Melford Pearson 1969
- Melford Pearson. Excerpted from his book, Challenge to Crisis. Pubsished by Aquila Press, Inc., PO Box 252, Noblesville, IN46061
- Northwest Area News, Sept. 1994, No. 127, Oct. 1994, No. 128, Nov. 1994, No. 129, Dec. 1994, No. 130, Jan. 1995, No. 131 and Feb. 1995, No. 132. Reprinted with the kind permission of the author.
Of all the built-in flaws of our economic system, the ramifications of money and credit are the least comprehended. Yet, without a basic understanding of the whole private banking complex, there can be no working grasp of the capitalistic structure. The tentacles of the banking octopus reach into every cranny and crossroads in this nation. There is not a man, woman or child who escapes the direct effects of its economic strangulation.
It is one of the paradoxes of civilization that money is the one thing that is needed, and used, by more people than anything else, while it is at the same time, the least understood by them. There is no object more desperately sought for every minute of a person’s life. Man will labor until aching muscles prevent sleep, he will put his life at stake, and he will steal and commit murder in order to acquire it. How strange that he evinces such little interest in understanding what money is, how it is created, and who controls the amount in circulation!
The answer, of course, lies in the fact that the average citizen has been conditioned to accept that the whole subject of money is too complex for his feeble brain to comprehend. He is unaware that the complexities and mysteries enshrouding the money question, and banking generally, have been promoted with premeditated design that the economic and financial enslavement of all citizens might go undetected.
This is not to say that all bankers, especially the employees of the banking business, are themselves dishonest, or conscious destroyers of the public will. It is to say that a monetary system, now so widespread as to be unquestioningly accepted, has been deliberately fostered, promoted and put over through the years by persons obsessed by the desire for personal power and profit, coupled with a complete indifference to the well-being of the rest of mankind. They have capitalized on the ordinary man’s innate honesty and credulity to the point where the philosophy of the unscrupulous has become generally accepted as the right one, the respectable one, the desirable one.
Belatedly, the people must awaken to the realization that there cannot be any social reform, any ability for the citizenry as a whole to purchase all that the nation can produce, without fundamental monetary reform. A sovereign people who want to enjoy the full fruits of their hard work, who want to see their children free from needless indebtedness, and who want to build a nation commensurate with its technological potential must break the power of the nation’s private debt-merchants.
It is sheer folly and blindness to seek economic well-being and social justice without confronting four-square the unyielding barrier of an archaic money supply.
The first enlightenment that must come to the people is that the private banking system of the present operates on the same fallacious principle as that of its progenitor, the 17th century goldsmith bankers. These were the private bankers who did largely all the banking of Western Europe. It was they who accidentally discovered the ruse of “fractional reserve” lending. Up the centuries it was to serve as the foundation for all private banking.
The goldsmiths were the custodians of gold. Those who owned the “precious” metal brought it to them for safe keeping. For each amount of gold deposited the goldsmiths gave the depositor a receipt that could be presented at any time and the amount of gold withdrawn. However, owners of the gold found that it was easier to exchange the receipts themselves in conducting their business than to disturb the gold in the vaults of the goldsmiths. In fact, only a very small percentage ever came to actually redeem their receipts. Consequently the receipts circulated as “money” with no thought, or suspicion, by either buyer or seller, as to lack of any gold backing.
It was this circumstance that led the goldsmith bankers to the cunning and deceptive principle of “fractional reserve” banking. If the larger number of those who possessed the receipts for the deposited gold did not come in and claim their actual gold, what prevented the goldsmiths from loaning out the depositor’s gold to others? In fact, what prevented the goldsmiths from writing out receipts for which no gold even existed? Who would be the wiser as long as they, the goldsmiths, simply maintained in their vaults sufficient gold to meet the claims of the small number who did present their receipts for gold payment?
This is exactly what the goldsmiths proceeded to do. They commenced to manufacture money, issuing receipts that neither had any gold backing nor were backed by either goods or services. They simply used the depositor’s gold, not their own, as a fractional reserve against which to create fictitious receipts to be loaned out in the form of interest-bearing debt. Thus was born the fractional reserve system of private banking.
There is a long evolving history of private banking from the time of the goldsmiths to the Federal Reserve System of this Twentieth Century. However, it is a consistent history of private bankers using a deceptive form of “reserves” upon which they could increase manifold the money supply by the simple expedient of manufacturing “money” or “credit.” More serious is the fact that all such artificial purchasing power has been put into circulation in the form of debt–obligating the people and their government with perpetual interest-bearing liens against both property and future labor.
