We'll start way back in history to give some
kind of historical perspective to this; we'll go back to the first
century BC and the tiny kingdom of Phrygia.
There was a philosopher by the name of
Epictetus and it was Epictetus who said,
"Appearances are of four kinds: things
either are as they appear to be; or they neither are nor appear to
be; or they are but do not appear to be; or they are not and yet
appear to be."
When I read that statement for the first
time, I had a big chuckle over it and I thought for sure that if
Epictetus were alive today he would probably be a Harvard professor of
money and banking; it sounds like so many explanations that I have read
about various aspects of the Federal Reserve System.
What he did was he took a fairly simple
concept but by the time that he was through explaining it, we didn't
have any idea what he was talking about. All Epictetus said was that
appearances can sometimes be deceiving. That's all he said but by the
time he was through explaining the four different ways in which they can
be deceiving, we were left back at the switch somewhere.
Nevertheless, I thought, accidentally perhaps, Epictetus had given me a
track to run on so-to-speak.
Actually it could be the theme since if
there's anything in the world that is deceiving it is the Federal
Reserve System. In fact, it is one of those appearances of the fourth
kind which are those appearances which are not and yet appear to be. I'm
going to use that as sort of a hook on the topic. We'll come back to it
from time-to-time and punctuate it if I can remember to do that because
it tells us something at the most fundamental level about the Federal
Reserve System and that is that appearances can be deceiving.
When I did my research on this topic I came to the startling conclusion
that the Federal Reserve System does not need to be audited, it needs to
be abolished. This is very intriguing to think we should audit the Fed
but I discovered that probably if they audited the Fed it would get a
clean bill because it's undoubtedly doing exactly what it's supposed to
do according to the law.
What it is supposed to do according to the
law is justification for abolishing it so all we have to do is
understand what the Federal Reserve System is supposed to do and we'll
be pretty upset about it. The fact of the matter is that most people
haven't the foggiest idea of what it is in fact supposed to do.
I came to the conclusion that the Federal Reserve needed to be abolished
for seven reasons. I'd like to read them to you now just so that you get
an idea of where I'm coming from, as they say.
I put these into the most concise phrasing
that I can to make them somewhat shocking and maybe you'll remember
The Federal Reserve is incapable of
accomplishing its stated objectives
It is a cartel operating against the
It's the supreme instrument of usury
It generates our most unfair tax
It encourages war
It destabilizes the economy
It is an instrument of
I don't know what you think about those
I know a lot of you folks agree with them
right off the bat, but I presume that there are some skeptics here
tonight and I hope there are otherwise I am the minister talking to the
choir. I know in fact that there are always quite a few skeptics that
come to these meetings and frankly you are the folks I'm talking to
tonight because once, not too long ago, I was in that same frame of
I would've thought to myself those are
rather extreme statements, I don't think they can be supported by fact.
Though time doesn't permit me to cover all of those seven points here
tonight, I would like to splash around on the first four topics for a
little while and show you that there is in fact quite a bit of reason
for a rational person to conclude that those statements are true.
I think the best place to begin is with the formation of the "creature
from Jekyll Island"; the creation of the Federal Reserve. It takes me
back to the title of the book "The Creature from Jekyll Island" and
anybody that's here thinking that we're going to show a movie which is a
sequel to Jurassic Park, you're in the wrong place.
The title was
designed, of course, to attract attention but it does have a great deal
of significance to it.
For those of you who have not yet had a
chance to delve into this, I should explain to you that Jekyll Island is
a real island that's off the coast of Georgia. It was on that island
back in 1910 that the Federal Reserve System was created at a highly
secret meeting that took place there. What I'd like to do is illustrate
to you that the meeting did in fact take place and I'll show some of the
documentation that is available for that to prove that the secrecy was
extreme and then we'll come face-to-face with the question, "why the
When things are done in secret quite often
there's something to hide and we'll explore what it was that they wanted
to hide. Once we've come to an understanding of that, then we'll finally
understand a very important aspect of the Federal Reserve System which
is not generally understood.
Back in 1910, Jekyll Island was completely privately owned by a small
group of millionaires from New York. We're talking about people such as
J. P. Morgan, William Rockefeller and their associates. This was a
social club and it was called "The Jekyll Island Club." They owned the
island and it was where their families came to spend the winter months.
There was a magnificent structure there, the
clubhouse, which was the center of their social activities. That
clubhouse is still there, by-the-way. The island has since been
purchased by the state of Georgia, converted into a state park and the
clubhouse has been restored and you can visit it. I think you'd be very
impressed by it.
As you walk through the downstairs corridors
you'll come to a door and on the door there is a brass plaque and it
"In this room the Federal Reserve System
This is not a secret anymore; it's a matter
of public record.
Around the clubhouse there were some
cottages as they were called which were built by some of the families to
quarter themselves. They're attractive little things; they were
magnificent examples of the architecture of the turn of the century. One
of the cottages through which they take tours if you're interested in
doing that, as I recall the guide told us that there were 14 bathrooms
in that cottage - not exactly what we would call a cottage.
The clubhouse is where the Federal Reserve System was created. Let's
retell that story in detail and see how it came about. The year was
1910, that was three years before the Federal Reserve Act was finally
passed into law. It was November of that year when Senator Nelson
Aldrich sent his private railroad car to the railroad station in New
Jersey and there it was in readiness for the arrival of himself and six
other men who were told to come under conditions of great secrecy.
For example, they were told to arrive one at
a time and not to dine with each other on the night of their departure.
They were told that should they arrive at the station at the same time
they should pretend like they didn't even know each other. They were
instructed to avoid newspaper reporters at all cost because they were
well-known people and had they been seen by a reporter they would've
asked questions. Especially if two or three of them had been spotted
together, this would've raised eyebrows and they would've asked a lot of
One of the men carried a shotgun in a big
black case so that if he had been stopped and asked where he was going
he was prepared to say that he was going on a duck hunting trip. The
interesting thing about that part of the story is that we find out later
from his biographer that this man never fired a gun in his life, in fact
he borrowed that shotgun just to carry with him on this trip as part of
Once they got on board the private railroad car this pattern continued.
They were told to use first names only, not to use their last names at
all. A couple of the men even adopted code-names. The reason for that is
so that the servants on board the train would not know who these people
were. They were afraid that if the servants would talk about it then the
word would leak out and it might get into the press. They traveled for
two nights and a day on board this car and they arrived after a 1,000
mile journey to Brunswick, Georgia.
From there they took a ferry across the
inland straits and they ended up on Jekyll Island in the clubhouse where
for the next nine days they sat around the table and hammered out all
the important details of what eventually became the Federal Reserve
System. When they were done they went back to New York.
For quite a few years thereafter these men denied that any such meeting
took place. It wasn't until after the Federal Reserve System was firmly
established that they then began to talk openly about their journey and
what they accomplished. Several of them wrote books on the topic, one of
them wrote a magazine article and they gave interviews to newspaper
reporters so now it's possible to go into the public record and document
quite clearly and in detail what happened there.
Who were these seven men?
The first one I have already mentioned,
Senator Nelson Aldrich was the Republican whip in the Senate, he was the
chairman of the National Monetary Commission which was the special
committee of Congress created for the purpose of making a recommendation
to Congress for proposed legislation to reform banking.
The public was quite concerned in those days
over what was going on in the banking industry; a lot of banks were
folding, people were losing their investments in banks, they had broken
their promise to guard the depositors assets, there were runs on the
bank, banks couldn't give the people their money back. In particular
they were concerned over the concentration of wealth in the hands of a
few large banks in New York on Wall Street.
This is what they called the "money trust"
in those days.
The money trust was a common phrase. Quite a few
politicians had been elected to office on their campaign promise to
break the grip of the money trust. President Wilson was one of those
politicians that campaigned on that even though Wilson was himself
hand-picked by the money trust and financed by the money trust and
surrounded by the money trust - all of his advisors and politic cronies.
The public didn't know that at the time and
it was a popular issue. If you campaigned against the money trust you
were quite apt to be elected and that was what I call "the people you
love to hate" money trust.
