MONOPOLY - IT'S ALL PLAY MONEY

So President #Compromise has finally come out with a “jobs plan.” Never mind that he’s been in office for two years and he is just now aggressively addressing the fact that Americans need jobs, the timing for it perfectly aligns with his reelection campaign. Isn’t that amazingly coincidental?

"[The plan] will provide a tax break for companies who hire new workers, and it will cut payroll taxes in half for every working American and every small business.”

Raw Story

And at least now that we know how the Federal Reserve works and have been clued in on how the government could actually completely eliminate income tax and still have the same amount of money (through “quantitative easing” and sales of treasury bonds, for example), I’m much less inclined to think he’s got any concern for American workers in this ploy. All he’s truly done is 1) made himself look good to workers, and 2) potentially made the Republicans look bad if they refuse to go along.

I hope that’s not too cynical for you, because it’s absolutely supported by the timing and the facts. So if the Republicans don’t come up with a way to deny him his jobs plan – and that’s a very big if – just remember when you are celebrating your huge windfall in tax reductions (where’s that sarcasm font when you need it?), that money will be going right out your other pocket in higher prices that sellers put on commodities because now you have more money to spend on them. I’m sorry. That’s just how it works. But boy does it sound good in a campaign when you say “lower taxes.”

Obama also proposed a $50 billion program to invest in highways, railroad and airport modernizations, which officials said would put hundreds of thousands of construction workers back to work.

[...]

He also proposed a $35 billion program to prevent layoffs of 280,000 teachers and to keep police officers and firefighters on the job.

[...]

-- A $30 billion project to modernize 35,000 public schools and tax credits to incentivise hiring of returning Iraq and Afghan war veterans.

-- A "returning heroes" tax credit to spur hiring of Iraq and Afghanistan war veterans

-- A $49 billion plan to reform an extend insurance payments for the long-term unemployed.

Now there’s some things we couldn’t have done two years – or one year – or six months - ago. I mean, we didn’t have the money, right? And suddenly we do.

It will be debt now. It probably could have been debt then just as easily.

He called on Congress to provide $10 billion to capitalize a national infrastructure bank to leverage private and public capital to invest in a broad range of projects.

Yes, that’s what we need – more banks to spread the funny money loan business around, keep that kite flying.

He has also warned that if the plan is blocked, he will seek to hold Republicans to account at the polls and accuse them of putting a desire to eject him from the White House above a patriotic duty to revive the economy.

And that is the whole point.

9/8/11 - Speaking over the heads of his audience directly to the Supercommittee, [Federal Reserve Chairman] Bernanke warned that “while prompt and decisive action to put the government’s finances on a sustainable trajectory is urgently needed, fiscal policymakers [i.e., you members of the Supercommittee] should not, as a consequence, disregard the fragility of the economic recovery.” In other words, it’s OK to do a little nibbling around the edges of government spending, but anything that would cut such spending seriously needs to be avoided altogether, at least until the economy gets back on its feet.

And that’s the problem. With the economy stalled, consumer spending slowing, factory production dropping, job growth at zero, 14 million Americans unemployed, jobless claims increasing, 42 million on food stamps, and consumer and investor confidence at its lowest levels in years, jumpstarting the economy is going to be a Herculean task even for the Fed.

New American

Meanwhile in Europe…

US stocks tumbled [Friday] more than two per cent after the top German official at the European Central Bank stepped down.

Juergen Stark resigned in protest of the bank's bond-buying programme, which has been a major tool in fighting the region's debt crisis.

[...]

"Stark's resignation is suggesting that there is a lot of pressure being built in the senior levels in the ECB," said James Dailey, portfolio manager of TEAM Asset Strategy Fund in Harrisburg, Pennsylvania.

"There is an increasing realisation that this is a major solvency issue in the banking system."

alJazeera

Speaking of banksters…my employer switched from offering health insurance to health savings accounts. I bank at a credit union which doesn’t handle HSAs, and I’m not allowed by law to hold that money in my checking or personal savings account. So my HSA money is deposited into a regular bank where the current $1700 draws a penny interest per month while the bank charges me $3.00 per month to hold it. And you know damned well they aren’t holding it. They’re using it. Spalding should have a racket that good.

The Creature from Jekyll Island:
A Second Look at the Federal Reserve
(2002 – G. Edward Griffin)

Regular type indicates text directly quoted from the book. Where the words are my own, type will be italicized.

Installment 10
Chapter 12

The exigencies of war in Europe [in 1914] required England and France to go heavily into debt. When their respective central banks and local merchant banks could no longer meet that need, the beleaguered governments turned to the Americans and selected the House of Morgan – acting as partners of the [European] Rothschilds – to act as sales agent for their bonds. Most of the money raised in this fashion was quickly returned to the United States to acquire war-sensitive materials, and Morgan was selected as the U.S. purchase agent for those as well. A commission was paid on all transactions in both directions: once when the money was borrowed and again when it was spent.

[In a few years, the] “Allies approached the brink of disaster, with no recourse other than to ask Germany for terms.” [Robert Ferrell, Woodrow Wilson and World War I]

Under these circumstances, it became impossible for Morgan to find new buyers for the Allied war bonds, neither for fresh funding nor to replenish the old bonds which were coming due and facing default.

On March 15, 1917, Ambassador [to England, Walter Hines] Page sent a telegram to the State Department outlining the financial crisis in England. Since sources of new capital had dried up, the only way to keep the war going, he said, was to make direct grants from the U.S. Treasury. But, since this would be a violation of neutrality treaties, the United States would have to abandon its neutrality and enter the war.

The Morgan group had floated one-and-a-half billion dollars in loans to Britain and France. With the fortunes of war turning against them, investors were facing the threat of a total loss. As Ferdinand Lundberg observed: “The declaration of war by the United States, in addition to extricating the wealthiest American families from a dangerous situation, also opened new vistas of profits.”

This makes me wonder what the relationship was between Prescott Bush, who helped finance Hitler, and the House of Morgan, financing England. That’s another research project that probably won’t happen.

Ten months before the election which returned [Woodrow] Wilson to the White House in 1916 “because he kept us out of war,” Colonel [EM] House negotiated a secret agreement with England and France on behalf of Wilson which pledged the United States to intervene on behalf of the Allies.

Some things never change.

....but hey, do what you want....you will anyway.

MONOPOLY – IT’S ALL PLAY MONEY

May 2011

It's rare to be able to write in praise of a high elected official, but Eric Schneiderman -- New York's recently elected state Attorney General -- thus far deserves it.

[...]

[M]ost noteworthy and impressive is his seemingly solitary fight to hold Wall Street accountable for the vast corruption and criminality that spawned the 2008 financial crisis, which continues to impose serious financial hardship and anxiety on hundreds of millions of people around the world. As the U.S. DOJ steadfastly looks the other way and other state Attorneys General prepare to settle all potential charges in exchange for payment of woefully inadequate "cost-of-doing-business" fines, Schneiderman is doing the opposite, aggressively expanding his investigation in a way that could single-handedly sabotage the efforts to permanently protect this industry from accountability.

Glenn Greenwald

August 2011

Eric T. Schneiderman, the attorney general of New York, has come under increasing pressure from the Obama administration to drop his opposition to a wide-ranging state settlement with banks over dubious foreclosure practices, according to people briefed on discussions about the deal.

