The Creation of the Federal Reserve System

cartel (kɑːˈtɛl) — n
1.Also called: trust a collusive international association of independent enterprises formed to monopolize production and distribution of a product or service, control prices, etc

1. Competitors joining together to limit competition among themselves and from others. Banks deemed "too big to fail" are bailed out by the Fed (taxpayers), small banks are allowed to fail - competition is limited.
2. Fed has a monopoly over the money supply - competing currencies not enforced by government due to legal tender laws.
3. As with all cartels/trusts/monopolies, the public is forced to pay higher prices. In the case of the Federal Reserve, the member banks' losses are passed onto the taxpayers when they get into trouble, in the form of higher prices and direct bailouts from Congress.
4. Cartel Agreement passed into law. Government is able to gain purchasing power through money creation.

Please explain how the Federal Reserve, which is a coalition of competing banks that have a monopoly over the money supply, can instantly give the government purchasing power that didn't exist before, and pass the costs onto taxpayers in the form of higher prices, is not a cartel between banks and government.

No thanks, it's irrelevent to this discussion.

 

It creates reserves... none of what the Fed creates ever sees the day of light in the real economy.

Obviously it hasn't

You sure they didn't experience any business cycles or you just making this up?

More false subjective claims.

Inflation isn't a question of morality, it's a question of economic growth. Is it moral to let the country suffer because you don't want inflation? Get out of here with that ridiculous logic

Maybe you are, I'm doing perfectly fine

False, the national debt is never mathematically impossible to pay off.

False, the primary dealers, other banks, and foreign central banks purchase 99% of treasury bonds auctioned off by the Govt. The private sector needs money first before they can purchase treasury bonds on the secondary market. Econ 202.

False

False, your infatuation with inflation and gold is scary!

By producing more and more.

 

Already explained. The Fed bails out big banks and lets the small banks fail.

It's not the norm becuase most banks are allowed to fail, but some are deemed too big to fail. That's the cartel protecting its most critical members. It's the norm to bail out LARGE banks.

Not necessarily. Gold bubbles are a result of speculation of the quantity of gold in circulation and speculation on the value of the dollar. Prices of other goods and services reflect the actual value of the dollar.

That doesn't make any sense. The only thing which would affect the real value of gold is the amount of it in circulation relative to the amount of goods and services. The supply of gold in circulation has not dropped that significantly over the past 7 years. However, the amount of dollars in circulation has significantly increased since then. The gold bubble right now is the result of a combination of price inflation and speculation that the dollar is going to be severely weakining once the velocity of money picks up, if the Fed doesn't pull back on the money supply.

What's the difference? Those countries are made up of individuals who cannot use gold as money.

That's exactly my point. If the price is going up, then more gold is going to come into circulation. Once, or if, the price starts going down, then people will stop bringing gold into circulation and start taking it back out of circulation. To say that you can't contract or expand the supply of gold based upon economic needs is incorrect.

I disagree. If demand is high enough then production will meet the demand adequately...assuming a free market.

Perhaps that's because gold which already existed has been put back into circulation to offset the demand for mining. We can't exactly quantize the amount of gold in circulation because it's not traceable like dollars are.

That doesn't make any sense. When you're using gold as money, there is no "price" of gold except for how many dollars it can buy you, which is a set amount locked by Congress.

 

That's what the Fed was designed to do, allow big banks to get away with reckless lending practices.

But they always will be as long as the Fed stands by ready to provide the money to do it.

Partially true. The Fed also has discretion to decide which banks fail and which get bailed out. Lehman Bros was on the chopping block. That was Kamikaze Ben's decision.

 

What "reserves" are you referring to? There are no gold reserves at the Federal Reserve. The name is just a gimmick. It's not federal, there are no reserves, and it's not a system of decentralized bodies. You have been fooled by Paul Warburg's deception.

What are you talking about? This statement is a lie. When the Fed buys govt securities on the open market, the money they create out of thin air gets injected into the economy as soon as the govt spends it.

This is the truth. It's being kicked while it's down by Obama, Congress, and Kamikaze Ben.

There is not a shred of evidence to show that they experienced any sort of business cycles.

How can something be false if it's a subjective opinion?

So you don't think there's anything immoral about forcibly devaluing people's savings, putting everyone in debt, and forcing them to pay higher prices because you think inflation helps the economy in the long run? We've been using your economic policies for decades now, and look where we are because of it. It's a failure. You need to abandon your Keynesian religion because it's been proven false.

