Federal Reserve System
Although listed as part of the Treasury Department, the IRS is actually a private collection agency for the Federal Reserve System. It originated as the Black Hand in mediaeval Italy, collectors of debt by force and extortion for the ruling Italian mob families. All personal income taxes collected by the IRS are required by law to be deposited in the nearest Federal Reserve Bank, under Sec. 15 of the Federal Reserve Act, "The moneys held in the general fund of the Treasury may be ....deposited in Federal reserve banks, which banks, when required by the Secretary of the Treasury, shall act as fiscal agents of the United States."
[...] the most powerful men in the United States were themselves answerable to another power, a foreign power, and a power which had been steadfastly seeking to extend its control over the young republic of the United States since its very inception. This power was the financial power of England, centered in the London Branch of the House of Rothschild. The fact was that in 1910, the United States was for all practical purposes being ruled from England, and so it is today. The ten largest bank holding companies in the United States are firmly in the hands of certain banking houses, all of which have branches in London. They are J.P. Morgan Company, Brown Brothers Harriman, Warburg, Kuhn Loeb and J. Henry Schroder. All of them maintain close relationships with the House of Rothschild, principally through the Rothschild control of international money markets through its manipulation of the price of gold. Each day, the world price of gold is set in the London office of N.M. Rothschild and Company.
When you or I write a check there must be sufficient funds in our account to cover the check, but when the Federal Reserve writes a check there is no bank deposit on which that check is drawn. When the Federal Reserve writes a check, it is creating money.
If there were no debts in our money system, there wouldn't be any money.
Whoever controls the volume of money in any country is absolute master of all industry and commerce... and when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.
First, the concept that the Fed is privately owned is legal fiction. [...] The stock cannot be sold or traded. Stockholders have none of the usual elements of control that come with ownership and, in fact, they are subservient to the central board. The seven members of the Board of Governors are appointed by the President and confirmed by the Senate. It is true that the Fed is independent of direct political control, but it must never be forgotten that it was created by Congress and it can be extinguished by Congress. In truth, the Federal Reserve is neither an arm of government nor is it private. It is a hybrid.
We do not want to merely abolish the Fed and turn over its operation to the Treasury. That is a popular proposal among those who know there is a problem but who have not studied the history of central banking.
It may come as a surprise to learn that the Federal Reserve holds but a small portion of the national debt, only about 9%. Agencies of the federal government have 28% (this constitutes an IOU for money taken from various "reserve" funds, such as Social Security, and spent for other purposes). Foreign investors own approximately 43% (2002 figures), and private-sector investors in the U.S. hold the balance.
The biggest doomsday mechanism of all, however, is the Federal Reserve System. It will be recalled that every cent of our money supply - including coins, currency, and checkbook money - came into being for the purpose of being lent to someone. All of those dollars will disappear when the loans are paid back. They will exist only so long as the debt behind them exists.
Without interest on the national debt, we would save enough to cut our personal income taxes by a third and we could reduce corporate taxes as well.
On average, over $5,000 is extracted from your family each year, not to provide government services or even to pay off previous debt. Nothing is produced by it, not even roads or government buildings. No welfare or medical benefits come out of it. No salaries are paid by it. The nation's standard of living is not raised by it. It does nothing except pay interest.
By 2006, gross interest payments on the national debt were running $406 billion per year. That consumed about 17% of all federal revenue. It now represents the government's largest single expense; greater than defense; larger than the combined cost of the departments of Agriculture, Education, Energy, Housing and Urban Development, Interior, Justice, Labor, State, Transportation, and Veterans' Affairs.
Congress had been assured that the Federal Reserve Act would decentralize banking power away from Wall Street. However, within a few years of its inception, the System was controlled by the New York Reserve Bank under the leadership of Benjamin Strong whose name was synonymous with the Wall Street money trust.
In any event, by the end of the war [World War I], Congress had awakened to the fact that it could use the Federal Reserve System to obtain revenue without taxes. From that point forward, deficit spending became institutionalized.
