(Book Review)

Killing the Banking Beast - A Second Look at the Federal Reserve

by Jane H. Ingraham  The New American

Vol 10, Number 18, September 5, 1994

Where does money come from? Where does it go? Who makes it? The money magicians’ secrets are unveiled. We get a close look at their mirrors and smoke machines, their pulleys, cogs, and wheels that create the grand illusion called money. A dry and boring subject? Just wait! You’ll be hooked in five minutes. Reads like a detective story — which it really is. But it’s all true. This book is about the most blatant scam of all history. It’s all here: the cause of wars, boom-bust cycles, inflation, depression, prosperity. Creature from Jekyll Island will change the way you view the world, politics, and money. Your world view will definitely change. You’ll never trust a politician again — or a banker.

*******

Has it ever occurred to you that the federal government has no need of taxes for revenue? Are you aware that banks prefer lending to governments because governments seldom repay loans? Do you realize that if all debts, both public and private, were paid, there would be no money at all in circulation?

These are only a few of the startling facts that fill the pages of this illuminating expose of the Insider scam called The Federal Reserve System (Fed). Although author G. Edward Griffin admits to having wondered if another book on the Federal Reserve is necessary (his six pages of bibliography suggest that the subject may have previously attracted attention), it is unlikely that any book has ranged across 2,000 years of money and banking from Diocletian to the Rothschilds to Alan Greenspan — and tied it into the new world order — as thoroughly as The Creature From Jekyll Island.

Griffin cuts through the obscurities about the Fed that are intentionally meant to mystify and disarm its victims (all of us). Convinced that the subject of money and banking is too arcane and complicated to understand, we victims are trapped in a world view that utterly fails to jibe with reality. The money manipulators, says Griffin, are exploiting our ignorance for the advancement of their own appalling plans; the urgency of awakening us to our danger has driven Griffin to write this extraordinary book.

Although Griffin has never held an academic position, he is a top-notch teacher. Making this little-understood subject simple by splendid organization, his account is divided into six sections with varying numbers of chapters; each section and chapter is introduced by a concise paragraph while each chapter is also summarized. Thus the reader is kept in touch with where he has been and where he is going, an ingenious and helpful device considering the enormous scope of Griffin’s narrative.

His explanations and definitions are meticulously worded; one can sense the care with which each word was chosen, leaving no room for confusion. Griffin continually draws documentation from primary sources, quoting letters, speeches, and published works that both enlighten and horrify. His own writing is difficult to quote; it is so trenchant that nearly every sentence entices. Yet at the same time Griffin has mastered the art of speaking personally to the reader, who never loses the feeling of being directly addressed.

 

All this adds up to a superbly clear, engrossing book that, once started, is impossible to put down.

 

 

Setting the Stage

In order to help us fully understand our present predicament, Mr. Griffin ranges far afield in explaining the historical, economic, and political antecedents of today’s money system. We are given a crash course on the nature of money; the origin of banks and the concept of fractional reserves; how this led to the seductive idea of using the same money over and over; how this inevitably led to economic disaster wherever and whenever tried.

 

We are instructed about the Rothschild formula, which perfected the art of making enormous profits from loans to governments, especially for wars; how this led to preventing any one nation from becoming strong enough to establish peace (the famous balance of power); how those who could instigate wars or revolutions were financed (including the Bolsheviks in 1917); how we Americans were sucked into World War I in order to save J.P. Morgan’s loans to England; how environmentalism is now the weapon of choice replacing war.

We are taken to the super-secret meeting of Insider financiers and Rothschild agent Paul Warburg on Jekyll Island in 1910 where the basic plan for what became the Federal Reserve Act was formulated; we learn that these plotters were already affiliated with the conspiratorial British one world Round Table group which preceded the Council on Foreign Relations (our secret government); we are astounded by the brazen deception of Congress that pushed through this unconstitutional act creating the Insiders’ fundamental tool — a central bank with the ability to inflate.

 

We are told how this same tool has been expanded internationally through the International Monetary Fund (IMF) and World Bank in order to create worldwide inflation, pay enormous sums of perpetual interest on never paid-up loans to Insider banks, and socialize the Third World, all courtesy of us unsuspecting taxpayers.

