What is a Central Bank? How did it evolve and what is their place in our economy?
To understand why there is a push to end the US Federal Reserve in the Occupy Wall Street movement we must understand the history behind the Central Banks.
Two days ago we presented The History of Central Banks - Part 1 (48 B.C. - 1791 A.D.) which covered the evolution up to the establishment of the first Central Bank in America in 1791.
In Part 2 we covered the period from 1791- 1865 in which two US Central Banks were created and then abolished.
At the end of Part 2 we covered how Abraham Lincoln had created debt free money called 'Greenbacks'. But the bankers struck back. With President Lincoln needing further congressional authority to issue more Greenbacks, Lincoln was forced into allowing the bankers to push their "National Banking Act" through Congress.
The most important part of this Act was that from now on the entire United States money supply would be created out of debt by the National Banks buying United States Government Bonds and issuing them for reserves for banknotes.
After he had been re-electied President of the United States on November 8th, 1864, Lincoln wrote a friend the following:
- "The money power preys upon the nations in times of peace and conspires against it in times of adversity. It is more despotic than monarchy, more insolent than autocracy, more selfish than bureaucracy."
Salomon P Chase, now President Lincoln's Former Secretary To The Treasury, stated:
- "My agency in promoting the passage of the National Banking Act was the greatest financial mistake in my life. It has built up a monopoly which affects every interest in the country."
- "Abraham Lincoln, the murdered emancipator of the slaves, was assassinated through the machinations of a group representative of the International Bankers, who feared the United States President's National Credit ambitions. There was only one group in the world at that time who had any reason to desire the death of Lincoln. They were the men opposed to his national currency program and who had fought him throughout the whole Civil War on his policy of Greenback currency."
- "They were the men interested in the establishment of the Gold Standard and the right of the bankers to manage the currency and credit of every nation in the world. With Lincoln out of the way they were able to proceed with that plan and did proceed with it in the United States. Within 8 years after Lincoln's assassination, silver was demonetized and the Gold Standard system set up in the United States."
- "The hard times which occurred after the Civil War could have been avoided if the Greenback legislation had continued as President Lincoln had intended. Instead there were a series of money panics, what we call recessions, which put pressure on Congress to enact legislation to place the banking system under centralized control. Eventually the Federal Reserve Act was passed on December 23rd 1913."
1876 - $600,000,000 / $14.60
- "I went to America in the winter of 1872 - 1873, authorized to secure, if I could, the passage of a bill demonetizing silver. It was in the interests of those I represented, the governors of the Bank Of England, to have it done. By 1873, gold coins were the only form of coin money."
Due to the manipulation of the money supply in America, one third of the workforce is unemployed and unrest is growing.
- "The disaster of the Dark Ages was caused by decreasing money and falling prices... Without money civilization could not have had a beginning and with a diminishing supply it must languish, and unless relieved, finally perish. At the Christian era the metallic money of the Roman Empire amounted to $1,800,000,000. By the end of the 15th century it had shrunk to less than $200,000,000... History records no other such disastrous transition as that from the Roman Empire to the Dark Ages..."
Despite this damning report from the commission, Congress took no action.
In 1877 rioting breaks out from Pittsburgh to Chicago. The bankers get together to decide what to do and they decided to hang on, as they knew that despite the violence, they were now firmly back in control.
At the meeting of the American Bankers Association they urged their membership to do everything in their power to put down any notion of a return to Greenbacks.
- "It is advisable to do all in your power to sustain such prominent daily and weekly newspapers, especially the Agricultural and Religious Press, as well as oppose the Greenback issue of paper money and that you will also withhold patronage from all applicants who are not willing to oppose the government issue of money... To repeal the Act creating bank notes, or to restore to circulation issue of money will be to provide the people with money and will therefore seriously affect our individual profits as bankers and lenders. See your Congressman at once and engage him to support our interests that we may control legislation."
In 1878 James Buel's letter clearly had some effect as, although pressure mounted in Congress for change, the press tried to turn the general public away from the truth.
- "The capital of the country is organized at last and we will see whether Congress will dare to fly in its face."
This early control of the media didn't work entirely as on February 28th Congress passed the "Sherman Law."
This law allowed the minting of a limited number of silver dollars ending the 5 year hiatus.
However this did not mean that anyone who brought silver to the United States Mint could have it struck into silver dollars, free of charge, as had been the practice in the period prior to Ernest Seyd's Coinage Act in 1873.
Gold backing of the American currency also remained.
But what the Sherman Law did ensure was that some money began to flow into the economy again. Coupled with the fact that the bankers now realized that they were still firmly in control, bankers started issuing loans again and the post Civil War depression was finally over.
This was a worry to the money changers because, as a Congressman, Garfield had been Chairman of the Appropriations Committee and was a member of Banking and Currency.
- "Whosoever controls the volume of money in any country is absolute master of all industry and commerce... And when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate."
Strangely enough within a few weeks of making that statement, President Garfield was assassinated on the 2nd of July.
- "On September 1st 1894 we will not renew our loans under any consideration. On September 1st we will demand our money. We will foreclose and become mortgages in possession. We can take two-thirds of the farms west of the Mississippi, and thousands of them east of the Mississippi as well, at our own price...Then the farmers will become tenants as in England."
- quote from the American Bankers Association, as printed in the Congressional Record of April 29, 1913.
The central issue in the Presidential campaign of 1896 is the issue of more silver money.
Senator William Jennings Bryan from Nebraska, a Democrat aged only 36, makes an emotional speech at the Democratic National Convention in Chicago entitled "Crown Of Thorns And Cross Of Gold."
Senator Bryan stated:
- "We will answer their demand for a gold standard by saying to them, you shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold."
