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The History of the Federal Reserve
Michael J. Ross writes "Money plays a key role in modern life; in fact, for some people, nothing is more important than acquiring more of it. Yet most people do not know what money really is, how it is created, how its supply is expanded and contracted, and who benefits from those changes. In the United States, the central figure in this ongoing drama, is our central bank, the Federal Reserve, whose history, power, and effects are explored in G. Edward Griffin's fascinating book The Creature from Jekyll Island: A Second Look at the Federal Reserve." Read on for the rest of Michael's review.
The Creature from Jekyll Island
author
G. Edward Griffin
pages
624
publisher
American Media
rating
9
reviewer
Michael J. Ross
ISBN
0912986212
summary
A compelling history and indictment of the Federal Reserve system
For the citizens of the United States and several Latin American countries, the "coin of the realm" is the US dollar, which is, in simple terms, created by the Federal Reserve, a.k.a., the Fed. But who created the Federal Reserve, and why? The subjects of banking in general, and the Federal Reserve in particular, would be considered by most Americans to be dry, boring, and of little importance to their day-to-day life. But those same people are endlessly fascinated by how to make more money (with minimal effort, such as the lottery), how to spend as little of it as possible (coupons never go out of style), and how to maximize one's investment returns. Why this disconnect? Why do Americans care so little about the origins of that which they spend a third of their time pursuing, and seemingly another third spending?
Some of these "salary slaves" may understand that their money serves as a store of wealth and a medium of commercial exchange, which makes possible their daily financial transactions without the need for bartering. But, for the most part, they do not understand the critical importance of what is backing that money, if anything; how that money comes into existence, and what debt offsets it; what entities control the supply and distribution of that money; and how those changes can be used to legally steal purchasing power from victims who may not be entirely unsuspecting, but do not truly comprehend how they are getting ripped off.
The typical American, if he or she has given any thought to the matter, would consider the following statements to be true: The Federal Reserve is federal, i.e., a part of the US government. The Federal Reserve is a reserve, i.e., it has monetary savings of real value. The Federal Reserve serves the public, and is not a cartel of private banks serving itself. The US dollar has real value, i.e., it represents tangible wealth, such as gold securely stored at Fort Knox. Inflation is an increase in prices. Inflation is caused by greedy companies, not the US government or the Federal Reserve.
As G. Edward Griffin makes clear in his book, none of these beliefs are true — regardless of how well entrenched they are in our conventional "wisdom." He also explains why the US government and the Federal Reserve have their own reasons for being in no hurry to eliminate this ignorance. Yet these topics are just a small portion of what is covered in his far-ranging discussion of the theory and history of money and banking, particularly within the United States.
Spanning 624 pages, the material is organized into 26 chapters, which are grouped into six sections: "What Creature Is This?" (the Federal Reserve's shameful birth, and the shenanigans of the Fed, S&Ls, the IMF, and the World Bank), "A Crash Course on Money" (money, gold, debasement, fiat money, fractional-reserve banking, and money creation), "The New Alchemy" (the Rothschilds, J.P. Morgan, and banker financing of wars and revolutions), "A Tale of Three Banks" (America's failed experiments with central banking, and the American Civil War), "The Harvest" (the unconstitutional creation of the Federal Reserve, and its dreadful effects, including the Crash of 1929), "Time Travel into the Future" (current crises caused by central banking, how they can be reversed, future scenarios, and what the individual can do regardless). Every one of the six sections begins with a brief summary, as does every chapter, with every chapter wrapped up with a more extensive summary.
The section summaries also appear in the table of contents, which precedes a preface and the author's acknowledgments. These are followed by a delightful introduction — a piece from the British humor magazine Punch, comprising a rather telling exchange between an unusually honest banker and a soon-to-be-disillusioned bank customer. The book contains three appendices: a summary of the structure and function of the Federal Reserve system; natural laws of human behavior in economics; and whether the M-1 measure of money is subtractive or accumulative. The author also provides an index, as well as an impressive bibliography, reflecting his extensive research on the topics. In addition, the author invites readers to join Freedom Force, an organization dedicated to increasing liberty in the United States, curbing federal totalitarianism, and abolishing the Federal Reserve — all through peaceful participation in government, and the shaping of public policy starting at the grassroots level.
The Creature from Jekyll Island is published by American Media, under the ISBNs 0912986212 and 978-0912986210. It first came out in July 1994, and is now in its fourth edition, and its 19th printing. It also has Japanese and German editions, published in February 2005 and August 2006, respectively. On the book's Web page, visitors will find testimonials and comments from readers, updates to the book, a review of the book by Jane H. Ingraham of The New American, and G. Edward Griffin's response to a critique of his book by Edward Flaherty, who holds a Ph.D. in Economics. On that Web page, interested readers can order audio cassettes or CDs of the author's lecture, based upon this book, and produced in 1998.
