SLEIGHT OF HAND

"I have never seen more Senators express discontent with their jobs....I think the major cause is that, deep down in our hearts, we have been accomplices in doing something terrible and unforgivable to our wonderful country. Deep down in our heart, we know that we have given our children a legacy of bankruptcy. We have defrauded our country to get ourselves elected." — John Danforth (R-Mo)

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            We are in a credit crisis. Banks aren’t lending! Small businesses can’t get loans and home-buyers can’t get mortgages. Why? Banks are making money without having to go to the trouble to make a loan. Thanks to the Fed’s near zero interest rates, the banks are getting nearly free money. Instead of lending it out, they’re buying government debt – at a high interest rate. And so, they’re getting money for practically nothing and turning around and giving it to our illustrious government for a lot more. How nice.

A good question is, why does our government go through a middleman and not deal with the Fed directly? An even better question is, why does our government go through the Fed at all? As President Wilson once said, ‘If the Nation can issue a dollar bond it can issue a dollar bill.’

        Instead, our government borrows the money it needs that it must repay with interest. No, that citizens must repay with interest. How much do we owe the Fed? As of March 2011 it was $1.6 trillion. This is 42% of the government’s total debt. According to congressional rule, the government can buy out the Fed for $450 million and own its own debt. But no, government spending must be slashed in order to reduce our deficit spending and pay back what we owe. Of which, at least 42% came from thin air – money the government had someone else make, that it could have made itself.  

GOOD GOVERNMENT BANKING

In a country we generally frown upon, the government’s central bank works like this: the bank prints money the government needs and provides it at no interest. This is unlike the U.S., where the government borrows from the Federal Reserve money on which it owes interest. Never mind that the government has a constitutional  duty to create money -- it gave this right away to the commercial banks in 1913. And, never mind that the Fed charges interest on  something it creates out of nothing (that is a subject for another day.) The end result is that we owe the Fed $1.6 trillion, and of course, social spending must be cut so we can begin to repay our 'debt.'  

This other country’s economy flourished after the 2007 global recession. Banks didn’t stop lending and the GDP grew by 10-11% (last year 8-9%), while in the U.S., growth was negative, and is now only 2-4%.

            What was this country? China! Yes, that terrible communist country that isn’t crippling its people with a mountain of debt.

         Why does the American government do this? President John Adams once said, there are two ways to conquer and enslave a country – one is by sword, the other is by debt. Our government is conquering its people through debt. We are voting into office, representatives who enslave us. We could stand to learn something from that communist country where leaders don’t take financial advantage of their people, don’t empower private banks, and don’t eviscerate their country's economy. 

HOW THE BIG BANKS GOT CONTROL OF WASHINGTON

The creation of the Federal Reserve is an instructive story of how the Big Banks took over Washington. There were two central banks in the country’s history that were so destructive to the nation’s economy that both lasted only the length of their charter, which was twenty years. The third, known as the Federal Reserve, has lasted almost one hundred. In 1910, the big bankers knew how difficult it would be to convince Congress to pass a bill to establish a central bank. If the bankers were honest in their demands – to establish a private banking cartel that would control the printing of money, and get taxpayers to cover risky bank bets – the public would never accept it. The central bank had to appear as if it were something that it wasn’t. It wouldn’t even have the word ‘bank’ in its name. No bankers would be associated with the bill, so their connection to it would not be in evidence. The central bank’s true objectives would never be stated, and false objectives would be offered in their place. The banking PR machine went into full swing, singing the praises of a Federal Reserve. It would get politics out of financial policy. It would stabilize the banks and the economy. Still, there was enough dissent that the bill was not tabled until three days before Christmas, when most representatives were home for the holidays. The bill passed. And that is how the big banks, in one bill, seized power over a country’s democracy. As banking magnate Mayer Amschel Rothschild said, ‘Let me issue and control a nation’s money and I care not who writes its laws.’

WHAT WENT WRONG

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In 1910, a handful of bankers, a U.S. Senator, and the Treasury Secretary devised a plan to wrest control of the money supply from Congress and give it to the banks. Three years later, on December 23, 1913, with many elected officials home for the Christmas holidays, the Federal Reserve Board (Fed) was created. The legislation took from Congress and gave to the new central bank the power to print money. Hailed as a means to take politics out of financial policy and stabilize the economy, in reality, the aim of the central bank was to make a profit. It was no coincidence that the same year the Federal Reserve was created, Federal Income Tax was imposed. The tax was needed to pay interest on the money that the government could no longer mint itself, but now had to borrow from the Fed. We pay tax, in part, to pay interest on free money the Fed creates out of thin air. (For an excellent history of the Fed see: The Creature from Jekyll Island, by G. Edward Griffin.)