Sen. Bernie Sanders of Vermont lays down some tough, meaningful questions to Federal Reserve chairman Ben Bernanke -- something rarely seen except from Rep. Ron Paul. Sanders and Paul aren't in the back pockets of big money interests as is Finance Chairman Barney Frank, who I believe accepted over $1M in campaign contributions from financial firms over the past few years, according to maplight.org.
Sanders asks Bernanke who were the recipients of $2.2 TRILLION worth of recent loans from the Fed -- above and beyond the hundreds of billions in TARP money. Bernanke tries to snow Sanders by saying the list is on the Fed's website. Sanders already knows that the website says that the info is none of the public's business.
Sanders also broaches the subject of whether the executives responsible for this mess should have been fired. Bernanke is visibly shaken, for perhaps the first time ever (publicly) during this ordeal.
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The Federal Reserve is quite the enigma. Few people really understand what it is, how it works, and most importantly how money is created in the US. I spent quite a bit of time trying to understand it, especially in light of this current financial crisis.
The Fed is actually a private, for-profit corporation. They're listed in the white pages, not the blue government pages and if they send you a letter, it has a stamp, not a government postage frank. They're owned by their member banks -- the big institutional and investment banks (the ones getting most of the TARP money) -- not the mom-n-pop banks on the corner that we do business with. (oh wait, there aren't any more investment banks any more are there?)
The Fed was created by government mandate in the early 1900's, but it was actually the result of a few big Wall Street bankers like JP Morgan who snuck away to Jekyll Island off the coast of Georgia (a privately owned resort) to conspire to form the Federal Reserve. The legislation was passed on/around Christmas eve when the Congress was virtually empty. That word "Federal" in their name kinda makes it sounds like they're a branch of the government.
The most interesting part is that they virtually create money out of thin air. When the boys in Congress want to spend more money than they took in taxes, they call up the Fed and issue them a few Billion dollars of treasury bonds. The Fed makes a journal entry in their books and makes an electronic deposit into the government's bank account. The really cool part is that we the taxpayers get to pay interest to the Fed for the money they created out of thin air and loaned to our out-of-control politicians. All of the shareholders of the Fed get to share in the billions and billions and billions of dollars of glorious profits. Seems that the more in debt is the nation, the more profit the central bankers make.
The story continues to get exciting. As the newly minted money makes its way into circulation, you and I deposit it into our local bank accounts. Now that the bank has our money, the banking laws allow them to turn around and loan out approximately 7 times the amount we deposited. It's called the fractional reserve system. The rest they create out of thin air, just like the Fed. Again, the cool part is that we get to pay them interest on the money they invented.
The final cool thing about this is that in order for you and I to pay interest to the banks on the money they created out of thin air, they have to steadily inflate the money supply every year to create that new money. The Fed typically shoots for an inflation rate of 4% a year. Since the Fed was conceived a hundred years ago or so, today's dollar is only worth about 5-cents. This is because of their debt-based system which requires inflation to continue.
This might sound complicated and it might not. In any regards, its only the 50-cent overview and I probably got a few facts wrong. I had a hard time getting my mind around it because it just doesn't seem logical that someone can create money out of nothing. But, once you start to understand how it works, lights will go off and you'll begin to really understand what this current financial crisis is all about.
In my earliest conversations with people about the Fed, they would say yes, but what alternative is there? Well, the answer is to let the Treasury create the money based on the annual GDP. Unlike the Fed, the Treasury won't have to charge itself interest and the money would still backed by the good faith and credit of the US Government, just like the Federal Reserve Notes are. (P.S. "the good faith and credit of the US Government" is really code-speak. What it actually means is the ability of the Government to levy and collect taxes from the citizens)
The founding fathers warned about ever allowing the central banker to gain control over the government. It was after all, one of the very things they fought to escape from with England. Many Presidents subsequent to the founding fought with the bankers. Lincoln, appalled at having to pay the bankers interest on borrowed money to finance the Civil War, created the US Greenback. Not long before he was killed, JFK signed an executive order to allow the treasury to print money and several billion dollars were actually printed I believe. Of course, both presidents were eventually assassinated. As you study history, you can decide for yourself if their murders had anything to do with the control of the creation of money vs. the stories we've been told.
If you want to learn more, the recommended book is "The Creature from Jekyll Island: A Second Look at the Federal Reserve."
[amazon]0912986395[/amazon]
Amazon is usually sold out, so you can buy it directly from the author at:
Creature from Jekyll Island (softbound book)
Don't have the time or inclination to read the book, then try listening to this great interview with the author:
Financial Sense Newshour Expert ~ Guest Name 02.28.2009
There are links for various audio formats near the top of the page.
CAUTION: Exploring further is like taking the RED PILL
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