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At this point in the story we have gotten to the Federal Reserve, the bankers bank. But first, perhaps, we should take a step back. You may be asking yourself this doesn’t sound right? This sounds like a made up story. I assure you it’s not, I did leave out some details and focused more on the main points. I didn’t want to bog you down with to much “boring” detail. If anyone has further questions feel free to ask in the comments.

The Federal Reserve is a bank, a cartel. It’s story is fascinating and complex. The things that happened to birth this creature and the people behind it may shock you or at least surprise you.

As I stated earlier people in this country did not want a central bank for many reason, mainly they couldn’t trust banks. Because of fractional reserve banking it was difficult to trust an institution that would take your money and then lend it out. For every ten dollars someone would give the bank, it would lend out nine dollars. This of course would work most of the time until someone wanted their ten dollars back, once the public knew that they couldn’t get their money back it could result in a “run on the bank”. A run on the bank or a currency drain were the two things that could happen to a bank leading to insolvency, causing the bank to close it’s doors, and therefore lose trust with the public.

Their were several “panics” in history that led to banks insolvency 1873, 1884, 1893, 1907. These “panics” were caused because of fractional reserve banking and the bank had to close its doors because they didn’t have enough money in reserve to give back to the public that in trusted the bank to keep it safe, or to give to other banks. Trying to pass off a bad economy for a bank closing can be difficult during the biggest boom that has ever happened in the history of the United States. All though they tried and mostly succeeded history will remember that during the industrial revolution the United States was more prosperous than ever.

What is a “run on a bank”? Most people probably know or at least have an idea. If you have ever seen the movie “It’s a Wonderful Life”. A currency drain is a little different and all though it can lead to a run on the bank it usually happens without the public knowing why. A currency drain is when a bank owes another bank money and doesn’t have the funds to pay. Lets say there are two banks in a town the first state bank and the mid state bank, if you have your money in the first state bank and write a check to someone that has an account at the mid state bank, that person then goes to the mid state bank and deposits the check. The mid state bank calls the first state bank and tells them the just deposited a check from them and they need the money. This all works well especially if the same thing happened in reverse and its just a simple book keeping entry, no money needs to change hands, but if that is not the case and the mid state bank has to fork over money to the first state bank that it doesn’t have in reserve this is called a currency drain.

In the three decades between 1870 and 1907 several banks went under 1,748 banks, as you can see this would cause distrust with anyone. This also allowed a lot of new banks to pop up all over the United States with the promise of taking care of the people and not losing their money. The thing is no business likes competition and if you own a bank and thousands of new banks are popping up all over you would want to put a stop to it, you  might even encourage these banks to close its doors. What was needed was a lender of last resort. There were a few big bankers that wanted to get all banks on the same page and encourage the same ratios of fractional reserve banking with everyone this would prevent distrust and also come with an insurance plan called bailout.

What needed to be done was to create a cartel, a central bank, that would unionize all banks and protect one another, but convince the public it was protecting them and their money. With all the trouble in the past few years it could be easy to convince people that something needed to be done to save them. What was needed was the federal government but the bank would have nothing to do with the federal government. So if an institution could be created that acted like a central bank, sounded like it was part of the federal government, and at the same time did not have the word bank in its title people might buy it.

In 1910 a secret meeting was held by six men five of them represented big banks including ones in the United States, like the bank of New York, and banks in Europe, through ties with the Rockefellers. One of them was a U.S. senator a republican “whip” Chairman of the National Monetary Commission. Their idea was brilliant and they carried it out in one of the best displays of slide of hand and illusion one could ever expect to see during the greatest magicians show on earth.

