The Birth of Legal Counterfeiting
The FED is a central bank.
Central banks are supposed to implement a country’s fiscal policies. They monitor commercial banks to ensure that they maintain sufficient assets, like cash, so as to remain solvent and stable.
Central banks also do business, such as currency exchanges and gold transactions, with other central banks.
In theory, a central bank should be good for a country, and they might be if it wasn’t for the fact that they are not owned or controlled by the government of the country they are serving. Private central banks, including our FED, operate not in the interest of the public good but for profit.
There have been three central banks in our nation’s history. The first two, while deceptive and fraudulent, pale in comparison to the scope and size of the fraud being perpetrated by our current FED. What they all have in common is an insidious practice known as “fractional banking.”
Fractional banking or fractional lending is the ability to create money from nothing, lend it to the government or someone else and charge interest to boot. The practice evolved before banks existed.
Goldsmiths rented out space in their vaults to individuals and merchants for storage of their gold or silver. The goldsmiths gave these “depositors” a certificate that showed the amount of gold stored. These certificates were then used to conduct business.
In time the goldsmiths noticed that the gold in their vaults was rarely withdrawn. Small amounts would move in and out but the large majority never moved.
Sensing a profit opportunity, the goldsmiths issued double receipts for the gold, in effect creating money (certificates) from nothing and then lending those certificates (creating debt) to depositors and charging them interest as well.
Since the certificates represented more gold than actually existed, the certificates were “fractionally” backed by gold. Eventually some of these vault operations were transformed into banks and the practice of fractional banking continued.
Keep that fractional banking concept in mind as we examine our first central bank, the First Bank of the United States (BUS).
It was created, after bitter dissent in the Congress, in 1791 and chartered for 20 years. A scam not unlike the current FED, the BUS used its control of the currency to defraud the public and establish a legal form of usury.
This bank practiced fractional lending at a 10:1 rate, ten dollars of loans for each dollar they had on deposit.
This misuse and abuse of their public charter continued for the entire 20 years of their existence. Public outrage over these abuses was such that the charter was not renewed and the bank ceased to exist in 1811.
The war of 1812 left the country in economic chaos, seen by bankers as another opportunity for easy profits. They influenced Congress to charter the second central bank, the Second Bank of the United States (SBUS), in 1816.
The SBUS was more expansive than the BUS. The SBUS sold franchises and literally doubled the number of banks in a short period of time.
The country began to boom and move westward, which required money. Using fractional lending at the 10:1 rate, the central bank and their franchisees created the debt/money for the expansion.
Things boomed for a while, then the banks decided to shut off the debt/money, citing the need to control inflation. This action on the part of the SBUS caused bankruptcies and foreclosures. The banks then took control of the assets that were used as security against the loans.
Closely examine how the SBUS engineered this cycle of prosperity and depression. The central bank caused inflation by creating debt/money for loans and credit and making these funds readily available.
The economy boomed. Then they used the inflation which they created as an excuse to shut off the loans/ credit/ money.
The resulting shortage of cash caused the economy to falter or slow dramatically and large numbers of business and personal bankruptcies resulted. The central bank then seized the assets used as security for the loans.
The wealth created by the borrowers during the boom was then transferred to the central bank during the bust. And you always wondered how the big guys ended up with all the marbles.
Now, who do you think is responsible for all of the ups and downs in our economy over the last 85 years?
Think about the depression of the late ’20s and all through the ’30s. The FED could have pumped lots of debt/money into the market to stimulate the economy and get the country back on track, but did they?
No; in fact, they restricted the money supply quite severely. We all know the results that occurred from that action, don’t we?
Why would the FED do this? During that period asset values and stocks were at rock bottom prices. Who do you think was buying everything at 10 cents on the dollar?
I believe that it is referred to as consolidating the wealth. How many times have they already done this in the last 85 years?
Do you think they will do it again?
Just as an aside at this point, look at today’s economy. Markets are declining. Why? Because the FED has been very liberal with its debt/ credit/ money.
The market was hyper inflated. Who creates inflation? The FED. How does the FED deal with inflation? They restrict the debt/ credit/ money.
What happens when they do that? The market collapses.
Several months back, after certain central banks said they would be selling large quantities of gold, the price of gold fell to a 25-year low of about $260 per ounce. The central banks then bought gold.