 

Lastly, Griffin foretells our dismaying fate if our course is not altered; then he lays out a step-by-step procedure of how to alter it, inviting us to join with him in doing so. Griffin looks the Fed “creature” straight in the eye and tells us it is not federal, it has no reserves, and it is not a bank. It is, in fact, a pernicious cartel operating against the public interest. The widespread belief that the Federal Reserve exists to “stabilize the economy” is hogwash; the real reason for its existence is the making of money — not out of “thin air” as is commonly supposed, but, more accurately, out of debt.

 

Griffin explains that,

it is the act of borrowing by the federal government that causes money to spring into existence

Griffin takes us through the Open Market steps by which Treasury IOUs (bonds) are inverted by the Federal Reserve into money through the issuance of Federal Reserve checks with no money in existence to cover them; anyone else doing this would go to jail. Congress has made this legal for the Fed, however, because this hidden process allows our congressmen to enjoy unlimited revenue without having to visibly raise taxes.

 

Without this service, says Griffin, the monetary/political partnership would dissolve, and Congress would abolish the Fed.

 

 

Money Multiplied

Griffin explains that these Federal Reserve checks are endorsed by the government, deposited in a Federal Reserve bank, and used to pay government expenses by checks which create the first wave of fiat (unbacked paper) money that floods into the economy. Recipients deposit these checks into commercial banks that are part of the Fed system. Here is where the real inflationary action is. (The Federal Reserve holds “only” seven percent of the national debt of almost $5 trillion. The 12 percent held by foreigners and the 56 percent held by Americans are not inflationary because the money used for purchase already existed.)

Commercial banks, like the Federal Reserve, also create money out of nothing — and collect interest on it — by multiplying every dollar deposited nine times. This amazing feat is accomplished through the device of fractional reserves, whereby the Fed allows 90 percent of deposits to be loaned out. As deposits become loans and loans become deposits, this process repeats with smaller numbers each time around.

 

For instance, $1 million in government money (first wave) to $900,000 (second wave), which gives birth to $810,000 (third wave), etc., until the process plays itself out. Thus, the banking cartel creates an amount of money that is nine times the amount of the original government debt that made the process possible.

Griffin shows that when the original debt is added in, the Federal Reserve and the commercial banks together have created approximately ten times the amount of the underlying government debt. Since this newly created money causes the purchasing power of all money to decline, the resulting rise in prices is, in reality, a hidden tax.

 

As Griffin puts it:

Without realizing it, Americans have paid over the years, in addition to their federal income taxes and excise taxes, a completely hidden tax equal to approximately ten times the national debt!

Griffin is astonished at the public’s indifference to this fleecing; he blames it on ignorance based on disinformation. Nothing could prove him more right than the current deception that inflation is higher prices caused by full employment and a strong economy; therefore, letting the "steam" out of the economy and slowing growth (and thereby employment) is “good.” This talk is madness.

 

Alan Greenspan, chairman of the Federal Reserve (who has the temerity to say he is “worried about inflation”), is repeating this claptrap as he pretends to control inflation by increasing interest rates that merely devastated the bond market, clobbered the stock market, and helped only the bankers. Thus the Insiders are perfectly protected and the scam rolls on.

There are many more threads to Griffin’s discourse on the operations of the banking cartel that should not be missed, such as:

• How holders of Treasury bonds can be paid off only by the creation of an identical bond out of nothing.

• Why the U.S. has to be, must be, in debt.

• How the Discount Window (Fed loans to banks) creates more phony money.

• How the federal government could operate without levying any taxes whatsoever.

• How the Fed causes booms and busts.

• How, since 1913, our money has depreciated by over 1,000 percent.

• How a gold standard automatically stabilizes prices.

• How the Fed can now monetize the debts of foreign governments!

• Without the extensive knowledge offered by Griffin, no American can fully understand the financial reality of our time.

 

 

Understanding the Game

Also critical to our reality check is an understanding of how the Fed protects and enriches the banking brotherhood in the international arena. The game our Insiders are playing makes the Rothschilds look like novices.

 

Here it is in a nutshell:

• The game starts with a mammoth loan (created out of nothing through the magic of fractional reserves) from (Citicorp, Chase Manhattan, Bank of America, etc.) to a Third World country with scant means of servicing the debt much less ever repaying the principle. Are these top bankers stupid?

• Hardly; Griffin explains that this is the kind of loan these bankers love, since they make their money from interest on the loan, not on repayment of the loan. They prefer the loan never to be repaid.