The power to expand the money supply automatically carried with it the power to contract the supply. Thus, the power to inflate and deflate the amount of money has consistently given the private bankers the power to destroy the purchasing value of money, affect the price of every product and service, concentrate the assets of the nation in the hands of a minority, and arbitrarily cause depressions at will.
It was this power that Mayer Amschel Rothschild, the founder of the notorious Rothschild International Bankers, referred to when he boasted, “Permit me to issue and control the money of a nation, and I do not care who makes its laws.” He knew, as he and his five sons so devastatingly proved, that no people, not even government itself, can go contrary to the dictates of those who control a nation’s money supply.
History reveals a constant struggle by governments, and their citizens, to limit the power wielded by private bankers. So powerful have the bankers been, and so beholden have governments been to the bankers, that at no time has any major nation been successful in setting up an honest and adequate money system that was solely under the jurisdiction of the sovereign people.
Unfortunately, it has always been the ignorance of the people and the supine indifference of their representatives and government that have permitted a minority to usurp the issuance and control of money–a function that belongs exclusively and absolutely to the people through their government.
Space is far too short in one chapter, or for that matter in a book, to delve into the chronological history of money and banking in this nation. However, we should first note that the framers of the Constitution did specifically intend that the power to control the nation’s money should be retained in the hands of the people through the Congress. Article I, Section 8, Part 5 of the Constitution states, “Congress shall have power to coin money, regulate the value thereof, and of foreign coin.” While only the word “coin” was used, because there were no banks of issue at the time, the Supreme Court has upheld the proposition that “whatever power there is over the currency is vested in the Congress.”
The extension of banking control over the economies of all nations has been simply the process of bankers securely entrenched in one nation extending credit, or making their hoarded wealth available, to other nations. Invariably, this process has been the most effective in the case of undeveloped nations or in the time of governments caught in the throes of war. So it was with our own nation. While the colonists saw the wisdom of issuing their own sovereign money, they were prohibited from doing so by the tyrannical government of George III. By the time they had won their independence, they were at the mercy of both foreign credit and American speculators who owned the main indebtedness of the new nation.
Within two years after the adoption of the Constitution in 1791, our own nation was placed in the clutches of private banking. It was engineered by Alexander Hamilton and the international financiers for whom he was spokesman. It was accomplished by the enactment of the First National Bank Act that gave birth, with the very inception of our Republic, to the deceitful philosophy that the only “sound” money is debt-money.
Unsuspectingly, the nation had agreed to turn over to the private bankers the nation’s bonds, or credit of the whole citizenry, as a “funding” of the existing debt, then allowing the bankers to issue bank notes on the government bonds. Not only was the power to control the amount of money in circulation placed in private hands but to them was extended the privilege of collecting interest on both the government bonds and the new “money” that they created in the form of loans.
Thus was born the gigantic piece of monetary chicanery that holds sway to the present. Stripped to stark nakedness, it stands exposed as a monument to mankind’s naiveté in protecting both his hard work and the products of his labor. And what does such a major deceit encompass? It encompasses the acceptance that while a nation’s bonds–secured by the whole nation–and the private citizen’s assets and working capacity, are sufficient for the private banks to issue money and make loans, those same bonds, assets and working capacity are not sufficient for a sovereign people themselves to put money directly into circulation without incurring any debt or without paying any vampiristic tribute called interest.
Founding Fathers Grapple with Private Banking
For over 175 years a developing nation was to be burdened with needless debt and have both its industry and commerce servile to the manipulations of debt-merchants. However, our forefathers were by no means unmindful of what was happening. In vain they pitted their opposition to the private banking interests that wielded too much power even in the nation’s infancy.
Consider the reaction of Thomas Jefferson who authored the Declaration of Independence, was the Republic’s third President, and was the nation’s staunchest pleader for a democratic society. In a letter to John Taylor, he had this to say:
” I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a money aristocracy that has set the Government at defiance. The issuing power should be taken from the banks and restored to the Government to whom it properly belongs.”
Equally vehement in underscoring the fallacies and dangers inherent in private control of the nation’s money supply was President John Adams. His reactions, summed up in a letter to Thomas Jefferson, have been echoed up the entire history of our nation by those who have investigated the money question. Terse and to the point, Adams wrote:
“All the perplexities, confusion and distress in America arise, not from defects in their Constitution, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit and circulation.”