In recent weeks, Shaun Donovan, the secretary of Housing and Urban Development, and high-level Justice Department officials have been waging an intensifying campaign to try to persuade the attorney general to support the settlement.

Mr. Schneiderman and top prosecutors in some other states have objected to the proposed settlement with major banks, saying it would restrict their ability to investigate and prosecute wrongdoing in a variety of areas, including the bundling of loans in mortgage securities.

NYT

Yes, I believe that restriction is the point.

But Mr. Donovan and others in the administration have been contacting not only Mr. Schneiderman but his allies, including consumer groups and advocates for borrowers, seeking help to secure the attorney general’s participation in the deal, these people said. One recipient described the calls from Mr. Donovan, but asked not to be identified for fear of retaliation.

Retaliation by the federal government. True, it’s not good weather for whistleblowers these days.

In an interview on Friday, Mr. Donovan defended his discussions with the attorney general, saying they were motivated by a desire to speed up help for troubled homeowners. But he said he had not spoken to bank officials or their representatives about trying to persuade Mr. Schneiderman to get on board with the deal.

That’s the next ratchet.

This doesn’t even qualify as competent three card monte. “No, don’t look at what we are trying to do for the banks. Really, all we care about is homeowners!”

[...]

It is high time to describe the Obama Administration by its proper name: corrupt.

Admittedly, corruption among our elites generally and in Washington in particular has become so widespread and blatant as to fall into the “dog bites man” category. But the nauseating gap between the Administration’s propaganda and the many and varied ways it sells out average Americans on behalf of its favored backers, in this case the too big to fail banks, has become so noisome that it has become impossible to ignore the fetid smell.

[...]

Even though Gretchen Morgenson of the New York Times focuses tonight on the Administration’s efforts to leash and collar Schneiderman, he isn’t alone in having significant reservations. Beau Biden of Delaware is also making a broad-ranging investigation, which is inconsistent with entering into a settlement. Martha Coakley of Massachusetts and Catherine Masto of Nevada also have initiatives underway that are at odds with a settlement, and neither one looks interested in reversing course. We’ve also been told the Colorado AG may opt out of the deal.

Naked Capitalism

Beau Biden? Shouldn’t he be careful? I don’t know Bo. Sometimes, skeptic that I am, I think politcians put up a pretend resistance. Certainly that is President #Compromise’s stock-in-trade.

The President -- who kicked off his campaign vowing to put an end to "the era of Scooter Libby justice" -- will stand before the electorate in 2012 having done everything in his power to shield top Bush officials from all accountability for their crimes and will have done the same for Wall Street banks, all while continuing to preside over the planet's largest Prison State . . . for ordinary Americans convicted even of trivial offenses, particularly (though not only) from the War on Drugs he continues steadfastly to defend. And as Sam Seder noted this morning, none of this has anything to do with Congress and cannot be blamed on the Weak Presidency, the need to compromise, or the "crazy" GOP.

[...]

Glenn Greenwald

Speaking of banksters...

The Creature from Jekyll Island:
A Second Look at the Federal Reserve
(2002 – G. Edward Griffin)

Regular type indicates text directly quoted from the book. Where the words are my own, type will be italicized.

Installment 9
Chapters 9 & 10

The reality of central banks … is that, under the guise of purchasing government bonds, they act as hidden money machines which can be activated any time the politicians want. … It is even easier than printing and, because the process is not understood by the public, it is politically safe.

To preserve the pretense of banking, it is said [the central banks] collect interest, but this is a misnomer. They didn’t lend money, they created it. Their compensation, therefore, should be called what it is: a professional fee, or commission, or royalty, or kickback, depending on your perspective, but not interest.

With the knowledge that money in America is based on debt, it should not come as a surprise to learn that the Federal Reserve System is not the least interested in seeing a reduction in debt in this country, regardless of public utterances to the contrary.

Thomas Edison summed up the immorality of the system when he said: “People who will not turn a shovel full of dirt on [a] 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.”

The entire function of this machine is to convert debt into money. …First, the Fed takes all the government bonds which the public does not buy and writes a check to Congress in exchange for them….There is no money to back up this check. These fiat dollars are created on the spot for that purpose. By calling those bonds “reserves,” the Fed then uses them as the basis for creating 9 additional dollars for every dollar created for the bonds themselves. [ed: banks are allowed to "loan" 90% more than they actually hold in reserve, and in this case, the "reserve" is not money at all, but US bonds.] The money created for the bonds is spent by the government, whereas the money created on top of those bonds is the source of all the bank loans made to the nation’s businesses and individuals. The result of this process is the same as creating money on a printing press, but the illusion is based on an accounting trick rather than a printing trick. The bottom line is that Congress and the banking cartel have entered into a partnership in which the cartel has the privilege of collecting interest on money which it creates out of nothing….Congress, on the other hand, has access to unlimited funding without having to tell the voters their taxes are being raised through the process of inflation. If you understand this paragraph, you understand the Federal Reserve System.

Speaking of the Fed as boogey-man, it always amazes me – I don’t know why – when, as often happens, I see the support Ron Paul has from young people.

Paul Punkers:

....but hey, do what you want....you will anyway.

MONOPOLY – IT’S ALL PLAY MONEY

While the United States has one of the highest tax rates for investments in machinery financed with equity, it offers a generous deduction for investments in machinery funded by debt.

Raw Story

What more do you need to know?

The Creature from Jekyll Island:
A Second Look at the Federal Reserve
(2002 – G. Edward Griffin)

Regular type indicates text directly quoted from the book. Where the words are my own, type will be italicized.

Installment 8
Chapter 8 – Fractional money

In addition to the goldsmiths who stored coins, there was another class of merchants, called “scriveners,” who loaned coins. The goldsmiths reasoned that they, too, could act as scriveners, but do so with other people’s money. They said it was a pity for all that coin to just sit idle in their vaults. Why not lend it out and earn a profit which then could be split between themselves and their depositors? … And so the warehousemen began to act as loan brokers on behalf of their depositors, and the concept of banking, as we know it today, was born.

[However] sharing the interest income with the owners of the deposits was not part of the original concept. (Are you not surprised?) That only became general practice many years later after the depositors became outraged and needed to be reassured that these loans were in their interest as well. In the beginning, they didn’t even know that their coins were being loaned out.

And here’s the other thing: the depositors were holding paper in lieu of their coins. This paper was worth the amount of coin they had in the vault. It is only by an agreement to believe in paper and a gamble that the depositor won’t come to redeem the paper that the lender can loan those coins. We have to pretend then that the paper is worth something even when the coins are not in the vault. In point of fact, if there is no coin in the vault, then that paper is only paper. So how do we float an entire global economy on these principles? It’s magic. You only have to believe.

Loaning paper money beyond the amount of coin you have to back it up, which is the result of this type of magic, is apparently called “fractional-reserve banking,” because no banker wants to call it “this paper I’m giving you is really only worth a fraction of what it purports to be, should everyone come back and want their coins.”

Depositors were never encouraged to question how the banks could lend out their money and still have it on hand to pay back on an instant’s notice.

When banks issued paper receipts for coins, they converted commodity money into receipt money. If [depositors] used coin, the receipt was never issued. If they used the receipt, the coin remained in the vault and did not circulate.

When the banks abandoned this practice and began to issue receipts to borrowers [not depositors], they became magicians. They created money out of debt.