That was one of the purposes of the National Monetary Commission which
was to propose legislation to break the grip of the money trust and
Aldrich was chairman of that committee. He was also the very important
business associate of J. P. Morgan. He was the father-in-law of
John D. Rockefeller, Jr.
which means that eventually he became the grandfather of Nelson
Rockefeller, our former vice-president. You remember his full name was
Nelson Aldrich Rockefeller; his middle name being derived from his
The second important person there was Abraham Andrew who was Assistant
Secretary of the Treasury. He later became a Congressman and he was very
important in banking circles.
Frank Vanderlip was there. He was the President of the National City
Bank of New York which was the largest of all of the banks in America
representing the financial interests of William Rockefeller and the
international investment firm of Kuhn, Loeb & Company.
Henry Davison was there, the senior partner of the J. P. Morgan Company.
Charles Norton was there; he was the President of the First National
Bank of New York which was another one of the giants.
was at the meeting; he was the head of J. P. Morgan's Banker's Trust
Company and Benjamin Strong three years later would become the first
head of the Federal Reserve System.
Finally, there was Paul Warburg who was probably the most important at
the meeting because of his knowledge of banking as it was practiced in
Europe. Paul Warburg was born in Germany and eventually became a
naturalized American citizen. He was a partner in Kuhn, Loeb & Company
and was a representative of the Rothschild banking dynasty in England
and France where he maintained very close working relationships
throughout his entire career with his brother, Max Warburg, who was the
head of the Warburg banking consortium in Germany and the Netherlands. Paul Warburg was one of the wealthiest men
in the world.
In fact, those of you who are Little Orphan Annie fans
will remember Daddy Warbucks.
Daddy Warbucks was the characterization of
Paul Warburg and everyone at the time was well aware of that fact. I have
his photograph in my book and if you compare the photograph to the
cartoon drawing you'll see the resemblance between Paul WARburg and
And while we're on the topic of cartoon
characters, if you played Monopoly, you remember the drawing of the
capitalist with the handle-bar mustache and the cigar? That's J.P.
These were the seven men aboard that railroad car who were at Jekyll
Island. Amazing as it may seem, they represented approximately 1/4 of
the wealth of the entire world. These are the men that sat around the
table and created the Federal Reserve System. For the skeptic who's
wondering it didn't happen that way surely Griffin is exaggerating to
make some kind of a point. Let me put your mind at ease that it did
happen that way (perhaps not at ease but in a state of tension).
How do we know? For example, Frank Vanderlip who was at the meeting
wrote an article that appeared in the Saturday Evening Post on February
9, 1935 and I'd like to read for you just a short excerpt from that
This is what Vanderlip said:
"I do not feel it is any exaggeration to
speak of our secret expedition to Jekyll Island as the occasion of
the actual conception of what eventually became the Federal Reserve
We were told to leave our last names behind us. We were told
further that we should avoid dining together on the night of our
departure. We were instructed to come one at a time and as
unobtrusively as possible to the railroad terminal on the New Jersey
littoral of the Hudson where Senator Aldrich's private car would be
in readiness attached to the rear-end of a train to the south.
Once aboard the private car we began to
observe the taboo that had been fixed on last names. We addressed
one another as Ben, Paul, Nelson and Abe. Davison and I adopted even
deeper disguises abandoning our first names. On the theory that we
were always right, he became Wilbur and I became Orville after those
two aviation pioneers the Wright brothers.
The servants and train crew may have
known the identities of one or two of us, but they did not know all
and it was the names of all printed together that would've made our
mysterious journey significant in Washington, in Wall Street, even
Discovery we knew simply must not
Why not? Why the secrecy? What's the big
deal about a group of bankers getting together in private and talking
about banking or even banking legislation?
And the answer is provided by Vanderlip
himself in the same article.
"If it were to be exposed publicly that
our particular group had gotten together and written a banking bill,
that bill would have no chance whatever of passage by Congress."
Because the purpose of the bill was to break
the grip of the money trust and it was written by the money trust. And
had that fact been known at the get-go, we would never have had a
Federal Reserve System because as Vanderlip said it would have had no
chance of passage at all by Congress. So it was essential to keep that
whole thing a secret as it has remained a secret even to this day. Not
exactly a secret that you couldn't discover because anybody can go to
the library and dig this out, but it is certainly not taught in
We don't know any of this in the official
literature from the Federal Reserve System because that was like asking
the fox to build the henhouse and install the security system.
That was the reason for the secrecy at the meeting. Now we know
something very important about the Federal Reserve that we didn't know
before, but there's much more to it than that. Consider the composition
of this group.
Here we had the Morgans, the
Rockefellers, Kuhn, Loeb &
Rothschilds and the Warburgs.
Anything strange about that mixture? These
were competitors. These were the major competitors in the field of
investment and banking in those days; these were the giants.
Prior to this period they were beating their
heads against each other, blood all over the battlefield fighting for
dominance in the financial markets of the world. Not only in New York
but London, Paris and everywhere. And here they are sitting around a
table coming to an agreement of some kind.
What's going on here? We need
to ask a few questions.
This is extremely significant because it happened precisely at that
point in American history where business was undergoing a major and
fundamental change in ideology. Prior to this point, American business
had been operating under the principles of private enterprise - free
enterprise competition is what made American great, what caused it to
surpass all of the other nations of the world.
Once we had achieved that pinnacle of
performance, however, this was the point in history where the shift was
going away from competition toward monopoly. This has been described in
many textbooks as the dawning of the era of the cartel and this was what
was happening. For the fifteen year period prior to the meeting on
Jekyll Island, the very investment groups about which we are speaking
were coming together more and more and engaging in joint ventures rather
than competing with each other.
The meeting on Jekyll Island was merely the
culmination of that trend where they came together completely and
decided not to compete - they formed a cartel.
I need to define that word so that you will know what I mean when I use
the word cartel. It is a group of independently owned businesses which
come together for the purpose of reducing or eliminating competition
between themselves to enhance their profit margin or to secure their
positions in the market. They do this by various means one of which is
price fixing - no competition on price.
There are other means. If we were forming a
cartel here I might insist that I get the north and you can have the
south and we won't compete. Or I would say I'll produce the gizmo and
you can have the widget and we won't compete or we'll share patents and
processes and whatever we do we agree to eliminate competition between
The more layers of agreement that we put one
on top of the other, the more we become encased in this cartel structure
and we become as one insofar as the market is concerned even though
within that grouping we are separately owned.
This is just as true with a banking cartel as it is with any other
industry. We come to the conclusion when we analyze the nature of the
Federal Reserve System how it operates, read the Federal Reserve Act,
place it against the context of the historical background and we come
smack to the realization that the Federal Reserve System although it
parades around looking as though it's a government operation of some
kind, is merely a cartel of banks right under our noses and it is
protected by law.
I sometimes get the impression that it's
been there dangerously operating all these years and we didn't even know
it. I saw a video some years ago about the lava tubes in Hawaii.
They are very impressive because apparently
once in a while the ground will just break out, a hole will fall down
and you can look into the hole and you see that there's a river of lava
actually flowing just a few feet under your feet and you don't even know
it's down there unless something breaks through and you hope you're not
on the piece that breaks through. I got the feeling that this is how the
Federal Reserve has been operating right under our feet; this cartel has
been running and we didn't even know it because that fact has been
carefully concealed from us.
Conclusion number 2 about the Federal Reserve System, a very important
thing that we didn't know is the cartel. There's even more to it than
that. Perhaps the third ingredient is the most important of all and that
is the realization that this cartel went into partnership with the
government. Now we have hold of something extremely significant.
Cartels often go into partnership with
governments because they need the force of law to enforce their cartel
agreement but in this case they did it in spades.
Whenever a partnership is formed there has to be a benefit to the
partners otherwise they don't form it.
So we need to ask the question,
What is the benefit, the payoff, for these two partners?
Why did they go
Why did the government go into a partnership like this and why
does the banking cartel?
In answering those questions we finally come to
grips with the reality of what this creature from Jekyll Island is.
Let's take a look at that; what's the payoff
to these two partners?
In order to see that we'll have to examine
in some detail the mechanism by which the Federal Reserve System creates
money. This is a real interesting study. I call it the "Mandrake
far below insert) named after that comic-book character of the 40s,
the Magician, who could create something out of nothing and then wave
his cape and it was back into the void again.
That's a pretty
descriptive phrase for the way the Federal Reserve System does it.