My only criticisms of the book concern not the material itself, but its production — more specifically, the printing and layout, presumably chosen and thus fixable in the future by the publisher. The generous font size used throughout the volume, makes it easy to read; but the bold text, such as the subheads found in every chapter, is a bit rough-edged — on some pages worse than others. The subheads, already bolded, do not need to be in all uppercase; the publisher should choose one or the other. In addition, the inside margin length is a bit too small, forcing the reader to crack open the book more than should be needed, in order to comfortably read the text closest to the binding. In future editions, some of the space in the outer margin could be used to solve the problem, without any change to the words on each page, and thus the length of the book.
But aside from these minor flaws, this book is to be highly recommended. The Creature from Jekyll Island is a remarkably thorough, detailed, and challenging critique of central banking and America's latest incarnation of it, the Federal Reserve. G. Edward Griffin's precision of language, and his interweaving of the major players and their motives, makes for a most compelling historical study.
Michael J. Ross is a Web developer, freelance writer, and the editor of PristinePlanet.com's free newsletter.
You can purchase The Creature from Jekyll Island from amazon.com. Slashdot welcomes readers' book reviews -- to see your own review here, read the book review guidelines, then visit the submission page.
Some of these "salary slaves" may understand that their money serves as a store of wealth and a medium of commercial exchange, which makes possible their daily financial transactions without the need for bartering. But, for the most part, they do not understand the critical importance of what is backing that money, if anything; how that money comes into existence, and what debt offsets it; what entities control the supply and distribution of that money; and how those changes can be used to legally steal purchasing power from victims who may not be entirely unsuspecting, but do not truly comprehend how they are getting ripped off.
The typical American, if he or she has given any thought to the matter, would consider the following statements to be true: The Federal Reserve is federal, i.e., a part of the US government. The Federal Reserve is a reserve, i.e., it has monetary savings of real value. The Federal Reserve serves the public, and is not a cartel of private banks serving itself. The US dollar has real value, i.e., it represents tangible wealth, such as gold securely stored at Fort Knox. Inflation is an increase in prices. Inflation is caused by greedy companies, not the US government or the Federal Reserve.
As G. Edward Griffin makes clear in his book, none of these beliefs are true — regardless of how well entrenched they are in our conventional "wisdom." He also explains why the US government and the Federal Reserve have their own reasons for being in no hurry to eliminate this ignorance. Yet these topics are just a small portion of what is covered in his far-ranging discussion of the theory and history of money and banking, particularly within the United States.
Spanning 624 pages, the material is organized into 26 chapters, which are grouped into six sections: "What Creature Is This?" (the Federal Reserve's shameful birth, and the shenanigans of the Fed, S&Ls, the IMF, and the World Bank), "A Crash Course on Money" (money, gold, debasement, fiat money, fractional-reserve banking, and money creation), "The New Alchemy" (the Rothschilds, J.P. Morgan, and banker financing of wars and revolutions), "A Tale of Three Banks" (America's failed experiments with central banking, and the American Civil War), "The Harvest" (the unconstitutional creation of the Federal Reserve, and its dreadful effects, including the Crash of 1929), "Time Travel into the Future" (current crises caused by central banking, how they can be reversed, future scenarios, and what the individual can do regardless). Every one of the six sections begins with a brief summary, as does every chapter, with every chapter wrapped up with a more extensive summary.
The section summaries also appear in the table of contents, which precedes a preface and the author's acknowledgments. These are followed by a delightful introduction — a piece from the British humor magazine Punch, comprising a rather telling exchange between an unusually honest banker and a soon-to-be-disillusioned bank customer. The book contains three appendices: a summary of the structure and function of the Federal Reserve system; natural laws of human behavior in economics; and whether the M-1 measure of money is subtractive or accumulative. The author also provides an index, as well as an impressive bibliography, reflecting his extensive research on the topics. In addition, the author invites readers to join Freedom Force, an organization dedicated to increasing liberty in the United States, curbing federal totalitarianism, and abolishing the Federal Reserve — all through peaceful participation in government, and the shaping of public policy starting at the grassroots level.