In practice, the Federal Reserve Bank of New York became the fountainhead of the system of twelve regional banks, for New York was the money market of the nation. [...] Under Strong the Reserve System, unsuspected by the nation, was brought into interlocking relations with the Bank of England and the Bank of France.
The United States entry into World War I provided the impetus for increasing the power of the Fed. [...] Voters ask fewer questions when their nation is at war.
From the outset, the national board and the regional branches were dominated by the New York branch. [Benjamin] Strong ruled as an autocrat, determining Fed policy often without even consulting with the Federal Reserve Board in Washington.
While technically and legally the Federal Reserve note is an obligation of the United States Government, in reality it is an obligation, the sole actual responsibility for which rests on the reserve banks. [...] The government could only be called upon to take them up after the reserve banks had failed.
The dissimilarities [between the Fed and previous central banks in the United States] were in those provisions which gave the Creature more privilege and power than the older central bank. The most important of these was the right to create the official money of the United States. For the first time in our history, the paper notes of a banking institution became legal tender, not only for public debts, but for private ones as well. Henceforth, anyone refusing to accept these notes would be sent to prison. The words "The United States of America" were to appear on the face of every not along with the great seal of the United States Treasury. And, of course, the signature of the Treasurer himself would be printed in a conspicuous location. All of this was designed to convince the public that the new institution was surely an agency of the government itself.
To convince Congress and the public that the establishment of a banking cartel was, somehow, a measure to protect the public, the Jekyll Island strategists laid down the following plan of action:
- Do not call it a cartel nor even a central bank.
- Make it look like a government agency.
- Establish regional branches to create the appearance of decentralization, not dominated by Wall Street banks.
- Begin with a conservative structure including many sound banking principles knowing that the provisions can be quietly altered or removed in subsequent years.
- Use the anger caused by recent panics and bank failures to create popular demand for monetary reform.
- Offer the Jekyll Island plan as though it were in response to that need.
- Employ university professors to give the plan the appearance of academic approval.
- Speak out against the plan to convince the public that wall Street bankers do not want it.
By 1913, the year in which the Federal Reserve Act was passed, those numbers had swelled to seventy-one per cent non-national banks holding fifty-seven per cent of the nation's deposits. Something had to be done to stop this movement. [...] What the bankers wanted - and what many businessmen wanted also - was a more "flexible" or "elastic" money supply which would allow them to create enough of it at any point in time so as to be able to drive interest rates downward at will. That would make loans to businessmen so attractive they would have little choice but to return to the bankers' stable.
In the autumn of 1926 a group of bankers, among whom was one with a world famous name, were sitting at a table in a Washington hotel. One of them raised the question whether the low discount rates of the System were not likely to encourage speculation. "Yes," replied the conspicuous figure referred to, "they will, but that cannot be helped. It is the price we must pay for helping Europe."
The culmination of these discussions took place at a secret meeting in 1927 at which it was agreed that the financial lifeblood of the American people would be donated for a massive transfusion to Great Britain. [...] the purpose of the meeting was to finalize a plan whereby the Governor of the Federal Reserve System was to deliberately create inflation in the U.S. so that American prices would rise, making U.S. goods less competitive in world markets and causing American gold to move to the Bank of England. [...] The purpose of inviting the Germans and the French to the meeting was to enlist their agreement to create inflation in their countries as well. Schacht and Rist would have no part of it and left the meeting early, leaving Strong and Norman to work out the final details between them.
There are few historians who would challenge the fact that the funding of World War I, World War II, the Korean War, and the Vietnam War was accomplished by the Mandrake Mechanism through the Federal Reserve System. An overview of all wars since the establishment of the Bank of England in 1694 suggests that most of them would have been greatly reduced in severity, or perhaps not even fought at all, without fiat money. It is the ability of governments to acquire money without direct taxation that makes modern warfare possible, and a central bank has become the preferred method of accomplishing that. [...] there can be no debate over the fact that fiat money in time of peace has no such justification. [...] Therefore, it is not an exaggeration to say that the Federal Reserve System encourages war.
