The Purpose of the Federal Reserve Banking System Is Quite Clear
In Brief
- The Facts:Centralized
banking has been devised for a purpose unseen and much different than
what the public and most of our elected leaders/legislators believe. The
purpose is not to stabilize, but to destabilize economies for ulterior
motives.
- Reflect On:How does a system described in the article benefit the people at all? What is really going on here and how did we get into this mess? What alternatives and solutions would you think of?
Do Probability
and Statistics interest you? Perhaps not. But what about the
secret workings of a casino? They are but two sides of the same coin.
One side is science, the other application. Economics is the science of
the production, distribution and consumption of goods and services. The
application of economics, if honed to a specific, razor sharp intention
becomes the most powerful weapon on Earth. This weapon is called the
Central Banking system. No country owns this weapon. It is wielded by a
tiny circle of people. The identities of these people are largely
hidden, but it is abundantly clear they owe allegiance to no country,
despot or political ideology. They deploy this weapon at their own
discretion. We are the frogs in the proverbial pot of water and they are
controlling the stove.
Some basics …
In the 2019 fiscal year the United States Government will spend 1.1 trillion dollars more than it will collect in taxes.(source) This
number is called the “budget deficit.” Operating with a budget deficit
is nothing new in our government’s history. This has been going on for
decades, independent of which party has controlled the White House or
Congress. If you were to add together all the deficits over the years
you would arrive at a sum of approximately 22 trillion dollars. This
number is called the “national debt.”
The ability to “pay off” this debt seems
impossible, yet we continue to operate more or less the same way,
borrowing more and more to meet our country’s obligation to social
services, defense, infrastructure, and obligations to our debt holders.
Most people are aware of these staggering numbers, yet few of us seem to
consider basic questions about the system, like “Where does the money
come from?” or “Who would be stupid enough to continue lending us these
sums given our poor track record of even balancing our budget?” The
answers to these questions are astounding and can lead to an
understanding of our nation’s history and monetary system that is
absolutely necessary to put nearly every aspect of geopolitics into
perspective.
In “The
Creature From Jekyll Island,” author G. Edward Griffin adeptly leads the
reader on an intriguing exploration of the origin of money, lending and
the banking system and its codependence with the governance of people.
Through his thorough examination of military conflicts, the rise and
fall of governments and repeated taxpayer funded bailouts, Mr. Griffin
makes it abundantly clear that human history has been driven more by the
inner workings of centralized banking and not the will of individuals
or even the apparent vision of their appointed leaders.
The
Federal Reserve, covertly conceived by the wealthiest few and brought
into existence by Congress in 1913, is part of a global system of
centralized banking that has been devised for a purpose unseen and much
different than what the public and most of our elected leaders and
legislators believe. The result of this system, as evidenced by repeated
examples, has not been to stabilize economies but to destabilize them. In his diligent and erudite analysis, Mr. Griffin goes further in asserting that this has been the intention of the founders of the modern banking system all along.
To accept his bold assertion it is useful to first consider how
this is accomplished before understanding why it is done in the first
place. A full analysis of this subject is obviously beyond the scope of a
single article. However, we can still arrive at a basic understanding
of the system and its repercussions here.
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Show me the money
As stated above, the total national debt is on the order of 22 trillion dollars as of 2019. However, according to The Federal Reserve
there is only about 1.7 trillion dollars of currency in circulation.
Where are the other 20 trillion dollars? Clearly, it exists only as
numbers attached to accounts existing in computer memory. Monetary
transactions are no longer dominated by the exchange of currency backed
by a commodity (like gold or silver), they are instead represented by
the increase of a receiver’s account balance that corresponds to the
equivalent decrement in the account of the payer. This, of course, seems
like a reasonable system that is equitable to both parties. However, if
you examine it more closely, certain fundamental questions arise,
primarily, where did the money come from in the first place?