The Federal Reserve was born and now it just needed to be excepted. All they had to do was convince the people that a lender of last resort was needed to protect them. Most people wanted a guarantee and were willing to listen especially since the wealthiest men on the planet were pitching it. The banks would be on board because they needed a guarantee too, they wanted to be able to lend out as much money as possible with little reserve, and when the time comes that they have no reserves they could receive a bailout. This bailout could come from the tax payers, but at the time there was no such thing. Interestingly enough the same year the Federal Reserve was signed into law, 1913, a federal income tax was also signed into law through the 16th Amendment. This would also allow a single currency, one that was backed by the government that could be used, no more would banks or states create their own currency.

With all this being done gold was still the standard and the money that was created by the Federal Reserve was backed by gold or so they said. What needed to be done now is get rid of the gold, maybe even make it illegal to own gold all together.

 

As continued from before, there are four types of money. We have only discussed two of them so far; Commodity money, receipt money. We briefly spoke of fiat money. Here are all four. 1. Commodity money 2. Receipt money 3. Fiat money 4. Fractional money.

How do banks come into play here? You might be asking yourself? If you have read this far hopefully you are asking that. We left off with the Goldsmiths how they could have evolved into a bank. To be a bank, the bank really had to have a deal with the government. Again it can be hard to convince people that the paper they are printing is money and so the government comes in and helps with that. There are recorded instances through history of the laws in place, fines and other such things for not accepting the bank’s paper as money. Threatening to fine someone for not accepting something as money is an easy way for a bank to prosper.

A bank needs a charter to get started, to save you some time of looking up a charter. A charter is simply a document allowing a bank to begin business as a bank. The charter is granted by the government so it comes with all the guarantees the government can give.

A bank began in the same place the Goldsmith began, for a small fee they could safely and securely store your money. Over time the bankers realized there was far more that could be done to turn a profit. Receipt money, the slips of paper that were handed out for place value of your money, was not enough, and eventually they moved into fractional money. This was easier to sell because you could more easily convince people that your money was being given out as a loan but you can always bring it back and redeem your receipt for gold or silver. And at first it was in small amounts the bank may only give out money 3 to 1. This ratio was more comforting than later amounts of 100 to 1. So for every dollar the bank had in the vault they would only lend 3. Fractional banking!

Some would say that the bank was making money out of nothing but the more appropriate way to say it is the bank was making money out of debt. Just like any business you have to have assets and liabilities. The great and LEGAL thing about a bank is that debt is both. You see if you have 3 dollars lent out its a liability, but if you are charging interest it’s also an asset, and this is done simultaneously. The name of the game then becomes create as much debt as possible.

This is what most banks in history have done and it went so backwards with money it imploded. The cycle looks like this, literally through history, a bank stores money, it lends money, it gets into fractional banking, the money inflates, it becomes worthless, the currency implodes, and the bank becomes insolvent. Either the government has stepped in to bail them out or people lost their money. The 1500, 1600, 1700, 1812, and then finally the Federal Reserve in 1913. There was close to 100 hundred years in between each one, it was about a life time. That is because after you lose everything you never trust a banker again, after that generation dies off they try it again. This brings us to inflation.

Most people have a general understanding of inflation, but what most people don’t understand is that it’s done on purpose. So inflation is when the money becomes less valuable so it takes more money to buy the same goods. Prices don’t go up the money goes down in value. This is what happened in colonial times the money inflated terribly and everyone learned their lesson. But when the war of 1812 came upon us we allowed another charter of a bank and began printing money again. During the presidency of Andrew Jackson he “killed” the bank and for 100 years the country did not have a central bank. It’s an interesting story.

Inflation is done on purpose did you catch that, crazy right? Think about it if you are amassing a large amount of debt like the kind a government can raise you want that money to be of far less value when you pay it back. It’s a hidden tax, the government can’t levy a tax on the people that would come close to what inflation is. This brings us to the Federal Reserve, but that is for next time……………………

Picking up were we left off with money. We discussed what is money and learned its a medium of exchange and really anything can be money. More specifically we discussed paper money and why that can lead to bad things. Perhaps worse than paper money is the banks that manipulate it, or maybe more appropriately said, the bankers that manipulate it.