Even Paul Krugman agrees with me. I've got both Austrian and Keynesian economists backing me up, and you've got nothing but your hopelessly naive and unfacutal opinionated viewpoint.

Fail.

The US government is further in debt than the amount of dollars that actually exist.

None of this changes the fact that the government borrows money from the private sector. I can go and buy a treasury bond tomorrow, and the government would be borrowing money from me (the private sector). Your original statement is false. Econ 101

Your say-so isn't good enough.

Nice strawman. You're just dodging the question, so I'll play along and ask again. What has caused them to have less money than they feel like they need?

But if we're expanding the effective money supply at a faster rate than we are producing, how are we going to sustain that for "thousands of years" without destroying the currency?

 

You don't understand our banking system do you?

False, the Fed purchases Govt securities from Primary Dealers who are special dealers in the securities. And none of that money gets injected into the economy unless banks increase the amount they lend. You have a lot to learn!

Because there is so much detailed evidence of the monetary operations of the Byzantine Empire, lol. Get real.

Fine, unproven

Nope, not one bit

Show me where Paul Krugman agrees with you.

Of course, but who cares. A third of the national debt comes due every year. It's not like we have to pay it off one day.

No it wouldn't. You would be buying it from the secondary market. It was already purchased. And if you wanted to buy directly from the Govt... who cares. It would produce the same effect.

GDP growth

Who is saying we are expanding it faster than we are producing? I'd like to see the math behind this, since we are at 73% productive capacity, and 16% underemployment. There is not very many signs that are in your favor.

 

Well, that's one out of 352. There may be a couple others out there.

 

That's an international cartel, like OPEC.

That is not what the Fed does at all.

Proved by the fact that thousands of banks have failed, thousands have been born, merged, changed size, market position. Etc.

If that is the work of an anti-competitive cartel, it is one hell of a lousy cartel.

That makes it a monopoly, perhaps. Not a cartel.

Any proof that the cost of borrowing has increased over the past 100 years?

Hell you can get a loan now for the among the lowest rates in history.

While the Fed system does provide some tremendous benefits to the Govt (and thus to us), it doesn't give the Govt "purchasing power" at all.

1) Banks do not have power over the money supply. The Fed Board, selected by the President, does.

2) The Fed doesn't give the Govt purchasing power.

3) A business cartel is a combination of competitors that set prices. The Fed is not a competitor of the banks, but a regulator of them, and does not set prices at which banks pay interest on deposits or loans.

 

Lehman was a small bank?

So the Fed is only a "cartel" of large banks? What's the cutoff?

But then also reflect the relative value of gold.

The value of the dollar did not appreciate by more than double 1980-84, not did it fall by 3/4th in the last four years.

Speculation and concern about the economy affect the value.

So what? If it was a superior system you'd see countries doing it with superior results.

The gold standards has been tried and retried. It's not being used because its not a very good system.

No necessarily. Prices have increased 4-5x in the past few years. How much has production increased? How much has come into the system?

You act as if the market for gold were a completely rational, analytical market where market psychology has no effect like it does in every other market. That's nonsense.

You think?

So how did gold prices quadruple over the past few years?

Where's all this extra production flooding the market?

With prices at 4-5x greater than a few years ago, that offsets the demand for mining? Huh?

You can "price" gold in term of what it will buy just like you can price dollars or a barrell of oil or anything else.

IN 1980 an oz of gold would by you the finest tailored suit. In 1984 it would buy you an average suit. Today it will buy you a very fine suit again. It has nothing to do with dollars. It was true for most the other good and products as well.

To believe that gold is stable in value, you'd have to believe that everything else dramatically increased in value in the early 80s and dramatically dropped in value in the late 2000s.

 

Nonsense.

When our government deregulates the industry, that is the Hobson's choice we have when these things happen. Shore up the industry or Great Depression 2.

Lehman was a small bank?

 

The Aldrich Plan was designed by American, English and German banking dynasties. What's your point?

