23.
The Federal Reserve System
The Federal Reserve
is the third central banking system in the U. S. The first two, called the First Bank of the United States
and the Second Bank of the United States, were chartered for the periods of
1792 - 1812 and 1816 - 1836, respectively.
The bank panic of
1907 motivated the major banking interests to assure that such difficulties
would not plague them in the future.
In 1910 a group of such bankers, pretending to be on a duck hunting trip
to Jekyll Island, Georgia, designed the future central bank. After supporting the banking bill they
had designed, it was defeated in Congress by suspicious rural and midwestern
Congressmen. So biding their time,
they had the bill reintroduced--with a different title but now with their
feigned opposition. In 1913, while
many members of Congress were on Christmas break, the remaining
"in's" passed the Federal Reserve Act and rushed it over for Woodrow
Wilson's signature on December 23rd.
Although the Fed was established by an act of Congress it is a privately
owned--by banks in the twelve districts--organization which can be found in the
white pages of your phone book.
The Federal Reserve
System thus had its origin in underhanded dealings at the behest of the special
interests of bankers. The point of
the Fed was to authorize a central bank which could generate an elastic money
supply in time of bankers's needs.
In other words, it allows them to create money out of thin air without
suffering the consequences of another panic or bank run. The Fed was thus created as a
cartelizing agency for banks the same as the I.C.C. was for railroads, and the
C.A.B. for airlines. In addition,
the Fed is an outlet for the sale of government bonds--government debt--and
thus facilitates the deficit financing of the federal government.
The Fed coordinates
the inflationary practices of banks, keeping each from the pressures of note
redemption which would otherwise keep their artificial money creation in
check. Since the founding of the
Fed in 1913 the value of the dollar has fallen by more than 90%! So much for the conventional wisdom
alleging that the Fed leads the fight against inflation.
Creation of the Fed
should be understood as an important step in a number of steps in the
undermining of an honest money based on gold. Other steps in this process include the legal tender laws;
the shift from Federal Reserve Notes redeemable in gold, to redeemability in
gold or lawful money, to redeemability in lawful money only, to no
redeemability at all; replacement of all bank notes with Federal Reserve Notes;
abandonment of the gold standard domestically in 1933; and abandonment of the
gold standard internationally in 1971. Since the Federal Reserve Notes in your wallet are not
redeemable in gold or anything else, it must be asked: In what sense are they notes? A
note is a promise to pay. The Fed
promises to pay nothing more than another promise to pay!
-
Paul, Ron
The Case for Gold ,
(Washington, D. C.: The Cato Institute, 1982)
-
Rockwell, Llewellyn, editor
The Fed ,
(Auburn, Alabama: The Ludwig von Mises Institute, 1993)
-
Rockwell, Llewellyn, editor
"The Real Secrets of the Temple" in The Free Market Reader edited by Llewellyn Rockwell ,
(Burlingame, California: The Ludwig von Mises Institute, 1988)
pp. 116 - 122.
-
Rothbard, Murray N.
The Case Against the Fed ,
(Aubrun, Alabama: The Ludwig von Mises Institute, 1994)
-
Rothbard, Murray N.
The Mystery of Banking ,
(New York: Richardson & Snyder, 1983)
-
Schiff, Irwin
The Biggest Con: How the Government is Fleecing You ,
(Camden, Connecticut: Freedom Books, 1976)
pp. 254 - 289.
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