The banking cartel was able [in World War I], through the operation of the Federal Reserve System, to create the money to give to England and France so they, in turn, could pay back the American banks - exactly as was to be done again in World War II and again in the Big Bailout of the 1980s and the '90s.
[...] Law 12, U.S.C., exempts the privately owned and controlled Federal Reserve Bank from paying income tax.
Federal Reserve notes are not legal tender because there has not been a constitutional amendment to make them legal tender "in obligation of contracts" as the Constitution says. In short, Federal Reserve notes are the equal of fiat money.
The bottom line is that there is no provision in the Constitution for a central bank and that is what the Federal Reserve Bank is.
Thus, from the very outset there were a few Congressmen who realized that the Federal Reserve Act was a gigantic fraud and that the Federal Reserve banks would be a den if thieves. The vote in favor of the act was strongly opposed by the Democrats. All the Senators and all but two Representatives in the House voted against the act.
When the President signs this act the invisible government by the money power, proven to exist by the Money Trust investigation, will be legalized.
The bill establishes national banks to be owned by other banks. The United States Treasury collects taxes from the people. These it will deposit in the regional banks but with no interest or very little. These banks will be controlled by nine directors -- three of them selected by the Federal Reserve Board and six by the banks. That will give the banks full control, with the privilege of the three other directors to look on and see how slick they will do it. It will work out this way: All taxes collected from the people by the United States officers will be deposited in the regional banks. . .
Under the present System, therefore, our leaders cannot allow a serious reduction in either the national or consumer debt.
Why, then, does the federal government bother with taxes at all? Why not just operate on monetized debt? The answer is twofold. First, if it did, people would begin to wonder about the source of the money, and that might cause them to wake up to the reality that inflation is a tax. Thus, open taxes at some level serve to perpetuate public ignorance, which is essential to the success of the scheme. The second reason is that taxes, particularly progressive taxes, are weapons by which elitist social planners can wage war on the middle class.
It is a sobering thought that the federal government now could operate – even at its current level of spending – without levying any taxes whatsoever. All it has to do is create the required money through the Federal Reserve System by monetizing its own bonds. In fact, most of the money it now spends is obtained in that way.
When the Fed creates fiat American dollars to give foreign governments in exchange for their worthless bonds, the money path is slightly longer and more twisted, but the effect is similar to the purchase of U.S. Treasury Bonds.
The previous figures are based on a “reserve” ratio of 10% (a money-expansion ratio of 10-to-1). It must be remembered, however, that this is purely arbitrary. Since the money is fiat with no previous-metal backing, there is no real limitation except what the politicians and money managers decide is expedient for the moment. Altering this ratio is the third way in which the Federal Reserve can influence the nation’s supply of money. The numbers, therefore, must be considered as transient. At any time there is a “need” for more money, the ratio can be increased to 20-to-1 or 50-to-1, or the pretense of a reserve can be dropped altogether. There is virtually no limit to the amount of fiat money that can be manufactured under the present system..
There are three general ways in which the Federal Reserve creates fiat money out of debt. One is by making loans to the member banks through what is called the Discount Window. The second is by purchasing Treasury bonds and other certificates of debt through what is called the Open Market Committee. The third is by changing the so-called reserve ratio that member banks are required to hold. Each method is merely a different path to the same objective: taking IOUs and converting them into spendable money.
The entire function of this machine is to convert debt into money. It's just that simple. First, the Fed takes all the government bonds which the public does not buy and writes a check to Congress in exchange for them. [...] The money created for the bonds is spent by the government, whereas the money created on top of those bonds is the source of all the bank loans made to the nation's businesses and individuals.
The assumption is that, the more we borrow, the more we have to borrow, and that debt based on fiat money is a never-ending spiral leading inexorably to more and more debt.
This is a partial truth. It is true that there is not enough money created to include the interest, but it is a fallacy that the only way to pay it back is to borrow still more. The assumption fails to take into account the exchange value of labor. [...]