The
total amount of money in circulation in 1950 was approximately 27
billion dollars. How do we now have 60 times more money? The answer is
that it was created by our banks and the Federal Reserve, an institution
uniquely endowed by our government to “print” money at its own
discretion. This should strike you as unnerving for two reasons. First,
our elected officials do not decide when more money is put into
circulation, they have abdicated that authority to the Federal Reserve
that acts independently. Second, why is there ever a reason to do this in the first place?
Clearly, the amount of goods and
services generated by the country has grown with our population and its
concomitant increase in our labor force. Also, innovation in
manufacturing and the development of technologies have given rise to
less expensive ways to make stuff. We have also engineered methods for
extracting our natural resources, making the required raw materials more
abundantly available for industry. These changes continually influence
the supply and demand for goods and services that ultimately will
dictate what things cost. These are the “market” forces that capitalism
relies upon to self-regulate and ostensibly create an environment for
innovation. If the amount of money in circulation is left untouched,
prices will continually readjust to represent the total value of the
total amount of goods and services generated by an economy. There should
never be a need to put more money into circulation.
Where does money actually come from?
The
expansion of the supply of money is less accomplished by the actual
printing of legal tender than it is by the “creation” of debt. To
illustrate this, let us consider a simplistic model of how a bank works.
First, a bank serves as a secure place to store depositor’s money. The
bank issues the depositor a receipt of deposit. Long ago these receipts
were recognized as being more convenient than actually using coins to
facilitate transactions. The “money” was in a vault, but the receipts of
deposit, when they began to be accepted as payment by a third party,
began functioning as money itself. Griffin explains that this form of
money is termed “receipt money.” The modern representation of this
convenience has taken the form of checking accounts.
When the bank acts as a lending
institution, it can also provide depositors with an added incentive to
keep their holdings there in the form of interest. The bank can pay this
interest on its deposits by lending this money out to other customers
in the form of mortgages, business and personal loans, etc. and charging
a higher interest on these sums. The ability of private citizens and
industry to have access to money to purchase homes or invest in their
businesses or education allows for economic growth and a higher standard
of living and is generally considered a good thing and something we all
depend upon.
When we receive a loan to purchase
something that we cannot “afford” we understand that it has not been
given to us for free. We will pay for it over time. In fact, we will pay
more for it through a loan than if we purchased it outright. The higher
the rate of interest and the longer the term of the loan, the more we
end up paying. In the case of a home mortgage paid over thirty years the
borrower ends up paying several times the amount they borrowed. This is
all spelled out to the borrower when they sign the promissory note and
agree to the terms.
However,
there is something insidious happening when banks lend money today. The
money that gets lent is not possessed by the bank, it is owned by the
depositors of the money. The depositors are free to continue to withdraw
from their accounts, meanwhile the borrowers also have access to the
very same pool of money. When your bank loans a sum of money to another
party the amount in your account there does not get reduced. So, where does the money come from? The bank is essentially creating
money out of debt and subsequently collecting interest on it. This
money is added to circulation and when this happens, the value of every
single dollar in the system gets depleted. Prices go up. This is
inflation, and it can exact a devastating toll on the system depending
on how much debt is created.
As
amazing as it may seem, banks are only required to keep available a
fraction (10% or less) of the amount of money they lend on hand to meet
the needs of their depositors. Clearly there may come a time when a
large number of depositors demand their money to be returned at the same
time. This is the dreaded “run on the bank” which should
send the bank into insolvency. However, this rarely happens these days
for two reasons. One is based upon the confidence we place on our
banking institutions to make sound loans and upon the economy in
general. As long as we are confident that the bank will return our money
if
we asked, we won’t demand it back. Secondly, banks operating in the
central banking system are able to borrow money from other banks to meet
the demands of their depositors when needed.
The Fed is a Monetary Cartel that has been setting us up for bigger failures
The
Federal Reserve, with the power Congress has endowed it with, sets
standards for the portion of money banks within its system are allowed
to loan compared to the money in their “vaults.” Because the
profitability of the bank is directly related to the amount of money
they loan out, banks are motivated to maximize the amount they lend.