• They know they can’t lose because the Federal Reserve guarantees that massive loans that go into default will not be allowed to seriously affect the issuing bank (too big to fail) because this would “disrupt the entire economy."

So, says Griffin,

"since the System makes it profitable for banks to make large, unsound loans, that is the kind of loans banks will make. Furthermore, it is predictable that most unsound loans will go into default."

Sure enough; pretty soon default threatens. The bank creates additional money out of nothing and lends that so its interest stream continues on both the original loan plus the new loan (the “roll-over” play). At the next crisis, the bank creates still more money out of nothing to cover the interest on both loans plus an additional amount for the borrower to spend freely (the “up-the-ante” play). Finally the bank agrees to a lower interest rate and a longer period for repayment (the "rescheduling" play). Eventually it is time for the “Final Maneuver.” Congress agrees to guarantee future payments and the whole mess is shifted to the backs of U.S. taxpayers while the borrower is trapped into an IMF “austerity” program that makes an “end run” around his sovereignty.

Now money moves through various foreign aid channels to the deadbeat borrower, who continues to pay perpetual interest to the bank. Almost all of this money is generated by the Federal Reserve; as it moves out into the economy it dilutes the value of the money already there. The American people, says Griffin, have no idea they are footing the bill to enrich the Insider bankers.

 

 

Founder’ Fears Realized

Readers may be surprised to learn that the Federal Reserve is the fourth central bank the United States has had, the previous three having crashed in inevitable raging inflation and widespread economic disaster. So clearly did our Founders understand and fear worthless paper money forced on the public by legal tender laws (precisely what we now have) that they filled the proceedings of the Constitutional Convention with statements of their horror of it.

 

We Americans today, deprived of hearing such truth, need to listen to their words:

• George Mason of Virginia: “I have a mortal hatred of paper money.”

• John Langdon of New Hampshire: “I would rather reject the whole [Constitution] than grant the new government the right to issue fiat money."

• George Reed of Delaware: “The right to issue fiat money would be as alarming as the mark of the beast in Revelation."

• Thomas Paine: “The punishment of a member of Congress who should move for such a law ought to be death."

Griffin does not stop with presenting the known picture, but projects today’s reality into the future. His first projection is a doomsday scenario his second is a realistic plan for saving our country and ourselves. These chapters might, after all, be the most important ones in the book.

Griffin sees doomsday as an engineered financial debacle the severity of which will cause panicked Americans to welcome — a World Bank "rescue" with a world currency. The IMF/World Bank is already functioning — in conjunction with the Federal Reserve — as a world central bank. A world currency is already designed, awaiting a crisis to justify its introduction.

 

From this point on, writes Griffin, there will be no escape from the new world order. At present the U.S. is being deliberately weakened by seemingly insane spending both at home and abroad: As just one more dismaying example, during President Clinton’s recent trip to Europe he blithely promised more billions of dollars to Poland, Ukraine, and the Baltic countries.

 

The name of the game is to spend on anything, anywhere. The object is to bring down the system.

 

 

Life in the New World Order

What will life be like in the Insiders’ new world order?  Griffin spells it out from the words of the Insiders themselves. One source is the 1966 secret Hudson Institute study commissioned by Defense Secretary Robert McNamara, entitled Report from Iron Mountain. This study cold-bloodedly discusses various means by which government might control the populace and perpetuate itself in power in the absence of war (UN peace).

Griffin’s review (with extensive quotes) of this truly diabolical Insider study is masterful; he takes it apart and shows us its consummate evil. The study’s premise is that historically the only means by which a government has ever been able to "secure the subordination of citizens to the state" is war.

Only war has been able to provide the external threat without which no government can accumulate power

War is used to make the masses put up with all kinds of privation, taxation, and controls without complaint. No amount of sacrifice in the name of victory is rejected. Resistance is viewed as treason.

But, says Griffin, Report From Iron Mountain explains that the war system may have to be replaced because,

"it may now be possible to create a world government in which all nations will be disarmed and disciplined by a world army, a condition which we will call peace."

In this case, what could be a substitute for war?

Here, explains Griffin, is the origin of the stratagem to promote ecological doom as the new enemy that threatens the entire world. The threat need not be real, provided the masses can be convinced it is real. Credibility is the key, not reality. Griffin writes that Report From Iron Mountain explains the avalanche of phony scientific claims that are uncritically publicized by the Insider-controlled media, as well as the funding of environmental "crazies" by corporations and businesses that would appear to have the most to lose. He sees the plan as being brilliantly successful.

