What would happen if the Federal Reserve was shut down
permanently? That is a question that CNBC asked
recently, but unfortunately most Americans don’t really think about the Fed
much. Most Americans are content with believing that the Federal Reserve is just
another stuffy government agency that sets our interest rates and that is
watching out for the best interests of the American people. But that is not the
case at all. The truth is that the Federal Reserve is a private banking cartel
that has been designed to systematically destroy the value of our currency,
drain the wealth of the American public and enslave the federal government to
perpetually expanding debt. During this election year, the economy is the
number one issue that voters are concerned about. But instead of endlessly
blaming both political parties, the truth is that most of the blame should be
placed at the feet of the Federal Reserve. The Federal Reserve has more power
over the performance of the U.S. economy than anyone else does. The Federal
Reserve controls the money supply, the Federal Reserve sets the interest rates
and the Federal Reserve hands out bailouts to the big banks that absolutely
dwarf anything that Congress ever did. If the American people are ever going to
learn what is really going on with our economy, then it is absolutely imperative
that they get educated about the Federal Reserve.
The following are 10 things that every American should know about the Federal
Reserve….
#1 The Federal Reserve System Is A Privately Owned Banking
Cartel
The Federal Reserve is not a government agency.
The truth is that it is a privately owned central bank. It is owned by the
banks that are members of the Federal Reserve system. We do not know how much
of the system each bank owns, because that has never been disclosed to the
American people.
The Federal Reserve openly admits that it is privately owned. When it was
defending itself against a Bloomberg request for information under the Freedom
of Information Act, the Federal Reserve stated unequivocally in court that
it was “not an agency” of the federal government and therefore not
subject to the Freedom of Information Act.
In fact, if you want to find out that the Federal Reserve system is owned by
the member banks, all you have to do is go to the Federal Reserve website….
The twelve regional Federal Reserve Banks, which were established by
Congress as the operating arms of the nation’s central banking system, are
organized much like private corporations–possibly leading to some confusion
about “ownership.” For example, the Reserve Banks issue shares of stock to
member banks. However, owning Reserve Bank stock is quite different from owning
stock in a private company. The Reserve Banks are not operated for profit, and
ownership of a certain amount of stock is, by law, a condition of membership in
the System. The stock may not be sold, traded, or pledged as security for a
loan; dividends are, by law, 6 percent per year.
Foreign governments and foreign banks do own significant ownership interests
in the member banks that own the Federal Reserve system. So it would be
accurate to say that the Federal Reserve is partially foreign-owned.
But until the exact ownership shares of the Federal Reserve are revealed, we
will never know to what extent the Fed is foreign-owned.
#2 The Federal Reserve System Is A Perpetual Debt
Machine
As long as the Federal Reserve System exists, U.S. government debt will
continue to go up and up and up.
This runs contrary to the conventional wisdom that Democrats and Republicans
would have us believe, but unfortunately it is true.
The way our system works, whenever more money is created more debt is created
as well.
For example, whenever the U.S. government wants to spend more money than it
takes in (which happens constantly), it has to go ask the Federal Reserve for
it. The federal government gives U.S. Treasury bonds to the Federal Reserve,
and the Federal Reserve gives the U.S. government “Federal Reserve Notes” in
return. Usually this is just done electronically.
So where does the Federal Reserve get the Federal Reserve Notes?
It just creates them out of thin air.
Wouldn’t you like to be able to create money out of thin air?
Instead of issuing money directly, the U.S. government lets the Federal
Reserve create it out of thin air and then the U.S. government borrows it.
Talk about stupid.
When this new debt is created, the amount of interest that the U.S.
government will eventually pay on that debt is not also created.
So where will that money come from?
Well, eventually the U.S. government will have to go back to the Federal
Reserve to get even more money to finance the ever expanding debt that it has
gotten itself trapped into.
It is a debt spiral that is designed to go on perpetually.
You see, the reality is that the money supply is designed to constantly
expand under the Federal Reserve system. That is why we have all become
accustomed to thinking of inflation as “normal”.
So what does the Federal Reserve do with the U.S. Treasury bonds that it gets
from the U.S. government?
Well, it sells them off to others. There are lots of people out there that
have made a ton of money by holding U.S. government debt.
In fiscal 2011, the U.S. government paid out 454 billion dollars just in interest on the national debt.
That is 454 billion dollars that was taken out of our pockets and put into
the pockets of wealthy individuals and foreign governments around the globe.
