“I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.” – Thomas Jefferson.
The Central Bank
There were numerous attempts in the 1880’s to create a central bank in America – most of these attempts point back to the Rothschilds. It is interesting that both the original American banking houses that represented Rothschild – August Belmont and the Erlangers – funded the North and the South respectively during America’s Civil War. Abraham Lincoln saw the power play behind this masquerade as one bank was seemingly played against the other. The invisible hand underneath was never seen by the multitudes. Lincoln did see it, for he had resisted the pressure to create in America a central private bank that would print its money. He also spotted the “divide-and-conquer” movement where the North was pitted against the South with both sides financed by the same money elite.
Abraham Lincoln battled for the right of Congress and the Treasury to hold the awesome power of coining money. He knew that to surrender this power to private banks was ultimately to surrender the sovereignty of America. Adams and Jefferson had warned of this all along. Defying the hidden bankers, Lincoln issued the greenbacks. Interestingly, Lincoln was soon assassinated.
“The money power preys upon the nation in times of peace & conspires against it in times of war. It is more despotic than monarchy, more insolent than autocracy, more selfish than bureaucracy. It denounces, as public enemies, all who even question its methods or throw light upon its crimes. I have two great enemies, the Southern Army in front of me & the financial institutions at the rear, the latter is my greatest foe.
– President Abraham Lincoln
Forty years later John Pierpont Morgan created the Panic of 1907 where the stock market fell nearly 50% from its peak in 1906, the economy was in recession, and there were numerous runs on banks and trust companies.
Early in 1907, Jacob Schiff of Kuhn, Loeb and Co., in a speech to the New York Chamber of Commerce, warned that “unless we have a Central Bank with adequate control of credit resources, this country is going to undergo the most severe and far reaching money panic in its history.”
The primary cause of the Panic of 1907 was a retraction of loans by some banks that began in New York and soon spread across the nation, leading to the closings of banks and businesses. Complete ruin of the national economy was averted when J.P. Morgan stepped in by organizing a team of bank and trust executives who redirected money between banks, secured further international lines of credit, and bought plummeting stocks of healthy corporations.
Morgan gained numerous holdings, as well as his bid to be the Rothschild’s number-one American agent. J.P. Morgan’s real feat and service to Rothschild in the Panic of 1907 was that he created a mood in America to believe that a central bank would prevent such a panic from occurring again and thus became receptive to a central bank. The severity of the downturn was such that it eventually pressured the United States Congress to accept the proposal by a group of bankers to pass the Federal Reserve Act (or Glass-Owen Bill), essentially a blueprint of the Nelson W. Aldrich plan that had been defeated in Congress earlier.
Senate Republican leader and financial expert Nelson Aldrich headed the National Monetary Commission set up following the Panic of 1907. Aldrich set up two commissions — one to study the American monetary system in depth and the other, headed by Aldrich himself, to study the European central-banking systems and report on them.
Centralized banking was met with much opposition from politicians, who were suspicious of a central bank and who charged that Aldrich was biased due to his close ties to wealthy bankers such as J.P. Morgan and his daughter’s marriage to John D. Rockefeller, Jr.
In 1910, Aldrich and executives representing the banks of J.P. Morgan, Rockefeller, and Kuhn, Loeb, & Co., secluded themselves for 10 days at Jekyll Island, Georgia. The executives included Frank Vanderlip, president of the National City Bank of New York, associated with the Rockefellers; Henry Davison, senior partner of J.P. Morgan Company; Charles D. Norton, president of the First National Bank of New York; and Col. Edward House, who would later become President Woodrow Wilson’s closest adviser and founder of the Council on Foreign Relations. There, Paul Warburg of Kuhn, Loeb, & Co. directed the proceedings and wrote the primary features of the Federal Reserve Act.
This bill allowed a group of bankers to create, buy the shares, and own the Federal Reserve System in 1913. Morgan’s own bank, The Morgan Guaranty Trust, was allowed to be among the inner circle of primary owners of the Federal Reserve.
Despite the importance of the Jekyll Island meeting, it remained a secret to both the public and the government until journalist Bertie Charles Forbes wrote an article about it in 1916, three years after the Federal Reserve Act was passed.
The Federal Reserve Act called for the creation of 12 private regional Federal reserve banks acting as fiscal agents for the U.S. Treasury each with its own branches, board of directors and district boundaries, and the System was to be headed by a seven member Federal Reserve Board made up of public officials appointed by the President. Also created as part of the Federal Reserve System was a 12 member Federal Advisory Committee and a single new United States currency, the Federal Reserve Note.