The barrage of propaganda has had a phenomenal result. Politicians are now being elected on nothing but "concern for the environment and a promise to clamp down on nasty industries," with no one caring about the damage done to the economy or our freedoms. Just as no sacrifice is too great in time of war, what happens to the economy or our freedom is of no consequence "when the very planet on which we live is sick and dying."

Griffin introduces us to multi-millionaire Maurice Strong, the powerful UN environmental czar, who gives us the whole line:

The U.S. is committing environmental aggression against the rest of the world. Current lifestyles of the affluent middle class — high meat intake, frozen and convenience foods, electric household appliances, cars, air conditioning, suburban housing — all this has to go. The world’s ecosystems can be preserved only by lowering our standard of living by rationing, taxation, and political domination by world government.

Reading this section will forever change the way in which you view government. Yet, says Griffin, this perverted, power-mad Insider fix need not prevail. None of these dreadful things needs to happen. He outlines a procedure by which the Federal Reserve can be abolished, the national debt paid, and the country returned to a sound monetary system based on silver and gold.

 

All that is needed are the efforts of concerned and caring Americans. Griffin invites us to join him in freeing ourselves from the one-world conspirators. It can be done.

 

www.bibliotecapleyades.net/sociopolitica/esp_sociopol_fed04.htm

 

(Reply)

 

MEET EDWARD FLAHERTY, CONSPIRACY POO-POOIST

A response to a critic of The Creature from Jekyll Island

© 2004 by G. Edward Griffin

Edward Flaherty is a Ph.D. of Economics who has been critical of my book, The Creature from Jekyll Island: A Second look at the Federal Reserve. Periodically I receive inquiries from readers who have visited Flaherty's web site, and they want to know if I can rebut what he says. I put this off for a long time because, first, his critique is lengthy and loaded with minutia that requires considerable time to respond properly and, second, the number of inquiries has been so small as to place the importance of this task far down on my list of priorities. Nevertheless, whenever I get an inquiry, I dread that my reader may think that a lack of response is a sign of not being able to defend my work; so, at last, I decided to step up to the plate and swing at the ball that Flaherty has thrown in my direction.

The essence of Flaherty's critique is that anyone who opposes the Federal Reserve must be some kind of a kook, totally lacking in scholarship. He lumps all Fed critics together, those who bring scholarship to the topic as well as those who do not, and the mixture tends to discredit everyone. It is an old tactic of dumping garbage into the grocery bag so that it all smells like garbage and is rejected in total.

On September 5, 2004, I received an email from a reader who had compared comments made in my recorded lecture with what Flaherty's web site says and asked for clarification. What follows is his inquiry with my reply embedded at appropriate locations.

My reader begins by quoting from my recorded lecture, followed by a quote from Eustace Mullins:

My lecture: I came to the conclusion that the Federal Reserve needed to be abolished for seven reasons. I’d like to read them to you now just so that you get an idea of where I’m coming from, as they say. I put these into the most concise phrasing that I can to make them somewhat shocking so that, hopefully, you’ll remember them:

1. The Fed is incapable of accomplishing its stated objectives.

2. It is a cartel operating against the public interest.

3. It is the supreme instrument of usury.

4. It generates our most unfair tax through inflation and bailouts.

5. It encourages war.

6. It destabilizes the economy.

7. It discourages private capital formation.

Eustace Mullins, Secrets of the Federal Reserve: “...the increase in the assets of the Federal Reserve banks from 143 million dollars in 1913 to 45 BILLION dollars in 1949 went directly to the private stockholders of the [federal reserve] banks.”

My reply: I stand firmly behind my seven points but I do not agree with Mullins on this. Please do not lump my work with other writers. Flaherty does this a lot. Guilt by association is a ploy that must be challenged and rejected.

Flaherty: It would be a mistake to examine these conspiracy theories....

My reply: Stop right there. There is nothing about my work that merits being classified as a conspiracy theory. In modern context, it is customary to associate the phrase “conspiracy theory” with those who are intellectually handicapped or ill informed. Using emotionally loaded words and phrases to discredit the work of others is to be rejected. If I am to be called a conspiracy theorist, then Flaherty cannot object if I were to call him a conspiracy poo-pooist. The later group is a ridiculous bunch, indeed, in view of the fact that conspiracies are so common throughout history. Very few major events of the past have occurred in the absence of conspiracies. To think that our modern age must be an exception is not rational. Facts are either true or false. If we disagree with a fact, our job is to explain why, not to use emotionally-loaded labels to discredit those who disagree with us.