The truth is that our current debt-based monetary system was designed by
greedy bankers that wanted to make enormous profits by using the Federal Reserve
as a tool to create money out of thin air and lend it to the U.S. government at
interest.
And that plan is working quite well.
Most Americans today don’t understand how any of this works, but many
prominent Americans in the past did understand it.
For example, Thomas Edison was once quoted in
the New York Times as saying the following….
That is to say, under the old way any time we wish to add to the national
wealth we are compelled to add to the national debt.Now, that is what Henry Ford wants to prevent. He thinks it is stupid,
and so do I, that for the loan of $30,000,000 of their own money the people of
the United States should be compelled to pay $66,000,000 — that is what it
amounts to, with interest. People who will not turn a shovelful of dirt nor
contribute a pound of material will collect more money from the United States
than will the people who supply the material and do the work. That is the
terrible thing about interest. In all our great bond issues the interest is
always greater than the principal. All of the great public works cost more than
twice the actual cost, on that account. Under the present system of doing
business we simply add 120 to 150 per cent, to the stated cost.But here is the point: If our nation can issue a dollar bond, it can
issue a dollar bill. The element that makes the bond good makes the bill
good.
We should have listened to men like Edison and Ford.
But we didn’t.
And so we pay the price.
On July 1, 1914 (a few months after the Fed was created) the U.S. national
debt was 2.9 billion dollars.
Today, it is more than more than 5000 times larger.
Yes, the perpetual debt machine is working quite well, and most Americans do
not even realize what is happening.
#3 The Federal Reserve Has Destroyed More Than 96% Of The Value Of
The U.S. Dollar
Did you know that the U.S. dollar has lost 96.2 percent of its value since 1900? Of course almost all of
that decline has happened since the Federal Reserve was created in 1913.
Because the money supply is designed to expand constantly, it is guaranteed
that all of our dollars will constantly lose value.
Inflation is a “hidden tax” that continually robs us all of our wealth. The
Federal Reserve always says that it is “committed” to controlling inflation, but
that never seems to work out so well.
And current Federal Reserve Chairman Ben Bernanke says that it is actually a
good thing to have a little bit of inflation. He plans to try to keep the
inflation rate at about 2 percent in the coming years.
So what is so bad about 2 percent? That doesn’t sound so bad, does it?
Well, just consider the following excerpt from a recent Forbes article….
The Federal Reserve Open Market Committee (FOMC) has made it official:
After its latest two day meeting, it announced its goal to devalue the dollar by
33% over the next 20 years. The debauch of the dollar will be even greater if
the Fed exceeds its goal of a 2 percent per year increase in the price
level.
#4 The Federal Reserve Can Bail Out Whoever It Wants To With No
Accountability
The American people got so upset about the bailouts that Congress gave to the
Wall Street banks and to the big automakers, but did you know that the biggest
bailouts of all were given out by the Federal Reserve?
Thanks to a very limited audit of the Federal Reserve that Congress approved
a while back, we learned that the Fed made trillions
of dollars in secret bailout loans to the big Wall Street banks during the
last financial crisis. They even secretly loaned out hundreds of billions of
dollars to foreign banks.
According to the results of the limited Fed audit mentioned above, a total of
$16.1 trillion in secret loans were made by the Federal
Reserve between December 1, 2007 and July 21, 2010.
The following is a list of loan recipients that was taken directly from page 131 of the audit report….
Citigroup – $2.513 trillion
Morgan Stanley –
$2.041 trillion
Merrill Lynch – $1.949
trillion
Bank of America – $1.344
trillion
Barclays PLC – $868 billion
Bear Sterns
– $853 billion
Goldman Sachs – $814
billion
Royal Bank of Scotland – $541 billion
JP
Morgan Chase – $391 billion
Deutsche Bank – $354
billion
UBS – $287 billion
Credit Suisse –
$262 billion
Lehman Brothers – $183
billion
Bank of Scotland – $181 billion
BNP
Paribas – $175 billion
Wells Fargo – $159
billion
Dexia – $159 billion
Wachovia –
$142 billion
Dresdner Bank – $135
billion
Societe Generale – $124 billion
“All
Other Borrowers” – $2.639 trillion
So why haven’t we heard more about this?
This is scandalous.
In addition, it turns out that the Fed paid enormous
sums of money to the big Wall Street banks to help “administer” these nearly
interest-free loans….
Not only did the Federal Reserve give 16.1 trillion dollars in nearly
interest-free loans to the “too big to fail” banks, the Fed also paid them over
600 million dollars to help run the emergency lending program. According to the GAO, the Federal Reserve shelled out an
astounding $659.4 million in “fees” to the very financial institutions
which caused the financial crisis in the first place.