Let's take a look at it and see how they create money through the
I am going to do this in a very simplified form. I
want to warn you that it's going to sound like it's too simple. It's
not. I'm going to strip out all the banking terminology, all the banker
language, all the accounting phrases that need to be defined and speak
in very plain English that anybody can understand. It may sound to you
as though I've simplified it too much and I want to assure you that in
spite of the simple language everything I'm going to tell you is
absolutely 100% technically accurate.
The other thing I want to warn you about is
don't try and make sense out of this because it can't be done; this does
not make sense and you'll blow a fuse trying to make it make sense. Just
remember that it is a scam and if you keep that fact in mind then you'll
have no trouble comprehending what's going on.
Here's how it works. It starts with the government side of the
partnership, it starts in Congress which is spending money like crazy.
It spends far more money than it takes in. It is spending way beyond its
How can it do that? Basically this is what
Let's say Congress needs an extra billion
dollars today so it goes to the treasury and says,
"We want a billion dollars" and the
treasury official says "You guys have got to be kidding, we don't
have any money here, you spent it all a long time ago, everything
that we've taken in taxes you fellows have spent by March."
"We thought that was true but we thought
we'd stop by just in case somebody sent some more in."
They get together and they go down the
street and they get the idea that we'll borrow the money.
So they stop at the printing office and they
don't print money at the printing office, they print certificates and
they're very fancy things with borders on the edge with an eagle across
the top and a seal at the bottom and it says "US Government Bond" or
"Note" or "Bill" depending on the length of the maturity of it. If you
hold it up to the light it really says "IOU" because that's what it is.
They print these things up and it looks very
impressive and then they offer them to the private sector; they're
hoping that people will come up and loan money to the federal government
and a lot of people do and are anxious to lend money to their
Why? Because they've been told by their investment advisors
that that's the most sound investment that you can make. Why? We've all
heard that these loans are backed by the full faith and credit of the US
They're not quite sure what that means but
it sure sounds good. I'd like to explain for you who are in doubt what
that means. The full faith and credit of the US government means that
the government solemnly promises to pay back that loan plus interest if
it has to take everything you and I have in the form of taxes in order
to do it, it's going to do it. It will take everything we have if
necessary to hold its pledge.
People don't realize that they're putting
themselves on the line, they're going to get their own money back minus
a substantial handling fee.
Plenty of money is loaned to the government but never enough. Congress
needs more money than that. They say not to worry. They go further down
the street to the Federal Reserve building. The Fed has been waiting for
them, that's one of the reasons it was created.
By the time they get inside the Federal
Reserve building the officer of the Fed is opening his desk drawer. He
knows they're going to be there and he's ready and he pulls out his
checkbook and he writes a check to the US Treasury for one billion
dollars or whatever the amount is that they need. He signs the check and
gives it to the treasury official.
We need to stop here for a minute and ask a question. Where did they get
a billion dollars to give to the treasury? Who put that money into the
account at the Federal Reserve System?
The amazing answer is there is no money in
the account at the Federal Reserve System. In fact, technically, there
isn't even an account, there is only a checkbook. That's all. That
billion dollars springs into being at precisely the instant the officer
signs that check and that is called "monetizing the debt," that's the
phrase they throw at you.
That means they just wrote a check, a big
rubber check. If you and I were to do that we would go to jail but they
can do it because Congress wants them to do it. In fact, this is the
payoff, this is the benefit to the government side of this partnership,
this is how the government gets its instant access to any amount of
money at any time without having to go to the taxpayer directly and
justify it or ask for it. Otherwise, they would have to come to the
taxpayer and say we're going to raise your taxes another $3,000 this
year and of course if they did that, they would be voted out of office
They like the Mandrake Mechanism
because it's a no questions asked source of money. You may have noticed
that it's been many years since Congress has even discussed what
anything costs, it's not an issue. It doesn't make any difference what
the cost is because regardless of the overrun they know they can go down
the street to the Federal Reserve and by law the officer has to write
that big check and give it to them and they're off and running.
There in a nutshell is the reason the government likes the Mandrake
Mechanism - easy instant access to any amount of money of any kind
without the taxpayer being involved directly in the loop.
But what about the banking side? This is
where it really gets interesting. Let's go back to that billion dollar
The treasury official deposits the check
into the government's checking account and all of a sudden the computers
start to click and it shows that the government has a billion dollar
deposit meaning that it can now write a billion dollars in checks
against that deposit which it starts to do real fast. For the sake of
our analysis, let's just follow $100 out of that billion in a check that
for some reason they write to the fellow that delivers the mail to our
The postal worker gets a check for $100 and
he looks at this thing and he can't imagine in his wildest dreams that
that money didn't exist two days ago anywhere in the universe. It's spendable so he wouldn't even care if you told him. He deposits it now
into his personal checking account. Now we're finally out of the Federal
Reserve and out of the government's check and we're into the private
banking system. We're in finally to that part of the partnership which
is involved in the cartel.
A $100 deposit has now been made in the
local bank and the banker sees that and runs over to the loan window and
opens it up and says "attention, everybody, we have money to loan,
someone just deposited $100." Everyone is overjoyed at that because
that's one of the reasons they come to the bank, they come to borrow
money. That's a sign of national health if you're in debt so they're
anxious to know that the bank has money to loan, they line up for these
loans. They heard the banker and they say $100 that's not very much and
he says not to worry we can loan up to $900 based on that $100 deposit.
How can that be done? It gets complicated the way they do it and
I'll tell you in very simple terms.
The Federal Reserve System requires
that the banks hold no less than 10% of their deposits in reserve. The
bank holds 10% of that $100 in reserve, $10, and it loans this first
fellow in line $90. What does he do with it? He wants to spend it so he
puts it into his checking account. In fact it probably goes directly
into his checking account.
Let's assume that they gave it to him and he
puts it back, when he puts it back it's a deposit, isn't it?
Only a $100 deposit but $900 in loans and that deposit is still there.
Where did the $900 come from and the answer is the same - there was no
money. This springs into existence precisely at the point at which the
loan is made. Notice the difference, an important distinction is when
the money is created out of nothing for the government it is spent by
On the banking side, however, when it's
created out of nothing it's not spent by the banks it is loaned by the
banks to you and to me and we spend it. Notice that when they loan it to
us we have to pay them interest on it. Think about this for a minute.
This money was created out of nothing and yet they collect interest on
it which means that they collect interest on nothing. Not too shabby!
What a concept, why didn't I think of that!
I wish I had a magic checkbook like that
where I could just write checks all day long and didn't have to have any
money any place just checks, loan it to you folks and you're silly
enough to pay me interest on it. That's how it works.
Now you see what the benefit is to the banking cartel for being involved
in this Federal Reserve System, interest on nothing. The process doesn't
end there, however. It has consequences to you and to me. I've heard
some people say "isn't that interesting, these fellows are sure smart, I
guess they deserve to be rich." It's as though we're out of the loop, it
doesn't affect us any, they got rich but we're ok. Well no, they got
rich alright but they got it by taking it from us.
How does that work? Let's follow this.
This newly created money goes out into the economy and it dilutes down
the value of the dollars that were already out there. It's like pouring
water into a pot of soup, it dilutes the soup. So by throwing more and
more money into the economic soup out there the money gets weaker and
weaker and weaker and we have the phenomenon called inflation which is
the appearance of rising prices.
I emphasis the word "appearance" because in
reality prices are not rising at all. What we're seeing is that
value of the dollar is going down, that's the real side of the equation.
If we had real money based on gold or silver or anything tangible that
couldn't just be created out of thin air, it could be based on
microphones, that they couldn't just create with the stroke of a pen,
you would see then that prices would remain stable over a long period of
To illustrate that point, it's interesting to know that if we had lived
in ancient Rome with a one ounce gold coin we would've been able to buy
a very fine toga, a hand-crafted belt and a pair of sandals - that was
the price in Rome. Today, if we have a one ounce gold coin what can we
buy with it? We can go into any men's store and buy a very fine suit, a
hand-crafted belt and a pair of shoes.
The price of these items hasn't changed in
thousands of years when expressed in terms of real money but when
expressed in terms of these things we carry around in our pockets called
Federal Reserve notes which is not really money at all, fiat money
anyway, the prices keep going up and up and up because the value of
those units keeps going down and down and down because they keep making
more and more and more of them and dumping them into the economic soup.
