Creature of Jekyll Island -- A Talk about the the Federal Reserve System

Philologos/Bible Prophecy Research ^ | April 04, 2000 | Edward Griffin

[arete]

. . . read the Federal Reserve Act, place it against the context of the historical background and we come smack to the realization that the Federal Reserve System although it parades around looking as though it's a government operation of some kind, is merely a cartel of banks right under our noses and it is protected by law.

We've all heard that these loans are backed by the full faith and credit of the US government. They're not quite sure what that means but it sure sounds good. I'd like to explain for you who are in doubt what that means. The full faith and credit of the US government means that the government solemnly promises to pay back that loan plus interest if it has to take everything you and I have in the form of taxes in order to do it, it's going to do it. It will take everything we have if necessary to hold its pledge. People don't realize that they're putting themselves on the line, they're going to get their own money back minus a substantial handling fee.

Congress has even discussed what anything costs, it's not an issue. It doesn't make any difference what the cost is because regardless of the overrun they know they can go down the street to the Federal Reserve and by law the officer has to write that big check and give it to them and they're off and running.

I wish I had a magic checkbook like that where I could just write checks all day long and didn't have to have any money any place just checks, loan it to you folks and you're silly enough to pay me interest on it. That's how it works.

when the bank loans you money which it created out of nothing, it cost nothing to make it, it wants something from you. It wants you to sign on the dotted line and pledge your house, your car, your inventory, your assets so that in case for any reason you cannot continue to make your payments they get your marbles, they get all of your assets. They're not going to lose anything on this. Whether it's expansion or contraction, inflation or deflation the banks are covered and we like sheep go right along with it because we haven't figured it out, we don't know that this is a scam. Of course we have no choice either right now because it's all enforced by law. We have no escape.

I can assure you that you know more about the Federal Reserve than you would probably if you enrolled in a four year course in economics because they don't teach this reality in school.

people will tolerate taxes up to about 40-43% and then they start digging in their heels and they just won't allow it to go any further. But with the central bank mechanism in place the lid was off. Now these governments could tax their people 50%, 60%, 70% and in some cases 80% of everything they produced and they did not have a revolt on their hands. They did not have resentment because the people didn't know that they were paying a tax.

Interesting and very accurate rant regarding the FED.

You may also wish to read this article -- Fractional Reserve Banking

Here is a graphic which illustrates how the currency is being debased even as we are told that taxes are being cut.

Richard W.

[arete]

Roger Arnold addresses the Barron's interview with Hugh Hendry on his shows.

Yesterday's Roger Arnold Show

Today's Roger Arnold Show

Happy New Year Everyone!!

Richard W.

[Beck_isright]

Happy New Year Richard!

(Wait until that chart hits 70!!!!)

[Zipporah]

I heard Edward Griffen speak about the Federal Reserve quite a few years ago..what an eye opener. We now have a monetary system based on 'faith'.. fiat money.

Interesting read.

[Servant of the 9]

The Federal Reserve is incapable of accomplishing its stated objectives.

The Fed has accomplished all its objectives since '29.
It has prevented another crash and kept the monetary system functioning.

You forgott the Tin Foil Hat Alert"

So9

[AdamSelene235]

The Fed has accomplished all its objectives since '29.

But the Fed was created in 1913.

It has prevented another crash

There haven't been any market crashes since 1929?

Or do you mean we haven't had another Depression? (which was the result of FDR's marxist economic policies)

and kept the monetary system functioning

Remind me how Bretton Woods worked out again.

[HighRoadToChina]

bUMP FOR LATER

[arete]

Yep, very few people understand how corrupted the system really is or even how it functions. People see inflation as some sort of randon economic event rather that the hidden tax and transfer of wealth that it actually is. The politicians and the bankers are robbing us blind. BTW, how did you happen to have the good luck to hear Griffen speak?

Richard W.

[arete]

You forgott the Tin Foil Hat Alert

No need for a conspiracy alert. It is all fact and ignored by those how still believe in a benevolent "doing the people's work" government. It's all about money, power and control.

Richard W.

[Zipporah]

A group of businessmen in my area brought him into speak re his book on the Federal Reserve and I got an invitation..during that period of time, I learned a LOT and effected my political views and made me much more aware..maybe ignorance was bliss.....sigh.

