MEET EDWARD FLAHERTY, CONSPIRACY POO-POOIST
A response to a critic of The Creature from Jekyll Island
© 2004 by G. Edward Griffin
A response to a critic of The Creature from Jekyll Island
© 2004 by G. Edward Griffin
Edward Flaherty is a Ph.D. of Economics who has been critical of my book, The Creature from Jekyll Island: A Second look at the Federal Reserve.
Periodically I receive inquiries from readers who have visited
Flaherty's web site, and they want to know if I can rebut what he says. I
put this off for a long time because, first, his critique is lengthy
and loaded with minutia that requires considerable time to respond
properly and, second, the number of inquiries has been so small as to
place the importance of this task far down on my list of priorities.
Nevertheless, whenever I get an inquiry, I dread that my reader may
think that a lack of response is a sign of not being able to defend my
work; so, at last, I decided to step up to the plate and swing at the
ball that Flaherty has thrown in my direction.
The essence of Flaherty's
critique is that anyone who opposes the Federal Reserve must be some
kind of a kook, totally lacking in scholarship. He lumps all Fed critics
together, those who bring scholarship to the topic as well as those who
do not, and the mixture tends to discredit everyone. It is an old
tactic of dumping garbage into the grocery bag so that it all smells
like garbage and is rejected in total.
On September 5, 2004, I
received an email from a reader who had compared comments made in my
recorded lecture with what Flaherty's web site says and asked for
clarification. What follows is his inquiry with my reply embedded at
appropriate locations.
My reader begins by quoting from my recorded lecture, followed by a quote from Eustace Mullins:
My lecture: 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 so that,
hopefully, you’ll remember them:
1. The Fed is incapable of accomplishing its stated objectives. 2. It is a cartel operating against the public interest.
3. It is the supreme instrument of usury.
4. It generates our most unfair tax through inflation and bailouts.
5. It encourages war.
6. It destabilizes the economy.
7. It discourages private capital formation.
Eustace Mullins, Secrets of the Federal Reserve:
“...the increase in the assets of the Federal Reserve banks from 143
million dollars in 1913 to 45 BILLION dollars in 1949 went directly to
the private stockholders of the [federal reserve] banks.”
My reply: I
stand firmly behind my seven points but I do not agree with Mullins on
this. Please do not lump my work with other writers. Flaherty does this a
lot. Guilt by association is a ploy that must be challenged and
rejected.
Flaherty: It would be a mistake to examine these conspiracy theories....
My reply: Stop right there. There is nothing about my work that merits being classified as a conspiracy theory.
In modern context, it is customary to associate the phrase “conspiracy
theory” with those who are intellectually handicapped or ill informed.
Using emotionally loaded words and phrases to discredit the work of
others is to be rejected. If I am to be called a conspiracy theorist,
then Flaherty cannot object if I were to call him a conspiracy
poo-pooist. The later group is a ridiculous bunch, indeed, in view of
the fact that conspiracies are so common throughout history. Very few
major events of the past have occurred in the absence of conspiracies.
To think that our modern age must be an exception is not rational. Facts
are either true or false. If we disagree with a fact, our job is to
explain why, not to use emotionally-loaded labels to discredit those who
disagree with us.
Flaherty continued: ... outside the context in which they were written.
My reply: I
try hard not to present text outside its context. When searching through
hundreds of documents and thousands of pages, it is inevitable that
some subtleties of context may be missed, but so far I have not yet been
advised of any instances of this. I welcome any corrections; but, until
specifics are brought to my attention, I stand firm on everything I
have written. Furthermore, I resent the implication that my work could
not stand without taking text out of context.
Flaherty: All
the conspiracy authors whose work I study here profess a belief in the
alleged ‘New World Order’ conspiracy, or some variant thereof.
My reply: An
informed reader would not waste time beyond this point. It is absurd to
claim that a blueprint for a New World Order based on the model of
collectivism is merely “alleged.” The evidence that this is a
demonstrable fact of modern history abounds. Some of that evidence is
presented in my work, The Future Is Calling, found in the Issues section of this web site.
Flaherty: Hypothesis:
Each of the 12 Federal Reserve banks is a privately owned corporation.
