THE GREATEST FRAUD OF ALL TIME

 

I just finished an intrigue novel, set in 1910, filled with shady international characters and high stakes gambling on a vast scale, the plot is just believable enough to keep you turning pages. In it six people representing one quarter of the world’s wealth meet in total secrecy where, even though they know each other, they use only first names, two of which are aliases. The plot centers on the creation of an illegal cartel which is so vast and diabolical that if the public were to ever to learn of it, the member’s lives and fortunes would be forfeited. One member is a highly influential member of Congress while two others represent the largest European banks. The rest of the conspirators are the power brokers of the New York financial world.  Any cartel is just a group of competitors that come together and agree to restrict competition and fix prices. The very nature of a cartel disrupts a free market and does not allow supply and demand to set the selling price of goods and services. I highly recommend the book and the author even came up with the perfect sinister sounding title; “The Creature from Jekyll Island”. By 2010 the book was in its fifth edition and twenty eighth printing.

Like most of my reading the book isn’t really a novel at all. It is a history book and it recounts the events surrounding the creation of the noble sounding “Federal Reserve”. I say noble sounding because it is neither a federal institution nor are there any reserve funds. Until the plot could be legalized by an act of Congress in 1913 the existence of the cartel and the meeting at Jekyll Island where it was formed had to be kept secret from the American public. In fact the choice of the name was critical to plan for selling this monster to the Congress. In the guise of pretending to stabilize the value of our currency while protecting the public from bank failures this Trojan Horse secretly, as in without congressional oversight, handed over control of the country’s financial system to a handful of bankers. The chairman of the Federal Reserve is appointed to a six year term and must be confirmed by the Senate. Once confirmed, and he is the only member so vetted, he must report to Congress once a year. He is not required to tell Congress how, what or why the Federal Reserve is doing what it is doing. So here is how the fraud works. The Federal Reserve Banks (that aren’t really banks) create money out of thin air and have the treasury print it. The currency is just a note that promises to pay the holder the face amount which is why our money says on it that it is a Federal Reserve note. Originally the money was backed by an equivalent value of gold but that was to restricting to the cartel so now they just say that it is backed by the full faith and credit of the government, in other words, by nothing at all. The principle mechanism that the Federal Government uses to push the fake money into the economy is through the sale of Treasury Notes. These are promises to pay the buyer back with interest at some set time in the future. What the government really does is pay off the notes that come due by selling more. The value of the new notes must be greater as the interest on the first notes must be paid. Well the problem is obvious the debt will continue to grow and never gets paid back. It is like paying off one credit card with another.

The Federal Government had to be in on the fraud in order to make it legal so it is fair to ask what it gets out of the deal. Remember that the cartel told the county that the point to all this was to stabilize the currency, well they don’t. The fact is they have inflated (devalued) the currency so much that today it takes a dollar to buy what you could get for seven cents in 1913. The government is paying the buyers of the Treasury Notes back with money that is worth less than the money they spent to buy them. This little sleight of hand by Uncle Sam covers the cost of the interest. The terrible cost of the scheme is born by the public whose savings continue to lose value from inflation.

The bankers who were in on the plot from the beginning wanted to be able to loan vast amounts of money to big companies and foreign governments. The more money they loan the more interest that they earn. The problem is that private banks that loan money need to be able to pay their depositors back and cover checks written on accounts and such. If the money is loaned out and not immediately available people might get nervous and all want their money out of the bank at once. Worse yet the bank might make some bad loans and never get the money back. The Federal Reserve became the perfect answer. They operate in secret without oversight so they can just tell the government it needs to protect the public by covering the banks losses. The banks are portrayed as “too big to fail” so the Fed steps in with a bailout and just like magic the taxpayer picks up the tab. Let’s take the case of the Penn Central railway. In 1970 it became at the time the nation’s biggest ever bankruptcy. Most of the country’s biggest banks had loaned Penn Central money and received seats on the board of directors as a condition for granting the loans. The banks also held large blocks of the railroads stock. Once it became obvious that the company was in trouble the board of directors, including bank representatives, borrowed large amounts of cash and paid lavish dividends. The shareholders including themselves profited and the stock price shot up allowing the banks to sell hundreds of thousands of shares before the public was made aware of the company’s financial trouble. Fed chairman Arthur Burns called upon the members to lend Penn Central an additional $125 million dollars but was unable to get the banks to budge until Congress guaranteed the loans. For some reason Congress mandated a retroactive pay raise of 13-1/2 % for all of the railways union workers as part of the deal. When the money failed to save the railroad the government nationalized the Penn Central and turned it into AMTRAK and CONRAIL. CONRAIL was sold off to private investors and operates at a profit, AMTRAK is 85% owned by the U.S. Government and has cost taxpayer by 2009 $23 billion dollars. To sum it up the banks made bad loans and put their own directors on the railroads board of directors. They realized that the company was in trouble so they inflated the value of the stock and sold it after cashing their dividend checks. The the Fed got the government to guarantee more loans which were repaid with interest by the taxpayers and then the original loans got paid back by the taxpayer with interest so that the government could nationalize the railroad and run it at a $23 billion dollar and counting loss. This same scenario has played out over and over from the New York City bankruptcy to Chrysler, General Motors and the Continental Illinois bank. In total by 1986 the Fed and Treasury Department had given Continental Illinois $9.4 billion dollars. Paul Volcker who was Fed chairman at the time told the Senate banking committee that “The operation is the most basic function of the Federal Reserve. It is why it was founded.” Bankers made the money while the tax payers picked up the check.

Remember when Congress passed the $700 billion dollar TARP bailout in 2008. A passage in the book I spoke of above says that the research firm CREDIT SIGHTS looked at all of the deals made by the Federal Reserve and the FDIC and concluded that the real cost to the tax payer was $5 trillion or $16,500 in lost money for every American citizen.

The Federal Reserve is not now and never has been about stabilizing the value of our currency and protecting the public from bank failures. The currency has been devalued constantly since 1913 and the public has paid in full for all of the failures created by bad lending while the bankers walk away free to do it all over again.

I do not have the space here to cover the book in more detail but I recommend that every tax payer get and read a copy.

 In 2010 the President signed into law an act referred to as dodd-frank. The law purports eliminate the disastrous bail-outs known as “too big to fail” and stabilize the financial system. The preposterous nature of this new monster becomes clear once you learn that it is administered by the Federal Reserve and also is exempt from congressional oversight. The Fed through this law is now legally able to access every citizens private financial data to use as they see fit!