The loop through which it travels can be large or small, but the fact remains all interest is paid eventually by human effort. [...] It is a form of modern serfdom in which the great mass of society works as indentured servants to a ruling class of financial nobility.
[...] every dollar that exists today, either in the form of currency, checkbook money, or even credit card money - in other words, our entire money supply - exists only because it was borrowed by someone; perhaps not you, but someone. That means all the American dollars in the entire world are earning daily and compounding interest for the banks which created them.
Let us consider the purchase of a $100,000 home in which $30,000 represents the cost of the land, architect's fee, sales commissions, building permits, and that sort of thing and $70,000 is the cost of labor and building materials. If the home buyer puts up $30,000 as a down payment, then $70,000 must be borrowed. If the loan is issued at 11% over a 30-year period, the amount of interest paid will be $167,806. That means the amount paid to those who loan the money is about 2 1/2 times greater than paid to those who provide all the labor and all the materials. It is true that this figure represents the time-value of that money over thirty years and easily could be justified on the basis that a lender deserves to be compensated for surrendering the use of his capital for half a lifetime. But that assumes the lender actually had something to surrender, that he had earned the capital, saved it, and then loaned it for construction of someone else's house. What are we to think, however, about a lender who did nothing to earn the money, had not saved it, and, in fact, simply created it out of thin air? What is the time-value of nothing?
When banks place credit into your checking account, they are merely pretending to lend you money.
After all, what's wrong with a little debt, prudently used and intelligently managed? The answer is nothing, provided the debt is based on an honest transaction. There is plenty wrong with it if it is based upon fraud.
If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash, or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless situation is almost incredible - but there it is.
It is difficult for Americans to come to grips with the fact that their total money-supply is backed by nothing but debt, and it is even more mind boggling to visualize that, if everyone paid back all that was borrowed, there would be no money left in existence. That's right, there would not be one penny in circulation - all coins and all paper currency would be returned to bank vaults - and there would be not one dollar in any one's checking account. In short, all money would disappear.
The first fact that needs to be considered is that our money today has no gold or silver behind it whatsoever. The fraction is not 54% nor 15%. It is 0%. It has travelled the path of all previous fractional money in history and already has degenerated into pure fiat money. The fact that most of it is in the form of checkbook balances rather than paper currency is a mere technicality; and the fact that bankers speak about "reserve ratios" is eye wash. The so-called reserves to which they refer are, in face, Treasury bonds and other certificates of debt. Our money is pure fiat through and through.
In truth, money is not created until the instant it is borrowed. It is the act of borrowing which causes it to spring into existence. And, incidentally, it is the act of paying off the debt that causes it to vanish.
The reason the Federal Reserve appears to be a complicated subject is because most discussions start somewhere in the middle.
By 1982, almost every Third-World government was running behind in payments. Mexico led the way by announcing it could not send any more money that year on its $85 billion debt. Federal Reserve Governor Henry Wallich rushed to Switzerland to negotiate an IMF loan of $4.5 billion through the Bank of International Settlements. The central banks of Europe and Japan provided $1.85 billion (about 40%); the rest came from the Federal Reserve.
The Panama bailout was a unique play. In no other country did we have an income-producing property to give away, so from that point forward the bailout would have to be done with mere money. To pave the way for that, Congress passed the Monetary Control Act of 1980, which authorized the Federal Reserve to "monetize foreign debt." [...] Until then, it was permitted to make money only for the American government. Now, it was able to do it for any government. Since then it has been functioning as a central bank for the entire world.
The IMF / World Bank is the protege of the Federal Reserve. It would not exist without the flow of American dollars and the benevolence of American leadership. The Fed has become an accomplice in the support of totalitarian regimes throughout the world.
The counterfeit options is available only if a country happens to be in the unique position of having its currency accepted as the medium of international trade, as has been the case for the United States. In that event, it is possible to create money out of nothing, and other nations have no choice but to accept it. Thus, for years, the United States has been able to spend more money than it earned in trade by having the Federal Reserve create whatever it needed.
