Since the creation of the Federal Reserve, the dollar has plunged in value (a 1913 dollar is worth around 12 cents in 1987) We experienced the worst financial period in our history under the watch of the Fed - we have experienced the same periodic occurrences of recessions under the Fed as we have had before the Fed (and after 1978) The track record of the Federal Reserve is abysmal whether you want to talk about stable prices, employment, or interest rates. It never fails to amaze me how people want to exempt the Fed from their performance, while in the same breath tout their goals which they have never achieved.

The First Bank of the U.S., established in 1791, performed a mixture of central and private banking functions. It was a privately owned and controlled bank, and coined and printed the US's money, money from which it demanded more back than what is created (the interest charge - which was in gold, for money that they didn't even have to break a sweat to create). The bank was patterned after the privately owned Bank of England (as are all of the major central banks with the exception of the Russian Gosbank) and pushed by Hamilton of whom is written in 'The Life and Times of James Madison" by W.C. Rivers, "He [Hamilton] frankly avowed his distrust of both Republican and Federal Government... in his private opinion he declared, that the British Government was the best in the world" In a letter from Morris to Robert Walsh 2/5/1811 it was stated about Hamilton that, "He disliked the Constitution... and he hated Republican Government" It turns out that Hamilton 1st Bank was really William Bingham's 1st Bank as a letter from Bingham to Hamilton is listed in Oliver Wolcott's Historical Papers where Bingham (a Philly banker) laid out the plans and structure of the bank. Guess who became a director when the bank opened? The bank was such a hit Congress refused to issue another charter (why, if it was such a benefit to the American people?) in 1811. Luckily for the banking community the War of 1812 conveniently happened which took Congress' mind off the banking question at which point the 2nd bank got started.

It was given the power to create $60 million, which it bought interest bearing government bonds with (1816). The 2nd Bank of the US (also privately owned and controlled, and again creating its own money and charging gold for interest on it) was run by the President of the 1st Bank, Nicholas Biddle who once had a very interesting conversation with Andrew Jackson (before his presidency) Biddle: "Andy, I can make or break any businessman in the nation" Old Hickory: "How can you do that Nick?" NB: "Simply by extending or withholding a businessman's loan." AJ: "Then Nick, by the Eternal I'll kill your bank" The bank quickly increased the money supply until 1819 when it reversed itself and started a large contraction resulting in the 1819 recession which emptied the west of gold and transferred land ownership to the banking community. (It was here that the constitutional issue was 1st addressed with Justice John Marshall creating the concept of 'implied powers' regarding the Constitution - which means that every constitutional power can be given away - see the United Nations charter for an example) Biddle asked Congress to renew the charter during Jackson's re-election bid - 4 years before it was due for renewal; Jackson was not distracted from his bid and vetoed the bill. The public voted him back by an almost 2-1 margin over pro-bank Henry Clay. Biddle then refused a presidential order to withdraw government funds from the bank and instead had the banking system seesaw credit, 1st withdrawing it then replenishing it, which of course created havoc with the economy. He is quoted a saying "Nothing but the evidence of suffering abroad will produce any effect on Congress... all other Banks and all the merchants may break, but the Bank of the United States shall not break." The public was unaware as to the source of the economic disturbances. Jackson told VP Van Buren "The Bank, Mr. Van Buren is trying to kill me. But I will kill it." There is a question as to whether Jackson meant politically or physically - but not too much later Richard Lawrence attempted the 1st presidential assassination (1/30/1885 for you trivia buffs). The 2nd Bank of the US did not get it's charter renewed.

