- The Federal Reserve is shrouded in mystery and considered a legitimate financial entity.
- What is little discussed is how the Fed is unconstitutional.
Most US populations little understand the Federal Reserve, but it is very well known among the elites. However, what is virtually never discussed in the establishment media is how the Federal Reserve is unconstitutional and how it was brought into existence by elites that designed it to work against the interest of the population and in favor of a tiny elite’s interests.
We will cover this little known topic.
How the Federal Reserve Act Created Fractional Reserve Banking
The Federal Reserve created a central bank that was disconnected from the US Government and moved the US from a full reserve banking system to a fractional reserve banking system. This video describes the creation of the Federal Reserve and the move to fractional reserve banking.
Roosevelt pushed through the 1935 Emergency Banking Act, enhanced the powers of the Federal Reserve.
The Banking Act of 1935 gave the Board of Governors control over other tools of monetary policy. The act authorized the Board to set reserve requirements and interest rates for deposits at member banks.
The act also provided the Board with additional authority over discount rates in each Federal Reserve district. – The Federal Reserve History
This was justified on the problems with the Great Depression, which was mainly due to the Federal Reserve’s irresponsible management of the economy that led to the “Roaring 1920s.”
The Federal Reserve Act of 1935 created the FDIC or Federal Depository Insurance Corporation. This was another subsidy to banks that is paid for by taxpayers. Now, when a bank or investment banks fail, the FDIC no longer takes over the banks’ management but instead bails them out. In the 2008 subprime mortgage crisis, the investment banks got themselves reclassified as traditional banks to access FDIC insurance.
This insurance was never intended for use by investment banks. It was designed to insure depositors — or individuals. Investment banks that created phantom insurance products and pumped the sub-prime crisis were rewarded by receiving FDIC insurance. This creates a massive liability, as investment banks now expect to dump their losses onto the US Government into perpetuity.
Why Did the US Government Take Over Banking?
One question that was not asked is if the US Government entirely delegated the power to create money to the Fed and then re-delegated it to individual banks. And if the US Government (read taxpayers) was also insuring the deposits with the FDIC. Then why didn’t the US Government take over all banking itself? The answer is that the elites want the central bank to be private, and they want individual banks to be private, even though all of their money creating or fractional reserve banking comes from the US Government.
What Thomas Jefferson Thought of Central Banks
Thomas Jefferson warned against the creation of a central bank, as it would undermine democracy.
The American financial system was deeply fragmented after the American Revolutionary War. The government was burdened with large wartime debts, and the new republic needed a strong financial institution to give the country a resilient financial footing. Alexander Hamilton and Thomas Jefferson had opposing views regarding whether or not the US could benefit from a European-style national financial institution. Hamilton was in favor of building a strong centralized political and economic institution to solve the country’s financial problem. He argued that a central bank could bring order to the US monetary system, manage the government’s revenues and payments, and provide credit to both the public and private sectors. On the other hand, Jefferson was deeply suspicious of a central bank because, he argued, it would undermine democracy. Jefferson and Southern members of congress also believed that a strong central financial institution would serve commercial interests of the north at the expense of Southern-based agriculture interests whose credit was provided by local banks during the post-revolutionary war era. – Wikipedia
This is well explained in this scene from the HBO series John Adams.
Notice that Hamilton’s plan describes the creation of national debt to create credit. In this case, the debate is over the Treasury, but this was a first step. Roughly 150 years later, the Federal Reserve would be created.
There are more details in this video.
The Federal Reserve has been but is now to an extreme handing out money to politically connected individuals. One of the important strategies for over a decade has been “quantitative easing.” This is where non-performing loans are moved off of the books of the banks and onto the public’s books. All of this happens without any legislation being passed and is close to invisible.
The Fed’s Coordination with Elite Interests
In August 2020, this created one of the most enormous stock bubbles of all time. In response to the lower demand from Coronavirus lockdowns, the Federal Reserve has pushed trillions to the largest institutions in the country.
The Federal Reserve has routinely enormously exceeded its mandate. In this exchange, the Fed Chairman at the time, Bernake, said he did not have a record of which banks the Fed loaned money to in Europe. This is $500 M in loans. Bernake then gets the date of the Federal Reserve Act wrong (1913, not 1917 — which is odd if you are the acting chairman not to know this), and then makes the false claim that the Fed was empowered to do this by the Federal Reserve Act.
Note From The Fed to Congress: We Don’t Report to You
But what is Congress going to do about it? Remember, the Fed does not report to the US Government. Bernake only appears in front of Congress as a courtesy. The US Government cannot ask for the Fed’s records or compel them to tell them the truth. When Fed chairmen have appeared in front of Congress, the main behavioral pattern has been to make as obscure as possible what the Fed does.
The Multiple Attempts to Create a US Central Bank
The following quotation explains how there were multiple short-lasting central banks in the US before the Federal Reserve was created in 1913.
The First Bank of the United States was established in 1791 chartered for a period of twenty years. The US government was the largest shareholder of the bank. Despite its shareholder status, the government was not permitted to participate in management of the bank. The bank accepted deposits, issued bank notes, and provided short-term loans to the government. It also functioned as a clearinghouse for government debt. The bank could also regulate state-chartered banks to prevent overproduction of banknotes. The bank was very successful in financing the government and stimulating the economy. In spite of its successes, hostility against the bank did not fade. Jeffersonians questioned the bank’s constitutionality. In 1811, the first bank of the United States failed to be renewed by one vote in both the House and the Senate. – Wikipedia
And then again in 1812.