After buying at the bottom, a group of 15 central banks announced that they would be restricting the amount of gold released into the market for the next five years. The price of gold went up $75.00 per ounce in just a few days.
How many hundreds of billions of dollars did the central banks make with those two press releases?
Gold is generally considered to be a hedge against more severe economic conditions. Do you think that the private banking families that own the FED are buying or selling equities at this time? (Remember: buy low, sell high.)
How much money do you think these FED owners have made since they restricted the money supply at the top of this last current cycle?
Alan Greenspan has said publicly on several occasions that he thinks the market is overvalued, or words to that effect.
Just a hint that he will raise interest rates (restrict the money supply), and equity markets have a negative reaction. Governments and politicians do not rule central banks, central banks rule governments and politicians.
President Andrew Jackson won the presidency in 1828 with the promise to end the national debt and eliminate the SBUS.
During his second term President Jackson withdrew all government funds from the bank and on January 8, 1835, paid off the national debt. He is the only president in history to have this distinction. The charter of the SBUS expired in 1836.
Without a central bank to manipulate the supply of money, the United States experienced unprecedented growth for 60 or 70 years, and the resulting wealth was too much for bankers to endure. They had to get back into the game.
So, in 1910 Senator Nelson Aldrich, then Chairman of the National Monetary Commission, in collusion with representatives of the European central banks, devised a plan to pressure and deceive Congress into enacting legislation that would covertly establish a private central bank.
This bank would assume control over the American economy by controlling the issuance of its money.
After a huge public relations campaign, engineered by the foreign central banks, the Federal Reserve Act of 1913 was slipped through Congress during the Christmas recess, with many members of the Congress absent.
President Woodrow Wilson, pressured by his political and financial backers, signed it on December 23, 1913.
The act created the Federal Reserve System, a name carefully selected and designed to deceive.
- “Federal” would lead one to believe that this is a government organization.
- “Reserve” would lead one to believe that the currency is being backed by gold and silver.
- “System” was used in lieu of the word “bank” so that one would not conclude that a new central bank had been created.
In reality, the act created a private, for profit, central banking corporation owned by a cartel of private banks.
Who owns the FED?
- The Rothschilds of London and Berlin
- Lazard Brothers of Paris
- Israel Moses Seif of Italy
- Kuhn, Loeb and Warburg of Germany
- the Lehman Brothers, Goldman, Sachs and the Rockefeller families of New York
Did you know that the FED is the only for-profit corporation in America that is exempt from both federal and state taxes? The FED takes in about one trillion dollars per year tax free! The banking families listed above get all that money.
Almost everyone thinks that the money they pay in taxes goes to the US Treasury to pay for the expenses of the government. Do you want to know where your tax dollars really go?
If you look at the back of any check made payable to the IRS you will see that it has been endorsed as,
“Pay Any F.R.B. Branch or Gen. Depository for Credit U.S. Treas. This is in Payment of U.S. Oblig.”
Yes, that’s right, every dime you pay in income taxes is given to those private banking families, commonly known as the FED, tax free.
Like many of you, I had some difficulty with the concept of creating money from nothing. You may have heard the term “monetizing the debt,” which is kind of the same thing.
As an example, if the US Government wants to borrow $1 million ó the government does borrow every dollar it spends ó they go to the FED to borrow the money.
The FED calls the Treasury and says print 10,000 Federal Reserve Notes (FRN) in units of one hundred dollars.
The Treasury charges the FED 2.3 cents for each note, for a total of $230 for the 10,000 FRNs. The FED then lends the $1 million to the government at face value plus interest.
To add insult to injury, the government has to create a bond for $1 million as security for the loan. And the rich get richer.
The above was just an example, because in reality the FED does not even print the money; it’s just a computer entry in their accounting system. To put this on a more personal level, let’s use another example.
Today’s banks are members of the Federal Reserve Banking System.
This membership makes it legal for them to create money from nothing and lend it to you.
Today’s banks, like the goldsmiths of old, realize that only a small fraction of the money deposited in their banks is ever actually withdrawn in the form of cash. Only about 4 percent of all the money that exists is in the form of currency.
The rest of it is simply a computer entry.
Let’s say you’re approved to borrow $10,000 to do some home improvements. You know that the bank didn’t actually take $10,000 from its pile of cash and put it into your pile?
They simply went to their computer and input an entry of $10,000 into your account. They created, from thin air, a debt which you have to secure with an asset and repay with interest.
