“Most Americans have no real understanding of the operation of the international money lenders. The accounts of the Federal Reserve System have never been audited. It operates outside the control of Congress and manipulates the credit of the United States.”
— Sen. Barry Goldwater
In 1913, Congress passed the Federal Reserve Act, which was signed into law by President Woodrow Wilson. The Act created the Federal Reserve System, which has since functioned as the central bank of the United States, setting interest rates, printing money and, as a result, determining inflation of U.S. currency.
The Federal Reserve (Fed), despite being authorized by Congress, operates outside of Congressional and Presidential authority and its leaders are appointed, not elected.
That is not to say that the Federal Reserve has not been used for the benefit of Congress and Presidents. According to historian Paul Johnson, the Fed enabled Presidents in the 1920s and 1930s to pursue “internationalism” and “keep the world prosperous by deliberate inflation of the money supply. This was something made possible by the pre-war creation of the Federal Reserve Bank system, and which could be done secretly, without legislative enactment or control, and without the public knowing or caring” (Modern Times, pgs. 232-233).
The creation of the Fed also facilitated America’s departure from the gold standard and allowed for the creation of fiat currency, a process begun by Franklin Roosevelt’s Gold Confiscation Order of 1933 and completed by Richard Nixon in 1971, when he severed all ties between the U.S. dollar and gold. Fiat currency creates massive inflation since the money printed has no standard for its valuation other than the word of the Federal Reserve. As more money is printed, the currency loses its value, with the dollar loses an estimated 96% of its value since the creation of the Fed. Ironically, the Federal Reserve made it possible for Britain to return to the gold standard in 1925 by extending them a line of credit from the New York branch of the Fed (Modern Times, pg. 235).
Such lines of credit have gone much farther in recent days, however. In fact, as one Congressional hearing revealed, the Federal Reserve has given out trillions of dollars in loans that were “off balance sheet transactions.” Even their Inspector General admits not knowing where the money went.
Such wealth-sharing was also part of Karl Marx’s plan for international Communism. In The Communist Manifesto, he argued for “Centralization of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly.” The Federal Reserve serves in such a capacity for the U.S. government, but with even more benefit for the State. The Fed can provide currency manipulation (through printing) when desired, but its technical separation from the State allows deniability for Presidents and Congress.
Such activities make Henry Ford’s statement far more understandable: “It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
Many years before Ford, Thomas Jefferson warned, “I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the government at defiance. The issuing power should be taken away from the banks and restored to the people to whom it properly belongs.” According to the Constitution, currency issuing rightly belongs to Congress, which abdicated the responsibility “to coin money, regulate the value thereof, and of foreign coin, and fix the standards of weights and measures” (Article I, Section 8 ) by authorizing the creation of the Federal Reserve.
But concerns over the Federal Reserve System even go beyond the very serious issues of Constitutional abandonment, inflation, secretive loans, and international entanglements. The Federal Reserve provides fuel for the American (and international) war machine. Governments have no money of their own, only what they take from citizens through taxation. Such restrictions necessarily limit the ambition for empire because citizens do not like taxes.
As Lew Rockwell, founder of the Mises Institute, said:
“You can line up 100 professional war historians and political scientists and talk about the twentieth century, and not one is likely to mention the role of the Fed in funding U.S. militarism. And yet it is true: the Fed is the institution that has created the money to fund the wars. In this role, it has solved a major problem that the state has confronted for all of human history. A state without money or a state that must tax its citizens to raise money for its wars is necessarily limited in its imperial ambitions. Keep in mind that this is only a problem for the state. It is not a problem for the people. The inability of the state to fund its unlimited ambitions is worth more for the people than every kind of legal check and balance. It is more valuable than all the constitutions ever devised.”
The creation of the Federal Reserve facilitated U.S. involvement in World War I through “money creation” and war bonds purchased by the Fed. As Rutgers University professor Hugh Rockoff notes, “Heavy reliance on the Federal Reserve meant, of course, that the stock of money increased rapidly.” Billions of dollars were simply created by the Federal Reserve. Rockoff goes on to note the long-term consequences of this: “Before the war the center of the world capital market was London, and the Bank of England was the world’s most important financial institution; after the war leadership shifted to New York, and the role of the Federal Reserve was enhanced.”
In other words, though the U.S. was still on the gold standard during World War I, the Federal Reserve grew in power and set a precedent for printing money to pay for war. Had the U.S. remained on a sound money standard (gold or silver) however, such tactics would have been limited and temporary. As noted earlier, this did not happen. The removal of the gold standard ensured that wars could be launched and financed simply through printing fiat currency. After all, the only ones who really suffer through such inflation are taxpayers.
When money is printed by the Federal Reserve, it is given out to banks which then make loans and investments. Since the money supply has increased, the value of the dollar goes down, prices increase, and the only ones left without income adjustment are the taxpayers and average workers who did not benefit from the sudden “increase” of money printed by the Fed. That is inflation – the devaluing of the currency through making more of it.
The State benefits because they can continue spending in spite of deficits. The banks benefit because they can be careless about loans and investments. And, the military-industrial complex benefits because wars can be launched without regard to cost. Money printing, with no gold or silver standard behind it, enables the State to act irresponsibly, economically oppress its own people, and engage in empire-building through endless war.
Skipping way ahead to the current war in Iraq, we see that the Federal Reserve’s printing press became President Bush’s war chest. Again, Lew Rockwell said:
“Fast-forward to the Iraq War, which has all the features of a conflict born of the power to print money…
In the entire run-up to war, George Bush just assumed as a matter of policy that it was his decision alone whether to invade Iraq. The objections by Ron Paul and some other members of Congress and vast numbers of the American population, was reduced to little more than white noise in the background. Imagine if he had to raise the money for the war through taxes. It never would have happened. But he didn’t have to. He knew the money would be there. So despite a $200 billion deficit, a $9 trillion debt, $5 trillion in outstanding debt instruments held by the public, a federal budget of $3 trillion, and falling tax receipts in 2001, Bush contemplated a war that has cost $525 billion dollars, or $4,681 per household. Imagine if he had gone to the American people to request that.”
The connection between America’s constant warmongering and the Federal Reserve’s constant money printing is strong. How else could America finance 900 bases in 150 different countries around the world? How else could they maintain military actions in Iraq, Afghanistan, Yemen, Egypt, Libya, Uganda, Pakistan, and God knows where else, all at the same time? How else could the U.S. go from war to war without taking a breath?
Only the State benefits from such practices. Politicians can continue being courted by banks and industries that benefit from inflation and loose monetary policies, ensuring they become “too big to fail.” The military-industrial complex (from weapons manufacturers to contractors who get government contracts) can bank on endless war. And Presidents can continue currying the favor of falsely-patriotic Americans who will endorse any and all military action around the world.
But, the system of printing and spending cannot last forever. Eventually, the currency becomes so devalued that printing does no good. The bill is too large to pay off and the system is forced to recognize that they are only making green paper. No one knows how near such a collapse may be, but with a now $15 trillion debt in the U.S., how long could it be?
Americans are largely unaware of what the Federal Reserve System has done and is doing to the economy. But, the importance of this must be understood and emphasized. If we end the Fed, we can end the immoral inflation that affects American workers and taxpayers. If we end the Fed, we can end much government abuse and corruption. If we end the Fed, we can end the wars.