The only small bank that has ever been bailed out by the government or Fed was Unity Bank of Boston. You cannot name a single exception to this rule. Have any of those smaller banks come close to knocking the giant banks out? The answer is no, becuase the Fed was crafted so that the big banks would not attempt to knock each other out but work together to ensure that small banks do not get saved while the big ones are able to get bailed out.

cartel (kɑːˈtɛl) — n
1.Also called: trust. a collusive international association of independent enterprises formed to monopolize production and distribution of a product or service, control prices, etc.

Please explain how the money trust, a collusive international association of independent competitor banking enterprises, formed to monopolize the production and distribution of money and controlling prices in the economy, is not a cartel.

The dollar is only worth 4% of what it was in 1913. The cost of borrowing is substantially higher.

And will inevitably lead to another bubble that will destroy the economy again.

You are correct about that statement, but that was the product of a grammatical error I made. Sorry, I meant to say a "coalition of competing banks that HAS a monopoly over the money supply", not "have".

Where does the government get its purchasing power if not through taxes and borrowing money that already existed?

It was established in the OP that the Aldrich plan was drafted by competitors. The Fed does indeed attempt to set prices...one of its stated objectives is price stability. Since it's a banking cartel with total control of the money supply, it effectively has price controls on everything in the economy. It does this via its monopoly over the money supply and interest rates. The Fed is a regulator in the sense that it forces its members to abide by certain anti-competition measures, like required reserve ratios...but that would be expected from a cartel that was designed to limit competition between its members.

 

No, but it was an exception to the rule.

The cutoff is dependent on how influential the bank is in the cartel.

Our pricing structure is based on Federal Reserve Notes, so yes that is true. That's why you cannot look at the price of gold as a commodity and claim that it's value is unstable. It's value is only unstable in terms of Federal Reserve Notes. The Federal Reserve Note itself is unstable, its true instantaneous value unknowable, and is subject to wild speculation.

Speculations are not necessarily grounded in reality. Just because people speculate that the value of the dollar is going to drop, thus driving the price of gold up, does not mean that the value of the dollar is actually dropping, nor does it mean that the supply of gold is decreasing relative to the supply of goods and services.

Only in terms of federal reserve notes, with a pricing structure based on federal reserve notes. This would not be true if the pricing structure was based on gold.

Not true. Legal tender laws prevent individuals from using gold as money.

We've never had a true gold standard in this country. Anywhere a true gold standard has been tried, it has had very successful results.

You're forgetting that we don't have the demand for gold right now because our money is fiat. If our money were backed by gold, the demand for gold would be much higher during times of deflation. Under our current system, only investors want gold, but under a gold standard, EVERYBODY would want gold.

The market for gold only exists as you know it right now becuase gold is a commodity. It would behave very differently if it were used as money and not just as a commodity.

But the guy who I sold the gold to in 1984 could buy a finely made suit today. It has nothing to do with the real value of the gold, the speculation on its value simply transferred wealth from me to him. The real value is conserved. He also could have bought a fine toga in Roman times. The point is that all gold bubbles eventually pop, and the gold is returned to a value that is much more realistic. That realistic price has maintained the same purchasing power for thousands of years.

In terms of Federal Reserve Notes and a pricing structure based on those Federal Reserve Notes, no gold would not be stable. That's becuase the Federal Reserve Note is not stable in value. It's subject to continuous inflation, especially in the early 80s, high inflation. You can't have any sort of stable pricing structure when the value of the currency is continuously changing, and the rate at which it's changing is changing. Because of this, the value of the dollar is subject to wild speculation that causes the price of gold to artificially rise and drop when there could be virtually no change in the amount of gold in circulation relative to goods and services.

 

It's had a good deal of success in that department.

The banks wouldn't fail if not for all the regulations in place which let them know they will be taken care of by the Fed/FDIC if they get into trouble.

An exception to the rule of course. Why don't you ask Kamikaze Ben why he let Lehman fail? Did the cartel decide it was time for them to go the way of the Dodo bird? And I'm not talking about the reason he stated to the media for letting them fail, I'm talking about the real reason.

 

This, from an article from 1996.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~

President Kennedy, the Federal Reserve
and Executive Order 11110

by Cedric X.

From The Final Call, Vol15, No.6, on January 17, 1996 (USA)

On June 4, 1963, a little known attempt was made to strip the Federal Reserve Bank of its power to loan money to the government at interest. On that day President John F. Kennedy signed Executive Order No. 11110 that returned to the U.S. government the power to issue currency, without going through the Federal Reserve. Mr. Kennedy's order gave the Treasury the power "to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury." This meant that for every ounce of silver in the U.S. Treasury's vault, the government could introduce new money into circulation. In all, Kennedy brought nearly $4.3 billion in U.S. notes into circulation. The ramifications of this bill are enormous.