The bank is allowed to create and lend as much debt as they want as long as they do not exceed the 10:1 ratio imposed by the FED.
It sort of puts a new slant on how you view your friendly bank, doesn’t it? How about those loan committees that scrutinize you with a microscope before approving the loan they created from thin air.
What a hoot! They make it complex for a reason. They don’t want you to understand what they are doing. People fear what they do not understand.
You are easier to delude and control when you are ignorant and afraid.
Now to put the frosting on this cake. When was the income tax created? If you guessed 1913, the same year that the FED was created, you get a gold star. Coincidence?
What are the odds? If you are going to use the FED to create debt, who is going to repay that debt? The income tax was created to complete the illusion that real money had been lent and therefore real money had to be repaid. And you thought Houdini was good.
So, what can be done? My father taught me that you should always stand up for what is right, even if you have to stand up alone.
If “We the People” don’t take some action now, there may come a time when “We the People” are no more.
You should write a letter or send an email to each of your elected representatives. Many of our elected representatives do not understand the FED. Once informed they will not be able to plead ignorance and remain silent.
Article 1, Section 8 of the US Constitution specifically says that Congress is the only body that can “coin money and regulate the value thereof.” The US Constitution has never been amended to allow anyone other than Congress to coin and regulate currency.
Ask your representative, in light of that information, how it is possible for the Federal Reserve Act of 1913, and the Federal Reserve Bank that it created, to be constitutional.
Ask them why this private banking cartel is allowed to reap trillions of dollars in profits without paying taxes. Insist on an answer.
Thomas Jefferson said,
“If the America people ever allow private banks to control the issuance of their currencies, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their prosperity until their children will wake up homeless on the continent their fathers conquered.”
Jefferson saw it coming 150 years ago.
The question is,
“Can you now see what is in store for us if we allow the FED to continue controlling our country?”
“The condition upon which God hath given liberty to man is eternal vigilance; which condition if he breaks, servitude is at once the consequence of his crime, and the punishment of his guilt.” — John P. Curran
The Birth of Legal Counterfeiting
“Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.” — Fifth plank of the Communist Manifesto, 1848
Crisis has been very good to government growth. It happens this way: the central government never does wrong, yet the evil that lurks in the world will on occasion strike us.
Sometimes the evil is external, as in 9-11, other times it is internal, as in the case of certain economic upheavals. When the crisis is mostly economic, the culprit is always the private sector, and the guilty parties are usually big shots who got swept away with avarice.
With a lapdog media clamoring for “reform,” politicians pass more laws and flood the airwaves with rhetoric about how their new legislation will crush the forces of greed. Most of us then go about our business, hoping that causality is not an avenging angel.
In the era following the War of Secession, the federal government aggressively promoted development of the West through huge subsidies and other favors to business cronies. Corruption flourished, and overextended banks occasionally failed, causing panics in 1873, 1884, 1893, and 1907.
Throughout this era there was growing opposition to sound money, eloquently expressed by railroad speculator Jay Cooke in 1869:
“Why,” he asked, “should this Grand and Glorious country be stunted and dwarfed – its activities chilled and its very life blood curdled by these miserable ‘hard coin’ theories – the musty theories of a bygone age.” 
The Panic of 1907 is especially significant because it led to government-directed banking “reform.”
The Panic of 1907
The panic got underway when United Copper’s stock price collapsed. Knickerbocker Trust of New York had invested heavily in United Copper, and depositors made a run on the bank to get their money out.
When Knickerbocker failed, depositors at other banks got nervous and demanded their money, igniting the panic. 
J. P. Morgan got together with other banking leaders and met virtually nonstop for three weeks to solve the crisis.
They secured credit from foreign investors, redirected funds from strong banks to weak ones, and bought stock in foundering but still promising companies. 
The panic died a few weeks later.
For the New York bankers, there remained a much more serious problem. The growth of state banks over the previous 20 years had slowly eroded their power.
By 1896, state and other non-national banks constituted 61% of the total, and by 1913, 71%. More significantly, non-nationals commanded 57% of banking resources by 1913. 
With such a troubling trend, what did the New York bankers do? They turned to their pals in Washington.
As we’ve seen, from the time of Lincoln’s administration government sought to partner with business, delivering special favors in return for political support. This is mercantilism, the system we rejected in 1776.
