100 Years Of The Federal Reserve

Today the Federal Reserve System will celebrate its centennial. 100 years ago today, in the waning moments before the Christmas recess, Congress passed (along partisan lines), the Federal Reserve Act. Some called it a perfect Christmas present. Still, many knew that the Fed was anything but an "economic Fourth of July" for the US, as magnate Paul Warburg called it.

The role of the Federal Reserve has changed over the years. Originally an arm of the Treasury Department, the Fed has transformed into a mysterious, independent institution which sets monetary policy at the behest of the banking establishment in collusion with the government.

The Fed was argued for as a means by which to put an end to financial crises, like the Panic of 1907. As Ron Paul notes, "Rather than preventing financial crises…the Fed has constantly caused new ones."

In 1914, the Fed embarked upon its century of easy money policies, first to fund World War I, which ultimately led to the Depression of 1920. From there, the Federal Reserve conjured the so-called "roarin' twenties" via easy money policies. As a direct result was the Great Depression, which until recent times had been the worst economic depression in US history.

The Fed continued its easy money policies, and the business cycle grew increasingly vicious. Few questioned the central banks role in US society. This meant more power over the years for the Federal Reserve, and in 1978 Congress handed the Fed the responsibility of maintaining full employment and stable prices. Coupled with the “Nixon Shock” – the closing of the gold window – this spelled unprecedented power for the “independent” institution.

The 1950s, one of the greatest periods of economic growth in the US, was still one in which few US citizens paid the income tax, which was introduced alongside the Federal Reserve Act. The fifties were also a period in which pawn shops were the main source of loans throughout the US, contributing the economic growth. 

On the centennial of the Federal Reserve System, people know better than to knowingly strengthen the collusion between banks and politicians. The evidence for doing so is overwhelming, to say the least. We see this in the many movements of the day, all over the world. 

In the century before the Federal Reserve was created, the average annual rate of inflation was half a percent. Since the Fed's creation, the annual rate has been about 3.5 percent officially. It's more like 9 or 10%. The official numbers show that the value of the US dollar has fallen by nearly 100% since the Federal Reserve was created in 1913.

What is one to expect from an institution thought up at a secret retreat in November 1910 at "Jekyll" Island, Georgia? The plan was first detailed by US Senator Nelson Aldrich and the eastern banking establishment.

Proponents argued that if the Federal Reserve Act was passed, the business cycle would be eliminated. That has not happened, obviously, but the Fed has certainly gained more power. Even it admits this. The Fed's official mission statement reads: To provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded.”

In more recent times, the Federal Reserve has directly handled the biggest transfer of wealth in US history. According to an official government report, the Federal Reserve made 16.1 trillion dollars in loans to international banks.

Nelson Aldrich spearheaded the move towards the Federal Reserve Act, setting up himself two commissions. One studied the American monetary system and the other studied the European central banking system.  After the studies, Aldrich met with members of the New York banking establishment and drafted the central banking bill.

After ten days, the first version of the Federal Reserve Act, known as the "Aldrich Plan," was put forth. It was rejected, as it was no mystery whom the bill came to benefit: wealthy bankers like JP Morgan and John D Rockefeller, as well as Paul Warburg, who attended the meeting and had long been in favor of a central bank. Aldrich was criticized for his close ties to the bankers.

President Wilson didn't think much of the law being shutdown for favoring bankers, and went forth to use the Aldrich Plan as the foundation for the Federal Reserve Act. 

Now, 100 years later, the effects of the Federal Reserve are no mystery.

And, of course, with the devaluation of the dollar comes increased prices over time. 

To truly underscore the effects the Federal Reserve has had on life in the US, we don't need to look much further than the Big Mac Index.

Many are using the centennial to re-invigorate attempts to “audit the fed.” We'd suggest getting straight to the point and ending the fed. The House of Representatives has put together studies on the effects of the Federal Reserve over its century-long history.

The Centennial Monetary Commission, HR 1176, is one recently introduced piece of legislation. Calling for a bipartisan, bicameral, commission, HR 1176 is introduced as an “empirical assessment” of monetary policies by the Federal Reserve. As Forbes states, “It is not an exercise in Fed bashing. It is an exercise in objective empiricism.”

Mmhmm…

As Ron Paul put it so succinctly, "It is no coincidence that the century of total war coincided with the century of central banking.”

But, today, on the 100th anniversary of the Federal Reserve, there are more ways to steer clear of the Federal Reserve than ever before. People are discovering the purchasing preservation power of gold and silver, as well as the disruptive implications of bitcoin, all of which are covered in our newsletter, where we analyze in detail the world the Fed has created, and how to prosper at The End Of The Monetary System As We Know It (TEOTMSAWKI).

Comments or questions? Email us at TDV@dollarvigilante.com and we may use your email in our Feedback Friday each week.