....but hey, do what you want....you will anyway.

MONOPOLY – IT’S ALL PLAY MONEY

News on Thursday that the Swiss central bank is prepared to consider temporarily pegging its currency to the euro sent the Swiss franc diving by as much as 6 per cent against the euro and 5 per cent against the US dollar.

While linking the franc to the euro would not happen overnight, and would face steep legal and political hurdles – a change to the Swiss constitution is required for starters – a peg would spell the death of another safe haven for investors.

Beyondbrics

Why would they be thinking about doing this?

[With] both the dollar and the euro weighed down by a deepening debt crisis, the historically stable Swiss franc has rocketed in value over the past year. It has gone up 21 per cent against the euro and 29 per cent against the dollar since the start of the year, as the two graphs below show.

The Swiss said that they are forced to violate their monetary constitution, because the irresponsible practices of the United States and European Union monetary authorities are driving so many dollars and euros into Swiss francs that the franc has appreciated to astronomical heights and is threatening Switzerland with the collapse of their export markets and Gross Domestic Product.

The EU says it has no choice but to bail out its private banks as that is the policy of Washington, DC, and that it must print euros in order to bail out the banks. This policy is in violation of the charter of the European Central Bank, but what do rules and laws mean in today’s world? Nothing whatsoever.

[...]

Oil producing countries such as Saudi Arabia and Qatar have their currencies in a fixed peg to the dollar. If the dollar depreciates too much in currency markets, the price of oil tends to go up. In other words, oil producers can compensate for US dollar devaluation by hiking the oil price of their main export.

[...]

Years ago China pegged its yuan to the US dollar, not to protect its currency from rising as a result of flight from the dollar, but in order to demonstrate that the money of what was seen as a questionable communist currency was "as good as the US dollar."

Not long ago China was forced off the fixed peg by the amount of Chinese money creation necessary to maintain the peg. China substituted a "moving peg" that allows the Chinese currency to slowly appreciate against the dollar. The Chinese currency is rising as the dollar falls, but the "floating peg" is behind events. Consequently, China’s currency is undervalued with regard to the "superpower" dollar, and China is importing inflation by having to create yuan in order to maintain the floating peg as the dollar is declining faster than the peg.

Paul Craig Roberts – Reagan Asst Treasury Secretary

Okay, I got about half of that. And what I really picked up on is this: wealthy Americans are stashing even more of their money in Swiss bank accounts so when the dollar tanks, they’ll have francs.

I can tell you this, as well: they are buying up land in Central America.

The Creature from Jekyll Island:
A Second Look at the Federal Reserve
(2002 – G. Edward Griffin)

Regular type indicates text directly quoted from the book. Where the words are my own, type will be italicized.

Installment 7
Chapter 8 – Fiat money

The two characteristics of fiat money…are (1) it does not represent anything of intrinsic value and (2) it is decreed legal tender. In other words, it is whatever the rulers decree to be money. And by law, you are required to accept and acknowledge it as such, even though you know it is actually worthless. As Marco Polo claimed about the Chinese emperor who created a system of fiat money, this is true alchemy.

The first fiat money in the US was created in Massachusetts. Massachusetts soldiers periodically made raids on Quebec, and when they returned empty-handed after one such raid, demanding to be paid for their efforts, there was no money in the coffers.

So they decided to simply print paper money. In order to convince the soldiers and the citizenry to accept it, the government made two solemn promises: (1) it would redeem the paper for gold or silver coin just as soon as there was sufficient tax revenue to do so, and (2) absolutely no additional paper notes would ever be issued. Both pledges were promptly broken. Only a few months later, it was announced that the original issue was insufficient to discharge the government’s debt, and a new issue almost six times greater was put into circulation.

Most of the other colonies were quick to learn the magic of the printing press…Next came the disappearance of gold or silver coins which went, instead, into private hoards or to foreign traders who insisted on the real thing for their wares.

In 1737, Massachusetts devalued its fiat currency by 66%. The promise was made that after five years the new money would be fully redeemed in silver or gold. The promise was not kept.

By the late 1750s, Connecticut had prices inflated by 800%. The Carolinas had inflated 900%. Massachusetts 1000%. Rhode Island 2300%.

And we can see why there have to be laws to make people use the stuff.

By this time, coins had completely disappeared from the scene….Most of them had been exported to other countries.

It has been shown that, even in colonial times, the classic booms and busts which modern economists are fond of blaming on an “unbridled free market” actually were direct manifestations of the expansion and contraction of fiat money which no longer was governed by the laws of supply and demand.

Of course, the Bank of England stepped in and put a stop to their colonies’ use of fiat money (the Bank of England issued its own). Apparently the colonists weren’t as threatened by the Bank of England, for they went back to using the coins they had hoarded instead of using the English paper. If you didn’t have coin, perhaps you had tobacco, and that worked, too, being officially adopted as money by both Virginia and Maryland.

Tobacco was used in early America as a secondary medium of exchange for about two-hundred years, until the new Constitution declared that money was, henceforth, the sole prerogative of the federal government.

Somebody should tell the Federal Reserve, which is a private enterprise, that money is the prerogative of the federal government.

So, things are getting back in shape and foreigners are willing to trade again when the colonies restore coin and leave off the funny money from the printing presses. And then…the war for independence. War costs money. Lots of money.

By artificially increasing the money supply….the real cost is hidden from view. It is still paid, of course, but through inflation.

At the beginning of the war in 1775, the total money supply stood at $12 million. [In five years the total was $425 million -] an increase of over 3500%. And, in addition to this massive expansion…on the part of the central government…the states were doing exactly the same thing. It is estimated that [by] the end of 1779, the total money supply expanded by 5000%. [At the same time] shoes sold for $5,000 a pair. A suit of clothes cost a million.

Fiat money is the means by which governments obtain instant purchasing power without taxation… It is, in fact, “collected” from us all through a decline in our purchasing power. It is, therefore, exactly the same as a tax, but one that is hidden from view, silent in operation, and little understood by the taxpayer.

An increase in fiat money in today's news is called "quantitative easing." Watch for it.

...but hey, do what you want...you will anyway.

MONOPOLY – IT’S ALL PLAY MONEY

[Texas Governor Scary] Perry, a late entry to the race to challenge Barack Obama for the White House, told a gathering in Iowa that it would be disastrous for the Federal Reserve to print more electronic money to fuel another round of asset purchases.

"Printing more money to play politics at this particular time in American history is almost treacherous, or treasonous, in my opinion," said Perry, on his first full day of campaigning for the Republican nomination.

UK Guardian

Which is why neither Rick Perry or Ron Paul will be the next president. Does he think American citizens (whom he fails to have a conversation with even as governor) elect presidents?

Does Michele Bachmann think the Fed can print money at will? If she wants to get close to the oval office, she'd better at least pretend she's okay with that.

Really, though, Rick Perry as president? The guy who wanted the State of Texas to secede? Huh-uh. He and Sarah Palin are essentially just attention hounds who may or may not actually believe they could be president. But they can't.

The Creature from Jekyll Island:
A Second Look at the Federal Reserve
(2002 – G. Edward Griffin)

Regular type indicates text directly quoted from the book. Where the words are my own, type will be italicized.

