Creature From Jekyll Island by G. Edward

In an article published in July of that year in a magazine called The Independent, he boasted: "Before the passage of this Act, the New York bankers could only dominate the reserves of New York. Now we are able to dominate the bank reserves of the entire country."

MYTH ACCEPTED AS HISTORY

The accepted version of history is that the Federal Reserve was created to stabilize our economy. One of the most widely-used textbooks on this subject says: "It sprang from the panic of 1907, with its alarming epidemic of bank failures: the country was fed ujd once and for all with the anarchy of unstable private banking."

Even the most naive student must sense a grave contradiction between this cherished view and the System's actual performance.

Since its inception, it has presided over the crashes of 1921 and 1929; the Great Depression of '29 to '39; recessions in '53, '57, '69,

'75, and '81; a stock market "Black Monday" in '87; and a 1000%

inflation which has destroyed 90% of the dollar's purchasing power.

Let us be more specific on that last point. By 1990, an annual income of $10,000 was required to buy what took only $1,000 in 1914.4 That incredible loss in value was quietly transferred to the federal government in the form of hidden taxation, and the Federal Reserve System was the mechanism by which it was accomplished.

Actions have consequences. The consequences of wealth confiscation by the Federal-Reserve mechanism are now upon us. In the current decade, corporate debt is soaring; personal debt is greater than ever; both business and personal bankruptcies are at an all-time high; banks and savings and loan associations are failing in 1. Quoted by Kolko, Triumph, p. 235.

2. Paul A. Samuelson, Economics, 8th ed. (New York: McGraw-Hill, 1970), p. 272.

3. See "Money, Banking, and Biblical Ethics," by Ronald H. Nash, Durell Journal of Money and Banking, February, 1990.

4. When one considers that the income tax had just been introduced in 1913 and that such low figures were completely exempt, an income at that time of $1,000

actually was the equivalent of earning $15,400 now, before paying 35% taxes. When the amount now taken by state and local governments is added to the total bite, the figure is close to $20,000.

THE JOURNEY TO JEKYLL ISLAND 21

larger numbers than ever before; interest on the national debt is consuming half of our tax dollars; heavy industry has been largely replaced by overseas competitors; we are facing an international trade deficit for the first time in our history; 75% of downtown Los Angeles and other metropolitan areas is now owned by foreigners; and over half of our nation is in a state of economic recession.

FIRST REASON TO ABOLISH THE SYSTEM

That is the scorecard eighty years after the Federal Reserve was created supposedly to stabilize our economy! There can be no argument that the System has failed in its stated objectives.

Furthermore, after all this time, after repeated changes in personnel, after operating under both political parties, after numerous experiments in monetary philosophy, after almost a hundred revisions to its charter, and after the development of countless new formulas and techniques, there has been more than ample opportunity to work out mere procedural flaws. It is not unreasonable to conclude, therefore, that the System has failed, not because it needs a new set of rules or more intelligent directors, but because it is incapable of achieving its stated objectives.

If an institution is incapable of achieving its objectives, there is no reason to preserve it—unless it can be altered in some way to change its capability. That leads to the question: why is the System incapable of achieving its stated objectives? The painful answer is: those were never its true objectives. When one realizes the circumstances under which it was created, when one contemplates the identities of those who authored it, and when one studies its actual performance over the years, it becomes obvious that the System is merely a cartel with a government facade. There is no doubt that those who run it are motivated to maintain full employment, high productivity, low inflation, and a generally sound economy. They are not interested in killing the goose that lays such beautiful golden eggs. But, when there is a conflict between the public interest and the private needs of the cartel—a conflict that arises almost daily-—the public will be sacrificed. That is the nature of the beast. It is foolish to expect a cartel to act in any other way.