obscure Fedspeak so no one but its creators knew its purpose. In plain English, the Federal Reserve Act authorized a private central bank to create money out of nothing, lend it to the government at interest, and control the national money supply, expanding or contracting it at will. Nothing has been the same since.
Contrary to common belief, it’s a private banking cartel owned by its member banks in each of its 12 Fed districts. “The amount of Federal Reserve stock” each one holds “is proportional to its size.” The New York Fed is most dominant owning 53% of the System’s shares because the nation’s largest commercial banks are located there of course. The largest banks are financial superpowers with interests in commercial and investment banking, insurance, real estate, home mortgages, credit cards, and virtually all things financial – nationally and globally. The Post-WW II, the center of power shifted from the House of Rothschild to Wall Street with David Rockefeller Sr. (John D’s grandson) becoming a sort of boss of bosses, much like organized crime but much more deadly and all powerful.
The Constitution doesn’t mention a federal income tax because the founders considered the taxation of private income, the ultimate source of productivity, to be economic folly. They also decided that the States and federal government shouldn’t impose the same tax at the same time. Congress was to have responsibility “for collecting national taxes from the States’ ” tax revenues. Direct taxes were to be apportioned according to each State’s population. “Income taxes were considered unapportioned direct taxes in violation of this provision of the Constitution.” Except in times of war, no federal income tax existed until the 16th Amendment was ratified on February 13, 1913 empowering Congress to levy one – unapportioned among the states. Even without one, the economy grew impressively for nearly a century and a half, adequately funded by customs and excise taxes. To get around the law Wall Street packaged the 16th Amendment with the Federal Reserve Act, both in 1913. The original tax code was simple enough to be covered in 14 pages. It’s now a 17,000 page monster, filled with obscure provisions professionals struggle to understand or even know about. It also has “whole pages devoted to private interests,” including loopholes exempting powerful corporations from paying rightfully owed taxes. Before WW II, income taxes affected few people. However, from 1939 – 1944, Congress passed various ones, including to fund the war effort, and began letting workers (voluntarily) pay them in installments. Thereafter, “withholding” became mandatory.
“Today the federal income tax has acquired the standing of a legitimate tax enforceable by law, despite longstanding (Supreme Court rulings) strictly limiting its constitutional scope.” Numerous other taxes were also added, including on capital gains, real estate, corporate income, FICA, sales, luxury, and IRS interest and penalties. With all hidden ones included (dozens in all), up to 40% of an average worker’s income goes for taxes. Enough for some tax protesters to challenge the 16th Amendment’s legitimacy on grounds that it was improperly ratified.
In the 1920s, production rose faster than wages, but (again like today) people could borrow on credit. Then as stocks soared in “value,” Wall Street promoted buying them on margin (namely, leverage on credit) on the premise that higher prices could repay loans. It turned “investing” into a “speculative pyramid scheme” based on money that didn’t exist. The Fed caused the whole scheme with easy and plentiful money (credit). It assured the inevitable crash, and late in the game Fed officials saw it coming. The subsequent fallout was disastrous. From 1929 – 1933, “the money stock fell by a third, and a third of the nation’s banks closed their doors….It was dramatic evidence of the dangers of delegating the power to control the money supply to a single autocratic head of an autonomous agency.” It resulted in a “vicious cyclone of debt….dragging all in its path into hunger, poverty and despair” – the very process repeating today, including insiders being tipped off, selling high, profiting from the collapse at fire sale prices, and letting the public pay for the dirty scheme they had in mind in the first place. Then, like today – shifting huge wealth amounts from “the Great American Middle Class to Big Money.”
Instead of shutting the Fed and prosecuting its conspirators, Congress enacted the Federal Deposit Insurance Corporation (FDIC), “ostensibly to prevent” another collapse. It was for rich and powerful, the equivalent of prominent names today and considered then like now, “too big to fail” run by officials too important to offend. Milton Friedman blamed the Great Depression on the contraction of the money supply, but others disagreed. Chairman Louis McFadden of the House Banking and Currency Committee said it “was not accidental. It was a carefully contrived occurrence.
Though filled with problems and not perfect FDR’s New Deal was remarkable in what it accomplished. It helped people, put millions back to work, reinvigorated the national spirit, built or renovated roads, bridges, schools, hospitals, parks and playgrounds, airfields, and various other infrastructure. It cut unemployment from 25% in May 1933 to 11% in 1937, then it spiked before early war production revived economic growth and headed it lower.
Post-WW II, it dominated economic policy, the idea being that deficit spending could propel nations to prosperity unlike the classical economic belief that money supply increases weren’t needed. Its theory was that when the supply contracts, so do prices and wages naturally leaving everything in balance like before. It didn’t work at a time people wanted jobs, but there were few around. Factories could produce, but there was little demand, and resources were available but unused – for the lack of enough pump priming to reinvigorate a collapsed economy.
Congressman Wright Patman suggested it in 1933 by asking: “Why is it necessary to have Government ownership and operation of banks? The Constitution of the United States says that Congress shall coin money and regulate its value,” not hand it over to predatory private bankers.