Like any firm, their main objective is to maximize profits. They do so
by lending the government money and charging interest. They manipulate
monetary policy for their own gain, not for the public good. Facts:
Yes, the Federal Reserve banks are privately owned, but they are
controlled by the publicly-appointed Board of Governors. The Federal
Reserve banks merely execute the monetary policy choices made by the
Board.
My reply:
Basically, Flaherty is correct as far as he goes. But, as we shall see
in so many of his statements, he stops short of the entire truth. A
half-truth is just as much of a deception as an outright lie. Flaherty
says that the Board of Governors is politically appointed. This is true
and it is supposed to make us feel safe in the thought that the
President responds to the will of the people and that he selects only
those who have the public interest at heart. The part of the story
omitted by Flaherty is that the President does not select these people
from his own personal address book, nor does he ask the public to submit
nominations. With few exceptions, he makes appointments from lists
given to him by the staffs of banking committees of Congress and from
private sources that have been influential in his election campaign. The
most powerful of all these groups are the financial institutions
(including prominent members of the Fed itself) and the media
corporations over which they have effective control. One does not have
to be a so-called conspiracy theorist to recognize the tremendous
influence that these institutions have over the outcome of presidential
campaigns, and anyone with knowledge of how our current political system
works will understand why the President makes exactly the appointments
that the banks want him to make. All one has to do to see the accuracy
of this appraisal is to examine the backgrounds and attitudes of the men
who receive the appointments. While there is an occasional token
individual who appears to come from the consumer sector of society, the
majority are bankers deeply committed to the perpetuation of the system
that sustains them. Anyone who would seriously challenge the power of
the banking cartel would never be appointed. So, while Flaherty is
correct in what he says, the implication of what he says (that the Fed
is subject to control of the people through the political process) is
entirely false.
Flaherty:
Nearly all the interest the Federal Reserve collects on government bonds
is rebated to the Treasury each year, so the government does not pay
any net interest to the Fed.
My reply:
Here is another half-truth that is a whopper deception. It is true that
most of the money paid by the government for interest on the national
debt is returned to the government. That is because the Fed’s charter
requires any interest payments in excess of the Fed’s actual operating
expenses to be refunded. However, before we jump to the conclusion that
this is a wonderful benefit, we must remember that the banking cartel is
able to use tax dollars to pay 100% of its operating expenses with few
questions asked about the nature of those expenses. After all of those
expenses are paid, what is left over is rebated to the Treasury, as
Flaherty says. There is no secret about this, and you will find an
explanation of it in my book. Technically, there is no “profit” on this
money. However, remember that creating money for the government is only
one of the functions of the Fed. The real bonanza comes, not from money
created out of nothing for the government, but from money created out of
nothing by the commercial banks for loans to the private sector. That’s
where the real action is. This is the famous slight-of-hand trick.
Distract attention with one hand while the coin is retrieved by the
other. By focusing on the supposed generosity of the Fed by returning
unused interest to the Treasury, we are supposed to overlook the much
larger river of gold flowing into the member banks in the form of
interest on nothing as a result of consumer and commercial loans.
Flaherty: Hypothesis:
Bankers and senators met in secret on Jekyll Island, Georgia in 1910 to
design a central bank that would give New York City banks control over
the nation’s money supply. Facts: The meeting did take place, but
plans for a return to central banking were already widely known.
Regardless, the proposal that came out of the Jekyll Island meeting
never passed Congress. The one that did, the Federal Reserve Act, placed
control over monetary policy with a public body, the Federal Reserve
Board, not with commercial banks.