Installment 6
Chapter 7 - Gresham’s Law

Expanding the Money Supply by Coin Clipping

It didn’t take long for state rulers of old to start shaving off a bit of each supposedly standardized metal coin and melting down the bits to keep for themselves. Perhaps this is where the term skimming or shaving off the top in bookkeeping comes from.

As governments became more brazen in their debasement of the currency, even to the extent of diluting the gold or silver content, the population adapted quite well by simply “discounting” the new coins. Real prices, in terms of labor or other goods … remained unchanged.

Governments do not like to be thwarted in their plans to exploit their subjects. So a way had to be found to force people to accept these slugs as real money. This led to the first legal-tender laws. By royal decree, the “coin of the realm,” was declared legal for the settlement of all debts.

Refusal to recognize the coin of the realm resulted in imprisonment or other negative outcome for those who refused.

The result was that the good coins disappeared from circulation and went into private hoards. … That is what happened in America in the ‘60s when the mint began to issue cheap tokens to replace the silver dimes, quarters, and half-dollars. Within a few months, the silver coins were in dresser drawers and safe-deposit boxes. … In economics, that is called Gresham’s Law: “Bad money drives out good.”

As I mentioned in my last Monopoly post, I myself have collected a few silver quarters, but I never see them any more. I assumed that the government pulled them out of circulation as they replaced them by the diluted coins, but of course there are bound to be people who were privy to the scheme and those who were quicker on the draw than me, and indeed have decent sized collections of them.

The final move in this game of legal plunder was for the government to fix prices.…Now the people were caught. They had no escape except to become criminals.

Perhaps the greatest example of a nation with sound money … was the Byzantine Empire.

It is an amazing fact of history that the Byzantine Empire flourished as the center of world commerce for eight-hundred years without falling into bankruptcy nor, for that matter, even into debt. Not once during this period did it devalue its money. … Its quality was so dependable that it was freely accepted … from China to Brittany, from the Baltic Sea to Ethiopia.

Byzantine laws regarding money were strict. Before being admitted to the profession of banking, the candidate had to have sponsors who would attest to his character. [Filing or chipping coins] called for cutting off a hand.Okay, I’m going to say that the citizens of Byzantium were essentially honest people. Otherwise, one would be able to pay sponsors to attest to their good character. Certainly the Iranian terrorist organization MEK has managed this simple feat in the US.

Switching empires - we’ve all grown up with stories of the fall of the Roman Empire due mostly to loose morals. We can now challenge that assertion if we are to believe the next passages from this book.

Especially in the later [Roman] Empire, debasement of the coinage became a deliberate state policy. Every imaginable means for plundering the people was devised. In addition to taxation, coins were clipped, reduced, diluted, and plated. Favored groups were given franchise for state-endorsed monopolies, the origin of our present-day corporation. And, amidst constantly rising prices in terms of constantly expanding money, speculation and dishonesty became rampant.

By the year 301 A.D., … the treasury was empty, agriculture depressed, and trade almost at a standstill. It was then that Diocletian issued his famous price-fixing proclamation as the last measure of a desperate emperor… The result? Conditions became even worse, and the royal decree was rescinded five years later.

The Roman Empire never recovered from the crisis. By the fourth century, all coins were weighted, and the economy was slipping back into barter again. By the seventh century, the weights themselves had been so frequently changed that it was no longer possible to effect an exchange in money at all. For all practical purposes, money became extinct, and the Roman Empire was no more.

And then there were banks.

After the Fall of Rome, banks saw their beginnings in goldsmith activities. Goldsmiths, who created vaults to guard their money, were increasingly entrusted with other people’s gold. The goldsmith gave you a written receipt for your gold, which presumably was more easily guarded than your huge piles of coins, and to redeem your gold from the vault, another written receipt was issued. Eventually, a system of third-party endorsements led to checking accounts.

Now what could go wrong?

....but hey, do what you want....you will anyway.

MONOPOLY – IT’S ALL PLAY MONEY

War and the Federal Reserve

Talk of imminent threat to our national security through the application of external force is pure nonsense…. Indeed, it is a part of the general patterns of misguided policy that our country is now geared to an arms economy which was bred in an artificially induced psychosis of war hysteria and nurtured upon an incessant propaganda of fear. While such an economy may produce a sense of seeming prosperity for the moment, it rests on an illusionary foundation of complete unreliability and renders among our political leaders almost a greater fear of peace than is their fear of war. – General Douglas MacArthur

Why is the United States constantly at war? If we look at the last half century or so, there is hardly a time when we haven’t been engaged in some major conflict with a purportedly global threat to our very existence.

[...]

[Quoting economist Paul Krugman:]“Think about World War II, right? That was actually negative social product spending, and yet it brought us out [of the depression] [...] Look, we could use some inflation.[...] It’s very hard to get inflation in a depressed economy. But if you had a program of government spending plus an expansionary policy by the Fed, you could get that. So, if you think about using all of these things together, you could accomplish a great deal.”

[...]

The Fed can “monetize” the debt simply by pushing a button on the government’s control panel [and printing more money to pay for military expenses...] and the President can [simultaneously] push another one marked “War” – and all without congressional approval.

[...]

Krugman’s canard about how World War II dragged us out of the Great Depression has been debunked by economists on both the right and the left, but plain common sense should alert the non-expert reader to the illogic of this view, let alone its complete lack of any moral sense. Essential goods and services were strictly rationed during the war years, and the relaxation of wartime regulations and controls was bound to create an economic upswing relative to what had gone before. Secondly, the rest of the Western world lay in ruins in the aftermath of the war, while the continental US was spared: this above all explains the postwar economic boom.

[...]

The central cause of the boom-bust-war cycle is the Fed, which is the motor of the war machine and the creator of the economic bubble that always ends in a painful bursting. Until [the Federal Reserve] is ended, or at least reined in, the buttons marked “inflation” and “war” are going to remain on the government’s control panel – begging to be pushed.

Justin Raimondo

The Creature from Jekyll Island:
A Second Look at the Federal Reserve
(2002 – G. Edward Griffin)

Regular type indicates text directly quoted from the book. Where the words are my own, type will be italicized.

Installment 5
Chapter 7 – Just what is money?

Some years ago, a Mr. A.F. Davis mailed a ten-dollar Federal Reserve Note to the Treasury Department.

Attached to Mr. Davis’ note was a request for the Treasury to honor the inscription on the note that said the US would redeem this note for “lawful money.” The Treasury sent back to Mr. Davis two five-dollar bills, each bearing the same inscription: “The United States of America will pay to the bearer on demand five dollars.”

Mr. Davis then sent back one five-dollar bill, asking for his money. This time, the Treasury returned his five-dollar bill with an attached note saying the term “lawful money” was not defined in federal legislation and furthermore that the term no longer had any special significance.

The phrases “…will pay to the bearer on demand” and “…is redeemable in lawful money” were deleted from our currency altogether in 1964.

This is also the same time that silver quarters were diluted with copper. Why not save money, I wonder, and make quarters thinner or smaller? The effect is the same - a quarter is worth less, but the latter solution doesn't require using up any copper. I have a few silver quarters, collected some years ago (which is how I know the date 1964 coincides with their devaluation), but my guess is there are few or none remaining in circulation.

Early money – why metals:

Experts may haggle over the precise quality of a gemstone, but an ingot of metal is either 100% pure or it isn’t, and it either weighs 100 ounces or it doesn’t.

