Money is Power
• “Permit me to issue and control the money of a nation, and I care not who makes its laws.” -Mayer Amschel Rothschild
• “We shall have world government…The question is only whether world government will be achieved by consent or by conquest.” -James Paul Warburg
• “Some…believe we are part of a secret cabal working against the best interests of the United States, characterizing my family and me as ‘internationalists’ and of conspiring with others around the world to build a more integrated global political and economic structure — one world, if you will. If that is the charge, I stand guilty, and I am proud of it.” -David Rockefeller
• “The powers of financial capitalism had a far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. …Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world.” -Carroll Quigley
If you were alive in 1910, you wouldn’t have been invited to the meeting. Don’t feel bad. Only a handful of the world’s 1.7 billion inhabitants at the time were important enough (and powerful enough) to be summoned. You also wouldn’t have known anything about what was discussed. In fact, you would have never known that a meeting took place. Despite the enormous impact on your country’s future, the scheme to create a new “monetary system” was none of your business. (As such, the powerful men who organized the meeting went to great lengths to keep it a secret.)
What you would have known in 1910 is the names of the powerful men who organized the meeting. They were: Rockefeller, Rothschild, Morgan and Warburg. Through their banks and investment firms, these four names represented 25% of the world’s wealth. …And in those days, the common people kept a close eye on these “super-rich bankers.” Citizens in the United States and Europe knew the game. They knew how the financial elite used their power to dominate industries and influence government. If word had gotten out that these extremely powerful competitors were meeting secretly, people would have feared they were combining forces to gain even more power and control. (The people would have been right.)
So, this is where the story of the Federal Reserve System begins. The banking empires of Rockefeller, Rothschild, Morgan and Warburg arranged a top secret meeting and sent representatives on their behalf to the privately owned Jekyll Island. To prevent the men from being recognized, Jekyll Island’s permanent staff had been sent on vacation and carefully screened temps took their place. Each participant was sworn to secrecy and instructed to only use their first name to further conceal their identity. (Nearly two decades passed before any of them publicly admitted they’d participated in the meeting.) In that meeting, the financial elite created, for themselves, the monetary system that we live under today.
1. The head of J.P. Morgan’s Bankers Trust Company -Benjamin Strong
2. Senior partner of the J.P. Morgan Company - Henry P. Davison
3. United States Senator, Chairman of the National Monetary Commission, business associate of J.P. Morgan and father-in-law to John D. Rockefeller Jr. - Nelson W. Aldrich
4. Assistant Secretary of the U.S. Treasury -Abraham Piatt Andrew
5. Representing William Rockefeller and the international investment banking house of Kuhn, Loeb and Company and president of the National City Bank of New York (The most powerful bank at the time) - Frank A. Vanderlip
6. Representing the Rothschild banking dynasty in England and France, partner in Kuhn, Loeb and Company, brother of Max Warburg who was head of the Warburg banking consortium in Germany and the Netherlands - Paul M. Warburg
Powerful competitors “joining forces” to achieve a common goal is nothing new. What is new about this particular meeting is the sheer magnitude of its success. By first writing the laws that would govern their industry (and then using government to pass and enforce those laws) the men of Jekyll Island created a system of generating profit and control that is unrivaled in all of human history.
By setting their differences aside, they could now direct their combined power against anything that stood in their way. Common enemies like emerging competition, currency drains and bank runs were targeted first. These enemies had limited the expansion of their wealth and power. Now they could be dealt with.
From the years 1900 to 1910, the number of banks operating in the United States had more than doubled to over twenty thousand. Most of the new banks had sprung up in the South and West and this was costing the large New York banks an increasing percentage of their business. However, in a “free market economy” there was little the New York bankers could do (legally) to stop this. So, as is often the case with unimaginably rich and powerful people, they coopted the power of government. By rewriting the “rules and regulations” in their favor, they could systematically weaken and eliminate their competitors.
Another form of “competition” came from self-financing. That is to say, businesses were using their own profits to finance new projects instead of using bank-borrowed funds. (From 1900 to 1910, seventy percent of funding for corporate growth came from within.) As such, the banks were being cut out of the equation and businesses were becoming increasingly independent. Even the federal government had gotten into the act. Worse than “not borrowing,” the government was actually paying off the national debt. Less and less debt equals less and less profit for the banks…this was a trend that had to stop.