My reply:
Here again we have a half-truth that functions as a deception. Plans for
a return to central banking, indeed, were already known, but they were
unpopular with the voters and large blocks of Congress. That was the
very problem that led to the great secrecy. Frank Vanderlip, one of the
participants at the Jekyll Island meeting, later confirmed that, if the
public had known that the bankers were the ones creating legislation to
supposedly “break the grip of the money trust,” the bill would never
have been passed into law. The facts presented in my book, and fully
documented by references from original sources, show that my version is
historical fact. Flaherty attempts to minimize these facts by implying
that the original, secret meeting was not important because the first
draft of the legislation was rejected. What he does not say is that the
second draft that was passed into law was essentially the same as the
first. The primary difference was that Senator Aldrich’s name was
removed from the title of the bill and replaced by the names of Carter
Glass and Robert Owen. This was to remove the stigma of Aldrich as an
icon for “big-business Republicans” and replace it with the more popular
image of Democrats, “defenders of the working man.” It was a strategy
advocated by Paul Warburg, one of the participants at the Jekyll Island
meeting. The fact that Flaherty makes no mention of this suggests that
he has not made an objective analysis but, instead, has presented a
biased critique in the guise of scholarship. His statement that “the
Federal Reserve Act, placed control over monetary policy with a public
body, the Federal Reserve Board, not with commercial banks” cannot be
taken seriously. The Federal Reserve is not a public body in any
meaningful sense of the phrase.
Flaherty: Hypothesis:
Through fractional reserve banking and double-entry accounting, banks
are able to create new money with the stroke of a pen (or a computer
keystroke). The money they lend costs them nothing to produce, yet they
charge interest on it. Facts: The banking system is indeed able
to create money with a mere computer keystroke. However, a bank’s
ability to create money is tied directly to the amount of reserves
customers have deposited there. A bank must pay a competitive interest
rate on those deposits to keep them from leaving to other banks. This
interest expense alone is a substantial portion of a bank’s operating
costs and is de facto proof a bank cannot costlessly create money.
My reply:
Flaherty presents facts that in no way contradict what I said in my
book. I speak of rotten apples, and he speaks of sweet oranges. My book
makes it clear that the bank’s ability to create money is tied to its
reserves. The current average ratio (it varies depending on the bank) is
about ten-to-one. In other words, for every one dollar on deposit and
held in reserve, the bank can create up to an additional nine dollars
out of nothing for the purpose of lending. The statement that the banks
must pay a competitive interest rate on those deposits is humorous when
one considers the math. For example, let us assume for the sake of
illustration that the bank pays 1.5% interest. Then it turns around and
charges, let’s say 6.5% interest. That’s a spread of 5%. Although that’s
a pretty good brokerage commission, it doesn’t sound exorbitant. But,
here is another of those half-truths. Don’t forget that the bank uses
each deposited dollar as a so-called reserve for creating up to an
additional nine dollars in loans. It collects interest on these loans as
well. Let us assume that the bank is not fully loaned up, as they call
it, and has an average of only eight dollars in magic-money loans for
every one dollar on deposit. In that case, it will collect 6.5% interest
on all eight of those dollars. That means, based on each dollar placed
on deposit, the bank will collect 52% in interest. After paying the
original depositor the generous “competitive” amount of 1.5%, the bank
actually receives a brokerage fee of approximately 50%. When Flaherty
says that “This interest expense alone is a substantial portion of a
bank’s operating costs and is de facto proof a bank cannot costlessly
create money,” one can only wonder what banking system he is describing.
It certainly is not the one in the United States.
Flaherty: Hypothesis:
Supporters of the Federal Reserve Act knew they did not have the votes
to win, so they waited to vote until its opponents left for Christmas
vacation. Since a majority of senators were not present to vote on the
bill, its passage is not constitutionally valid. Facts: The
voting record clearly shows that a majority of the senate did vote on
the bill. Although some senators had left Washington for the holiday,
the Congressional Record shows their respective positions on the
legislation. Even if all opponents had all been present to vote, the
Federal Reserve Act still would have passed easily.
My reply: I
agree with Flaherty on this issue and often have said so in the Q&A
portions of my lectures. Please note that this is not contradictory to
what I wrote in The Creature. What I said there is an accurate
historical fact. There is little doubt in my mind that the vote would
have passed eventually, but by slipping it through as they did, it
circumvented the possibility of challenges and debate. I have never
commented on the Constitutionality question, although I tend to think
that a strict interpretation would have made this vote invalid. The
problem here, however, has nothing to do with the Federal Reserve Act
but with the rules of Congress.
Flaherty: Hypothesis:
All money is created only when someone takes out a loan. Therefore,
there can never be enough of this debt-money in circulation to repay all
principal and interest. This imbalance causes inflation, financial
crises, social maladies, and will eventually destroy the economy unless
there is a massive injection of “debt-free” money. This idea is from Dr.