Furthermore, because a lifeline to more money through other banks
exists, there is little reason for any individual bank to be
conservative. By uniting banks under common lending practices it becomes
clear that no individual bank will be allowed to go bankrupt. However, there now exists the possibility that many or all banks may fail simultaneously
with a deep and widespread dive in consumer confidence and/or an
accumulation of a great amount of bad debt. Note that the latter will
automatically give rise to the former as in the case of the great
recession of 2008 when it became recognized that a massive number of
irresponsible home loans were made over the course of a decade.
When
such a crisis arises, it is made clear to the public that a dire
situation is at hand and it would result in major suffering for all if
the government didn’t intervene. Government steps in by infusing the
banking system with large sums of money. This money does not exist
anywhere. It is created on the fly by the issuance of government bonds,
essentially IOUs. But who would be willing to accept government IOUs in
such a crisis? Nobody. Nobody, except the Federal Reserve. Through the
purchase of government debt the Federal Reserve floods the system with
essentially a limitless amount of “money.” This money did not come from
the sale of goods and services or gold bars from the treasury. This
money is ink on paper called Federal Reserve Checks which are used to
fund government debt and ultimately result in greater balances in
commercial bank accounts when the government spends it. The crisis gets
averted. Or does it?
In the
short run, the economy does not grind to a halt, and we laud the
intervention as a success. However, there has been no increase in the
amount of goods, commodities or services that the nation possesses.
There is just more money out there. When that happens, the value of
every single piece of currency, including the money in your wallet,
drops. We grumble at the necessity of more taxes and less governmental
services but few taxpayers realize the extent that their own wealth has
been decremented by an unseen cost called inflation, the direct cause of
poor lending practices of our banks. We are told that we are in a
crisis for a number of vague and complex reasons having to do with
rarely agreed upon economic theories and a failure of our leaders to
appreciate them. In fact, the reasons are simple. We have a system where
banks can and will make the most profit if they make more loans. When
they fail, the Federal Reserve ultimately steps in by creating more
debt, which we shoulder by allowing our earnings and savings to be
devalued.
Let us
briefly review. The Federal Reserve has united most banks to accept
universal lending practices. This effectively prevents individual banks
from defaulting on their obligations, but creates a situation where a
nationwide or global banking crisis can occur. When (not if) that
occurs, the Fed has an understanding with the government that it will
infuse the system with money by “buying” government debt (in the form of
government bonds) that will be used to “salvage” the system. The
public will eventually pay for this in two ways. First, through
the obligation to repay the debt and interest and second,
through inflation as money floods the system. It should be clear then
that this maneuver is designed to keep lending institutions in perpetual
business aggrandizing their wealth.
Central Banks make money by doing nothing
It is
important at this point to look more closely at the money making machine
the banks use for generating profit. Recall that banks are only
required to hold no more than ten percent of their deposits (assets) on
hand and are free to loan out the rest. However, there is a greater harm
they can exact through our banking system’s definition of an “asset.”
Let us say that a bank holds $1,000,000 in deposits. It can write
$900,000 worth of loans on that money keeping $100,000, or 10% of it on
its books as “reserves.” That money loaned out does not exist, it is
created the moment the loan is written. Once written, that loan,
effectively the promise of the borrower to pay it back, is now considered an asset of the bank too!
This means that the bank can subsequently write loans of 90% of that
“asset” (or another $810,000) as well. Once the second round of loans go
out, they too are considered assets. This iterative process effectively
allows the bank to “loan” out $9 for every $1 it was given as a
deposit. The bank uses the one million dollars in deposits (reserves) to
“create” nine million dollars in debt and, of course, earn interest on
it. The term “earn” is highly questionable in this scheme. The bank
provides no real service, creates no tangible product, does no labor and
assumes little risk yet is able to collect a continuous stream of money
from assets that never existed until the moment someone agreed to
borrow from them. This is called “fractional reserve banking” and as
shocking as it seems, it exists wherever an economy has abandoned a
commodity (gold or silver) backed currency. In other words, everywhere.
