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!
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