Perhaps the most important monetary attribute of metals is their ability to be precisely measured, [and the] primary reason metals became widely used as commodity money is that they meet all of the requirements for convenient trading. In addition to being of intrinsic value for uses other than money, they are not perishable … ; by melting and reforming they can be divided into smaller units and conveniently used for purchases of minor items, which is not possible with diamonds, for example; and, because they are not in great abundance, small quantities carry high value.

This should give us a clear view of human nature. We can be amongst the elite only if we possess something that most people do not – and cannot – have.

We value that which is rare.

This only applies to material things, interestingly enough. Otherwise, we should value rare things such as truth, artistic abilities, altruism, compassion and intelligence. We do not.

We do, however, value gold.

It is estimated that approximately 45% of all the gold mined throughout the world since the discovery of America is now in government or banking stockpiles. There undoubtedly is at least an additional 30% in jewelry, ornaments, and private hoards. Any commodity which exists to the extent of 75% of its total world production since Columbus discovered America can hardly be described as in short supply.

The deeper reality, however, is that the supply is not even important.

If Santa Claus were to visit everyone on Earth next Christmas and leave in our stockings an amount of money exactly equal to the amount we already had, there is no doubt that many would rejoice over the sudden increase in wealth. By New Year’s day, however, prices would have doubled for everything, and the net result on the world’s standard of living would be exactly zero.

This I suppose explains the situation which I have argued more than once to co-workers: quit whining about how the boss makes too much money. It doesn’t matter that the boss makes a great deal more money than you, nor even whether he merits it. The only thing that matters is whether you believe you have enough, and if you don’t, then complain to someone who might possibly do something about it. But you will never have more than enough. (And these days you may be lucky to have just that.) The system works so that if you make more money, you are going to at the very least pay more taxes. If your coworkers also manage to get a similar raise, you are all going to end up paying more for things like health coverage (because the insurance industry knows you are now making more money) and housing, etc (because you are all forever competing for the same goods). Your ratio of income to expenses is going to remain essentially fixed. The system is rigged.

Of course, that is very simplified, and there must be factors that create more or less purchasing power for the average worker, otherwise we wouldn’t be able to talk about being better or worse off from one generation to another, so I was wrong in this one regard; our income to expense ratio is growing worse, possibly because, contrary to what we are told, we do not live in a free-market enterprise – it’s finagled and tinkered to the advantage of the few at the top, and oddly supported by many at the bottom who labor under the delusion 1) that they are not at the bottom and 2) can actually get to the top.

Enough for now.

Perhaps it would behoove us to think of ways to make good use of US bills once they become worthless as money. We could, of course, burn them for heat, but I think you wouldn’t get much return for your investment there. Since they are fabric and do in fact make it through the wash, we could use them to create clothing, drapery and bed linens. What else?

....but hey, do what you want....you will anyway.

MONOPOLY – IT’S ALL PLAY MONEY

Investor confidence has dropped after the U.S. sovereign debt rating was cut by Standard & Poor’s on Aug. 5, and amid worsening public debt problems in Europe.

[...]

The Bank of Mauritius is seeking to limit its foreign reserve exposure to the U.S. dollar and the euro and will diversify to include more holding from trade partners such as China, India and South Africa.

[...]

“We want to move away from dollar-based trade into yuan- based trading with China and rupee-based trading with India. Likewise with the South Africans with whom we trade a lot,” Bheenick said. “We want to have direct trading, trying to bypass the dollar channel and the euro channel.”

Business

Nigeria's central bank plans to diversify its foreign exchange reserves away from an over-reliance on the dollar and wished to increase its exposure to the Chinese yuan among other currencies, its deputy governor told Reuters on Saturday.

Reuters

Beijing should move rapidly to diversify its foreign exchange reserves, buying more euro and yen rather than dollar assets, after U.S. debt was downgraded by one rating agency, a paper run by China's central bank cited local banking sources as saying.

"China can keep buying yen and euro; and in the dollar assets, China can cut its holdings of treasuries and institutional bonds for U.S. stocks and corporate bonds," an unidentified "expert" with the Industrial and Commercial Bank of China, the largest Chinese lender, was quoted by the Financial News as saying.

The newspaper report does not necessarily represent China's official stance. China's central bank and State Administration of Foreign Exchange, which manage China's stockpile of $3.2 trillion foreign exchange reserves, the world's largest, have kept silent since the first credit downgrade of U.S. debt.

Reuters

We shall see.

The Creature from Jekyll Island:
A Second Look at the Federal Reserve
(2002 – G. Edward Griffin)

Installment 4
Chapter 5

Regular type indicates text directly quoted from the book. Where the words are my own, type will be italicized.

We have been told that our nation’s trade deficit is a terrible thing, and that it would be better to “weaken the dollar” to bring it to an end. Weakening the dollar is a euphemism for increasing inflation. In truth, America is not hurt by a trade deficit at all. In fact, we are the benefactors while our trading partners are the victims. We get the cars and TV sets while they get the funny money. We get the hardware. They get the paperware.

There is a dark side to the exchange, however. As long as the dollar remains in high esteem as a trade currency, America can continue to spend more than it earns. But when the day arrives – as it certainly must – when the dollar tumbles and foreigners no longer want it, the free ride will be over. When that happens, hundreds of billions of dollars that are now resting in foreign countries will quickly come back to our shores as people everywhere in the world attempt to convert them [...] and to do so as quickly as possible before they become even more worthless.

The chickens will come home to roost. But, when they do, it will not be because of the trade deficit. It will be because we were able to finance the trade deficit with fiat money created by the Federal Reserve.

And then we get into the global business with both feet through the magic money workings of the IMF and World Bank, which apparently is mostly funded by US dollars.

Funding for [World Bank] loans comes from member states in the form of a small amount of cash, plus promises to deliver about ten-times more if the Bank gets into trouble. The promises, described as “callable capital,” constitute a kind of FDIC insurance program, but with no pretense at maintaining a reserve fund.

Based upon the small amount of seed money plus the far greater amounts of “credits” and “promises” from governments of the industrialized countries, the World Bank is able to go into the commercial loan markets and borrow larger sums at extremely low interest rates. After all, the loans are backed by the most powerful governments in the world which have promised to force their taxpayers to make the payments if the Bank should get into trouble.

Suddenly, I’m seeing what they mean by “too big to fail.” But I’m afraid they might be wrong.

I’m wading through chapter 5, and this may be where I got stopped in my previous attempt to read this book. Wading, maybe is not the right word, but somehow I’m trying to glean the bare facts from the author’s constant rants against socialism. He wants to abolish the Fed, among other reasons, because it supports totalitarian dictators by loaning money to third world countries.

In my other readings of the World Bank/IMF “evils” the story is that it loans money to countries against faked positive assessments of those countries' abilities to pay it back, thereby keeping them in the perpetual business of paying interest and unable to ever get out of debt and get their economies on sound footing. A number of Latin American countries have finally caught on and are pulling out of their IMF loans, with the help of financing from Venezuela, I believe. I think this is a much more reasonable view of what’s going on than that the IMF is “brothers under the skin to socialist dictators” as the author of this book claims.

The author continues in chapter 6 ranting about the “New World Order” and how it’s all socialism and communism. So I think I will skip that and pick up again (when I pick up again) in Section II – A Crash Course On Money - Chapter 7, where it should get interesting again.