That's still not the end of the process. We lost some purchasing power
through this process called inflation. We lost something and very few
people ask the question "who got it"? It's as though nobody got it, we
all lost it, it's like it evaporated and went up to heaven somewhere.
No, somebody got it.
For every loser there's a winner. Or I
should say for every fifty losers there's one winner that gets it all.
Somebody got it. Who?
Those people that got our lost purchasing power
are the ones who were right up at the point where the fresh money was
injected into the economic pot of soup. The ones that got the money
first gained because they had full purchasing power at that instant when
the money was created.
By the time they spent it and gave it to you
and you spent it on something and gave it to him and by the time that it
got out to the edge of the pot where most of us are it's diluted. The
ones that were right up at the nozzle got our lost purchasing power.
are they? Obviously the government was up there first. Remember the
billion dollar check, the very beginning of this process went to the
government and they spent it instantly and that money went out into the
economy and that was the beginning of this ripple effect.
Who else? The next ones were the people who
were up at the loan window.
They got the money that was freshly created
by the banking system because they were the borrowers. We all know that
in times of inflation borrowers gain, this is no mystery. We've been
told and advised to borrow money and stay up to the hilt in debt because
you borrow in dollars but because of inflation you can pay back with 50
So everybody knows about this part of it. What they forget is that the
alleged benefits of doing this are surrendered to the bank in the form
of interest payments. They're really not gaining that much. The gain
that they are getting through the inflation process they're having to
give to the bank in the form of interest on nothing. And it seems that
they're gaining because they have these paper profits.
The value of this real estate is going up
and up and up or the value of my stock is going up and up and up but
it's all paper. As far as purchasing power is concerned it's not going
up, up, up at all. Nevertheless they're still having to pay for that
illusion in the form of interest payments on nothing.
Then comes the inevitable contraction of the economy. People don't
realize that the economy moves traditionally like a saw-tooth - it goes
up gradually for a long period of time and seems like forever it's going
to go up, you can plan on it forever and don't worry about it and then
clunk! it falls down very quickly and then it starts the next long climb
and people forget that every once in a while it comes down very
abruptly. When it contracts people are extended out there and they can't
service their debt and make the payments and they lose their assets.
Another interesting thing about this is that when the bank loans you
money which it created out of nothing, it cost nothing to make it, it
wants something from you. It wants you to sign on the dotted line and
pledge your house, your car, your inventory, your assets so that in case
for any reason you cannot continue to make your payments they get your
marbles, they get all of your assets.
They're not going to lose anything on this.
Whether it's expansion or contraction, inflation or deflation the banks
are covered and we like sheep go right along with it because we haven't
figured it out, we don't know that this is a scam. Of course we have no
choice either right now because it's all enforced by law. We have no
escape. We have no choice but it's even better that we don't understand
it because we can't complain about it either.
There you have it.
The two groups that got our lost purchasing power - is anyone
surprised?- the two members of the partnership, the government and the
banking cartel. The two groups that comprise the Federal Reserve System.
This lost purchasing power which is going from us to them is a tax. We
don't think of it as a tax but it is. We have no escape from it. In
fact, it's more a tax than the income tax or the excise tax which you
can escape in one way or another. You can't escape this one. There are
no deductions, no exemptions, everyone pays it and it is the most cruel,
unfair tax of all because it falls most heavily on those who can least
afford to pay it.
It falls on those on fixed incomes, those
who are retired. Anyone who has saved their money is paying this tax in
direct proportion to the degree to which they have been frugal. It's a
tax even though we don't think of it as that and it's time to think of
it as that. It's a tax that goes from us to the government and to the
Let's summarize. What is the benefit to the members of the partnership?
The government benefits because it is able to tax the American people
any amount it wishes through a process which the people do not
understand called inflation. They don't realize they're being taxed
which makes it real handy when you're going for re-election. On the
banking side they're able to earn perpetual interest on nothing. I
emphasis the word "perpetual" because remember when the loan is paid
back it's turned around and loaned out to somebody else.
Once that money is created the object of the
bank is to stay loaned up" as they say. In reality the banks can never
stay 100% loaned up and that ratio varies a lot but the objective is to
stay loaned up to whatever extent is possible. Generally speaking once
this money is created in the loan process it is out there in the economy
forever, perpetually earning interest for one of the members of the
banking cartel which created that money.
There you have in a condensed form a crash course on the Federal Reserve
System and I can assure you that you know more about the Federal Reserve
than you would probably if you enrolled in a four year course in
economics because they don't teach this reality in school.
So what, they say? Can you imagine that?
I knew when I wrote this book and it got out
that there would be some objection to it but I never dreamed what it
would be. I couldn't think of any objection to it, I thought what are
they going to say, what are the defenders of the Federal Reserve System
going to say to me? I figured they were going to try and pick some error
that I had made in some technical issue and try and make me look like a
But I never dreamed that the only
opposition, at least that I've run into so far, is the question "so
I was on the Pat Buchanan radio show about a month ago and they have a
cohost which is usually a representative of the opposing point of view
and this day they had a fellow by the name of Barry Lind (?) who was an
ACLU type high-powered intellectual and I was kind of nervous thinking
here it comes, I'm going to get it now and I'm going to be made a fool
of right in front of all these millions of people out there in radio
land. I was really worried.
It's kind of hard on these radio shows to
get your point across as they don't let you speak like you folks let me
do here. The lion's share of the time goes to Buchanan and then the
co-host gets his shot and then the commercials come in and you've got
three minutes to say your whole thing and they're always interrupting
I made my little shot as best I could and it
was Barry Lind's turn and he looked at me and he said:
"Well, what you say is true, but so
what?" I couldn't believe it. And then he capped it with, which is
the real argument: "We're living well aren't we?"
This is an interesting question and I have
run into that repeatedly since then.
What are you complaining about? we're living
well aren't we? And the implication is that without this scam we
couldn't be living well, without this scam somehow we'd be still
crawling around in caves. We wouldn't have society with a high standard
of living, we wouldn't have any of the things that we cherish without
this scam, that's the whole implication. So how do you answer that? So
First of all, we are not living that well. People like Barry Lind are
undoubtedly living very well and there are plenty of people in the
system who are living very well. Generally those are the ones who are up
at the nozzle where this new money is coming into the system or they're
involved in the government or they have government subsidies of they're
close to the nozzle. For most people, away from the nozzle, it's not
going so well, we're not living that well.
It is a matter of fact that the only reason
that America has been able to maintain the appearance of a high standard
of living since the Federal Reserve System has gotten into full swing,
especially after WWII, is because of the shift towards two family
incomes. It now takes two working people to just maintain the semblance
of where we used to be with one person working in the family.
And in spite of the two family income real
wages are down for the common man today, real wages in terms of the
number of hours a person must work in order to acquire the necessities
of life. Young couples who are living on a single income now have a
lower standard of living than their parents did. The net worth of the
average household is falling.
The leisure time for the average American is
shrinking. The percentage of families who own their own homes is
dropping. The age at which a family acquires its first home is rising.
The number of families that are counted in the middle class is falling.
The number of people below the poverty line is rising. Personal
bankruptcies today are about three times what they were in the 1960s and
over 90% of Americans are broke at the age of 65.
So we're not living well at all as a result
of this creature.
Furthermore, there's another thing wrong with it. That is that when you
have a money supply based upon thin air it not only expands but it
contracts. If it were based on gold or silver or microphones, the money
supply couldn't expand and contract because there they are but when it's
politically motivated it can contract and that is the core cause of all
of the booms and busts that have plagued America for so many years.
In other words, this is the concept behind
the recession and the depression and that is another thing that's wrong
The third thing that's wrong with it is that it is dishonest. You don't
really need anything more than that do you? Even if it were the element
that was creating our prosperity, even if it didn't cause recessions and
depressions the fact that it is fraud, the fact that it is deception,
it's dishonest and theft is really a good enough reason in my opinion to
get rid of it. That's what's wrong with this scam.
Let's go back to Jekyll Island.
They had an interesting problem there which
was what to call their creature. This partnership between government and
banks which we've been discussing was not new with the Federal Reserve
System. In fact, it was a concept that was created in Europe in the 16th
century. It was perfected with the formation of the Bank of England in
1694 and from that point forward all of the governments of Europe had
used this Mandrake Mechanism.