An ironical twist of events found Jefferson President of the nation at the outbreak of the War of 1812. So dependent was the nation for its money supply on the private bankers that he was compelled to acquiesce to the chartering of the Second Bank of the United States. Twenty years later, President Andrew Jackson vetoed the bill that would have renewed the charter, which expired in 1836. It is well to note that under President Jackson’s tenure the nation was free of all debt. Under no administration, before or after, was the nation to be free of needless interest-bearing indebtedness.
President Jackson, along with Jefferson and Adams, recognized the stupidity of a sovereign nation making itself beholden to private bankers for its supply of money. Why should a nation that had just won its political freedom become subservient to financial despots and thus make a mockery of economic freedom? In his farewell address of March 4, 1837, he minced no words in making this indictment of the privately owned central bank of issue:
“In the hands of this formidable power, thus organized, was also placed unlimited dominion over the amount of circulating medium, giving it the power to regulate the value of property and the fruits of labor in every quarter of the Union, and to bestow prosperity or bring ruin upon any city or section of the country as might best comport with its own interest or policy….Yet, if you had not conquered, the government would have passed from the hands of the many to the hands of the few, and this organized money power from its secret conclave would have dictated the choice of your highest officers and compelled you to make peace or war, as best suited their wishes. The forms of your government might for a time have remained, but its living spirit would have departed from it.”
President Andrew Jackson had made a heroic gesture in trying to liberate the nation from the stultifying and exploitative power of private bankers but history must record it only as a gesture. He provided no sound alternative. Government deposits were placed in State banks that in turn used the public credit in a splurge of reckless lending that led to widespread indebtedness and bank failures. Thus ensued the panic of 1837 with its attendant foreclosures and inflated prices. It was the first of the major money panics that were to afflict the nation.
Of all the outstanding men who make up the best of American history, Abraham Lincoln, perhaps more clearly than anyone, understood how wrong it is for anyone except government to issue the nation’s money. He did more than indict the unscrupulous private bankers and challenge their unchecked power to place a whole nation in bondage and famish its people. He courageously gave the nation the only honest money its citizens have ever enjoyed.
It was Lincoln who stated:
“Money is the creature of law, and the creation of the original issue of money should be maintained as an exclusive monopoly of the National Government….The privilege of creating and issuing money is not only the supreme prerogative of the Government, it is the Government’s greatest opportunity.”
He took positive steps to fulfill his conviction.
During the early years of the Civil War, Lincoln through the Congress succeeded in issuing $450,000,000 of United States legal tender notes without one cent either of indebtedness or of interest incurred by the nation. Such Constitutional money was called “greenbacks” and was secured by the assets of the entire United States. Why need a great and sovereign nation turn its credit over to private bankers to be rented back in the form of interest-bearing indebtedness? Couldn’t all of the nation’s money supply, geared to its economic need, be brought into existence without saddling the nation, or its people, with liabilities for the use of its own credit and assets? The answer is emphatically affirmative, but the private usurers and bondsmen had no disposition to tolerate a circumvention of their merry game of siphoning off the wealth of the nation.
There is ample evidence leading one to believe that Lincoln signed his own death warrant when he took the first bold step to abolish financial servitude. Whereas his Emancipation Proclamation decreed the abolition of physical slavery for a large segment of the population, his issuance of “greenbacks” decreed the abolition of economic slavery for every man, woman and child in the nation. But ruthless and avaricious financiers were not to be thwarted in their systematic sacking of the virgin territory and untapped resources of America.
Not able to stop the issuance of nearly half a billion dollars in Constitutional and sound money, the banking syndicate was successful in placing a limitation on the “greenbacks” themselves. Thus these notes bore upon their face the following: “This note is a legal tender at its face value for all debts, public and private, except duties on imports and interest on the public debt.” It was this exception clause that forced government and importers to kowtow to private bankers and ultimately depreciated the “greenbacks.” In 1879, after all the depreciated greenbacks had been bought up by financial speculators, Congress was induced to pass a law that all the notes issued during the Civil War were to be redeemed at face value in gold. It was another triumph for the nation’s debt-merchants.
Lincoln’s efforts not only to unmask but to destroy the gargantuan deceit of private banking were to no avail. Nevertheless he had made a valorous attempt to erase both over-burdening debt and pyramiding interest from the economic lives of all the generations to follow. He recognized that debt and interest are cancerous growths that devalue human toil, stifle progress and have no place in an equitable and unfettered economy. If Lincoln had been successful in introducing the nation to a sound and honest money supply, the other built-in evils of predatory capitalism would have crumbled. One hundred years of wholesale foreclosures, hardships, anguish and periodic economic breakdowns would have been precluded. But such was not the pattern slated for America.