MONOPOLY – IT’S ALL PLAY MONEY

The Bank of England signalled that interest rates would stay on hold for a long time to come as it cut its growth forecasts for the UK, blaming the weaker global economy.

UK Guardian

Which, as everyone knows, is controlled by economy fairies and gods, and has nothing whatsoever to do with the Bank of England, nor any other bank.

Goldman Sachs estimated last week that there was a one-in-three chance of returning to negative growth in the coming quarters

[...]

The Federal Reserve pledged Tuesday to hold interest rates near zero for two more years and said it was mulling the tools it has to boost a slowing economy.

[...]

"Downside risks to the economic outlook have increased," the Federal Open Market Committee (FOMC) said after a one-day meeting.

[...]

The Fed said it now expects growth at a "somewhat slower pace" over the coming quarters than it had estimated in June.[The Fed]made no suggestion that it was considering a successor to its "QE" or "quantitative easing" program to boost the economy; only that the meeting "discussed the range of policy tools available" to promote growth.

Raw Story

Translate at will.

The Creature from Jekyll Island: A Second Look at the Federal Reserve (2002 – G. Edward Griffin)

Regular type indicates text directly quoted from the book. Where the words are my own, type will be italicized.

Installment 3: S&Ls and Junk Bonds
Chapter 4

The damage done by the banking cartel is made possible by the fact that money can be created out of nothing. (Quantitative easing.)

By comparison, the problem in the savings-and-loan industry is easy to comprehend. It is simply that vast amounts of money are disappearing into the black hole of government mismanagement, and the losses must eventually be paid by us.

[During the Great Depression of the 30s] it became widely accepted at all levels of American life … that it was desirable for the government to take care of its citizens and to protect them in their economic affairs. And so, when more than 1900 S&Ls went belly-up…Hoover – and a most wiling Congress – created the Federal Home Loan Bank Board to protect depositors in the future….The public was led to believe that government regulators would be more wise, prudent, and honest than private managers.

The next step was for the Federal Reserve Board to require banks to offer interest rates lower than those offered by S&Ls.

These measures effectively removed real estate loans from the free market and placed them into the political arena…The additional cost to S&Ls of compliance with [rigid government] regulation has been estimated …at about $11 billion per year, which represents a whopping 60% of all their profits.

In 1979, the Federal Reserve had raised interest rates so that S&Ls were paying 15.8% to attract depositors while still charging only 12.9% for mortgage loans, and operating ”deep in the red.” Brokers no longer cared how weak the operation was, because the funds were fully insured.

In the early days of the Reagan administration, government regulations were changed so that the S&Ls were no longer restricted to the issuance of home mortgages, the sole reason for their creation in the first place. In fact, they no longer even were required to obtain a down payment on their loans. They could now finance 100% of a deal – or even more. Office buildings and shopping centers sprang up everywhere regardless of the need. …In at least twenty-two of the failed S&Ls [of this period], there is evidence that the Mafia and CIA were involved.

The Garn-St.Germain Act allowed the thrifts to lend an amount of money equal to the appraised value of real estate rather than the market value. It wasn’t long before appraisers were receiving handsome fees for appraisals that were, to say the least, unrealistic…The amount by which the appraisal exceeded the market value was defined as “appraised equity” and was counted the same as capital.

Any wonder we have economic problems? Out of thin air, capital is born from a fraudulent appraisal.

By 1989, the FSLIC no longer had even two-tenths of a penny for each dollar insured. Its reserves had vanished altogether [in payouts to failing S&Ls].

In February, an agreement was reached between Alan Greenspan, Chairman of the Federal Reserve Board, and M. Danny Wall, Chairman of the Federal Home Loan Bank Board, to have $70 million of bailout funding …come directly from the Federal Reserve. The Fed was usurping the role of Congress and making political decisions entirely on its own.

Finally in August…Congress passed the Financial Institutions Reform and Recovery Act and allocated …$300 billion over thirty years [an amount that eventually proved to be only about half the actual cost]…the biggest bailout ever. The FSLIC was eliminated because it was hopelessly insolvent and replaced by the Savings Association Insurance Fund…[and] Banking Insurance Fund for the protection of commercial banks, and both are now administered by the FDIC.

Smoke and mirrors.

Four entirely new layers of bureaucracy were added…When President Bush (the first) signed the bill, he said:

“This legislation will safeguard and stabilize America’s financial system and put in place permanent reforms so these problems never happen again.”

Sort of like WWI being the war to end all wars.

The next step was to create bookkeeping assets out of thin air…accomplished by authorizing the S&Ls to place a monetary value on community “good will”!

Then, the FSLIC began to issue “certificates of net worth,” which were basically promises to bail out the ailing S&Ls, [and which the S&Ls were allowed] to count …as assets on their books.

OK, let me recap what can be called an asset in the banking business: 1) actual money; 2) actual capital; 3) negative money in the form of loans; 4) fraudulent appraisal values; 5) certificates issued by the FSLIC promising to cover the institution's debts; 6) public good will. Am I missing anything? And how is public good will measured?

In Chapter 4 there is a detailed account of how Michael Milkin in California ended up being the fall guy in the big junk bond scandal of the late 80s and the New York brokers broke the back of what promised to be a lucrative market dealing in actual valuable stock from smaller brokerage houses (so called “junk bonds”) instead of bookkeeping gimmicks that I won’t go into. But it certainly gave me a different picture than the one I have held over the years regarding the drubbing and jailing that Milken took. The upshot of the story is this:

With the California upstarts out of the way, it was a simple matter to buy up the detested bonds at bargain prices and to bring control of the new market back to Wall Street. The New York firm of Salomon Brothers, for example, one of Drexel’s most severe critics during the 1980s, is now a leading trader in the market Drexel created.

[At the time [the 1994 edition of this] book went to press …S&Ls were still hemorrhaging and] President Clinton was asking Congress for an additional $45 billion and hinting that this should be the last bailout.

This being the second bailout of the S&Ls, and of course, the dust is still settling on the latest financial bailout, this time the nation's large banks. That will be the last one, of course.

[The S&L industry] could not function without Congress standing by to push unlimited amounts of money into it.

....but hey, do what you want....you will anyway.

MONOPOLY – IT’S ALL PLAY MONEY

Efforts by US President Barack Obama and other global leaders to restore confidence failed to do the trick Tuesday as markets hit new lows in a massive sell-off driven by fears of a new recession.

[...]

"The financial crisis has changed its nature and become even more vicious," Berenberg Bank chief economist Holger Schmieding added.

[...]

Investors were now looking ahead to US Federal Reserve meeting later in the day in the hope the US central bank could come up with some fresh cash to spur activity under its policy known as Quantitative Easing (QE) but many were sceptical it has any firepower left with which to stem the tide.

Raw Story

Quantitative Easing. That’s another term I’ll have to remember that really means making money from thin air.

The US president stressed in a televised speech that the United States "always will be a triple-A country."

That’s right, sports fans. We’ll always be number one. Don’t let the markets fool you.

“I think this debt ceiling deal was really a declaration of war on the poor,” [talk show host (?) Tavis Smiley] said. “The Congress and the president have declared war on the poor. You can’t sign into law legislation that raises the debt ceiling but opens up a crater in the floor.”

“Put another way, no unemployment extensions for poor people, no closing of a single corporate loophole, not one new tax on the rich and the lucky – so once again the corporations get off scot-free, Wall Street and the big banks get off scot-free, yet all these cuts aimed at the poor.”