[arete]

effected my political views and made me much more aware..maybe ignorance was bliss

Ignorance is bliss until they feed you into the woodchipper. Then it stops being fun and games. Our only defense is our knowledge, understanding and awareness. As they say, "Stay alert. Stay Alive".

Happy New Year to you!

Richard W.

[PistolPaknMama]

Quite fascinating article. Thanks for posting!

[arete]

Quite fascinating article

Truth is indeed stranger than fiction. Ever learn this stuff in school? Why?

Richard W.

[Beck_isright]

BUTTONWOOD’S daughters had a jolly time recently when their grandparents took them to Lapland to ride on skidoos, dance round fires with elves and visit the “real” Father Christmas. Children often believe in what they want or need to believe in. So, apparently, do adults, especially those who dabble in financial markets. Quite possibly, investors became too fearful of companies and economic prospects at the end of 2002, shunning anything with the merest whiff of risk. Quite probably, they have taken too much on trust in 2003. Those assets that had been shunned as lepers became this year’s must-have buy.

The US Treasury Department provides news and information on the financial markets, including securities, Treasuries yields and public debt. The Federal Reserve and the Department of Commerce give monetary, economic and trade information. The Bank of Japan, the Cabinet Office and the Ministry of Finance give information on Japan's fiscal, monetary and economic policies. Standard & Poor's gives credit-ratings and posts information and research on the financial markets. The Institute for International Economics publishes research on economic-policy issues. Ronald McKinnon, at Stanford University, publishes papers on currencies, exchange rates and the dollar.

Thus did money flood into investment-grade and junk bonds, both of which had their biggest rallies in history, egged on by rising share prices and falling uncertainty about those prices in the form of lower volatility. Thus, too, did money pour into equities. Having fallen sharply in the previous three years, their worst performance since the 1930s depression, this year world equity markets have put in their best performance for 17 years. On Monday, the Nasdaq index of technology stocks closed above 2,000 for the first time since January 2002; and on Tuesday, European shares rose for a sixth straight session to reach new highs for the year. Emerging markets, in particular, have benefited from the wall of foreign money: in dollar terms they have risen by half. Even Japan, that perennial under-achiever, has gone up by about 22% from the start of the year, and by 38% from its lows in April.

Some of the enthusiasm shown by investors is understandable. For one thing, the flood of bankruptcies of big, seemingly established companies slowed to a trickle in 2003, which did wonders for confidence. In the three years to the end of 2002, some 26 investment-grade firms went bust, compared with 45 in the previous 30 years. This year, you would struggle to name a handful: no longer does each day bring new headlines about corporate shenanigans and soured bets on what was known in times past as the “new economy”. True, the odd multinational is still going spectacularly bust—witness the ongoing fraud investigations at Parmalat, an insolvent food-and-dairy group—but the headlines in the past few months have mostly been of a rosier kind: bumper corporate profits, balance-sheet repair after the ravages of the bubble and, above all, the seemingly miraculous economic recovery in America and elsewhere.

There is, in fact, nothing very miraculous about the American recovery, though Buttonwood is surprised at quite how strong it has turned out to be. A massive fiscal stimulus combined with a sharp boost to monetary policy—both from a sustained reduction in short-term interest rates and the hefty trade-weighted fall of the dollar (which this week slipped to a record low against the euro)—has had quite an effect.

Whether recovery is sustainable is another matter. The simple fact is that Americans spend a lot and save almost nothing. That is why their country runs a huge current-account deficit. That is also why Joe Public, after he has forgotten the pain of the last experience, periodically rushes into risky assets again. He needs apparently turbo-charged returns to fund his spending habits. The fall in long- and short-term interest rates has boosted house prices and made Americans feel richer. But in the long term they will have to save more.

Helped by surging profits and rock-bottom interest rates, corporate balance-sheet repair has been happening, but there has probably been more talk than action. That is why the big rating agencies are still downgrading far more companies than they are upgrading. Corporate America (corporate everywhere, indeed) is, in other words, still awash with debt, and rating agencies are less convinced than they were that it will be paid back. Not that this has bothered investors much. Credit spreads—the difference in yield between corporate bonds and Treasuries—have more than halved for investment-grade bonds. The high-yield market no longer yields enough to be given that moniker, such has been the thirst for high-risk, high-return assets.