In 1863 the financial barons and usurers moved with a vengeance. Holding over $2,600,000,000 of interest-bearing government bonds, which the government had been forced to sell to the banks to underwrite the costs of the Civil War, the bankers compelled the passage of the National Bank Act. The Congress was helpless to offer any opposition. Under the newly enacted law, the national banks were granted the privilege of depositing their purchased bonds with the Treasurer of the United States and then to issue up to 90% of those bonds in bank notes to private borrowers. Thus on precisely the same money they collected 6% interest on the bonds themselves and a similar interest, usually more, on the private bank notes they “manufactured.”
From the time of the Civil War up to the present there is a perpetual history of how private bankers and their syndicates have inveigled out of Congress privileged and unconstitutional legislation giving them despotic control of the nation’s money supply. No small part of their intrigue involved their garnering of the gold and getting Congressional sanction that any money issued by the government must be redeemed in the precious metal owned by the private banks. Thus they could prevent the United States government from interfering with the bankers’ exclusive monopoly.
“Mystic” Quality of Gold
Throughout the monetary history of this nation, the private banks have promoted the calculated deception that gold is the only sound basis for a nation’s money supply. The fact that such basis permitted them to control the money supply simply by cornering the gold supply was carefully kept from the people. What should have registered with the people with shocking impact is this challenging question: If the whole purpose of a money supply is to facilitate the exchange of goods and services, and to provide for productive expansion, why then shouldn’t all money be related directly to those goods, services and production?
What twisted reasoning dictates that a nation’s progress and well-being should be dependent on some mystic quality of a metal instead of being directly dependent on the natural resources, manpower and ingenuity of the whole nation and its people?
Not having any understanding of how his money was created, or more importantly, how the amount of money was arbitrarily determined, the average citizen has unsuspectingly accepted the promoted fiction that both his cash and checks were backed by gold. While it is true that prior to 1934 the legal promise existed to convert both currency and bank deposits into gold, no such amount of gold has actually existed.
For example, when the Federal Reserve was organized in 1914, the total deposits and currency in circulation amounted to 20 billion dollars, but there was only 1.6 billion dollars of monetary gold in the country. In other words, the amount of money in circulation was 12 times the amount of gold. According to figures from the House Committee on Banking and Currency, a similar proportion held true 50 years later in 1963. At that time the money supply, both cash and checks, totaled 157.4 billion dollars and the Treasury’s gold was only 15.6 billion dollars.
However, citing these figures is begging the point. In 1934, the private banking institutions succeeded in pushing through a law that not only made it illegal to possess gold but no American citizen could demand gold in exchange for his dollars. As usual, of course, there was an exemption for the non-American. Foreigners holding American credit could, through their banks, demand and have their dollars converted into gold bullion.
From a private banking system based on useless bags of gold, we have come supinely to accept an entire money supply based on debt. Not one person in a thousand, more likely, not one in a hundred thousand, recognizes the hoax that private bankers have perpetrated on the nation, its citizens and its government. Unsuspectingly, the people and their government have turned over their property and their earning capacity to the private banks to be monetized and lent back to them in the form of interest-bearing indebtedness.
Slowly but surely more people are beginning to recognize the fallacious gimmick of fractional-reserve lending that permits the private banks to grant loans five times or more the assets or reserves of the bank itself. (And bear in mind that it is the people’s credit that makes the loans good.) All such granting of loans, or credit-dollars, is nothing but the manufacture of money. Every time a loan is made, this is money that had no existence prior to its creation by the private bank.
The arbitrary power to expand and contract the money supply, by the making of loans or calling them in, has placed in the hands of the private bankers the unhallowed power not only to change the purchasing worth of the dollar but has given them the power literally to control the amount of work the nation can perform.
The nation’s entire working capacity has been made beholden to the whim and greed of those who are nonproducers.
INFLATION AND DEFLATION
The average American has little or no understanding of the causes either of inflation or deflation of his nation’s money and credit. The fundamental causes of the erosion of the dollar entirely escapes him because he has been purposely kept ignorant of how his nation’s debt-money functions.