Flaherty continued: ... outside the context in which they were written.

My reply: I try hard not to present text outside its context. When searching through hundreds of documents and thousands of pages, it is inevitable that some subtleties of context may be missed, but so far I have not yet been advised of any instances of this. I welcome any corrections; but, until specifics are brought to my attention, I stand firm on everything I have written. Furthermore, I resent the implication that my work could not stand without taking text out of context.

Flaherty: All the conspiracy authors whose work I study here profess a belief in the alleged ‘New World Order’ conspiracy, or some variant thereof.

My reply: An informed reader would not waste time beyond this point. It is absurd to claim that a blueprint for a New World Order based on the model of collectivism is merely “alleged.” The evidence that this is a demonstrable fact of modern history abounds. Some of that evidence is presented in my work, The Future Is Calling, found in the Issues section of this web site.

Flaherty: Hypothesis: Each of the 12 Federal Reserve banks is a privately owned corporation. Like any firm, their main objective is to maximize profits. They do so by lending the government money and charging interest. They manipulate monetary policy for their own gain, not for the public good. Facts: Yes, the Federal Reserve banks are privately owned, but they are controlled by the publicly-appointed Board of Governors. The Federal Reserve banks merely execute the monetary policy choices made by the Board.

My reply: Basically, Flaherty is correct as far as he goes. But, as we shall see in so many of his statements, he stops short of the entire truth. A half-truth is just as much of a deception as an outright lie. Flaherty says that the Board of Governors is politically appointed. This is true and it is supposed to make us feel safe in the thought that the President responds to the will of the people and that he selects only those who have the public interest at heart. The part of the story omitted by Flaherty is that the President does not select these people from his own personal address book, nor does he ask the public to submit nominations. With few exceptions, he makes appointments from lists given to him by the staffs of banking committees of Congress and from private sources that have been influential in his election campaign. The most powerful of all these groups are the financial institutions (including prominent members of the Fed itself) and the media corporations over which they have effective control. One does not have to be a so-called conspiracy theorist to recognize the tremendous influence that these institutions have over the outcome of presidential campaigns, and anyone with knowledge of how our current political system works will understand why the President makes exactly the appointments that the banks want him to make. All one has to do to see the accuracy of this appraisal is to examine the backgrounds and attitudes of the men who receive the appointments. While there is an occasional token individual who appears to come from the consumer sector of society, the majority are bankers deeply committed to the perpetuation of the system that sustains them. Anyone who would seriously challenge the power of the banking cartel would never be appointed. So, while Flaherty is correct in what he says, the implication of what he says (that the Fed is subject to control of the people through the political process) is entirely false.

Flaherty: Nearly all the interest the Federal Reserve collects on government bonds is rebated to the Treasury each year, so the government does not pay any net interest to the Fed.

My reply: Here is another half-truth that is a whopper deception. It is true that most of the money paid by the government for interest on the national debt is returned to the government. That is because the Fed’s charter requires any interest payments in excess of the Fed’s actual operating expenses to be refunded. However, before we jump to the conclusion that this is a wonderful benefit, we must remember that the banking cartel is able to use tax dollars to pay 100% of its operating expenses with few questions asked about the nature of those expenses. After all of those expenses are paid, what is left over is rebated to the Treasury, as Flaherty says. There is no secret about this, and you will find an explanation of it in my book. Technically, there is no “profit” on this money. However, remember that creating money for the government is only one of the functions of the Fed. The real bonanza comes, not from money created out of nothing for the government, but from money created out of nothing by the commercial banks for loans to the private sector. That’s where the real action is. This is the famous slight-of-hand trick. Distract attention with one hand while the coin is retrieved by the other. By focusing on the supposed generosity of the Fed by returning unused interest to the Treasury, we are supposed to overlook the much larger river of gold flowing into the member banks in the form of interest on nothing as a result of consumer and commercial loans.

Flaherty: Hypothesis: Bankers and senators met in secret on Jekyll Island, Georgia in 1910 to design a central bank that would give New York City banks control over the nation’s money supply. Facts: The meeting did take place, but plans for a return to central banking were already widely known. Regardless, the proposal that came out of the Jekyll Island meeting never passed Congress. The one that did, the Federal Reserve Act, placed control over monetary policy with a public body, the Federal Reserve Board, not with commercial banks.