After the War of 1812, economic instability necessitated the creation of a second national bank. Due to expanding money supply and lack of supervision, individual bank activity sparked high inflation. In 1816, a second national bank was created with a charter of twenty years. Three years later, during the panic of 1819 the second bank of the United States was blamed for overextending credit in a land boom, and would tighten up credit policies following the panic. Under the premise that the bank favored a small economic and political elite at the expense of the public majority, the Second Bank became private after its charter expired in 1836, and would undergo liquidation in 1841. – Wikipedia
The Predicted Outcomes of the US Federal Reserve
When the US Federal Reserve was created in 1913, there were already concerns about what it could and what it eventually did become.
Since the Aldrich Plan gave too little power to the government, there was strong opposition to it from rural and western states because of fears that it would become a tool of bankers, specifically the Money Trust of NYC. – Wikipedia
Amazingly, the critics of the Federal Reserve Act predicted everything that the Federal Reserve would eventually become.
Preceding the creation of the Federal Reserve, no U.S. central banking systems lasted for more than 25 years. Some of the questions raised include: whether Congress has the Constitutional power to delegate its power to coin money or issue paper money (an obvious reference to Article 1, Sec. 8, Clause 5, which states: “The Congress shall have power To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”), whether the structure of the federal reserve is transparent enough, whether the Federal Reserve is a public Cartel of private banks (also called a private banking cartel) established to protect powerful financial interests. – Wikipedia
This further illustrates that the Federal Reserve is unconstitutional. The US Government has the right “to coin money,” not some delegated entity that is not even part of the US Government.
How the Federal Reserve Props Up Elite Interests
This is another insightful comment that was included in the New York Times article.
For all the talk about “Free Markets”, the last 40 years have been a case of controlled markets – not control by the government directly (aka Communism/Socialism, etc) but by the Federal Reserve. The Fed pumps money into the system to make up for failures of the powerful participants in the markets – the banks, hedge funds, private equity investors, etc… and actively does not intervene to help the ordinary citizen or worker. They do this by their various purchasing programs and bailouts. What’s more, they encourage the Congress and the Executive not to intervene to help the ordinary citizen or worker either, rather to penalize them.
And this one..
While Main Street burns, the Federal Reserve props up Wall Street and Americans of wealth, thereby exacerbating the conditions of inequality which in part are at the root of the riots. If Donald Trump is reelected, he can thank Fed Chair Jerome Powell.
And this one..
The stocks market will never go down because it has unlimited insurance from the US govt and its institutions. When the choice comes to saving wall street or saving main street, the US govt and its institutions will always prefer wall street and direct maximum amount of money there while giving crumbs to main street. This is the story of the 2008 recession bailout and also of the current stimulus. Beyond bailouts, the greatest insurance provided by the US govt is unlimited free capital by keeping interest rates close to zero. Then there is direct intervention in the bond market to “stabilize” it. The US Fed has made it plenty clear that they will cross every self imposed red line to save the markets. The game is rigged for wall street and the investors know that, hence stocks will defy the overall pain in main street. People need to realize that the federal govt is for the giant corporation, by the giant corporation and of the giant corporation.
This quote describes the actual relationship between the financial system and the US Government.
The financial markets are a highly modulated, planned, and protected system of relations between our quasi-public institutions and wealthy companies and individuals. The life support now being undertaken via repo injections is more of the same. The major difference is that it’s coming at a time when all signs point toward the inevitability of recession.
Bizarrely, there is a possible silver lining in this gathering crisis. It is this: the old monetarist tricks are structurally played out. The Fed Funds rate is effectively at zero and the central bank has already taken over and semi-nationalized whole sections of finance. In the face of a new slump the cheap money strategy won’t work. The only polices that will revive growth will be the sorts that socialists are already demanding on purely ethical grounds: debt cancellation, free higher education, single payer health care, government jobs programs, and a Green New Deal to drive an energy transition. – Jacobin
This quote from Ray Dalio describes how the Fed gives away money to elite interests that is never paid back.
But what if the debts never had to be paid back? Then there would be no debt squeeze and no painful paying back period. But that would be terrible for those that lent to them because they’d lose their money, right? Let’s think about that for a moment to see if we can find a way around that problem. Since government (i.e., the central government and the central bank combined) has the abilities to both make and borrow money, why couldn’t the central bank lend money at an interest rate of about 0% to the central government (to distribute as it likes) and also lend to others at low rates and allow those debtors to never pay it back. Normally debtors have to pay the original amount borrowed (principal) plus interest in installments over a period of time. But what if the interest rate was 0% and the central bank that lent the money kept rolling over the debt so that the debtor never had to pay it back? That would be the equivalent of giving the debtors the money but it wouldn’t look
The Federal Reserve Act of 1913 was passed in violation of the US Constitution, which is supposedly the supreme document of the land. Since its inception, not only is its ownership secret (with it being suspected that it is in part owned by other foreign banks), but it has functioned to protect elite monied interests while owing its money creation power and issuing and regulating the currency of the United States.
The fact that the Federal Reserve’s behavior was predicted by critics of the Federal Reserve Act and the history of US central banks that preceded the current US central bank has been conveniently hidden from the US population.