The purpose now is to cast some light on the twin mysteries of inflation and deflation, and to demonstrate how the real culprit of destroyed purchasing power is the whole privately owned and controlled banking system. For, if a person doesn’t grasp the mechanics of how and why our money supply is systematically manipulated, there can be no understanding of how billions of dollars in interest, foreclosed property and savings are ruthlessly or callously wrested from the people by private debt-merchants.
The fact to be recognized is that coins and all currency constitute less than ten percent of the money supply. Over ninety percent of all the nation’s monetary needs are provided for by credit in the form of loans that create demand deposits or checking accounts. It comes as a total surprise to most Americans to learn that private banks do not loan to borrowers other people’s savings or the assets of the bank itself. Every credit-dollar that a commercial bank puts into circulation in the form of loans is new money that has been created.
At any given moment, the purchasing power of the people is the amount of cash and checking accounts in existence. In short, the law of supply and demand applies explicitly to the purchasing value of the unit “dollar.” Increase the number of dollars in circulation and there exist low prices and a high dollar.
It is the manipulation by first creating a cheap dollar, with all its attendant ramifications of easy borrowing and increased indebtedness, and then creating a high dollar, with all its attendant ramifications of foreclosures and destroyed purchasing power – coupled with “administered” prices – that has resulted in every major depression and panic the nation has known since its inception. The toll paid by the American people throughout their history in hardship, suffering and heartache is immeasurable in the wake of such financial intrigue.
Startling as it may seem to most Americans, it is impossible, under our present private money system, to have prosperity, with full employment and full production, without a commensurate increase in indebtedness. It is impossible to get a single dollar of the very lifeblood of our economic system into circulation without an individual, or a corporation, or the government going into debt. And for the privilege of going into debt, each must pay a tribute to the private Shylocks in the form of exorbitant interest!
At this point, it should be easy to observe that when the private banking system commences to expand the money supply, making loans easy to get, we have the condition of inflation, a lot of new credit dollars in circulation, against which there are no existing goods and services. Immediately, there is a resurgence of business. Production is increased and the unemployed go to work. New businesses are commenced to produce new items, and general prosperity and good times are at hand.
Parenthetically, however, we should note that the expansion of the money supply has not added one iota to the nation’s resources, has not added one additional human being to the work force, or added one scintilla to the nation’s technological know-how. Momentarily, private banking has performed no other gesture than to release its stranglehold on the nation’s ability to produce. However, the “magnanimity” of its gesture is but prelude to the big steal in the making.
At the point when the nation and its people are saddled with as much indebtedness as “the traffic will bear,” the private banks reverse their whole monetary policy. They commence to call in their loans and to restrict all spending. In other words, they bring about a condition of deflation. A circumstance has now been deliberately created in which the cash and credit in circulation is less than the goods and services that are available for purchase. Inventories become stagnant, people are thrown out of work, and the whole nation has landed in a disastrous depression.
Witness now what has really happened to the people and their government. It is only a small part of the tragic picture to point out the slowdown of the economy, the hunger, the millions unemployed. The real crime of private banking is that while the people and their government incurred their indebtedness during a period of inflation when a dollar was cheap, they have now to pay off their debts with a dollar that is high. Human effort throughout the whole spectrum of the economy has been devalued.
This is the harvest time for the private banks and lending institutions. Not only is there unavoidable wholesale foreclosure on homes, farms and small businesses, but every dollar of both public and private indebtedness must be paid back by future earnings made up of a dollar representing increased human effort. Hundreds of billions of dollars are added to the coffers of the unscrupulous financiers by thus inflating and deflating the nation’s money supply. It is a high price that the people must pay to enjoy only a temporary prosperity. It is the inevitable consequence of a money system that is based on debt.
The power to inflate and deflate the money supply by arbitrarily creating debt-dollars is only half the picture. Equally devastating to the economy, and thus affecting the lives of all the people, is the whole spectrum of ruinous interest. Every credit-dollar that is put into circulation by the private commercial banks is in the form of interest-bearing indebtedness.
In a few paragraphs it would be impossible to cover adequately this evil which has plagued mankind up the centuries, an evil that all major religions in their earliest histories both denounced and forbade. However, we should have a minimal grasp of the pyramiding effect of interest in order to understand the impact it has on our fortunes, our lives, and the stranglehold it currently exerts in suffocating the whole economy.