This thirst for risk has extended around the world and is, Buttonwood is tempted to say, indiscriminate. Foreign, mostly American, investors have been piling into Latin America, Russia, central Europe, China and Japan. Perhaps they will not be fleeced as much as they were in previous episodes, though history is not on their side—and the recent arrest of the boss of Russia’s biggest oil company provides proof, if any were needed, that whatever a country’s growth prospects, in emerging markets property rights are generally someone else’s. Unfashionably, and perhaps against his better judgment, Buttonwood is still bullish on Japan—or at least its equity market, which is still priced for Armageddon.

For now, the world economy is still heavily reliant on America, whose financial markets are replete with risks and seeming paradoxes

Indeed, one of the biggest questions in the coming year is whether Asia can take up more of the slack for powering world growth from America. The region has grown mightily this year and there is no reason why it should not continue to do so as intra-regional trade expands. The sharp rise in commodity prices this year says more about demand in China than it does about inflationary pressures in the West.

For now, though, the world economy is still heavily reliant on America, whose financial markets are replete with risks and seeming paradoxes. This supposed bastion of free trade is rife with protectionism. In an election year, only the brave would bet on the Bush administration resisting calls from interest groups for more of the same. The administration also risks creating a dollar crisis by talking down the value of the dollars it gives back to those investing in the country. That isn’t very clever, given how much America has to borrow from abroad. There are already signs of unhappiness about this: portfolio flows to America have been drying up as the dollar continues to fall. It could get a lot worse.

But the paradox that most concerns Buttonwood is this: why, despite the strong pick-up in growth and growth expectations around the world, the surge in equities and corporate bonds, and the dramatic rise in the price of gold, do ten-year Treasury bonds—the world’s benchmark risk-free asset—yield only a fifth of a percentage point more than they did at the start of 2003? In this, Buttonwood is a little lost—and a little worried.

Don’t believe the hype

[vpintheak]

Great info. I have found out that this topic is extremely hard to talk to people about though. They can't seem to get their minds around the FACT that this is a system used to make the banks wealthy, and the government knocking at your door for their "fair share" of your money.

[Eastbound]

"The Fed has accomplished all its objectives since '29. It has prevented another crash and kept the monetary system functioning."

. . . by lending more money, the interest(no principle) on which will be paid for from the taxable income of your children and your children's children. Sure it functions, but at the consequence of indenturing your offspring who will have no say so in the matter. Isn't that something like 'involuntary servitude?' Sure it is -- and in violation of A13.

Furthermore, banks don't lend billions unsecured. Look around you and see how much property and natural resources are already controlled by the UN.

Sometimes I get the feeling that our government is nothing more than a caretaker/guardian/trustee hired by the 'central bank.' ;<

I've an idea. Why not just refuse to pay the debt and tear up the mortgage they hold on our children? Then we can slowly get back to microphones or even gold and silver, the measure of true wealth and independence.

[Beck_isright]

Fed's Folly Will Come Due in 2004

[Eastbound]

Meant to ping you.

[arete]

I have found out that this topic is extremely hard to talk to people about though

That is one of the reasons that topics such as this will never be taught in schools. How long could the scam continue once everyone knew that their pockets were being picked and that the illusionary prosperity that we "enjoy" is all based on a ponzi scheme of massive debt creation? Unfortunately, all fiat currency ponzi schemes based on continually inflating debt eventually collapse. Ours will too and maybe in the not too distant future. Washington is already in fifth gear with the terrorist fear mongering propaganda and I suspect it has more to do with big economic problems than it does actual terrorism. The politicians are going to need a scapegoat when the illusion hits the fan.

Richard W.

[arete]

Why not just refuse to pay the debt and tear up the mortgage they hold on our children?

If you really what to screw with the system, refuse to go into debt and start saving. The monetary central planners are at the point of desperation now where savers are being punished by low interest rates and those who borrow and spend are rewarded. Just do the opposite of what the criminals want you to do and you don't have to suffer the consequences of the economic enslavement.

Richard W.