The Fed makes the most when we are at War
Turning back to Mr. Griffin’s assertion that the system has been designed
to create instability, we can see that the banking system reaps the
greatest benefit when needs exceed resources. The Federal Reserve (and
any central bank) has the sole authority to create money when the need
for debt arises. Is it unreasonable that central banks, functioning
without accountability to any authority, government or otherwise, would
welcome every opportunity to exert this power, especially when it is so
lucrative to them?
If we
were to examine the situation from a central banker’s perspective we
would regard global events in the context of debt. What kind of event
creates the greatest and most urgent need for resources? War. War
requires a nation to redirect their youth away from the creation of
goods and services and into military service. There is the cost of
munitions, fuel, care for the wounded and ultimately reparations. The
bigger and the longer the war the better …if you were a central banker.
The Greatest Conspiracy in our history is still in play today
Could
there really be an unholy alliance between central banking and
governmental war machines? This may be obvious to some, but to many this
approaches absurdity. A government for and by the people seems too
powerful to be influenced by financiers and monetary policy makers. If
banking insiders had any influence over our elected officials, the media
would bring immediate public attention to it, right? In order for this
kind of treachery to take place it would require the hidden
collaboration of a very small group of extremely influential persons in
government, central banking and the media. This would be a conspiracy,
which many believe would be impossible today.
There is
no question that it has happened in the past. As detailed in “The
Creature from Jekyll Island,” the United States entered WWI after The Lusitania,
a massive British liner with 195 American civilians on board, was sunk
by a German U-boat attack. Prior to setting sail from New York, The Lusitania
was loaded with tons of weaponry including six million rounds of
ammunition purchased with funds raised for England through JP Morgan’s
investment house. This was done in broad daylight with the ship’s
manifest a matter of public record. The German government protested that
using such a ship to transport weapons was in direct violation of
international neutrality treaties. The American government denied this
was taking place. The German embassy then appealed to the American
people directly, placing ads in newspapers urging them not to book
passage on The Lusitania as it represented a strategic target that would fall under German attack. The U.S. State Department prevented these warnings from being run.
At this
time J. P. Morgan, one of the chief architects of the newly created
Federal Reserve, was profiting from selling English and French bonds to
American investors to raise money for their war effort against Germany.
In addition, the two countries spent significant sums on products
purchased from companies in Morgan’s control. When it became clear that
Germany was nearing victory through their control of shipping lanes in
the Atlantic with their U-boats, Morgan’s income stream was threatened.
England, France and the American investing house knew their causes would
only be saved if the United States entered the war against Germany. At
the time this seemed a practical impossibility as Woodrow Wilson,
approaching reelection, was riding a broad anti-war sentiment sweeping
the country. This all changed when the The Lusitania
sank. Morgan had, in the meantime, purchased control over major
segments of the media and flooded the public with pro-war editorial. The
media, the banks and our government worked together to see that America
entered WWI on April 6, 1917. War expenditures, as always, were fueled
by monetary expansion engineered by The Fed. Between 1915 and 1920 the
monetary supply doubled and the value of our currency dropped by nearly
50%.
WWI is
one of many examples in our planet’s history where the spoils of war
went largely to the inner circles of the banking system that often
finance both sides of conflicts. If this version of history still seems
too incredible to believe, consider this: How often would a nation
engage in war if it didn’t have the money to pay for it? Nations rarely
do, unless they have a central banking system. Conventional
history books paint our species’ long tradition of conflict as good vs.
evil or liberty vs. tyranny while characterizing dictators and their
ideologies as threats to the greater good. The real threat is hidden in
plain sight and is far more diabolical, as it is not confined by borders
or allegiance to governments that inevitably rise and fall.
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