We can get some idea of the billions of dollars, the hundreds of billions, paid in interest solely on the public debt by considering President Lincoln’s issuance of “green backs” which were the only “money” this nation has ever had without incurring debt or interest. If that $450,000,000, less than one-half billion dollars, had been put into circulation by turning over to the private banks interest-bearing bonds, the accumulated interest today, according to computations by the Treasury Department, would be over 40 billion dollars.
Now give thought to a whole monetary history of the Federal government beholden to private usurers for use of the nation’s own credit. The magnitude of the interest charges on the Federal debt should be apparent. From a Federal debt of less than one billion dollars in 1800, the debt has risen to the current over-burdening amount of over 360 billion dollars. It is a whole history of indebtedness with a sovereign people naively paying the private bankers hundreds of billions of dollars for use of the people’s own credit.
Today the interest on the Federal debt alone is 16 billion dollars, second only to national defense as the largest item in the national budget. If during the next 24 years there is no increase in indebtedness, the accumulated interest on the Federal debt will exceed the total amount of the principal, with the 360 billion dollars in debt still burdening the nation and the people.
To get a glimpse into the astronomical amounts that the private banks extort out of the economy is to consider two very simple facts. The first is that any amount of money loaned at 6% compound-interest doubles itself every 12 years. The second fact is that of geometric progression, where if one takes a mere penny and doubles it, and then doubles each total for thirty times, one will come up with the incredible grand total of over 5 million dollars. It is the foregoing two facts, plus the fact that the vast bulk of loans by the private banks are simply book entries and are not made up of the deposits of others or assets of the bank itself, that makes interest-taking so insidious, so pernicious, and so astronomical.
Perhaps we can get a sufficient appreciation of unmitigated exploitation that is reflected in exorbitant interest charges by considering a statistical table placed in the Congressional Record by Representative Wright Patman on July 27, 1967. This table covers the interest paid on both the public and private debt for each year from 1951 to 1966. The significance of the 15-year table is that it compares what the interest would have been if interest rates had been kept at the 1951 level.
In 1951, the total indebtedness, private and public, was 524 billion dollars. In 1966, the total indebtedness, private and public, had pyramided to 1,368.3 billion dollars–over one and a third trillion dollars. During this 15-year period, the American people and their government have paid in interest the staggering sum of 680.2 billion dollars. If the interest rates had not been unnecessarily increased, the total interest paid would have been 468.5 billion dollars.
The net result is that from 1951 to 1966 the private banking system, through the interest manipulation of the banker-dominated Federal Reserve, extorted $211,700,000,000 (211.7 billion dollars) from the citizenry.
Representative Patman, in presenting these official statistics, stated,
These figures plainly establish that high interest rates have been a burdensome tax on the low and moderate income families. High interest rates have deprived these people of huge chunks of their wages and at the same time have prevented the construction of needed housing and other works.
He further commented:
The Federal Reserve has acted as destructively as the worst of the rioters. And the resulting damage to the economy has far exceeded the damage from all the riots. The Federal Reserve’s December 6, 1965 defiance of the President wiped out the chance to build 500,000 new housing units in 1966–far more than have been burned or destroyed in all the riots combined.
To appreciate the magnitude of the excessive interest paid only in the year 1966 is to make a comparison with farm income. In so doing we should realize that there are approximately 3.4 million farms, and that these millions of farms are responsible for supplying the food that nourishes all our citizens. In addition, these millions of farms provide much of the fiber used in making the nation’s clothing. Now consider the fact that the excessive interest paid only in the year 1966, which was 36 billion dollars, was the same amount as the total gross farm receipts from marketings in 1963. Incredible as it might seem, the excessive interest of nonproducers in one year was equal to the total output of the nation’s producers who sustain life for 200,000,000 citizens!
Let’s give some thought to the total of 211.7 billion dollars that represents the excessive interest for the past fifteen years. A hypothetical construction project of building houses priced at $20,000 per unit would seem to give us a good yardstick. As we construct each 50-foot house, we butt each next to the other with no space between. For 211 billion dollars, how long a line of houses would we have constructed? We would have constructed a line of houses, each butted against the next, going around the world four times.
While interest charges are involved in everything that is purchased, in no area is its evil more apparent than in home buying. However, in too few cases, particularly the young couple desperate to get a home of their own, are the buyers aware that they are the victims of a merciless game of paying double the amount in human effort for value received. Month in and month out, during the best years of their lives, the nation’s homeowners are paying for two houses but receiving only one. In fact, the average couple is unaware that, because of exorbitant interest charges, their home is depreciating faster than they are able to reduce the mortgage.
