Liberty Maven

We at Liberty Maven feel that one of the most important issues of our time that American citizens need to understand is how the Federal Reserve System works, and how it is destroying our country, and therefore how important it is that we abolish it once and for all.  We cannot stress this enough, so if you have previously glossed over the subject please take a moment to read this article carefully.

The Federal Reserve System is our nation’s central bank.  It was created in 1913 by the passage of the Federal Reserve Act.  It is a private banking cartel that has been given special powers to control our currency, the U.S. Dollar.

The Fed is an anathema to any clear-thinking person who cares for the well-being of our monetary system and our economy, and who understands the Federal Reserve’s role in the destruction of our currency.  The problem is, the majority of Americans simply aren’t educated on the subject.  But can the average person really be blamed?  The subject is rarely, if ever, mentioned in public schools, and the only time one hears about the Fed in the mainstream media it is presented in a positive light, often as our savior.

For a quick explanation of how the Federal Reserve works, read what Richard Russel wrote last year:

Consider the following – - let’s take a situation where the U.S. government needs money. The U.S. doesn’t just issue United States Notes, which, of course it could. These notes would be dollars backed by the full faith and credit of the United States. No, the U.S. doesn’t issue dollars straight out of the U.S. Treasury.

This is what the U.S. does — it issues Treasury Bonds. The U.S. then sells these bonds to the Fed. The Fed buys the bonds. Wait, how does the Fed pay for the bonds? The Fed simply creates money “out of thin air” (book-keeping entry) with which it buys the bonds. The money that the Fed creates from nowhere then goes to the U.S. The Fed holds the U.S. bonds, and the unbelievable irony is that the U.S. then pays interest on the very bonds that the U.S. itself issued. The mind boggles.

Note that the owners of the Federal Reserve profit greatly from collecting all this interest. 

Bill Bonner of The Daily Reckoning explained it this way:

When you buy a U.S. Treasury bond, you pay for it with real money – or, at least as real as dollars get. Money changes hands. No net increase in the money supply. But when the Fed buys a Treasury bond it creates the money to buy it…and thus the money supply increases. It’s called “monetizing the debt” – or converting debt into currency. 

But back to Richard Russell:

The damnable result is that the Fed effectively controls the U.S. money supply. The Fed is …not even a branch of the U.S. government. The Fed is not mentioned in the Constitution of the United States. No Constitutional amendment was ever created or voted on to accept the Fed. The Constitutionality of the Federal Reserve has never come before the Supreme Court. The Fed is a private bank that keeps the U.S. forever in debt – - or I should say in increasing debt along with ever rising interest payments.

How did the Fed get away with this outrage? A tiny secretive group of bankers sneaked through a bill in 1913 at a time when many in Congress were absent. Those who were there and voted for the bill didn’t realize (as so often happens) what they were voting for (shades of the shameful 2002 vote to hand over to President Bush the power to decide on war with Iraq).”

For an excellent description of exactly how this secretive banking cartel conspired on a private island to push the Federal Reserve Act through Congress, read The Creature From Jekyll Island – A Second Look at the Federal Reserve, a book highly recommended by Liberty Maven and notables such as Ron Paul and Chris Martenson.

Richard Russel continues:

After President Wilson signed the Federal Reserve Act into law in 1913, he reportedly said, “I am a most unhappy man, I have unwittingly ruined my country…a great industrial nation is now controlled by its system of credit…the growth of the nation, therefore, and all of our activities are in the hands of a few men…” Thus we have an early statement about the threat to “democracy” occasioned by The Fed.

“Since its inception in 1913, the Federal Reserve Board has been responsible for almost 95% devaluation of the U.S. Dollar. All this has been achieved through its ability to continually inflate the money supply.