To gain control of this problem, the bankers needed a system that allowed them to bypass the free market and manipulate interest rates directly. For instance, to encourage debt over saving and self-financing, they could tip the interest rates down. (Low interest rates encourage people to borrow and spend recklessly – more borrowing equals more debt, more debt equals more profit for the banks.) Then there is the option of being able to raise interest rates at will. This kind of control was a powerful tool they couldn’t do without.
One of the greatest threats a bank faces is known as a “bank run.” It should be noted that if banks actually ran a legitimate business, “bank runs” wouldn’t be a problem. But they don’t run a legitimate business and so bank runs are a problem. To understand what a bank run is, it helps to understand the fraudulent nature of our banking system. In essence, it is this:
When you deposit money in a bank, you expect the bank to keep your money safe until you want to withdraw it. If 100 people deposit 100 dollars in a bank ($10,000 total) the expectation is; the bank now has $10,000 in their vault. Under these circumstances, there would be no problem if all 100 people showed up on the same day to withdraw their $100. The bank could simply take the $10,000 out of the vault, return $100 to 100 people and that would be the end of that.
The problem is the bank never has anywhere near as much money on hand as it owes to its depositors. Instead of keeping your money in their vault, the bank loans it out to others. As if that isn’t bad enough, they then (based on the rules of our current system) are allowed to loan out even more money they don’t physically have. (Don’t worry; we’ll cover this ridiculous fact of modern banking in Chapters 6 and 8.) When all is said and done, it isn’t uncommon for a bank to have only a couple dollars on hand for every $100 (or more) that it owes to others.
If the public keeps its money in the bank, as it usually does, no problems arise. But if something spooks the public, or if more than a few percent of the population simply decides they’d like to have their money, the scam is exposed. When word gets out that the bank is stalling or unable to pay its depositors, the problem intensifies. Suddenly masses of people converge on the bank in an attempt to “get their money” (this is known as a bank run.) The bank of course doesn’t have anywhere near enough money to return to its depositors and bankruptcy usually follows. Sadly it’s the depositors who end up “paying the price.”
A normal human would look at the system and say it needed to be corrected. Banks shouldn’t be allowed to loan out depositor’s money without the depositor’s consent. Nor should the bank be permitted to create even greater financial obligations by loaning out even more money it doesn’t actually have. But who said any of this was going to make sense? We can’t forget the banking business is a business. Its current structure wasn’t created for the benefit of the “normal humans” who don’t understand it. There is a lot of profit to be made in loaning out money you didn’t have to earn, so figuring out a way to protect the inherently fraudulent system (rather than correcting it) was one of the main goals of the Jekyll Island conspirators.
A currency drain is very similar to a bank run. The bank owes more money to other people than it has on hand and, as a result, it is driven into bankruptcy. With a currency drain however, instead of depositors lining up at the bank’s teller window seeking their money, now it is other banks lining up seeking what they’re owed.
As an easy example, imagine for a moment there are only two banks: Joe’s Bank and Mary’s Bank.
Let’s say that I (Joe) have a $100 balance in my checking account. I decide I want to purchase Mary’s computer and she agrees to sell it to me for $100. Rather than go to my bank to withdraw cash, I simply write Mary a check.
When Mary cashes my check at her bank, the $100 she is given comes out of her bank’s available cash. In other words, Mary’s bank is temporarily “out” $100. The transaction isn’t complete until Mary’s bank sends the check I wrote to my bank and demands the $100 from my account.
Now imagine my bank agrees to “loan me” $1,000 it does not have. (Again, we’ll cover how banks literally “create money out of nothing” in chapters 6 and 8.) For now, suffice to say my bank simply types “1000” into their computer and, by doing so, adds $1,000 to my checking account balance
With my new $1,000 balance I go to Mary and ask if she’d like to sell her old lawn tractor. She agrees. I write her a check for $1,000, she deposits it in her bank, and her bank returns the check to my bank for payment. However, this time my bank cannot come up with the cash it needs to pay Mary’s bank. This is the basic idea of how a “currency drain” manifests. Currency drains come about when banks make more promises to “pay money on demand” than they can keep.
Of course, in the real world, there are many banks and many customers. While I’m writing a check for $1,000 that will be deposited in Mary’s bank, somebody from Mary’s bank might write a check for $1,000 that will be deposited in mine. In this case, the two checks would cancel each other out (each bank owes the other $1,000.) Because no money would need to be transferred to balance these transactions, there wouldn’t be any “drain” on either bank’s available currency.