They didn't call it the Mandrake
Mechanism, of course, they called it a "central bank," that's the
technical phrase for this partnership. If you want to look it up in a
textbook or encyclopedia you'll find it under the heading "Central
From the Bank of England forward all the governments of Europe had
central banks for a very good reason. The kings and princes of Europe
had learned from hard experience that they could raise the taxes of
their subjects only so high and then they had a revolt on their hands
and they tended to lose their jobs (and heads).
It appears that that natural level was about
40-43%; people will tolerate taxes up to about 40-43% and then they
start digging in their heels and they just won't allow it to go any
further. But with the central bank mechanism in place the lid was off.
Now these governments could tax their people 50%, 60%, 70% and in some
cases 80% of everything they produced and they did not have a revolt on
They did not have resentment because the
people didn't know that they were paying a tax. They knew that prices
were going up, but they didn't understand why, they didn't know who was
getting their lost purchasing power.
It was a nifty arrangement for these governments. It was at that point
in history that governments' wars began to heat up. They always had wars
but they were relatively small things because wars are expensive and the
people won't pay more than 40% for everything including wars. But now
that they had a way to tax higher than that, they could engage in very
expensive wars. It's at that point in history that Europe plunged
headlong into continuous war and big, very, very expensive wars. The
people paid for them uncomplainingly through the process of inflation.
So when it came time to transplant this concept to America these seven
men on Jekyll Island knew very well that they were creating a central
bank; that was the reason that Paul Warburg was so valuable because he
was the man with the intense knowledge, the detailed technical knowledge
of how central banks operate. But they had a problem.
How could they conceal that from the
American people because Congress was already on record as saying they
did not want a central bank in America. I don't think they knew what
that phrase really meant, but they knew that Europe had them, whatever
they were, and we didn't want any. They said in America if we're going
to have banking reform we don't want what they do over in Europe, we
want something that is unique for America and its principles and
The problem before these men on Jekyll Island is what to call the
central bank so that nobody would know it was a central bank. And they
theorized over this and this was their strategy: they said first let's
give it a name and we'll add the word "Federal" to it to make it sound
like it's government. Then we'll add the word Reserve" to make it seem
like there are reserves somewhere, like it was a banking concept.
We'll add the word "System," a very
important word even though it may seem obscure now because remember in
those days the concern was the concentration of financial power in New
York so they had to sell the idea of a system of regional banks which
would diffuse that power all over the nation. First they talked about
ten regions and then they said that wasn't enough, twelve regions, we'll
have twelve banks.
And we'll build big buildings out there in
all of those regions so the local yokels can go and look at the building
and say "golly we've got one of those out here." Diffusion of power away
from New York; you can go and touch the building.
The word "System" was very important.
When you look at it you realize that what they created there was not
federal, there are no reserves, it's not a system at all in the sense of
diffusion of power and these Federal Reserve banks aren't even banks. On
all four words we're dealing with appearances of the fourth kind. It was
The next thing was to sell this creature to the public. The first draft
of the Federal Reserve Act as it was presented to Congress was called
the Aldrich Bill named after the sponsor, Senator Nelson Aldrich. This
was against the good advice of Paul Warburg.
"Nelson, don't put your name on that
bill because you are so identified with big business interests that
Congress will vote it down; the people will not accept it."
And apparently Aldrich's ego was too big.
He must've said:
"Well no, after all I'm highly respected
in the Senate and I am the Chairman of the National Monetary
Commission" and for whatever reason he insisted that his name be on
It appears that he wanted to go down in
history as the originator of the Federal Reserve System. Warburg was
right. When the bill was introduced Congress put thumbs-down on it: "The
Bill of Big Business."
They took the bill back for it was just a minor setback, they scrambled
the paragraphs around a little bit, took Aldrich's name off real fast
and they found a couple of Democrats to sponsor the bill. This was
different. Everybody knew that the Republicans represented big business
but they also knew that Democrats represented the common man, the little
guy, the fellow on the assembly line (like Ted Kennedy).
They found a couple of millionaire Democrats
to sponsor the bill. They found Carter Glass in the House and Senator
Robert Owen who himself was a banker. Now it was the Glass-Owen bill and
it was totally different and acceptable.
The next thing, Aldrich and Vanderlip began to give speeches and
interviews to newspaper reporters condemning the bill.
"This bill will be ruinous to banking.
It will be terrible for the country."
By the time the common man read that in his
newspaper he said:
"Oh golly, I guess these big bankers
don't like the bill very much so it must be pretty good."
These fellows were not stupid. You have to
give them credit.
They didn't get to be where they were by
being country bumpkins. They understood politics, they understood mass
psychology and they played their cards exceedingly well. Meanwhile these
same individuals out of their own pockets were paying the price for the
costs of bringing up what they called grassroots study clubs all over
the country. They sponsored these clubs and they held public meetings
and printed brochures and pamphlets extolling the virtues of the Federal
They gave large amounts of money to some of
the better known universities in America; they created newly formed
departments of economics with that money; they hand picked their own
people to be the professors to head up those departments and then those
professors with all of their academic credentials gave speeches and
wrote scholarly essays extolling the virtues of the Federal Reserve
System. And then at the insistence of Paul Warburg who was forever the
master strategist, they added several very sound provisions to the
Federal Reserve Bill.
By that I mean they added some provisions
which seriously restricted the ability of the Federal Reserve to create
money out of nothing.
Warburg's associates said,
"Paul, what are you doing? We don't want
those in there this is our bill."
And his response was this, he said,
"Relax fellas, don't you get it? Our
object is to get the bill passed. We can fix it up later."
Those were his exact words.
"We can fix it up later."
He was so right.
It was because of those provisions that they
won over the support of William Jennings Bryan the head of the Populist
Movement, the last hold-out against the bill. Bryan was concerned that
this would be an instrument for ruining the nation's money supply but
when he saw those provisions he said, "Oh well, those are good
provisions, I guess I can support the bill now" never dreaming that this
was temporary. Everything is temporary in politics.
When people go to sleep things can get
Warburg was right and they fixed it up later. The Federal Reserve Act
since it was passed has been amended over 100 times. Every one of those
provisions were long ago removed and many more have been added which
greatly expand the power and reach of the Federal Reserve System to
create money out of nothing.
With this kind of professional strategy and
deception these people were real professionals and the public didn't
stand a chance. It is no surprise that popular support was finally
gained for the bill and on December 22, 1913 the bill was passed by
Congress and the following day was signed into law by President Wilson
and the creature from Jekyll Island finally moved into Washington, DC.
Let's stand back from the creature a few paces and take a look at its
general form and shape and see what it is we got.
We got a corporation chartered by Congress
which was given an exclusive franchise to create our nation's money
supply. We got a mechanism whereby Congress has been able to raise
unlimited taxes from the American people without them even knowing that
they're paying a tax and we got a mechanism whereby the banks can earn
perpetual interest on nothing.
That is the shape and form of the creature
from Jekyll Island.
Here's an interesting question, Who owns the Federal Reserve System?
You hear a lot of discussion on this particularly on talk radio
When the subject of money comes up somebody
calls in and says,
"Did you know the Federal Reserve is
completely owned by the private banks? It's a private corporation.
What we need to do," they say "is abolish the Fed and turn it over
to the government so they can operate it for the benefit of the
Some of you are laughing and I'm sure there
are some people here thinking what's wrong with that so let's analyze
First of all it is a half-truth and it is a non-solution. Let's deal
with the half truth first. It is true that the Federal Reserve System is
not an agency of the federal government in any shape or form. As I
mentioned before, it is a corporation that is chartered by Congress and
like all corporations it has stock certificates and those stock
certificates in this case are held by the banks within the Federal
Every bank that's in the system is an owner
of the Federal Reserve - remember this is a cartel. They own it in one
sense of the word, in the sense that they have stock certificates but up
to that point it looks as though it has all the attributes of a
privately held corporation. But that's as far as it goes because those
stock certificates do not carry with them any of the attributes of
For example, the holders of these
certificates cannot sell them. If you can't sell something then you
don't really own it, that's one of the tests of ownership, your ability
to dispose of it. You cannot sell it. Furthermore the larger banks put
up more money than the smaller banks, it's a ratio to their assets, so
the larger banks have more stock certificates in the system than the
small ones and yet regardless of the number that they hold, every bank
has just one vote.