And yet, despite the obvious destruction the Fed has caused, politicians rarely even mention it.  It is almost as if politicians purposely avoid discussing it.  As Tom Woods mention in his must-read book, Meltdown:

Almost nobody in Washington, and precious few elsewhere, has been willing to question the greatest single government intervention in the economy, and the institution whose fingerprints are all over our current mess: America’s central bank, the Federal Reserve System.  The Fed is hardly ever mentioned in connection with the crisis, except perhaps as our savior.  Major newspapers, magazines, and websites purport to dissect and identify its causes without mentioning the Fed at all.  That’s nothing new: there has been no serious discussion of the Federal Reserve in public life for the nearly one hundred years since its creation.  The Fed is a wonderful thing, and that’s that.

He then goes on to cite examples such as when President Bush addressed the nation back on September 24th when most American opposed the proposed bailout schemes.  Bush referenced Fannie Mae and Freddie Mac and other “root casues,” but there was absolutely no mention of the Fed.  As Woods put it, “the President stuck to the script: not a single word about the central bank.”

Richard Russel goes on:

And, between 1985 and 2005, the Federal Reserve Board has increased the money supply by five times. This extraordinary money creation is merely the catalyst for debt creation. In a fiat money system, money is debt…there is absolutely no way this money can ever be repaid except by continued inflation. But, now that the credit bubble is blown up, inflation is no longer an option; bankruptcy looms.”

But that’s only the extreme tip of the iceberg.  In the past year, the Fed has been “printing money”  at an unprecedented clip.  Take a look at this chart, which extends to the beginning of 2009:

As you can see, the money supply has been increasing exponentially in the past year.  And this chart does not include the Fed’s recent decision to pump an extra $1 trillion into the mortgage market and longer-term Treasury securities, so the problem is only getting worse.

Bill Bonner wrote recently that “given the size of upcoming Treasury purchases, the total size of the U.S. monetary base is expected to increase 500% in the months ahead.”

Ben Bernanke, the chairman of the Federal Reserve is of the mindset that if he can just print enough money our economic problems will be solved, and once the economy rebounds he’ll reel the money back in.  The problem is that no central bank that has ever attempted this has ever succeeded, and every fiat currency that has ever existed has ultimately failed.

Lastly, on a more personal note, I find Ben Bernanke to be an extremely arrogant megalomaniac who appears to see himself above the “common man”.  Just take a look at how he reacted when a Congressman asked a straightforward question, but Bernanke was unwilling to give a straightforward answer:

Representative Donald Manzullo, a Republican from Illinois, said taxpayers have suffered losses of 40 percent to 50 percent on their investment portfolios, while people with insured retirement plans at AIG lost nothing.

“They are paying $40 billion so other people don’t lose anything on their retirement plan,” Manzullo said. “That is what you are saying. That is what happened isn’t it?”

Bernanke said the aid to the insurer was provided to avoid a “catastrophic” collapse of the financial system that could have produced even higher losses on Americans’ portfolios.

“Give me a yes or no, please,” Manzullo demanded. “Not one of you three can give me a yes on that answer or no?”

“It is a poorly posed question,” Bernanke said.

Here’s a video clip of it:

Wow.

If you were previously unclear on the role of the Federal Reserve in our nation’s economy, hopefully this article has served to shed a little light on it.  I beseech you to contact your representatives by telephone.  Simply tell the operator who answers that you strongly support HR1207 (“Federal Reserve Transparency Act”) and HR833 (“Federal Reserve Board Abolition Act”).  It will take you less than two minutes.  After that, try using DownsizeDC.org’s email system.

If there were some concepts in this article that you are uncomfortable with or unclear about, I urge you to take Chris Martenson’s Crash Course, easily the best resource on the net to bring you up to speed quickly.

Here are some of our previous articles on the subject:

• Ron Paul’s Federal Reserve Transparency Act of 2009
• Ron Paul’s Federal Reserve Transparency Act of 2009 Gains 21 Co-Sponsors!
  
• Support Ron Paul’s Federal Reserve Board Abolition Act
  
• Ron Paul’s HR1207 “Federal Reserve Transparency Act” up to 42 Coconspirators
  
• Ron Paul’s HR1207 now has 39 Coconspirators
• The Federal Reserve – A Good Company to Work For?
• Ron Paul on Mancow and the return of pig lipstick
  
• Ron Paul turns earmark defense into Fed transparency advocacy on the House floor