Full disclosure, I do not dislike banks, or bankers, I use a bank. From what I have learned about money and what people have done with banks, and other financial institutions has taught me a thing or two, and all I can ssy is proceed with caution.

A bank seems like a good thing right? I mean without banks what would you do with all your money. The mattress that you sleep on would be stuffed with money. That’s not very comfortable and fire or theft could take it from you in a moment. So why a bank? Couldn’t we just buy a safe or a vault and store it in there?

If you wanted to start your own business and make some money, would you open a bank? Its a business right? Couldn’t you make a lot of money, there is a lot of money already stored there.

Why banks? Isn’t that the question? Where did they come from who thought of it?

In ancient times when you carried your gold around with you there needed to be a safe place to store it.  That is what led to a bank, or what helped to discover it anyway.

Lets start with the Goldsmiths. It sounds interesting like a blacksmith but completely different. Back to the ancient times when a person carried their gold with them they were taking a risk and it became more and more dangerous to do so. If you didn’t have a bodyguard it was very likely that someone could come up to you, hit you from behind, and take it. In true capitalist fashion someone realized they could open a store and if they could guarantee security you might leave your gold with them and the risk would go down. Every time you needed to purchase something you would have to go to the goldsmith and ask them for the amount of gold you needed to make that purchase. All though the risk went down because you weren’t caring your entire fortune with you it was still a risk. The idea caught on and soon everyone used a goldsmith.

In comes the idea of writing a slip, the goldsmith could just give you a slip that would represent the gold that you had stored there. When you needed just a small amount the goldsmith would give you a slip and subtract that from your total. When you went to make a purchase you could hand that slip to a person, because that person used the same goldsmith too, and that person could take that slip back to the goldsmith and they would adjust the total for them. The goldsmith realized that not everyone wanted their gold at the same time, there was always plenty there.

Then comes the idea of writing more slips than the amount of gold on hand. Why not, like I said above, no one ever needed all their gold at once so it shouldn’t be a problem. As you can see this could have evolved into a bank very easily. We don’t know if the goldsmith ever charged interest, or a fee and gave out a loan but you can see how that evolved. There was a fee to keep it stored there, and that makes since because the goldsmith had to guarantee its security around the clock. As long as there has been people there have been bad people that have wanted to take something that didn’t belong to them. I can only speculate that of course the goldsmith wouldn’t have been able to give a loan and charge a fee to someone because no body back then would have thought that was ethical, legal, or moral to do. Just imagine trying to explain that. “I’m going to keep your money, while its here being stored I will give it to other people as a “loan” and make them pay me back”, you might ask what if they don’t pay it back? I would have a tough time explaining what to do. “You see other people have their money here too and if the loan doesn’t get paid back I will take from them and give to you.” You might ask what if you loan too much and everyone loses their money? Then, I the goldsmith would have to guarantee that I wouldn’t lose your money and if that did happen there would have to be some kind of bailout, like deposit insurance………………………….but then the goldsmiths would have been bankers………to be continued.

What is money? That is a pretty basic question right? It’s what makes the world go around. Maybe, as some of you have heard it’s the root of all evil.

Just as many other things do the question of money has really got me asking why? Such as the question above what is money? We all strive for more of it, we all think about it so what really is it? Really?

I heard someone say once that you think of something when you have little of it. For example if you only had a certain amount of oxygen you would think about it a lot, wouldn’t you? When you hold your breath to go under water don’t you think of every second until you can get back to the surface for life saving oxygen. I guess this is true with money too. All though I don’t have a lot of money I can only assume that is true.

Money has a weird history or maybe better said, it has an interesting history. Haven’t you ever thought, what if I didn’t need money? I know I have. I thought to myself I wouldn’t have to go to work today, I wouldn’t have to continue to go to a job I dislike, or I wouldn’t be stressed out about it. Have people always thought this way?