Certainly, it should dawn on the nation’s homeowners, or home-builders, that they not only give a first mortgage on their home to the bank but that it is their earning capacity that makes the loan substantive. In short, the average home-builder must pay the voracious money-lender in interest an amount equal to the price of the home for the use of the home-builder’s own credit while the money-lender doesn’t as much as replace one shingle or plant one seed of grass during a 25-year period of receiving payments.
There are no economic crimes against humanity comparable to the diabolical power to manufacture a nation’s money and to charge tributes called interest. A halt must be called to the whole business. The same element that makes the citizen’s mortgage and the government’s bond good for the private banker is the same element that would allow a sovereign people the right to provide for their own monetary needs without either the burden of debt or interest.
Federal Reserve System
In 1913 the Federal Reserve Act was passed. Under the guise of setting up a flexible money system that would meet the commercial and individual credit needs of an expanding economy, the private bankers pushed through Congress a system of money control that gave them despotic power in determining the whole money supply of the nation. Consequently, up here in the 1960s , a mere handful of men, occupying the highest positions in the private banking complex, exercise a life-and-death influence over the lives of every man, woman and child far exceeding the combined power of both the President and the entire Congress.
The key to an understanding of how the Federal Reserve System is a private-banker-oriented and dominated autocracy is the fact that of the nine directors of each of the 12 Federal Reserve Banks, six are elected by the private member banks. A questionnaire sent out in 1964 by the House Banking and Currency Committee revealed that even of the 36 directors elected by the Federal Reserve Board, 19 were, or had been connected with the private banking industry. In short, 91 out of the total 108 directors of the Federal Reserve Banks had connections or associations with the private banks that they were supposed to regulate.
The arrogant statement of William McChesney Martin before the Joint Economic Committee of the U.S. Congress on February 26, 1965, should leave little doubt as to the fact that it is the wishes of the private bankers that the Board serves and not the people whose earnings and savings should be protected. Testifying before the Committee, Chairman Martin brazenly stated that “the Federal Reserve Board has the authority to act independently of the President,” even “despite the President.” Ten months later, the Federal Reserve Board demonstrated its self-proclaimed autocracy by arbitrarily raising the interest rate despite the pleadings of President Johnson to the contrary.
Open Market Committee
However, not the Federal Reserve Board, nor the Federal Reserve Banks, are the real power over the nation’s money. The fundamental and dictatorial monetary powers of the nation are exercised by a committee that most Americans do not know even exists. This is the Open Market Committee that is made up technically of five Federal Reserve Bank presidents and the seven members of the Federal Reserve Board. However, all twelve presidents of the Federal Reserve Banks participate in its deliberations.
The Open Market Committee is not only the most powerful single group of men in this nation, but perhaps in the world. Meeting in secret, immune from public auditing or disclosure of the minutes of its meetings, its operations of buying and selling government securities give it absolute and autocratic control over the nation’s entire money supply. In the hands of this Committee exists the power to inflate or deflate arbitrarily the amount of money to conduct the over-all economy. Through its actions literally billions of dollars in interest and foreclosures flow into the private bankers’ coffers while at the same time the nation needlessly suffers economic breakdown, unemployment, business stagnation and spiraling indebtedness.
There was no provision for the Open Market Committee in the Federal Reserve Act of 1913. The intent of the Act was to set up twelve semi-autonomous Federal Banks that would provide the necessary reserves for its members by monetizing the “eligible” short-term commercial paper, thereby responding to business conditions and requirements of each regional area of the nation. The Federal Reserve Board would determine the discount rates and interest rates, thus serving as a check on the amount of reserves the commercial banks would have against which to make loans.
In less than ten years after the enactment of the Act, the powerful private banks in the East had succeeded in thwarting the specific intent of the Federal Reserve System by converting it into a central banking system by the setting up of an ad hoc committee to coordinate the buying and selling of government bonds. Later they succeeded in pressuring Congress to give legality to the Open Market Committee that gave the private banks absolute control over the nation’s money supply.
Today it has a portfolio of over 40 billion dollars in government bonds that have been paid for once by the taxpayers with Federal Reserve notes and therefore should be retired. Instead these billions of dollars in government securities continue to collect interest and are the primary source of “reserves” for the commercial banks for placing the nation further and further in debt.
Bankers Testify Under Oath
To those who are unacquainted with the ramifications of money control, it may be a surprise to learn that shelf upon shelf of books have been written upon the subject. The incredible circumstance is that so much knowledge could exist without sufficient people rising in enlightened protest to demand monetary reform.