By the early 20th century, we were neck-deep in Progressive propaganda, and there was no viable group opposing government takeover of our lives. The once laissez-faire, sound-money Democratic Party died with the nomination of William Jennings Bryant for president in 1896.
From that point on, both Republicans and Democrats were promoting more statism as the miracle cure for ills it had breeded.
Both Congress and the American Banking Association had been pushing for central banking since the 1890s. The Panic of 1907 gave them another excuse to go after it.
Amid all the maneuvering and proposals, Morgan banker Henry Davison organized a duck hunting trip at Jekyll Island, Georgia in December, 1910.
The ducks they took aim at were not the web-footed kind, but the unsuspecting American citizen who had always thought of money as gold.
The hunters were major players in American mercantilism:
- Senator Nelson Aldrich (R., R.I.), who had headed up the National Monetary Commission, a congressional committee dedicated to developing ideas for central banking
- Frank Vanderlip of Rockefeller’s National City Bank
- Paul Warburg of the investment firm of Kuhn, Loeb, & Co., who was there to promote the German central bank of Bismarck
- Charles Norton of First National Bank of New York, a Morgan company
- Davison, a partner of J.P. Morgan’s. 
They devised a plan whereby a board of commercial bankers would supervise regional reserve banks.
When Aldrich later introduced it to Congress, Democrats blocked it. In 1913, Carter Glass, a Democratic congressman from Virginia, used the Jekyll Island scheme as the basis for the Federal Reserve Act. 
The Act created 12 regional reserve banks ruled by a board of Washington bureaucrats, including the Treasury secretary and presidential appointees. Though the 12 reserve banks are officially “private” institutions, they’re little different than government agencies, as Murray Rothbard noted.
In this manner government seized what Rothbard called “a crucial command post” of the economy, and therefore of the American society.  It used crisis – repeated panics created by government meddling – and the economic illiteracy and trust of the public to achieve its purpose.
And what has it sown from its command post? A subtle means of wealth transfer. A method of taxing us without legislation.
A way of counterfeiting money legally.
“Through the purchase of [usually government] debt by a bank, fiat money is injected into the economy,” Gary North writes. 
“Wealth then moves to those market participants who gain early access to this newly created fiat money,” who are usually politically connected.
The ones on fixed incomes or without close government connections bear the cost of higher prices later, as the money injection passes through the economy.
As most people know by now, the Fed greatly reduced reserve requirements during the 1920s, expanding credit recklessly and generating a false prosperity that ended in the crash of 1929.
People understood that the Fed was manufacturing dollars out of thin air and started to pull their money out of banks, converting them to gold. Roosevelt closed the banks, then announced it was illegal to own gold.
He forced people to give back to the Fed what was rightfully theirs. In 1933 Roosevelt made the dollar fiat currency domestically, but backed by gold internationally.
Roosevelt also created the Federal Deposit Insurance Corporation (FDIC) in 1933, providing federal guarantee of bank deposits. Bank runs and the threat thereof have vanished, and most people believe this is good.
But as Lew Rockwell observes,
“The government-banking cartel regards the bank run – the threat of which used to keep wanton investing at bay – as against the national interest. As a result, the industry is perpetually shaky, and the largest banks are a menace to public life itself.” 
Prior to 1929 the government had never intervened to help recovery from a recession.
Previous administrations had let recessions run their course and recovery, at the hands of the market, usually occurred in a year or less.
Hoover, and then Roosevelt to a much greater degree, took the statist course and drove the economy into a prolonged depression. For this, Roosevelt has been deified.
The Fed is the keystone of government wrong-doing.
As Ludwig von Mises wrote long ago,
“Ideologically, [sound money] belongs in same class with political constitutions and bills of rights.” 
In the name of civil liberty and civilization itself, the Fed should be abolished.
1. The Mystery of Banking, Murray Rothbard, New York: Richardson and Snyder, 1983. p. 135. (PDF version)
2. Separating Money and the State, Part I: Eighty Years of Destruction, Douglas E. French,
3. The Panic of 1907 and the Birth of the Federal Reserve, Jim Klann, 4. Rothbard, p. 136.
5. Rothbard, p. 137.
7. Taking Money Back, Murray Rothbard,
8. Rothbard, Mystery of Banking, Forward by Gary North.
9. Banks on the Dole, Llewellyn H. Rockwell,
10. The Theory of Money and Credit, Ludwig von Mises, Yale University Press, 1953, p. 414.