My reply: Here again we have a half-truth that functions as a deception. Plans for a return to central banking, indeed, were already known, but they were unpopular with the voters and large blocks of Congress. That was the very problem that led to the great secrecy. Frank Vanderlip, one of the participants at the Jekyll Island meeting, later confirmed that, if the public had known that the bankers were the ones creating legislation to supposedly “break the grip of the money trust,” the bill would never have been passed into law. The facts presented in my book, and fully documented by references from original sources, show that my version is historical fact. Flaherty attempts to minimize these facts by implying that the original, secret meeting was not important because the first draft of the legislation was rejected. What he does not say is that the second draft that was passed into law was essentially the same as the first. The primary difference was that Senator Aldrich’s name was removed from the title of the bill and replaced by the names of Carter Glass and Robert Owen. This was to remove the stigma of Aldrich as an icon for “big-business Republicans” and replace it with the more popular image of Democrats, “defenders of the working man.” It was a strategy advocated by Paul Warburg, one of the participants at the Jekyll Island meeting. The fact that Flaherty makes no mention of this suggests that he has not made an objective analysis but, instead, has presented a biased critique in the guise of scholarship. His statement that “the Federal Reserve Act, placed control over monetary policy with a public body, the Federal Reserve Board, not with commercial banks” cannot be taken seriously. The Federal Reserve is not a public body in any meaningful sense of the phrase.

Flaherty: Hypothesis: Through fractional reserve banking and double-entry accounting, banks are able to create new money with the stroke of a pen (or a computer keystroke). The money they lend costs them nothing to produce, yet they charge interest on it. Facts: The banking system is indeed able to create money with a mere computer keystroke. However, a bank’s ability to create money is tied directly to the amount of reserves customers have deposited there. A bank must pay a competitive interest rate on those deposits to keep them from leaving to other banks. This interest expense alone is a substantial portion of a bank’s operating costs and is de facto proof a bank cannot costlessly create money.

My reply: Flaherty presents facts that in no way contradict what I said in my book. I speak of rotten apples, and he speaks of sweet oranges. My book makes it clear that the bank’s ability to create money is tied to its reserves. The current average ratio (it varies depending on the bank) is about ten-to-one. In other words, for every one dollar on deposit and held in reserve, the bank can create up to an additional nine dollars out of nothing for the purpose of lending. The statement that the banks must pay a competitive interest rate on those deposits is humorous when one considers the math. For example, let us assume for the sake of illustration that the bank pays 1.5% interest. Then it turns around and charges, let’s say 6.5% interest. That’s a spread of 5%. Although that’s a pretty good brokerage commission, it doesn’t sound exorbitant. But, here is another of those half-truths. Don’t forget that the bank uses each deposited dollar as a so-called reserve for creating up to an additional nine dollars in loans. It collects interest on these loans as well. Let us assume that the bank is not fully loaned up, as they call it, and has an average of only eight dollars in magic-money loans for every one dollar on deposit. In that case, it will collect 6.5% interest on all eight of those dollars. That means, based on each dollar placed on deposit, the bank will collect 52% in interest. After paying the original depositor the generous “competitive” amount of 1.5%, the bank actually receives a brokerage fee of approximately 50%. When Flaherty says that “This interest expense alone is a substantial portion of a bank’s operating costs and is de facto proof a bank cannot costlessly create money,” one can only wonder what banking system he is describing. It certainly is not the one in the United States.

Flaherty: Hypothesis: Supporters of the Federal Reserve Act knew they did not have the votes to win, so they waited to vote until its opponents left for Christmas vacation. Since a majority of senators were not present to vote on the bill, its passage is not constitutionally valid. Facts: The voting record clearly shows that a majority of the senate did vote on the bill. Although some senators had left Washington for the holiday, the Congressional Record shows their respective positions on the legislation. Even if all opponents had all been present to vote, the Federal Reserve Act still would have passed easily.

My reply: I agree with Flaherty on this issue and often have said so in the Q&A portions of my lectures. Please note that this is not contradictory to what I wrote in The Creature. What I said there is an accurate historical fact. There is little doubt in my mind that the vote would have passed eventually, but by slipping it through as they did, it circumvented the possibility of challenges and debate. I have never commented on the Constitutionality question, although I tend to think that a strict interpretation would have made this vote invalid. The problem here, however, has nothing to do with the Federal Reserve Act but with the rules of Congress.