Raw Story

Okay, I see we are going to have to silence some agitators.

The Federal Reserve gathers on Tuesday under growing pressure to take some type of action to stem a financial market meltdown linked to fears of a new U.S. recession.

[...]

While most analysts expect the Federal Reserve to not make any major changes in policy at its meeting on Tuesday, some wonder whether market disruptions of recent sessions warrant some kind of central bank intervention.

[...]

"If the Fed does nothing, it could prove to be a disappointment at this point," said JP Morgan analysts on a conference call to discuss the S&P downgrade.

Some economists argue the Fed is close to out of bullets. Interest rates are effectively zero and the Fed's balance sheet stands at a record $2.9 trillion after an unprecedented program of unconventional monetary easing.

Raw Story

Wait…..Moody’s to the rescue!

The United States remains on a fiscal footing that is as solid as other AAA-rated countries, the Moody's ratings agency said Monday, in a retort to last week's downgrade by its rival Standard & Poor's.
"Relative to other large AAA-rated governments, the US debt position is somewhat high, but not out of line with the positions of these countries," Moody's said in an analyst note.

AFP

See? We’re not going under any faster than Europe.

[March 20] While the world has been transfixed with Japan, Europe has been struggling to avoid another financial crisis. On any Richter scale of economic threats, this may ultimately matter more than Japan’s grim tragedy. One reason is size. Europe represents about 20 percent of the world economy; Japan’s share is about 6 percent.

[...]

Just last week, European leaders were putting the finishing touches on a plan to enlarge a bailout fund from an effective size of roughly 250 billion euros (about $350 billion) to 440 billion euros ($615 billion) and eventually to 500 billion euros ($700 billion). By lending to stricken debtor nations, the fund would aim to prevent them from defaulting on their government bonds, which could have ruinous repercussions. Banks could suffer huge losses in their bond portfolios; investors could panic and dump all European bonds; Europe and the world could relapse into recession.

WaPo

The old "You can't pay that debt? I'll just loan you some more money. It's all interest to me."

The American International Group sued Bank of America on Monday over hundreds of mortgage-backed securities, adding to the surge of investors seeking compensation for the troubled mortgages that led to the financial crisis.

[...]

[AIG] claims that Bank of America and its Merrill Lynch and Countrywide Financial units misrepresented the quality of the mortgages placed in securities and sold to investors.

[...]

A.I.G., still largely taxpayer-owned as a result of its 2008 government bailout, is among a growing group of investors pursuing private lawsuits because they believe banks misled them into buying risky securities during the housing boom. At least 90 suits related to mortgage bonds have been filed, demanding at least $197 billion.

[...]

A.I.G. is preparing similar suits against other large financial institutions including Goldman Sachs, JPMorgan Chase and Deutsche Bank.

[...]

The private actions stand in stark contrast to the few credit crisis cases brought by the Justice Department, which is wrapping up many of its inquiries into big banks without filing any charges. [... The] Justice Department has brought three cases against employees at large financial companies and none against executives at large banks

NYT

I supposed when they own you, you can’t very well press charges against them. Those government inquiries we see put into motion from time to time seem almost always to be toothless and time-wasting. We may as well say, “Convene an inquiry and have the report on my desk in half an hour.” Save everyone time and money.

Even more investigations may soon be shut down because the Justice Department is heavily involved in negotiations between big banks and state attorneys general that may give the banks broad immunity against future claims.

Because they don’t have enough leeway as it stands.

Cases like A.I.G.’s may turn up information in interviews and document discovery that could be helpful to the government, though it is unclear if the Justice Department would seek to reopen closed cases.

It seems pretty clear to me. It won’t.

This seems like a good place to lodge the next Creature installment.

The Creature from Jekyll Island:
A Second Look at the Federal Reserve (2002 – G. Edward Griffin)

Regular type indicates text directly quoted from the book. Where the words are my own, type will be italicized.

Installment 2
Chapters 2-3

The name of the game is “Bailout.” [The objective] is to shift the inevitable losses from the owners of the larger banks to the taxpayers.

Just to review banking 101...When a loan is made, the bank doesn’t just put it down in its records as a liability (in case it doesn’t get repaid), it puts it down in its records as an asset, because the bank is drawing interest on it and expects that it will be paid back. If it’s not paid back, it comes off the asset side of the balance sheet, but remains a liability. It will remain on the asset side, however, for as long as the bank wishes to pretend it’s going to be repaid. In this fashion, a bank’s reports can make it seem to have assets even as it is going belly up. And having huge loans out is actually a plus for the bank as long as the interest gets paid. If you’re permitted to “loan” money you don’t actually have (and banks are), then it’s all profit. So actually, a bank’s interest is perpetual interest, and not being paid back.

FDR …took the next step … by establishing the Federal Deposit Insurance Corporation (FDIC) and the Federal Saving and Loan Insurance Corporation (FSLIC)…At the same time, loans on private homes became subsidized through the Federal Housing Authority (FHA).

[Under Carter, the amount of federal insurance for a private depositor was raised] from $40,000 to $100,000. Those with more than that merely had to open several accounts, so, in reality, the sky was the limit.

And now, the sky is falling.

The American people have no idea they are paying the bill (for corporate and foreign defaults)…they think it is the greedy businessman who raises prices or the selfish laborer who demands higher wages or …

They do not realize that these groups also are victimized by a monetary system which is constantly being eroded in value by and through the Federal Reserve System.

But the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Federal Deposit Loan Corporation now guarantee that massive loans made to large corporations and to other governments will not be allowed to fall entirely upon the bank’s owners should those loans go into default…on the argument that, if these corporations or banks are allowed to fail, the nation would suffer from vast unemployment and economic disruption.

Yes, we well remember the exact phrase: Too big to fail..

MONOPOLY – IT’S ALL PLAY MONEY

Welcome to Oz. Meet the man (or men) behind the curtain.

The European Central Bank has moved to halt Europe's runaway debt crisis by pledging to buy government bonds from Italy and Spain.

The move to prop up Europe's struggling nations came after a day of frantic discussions between the finance ministers of the world's leading economies. Markets open for the first time since Standard & Poor's decision to cut the US's credit rating from AAA late on Friday.

UK Guardian

Maybe this is a good time to take a look at central banking, and specifically, the Federal Reserve. A few years back, I began reading a large volume titled The Creature from Jekyll Island: A Second Look at the Federal Reserve by G. Edward Griffin, describing the workings and inception of the Federal Reserve during a secret meeting on Jekyll Island, Georgia, in 1913. I never made my way through it. Perhaps if I blog some salient points from it, I can stick with it, and those of us who realize the bankers truly are banksters as they’ve been called of late will be a little more enlightened as to what’s going on and how we got here.

Texas Representative and presidential aspirant Ron Paul seems to be the most vocal about the “evils” of the Federal Reserve, so I may as well start by quoting his website.

The Federal Reserve is the chief culprit behind the economic crisis. Its unchecked power to create endless amounts of money out of thin air brought us the boom and bust cycle and causes one financial bubble after another. Since the Fed’s creation in 1913 the dollar has lost more than 96% of its value, and by recklessly inflating the money supply the Fed continues to distort interest rates and intentionally erodes the value of the dollar.

[...]