Years ago back in the ancient times what was money? Like the physical part, was it paper? Was it gold, or something else? Think about people thousands of years ago did they dislike their job for the same reason? I guess that is another subject.

Money is and was a medium of exchange. If I really wanted KFC for lunch I could exchange something for it, but the trick is it has to be something that you (the owner of the KFC lunch) would want. Now a days we all agree that I have to give you paper for it, but how did this come to be?

Long ago before paper money was made so easily it was just coin. The coins were made of gold, silver, and other metals that were easy to cut and stamp an image into. Gold and silver were the most commonly used probably because it wasn’t really good for anything else. How did they decide how much each coin was worth? Most of this was done through old fashion economics, the harder it was to make, and get the more it was worth. Then the government stepped in with something called FIAT. This is a pretty common word used now to describe money. The government would step in and declare by fiat what the value was. Fiat basically means because I said so. You can see how this would be dangerous, but for the most part everyone agreed and got along, just like today.

Paper money is a relatively new idea and hasn’t been around for very long. One of the reasons for this is because paper is not worth anything and it can be hard to convince people there is value in it, without a fiat of course. One of the first recorded cases of paper money was the Kahn. When Marco Polo came back from his famous journey across the Orient he spoke of it, he also mentioned that he thought it was strange that people accepted this paper for value. Paper is also easier to fake, you see with coins made out of gold, silver, and other metals it was more difficult to fake and copy. It did happen, through debasement, but not often.

We can skip forward a few hundred years and get to early 1700’s and the birth of the United States. They had paper money back then. They had several different kinds of currency from the different states. During the Revolutionary war a Continental was invented and used for money. The problem with this was, just as always, you can’t continue to print paper and convince people it has value. There wasn’t a lot of money in the colonies back then so the banks printed more, at the request of the government to purchase more stuff. Wars are very expensive! Eventually people caught on and the Continental collapsed in value and it became worthless. George Washington said that a wheel barrel full of Continentals could barely buy a loaf of bread. The founders learned from this and decided that it’s not a good idea to have paper money that can be printed at will and therefore they made it unconstitutional for the federal government to print money and gave the power to the states only to coin legal tender, they could only coin money.

A lot has happened since then and the United States has gone very far astray from the lesson learned during the founding. If we would have only listened and not allowed ourselves to be tempted to print money it would be easier, perhaps. With the birth of the Federal Reserve, as I wrote about in a previous article, money has lost so much value that you could buy more in the 1920’s with a dollar bill than you can today. When banks get involved and greed is mixed in its a recipe for disaster, we can talk about that at a later time.  I guess what I’m trying to say that money is just paper and the more you print the less it is worth and eventually it goes back to being just paper, no matter what fiat is declared.

