As a general
rule, the most successful man in life is the man who has the best information
Should we leave
the creation of new money, via credit, in the hands of bankers or place its
creation solely with our government?
“The
financial system used by all national economies worldwide is actually founded
upon debt. To be direct and precise, modern money is created in parallel with
debt…
The creation
and supply of money is now left almost entirely to banks and other lending
institutions. Most people imagine that if they borrow from a bank, they are
borrowing other people's money. In fact, when banks and building societies
make any loan, they create new money. Money loaned by a bank is not a loan of
pre-existent money; money loaned by a bank is additional money created. The
stream of money generated by people, businesses and governments constantly borrowing
from banks and other lending institutions is relied upon to supply the
economy as a whole. Thus the supply of money depends upon people going into
debt, and the level of debt within an economy is no more than a measure of
the amount of money that has been created.” Michael Rowbotham,
‘The Grip of Death’
US Federal
Reserve – the Fed
On the night of
November 22, 1910 a delegation of the nation’s leading financiers, led
by Senator Nelson Aldrich, left New Jersey for a very secret ten day meeting
on Jekyll Island, Georgia.
Aldrich had
previously led the members of the National Monetary Commission on a two year
banking tour of Europe. He had yet to write a report
regarding the trip, nor had he yet offered any plans for banking reforms.
Accompanying
Senator Aldrich to Jekyll Island were:
- Frank
Vanderlip, president of the National City Bank
of New York, associated with the Rockefellers
- Henry
P. Davison, senior partner of J.P. Morgan Company, regarded as
Morgan’s personal emissary
- Charles
D. Norton, president of the Morgan dominated First National Bank of New
York
- Col.
Edward House, who would later become President Woodrow Wilson's closest
adviser and founder of the Council on Foreign Relations
- Benjamin
Strong, a lieutenant of J.P. Morgan
- Paul
Warburg, a recent immigrant from Germany who had joined the banking
house of Kuhn, Loeb and Company, New York directed the proceedings and
wrote the primary features of what would be called the Aldrich Plan.
After the
Jekyll Island visit the National Monetary Commission “wrote” the
Aldrich Plan which formed the basis for the Federal Reserve system.
"In 1912
the National Monetary Association, under the chairmanship of the late Senator
Nelson W. Aldrich, made a report and presented a vicious bill called the
National Reserve Association bill. This bill is usually spoken of as the
Aldrich bill. Senator Aldrich did not write the Aldrich bill. He was the
tool, if not the accomplice, of the European bankers who for nearly twenty
years had been scheming to set up a central bank in this Country and who in
1912 has spent and were continuing to spend vast sums of money to accomplish
their purpose." Congressman Louis T. McFadden on the Federal
Reserve Corporation: Remarks in Congress, 1934
After several
failed attempts to push the Federal Reserve Act through Congress, a group of
bankers funded and staffed Woodrow Wilson's campaign for President. He had
committed to sign a slightly different version of the Federal Reserve Act
than Aldrich’s Plan.
In 1913,
Senator Aldrich pushed the Federal Reserve Act through Congress just before
Christmas when much of Congress was on vacation. When elected president
Woodrow Wilson passed the FED.
The Federal
Reserve Bank (FED) is a privately owned company (Wikipedia describes the Fed
as a complex business-government partnership that rules the financial world)
that controls, and profits immensely by printing money through the US
Treasury and regulating its value.
“Some
[most] people think the Federal Reserve Banks are U.S. government
institutions. They are not … they are private credit monopolies which
prey upon the people of the U.S. for the benefit of themselves and their
foreign and domestic swindlers, and rich and predatory money lenders. The
sack of the United States by the Fed is the greatest crime in history. Every
effort has been made by the Fed to conceal its powers, but the truth is the
Fed has usurped the government. It controls everything here and it controls
all our foreign relations. It makes and breaks governments at will.”
Congressional Record 12595-12603 — Louis T. McFadden, Chairman of the
Committee on Banking and Currency (12 years) June 10, 1932
“… we conclude that the [Federal] Reserve Banks are not
federal … but are independent, privately owned and locally controlled
corporations … without day-to-day direction from the federal
government.” 9th Circuit Court in Lewis vs. United States, 680
F. 2d 1239 June 24, 1982
The FED began
with approximately 300 people, or banks, that became owners (stockholders
purchased stock at $100 per share) of the Federal Reserve Banking System. The
Fed is privately owned - 100% of its shareholders are private banks, the
stock is not publicly traded and none of its stock is owned by the US
government.