There's another violation of the principle
of private ownership. Furthermore that vote doesn't buy them anything.
They can't vote for anything of substance; they cannot vote for their
national management which is the most important thing, isn't it? The
board of directors and chairman of the Federal Reserve System are
appointed by the President, they're not elected by the banks that are
part of the system, the President does that.
All that the local banks can vote for with their vote are the boards of
directors of the regional banks, so-called, which are subdivisions
within the system. They can't even vote for the leadership in their
local subdivisions because the chairman and the vice-chairman of those
12 regional banks are appointed by the national board.
They can vote for their officers at those
regional banks, the president, the vice-president and treasurer but
guess what? Those are subject to veto by the national board. Get the
picture? All power has always been at the top of this system.
The only thing that the charter allows them
to vote for, those boards of directors, of substance is to set the
interest rates within their regions. But this should come as no surprise
to anybody that even that is subject to veto by the national board. You
see this concept of diffusion of power throughout the regions of the US
is a scam.
There is no power at the local level. There
is nothing that these boards of directors who are voted in by the banks
who hold the certificates can do of substance. All they're allowed to do
really is play golf.
It is not a privately held corporation in the traditional sense of the
word. This idea of diffusion of power over the 12 regional banks was
just a necessity of 1913 to sell the concept to the American people. If
it hadn't been for this aversion against the concentration of power in
New York they would never have had these 12 regions; it's just a
leftover from the necessity to sell it and doesn't serve any function
So it's not a corporation in the traditional
sense of the word, it's not a government agency in the traditional sense
of the word so what is it? It's a hybrid, part corporation and part
government, part private, part government. In fact, it is exactly what
you would expect it to be considering the fact that it is a partnership
between the private banking cartel and the government. It's a unique
structure which was designed to perform a unique function.
Is it a solution to abolish the Fed and turn it over to the Congress to
run on behalf of the people? At least we get the dirty bankers out of
the loop, right? And that makes everybody feel good...well, we're not
paying interest to the banks anymore but what happens? Now the
government is running the whole thing by itself. Now that solves a lot
of problems doesn't it? Now they're creating money out of nothing all by
Well, they've always been able to do that.
The government doesn't want to do that, that's the reason they got into
this partnership in the beginning because when the government creates
money directly it's too obvious. That's why the kings and princes of
Europe couldn't do it. They printed money, that's how they did it
generally, but when the government prints money you can see all this
money around that says the government on there and you know exactly
what's going on.
They like to work through the banking system
because when it appears in your checking account it doesn't say
government on it and you don't know how it got there.
The government really doesn't want to do it that way but even if they
did it wouldn't make much difference because it's not important who owns
the Federal Reserve System. The important thing is what it does and as
long as it a central bank, which means as long as it has the power and
the mandate to create money out of nothing it will create money out of
nothing. That's what it will do and it will continue to do exactly the
same thing and be run no doubt by the same people as it is now and we
would not have solved anything.
We must keep in mind that in Europe all of
the central banks there are in fact direct agencies of their respective
governments; they are not hybrid organizations at all like ours. And yet
in those countries they do exactly the same as the Federal Reserve
System has been doing here. Just turning it over to the government is a
Let's talk briefly about what the objectives of the Federal Reserve
System are. We've been told over and over again that the purpose of the
Fed is to stabilize the economy. Right now with the interest rates going
up, up, up what are we told? why are they doing that? Well, that's to
stabilize the economy so we won't have massive inflation right? It's
being done for us folks! Don't you feel just warm all over knowing that
they're looking out for you?
That's always the answer; the purpose of the
Fed is to look out for us and stabilize the economy, put an end to
banking anarchy and all that sort of thing.
Right now the textbook that is most commonly
used in our school systems in economics is a book written by Paul
Samuelson and in that book here's what he says regarding the purpose
of the Fed:
"The Federal Reserve sprang from the
panic of 1907 with its alarming epidemic of bank failures. The
country was fed-up once and for all with the anarchy of unstable
That's what the students are learning.
Let's let that go for the moment and say ok if that is the purpose of
the Fed, let's give it a report card and see how well it has done in
stabilizing the economy. Since it was created in 1913 the Federal
Reserve System has presided over the crashes of 1921 and 1929, the Great
Depression of 1929 1939, recessions in the years 1953, 1957, 1969, 1975
and 1981, and a stock market Black Monday in 1987.
We all know that corporate debt is soaring,
personal debt is greater than ever before, both business and personal
bankruptcies are at an all-time high, banks and savings and loan
associations have failed in greater numbers than ever before in our
history, interest on the national debt now consumes half of all of our
tax dollars, heavy industry has all but been replaced by overseas
competition, we're facing an international trade deficit for the first
time in our history, 75% of downtown Los Angeles and other metropolitan
areas are now owned by foreigners and over half of the nation now
officially is in a state of recession.
That is the report card for the Federal Reserve System after 80 years of
stabilizing our economy. I don't even think it's controversial to say
that it has failed to meet its stated objectives. The only controversial
part is why has it failed? My answer is because those have never been
its real objectives at all.
What are its objectives? What are the objectives of any cartel?
To make money for the members of the cartel,
to improve the profit margins of the members of the cartel and to
stabilize themselves in the marketplace. That is the true objective of
the Federal Reserve System. Now if we hold that up as our guiding
principle and give the Federal Reserve a report card it gets a different
In particular I'd like to have you look with me at three particular
objectives which were very well discussed in that period in which the
Federal Reserve System was created. We always have to go back to that
because we can learn so much from that period of history. There were
three things that the bankers, particularly the ones on Jekyll Island,
wanted the Federal Reserve Act to accomplish.
What are they? The first one was to stop the
erosion of their power away from New York. Just the opposite of what the
Federal Reserve Act was sold to us as to accomplish, to keep the power
of New York.
They were concerned that as the nation was
expanding westward and southward new banks were springing up all along
the frontier and every year a little bit more of the nation's capital
would drift away from New York. They still had the lion's share, of
course, but they could see the chart and they knew that they had to put
a stop to that now while they still had the power to do so. Competition
is a sin said John D. Rockefeller I and that includes competition from
these upstart banks.
It's a good point to mention that when I'm talking about the banking
cartel I'm talking primarily about the big New York banks and not the
local bank down the street that's struggling under the system. One of
the purposes of the Federal Reserve System was to keep the lid on those
new competitive banks so they could never grow and become large like the
ones on Wall Street.
The small banks have always been the target
in this system and needed to be kept in line, to be regulated out of
existence, a process which you've noticed has been going on for many,
many years. There is objective number one, to keep control over the
money markets in New York.
Objective number two was to reverse the trend of what is called private
capital formation. That's banker language for a process in which an
individual or a corporation uses their own savings to pay for something
instead of going to the bank and borrowing it, if you can imagine that
happening. It was happening at the turn of the century.
The trend was that businesses in particular
were withholding some of their dividends each quarter and putting that
money into a sinking fund and then as the money accumulated or as the
capital formed, then they finally had enough that they could use their
own money to build that new factory or to launch a research &
development project or whatever instead of going to the banks and
borrowing for it. The banks were very concerned over this trend because
this is their life-blood.
Loaning money is what they do so how do you
loan money when people don't want to borrow it? The answer they knew,
and they talked a lot about this, was to lower interest rates, get those
rates down so that they were so attractive that people would be crazy
not to come to the banks and borrow money at those good interest rates.
How do you lower interest rates? Today it's easy when you've got the
lever at the Federal Reserve you just throw it up or down and interest
rates go up or down; you have total control over it. In 1913 there was
no lever. The money in those days was backed by gold and silver and they
couldn't control it.
They hated that. These guys hate gold and
silver behind money because under those conditions interest rates are
the result of the natural forces of supply and demand; they couldn't
just create money out of nothing. It was the result of the interaction
of millions of people bidding for products and services and digging
money out of the ground, literally gold and silver and converting into
They were looking for a way to artificially push the interest rates
down. How do you do that? They said the only way you can do that is with
a flexible currency. That was the cry that they put up in those days.
What the nation needs, they said, is a flexible currency to meet the
demands of industry and agriculture.