Flaherty: Hypothesis: All money is created only when someone takes out a loan. Therefore, there can never be enough of this debt-money in circulation to repay all principal and interest. This imbalance causes inflation, financial crises, social maladies, and will eventually destroy the economy unless there is a massive injection of “debt-free” money. This idea is from Dr. Jacques Jaikaran’s book, The Debt Virus. Facts: The hypothesis shows an incomplete view of how the banking system interacts with the economy. The system necessarily creates an amount of “debt-free” money equal to the interest on its loans. It does this whenever it pays operating expenses, dividends, or purchases assets. As a result, there is more than enough money in circulation to retire all bank-related debt.

My reply: I object to being lumped together with other analysts on this issue. I did not write The Debt Virus, I wrote The Creature from Jekyll Island. On page 191, I explained why I consider the claim that there is not enough money to pay off interest to be a myth

Flaherty: Hypothesis: The Federal Reserve consistently resists attempts to audit its books. This is because any independent inspection would reveal the Fed’s treachery. Fact: Independent accounting firms conduct full financial audits of the Federal Reserve banks and the Board of Governors every year. The Fed is also subject to certain types of audits from the Government Accounting Office.

My reply: I never wrote or implied, as Flaherty says, that “any independent inspection would reveal the Fed’s treachery.” What I wrote is: (1) The Fed resists external audit; (2) If it were audited by an independent party, I suspect there would be nothing illegal found; (3) The problem is not that it steals from the American people illegally but that it does so legally; (4) Therefore, we do not need to audit the Fed, we need to abolish it.

Flaherty: Hypothesis: Major European banks and investment houses own the Federal Reserve. From across the Atlantic they dictate monetary policy for their own benefit. Facts: No foreigners own any part of the Fed. Each Federal Reserve bank is owned exclusively by the participating commercial banks and S&Ls operating within the Federal Reserve bank’s district. Individuals and non-bank firms, be they foreign or domestic, are not permitted by law to own any shares of a Federal Reserve bank. Moreover, monetary policy is controlled by the publicly-appointed Board of Governors, not by the Federal Reserve banks.

My reply: Flaherty is basically correct, and I have never claimed in my book or in my lectures that it was otherwise. I do not appreciate being lumped together with those who claim foreign control over the Fed. The real danger in this line of reasoning is that it is often coupled with the argument that, if we could only get control away from foreigners and put it into the hands of Congress or the Treasury, then everything would be all right. In truth, even if the Fed were in the hands of foreigners, placing it into the hands of American bankers and politician would make little difference. The Fed does not need to be converted into a government agency. It needs to be abolished.

The Creature from Jekyll Island

A Second Look at the Federal Reserve

by G. Edward Griffin

Where does money come from? Where does it go? Who makes it? The money magicians' secrets are unveiled. We get a close look at their mirrors and smoke machines, their pulleys, cogs, and wheels that create the grand illusion called money. A dry and boring subject? Just wait! You'll be hooked in five minutes. Reads like a detective story — which it really is. But it's all true. This book is about the most blatant scam of all history. It's all here: the cause of wars, boom-bust cycles, inflation, depression, prosperity. The Creature from Jekyll Island is a "must read." Your world view will definitely change. You'll never trust a politician again — or a banker. Available from The Reality Zone at www.realityzone.com/creature.html.

The Creature from Jekyll Island

An address by G. Edward Griffin

This is Mr. Griffin's acclaimed lecture based on his book by the same title. Heard by over a million people around the world. Audio cassette or CD. 74 minutes. Available from The Reality Zone at www.realityzone.com/creatfromjek1.html.

The Federal Reserve

A discource by G. Edward Griffin

Mr. Griffin, founder of Freedom Force International and author of The Creature from Jekyll Island addresses these issues.

What is the Federal Reserve System?

Who drafted the plan for the Fed

When and where did it occur?

How is money created?

What impact has this on the American dollar?

Should our currency be backed by gold or silver?

Where does Congress get most of its funding?

What is the solution to the problem of fiat money?

Why do bankers get away with it?

What might happen if we continue on our current path?

What might come from a return to constitutional money?

What can concerned citizens do to help?

DVD. 42 minutes. Available from The Reality Zone at www.realityzone.com/griffinfrs.html.