Fed Up: Federal Reseve Potted History

Many people know that the Federal Reserve Bank is a particular hobby-horse of mine. I consider it the greatest money-making con-job in history. I'd like to present a simplified introduction to the time-line of this remarkable coup, as I think the current political landscape in the US appears to be a direct result.

You may have the impression that the Federal Reserve Bank is some kind of governmental financial control centre that solemnly decides the United States money policies based on the public interest. You may even remember the ex-chairman Alan Greenspan (current chair is Ben Bernanke) soberly announcing interest rate increases and the like. But do you know anything else?

The story of the Fed is simple enough. In 1913 a group of wealthy bankers secretly subverted the constitution, bribed senators, and used their financial clout to take control of two important aspects of government.

  1. The right to print money
  2. The right to control inflation (interest rates, money supply)

Why would the government hand these powers over to a private corporation? (And by the way, the Federal Reserve Bank is about as federal as Federal Express [FedEx].) The bankers arbitrarily concocted a scare by calling in loans which created a rush on money, and, in turn, cleared out the smaller banks. They claimed the economy would be safer if they regulated the money supply. The institution they created (under extreme secrecy) was the Fed.

Wilson signed it into law and regretted it for the rest of his life.

'[W]e have come to be one of the worst ruled, one of the most completely controlled and dominated, governments in the civilized world—no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men.' from Woodrow Wilson's The New Freedom: A Call for the Emancipation of the Generous Energies of a People

What did they do with this new found power? They caused the 1929 Wall Street Crash and in consequence, the Great Depression. Why would they do this? They already owned half the country. Answer, to buy the rest of America on the cheap. Warburg, Rockefeller, Morgan, they all quietly exited the market in the months preceding the crash. Then, in a similar move to the bank scare, they forced margin calls on the stock exchange–which is like calling in the full amount of your mortgage. Next, they bought up the steel industry, railroads, the remaining banks, and everything else for a fraction of their worth.

The next step was to remove the gold standard (the requirement that currency be backed by gold reserves) which would make paper money (which only the Fed could print) worth whatever the Fed said it was worth. You may not know that in 1933 it became illegal for US citizens to own gold bullion, and that the government confiscated all gold in private hands that year.

Where do you think the US government's money comes from? Income tax? Wrong. As a consequence of the above events, the Fed now loans money to congress and then charges interest (the famous, and entirely arbitrary, Federal Reserve interest rates) which the government pays by borrowing more money. Sounds weird, huh? Wait till you hear the next bit.

Interestingly, I remember hearing years ago a rumour that the US Income Tax was unconstitutional. The claim certainly tallied with my understanding of Article One of the US Constitution which forbids unapportioned taxes. But I figured it was just some silly loophole, like that thing we had here about the radar guns. In reality, US citizens should have to pay taxes to cover schools, roads, and hospitals; it would be churlish to opt out. Right?

It turns out that not only is US income tax illegal (or at best 'voluntary'), but the Grace Commission Report showed that 100% of all income taxes go (you guessed it) to the Federal Reserve Bank as interest payments. (Oh, by the way, they also brought in the income tax back in 1913.)

You heard me, the complete taxes on the labour of every US citizen vanish straight up the pipe to the wealthiest men on the planet (in a reverse of the trickle-down effect, I suppose). What a scheme! You have to admire the elegance of the Fed's system. Or at least their cajones.

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