Rep. Charles Lindbergh Sr., the most vocal opponent of the bill and a member of the House Banking and Currency Committee, who on the day before the Federal Reserve Act was passed told Congress:
“This is the Aldrich bill in disguise…The worst legislative crime of the ages is perpetrated by this banking bill…The banks have been granted the special privilege of distributing the money, and they charge as much as they wish…This is the strangest, most dangerous advantage ever placed in the hands of a special privilege class by any Government that ever existed. The system is private…There should be no legal tender other than that issued by the government…The People are the Government. Therefore the Government should, as the Constitution provides, regulate the value of money.” (Congressional Record, 1913-12-22)
President Wilson named Warburg and other prominent experts to direct the new system, which began operations in 1915 and played a major role in financing the Allied and American war efforts. Warburg was the only appointee asked to appear before the Senate, whose members questioned him about his interests in the central bank and his ties to Kuhn, Loeb, & Co.’s “money trusts”.
With virtually all the banks on the brink of collapse, President Roosevelt succeeded in establishing the Federal Reserve Board as the authority in banking. Independent banks were not forced to join the Federal Reserve System. But those that did not found they could not transact business through any member bank.
The central bank can inflate the currency; it can reallocate funds to distressed areas through loans; and it can create money out of thin air through the use of “fractional banking.” The central banking system now determines interest rates for virtually every bank in the country. A change in the reserve requirement or discount policy will affect the lives of every American, regardless of their economic status.
The actions of The Federal Reserve Board have proven to be the first cause in the death of our economy. The stop-&-go monetary policy created by these institutions makes business conditions unpredictable & thus inhibits investment & productivity. They have also been proven susceptible to political pressure for cheaper credit. When governments control a money supply, even indirectly, they have always throughout history abused that power. Inflationary creation of base money serves to enlarge the governments command over real resources in a way hidden from the people. The wealth-redistributive power of money injections makes it suitable for use as a vote-buying tool. It should be obvious: The monetary disorders of nations can only be caused by their existing monetary authorities, especially in the absence of any real competition, competition, which is the only force which keeps commercial action honest.
The assumption that government has an inherent role in money & banking, (apart from setting standards, as they do with inches and feet, ounces and pounds, minutes and hours) is as preposterous as believing they have a place competing with any private business. In history when banking was most stable it was closest to pure laissez-faire operation. Whenever a nation was growing well, was creative, inventive, & productive you will find a banking system very close to free-enterprise competitive banking. Having politicians & bureaucrats in charge of the money supply is like having Dracula in charge of a blood bank. The banking systems of the western world are the complete & only cause of recessions, inflations, ‘stagflations’ depressions, panics & runs.
Benjamin Franklin made a visit to England in 1763 and while there he was asked to explain the prosperity of the colonies while on the other hand, England was suffering a bust, he replied: “That is simple. It is only because in the colonies we issue our own money. It is called ‘Colonial Scrip’ and it is issued in the proper proportions to the demands of trade & industry.
It was not very long until this information was brought to the Rothschild’s Bank, and they saw that here was a nation ready to be exploited; here was a nation setting up an example that they could issue their own money instead of the money coming through the banks.
The Rothschild’s Bank caused a bill to be introduced in the English Parliament, which provided that no colony of England could issue its own money. “Thus, they had to use English money. The colonies were compelled to discard their money and mortgage themselves to the Rothschild’s Bank of England to get money. Then, for the first time in the history of The United States, money began to be based on debt. Benjamin Franklin stated that in one year from that date the streets of the colonies were filled with the unemployed.
Central banking is barbarous
Writing in 2005, James Turk said central banking is barbarous for the following reasons:
- Money is a product of the free market. It is a fundamental building block of our society because it allows people to interact with one another in the market process. Money existed long before governments and central banks began ‘managing’ it. Tragically, instead of being a neutral and unhindered tool in commerce fair to one and all, money has now become a matter of force and decree, which is disruptive to the market process and therefore harmful to society.
- Prior to the creation of the Bank of England, every exchange in this interchange of activity we call the market process traded value for value. In other words, gold was exchanged for land, silver for food, etc. – assets were traded for assets. The Bank of England changed this process by creating money substitutes. Its banknotes are not a tangible asset like gold or silver. Banknotes are merely money substitutes and not money itself. Money substitutes are a liability of the bank issuing that paper currency, which brings with it all sorts of payment risk that one does not have when using tangible assets as currency.
- Central banks act in secrecy, and consequently, they are not held accountable. They consider themselves – and act as if – they are above the law. What’s more, this secrecy favors the insiders, and it is this fundamental principle upon which central bank market intervention has been constructed, including, for example, the ongoing intervention in the gold market.