Which brings us to the events surrounding the National Banking Act of 1863 where we find - surprise! another war (the civil war). This is also the 1st time the government issued debt-free paper - Lincoln's greenbacks. Why? He needed the money to keep the Union together, the Wall Street bankers offered him a loan at a mere 24-36% interest (Appleton's Cyclopedia for 1861 page 296 in case your local bookstore has a copy lying around). Lincoln had $60 million of full legal tender US notes printed via acts on 7/17/61 and 2/12/62. The bankers were so thrilled they hastily had a small convention (4 days after the Legal Tender act was passed) and soon after Congress added the 'Exception Clause' to the greenbacks making them ineligible to be used on import duties and interest on the debt. Since we were in war there was a great demand for imports. The importers had to use gold, it took them $2.85 worth of greenbacks to buy $1 of gold. They passed along their added expenses to the price of their goods. The banker then used the depreciated greenback to buy government bonds at the face value of the greenback and drew interest in gold in advance - which he then sells the next day for the importer's greenbacks and so on and so on... not bad work if you can get it. The national banking act was pushed by Senator John Sherman. The following letter was written by the famous Rothschild bankers of England on 6/25/1863 to Wall Streeters Ikleheimer, Morton, & Vandergould, "A Mr. John Sherman has written us from a town in Ohio, U.S.A., as to the profits that may be made in their National Banking business under a recent act of your Congress... Apparently this act has been drawn upon the plan formulated here last summer by the British Bankers Association... 'The few who understand the system', he says, 'will either be so interested in its profits, or so dependent on its favors, that there will be no opposition from that class, while... the great body of people... will bear its burdens' " they received a reply from the NY bankers in a 7/5/63 letter, "...He [Sherman] rightfully thinks he has everything to gain both politically and financially... by being friendly with men and institutions having large financial resources..." They also included a circular on how to get a charter and how to make a fortune off it. Another Bankers circular - the Hazard Circular - stated, "It will not do to allow the greenback, as it is called, to circulate as money any length of time, as we cannot control that." It was also quoted in 'Dollars and Sense' by Congressman Jerry Voorhis (Ca.) in 1938 Under the National Banking act the bankers invested greenbacks in government bonds. In addition to the bonds he then received 90% of the sum back in national bank notes to carry out his banking business. The bankers drew interest twice from one investment. Nice work if you can get it (deja vu!). The banking community dropped the circulation of money from 1.8 Billion in 1866 to 696 million by 1877 producing a severe recession of which the United States Monetary Commission wrote, "The true and only cause of the stagnation in industry and commerce, now and everywhere felt, is the fact everywhere existing of falling prices, caused by a shrinking volume of money." Senator John Logan states on 3/17/74 about the 1873 panic "No, sir, the panic was not attributable to the character of the currency, but to a money famine, and to nothing else." Why would Congress pass all these acts? Well at this time the banking interest had about "189 representatives in Congress" (Mrs. S.E.V. Emery 1887) It is interesting to note that on 12/23/1793 the following was passed - "Any person holding any office or any stock in any institution in the nature of a bank... cannot be a member of the House whilst he holds such office or stock." Signed by Washington. I don't know as of today - but it wasn't repealed back in the 1860's. Which brings us to the bank panics which eventually led to the Fed.

About the 1893 panic - Senator Robert Owen (a bank owner himself) testified to Congress that he received what was known as the Panic Circular of 1893 from the National Banker's Association. It stated, "You will at once retire one-third of your circulation and call in one-half of your loans..." Congressman Charles Lindbergh (father of the famous aviator) saw this letter and remarked that is was intended to cause "business men to appeal to Congress for legislation that would favor the bankers." The final straw was the 1907 panic. The founding father of the Fed, Paul Warburg (whose family is a principal stockholder in the German central bank) spoke before the members of the Twin City Banker's Club in St. Paul on 10/22/15 where he said "nothing is more ungovernable than a man reputed to be prosperous;and, on the other hand, nothing is more receptive of authority, than a man who is humbled by misfortune.... So, you see, even in those days [he was telling a story about ancient Romans] they required a 1907 in order to be ready for some sound legislation." Remember the talk about Perot being the first 3rd party candidate in a long while to get a significant amount of the vote? Guess who was the previous one to do it - independent (Republican) Teddy Roosevelt who ran against Democratic Wilson (in favor of the Fed) and Republican President Taft (against the Fed). Wilson won.

According to the 1964 House of Rep Banking & Currency committee pub 'Money Facts' (9/21/64) "Do private bank interests influence Federal Reserve policy? Yes.... These presidents are elected by the individual regional banks' nine-man board of directors with its preponderance of private bank representatives."

There never was a government owned or controlled central bank. Most of the central banks of the major nations are private banks as was the Bank of England the colonists suffered under.