While there has been no dearth of information available on either the forces or personalities behind money control or the diabolical power that they have exercised, and do exercise, the real difficulty has been in getting large enough numbers of people to accept the truth of the allegations.
One of the chief obstacles has been that most of the writings on, and analyses of, money and banking have embodied very little direct testimony by bankers themselves. Thus the accused could continue to promote the doubt in the reader’s mind that the accusers were presenting an erroneous case. Like the yokel who saw a giraffe for the first time, the reader was conditioned to react, “There just ain’t such an animal!”
Of very recent times, a most fortunate development came to pass. It was to mark the end of any deceptive counteraction that those who were endeavoring to awaken the people to the iniquitous machinations of private banking were subverters of the public trust and advocates of “funny-money” schemes. Out of the mouths of bankers themselves, under oath, was to come the whole story of the workings of their own nefarious system.
For the whole year of 1964, spring, summer and fall, a committee of the United States Congress conducted extensive hearings into the operations of the Federal Reserve system. No aspect or ramification of the 50-year existence of the nation’s banking system was left unscrutinized. It was the first time in the history of the nation that a duly constituted Committee of Congress had so penetratingly and thoroughly investigated the issuance and control of our whole money supply.
The man who spearheaded the investigation was Representative Wright Patman of Texas who is the Chairman of the House Committee on Banking and Currency, and was also chairman of the Subcommittee on House Finance which was responsible for the hearings. It should be noted that Rep. Patman has been for 40 years one of the nation’s most knowledgeable and forceful critics of the privately controlled Federal Reserve System. He has stressed consistently that under the Constitution it is the right and duty of Congress to create and control the money supply and that under the Federal Reserve Act passed on December 13, 1913, and subsequent Acts, the absolute power over the nation’s money has been exercised by private bankers.
The hearings are too voluminous for the average person to read en toto. However, for the scholar there is now available an historic and documented record of how private banking operates and how the nation’s whole economy is despotically influenced by its actions. Not only were all the executives of the Federal Reserve System itself, the 12 presidents of the Federal Reserve Banks and the seven members of the Federal Reserve Board, meticulously interrogated but included as well were the Secretary of the Treasury, officials of the General Accounting Office, representatives of the American Bankers Association, the Independent Bankers Association and representatives of the commercial banks.
Included also were dozens of experts representing a wide range of testimony. Among them were the President of the Cooperative League, the research director of the AFL-CIO, past advisors to Presidents Truman and Kennedy, and a number of outstanding authorities on law, political economy and public administration. In addition, many statements and exhibits were all made part of the hearings. The three volumes entitled “The Federal Reserve System After Fifty Years“, which cover the hearings, fill over 2200 pages alone. Corollary volumes make a stack of priceless documentation over a foot high.
At the conclusion of the hearings the majority of members of the Subcommittee made specific recommendations, and later introduced bills, for the express purpose of reversing high interest rates and tight money, and curbing the exorbitant power of the private banks which control the Federal Reserve System. At this writing all such effort has been smothered by the pressure and intimidation of the financial lobbies spearheaded by the American Bankers Association. Under no circumstances do they intend to tolerate legislative interference with their monopolistic control of the nation’s credit and money supply.
The extent to which the banking lobbies will go is graphically borne out by the attempted bribe of Representative Gonzales, a member of the Sub-committee from Texas. Representative Gonzales testified that he had been offered a position on the Board of Directors of a bank coupled with a stock gift amounting to $14,000. One can only speculate as to how many elected representatives, over the years, have succumbed to similar overtures of bare-faced bribery.
Viewing our history in retrospect, it taxes the imagination to realize that a young and fertile land, filled with such an energetic and ingenious people, should have been betrayed so long to the connivings of those who were non-producers. How utterly incredible that debt-merchants, with nothing but their garnered bags of gold, and their usurped power to create interest-bearing debt, could so long systematically bilk a nation without an outraged citizenry making them disgorge their unearned wealth and unearned claims!
The answer lies of course in a number of circumstances which we have alluded to earlier. Overridingly, it has been the circumstance of the majority of the people caught in the throes of eking out an existence being too preoccupied to enlighten themselves about the subject of money. Others recognized that to protest was to jeopardize their economic livelihood, besides having the stigma attached to their person that they were advocates of “funny money.” There has always been a penalty for being too brash in indicting the pernicious power of private banking.