- Central banks have freed governments from the need of having to ask their citizens – through their elected representative – for more taxes. Central banks can acquire government debt and use it to create currency out of ‘thin air’ for governments to spend on their latest whim. What’s worse, through their policies that create inflation, central banks enable governments to steal from their citizens.
- There are several tools in the central banks’ arsenal, and one of them is disinformation, which they regularly practice. For example, central banks have come to make us believe that inflation is “rising prices”. But wet streets do not cause rain. By changing the definition of inflation to one of “rising prices” rather than what it really is – monetary debasement engineered by central banks – the true culprit – which is the central banks themselves – is masked, which leads into the next point.
- Not only are central banks guilty of disinformation, deception is one of their most frequently used tools. The history of banking is replete with examples that demonstrate not just a lack of disclosure, but rather, outright deception. To give just one example, look how central banks today account for their gold loans. They carry gold in the vault and gold out on loan as one line item on their balance sheet. In effect, central banks are saying they can ignore the truthful disclosure established by generally accepted accounting principles, and they can as a result report cash and accounts receivable as one and the same thing. Accounting like that would make even the people at Enron blush, but it also highlights the seventh point.
- Central banks have in effect turned the market into a command economy. The power to create money out of thin air brings with it the much greater power to control a nation’s economy and therefore the economic destiny of millions. Central bankers today are no different than the former Soviet Union politburo members, who pulled strings and pushed buttons to try making the economy – which means each and every one of us who participate in the economy – bend to their beck and call. But it is not only the economic destiny of millions that is determined by central banks, which brings us to the eighth reason central banking is barbarous.
- Central bankers and their comrades in government know that this command economy power forces them to walk a fine line between prosperity and economic collapse, given the inherent fragility of this credit-based monetary system they operate. To try reducing this ever-growing fragility – in a vain attempt to make it easier for central banks to effectively and totally control this command economy – governments take away peoples’ freedom to act. Central banks usher in controls (like the reporting now required by the Patriot Act) and policies (ever hear of the ‘too big to fail’ doctrine that underwrites bad decisions at banks with taxpayer money) to perpetuate their stranglehold on power regardless whether they are doing a good or bad job – and it is usually bad – in commanding the economy.
- The command economy that central banks operate encourages the growth of debt, rather than savings. Banks want to expand their balance sheets – i.e., make more loans – in order to earn greater profits, and governments want central banks to accommodate this objective because the resulting credit expansion provides opportunities to acquire new things, which create an illusion of prosperity that makes people believe their wealth is rising. The result of this debt-induced, pseudo-prosperity is a complacent populace, the net effect of which tends to perpetuate government power and politicians’ perquisites. Instead of following a sound and time-tested ‘pay as you go’ policy, consumers, businesses and governments have adopted a new creed – ‘buy now and pay later’. So the mountain of debt that exists in the US today, and the excessive consumption that continues to enlarge that mountain, is directly the result of central banks and their need to grow more debt to avoid the inevitable ‘bust’ that would follow if this growth in debt were to stop. Newsletter writer Richard Russell explains it very simply in just three words – “inflate or die”. That reality explains why Ben Bernacke (presently the chairman of the President’s Council of Economic Advisors, but a former Federal Reserve governor who reportedly is being considered to replace Alan Greenspan as chairman) has said that he would in effect drop $100 bills from helicopters if necessary to inflate the economy.
- What central banks do domestically, they also do to the international monetary system. Thus, the inherent fragility and the huge structural imbalances arising from cross-border trading exist today because of central bank actions. The automaticity of the classical gold standard ensured that imbalances such as trade deficits were relatively short-lived. In contrast, present central bank policies have perpetuated the long running US trade deficits, which are now several decades old. What’s worse, the US trade deficits are growing. The debt being created to finance these deficits impacts the monetary environment of each US trading partner. So central bank engineered imbalances are not just domestic problems; they also have global implications.
Source: James Turk, “The ‘Barbarous Relic’ – It’s Not What You Think“, September 14, 2005
“What is needed here is a return to the Constitution of the United States. We need to have a complete divorce of Bank and State. The old struggle that was fought out here in Jackson’s day must be fought over again… The Federal Reserve Act should be repealed and the Federal Reserve Banks, having violated their charters, should be liquidated immediately. Faithless Government officers who have violated their oaths of office should be impeached and brought to trial. Unless this is done by us, I predict that the American people, outraged, robbed, pillaged, insulted, and betrayed as they are in their own land, will rise in their wrath and send a President here who will sweep the money changers out of the temple.” – Congressman Louis McFadden