Another scenario where a bank would not have to worry about experiencing a currency drain would be: I write a check from my bank to somebody who also banks at my bank (or one of its many other branches.) When the person I wrote the check to deposits it at one of the “Joe’s bank” branches, the bank only needs to subtract some digits from my account balance and add some to the depositor’s account.
But back to the main point: Rigging the system to protect against currency drains (rather than correct the underlying fraud that causes them) was one of the “great achievements” of those who brought us our “Federal Reserve System.”
As the system stood in 1910, some banks were more reckless than others about “loaning money” they didn’t have. (Remember, banks make money on loans…the more loans they can issue and collect interest on, the more profit they earn. There is always a great temptation to loan as much as possible.) The predictable result of reckless banking was this: Customers would borrow from a reckless bank and then write checks on their newly created account balance. Those checks would wind up deposited with other banks and those other banks would demand payment. Inevitably, the reckless bank would be drained of all its available currency (all of its customers’ cash deposits) and would go belly up.
To illustrate this a little further, imagine we have a cautious bank and a reckless bank. The cautious bank has $10,000 of its own money on hand for every $10,000 in “checking account” money it creates as loans. As a result of keeping cash reserves equal to 100% of its loans, it will never have a problem with too many checks coming in from other banks. It will always be able to meet its obligation to produce cash because its obligations are 100% backed by its cash reserves.
Our other bank (the reckless one) has $10,000 in cash on hand, but it isn’t happy with earning interest on only $10,000 in loans…it wants to earn interest on $500,000. So it starts issuing “loans” (creating new checking account balances “out of thin air” for its loan customers.) As those customers start writing checks, and those checks start finding their way into other banks, the inevitable “currency drain” begins. The bank goes broke, depositors lose everything, and the free money (interest/profit earned on money that existed only as keystrokes in a computer) is over for the bankers involved.
Historian John Klein explains: “The financial panics of 1873, 1884, 1893, and 1907 were in large part…triggered by the currency drains that took place in periods of relative prosperity when banks were loaned up.”
In other words, banks were walking closer and closer to the edge of how much money they could loan out (without sufficient cash to back those loans) and this practice led to repeated panics and the failure of some 1,748 banks over a couple decades. Again, rather than do the obvious (fix the fraudulent system), our banker friends were intent on expanding their profits and protecting themselves from the naturally occurring losses.
The Bankers’ Immediate “Wish List” Probably Looked Something Like This:
1 Stop the growing influence of smaller “rival banks.” By pushing them out, they could expand their control over the nation’s financial resources.
2 Make the money supply “more elastic.” (Make it easier for them to create large amounts of “money,” out of thin air, to loan.)
3 Create a system that allowed them to manipulate interest rates. (With this power, they could entice borrowers and reverse the trend of people using their own profits to finance growth.)
4. To help stave off currency drains and bank runs, encourage banks to maintain the same loan to reserve ratio (If everyone only loans out TEN TIMES their cash reserves, the system would be easier to manage than if some banks were “recklessly” loaning out fifty or one hundred times their reserves.)
5. Consolidate the inadequate cash reserves of the nation’s individual banks into one large reserve. (That way, if a member bank was experiencing a “run,” cash from the consolidated reserve could be sent over to satisfy withdrawal requests.)
6. If the entire system should come crashing down, have a mechanism in place to shift the losses from the bankers to the taxpayers.
7. Convince the people (and Congress) the “new system” would protect and benefit the public.
To achieve these goals, the bankers needed a strong alliance backed with legislation and sustained by the power of government. A near perfect model was already up and running in Europe; it was simply a matter of exporting it to the United States.
Still, that would prove easier said than done. Unlike today, voters knew better than to allow a handful of banking interests to centralize power, interfere with competition and manipulate the free-enterprise system. They had no faith in what was commonly referred to as “the money trust” and these men were “the money trust.” So, selling the scheme became an issue of wrapping everything in the right words and then pouring on the propaganda.
How They Sold It To the Public
Anger over recent panics and bank failures (caused by the fraudulent banking system already in place) was used to stir up demands for “monetary reform.” After creating sufficient public outcry, the Jekyll Island conspirators stood ready with the “solution” they had drafted.
The cartel3 would operate as a central bank, but for the purpose of public relations the word “bank” would not be used. To gain the public’s trust, “the system” was given the appearance of a federal agency. (In reality, the system is owned and controlled by private interests.)