Does reading that make you angry?
It should.
#5 The Federal Reserve Is Paying Banks Not To Lend Money
Did you know that the Federal Reserve is actually paying banks not to make
loans?
It is true.
Section 128 of the Emergency Economic Stabilization Act of 2008 allows the
Federal Reserve to pay interest on “excess reserves” that U.S. banks park at the
Fed.
So the banks can just send their cash to the Fed and watch the money come
rolling in risk-free.
So are many banks taking advantage of this?
You tell me. Just check out the chart below. The amount of “excess
reserves” parked at the Fed has gone from nearly nothing to about 1.5
trillion dollars since 2008….
But shouldn’t the banks be lending the money to us so that we can start
businesses and buy homes?
You would think that is how it is supposed to work.
Unfortunately, the Federal Reserve is not working for us.
The Federal Reserve is working for the big banks.
Sadly, most Americans have no idea what is going on.
Another example of this is the government debt carry trade.
Here is how it works. The Federal Reserve lends gigantic piles of nearly
interest-free cash to the big Wall Street banks, and in turn those banks use the
money to buy up huge amounts of government debt. Since the return on government
debt is higher, the banks are able to make large profits very easily and with
very little risk.
This scam was also explained in a recent article in the Guardian….
Consider this: we pretend that banks are private businesses that should
be allowed to run their own affairs. But they are the biggest scroungers of
public money of our time. Banks are lent vast sums of money by central banks at
near-zero interest. They lend that money to us or back to the government at
higher rates and rake in the difference by the billion. They don’t even have to
make clever investments to make huge profits.
That is a pretty good little scam they have got going, wouldn’t you say?
#6 The Federal Reserve Creates Artificial Economic Bubbles That Are
Extremely Damaging
By allowing a centralized authority such as the Federal Reserve to dictate
interest rates, it creates an environment where financial bubbles can be created
very easily.
Over the past several decades, we have seen bubble after bubble. Most of
these have been the result of the Federal Reserve keeping interest rates
artificially low. If the free market had been setting interest rates all this
time, things would have never gotten so far out of hand.
For example, the housing crash would have never
been so horrific if the Federal Reserve had not created such ideal conditions
for a housing bubble in the first place. But we allow the Fed to continue to
make the same mistakes.
Right now, the Federal Reserve continues to set interest rates much, much
lower than they should be. This is causing a tremendous misallocation of
economic resources, and there will be massive consequences for that down the
line.
#7 The Federal Reserve System Is Dominated By The Big Wall Street
Banks
Even since it was created, the Federal Reserve system has been dominated by
the big Wall Street banks.
The following is from a
previous article that I did about the Fed….
The New York representative is the only permanent member of the Federal
Open Market Committee, while other regional banks rotate in 2 and 3
year intervals. The former head of the New York Fed, Timothy Geithner, is now
U.S. Treasury Secretary. The truth is that the Federal Reserve Bank of New York
has always been the most important of the regional Fed banks by far, and in turn
the Federal Reserve Bank of New York has always been dominated by Wall Street
and the major New York banks.
#8 It Is Not An Accident That We Saw The Personal Income Tax And The
Federal Reserve System Both Come Into Existence In 1913
On February 3rd, 1913 the 16th Amendment to the U.S. Constitution was
ratified. Later that year, the United
States Revenue Act of 1913 imposed a personal income tax on the American
people and we have had one ever since.
Without a personal income tax, it is hard to have a central bank. It takes a
lot of money to finance all of the government debt that a central banking system
creates.
It is no accident that the 16th Amendment was ratified in 1913 and the
Federal Reserve system was also created in 1913.
They have a symbiotic relationship and they are designed to work
together.
We could fill Congress with people that are committed to ending this
oppressive system, but so far we have chosen not to do that.
So our children and our grandchildren will face a lifetime of debt slavery
because of us.
I am sure they will be thankful for that.
#9 The Current Federal Reserve Chairman, Ben Bernanke, Has A
Nightmarish Track Record Of Incompetence
The mainstream media portrays Federal Reserve Chairman Ben Bernanke as a
brilliant economist, but is that really the case?
Let’s go to the videotape.
The following is an extended excerpt from an article that
I published previously….
———-
In 2005,
Bernanke said that we shouldn’t worry because housing prices had never declined
on a nationwide basis before and he said that he believed that the U.S. would
continue to experience close to “full employment”….