"The hard truth is that the administration cannot change Federal Reserve policy." 1964 House B&C. In Johnson's 1964 Annual Economic Report to Congress he actually asked the Federal Reserve not to undermine his efforts to reduce unemployment and raise incomes. The Fed refuses to submit to even a government audit. The Fed is about as entrenched as an entity can get. Witness the 1920-21 recession. The following is from that great conspiratorial body of work - the Congressional Record; specifically Senate document #310 67th Congress 4th session (2/24/1923) where the entire text of a Federal Reserve meeting held in secret in Wash DC on 5/18/1920 took place. In attendance were 5 board members, the Federal Advisory Council (elected by the directors and always bankers) and the Class 'A' directors. Governor WPG Harding opened the meeting, "Now, there is undoubtedly a spirit of extravagance in this country which must be curbed." Which is strange considering that they encouraged farmers to expand as he noted, "Every effort should be made to stimulate necessary production, especially of food products." Hmm...lots of borrowing and lots of collateral. "We can restrict credit and expand production, letting the expansion of production proceed at a greater rate than the restriction of credit, and we are then working in the right direction." Anybody have any ideas of how that's possible?? Perhaps it wasn't the economy's production he was thinking of expanding. "It is very clear that if we find it impossible under the present circumstances to increase the volume of production of the most essential articles, the only thing for us to do is to reduce consumption of those articles." And most people think periods of expansion and recession just happen and are beyond our abilities to control. The public was encouraged to buy government bonds (Liberty bonds). Harding had a plan about them too. "You can further see that if by any pressure these bonds can be turned out of the Federal Reserve banks and passed over to the strong boxes of great institutions - savings banks, ... just to that extent the 12 banks would be in a position to extend additional facilities... Of course it seems hard that anyone who for patriotic purposes should have invested in Government bonds should be practically called upon to part with say, a loss of from 8 to 9 percent, but facts are stubborn things" all the 12 districts (A directors) were polled for their thoughts "We seem to have been able to have had some liquidation in our district" "I also think that the rates for money should continue on a high level, with the hope of causing liquidation in commodities." Boston A directors "...unless there is a very substantial contraction and a very definite and positive announcement made in some way, the users of credit in the country may become more hopeful again that the situation is not one to be feared" NY directors, and there was no positive/definite announcement given, Harding stated that he had a speech prepared to give to the press, and warned all in attendance of revealing the purpose of the meeting. "I think a reasonable depression in business will be a good thing for the country" Cleveland Fed director It goes on and on, but not all believed this was necessary, "I hardly see the necessity of increasing the rate at this time... I have made a pretty close examination of it, and I do not think the shelves are overloaded." A Richmond Fed director thought the economy was OK as it was, but unfortunately he was in the extreme minority. Senate Document #23 first discussed the text of this meeting (2/28/23). Comments from Senator Heflin, "The Supreme Court of the United States rendered a decision months ago taking the Federal Reserve Board to task, criticizing and condemning its conduct in its effort to destroy a little State bank in Nebraska." About the text of the meeting, "We never got hold of this little document until Governor Harding was driven from the Federal Reserve Board." "It was agreed in that secret meeting to hoist the black flag... Out in Southern California the bankers' convention was in session,... and this Federal Reserve agent got up and said to these bankers: 'You must not loan any more money on farm paper, agricultural products, live stock... If you loan them money, we will not rediscount your paper." " I referred to a man.. now a senator... telling me that they sent him word that they were going to deflate, and telling him accordingly and get in out of the weather." (He didn't and lost a bundle) "I hold in my hand a letter, written by the governor of the Federal Reserve Bank of Atlanta, in which he acknowledges that they charged a bank in my state 87.5 percent interest." The only place to escape the rate increase and subsequent recession was New York where rates went unchanged.

The 1964 House B&C in 'A Primer on Money' state how in 1958 the Fed lowered the reserve requirement so that banks could purchase government securities with the excess reserves rather than make economy expanding loans with it. In 59 the ABA sponsored the 'Bond Giveaway bill' (with the Fed's blessing) which transferred bonds held by the Fed (who return some of the interest to the Treasury) to private banks (who return nothing to the Treasury)

Congressman Wright Patman in 8/3/64 "It is a fact that the Open Market Committee's actions have created three depressions in the last 10 years - 1953-54, 1957-58, 1960-61. Each of these man-made recessions was preceded by tighter money and higher interest rates." Why didn't Congress abolish it given these facts? Perhaps the bankers are still well-represented in Congress. The public is vastly ignorant on the source of these problems and do not call for the Fed's scalp - they call for the government's - but for the life of me I just can't remember the last time Congress sat down and passed a law creating a depression.