You still hear that phrase today - "flexible
What does that mean? You need a dictionary
sometimes to look these phrases up. Flexible currency does not mean the
paper stuff in our pockets that bends, it means money-created out of
The trick here is not hard to figure out. If
you can create money out of nothing, you don't have to charge an awful
lot of interest on it to show a profit. It's that simple. If you have a
flexible currency you can in fact lower interest rates and still do
pretty well, can't you? They wanted a flexible currency so they could
lower interest rates and entice people back into the banks to borrow
money and to reverse the trend toward private capital formation.
Objective number two.
The third objective was to pass on the inevitable losses within the
banking system on to the taxpayer in the name of protecting the people.
Those were three of the major objectives at the time the Federal Reserve
System was created. I say those are the true objectives of the Fed. On
that basis, let's give it a report card.
Did it keep control in New York in the hands of the larger banks? The
answer is a resounding yes. Anyone who knows about the financial markets
knows that this is definitely what's happened. Yes we have big banks in
the west and in the south but they're nothing compared to those banks in
New York which are astride the world with offices in Peking and Moscow
and Africa and everywhere; these are the giants and they have remained
that way from the very beginning because of the Federal Reserve System.
A few years ago there was a book that was published by Simon & Schuster
and it was called "Secrets of the Temple" written by William Grider(?).
It was a best-seller and it was advertised as a scathing attack against
the Federal Reserve System. When I heard that I couldn't believe my
A scathing attack against the Federal
Reserve System published by Simon & Schuster? one of the big publishing
I thought, I don't have to finish my own
book, they've done it. So I ran down and got a copy of the book and
devoured it and read it in one day and I was totally amazed on two
points. First of all, much to my surprise, I did not expect this,
Grider's history was, I thought, excellent. I thought it would be a
whitewash but his history was right-on. He had all the gory details and
I couldn't believe it but I knew these things were true because I was
right then in the middle of researching them.
On the subject of the concentration of power in New York, I'd like to
read to you an excerpt from Grider's book.
"At the time [he's talking about 1913]
the conventional wisdom in Congress was that the government
institution would finally harness the money trust, disarm its powers
and establish broad democratic control over money and credit. The
results were nearly the opposite. The money reforms enacted in 1913
in fact helped to preserve the status quo, to stabilize the old
Money center bankers would not only gain
dominance over the new central bank but would also enjoy new
insulation against instability and their own decline. Once the Fed
was in operation the steady diffusion of financial power halted.
Wall Street maintained its dominant position and even enhanced it."
The other thing that amazed me was Grider's
He proved that the Federal Reserve had
always acted against the public interest. He proved that it was designed
to do that from the very beginning so what do you suppose his conclusion
was regarding a solution? that we abolish the Fed? No, nothing that
How about a major overhaul? No, not
necessary. What then? Grider said, you see it's all so complicated,
we're learning as we go, we've made a lot of mistakes but don't worry
folks we're on it now, relax, it's under control, all we need now is
That is the kind of powder-puff criticism it takes to be published by
Simon & Schuster or any of the other major publishing houses which are
firmly interlocked in the investment web on Wall Street. It doesn't make
any difference how accurate your history is; it doesn't make any
difference how much you point with alarm or how righteous you may sound
if you have no realistic solution to the problem then who cares? They
like that because it gives the people the impression that something's
being done, somebody is really calling attention to the problem. But
they have no solution or they're carefully selected so that the ones
with the real solutions do not get the media, do not get the major
This is a tactic which we have to better understand especially in these
critical days ahead.
A tactic of controlled opposition. It makes
no difference how accurate you are when you're pointing to the problems
in America. If you don't have a solution what difference does it make?
If your solution is put wiser men in there or if your solution is vote
Republican and don't ask questions about what kind of Republican then
you are controlled opposition and this is something we have to be very,
very alert to in these critical days ahead.
Back to the topic.
The Federal Reserve System gets an A on its
report card for maintaining control over the financial markets in New
York. What about reversing the trend toward private capital formation.
Boy, did they ever. Periodically they get those interest rates down so
low and everybody is lured into the banks. Borrow like crazy and then
the economy crunches down and they're all stuck with this overhead and
they can't make their interest payments.
We've seen businesses go out of existence because they cannot service
their debt. You've seen people lose their homes and their cars because
they cannot service their debt. There are many giant corporations today
that are just hanging in there by the skin of their teeth because of
their debt overhead. The fact is that many of these companies now send
more money to the banks every quarter in the form of interest payments
on their loans than they send to their stockholders as dividends on
their stock. Think about that for a minute.
The banks which had no part in the operation
of the company whatsoever, the banks which made this money out of
nothing are making more money from these industries than the people who
work for the money, save the money, invested the money and risked the
money to own those corporations. This is because they quite successfully
reversed the trend toward private capital formation and they did it with
a flexible currency.
The Federal Reserve System gets an A+ on its
report card for objective number two.
Finally, did they pass along their inevitable loses to the taxpayer in
the name of protecting the people? This is what I call "Operation
Bail-Out." Every time one of the big banks gets into trouble, not the
small banks remember, they're the competition, the big banks get into
trouble and they are bailed out at taxpayers' expense. Always in the
name of protecting the people.
If a large corporation is in trouble because
it can't make its interest payments to the bank anymore, they go to
Congress and say,
"we can't let this corporation fold;
look at the thousands of jobs that would be lost; look how the
people would suffer."
When a third world country can no longer
make its interest payments to a large bank in New York, what happens?
The bank goes to Congress and says,
"you know, you'd better do something
about this because if we have to write that loan off of our books we
may be bankrupt, we could fold. And look at all of the depositors,
good Americans, who have their accounts with us who would lose their
deposit. Maybe the FDIC won't be able to cover; we could have a
crisis on our hands. If our bank falls maybe the other banks will
fall too and we'll have a national recession. Look how the people
So Congress dutifully steps forward,
remember it's a partner in this, and votes the funds to guarantee the
loans or in some way to pass the payments on directly or indirectly in
some very ingenious methods to the taxpayer. That money is raised
primarily through the Federal Reserve System and we pay it through the
So the Federal Reserve System has done pretty well on that. In case you
have missed a few of the more memorable games, I'd like to review them
for you. Penn Central Railroad was bailed out in 1970. That was a good
year because Lockheed Corporation was bailed out the same year.
Commonwealth Bank of Detroit was bailed in
1972; New York City in 1975; Chrysler in 1978; First Pennsylvania Bank
in 1980; Continental Illinois, the largest of the banks so far, in 1982.
And look at all of these third world countries which cannot pay their
They are paying their interest payments and
you're doing it for them because the Federal Reserve System creates the
money that we send to the International Monetary Fund and the World Bank
and then they give it to those countries so that they can pay the
interest to the banks. Maybe you've missed that little trail but that's
how it works.
The Federal Reserve System gets an A+++ on all of these points and it
has surely been a huge success in terms of the people who created it.
Actions have consequences and one of the consequences of this scam is
what we call a "national debt." Its rapidly approaching 5 trillion
dollars that we know about, it's much higher than that if you include
the unfunded debt and all of the things that are off-budget and all of
the funny stuff that they do with the accounting in Washington. With all
honest accounting you'd find it was much, much higher than that.
But even at 5 trillion dollars it's a staggering figure. I'm told if we
had a stack of $100 bills about 40 inches high we'd be a millionaire. A
stack of $100 bills equaling 5 trillion dollars would rise into space
3,350 miles. That's a lot of money and it all came from us and it's
earning perpetual interest.
Another way of measuring that is that we've had a known inflation of
1,000% since the Federal Reserve System was created. Another way of
phrasing that is that a dollar in 1913 today buys about nine cents worth
That's how much money has been taken from
us, taxed from us, through this hidden process.
I say 1,000% inflation that is known because it's much more than that.
Have you ever wondered, as I used to, why don't we have more inflation
than we have had? I knew they were creating this money like crazy, why
only this inflation?
And then I found out.
Have you ever heard the expression that
we're "exporting our inflation." Every once in a while you find that
phrase in the financial section of the newspaper. It used to drive me
crazy - how can you export inflation? It's one of those phrases that
people use and I'm not sure most of the people who use the phrases know
what they mean. Like the other day I read that the Federal Reserve
System bought dollars today to bolster up the dollar. How can you buy
dollars? What do you buy it with? They buy it with other currencies, the
Federal Reserve holds a lot of different currencies, yens and Dutch
marks and that kind of thing so they just swap currencies around.
