The Federal Reserve

I read "The Creature from Jekyll Island" by G. Edward Griffin, and it has me thinking not only about the precarious means by which the Federal Reserve was put together, but also about the relation between the Federal Reserve and the current recession.



The first fact that everyone has to realize (but I would assume 80% of the population doesn't know) is that the Federal Reserve is not a governmental entity, it is a group of banks. While these banks are "American" companies, the controlling interest in these banks however may not be. While the chairman of the Fed is appointed by the president, in many cases the list of available people to take the helm is so narrow and limited that the president has very little choice except to choose one of those who the banking institutions put forward for the job.

My thoughts then naturally gravitated to "Federal Reserve Notes" which are obviously the currency that we use daily, otherwise known as the U.S. Dollar. Our paper money system is run by the Federal Reserve, they even reimburse the Treasury Department for the cost of printing. Most know that banks "leverage" our deposits typically around twelve-fold, which means that if I deposit $1,000 into my local Chase bank account, they can loan out $12,000 on these solid assets. Griffin brings up a scary proposal in his book where we follow a sensationalized typical government transaction. The treasury department needs more money in order to pay for it's expenditures (Payroll, payments to contracting corps (Lockheed, Raytheon, etc)) so it goes to the Federal Reserve to borrow the money. The Federal Reserve lends the money to the government (with interest) and the government uses the money to pay Joe the local Postal worker his $1,000 salary. Joe goes to Chase and deposits his $1,000, and now Chase has $12,000 that it can lend out. The cycle begins again when the government needs more money, and with Chase being part of the Federal Reserve Network part of the new amount that the government is borrowing from the Fed is hypothetically Chase's leveraged $12,000 from Joe's $1,000 deposit, which is lent to the government to pay Joe his next $1,000. Imagine if other businesses operated in this manner, it seems like the biggest of all Ponzi schemes to me.

There is much more I plan on writing about this in the weeks to come - just something to get off my chest before the weekend comes! Sphere: Related Content