“We’ve never had a decline in house prices on a nationwide basis. So,
what I think what is more likely is that house prices will slow, maybe
stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive
the economy too far from its full employment path,
though.”
In 2005, Bernanke also said that he believed that derivatives
were perfectly safe and posed no danger to financial markets….
“With respect to their safety, derivatives, for the most part, are traded
among very sophisticated financial institutions and individuals who have
considerable incentive to understand them and to use them
properly.”
In 2006, Bernanke said that housing prices would probably keep
rising….
“Housing markets are cooling a bit. Our expectation is that the decline
in activity or the slowing in activity will be moderate, that house prices will
probably continue to rise.”
In 2007, Bernanke insisted that there was not a problem with
subprime mortgages….
“At this juncture, however, the impact on the broader economy and
financial markets of the problems in the subprime market seems likely to be
contained. In particular, mortgages to prime borrowers and fixed-rate mortgages
to all classes of borrowers continue to perform well, with low rates of
delinquency.”
In 2008, Bernanke said that a recession was not coming….
“The Federal Reserve is not currently forecasting a
recession.”
A few months before Fannie Mae and Freddie Mac collapsed,
Bernanke insisted that they were totally secure….
“The GSEs are adequately capitalized. They are in no danger of
failing.”
For many more examples that demonstrate the absolutely nightmarish track
record of Federal Reserve Chairman Ben Bernanke, please see the following
articles….
*”Say
What? 30 Ben Bernanke Quotes That Are So Stupid That You Won’t Know Whether To
Laugh Or Cry“
*”Is
Ben Bernanke A Liar, A Lunatic Or Is He Just Completely And Totally
Incompetent?“
But after being wrong over and over and over, Barack Obama still nominated
Ben Bernanke for another term as Chairman of the Fed.
———-
#10 The Federal Reserve Has Become Way Too Powerful
The Federal Reserve is the most undemocratic institution in America.
The Federal Reserve has become so powerful that it is now known as “the
fourth branch of government”, but there are less checks and balances on the Fed
than there are on the other three branches.
The Federal Reserve runs the U.S. economy but it is not accountable to the
American people. We can’t vote those that run the Fed out of office if we do
not like what they do.
Yes, the president appoints those that run the Fed, but he also knows that if
he does not tread lightly he won’t get the money from the big Wall Street banks
that he needs for his next election.
Thankfully, there are a few members of Congress that are complaining about
how much power the Fed has. For example, Ron Paul once told MSNBC that he
believes that the Federal Reserve is now actually more powerful than
Congress…..
“The regulations should be on the Federal Reserve. We should have
transparency of the Federal Reserve. They can create trillions of dollars to
bail out their friends, and we don’t even have any transparency of this. They’re
more powerful than the Congress.”
As members of Congress such as Ron Paul have started to shed some light on
the activities of the Federal Reserve, that has caused many in the mainstream
media to come to the defense of the Fed.
For example, a recent CNBC article entitled “If The Federal Reserve Is
Abolished, What Then?” makes it sound like there is absolutely no other
rational alternative to having the Federal Reserve run our economy.
But this is not what our founders intended.
The founders did not intend for a private banking cartel to issue our money
and set our interest rates for us.
According to Article I,
Section 8 of the U.S. Constitution, the U.S. Congress has been given the
responsibility to “coin Money, regulate the Value thereof, and of foreign Coin,
and fix the Standard of Weights and Measures”.
So why is the Federal Reserve doing it?
But the CNBC article mentioned above makes it sound like the sky would
fall if control of the currency was handed back over to the American people.
At one point, the article asks the following question….
“How would the U.S. economy then function? Something has to take its
place, right?”
No, the truth is that we don’t need anyone to “manage” our economy.
The U.S. Treasury could be in charge of issuing our currency and the free
market could set our interest rates.
We don’t need to have a centrally-planned economy.
We aren’t China.
And it goes against everything that our founders believed to be running up so
much government debt.
For example, Thomas Jefferson once declared that if he could add just one
more amendment to the U.S. Constitution it would be a
ban on all government borrowing….
I wish it were possible to obtain a single amendment to our Constitution.
I would be willing to depend on that alone for the reduction of the
administration of our government to the genuine principles of its Constitution;
I mean an additional article, taking from the federal government the power of
borrowing.
Oh, how things would have been different if we had only listened to Thomas
Jefferson.
Please share this article with as many people as you can. These are things
that every American should know about the Federal Reserve, and we need to
educate the American people about the Fed while there is still time.