The Creature from Jekyll Island is published by American Media, under the ISBNs 0912986212 and 978-0912986210. It first came out in July 1994, and is now in its fourth edition, and its 19th printing. It also has Japanese and German editions, published in February 2005 and August 2006, respectively. On the book's Web page, visitors will find testimonials and comments from readers, updates to the book, a review of the book by Jane H. Ingraham of The New American, and G. Edward Griffin's response to a critique of his book by Edward Flaherty, who holds a Ph.D. in Economics. On that Web page, interested readers can order audio cassettes or CDs of the author's lecture, based upon this book, and produced in 1998.
My only criticisms of the book concern not the material itself, but its production — more specifically, the printing and layout, presumably chosen and thus fixable in the future by the publisher. The generous font size used throughout the volume, makes it easy to read; but the bold text, such as the subheads found in every chapter, is a bit rough-edged — on some pages worse than others. The subheads, already bolded, do not need to be in all uppercase; the publisher should choose one or the other. In addition, the inside margin length is a bit too small, forcing the reader to crack open the book more than should be needed, in order to comfortably read the text closest to the binding. In future editions, some of the space in the outer margin could be used to solve the problem, without any change to the words on each page, and thus the length of the book.
But aside from these minor flaws, this book is to be highly recommended. The Creature from Jekyll Island is a remarkably thorough, detailed, and challenging critique of central banking and America's latest incarnation of it, the Federal Reserve. G. Edward Griffin's precision of language, and his interweaving of the major players and their motives, makes for a most compelling historical study.
Michael J. Ross is a Web developer, freelance writer, and the editor of PristinePlanet.com's free newsletter.
You can purchase The Creature from Jekyll Island from amazon.com. Slashdot welcomes readers' book reviews -- to see your own review here, read the book review guidelines, then visit the submission page.
...and a free e-book download is What has Government done to our money? by the esteemed Murray N. Rothbard.
I've read dozens of books (over 30, for sure) on central banking theory, and none of them have given a completely clear and transparent picture of what the Fed really is, what is does, and what it is supposed to do. In the end, all central banks have one customer: member banks (the banks you and I go to), and the central banks have one policy: save their buddies in the member banks against any malinvestment or market change.
The Fed isn't here to protect the value of OUR money (in fact, since the Fed's creation in 1913, the US dollar is about 95-96% devalued), and it isn't here to protect our investments or savings.
Waiting for some idiot to post a link to the Zeitgeist movie's section on the federal reserve. Seriously hoping it doesn't happen, but i have a strange feeling that at least one person on here has fallen victim to the allure of spooky music mixed with insane and unfounded assertions.
09 F9 11 02 9D 74 E3 5B D8 41 56 C5 63 56 88 C0
No nerdly discussion about the history of money would be complete without a slavish recommendation to read Neal Stephenson's Baroque Cycle. Which, indeed, one should. ADHD raised-on-MTV types needn't bother, but it's pure gold. (+5 self-referental humor!)
Don't disappoint your bird dog. Go to the range.
There are plenty. Many people do not consider this book to be a balanced discussion of the subject matter at hand. This type of controversy should be mentioned in any prominent book review.
http://en.wikipedia.org/wiki/Federal_reserve ;)
I was a lit major in school but often found myself led stangely enough to the subject of money, currency in particular, as it's a subject that seems to have had much more relevance in people's everyday life in that past than it does now. I find the Federal Reserve, especially the institution of FDIC after the Great Depression, one of the greatest innovations of the 20th century. As Milton Friedman points out, it effectively ended the terrible plague of bank runs that wracked economies in the past.
To get a sense how invisible money as an instrument is to most people in modern stable economies, you can look at the plays of Shakespeare and all the reference to coinage and especially "debased" currency during the period. One of the most insightful history books I've read is E.C. Challis's The Tudor Coinage. It really gives you a sense of how much we take a stable currency, as the bedrock for a stable economic system, for granted.
Anyway, if you have any curiosity about that subject at all, you can check out this article:
http://links.jstor.org/sici?sici=0013-0117(196712)2%3A20%3A3%3C441%3ATDOTC1%3E2.0.CO%3B2-H
I've been looking for a good stimulating non-fiction read. I think I'll pick up G. Edward Griffin's book. Thanks for the review.
Innovation makes enemies of all those who prospered under the old regime... -- Machiavelli
If you want to read about what central banks are up to, I suggest you read some books on economics - from the 19th century. It was clear to people back then why governments wanted to create fiat money, whether it was sustainable and that sort of thing. They hit it right on the money back then, any other commentary nowadays is just an addendum to what was figured out then.
On second thought, maybe not the impartial history of the role of currency in American society, nor the impartial review of a new book, that I was looking for.