Do you want to be informed? Have you ever asked yourself, “am I informed” about a certain topic? Hopefully if you have kept reading this far I can help to give you an idea, and that would, at the very least, help you begin to be informed.
What is it you want to be informed about? For the purpose of this writing we have, obviously, stuck to the thought process of our government. It seems that most people, that I speak with anyway, say they are not sure about what they hear, and as I mentioned in the past, they definitely don’t know why a certain thing is the way it is.
Again why is the important question? Right? So if someone said so what if they are wrong? The only thing, one can do is compare what is being said to when it has worked or, of course, to when it has not worked. Keep in mind that when you compare average too average you end up with.. . . . . . .well average. So we should compare to something that was, hopefully, more that average.
Remember almost no idea on Earth has not been thought of, or tried before. This is helpful because it gives us examples of when an idea was tried and how it worked. As history has proven, history repeats itself.
Now you might be thinking, “That is not true, it can’t be, this idea couldn’t have been tried before because off”. . . . fill in the _______. But, it almost always has been tried before, yeah sure in a different setting or a different time, it is still helpful because it gives us a format. If you were tasked with writing a paper and you found one that your great grandpa wrote on a similar subject you could, at the very least, use his format. Right?
So, when thinking about any topic, healthcare, welfare, abortion, immigration, gun control, freedom of speech, freedom of religion, almost anything we can compare to what other have tried or wrote about and it gives us the format we can put it in. A perspective is important. Don’t you think?
Around the turn of the 20th century there were a lot of ideas about how to help people and what this country needed to do. Some even said, of course, that these were new ideas, that because of the times they were in, the “old” ideas, and thoughts were not relevant anymore. Sound familiar? So certain people decided to try something different. Well I can’t say for sure but perhaps no one pointed out to them that all these ideas were thought of or tried before, and that there was a reason these ideas weren’t chosen.
Some of these ideas were called “The new deal” some just hitched a ride, and still some were born before the new deal was announced. Take, for example, the Federal Reserve. Hopefully you have asked yourself why about the Federal Reserve or, at the very least what? What is the Federal Reserve? Why did it need to be created? And my personal favorite, if the country existed for 143 years before it, couldn’t we live without it? The answer is, of course, a big gigantic yes. But I don’t blame anyone for wanting to try something different, and it certainly wasn’t new.
Is the Federal Reserve federal? Is it a reserve of some kind? Important questions, right? The answers could be debated I’m sure but I can only tell you what I have learned. In the early 1900’s there were no central banks. Meaning there was not a place that was backed by the government that financed anything. In fact money as we know it was all together different back then. Today we have Federal Reserve notes, check your money all the bills have that printed on it. Before the Federal Reserve only the treasury could issue paper money, and even then it went outside of its constitutional powers. The states had the power to coin money. So the powers that be, or to use correct English, the powers that were, wanted more.
See if you have a limited amount of money coined by the states it doesn’t do what most bankers would want it to do. You want elasticity in your money don’t you? So they got together and tried to create a bank, the only problem was that the country still had a bad taste in their mouth for banks, specifically central banks. So they knew they had to be creative when coming up with this idea to get more elasticity in money. Someone came up with the idea for the name, knowing they couldn’t use a name with “bank” in it, they choose Federal Reserve. It sounds proper right? Was it legal? Was it the right thing to do? Who knows, but you can bet someone, or many would get rich off of it.
If some of you are asking why didn’t the country want a central bank, and hopefully all of you reading are asking that, some of the answers can be found during the founding of the country in the revolutionary war, and in 1835 during the presidency of Andrew Jackson. All I can say about that is they knew if you give that kind of power to people they will, almost, without fail abuse it. As the saying goes power corrupts, absolute power corrupts absolutely.
Well at the time it wasn’t legal for these people to create the Federal Reserve they had to change the thinking of people in the country, they had to change a few laws, and amend the constitution. How do you change people’s thinking, well the best way, as history shows, is with crisis. They had to find a way to show people that money was dangerous and that without some extremely smart people controlling it, a depression would be the result. The term depression only gets used in retrospective so at the time, in its current state, they called it a panic. See the panic of 1907. This started to shift peoples thinking about a central bank.
Fueled by the panic several rich people from around the world, they may or may not have contributed to the panic, used its power to influence the people. They conjured up this idea of the Federal Reserve and pitched it to congress. The Owen-Glass act was the first thing that got it all started and in 1913 president Wilson signed the Federal Reserve into law. This gave a place for a central bank, a place where money could gain enormous leverage, and elasticity.
How does it all work? You might ask, hopefully you are asking, its pretty great. When you think of a bank, you think of money right? Well these rich folks didn’t want to spend money they wanted to make money so there was no reserve. The Federal Reserve had a exclusive deal with the United States, it wasn’t owned by the U.S., it just had a deal with them, to be the sole provider of money to it. So if they U.S. needed money the Federal Reserve would write a check and hand it to the Treasury. Once the Treasury had it, it became money, only now it was a loan to the U.S. and had to be paid back with interest. Genius right. Today the Federal Reserve is a little different than as it began, but they still create money out of nothing. Remember all the stimulus packages they have created printing trillions.