Instead of returning money-creation power to the government, Roosevelt allowed “moneychangers” to keep it under an overhauled Federal Reserve – a citadel run from the top down (by) a small cartel of appointed banking representatives (operating) behind a curtain of secrecy,” more powerful than government itself.
In a1964 Committee document titled “A Primer on Money,” it concluded:
“The Federal Reserve is a total moneymaking machine. It can issue money or checks. And it never has a problem of making its checks good because it can obtain the $5 and $10 bills necessary to cover (them) simply by asking the Treasury Department’s Bureau of Engraving to print them.” Although the Fed now returns most interest on its government bonds to the Treasury, of far greater importance is the windfall its member banks get. “The bonds that have been acquired essentially for free become the basis of the Fed’s ‘reserves” – the phantom money that is advanced many times over by commercial banks in the form of loans.”
Virtually all money in circulation comes from the Fed and its member banks, expanded by a factor of about 10 (through fractional reserve lending) for every federal debt dollar monitized. It all “consists of loans on which the banks have been paid interest.” This interest, not what the Fed gets, “is the real windfall to the banks. The limitless money-creation machine is kept hidden “in obscure Fedspeak,” even undecipherable to people who think they understand the process. Multiplying reserves is called fractional reserve banking but seems more like a con game. Each dollar deposited “magically” becomes 10 in the form of loans or computer-generated funds. These reserves are being phased out so the 10 – 1 multiple is actually higher but the principle is the same.
So if $1 million deposited becomes $10 million, and $900,000 can be loaned out (the other $100,000 required for reserves), “money created out of thin air. The windfall afforded banks, the Fed’s owners, that “use the securities as the ‘reserves’ that get multiplied many times over in the form of loans and that generate huge profits for them.
There’s effectively no limit now as if banks exhaust their reserves, they can borrow freely from the Fed – today at zero percent interest. Banks don’t have to have the money they lend before they make loans, because the Fed will ‘provide’ the necessary reserves. Loans then become deposits that banks can freely re-lend many times over – the more deposits, the greater the amount of lending. It’s a process of multiplying the money supply and charging interest for doing it, a very profitable business when working well in a healthy economy.
In plain English, “reserve accounts are a smoke and mirrors accounting trick concealing the fact that banks create the money they lend out of thin air, borrowing any ‘reserves’ they need from the Fed, which also creates the money out of thin air.” What a business, especially given how secretive it is under the protection of the federal government that sanctions the con. There’s more as well. Besides what they loan out, banks “create their own investment money” to use for their own purposes. Traditionally, commercial banks invested conservatively, but not investment banks. They raise money for their clients through stock issuances and sales. Here large sums are available through magical money creation and open-ended Fed borrowing, then leveraged multiple times through more borrowing. The game worked “magically” until it no longer did the old way, so alternatives are used.
The 1929 “Crash” happened on three “Black” days but “continued for nearly four years, stoked by speculators who made huge profits on the market’s” ascent and during its plunge to 11% of its peak value. This so called bear raid targets vulnerable stocks for “take-down” quick profits or corporate takeovers at fire sale prices. When done on a large scale, short selling can impact markets greatly on the downside just like heavy “program buying” can rocket it up. The whole business amounts to blatant manipulation for quick profits. Hedge funds and derivatives are the latest legalized scams used by the wealthy to scam money. Hedge funds are private funds that pool the assets of wealthy investors with the aim of making ‘absolute returns’ – making a profit whether (markets go) up or down” on whatever financial assets they invest in. Leverage is used for maximum profitability, the more of it the greater gain or loss. In futures trading, it’s called the margin – placing “many more bets than if they had paid the full price.” At their peak, they half of the daily equity market trading because of their numbers, size, amount of capital, and frequency of their buying or selling. Derivatives are essentially making “side bets that some underlying investment will go up or down” to insure against the risk. “All derivatives are variations on futures trading and is inherently speculation or gambling.” Familiar examples include puts and calls – on whether assets will go down or up. They’re unregulated, hard to trace, and “very hard to understand,” quite often impossible. Warren Buffett called them “financial weapons of mass destruction” even though he owns a sizable amount of them and incurred considerable losses as a result. Derivatives aren’t assets. They’re “just bets” on how assets will perform using very little real money. Most is borrowed to make private unreported, unregulated bets that have soared to a “notional value” of around $370 trillion, according to the Bank for International Settlements. The amount gets so large because when unregulated “gamblers can bet any amount of money they want,” and when markets work well for them, the sky’s the limit. In 2008 these derivatives nearly collapsed our entire financial system which led to a world wide “great recession”.
Even though banks can create money out of thin air they can still go bankrupt. Because under accounting rules, commercial banks have to balance their books so their assets equal liabilities. They create all the money they can find borrowers for, but if loans default, banks must record a loss. Just imagine – if the government created money and not banks it would lead to economic stability. Future financial crises could be avoided or greatly lessened in their impact. The killer of inflation would be minimal or non-existent and prosperous growth would be long-term. Also bank loans would be far less risky than today assuring steady profits but in smaller amounts. This smaller amounts of bank profits is the only downside and its only a downside to the few monied interests that control the current system. If we are ever to recover our financial and political independence then we need to elect a President and congress who will End the Fed and remake our banking system.