With the stroke of a pen, Mr. Kennedy was on his way to putting the Federal Reserve Bank of New York out of business. If enough of these silver certificates were to come into circulation they would have eliminated the demand for Federal Reserve notes. This is because the silver certificates are backed by silver and the Federal Reserve notes are not backed by anything. Executive Order 11110 could have prevented the national debt from reaching its current level, because it would have given the government the ability to repay its debt without going to the Federal Reserve and being charged interest in order to create the new money. Executive Order 11110 gave the U.S. the ability to create its own money backed by silver.

After Mr. Kennedy was assassinated just five months later, no more silver certificates were issued. The Final Call has learned that the Executive Order was never repealed by any U.S. President through an Executive Order and is still valid. Why then has no president utilized it? Virtually all of the nearly $6 trillion in debt has been created since 1963, and if a U.S. president had utilized Executive Order 11110 the debt would be nowhere near the current level. Perhaps the assassination of JFK was a warning to future presidents who would think to eliminate the U.S. debt by eliminating the Federal Reserve's control over the creation of money. Mr. Kennedy challenged the government of money by challenging the two most successful vehicles that have ever been used to drive up debt - war and the creation of money by a privately-owned central bank. His efforts to have all troops out of Vietnam by 1965 and Executive Order 11110 would have severely cut into the profits and control of the New York banking establishment. As America's debt reaches unbearable levels and a conflict emerges in Bosnia that will further increase America's debt, one is force to ask, will President Clinton have the courage to consider utilizing Executive Order 11110 and, if so, is he willing to pay the ultimate price for doing so?

http://www.sweetliberty.org/issues/eo/eo2.htm

 

The free market can only allocate things like food, water, clothing, housing, computers, automobiles, communication devices, commodities, and a million other things. It cannot allocate money, though. Supply and demand doesn't work with money. Only with everything else.

 

I think the most important point is that the Federal Reserve is a form of central planning. That's why they call it "central banking". Central planning has never worked, and it never will work. But, for some reason, people think that banking is the exception to this economic rule, and that money can only be efficiently managed by central planners. I'm not sure how they arrived at this conclusion, but it's obviously wrong, as any student of economics and history knows.

 

They still believe that having the ability to print money will help the economy during times of economic hardship. History has shown this to be false, and yet our government thinks this time will be different. We unnaturally adjust our economy and it will eventually snap back. They call those bubbles in the market and don't know how they happen.

 

Your definition of "cartel" doesn't fit the Fed.

Not since Govt deregulated the banking industry, allowing banks to expand their markets and services, paving the way for the mega-banks.

Right. That's not the Fed. It is not a collusive interanation association of enterprises formed to monopolize production and distribution of a product or service, control prices,

What money trust? The Fed? The Fed is not a money trust. 1) it is not collusive, 2) it is not a international association of independent competitor banking enterprises, 3) it was not formed to monopolize the production and distribution of money and controlling prices in the economy and 4) is not a cartel.

You weren't around in the late 70s early 80s, were you?

If we maintain a tax code that greatly favors speculative investment income over earned income and production combined with lax or absent regulation, we assuredly will.

The banks do not have monopoly power over the money supply. The Fed does. The banks do not have power over the Fed. The Fed has power over the banks.

When you say "purchasing power" do you mean funds to expend? Those are the two primary sources.

Where does the Fed set interest rates for banks in terms of the interest they pay for deposits or charge for loans?

 

Where does history show that to be false?

 

Central planning has worked great in many case. We have far less pollution, a safer workplace, information about disclosure of products and services, safer food and drugs and products, better working conditions, the aged infirm and survivors off the streets, etc. etc., thanks to central planning.

 

The Fed has only limited control over the bank. You should be directing your ire over lack of regulation to where it belongs: The Govt.

Nonesense. There were no regulations which let them know that and banks and business fail all the time without such knowledge..

Ah. "Exception to the rule." So your statement that big banks never are "allowed" to fail was false.

 

I agree that big business have way too much political power and influence in our Govt.

Thanks Congress and Supremes.