[...] The result is that America has continued to finance its trade deficit with fiat money - counterfeit, if you will - a feat which no other nation in the world could hope to accomplish.
[...] In truth, America is not hurt by a trade deficit at all. In fact, we are the benefactors while or trading partners are the victims. We get the cars and TV sets while they get the funny money. We get the hardware. They get the paperware.
[...] But when the day arrives - as it certainly must - when the dollar tumbles and foreigners no longer want it, the free ride will be over. When that happens, hundreds of billions of dollars that are now resting in foreign countries will quickly come back to our shores as people everywhere in the world attempt to convert them into yet more real estate, factories, and tangible products, and to do so as quickly as possible before they become even more worthless. As this flood of dollars bids up prices, we will finally experience the inflation that should have been caused in years past but which was postponed because foreigners were kind enough to take the dollars out of our economy in exchange for their products.
The chickens will come home to roost. But, when they do, it will not be because of the trade deficit. It will be because we were able to finance the trade deficit with fiat money created by the Federal Reserve. If it were not for that, the trade deficit could not have happened.
Through a complex tangle of bank loans, subsidies, and grants, the Federal Reserve is becoming the "lender of last resort" for virtually the entire planet.
The savings-and-loan industry, is really a cartel within a cartel. It could not function without Congress standing by to push unlimited amounts of money into it. And Congress could not do that without the banking cartel called the Federal Reserve System standing by as the "lender of last resort" to create money out of nothing for Congress to borrow. [...]
The thrifts [S&Ls] have become the illegitimate half-breed children of the Creature. [...]
If America is to survive as a free nation, her citizens must become far more politically educated than they are at present. As a people, we must learn not to reach for every political carrot dangled in front of us. As desirable as it may be for everyone to afford a home, we must understand that government programs pretending to make that possible actually wreak havoc with our system and bring about just the opposite of what they promise.
The scam could never work unless the Fed was able to create money out of nothing and pump it into the banks along with "credit" and "liquidity" guarantees. Which means, if the loans go sour, the money is eventually extracted from the American people through the hidden tax called inflation. That's the meaning of the phrase "lender of last resort."
One of the standard variations of the Final Maneuver is for the government, not always to directly provide the finds, but to provide the credit for the funds. That means to guarantee future payments should the borrower again default. Once Congress agrees to this, the government becomes a co-signer to the loan, and the inevitable losses are finally lifted from the ledger of the bank and placed onto the backs of the American taxpayer.
Money now begins to move into the banks through a complex system of federal agencies, international agencies, foreign aid, and direct subsidies. All of these mechanisms extract payments from the American people and channel them to the deadbent borrowers who then send them to the banks to service their loans. Very little of this money actually comes from taxes. Almost all of it is generated by the Federal Reserve System. When this newly created money returns to the banks, it quickly moves out again into the economy where it mingles with and dilutes the value of the money already there. The result is the appearance of rising prices but which, in reality, is a lowering of the value of the dollar.
The American people have no idea they are paying the bill. They know that someone is stealing their hub caps, but they think it is the greedy businessman who raises prices or the selfish laborer who demands higher wages or the unworthy farmer who demands too much for his crop or the wealthy foreigner who bids up our prices. They do not realize that these groups also are victimized by a monetary system which is constantly being eroded in value by and through the Federal Reserve System.
Since its [The Fed] inception, it has presided over the crashes of 1921 and 1929; the Great Depression of '29 to '39; recessions in '53, '57, '69, '75, and '81; a stock market "Black Monday" in '87; and a 100% inflation which has destroyed 90% of the dollar's purchasing power.
Here, then, were the main challenges that faced that tiny but powerful group assembled on Jekyll Island:
- How to stop the growing influence of small, rival banks and to insure that control over the nation's financial resources would remain in the hands of those present;
- How to make the money supply more elastic in order to reverse the trend of private capital formation and to recapture the industrial loan market;
- How to pool the meager reserves of the nation's banks into one large reserve so that all banks will be motivated to follow the same loan-to-deposit ratios. This would protect at least some of them from currency drains and bank runs;
- Should this lead eventually to the collapse of the whole banking system, then how to shift the losses from the owners of the banks to the taxpayers.