The plan’s initial structure was kept somewhat conservative, but it contained plenty of wiggle room to get it just right over time. To avoid the appearance of a “Wall Street centralized power structure” it was designed with regional branches scattered about the country. To create the appearance of academic approval, university professors were employed to tout its merits.
Last but not least, the VERY MEN who conspired to make the plan a reality attacked and condemned it publicly. This final step convinced the public it was “bad for the money trust” and hence “good for them.” From start to finish, the banker’s PsyOP worked like a charm.4
What began as a secret plan in 1910 became a reality on December 23, 1913. “The Creature from Jekyll Island” (The Federal Reserve System) was signed into existence and it has been feeding on us all ever since.
Although “The Fed” was supposedly implemented to stabilize our economy and benefit the public, a look at its history shows it has done anything but.
Since its inception, it has presided over the crashes of 1921 and 1929; the Great Depression of 1929 – 1939; recessions in 1953, 1957, 1969, 1975, and 1981; a stock market “Black Monday” in 1987; and a 1000% inflation which has destroyed 90% of the dollar’s purchasing power.
That latter point (a 1000% inflation which has destroyed 90% of the dollar’s purchasing power) is an outdated figure. As of this writing, it is actually closer to 97%! It’s impossible to assess the full impact of the Federal Reserve System without taking inflation into account.
Inflation has been called a “hidden tax” because it reduces your purchasing power just as surely as government taking part of what you’ve earned (in taxes) reduces your purchasing power.
If you earn $10,000 dollars and the government takes $3,000 of it, your purchasing power has been reduced by 30 percent. If you earn $10,000 and a government-sanctioned inflationary policy reduces the purchasing power of your money by 30%, the impact on your earnings is the same; you’ve suffered a loss in purchasing power equal to $3,000. It’s no different than if they had simply taken the $3,000 from you.
Unfortunately, very few people understand this and that works to the advantage of those who profit from the system. Think about it. You’d be mad if somebody stole $3,000 from you; you’d know exactly how much of your money was missing and you’d want to go after whoever took it. But when was the last time you complained about the erosion of your purchasing power? When was the last time you tried to figure out how much of your money has been stolen via inflation over the past 5 or 10 years? When was the last time you “went after” those responsible?
We will cover inflation in greater detail in upcoming chapters. For now, we’ll keep it very simple: As the Federal Reserve facilitates the reckless expansion of our money supply (inflating the amount of currency and credit in our economy) the ever increasing volume of money decreases the value of our dollars. As the value of our dollars goes down, the number of dollars it takes to buy things goes up.
In short, the Federal Reserve System has failed miserably in its stated objectives. It has not stabilized the economy and it does not protect and benefit the public. Furthermore, based on the inherently fraudulent nature of the system, it can be reasonably argued that its stated objectives were never its REAL objectives at all.
When one realizes the circumstances under which it was created, when one contemplates the identities of those who authored it, and when one studies its actual performance over the years, it becomes obvious that the System is merely a cartel with a government façade.
Antony Sutton, Professor of Economics at California State University sums it up this way:
Even today,…academic theoreticians cover their blackboards with meaningless equations, and the general public struggles in bewildered confusion with inflation and the coming credit collapse, while the quite simple explanation of the problem goes undiscussed and almost entirely uncomprehended. The Federal reserve System is a legal private monopoly of the money supply operated for the benefit of the few under the guise of protecting and promoting the public interest.
If “the system” cannot meet its stated objectives, and if those stated objectives were never more than bait (used to get us on the hook,) then there is no reason why this “Creature” should be permitted to breathe another day. Congress created it. Congress can, and should, kill it.
: Unless otherwise noted, all indented quotes like this are the words of G. Edward Griffin.
: Regarding the term Currency drain
: Today, the term “currency drain
” is almost always used to describe the removal of currency from the banking system and the loss of “excess reserves” that this causes. However, here the term is used to describe a problem that banks faced “Pre
-Federal Reserve System.” (Prior to the creation of the Federal Reserve System, it was not uncommon for reckless banks to “inflate deposits” far more than others. This invariably led to a “drain” on the reckless bank’s currency, as described here.)
: A “cartel” is basically an alliance between businessmen who seek to monopolize a certain market or industry. (It’s especially dangerous in this case since the “monopoly” involves our nation’s money supply.)