All pricing in the economy is based on "Federal Reserve Notes". You point is irrelevant to the the Fed or banking.

The value of Gold has fluctuated widely relative to all other goods and services, irrespective of the dollar.

Of course speculation is not necessarily grounded in reality.

Which is an excellent reason why our currency should not be based upon and uncontrollable commodity that is subject to irrational market behavior.

Repetitive and wrong. As I've shown the value of gold has fluctuated wildly compared to other goods and services, not just the dollar.

Does not address my point.

Examples?

No demand for gold? So why did it quadruple in price over the past few years? Everything else just became less valuable, right?

Our money was backed by gold, and demand was much higher in recessions, which increased interest rates at the worst time, and caused people to horde gold even more, causing crippling deflation all of which added to the great problems in the Great Depression.l

Deflation is a bad thing. Just look at what is going on with mortgages right now.

Again, you assert this, without any explanation as to why.

So what? In the interim 20 years it went way down in value.

There is nothing stable about it. Gold has fluctuated wildly. That is not a good premise for a currency.

What is the "real value" in gold in your view, and how do you measure it?



In terms of Federal Reserve Notes and a pricing structure based on those Federal Reserve Notes, no gold would not be stable. That's becuase the Federal Reserve Note is not stable in value. It's subject to continuous inflation, especially in the early 80s, high inflation. You can't have any sort of stable pricing structure when the value of the currency is continuously changing, and the rate at which it's changing is changing. Because of this, the value of the dollar is subject to wild speculation that causes the price of gold to artificially rise and drop when there could be virtually no change in the amount of gold in circulation relative to goods and services.[/QUOTE]

 

And if they all were allowed to fail like Lehman was, then we wouldn't have to worry about mega-banks in the first place. There's too many regulations in place that allow these mega-banks to survive when they should perish. The Fed and govt act as regulators for the banks. A little bit of deregulation amongst a massive amount of regulation is still a massive amount of regulation. True deregulation would be a blessing because the Fed/govt would be prohibited from bailing out any banks, period.

Disproven by the OP's. The Fed was created in a collusion on Jekyll Island by the money trust, which comprised international competing banking enterprises (Rockefellers, Morgans, Rothschilds, Warburgs, Kuhn/Loeb).

Please explain how the Federal Reserve System does not have a monopoly over the production and distribution of money and does not attempt to control prices in the economy.

Yes it is.

Irrelevent to this discussion.

Or you can let the market set the interest rates so that people can get loans at realistic rates that accurately reflect what the market is calling for instead of letting every schmuck that walks in the door take out a loan. That's how we got into this mess in the first place. What makes you think more of the same thing is a good thing?

I never said that the banks have a monopoly over the money supply. I said "the coalition of banks has a monopoly over the money supply".

What happens when nobody on the open market is purchasing as many treasury bonds as the treasury is trying to sell?

It doesn't. The "too-big-to-fail" mentality allows the most influential members of the cartel to charge excessively low interest rates, because of the moral hazard. However, the small banks have to watch themselves more closely because they will not get bailed out. They are much more likely to fail than the bigger banks, which is how the Fed is able to limit competition among the largest banks.

 

Since when is the government bailing out a bank with taxpayer money "deregulation"?

Making loans with dollars that didn't initially exist should be illegal. They would be far less prone to failure if they were forced to use money that existed to make their profits. So I guess I do agree that we do need more regulation, but not the kind of regulation you think we should have.

I never said that big banks are never allowed to fail. Lehman Bros is proof of that.

 

Baseless supposition.

Regulations don't do that. Lack of regulations let them get so big.

We had those massive regulations for 50 years after the GD without a a credit market implosion.

So what. All legislation is created by collusion. That does not make the Fed a "money trust" or cartel.

There you go.

https://www.google.com/advisor/mortgages?bsp&s=2&kw=+mortgage&cat=2&schema=refinanceAmb&c=ma_tam

Not by any normal definition.

Not at all. The costs of borrowing were far higher then than now.

You mean like this?

https://www.google.com/advisor/mortgages?bsp&s=2&kw=+mortgage&cat=2&schema=refinanceAmb&c=ma_tam

And I said banks do not have monopoly power over the money supply, therefore a coalition of them cannot.

The Fed has monopoly power over the money supply.

Interest rate increases.

Is that another one of those statements that when I show you're wrong it's an "exception"?