The US
government pushed through the Sixteenth Amendment (which exempted income
taxes from constitutional requirements regarding direct taxes) restarted an
income tax on Americans to pay the interest to the FED and reorganized the
IRS to collect the monies – the interest - “owed” to the
FED from its citizens.
Sir Josiah
Stamp, president of the Rothschild Bank of England and the second richest man
in Britain in the 1920s, said the following in 1927 at the University of
Texas:
“The
modern banking system manufactures money out of nothing. The process is
perhaps the most astounding piece of sleight of hand that was ever invented.
Banking was conceived in inequity and born in sin. Bankers own the Earth.
Take it away from them but leave them the power to create money, and with a
flick of a pen, they will create enough money to buy it back again. Take this
great power away from them and all great fortunes like mine will disappear,
for then this would be a better and happier world to live in. But if you want
to continue to be the slaves of bankers and pay the cost of your own slavery,
then let bankers continue to create money and control credit.”
The FED banking
system collects billions of dollars in interest annually and distributes the
profits to its shareholders - the interest on bonds acquired with its
newly-issued Federal Reserve Notes pays the Fed’s operating expenses
plus a guaranteed 6% return to its banker shareholders.
The US Congress
gave the FED the right to print money at no interest to the FED. The FED
creates money from nothing, loans it out through banks and charges interest.
The FED also buys government debt with money from nothing, and charges U.S. taxpayers interest.
The FED is the
only for profit corporation in America that is exempt from both federal and
state taxes.
The Chicago Plan
In 1933,
economists at the University of Chicago put forward confidential proposals to
roughly 40 individuals concerning banking reform. After receiving feedback
from a number of individuals the proposals were re-written, the supplementary
"Long-time Objectives of Monetary Management" was added as well as
an appendix, "Banking and Business Cycles."
Collectively,
these recommendations have come to be known as the Chicago Plan.
Irving Fisher was a strong advocate.
“The Best
Economic Minds In The Country devised a reform plan. Henry Simons from the
University of Chicago created the proposal and prominent economists from
other universities joined him in what became known as the “Chicago
Plan.” Economists like Paul Douglas of the U of C.; Frank Graham and
Charles Whittlesley of Princeton; Irving Fisher of
Yale; Earl Hamilton of Duke; and Willford King of
NYU, to name a few.” The
1930’s Chicago Plan Vs. The American Monetary Act, Stephen Zarlenga
The Chicago
Plan called for only the government to be able to issue the currency –
banks would no longer be able to create money by making loans.
"The
essence of the 100% plan is to make money independent of loans; that is to
divorce the process of creating and destroying money from the business of
banking. A purely incidental result would be to make banking safer and more
profitable; but by far the most important result would be the prevention of
great booms and depressions by ending chronic inflations and deflations which
have ever been the great economic curse of mankind and which have sprung
largely from banking.” Irving Fisher
The Chicago
Plan recognized the distinction between money and credit:
- The
power to create money was to be removed from private banks by abolishing
fractional reserves – the mechanism through which the banking
system creates money
- The
loan-making function (banks) was to be separated from the money-creation
function (government). Bank lending was to be from deposited long-term
savings
Although easily
implementable the Chicago Plan was never seriously considered by the
day’s government, instead, watered down alternative measures
(institutionalized Federal deposit insurance and the separation of commercial
and investment banking) were introduced in the Banking Act of 1935 which
created the Federal Open Market Committee (FOMC) who were charged with
controlling the money supply through open market operations using government
securities.
After a
mid-1930s recovery from the Great Depression the US again entered Recession
in 1937-1938 and the key elements of the Chicago plan resurfaced in the July
1939 draft titled ‘A Program for
Monetary Reform’, this
document was never published and never resulted in legislation.
Conclusion
“It is
time to part with the fallacy that economic growth and employment creation
are the main duties of central banks...Economic agony and financial disorder
will continue until central banks decide to rehabilitate monetary conditions
and restore direct control of the money creation process.” Dust off the Chicago Plan,
Hossein Askari and Noureddine Krichene, atimes.com
Milton Friedman
wrote “The creation of
fiat currency should be a government monopoly.”
Today monetary
reform advocates are revisiting the 1933 ‘Chicago Plan’ and the
1939 ‘A Program for Monetary Reform’.
Perhaps
it’s time some kind of monetary reform was on all our radar screens. Is
it on yours?
If not, maybe
it should be.
Richard
(Rick) Mills
rick@aheadoftheherd.com
www.aheadoftheherd.com
Richard
is the owner of Aheadoftheherd.com and invests in the junior
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