The bankers supported the Republican candidate, William McKinley who in return favored the gold standard.
Furthermore those in the McKinley campaign got manufacturers and industrialists to inform their employees that if Bryan were elected all factories and plants would close and there would be no work.
This tactic succeeded, McKinley beat Bryan, albeit by a small margin.
- "On the one hand there is the party which holds the power because it holds the wealth, which has in its grasp all labor and all trade, which manipulates for its own benefit and its own purposes all the sources of supply, and which is powerfully represented in the councils of State itself. On the other side there is the needy and powerless multitude, sore and suffering. Rapacious usury, which, although more than once condemned by the Church, is nevertheless under a different form but with the same guilt, still practiced by avaricious and grasping men...so that a small number of very rich men have been able to lay upon the masses of the poor a yoke little better than slavery itself."
During the early 1900's, the money changers were anxious to advance their business of setting up another private Central Bank for America.
- “Unless we have a Central Bank with adequate control of credit resources, this country is going to undergo the most severe and far reaching money panic in its history.”
Interestingly J. P. Morgan's father, Julius Morgan, had been America's financial agent to the British, and after Julius' death, J. P. Morgan took on a British partner, Edward Grenville, who was a long time director of the Bank Of England.
So Morgan manufactured $200,000,000 of this completely reserveless private money and used it to purchased goods, services and sent some to his branch banks to lend out at interest.
As a result the general public regained confidence in money, but most importantly it meant the banking power was now further consolidated into the hands of a few large banks.
- "All this trouble could be averted if we appointed a committee of six or seven public spirited men like J. P. Morgan, to handle the affairs of our country."
Following the panic President Theodore Roosevelt had also signed into law a bill creating the "National Monetary Commission."
In this group were Paul Warburg, who was earning a $500,000 a year salary from Rothschild owned firm, Kuhn, Loeb & Company.
This salary was for him to lobby for a privately owned central bank in America.
Also present was Jacob Schiff, a Rothschild who had purchased Kuhn, Loeb and Company shortly after he arrived in America from England.
The Rothschilds, Warburgs and Schiffs, interconnected by marriage, were essentially the same family.
- "I was as secretive indeed, as furtive as any conspirator... Discovery we knew, simply must not happen, or else all our time and effort would be wasted. If it were to be exposed that our particular group had got together and written a banking bill, that bill would have no chance whatever of passage by Congress."
It was not just the setting up of a Central Bank that was on the agenda.
- "Competition is Sin!"
Senator Aldrich later admitted in a magazine article:
- "Before passage of this Act, the New York Bankers could only dominate the reserves of New York. Now we are able to dominate bank reserves of the entire country."
- "The Aldrich plan is the Wall Street Plan. It means another panic, if necessary, to intimidate the people. Aldrich, paid by the government to represent the people, proposes a plan for the trusts instead."
As this debate continued on, the bankers realized they didn't have enough support. So the Republican leadership never brought the Aldrich bill to a vote.
- "Baruch brought Wilson to the Democratic Party headquarters in New York in 1912, 'leading him like one wood a poodle on a string.' Wilson received an, 'indoctrination course,' from the leaders convened there...."
During the Democratic Presidential campaign, Wilson and the rulers of the Democratic Party pretended to oppose the Aldrich bill. As Republican representative, Louis T. McFadden, explained twenty years later, when he was was Chairman Of The House Banking And Currency Committee:
- "The Aldrich Bill was condemned in the platform...when Woodrow Wilson was nominated... the men who ruled the Democratic Party promised the people that if they were returned to power there would be no central bank established here while they held the reins of government. Thirteen months later that promise was broken, and the Wilson administration, under the tutelage of those sinister Wall Street figures who stood behind Colonel House established here in our free country the worm-eaten monarchical institution of the, 'King's Bank' to control us from the top downward and to shackle us from the cradle to the grave."
- "Brushing aside the external differences affecting the 'shells' we find the 'kernels' of the two systems very closely resembling and related to one another."
However this admission by Warburg was not made public.
- "Although the Aldrich Federal Reserve Plan was defeated when it bore the name Aldrich nevertheless its essential points were all contained in the plan that finally was adopted."
- "The... bill grants just what Wall Street and the big banks for twenty-five years have been striving for - private instead of public control of currency. It (the Glass-Owen bill) does this as completely as the Aldrich bill. Both measures rob the government and the people of all effective control over the public's money, and vest in the banks exclusively the dangerous power to make money among the people scarce or plenty."
The debate on this bill was not going well for the banks with many Senators intimating the bill was corrupt and deceitful.
Representative Charles A Lindbergh Sr. stated:
- "This Act establishes the most gigantic trust on earth. When the President signs this bill, the invisible government of the monetary power will be legalized. The people may not know it immediately, but the day of reckoning is only a few years removed... The worst legislative crime of the ages is perpetrated by this banking and currency bill."
Interestingly, only a few weeks earlier, in October, Congress finally passed a bill legalizing direct income tax of the people.
- The Federal Open Market Committee approves the purchase of United States Bonds (Bonds are simply promises to pay or Government IOU's. People purchase bonds in order to get a secure rate of interest. At the end of the term of the bond, the government repays the bond, plus interest and the bond is destroyed.)
- The bonds are purchased by the Federal Reserve.
- The Federal Reserve pays for these bonds with electronic credits to the seller's bank, these credits are based on nothing.
- The banks use these deposits as reserves. They can loan out over ten times the amount of their reserves to new borrowers, all at interest.
The Federal Reserve is basically a government within a government. Congress doesn't control it and it's funded by the banks.
Tomorrow Part 4: The Era of the Federal Reserve (1913 - 2011)
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