HR 1207, the bill to audit the Federal Reserve, swept the country and made the central bankers shudder at their desks. The bill passed as an amendment both in the House Financial Services Committee and in the House itself.

[...]

A handful of Fed-loving U.S. senators led by Chris Dodd rewrote the Senate version of the Financial Reform Bill to strip out Ron Paul’s Audit the Fed amendment and actually expand the Fed’s power over banks, lending and money. As Alan Grayson pointed out here, and Ron Paul commented on here, the Dodd bill completely eliminated legislation to audit the Federal Reserve, which already passed in the House.

[...]

On June 30, 2010, the GOP introduced Ron Paul’s Audit the Fed bill as a motion to recommit, which was the last chance to alter the financial regulation bill. Audit the Fed failed by a vote of 229-198. All Republicans voted in favor of the measure with 23 Democrats crossing the aisle to vote with Republicans. 114 co-sponsors of HR 1207, all Democrats, jumped ship and voted against Audit the Fed.

RonPaul.com

OMG, the cheese, Ron, please stop with the cheese. There’s also an “Audit the Fed” song on his site.

But, okay, cheese aside, here’s Ron Paul himself on the need to audit the Federal Reserve.

[The] big guns have lined up against HR 1207, the bill to audit the Federal Reserve. What is it that they are so concerned about? What information are they hiding from the American people?

[...]

[Chairman Ben] Bernanke argues that the knowledge that their discussions and decisions will one day be scrutinized will compromise the freedom of the Open Market Committee to pursue sound policy. If it is sound and honest and serves no special interest, what’s the problem?

[...]

The detailed transcripts of the FOMC meetings are released every 5 years, so why would this be so different and what is it that they don’t want the American people to know? Is there something about the transcripts that need to be kept secret, or are the transcripts actually not verbatim?

[...]

Only an audit of the Federal Reserve will answer these questions.

[...]

Once we get the audit bill passed and we can reveal what they are doing, I think the next step is to end the Fed. That’s why they don’t want that.

End the Fed? Is that what we need to do? If so, how would we go about doing that and what would be the short- and long-term repercussions? Not that "we" could effect an end to the Fed, I'm just asking, because I don’t have a clue. I guess I should start with understanding what the Fed is and how it came about.

So, back to the book, and the first (and probably most lengthy) installment.

Regular type indicates text directly quoted from the book. Where the words are my own, type will be italicized.

The Creature from Jekyll Island:
A Second Look at the Federal Reserve
(2002 – G. Edward Griffin)

Chapter 1

“Picture a party of the nation’s greatest bankers stealing out of New York on a private railroad car under cover of darkness, stealthily hieing hundreds of miles South, embarking on a mysterious launch, sneaking on to an island deserted by all but a few servants, living there a full week under such rigid secrecy that the names of not one of them was once mentioned lest the servants learn the identity and disclose to the world this strangest, most secret expedition in the history of American finance.” – B.C. Forbes 1916

The party:

1. Rhode Island Senator Nelson W. Aldrich (father-in-law to John D Rockefeller, JR)

2. Abraham Piat Andrew, asst Secretary of the US Treasury

3. Frank A Vanderlip, president, National City Bank of New York (representing Wm Rockefeller and investment bankers Kuhn, Loeb & Co)

4. Henry P Davison, senior partner of JP Morgan

5. Charles D Norton, president of JP Morgan’s First National Bank of NY

6. Benjamin Strong, head of JP Morgan’s Bankers Trust Company

7. Paul M Warburg, a German immigrant, partner in Kuhn, Loeb & Co (representing Rothschild bankers in England & France, and brother of Max Warbug, director of the German Reichsbank and financial adviser to the Kaiser)

“Once aboard the private car we began to observe the taboo that had been fixed on last names. … 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….If it were to be exposed publicly that our particular group had got together and written a banking bill, that bill would have no chance whatever of passage by Congress.” – Frank Vanderlip

In 1910, the number of banks in the United States was growing at a phenomenal rate. In fact, it had more than doubled to over twenty thousand in just the previous ten years. … By 1913, when the Federal Reserve Act was passed, [non-national banks had grown to] seventy-one percent [and held] fifty-seven percent of deposits. In the eyes of [the seven conspirators] this was a trend that simply had to be reversed.

[Furthermore], between 1900 and 1910, seventy percent of the funding for American corporate growth was generated internally (via profits), making industry increasingly independent of the banks. Even the federal government … had a growing stockpile of gold, was systematically redeeming the Greenbacks … issued during the Civil War, and was rapidly reducing the national debt. [The bankers wanted to] tip the balance of interest rates downward to favor debt over thrift. To accomplish this, the money supply simply had to be disconnected from gold and made more plentiful.

They were often competitors, and there is little doubt that there was considerable distrust between them and skillful maneuvering for favored position in any agreement. But they were driven together by one overriding desire to fight their common enemy. The enemy was competition.

(There is another issue concerning these men – the possible demand of depositors for return of their money (the threat of a “run” on a bank), or even spending all of the money they deposit before it has had time to earn interest for the bank. Banks loan other people’s money to their borrowers on the bet that the depositor won’t want it back before the bank can collect enough interest off its loans to give it back without digging into its own pockets. And banks loan more money than they have – it's the "magic of money.")

[In] modern banking … promises-to-pay often exceed savings deposits by a factor of ten-to-one. And, because only about three percent of these accounts are actually retained in the vault in the form of cash – the rest having been put into even more loans and investments – the bank’s promises exceed its ability to keep those promises by a factor of over three hundred-to-one.

The secret Jekyll Island party's agenda:

1. How to stop the growing influence of small, rival banks and to insure that control over the nation’s financial resources would remain in the hands of those present;

2. How to make the money supply more elastic (so it could be expanded and contracted at will) in order to reverse the trend of private capital formation and to recapture the industrial loan market;

3. How to pool the meager reserves of the nation’s banks into one large reserve so that all banks will be motivated to follow the same loan-to-deposit rations. This would protect at lease some of them from currency drains and bank runs;

4. Should this lead eventually to the collapse of the whole banking system, then how to shift the losses from the owners of the banks to the taxpayers;

5. How to convince Congress that the scheme was a measure to protect the public.

For purposes of public relations and legislation, they would devise a name that would avoid the word bank altogether and which would conjure the image of the federal government itself. Furthermore, to create the impression that there would be no concentration of power, they would establish regional branches.

[Warburg argued that the solution] was to follow the German example whereby banks could create currency solely on the basis of “commercial paper,” which is banker language for I.O.U.s from corporations.

“Before the passage of this Act, the New York bankers could only dominate the reserves of New York. Now we are able to dominate the bank reserves of the entire country.” -- Senator Nelson Aldrich, 1914

“The Federal Reserve System is a legal private monopoly of the money supply operated for the benefit of the few under the guise of protecting and promoting the public interest.” – Antony Sutton, Hoover Institution Research Fellow

Since its inception, it has presided over the crashes of 1921 and 1929; the Great Depression of ’29 to ’39; recessions in ’53, ’57, ’69, ’75, and ’81; a stock market “Black Monday” in ’87; and a 1000% inflation which has destroyed 90% of the dollar’s purchasing power. Remember, this edition of this book was written in 2002, so add to that the “recession” we are either in or not in now, depending upon whom you ask, and the severe failure of the banks in 2008 and subsequent crumbling of the economy.

....but hey, do what you want....you will anyway.