I am often impressed to see the power that some Americans have to influence the lives of the rest of us. Look at the recent strike at the GM plant in Dayton. Here was a single facility making only one of hundreds of different parts for GM cars. The union workers at that facility went on strike, and the whole nation’s industry began to slow down for lack of those parts. Now that’s leverage.
There is one little understood institution in America whose power over our economy dwarfs that of the autoworkers in Dayton: The Federal Reserve System. Whenever the czars at the Fed have a meeting, Presidents, industrial giants, investors, home buyers, everyone with an interest in our economy awaits their verdict with bated breath. If they decide to raise interest rates, politicians and industries could fall, homes will not be purchased, jobs will be lost. If they decide to lower the rates, officeholders, industries and consumers may prosper, but the inflation rate may increase. That’s a lot of power and responsibility for a handful of people whose names would not be recognized by one in 10,000 Americans. Too much by far.
The Federal Reserve System was conceived in 1910 by a group of notorious robber barons at a then-secret meeting at J. P. Morgan’s estate on Jekyl Island, Georgia. After three years of political machinations, Congress passed the Federal Reserve Act in 1913. The bill was promoted publicly as a plan to reform the nation’s monetary system and stabilize the currency by taking control of it out of the hands of big bankers. In reality, of course, the Act was written by the bankers for the purpose of solidifying their control over our currency.
The people of the United States granted to Congress the power “to coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures” in Article I, Section 8 of the Constitution. Wisely, we never gave them the constitutional power to delegate this money-creating and regulating responsibility to any private group. Yet this is exactly what the Federal Reserve Act did. It created a cartel of private banks, managed by a Board appointed for long terms of office by the president. This group of banks became the sole issuer of U.S. money, with full control over its quantity and thus its value.
How has the Federal Reserve performed in its stated purpose of stabilizing our currency? Soon after its formation, the management of the Fed created the conditions that led to the depression of the 1930s. It has presided over the loss of the gold backing of our money, and the consequent loss of about 90% of the value of the dollar. Booms and busts have been worse after the advent of the Fed than before.
If the system hasn’t accomplished its stated goals, what then has it been able to do? It has been the tool used by the major bankers to gain control over the smaller banks. It has been able to bail out many international banks when their reckless overseas lending policies brought them to the brink of bankruptcy. It has been the financing agency for Congress’ unprecedented deficit spending on the welfare state and war. Many people believe that it has intentionally manipulated the economy in order to influence the results of our presidential elections.
Our government doesn’t need the help of any private banking cartel to manage money. We need to repeal the Federal Reserve Act and return control of our currency to Congress. Then we need a serious national discussion about how real currency reform can be achieved, giving consideration to restoring the gold backing to our money. As long as the Federal Reserve has control over our nation’s money, Congress’ control of the purse-strings will not have the benefits the Founders intended.