In any event, thanks for pointing out the author's agenda in the review.
Innovation makes enemies of all those who prospered under the old regime... -- Machiavelli
A good video on the subject is From Freedom to Fascism (http://www.freedomtofascism.com/) You can purchase the DVD for a $1. The movie cites the book and includes some video commentary from the Author of Creature from Jekyll Island. If you are alarmed about what you learn you may want to consider throwing some support behind Congressmen Ron Paul, who is running for president. He entered politics because of his concerns about monetary policy and the Federal Reserve. He is currently the ranking chair of the house finance committee and there is some great YouTube videos on his exchanges with the Fed during committee meetings.
This is what I don't like about arguments against the gold standard.
The entire disadvantage you just listed as stemming from a gold standard is: "Things requiring gold would be unjustifiably expensive."
That advantage is so bad that no one can support a gold standard unless they "fundamentally misunderstand macroeconomics"?
It's things like this that for so long kept me from understanding the hate for the gold standard. The best arguments against it seemed to be pretty trivial, and yes, that includes the extensive list on Wikipedia.
Think how confusing that must sound: Those who support a gold standard are idiots because they are too dismissive of high prices for items containing gold. Huh?
After a while of wringing out sources for a serious argument, I finally found something more convincing, which is this:
1) Under a gold standard, the (very high) volatility of gold is imposed on the general price level, making it that much harder to plan economic activity, and magnifying negative events.
2) Significant amounts of gold must be held out of production, just for use as money, with signficant opportunity cost.
3) Increasingly huge portions of the economy are diverted to gold production during times of economic growth because that, rather than e.g. cancer cures, have the highest return.
Apology to Ubuntu forum.
When a bank lends money that's backed by someone's mortgage, it's backed by a very "real asset": the mortgaged property.
IANAE, The corollary is that the mortgage must be for an amount that is very close to the value of that asset. If you have massive over estimates of property values due to something like a real estate bubble, once the bubble burst the revaluation throws the system out of whack. Banks says they have X dollars but due to over valuation they actually only have Y% of X dollars where Y is 100. If there is a crash like that and a simultaneous extreme cash call from the banks actual creditors (their customers) then the whole system collapses.
Gold backed currencies aren't subject to this rare circumstance but Gold standards have a lot of draw backs. Thus even with the known failure conditions of the current system it's still better then the gold standard.
"There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy."
There's much more I could say, but that's an example of the type of information I pass on to friends and neighbors all the time when they hear that I work "at the Fed."
[I'm posting anonymously just in case my employer might think this post violates some policy or other. I don't think it does, because this is public information, but I rather like working here, so I'll play it safe.]
This only restricts the states from coining money that is not gold or silver. The federal government can make anything they want legal tender. Once it's legal tender, the states can use it.
Give me Classic Slashdot or give me death!
I don't think so. If I'm a State, and I accept Federal Reserve Notes as payment of taxes, this de facto renders Federal Reserve Notes to be legal tender. The Federal Government can coerce the several States to accept the debt-backed fiat currency of the Federal Reserve as legal tender, but I'm not sure this was ever necessary. If the States had decided to operate on Constitutional principles, then yes, that would be a point of contention. Most people have no clue how fiat currency and fractional reserve banking function, and I'm certain you could include many politicians.
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However, why would the Constitution in Article 1, Section 10, prohibit the States from making anything but gold and silver legal tender, if Article I, Section 8 allows the Federal government to not only coin currency, but print currency?
Probably because they wanted to keep the States from being able to declare any old thing as currency. You don't want Virginia using tobacco leaves as money, or Florida to declare it will accept foreign banknotes, etc.
"Today, they simply ask the Fed to print more money for them to borrow."
The FED only lends money to banks, who lend it out for loans to private industry. Believe it or not, the majority of the domestic national debt it owed to . . . the U.S. government. Social security has been collecting a surplus of money since its inception, and the government has been spending that, and issuing bonds to repay what they took from the program at a later date (presumably they will pay for it by raising the federal income tax). The rest of the national debt is owed to private investors who purchased bonds from the government at a fixed rate of return, much of this money is owed to foreign entities. To finance a deficit, the government issues more bonds, which it must repay later with interest.
The FED isn't some huge conspiracy, a bunch of banks got together and tried to find a way to end the volatility that the money market was continually facing. The primary goal of the FED is controlling inflation. People always say that inflation is out of control, I don't know what country they live in. We have very low, but always positive inflation. Most economists agree that this is the best situation. Anything else you can think of (including a commodity standard) would be much worse. It would be more volatile, and it would be hard to control inflation.