This expression of exporting inflation - what does that mean? It means
70% of the American currency that has been created by our Federal
Reserve System is no longer in America, it's overseas. Other nations use
American dollars as their unofficial money supply. Especially those
countries which have no realistic money of their own.
These countries that undergo inflation rates
of 5,000 and 10,000% a year, you can't work with money like that. Women
have to take wheelbarrows full of paper money to the grocery store to
buy a bottle of milk. You can't carry on any serious economic
transaction with money like that and they don't, they use American
All the banks in those systems have dual types of money. American
dollars are the mainstay of economic transactions in most of those
countries. That's where a lot of our money went. We have been spared the
inflationary impact of all that money because had it stayed here, it
would've bid against the existing money here and would have diluted our
pot even more and we would've known what the inflation should've been.
What happens when the day comes when for whatever reason these countries
can no longer, or no longer wish to, use American dollars? What are they
going to do with those dollars?
They'll send them back. They'll buy
something with them while they can. It'll be a big rush. It'll be our
refrigerators, our automobiles, our real estate, our high-rise
buildings, our corporate stock, our politicians, whatever's for sale.
All of this money will come in and then we'll find out in a very short
period of time what the true inflation rate really should have been all
of these years.
Incidentally, if you've followed in the newspapers the talk about the
new money that they're going to release, they're talking about
two-tiered money, one for overseas and one for here. It will probably be
a different color. Frankly I think they're recognizing this fact that
the money would return and they're going to make it illegal for all of
this overseas money to come back by making it a different color so that
they won't be able to bring it here or if you do bring it here you won't
be able to spend it here, it won't be legal here.
Those are some of the consequences of the
actions of the Federal Reserve Scam. I have one last topic that I want
to talk to you about and then I'll get to the conclusion. This is an
extremely important topic and it has to do with usury. In ancient times
usury was defined as interest on a loan, any interest on any loan. In
modern times that has been redefined to mean excessive interest on a
loan. Moderate interest seems logical to us in recognition of the fact
that if we work hard for our money, we save it and surrender its use for
a period of time being a sacrifice on our part and then loan it to
somebody else for their venture, we're entitled to a reasonable return
on that sacrifice.
A reasonable interest rate is a concept that
very few people have problems with, it seems logical and fair.
But what is this thing called excessive interest?
Thomas Edison said,
"People who will not turn a shovel-full
of dirt on the project nor contribute a pound of materials will
collect more money than will the people who will supply all the
materials and do all the work."
I wondered when I read that if Tom was
exaggerating so I got my calculator out. I assumed that there was going
to be a $100,000 house built. I assumed that $30,000 would have to go
for land, architect's fees and permits and that kind of thing. $70,000
would go for the actual construction of the house, building materials
and labor. I assumed that the buyer would go to the bank and put 20%
down and then borrow the balance at 10% over 30 years. I punched in the
numbers and discovered that the borrower will pay to the bank in
interest $172,741 compared to $70,000 paid for the construction of the
In other words, about 2 1/2 times as much
money will be paid to the bank in interest than will be paid to those
who provide all the labor and all the materials.
And you may say to yourself, yes but that's
fair, after all a 30 year loan is a long loan and people work for their
money and sacrifice its use and loan it and so forth and deserve to be
compensated. No. Not this money. Nobody worked for this money, nobody
saved this money. There was no sacrifice of any kind for this money.
This money was created out of nothing and I suggest that $172,741
interest on nothing is excessive!
I think it's time for a new definition of usury as follows: any interest
on any loan of fiat money (meaning money made out of nothing). This
example of a $100,000 home, as shocking as it is, producing $172,741
unearned interest, this is just a grain of sand in the Sahara. You have
to multiply that by all the homes in America, by all of these hotels in
America, all the high-rise buildings, all the factories, all the
airplanes, automobiles, farm equipment, schools, everything, all the
physical assets of America.
You apply this same ratio and can you see it
in your mind? We're talking about a river of unearned wealth that is so
wide you can't even think of crossing it, flowing perpetually into the
banking cartel. A dead short across the productive element of society.
Money being taken from people who are working hard providing the
material and the labor. They don't even know that this is being taken
from them and it's in this huge river of wealth flowing into the banking
It's a staggering thought.
You are led to the question of where is this river flowing? Where's it
going? Get a picture of this that it's all going into a lake somewhere
and maybe there's a dam and the wealth is building up and somewhere
they're getting it all. Getting it no, they're spending it. They're not
accumulating it at all. What are they spending it for?
The answer may surprise you.
They're not buying more yachts and mansions
with this money, they've already got all of those they possibly want. In
fact they got rid of the mansions on Jekyll Island a long time ago
because they were bored with that. That's not it. When a person has all
the wealth that you could possibly want for the material pleasures of
life, what is left? Power. They are using this river of wealth to
acquire power over you and me and our children.
They are spending it to acquire control over the power centers of
society. The power centers are those groups and institutions through
which individuals live and act and rely on for their information.
They are literally buying up the world but
not the real estate and the hardware, they're buying control over the
organizations, the groups and institutions that control people. In other
words, to be specific, they are buying control over politicians,
political parties, television networks, cable networks, newspapers,
magazines, publishing houses, wire services, motion picture studios,
universities, labor unions, church organizations, trade associations,
tax exempt foundations, multi-national corporations, boy scouts, girl
scouts, you name it.
Make your own list of organizations and you
will find that this is where those people have been for many decades
spending this river of wealth to acquire operational control
particularly over those institutions and individuals, those
organizations that represent opposition to themselves. That's a critical
area for expenditure on their part.
This process has gone on not only to a marked degree in America and in
the other industrialized nations of the world, but it has gone on in the
so-called third world or underdeveloped nations to such a degree that I
would say the process is now complete. They own these countries already.
Have you ever wondered what's going on there at the International
Monetary Fund and the World Bank? Kind of an obscure operation isn't it?
You don't read much about it except once in
a while on the back page of the newspaper you find out that Congress at
the insistence of the President authorized another $100 billion for the
International Monetary Fund. And then the article tells you that this
money will be used to make loans to underdeveloped nations or grants to
them to raise their standard of living.
Do you believe that? That's one of those
appearances of the fourth kind if you ever saw one.
If the money is to be used to raise the
standard of living of these countries they're not doing a very good job
of it because after all of these decades, after all of these hundreds of
billions of dollars, you cannot point to one country that has had its
standard of living raised one iota by that. In fact in most cases it's
the other way around and that's not an accident because the money has
not been used to raise the standard of living.
The money does not go to the people in those
countries. It goes to the politicians of those countries, to their
governments and the money is designed and spent to strengthen their
power structures, their ability to control their populations. They
usually start off as inefficient dictatorships but by the time they get
all this money from the IMF, they are now efficient dictatorships. They
have a well-equipped army, a better bureaucracy, total control of their
subjects. That's where the money's being spent.
These countries have been purchased because the politicians in those
countries are now totally addicted to this money. We talk about welfare
families in America that are third and fourth generation welfare,
they're on the dole forever, they cannot dream of anything else. The
politicians in these countries are the same way and it's now second,
third and in some cases fourth generation international welfare from the
United Nations funding.
They have no ideology - communism,
socialism, capitalism, fascism, what difference does it make? Where's
the money? As long as they live well, they have their mansions, their
yachts, their limousines, they go to New York to the UN and have their
suites at the Waldorf-Asoria and that's all they care about.
These countries have been purchased through this means and are now owned
by this group at the UN and they're firmly in place in the new world
order where they're just waiting for you and me to show up. That's the
other side of this coin. Not only does this transfer of wealth from
America to these countries not raise their standard of living but it
does lower ours.
That too, believe it or not, is part of the
Just waste, get rid of money, get rid of
productive power to reduce our standard of living. A strong nation is
not a candidate to surrender its sovereignty but a weak nation is. If
America can be brought to her knees where she is struggling for
survival, if people are hungry, if we have riots in our streets, then
Americans could possibly be grateful for any assistance we could get
from the UN.
Those wonderful blue helmeted peace-keeping
forces could bring order back to our streets or international money, a
new world money with purchasing power again might be welcomed by the
unthinking, unknowing American public. That is what we're dealing with.
What I'm trying to say is that the name of the game out there is not
wealth, it is power.