Jacques Jaikaran’s book, The Debt Virus. Facts: The hypothesis
shows an incomplete view of how the banking system interacts with the
economy. The system necessarily creates an amount of “debt-free” money
equal to the interest on its loans. It does this whenever it pays
operating expenses, dividends, or purchases assets. As a result, there
is more than enough money in circulation to retire all bank-related
debt.
My reply: I object to being lumped together with other analysts on this issue. I did not write The Debt Virus, I wrote The Creature from Jekyll Island. On page 191, I explained why I consider the claim that there is not enough money to pay off interest to be a myth
Flaherty: Hypothesis:
The Federal Reserve consistently resists attempts to audit its books.
This is because any independent inspection would reveal the Fed’s
treachery. Fact: Independent accounting firms conduct full
financial audits of the Federal Reserve banks and the Board of Governors
every year. The Fed is also subject to certain types of audits from the
Government Accounting Office.
My reply: I
never wrote or implied, as Flaherty says, that “any independent
inspection would reveal the Fed’s treachery.” What I wrote is: (1) The
Fed resists external audit; (2) If it were audited by an independent
party, I suspect there would be nothing illegal found; (3) The problem
is not that it steals from the American people illegally but that it
does so legally; (4) Therefore, we do not need to audit the Fed, we need
to abolish it.
Flaherty: Hypothesis:
Major European banks and investment houses own the Federal Reserve.
From across the Atlantic they dictate monetary policy for their own
benefit. Facts: No foreigners own any part of the Fed. Each
Federal Reserve bank is owned exclusively by the participating
commercial banks and S&Ls operating within the Federal Reserve
bank’s district. Individuals and non-bank firms, be they foreign or
domestic, are not permitted by law to own any shares of a Federal
Reserve bank. Moreover, monetary policy is controlled by the
publicly-appointed Board of Governors, not by the Federal Reserve banks.
My reply:
Flaherty is basically correct, and I have never claimed in my book or in
my lectures that it was otherwise. I do not appreciate being lumped
together with those who claim foreign control over the Fed. The real
danger in this line of reasoning is that it is often coupled with the
argument that, if we could only get control away from foreigners and put
it into the hands of Congress or the Treasury, then everything would be
all right. In truth, even if the Fed were in the hands of foreigners,
placing it into the hands of American bankers and politician would make
little difference. The Fed does not need to be converted into a
government agency. It needs to be abolished.
The Creature from Jekyll Island A Second Look at the Federal Reserve
by G. Edward Griffin
Where does money come from? Where does it go? Who makes it? The money magicians' secrets are unveiled. We get a close look at their mirrors and smoke machines, their pulleys, cogs, and wheels that create the grand illusion called money. A dry and boring subject? Just wait! You'll be hooked in five minutes. Reads like a detective story — which it really is. But it's all true. This book is about the most blatant scam of all history. It's all here: the cause of wars, boom-bust cycles, inflation, depression, prosperity. The Creature from Jekyll Island is a "must read." Your world view will definitely change. You'll never trust a politician again — or a banker. Available from The Reality Zone at www.realityzone.com/creature.html.
The Creature from Jekyll Island An address by G. Edward Griffin
This is Mr. Griffin's acclaimed lecture based on his book by the same title. Heard by over a million people around the world. Audio cassette or CD. 74 minutes. Available from The Reality Zone at www.realityzone.com/creatfromjek1.html.
The Federal Reserve A discource by G. Edward Griffin
Mr. Griffin, founder of Freedom Force International and author of The Creature from Jekyll Island addresses these issues.
What is the Federal Reserve System?
Who drafted the plan for the Fed
When and where did it occur?
How is money created?
What impact has this on the American dollar?
Should our currency be backed by gold or silver?
Where does Congress get most of its funding?
What is the solution to the problem of fiat money?
Why do bankers get away with it?
What might happen if we continue on our current path?
What might come from a return to constitutional money?
What can concerned citizens do to help?
DVD. 42 minutes. Available from The Reality Zone at www.realityzone.com/griffinfrs.html.
Printed on 09 February 13 at 09:32
URL of this page: http://www.freedomforceinternational.org/printerfriendly.cfm?pffile=meetflaherty_content.cfm
No comments:
Post a Comment