When thinking about writing a blog, the first thing I thought of were the two questions above. My goal is to answer those questions along with many more as long as you the reader choose to, you know, keep reading.

First why read? Aren’t there enough blogs out there, aren’t there enough articles on your Facebook page, and any other social media you subscribe too. The answer is a resounding yes, a scream from the mountain tops yes. And if there are what would make one want to read more. I faced this difficult question and thought….. I don’t know. I believe the goal of any good blog writer is that their audience, if they have one, likes to read what is written, they like to learn what is being taught. So too sum it up hopefully I can pass along some good information or at least point you, the reader, in the direction of a good answer. Certainly, my goal is to hope to accomplish just that.

 

Second why me? If you are still reading and thinking who is this person and why should I read anything that is written, I too also asked myself the same question. Who am I? The answer nobody, I am a voice among thousands/millions, I am a needle in a haystack, one brick laid in the foundation of a sky-scrapper, a….well you get the point. What I can tell you is that I am a learner, aren’t we all, you might be saying to yourself, and yes that is true. But, well I have chosen to learn about a few specific things, things that I have found extraordinarily useful so much so that I wish I would have known these things years ago. I am still learning, and at this point, as I have found while sharing this information with friends and colleagues, others wish to know it too, or at least understand it better. I feel it is only fair at this point that I share with you that I consider myself a nerd to dive into certain subjects so much. Many have told me they wish to be informed about certain things, but not to the degree that I have invested into it. I love to read about things I do not know and in doing so I have decided with help from others that I should share this information. Hopefully that answers the second question for you it certainly worked for me.

So now that’s out of the way. What should I write about? What would others want to learn? Or at the very least what would others suffer through a few paragraphs on a blog about. I don’t want to lose you so maybe you should sit down for this. Ok are you ready? Politics…. . . . . but wait before you close this article and scroll on down your feed, what I mean is well… First of all I am not writing to tell you that you need to be a democrat or that you need to be a republican. As for now let’s just say an American, a free thinker. There that sounds better than politics, a “free thinker”. I often here things or see things about current events and wonder why? Someone might say to me “you know Trump shouldn’t” and I think why? Or “Obama messed up when he” still why? How do you know that? What are you basing that platform off of? And they may be right. I am sure there are lots of things Trump “shouldn’t” and many other things “Obama messed up”, but I still wanted to know why. I have found that it depends, doesn’t it? It depends on what you believe or what you would like to believe or what you were taught to believe, here in lies the answer, or perhaps the question. Why do you believe what you believe? I have found that almost no one can answer that question to my satisfaction. Why does one believe what they believe, yeah sure they were raised that way, or that is what they were taught to believe, but WHY? These questions and more got me to thinking and in my thinking I ran into some folks. These folks, unlike most, pointed me to information, they didn’t tell me what to believe, they didn’t ask what I was taught to believe, they didn’t even ask how I was raised. They simply pointed me to answers. These answers, which more often than not led to more questions, are what I want to share with you. I want to give you the same things that were given to me answers. If this is enough, and I hope it is, please by all means keep reading.

I do want to share that I feel it’s important to throw out there that for the purpose of this blog I want to try to remain as natural as possible on these topics we shall discuss. I want to point you in the direction I was pointed in, that direction may not be the direction you want to go, and as I found out all you have to do is go another way. When talking about politics or as we mentioned above “free thinkers” its easy to throw stones or instantly hate the other, but what I wanted to know and hopefully will shed some light on for you is the WHY.

So when you hear something in current events, things like; why should health care be for everyone? Why should college tuition be free? Why doesn’t the government just pay for it? Why doesn’t the minimum wage go higher? Why don’t we all get along? Why are guns legal? Why hasn’t someone made guns illegal? Why are drugs illegal? Why are illegal immigrants bad? Buy American. Keep American jobs here. How do we keep American jobs here? And so many more hopefully you will think of this blog and together we can shed some light on things.