The Chicago Fed calls bank created checkbook dollars the most important part of the money stock. The economy is run by bank loans/investments/expenditures (all with created dollars), the notion that banks aren't creating money is patently absurd. The Fed can force a contraction, but they can't "push on a string" as they're fond of saying. During the 29 depression the Fed increased open market operations by $600 million in the last 6 months of 1932 but the banks refused to make loans as evidenced by the continuance of the drop in the money supply. Now if the Fed has "ultimate power" in this regard as you seem to believe then why did the money supply continue to drop?

The Fed can expand/contract bank reserves. It's 100% up to the banks to expand loans/investments with extra reserves provided by the Fed.

It 1939 the Board of Governors put out "The Federal Reserve System, its Purposes and Functions" which did indeed explain every detail of how the Fed created money; too much detail as it turned out for they quickly pulled it out of circulation and replaced it with a sanitized edition. Knowledge is power as the saying goes.

The Bank of North Dakota - the only government (state) owned bank in the US, small but extremely well run and profitable (for the state and taxpayers that is) It helps all of North Dakota's citizens/businesses, including the ones that private banks won't touch. Why was it started? Locals got fed up with short term loans of 12.5% from private bankers so they elected politicians who were in favor of the bank and it opened around 1919. Other states have tried this idea but the private financial interests have successfully fought them off in every instance, particularly in New York state. These banks were not in competition with the private banks and were not meant to replace them, but it didn't matter to the financiers.

An executive at the Chicago Fed informs me that the thrifts did indeed create checkbook money prior to 1980 and the act only made them subject to the Fed's reserve requirements as well as extending other Fed services to them. I've written the NY Fed for confirmation of this - they're actually pretty good at answering people's questions.

"The annual volume of dealing in Government securities in New York amounts to over $400 billion. Of this the Open Market Committee of the Federal Reserve accounts for roughly $20 billion." (page 19 of Money Facts) Testimony to the House from Comptroller Elmer B. Staats "in 1970 the total transactions reported by the dealers in Government securities recognized by the Federal Reserve was $738 billion... That represents about three times the value of the transactions on the New York Stock Exchange." Testimony of George W Mitchell Vice Chairman of the Fed Board to the House "Last year [1972] we purchased $24.5 billion worth of securities... sold $17.5 billion... made repurchase agreements amounting #33.9 billion. Now out of that we netted an increase in our portfolio of $5 billion." The Richmond Fed shows a Board graph giving the total dollar volume of government security transactions - $120 Trillion (with a T) by the end of 1991. The FOMC does peanuts compared to what gets done by the NY Fed's Trading Desk - so who's making the decisions?.

Considering that the debt owed to the Fed, banks and thrifts is about $1 Trillion and the M1 is about $1 Trillion and given that they all extinguish funds repaid to them from the money supply (except for the Fed and their interest) just paying off the banking industry would wipe out the M1. The fact is that banks create debt money for loans and investments and create debt-free money for their expenditures. Unfortunately for us, the banks extinguish at least this amount in the repayment process.

The total debt of the US as stated in the Fed's Z-7 Flow of Funds report is about $15 Trillion and there's a $1 Trillion M1 to pay that amount off with. If you want a reason for price inflation take a guess at the annual interest accrued from that $15 Trillion.

The debt is ultimately owed to the entity that created the money that everyone used to buy pieces of the debt - the banking industry; when the American public gets paid off they will have to pay the entity that loaned them the money to do it. The public debt is owed to the banking community.

The gold supply of the United States Government is owned by the 12 Federal Reserve Banks.

The Fed themselves admit they earn interest on Federal Reserve Notes. The US taxpayer is taxed on every Federal Reserve Note floating around. They are a money losing proposition for the US taxpayer.

Recommend Pieces of Eights: Monetary Powers and Disabilities of the US Constitution by Vieira, Edwin, Jr.

Carmen Pirritano, 1337 Rowland Road, Langhorne PA 19047