- How to convince Congress that the scheme was a measure to protect the public.
Here were representatives of the world's leading banking consortia: Morgan, Rockefeller, Rothschild, Warburg, and Kuhn-Loeb. They were often competitors, and there is little doubt that there was considerable distrust between them and skillful maneuvering for favored position in any agreement. But they were driven together by one overriding desire to fight their common enemy. The enemy was competition.
The purpose of this meeting on Jekyll Island was not to hunt dicks. Simply stated, it was to come to an agreement on the structure and operation of a banking cartel. The goal of the cartel, as is true with all of them, was to maximize profits by minimizing competition between members, to make it difficult for new competitors to enter the field, and to utilize the police power of government to enforce the cartel agreement. In more specific terms, the purpose and, indeed, the actual outcome of this meeting was to create the blueprint for the Federal Reserve System.
The Venetians control the Federal Reserve System; they lend to us, but we do not lend to them; they are the head, and we are the tail.
Because once they got the Federal Reserve into position, locked into position illegally, but locked into a position of power, then they could put on the dollar "Annuit Coeptis," "Our Enterprise is now a Success," meaning, "We have now taken over America, and America was sound asleep and didn't even know it." So what I'm saying is that we have all been had.
They [the bankers] pushed the bill through just before Christmas 1913 when many Congressmen were already at home with their families for the holiday. Now they could control American interest rates and make a fortune lending the government money that doesn’t exist and charging interest on it.
When the Federal Reserve Bill was going before Congress the bankers who had written the bill vehemently opposed it in public. The bankers were very unpopular by this time and they wanted to give the impression that the bill was bad for them, so increasing the public support for it to be passed.
1902, the Rothschilds sent their agents, Paul and Felix Warburg, to America to engineer the creation of the Federal Reserve.
The Bank of the United States caused so much poverty, bankruptcy and rebellion, that it was eventually closed down, but soon after that came its replacement, the Federal Reserve. The Rothschild’s main banking operation in America in the early part of this century was Kuhn, Loeb and Company in New York which was headed by Jacob Schiff.
One of the Brotherhood’s most important coups was the creation in 1913 of the Federal Reserve, the so-called ‘central bank’ of the United States. It is neither federal nor has any reserve. It is a cartel of private banks owned by the 20 founding families, mostly European, which today decides the interest rates for the United States and lends non-existent money (figures on a screen) to the US Government on which the taxpayers have to pay interest. This is what we call the ‘American Deficit’ - it is fresh air. The Federal Government of the United States does not own a single share in the Federal Reserve and American citizens cannot purchase them.
Profits exceed $150 billion a year and the Federal Reserve has not once in all its history published audited accounts. This income is assured because:
1. the Brotherhood control the US Government (the Virginia Company under another name) which continues to borrow ‘money’ from the ‘Fed’
2. they also control the privately-owned Internal Revenue Service (IRS), the illegal terrorist organization which collects the taxation from the people
3. it controls the media to ensure that people never find out about 1 and 2
Patriots believe that the creation of money by the private banks is unconstitutional in the United States because the Constitution says that Congress must create the currency. But it doesn’t say that. Article One, Section 8, says that: “Congress shall have the power to coin money and regulate the value thereof.” It does not say (on purpose) that only Congress shall have that power, nor that they have to use that power. Section 10 says that no State shall coin money and that gold and silver coins shall be the only payment of debts. So paper money must be unconstitutional? No. An area of Maryland was given to the new Congress to create the District, not the State, of Columbia for the new federal capital called Washington DC. Within this district is the privately-owned central bank of America, the Federal Reserve, which issues the nations paper currency. The District of Columbia is effectively isolated from many of clauses in the Constitution which apply to the States. The main Founding Fathers would have known that.
The interest on the national debt must be paid, and is paid, by the Treasury of the United States issuing T-Bills and Treasury Notes.