Privatization of money happened long ago

For better or worse, it is a fact that in 1914, cash and credit in the world's largest economy became the private property of mysterious private bank owners. No reading of business pages can be accurate without that fact borne in mind.

by Kevin Potvin <kpotvin@republic-news.org>

You have to give a nod to the bug-eyed conspiracy theorists on at least one point: it is absolutely true that the US Federal Reserve is a completely private company. It is all the more astonishing a fact by the way hardly anyone knows or acknowledges it. This sobering reality, lying as it does at the center of the very heart of the whole global financial system, is significant enough to always bear in mind whenever news from the world of business is considered.

Following a series of currency crises in the United States, especially a run on the banks in 1907, an effort to establish a central banking authority in the US economy culminated in legislation passed in 1914, during Woodrow Wilson's administration. The key to the Federal Reserve Act of 1914 is the granting by the federal government to the Federal Reserve a legally-protected monopoly over the right to create and disburse cash and credit in the US economy.

What is unprecedented about the American central bank is that it is wholly owned by just a few completely private banks. The Federal Reserve Bank of New York is the chief of the five branches located around the country. Five private New York banks own a controlling majority of stock in the Federal Reserve Bank of New York, which controls all the other branches. The US government owns not one share of stock in the Federal Reserve.

Because the population generally always grows, every economy always needs a larger amount of cash in it to function smoothly and ensure that everyone who wants to buy something (and can afford to do so) can get the actual cash necessary to do it. For example, all of Canada's ATMs must be sufficiently stocked with enough actual paper cash every day to ensure that everyone who comes to withdraw some can do so. If the ATMs ran out of cash for a weekend, the economy would grind to a halt.

Credit needs to be managed in the same way for the same reasons, credit being the anti-matter to the matter of cash, both of which need to exist for the other to exist as well. All banks buy the credit they sell to customers (as loans, mortgages, overdrafts, and so on) from their national central banks.

Every nation has a central bank that is in charge of managing cash and credit levels in their respective countries. If too much cash is created, inflation can result, which is a degradation in the value of each dollar. If too little cash is created, the economy is unnecessarily hampered by the fact that people can't get the cash to do the buying they want.

Likewise, too much credit in an economy allows businesses and homeowners to take on more debt than is healthy, while not enough credit prevents good business ideas and deserving homeowners from finding their necessary financing.

Everywhere in the world, the central bank is an agency of the national government, for the simple reason that it is by far the most powerful instrument of national sovereignty. A central bank can create booms and busts at the flick of a mouse, and can determine more than any other office can the fate of nations economically, militarily, and as a result, politically and socially, too.

Central banks are everywhere an agency of the state, except in the United States, coincidentally also by far the largest and most powerful economy in the world, and the one whose movements determine to a large degree the fates of every other economy on the planet. In the US, and the US alone, the central bank is a wholly privately owned corporation. The fate of the US, and through various forms and degrees of dependency, the fates of all people of every country on Earth, is in the hands of five private banks in New York.

Canada's central bank can only raise or lower credit rates and cash levels in strict observance of what the US central bank is doing, or else risk utter economic chaos in this country. Less cash, when the US central bank is not also lessening cash levels in the US, would raise the value of each Canadian dollar, doing great damage, overnight, to our economy's ability to export to the US. Raising interest rates, when the US central bank is not also doing likewise, would cause an overnight stampede of business investment out of Canada.

While in Canada we the people might own and operate this most important instrument of national sovereignty, we are not in fact able to exercise that control because of the level of integration of our economy with that of the US. The US central bank has far more control over Canadian cash levels and credit rates than we do. That is, five wholly private banks in New York essentially control Canadians' greatest instrument of national sovereignty, as well as those in every other country on Earth.

Back in 1914, when the privately-owned US central bank was established, the deal between the five private banks and the federal government was that the government would grant a protected monopoly over cash and credit creation (and destruction) to the Federal Reserve, in exchange for the President having the right to appoint the chair of the Federal Reserve, presently occupied by Allan Greenspan.

However, should a president ever appoint someone to the post that the controlling five private banks did not recommend, we can well imagine that the economy would be thrown into turmoil. Thus, after 90 years, the chair of the Federal Reserve has always been who ever the five private banks have recommended to the president that it should be.

If you look at any of your US currency, you will see it says right on the money, The Federal Reserve Bank (and then it indicates one of the five branches). As the Federal Reserve is a private corporation in which the US government owns not one share of stock, cash in America was, quite literally, privatized in 1914, and remains so to this day. All the cash in Americans' pockets and all deposits in their banks, and equally so, all the credit on their cards, in the mortgage on their houses, and in the loans on their cars, belongs not to their democratically elected government, but to a very small clique of private and mysterious New York banks who finessed a deal a century ago to acquire a private monopoly over cash and credit creation. Hardly any Americans, nor anyone else for that matter, knows about this.

Eustice Mullins, in his Secrets of the Federal Reserve (Bankers Research Institute, originally published in 1958, and republished in 1993), argues that control over cash and credit supplies allows the private banks to create sharp ups and downs in the economy by simply choosing, in secret, to increase or decrease cash and credit supplies. The resulting instability in the economy, particularly on the stock markets, allows anyone with foreknowledge of the rise or fall to exploit that knowledge to make extreme profits.

A recent example of the Federal Reserve first flooding the market with cash and credit to create a huge bubble on the stock markets, then soaking cash and credit back up to plunge the stock markets down again, occurred in the late 1990s. The Federal Reserve-created tech bubble propelled the New York Stock Exchange to over 11,000 points and the Nasdaq to over 5,000 points. Nortel, a tech company, went from roughly $10 a share to $124 a share at its peak.

The moment the five private banks decided to instruct the Federal Reserve to choke new cash and credit, the markets collapsed. The NYSE fell to under 8,000 points, and the Nasdaq to nearly one fifth what it was at its peak. Nortel fell from $124 to under a dollar.

None of these movements, both on the way up or on the way down, had anything to do with the real economic performance these companies were capable of or promised in their futures. At one time, the value of tech darling Amazon.com could only be justified if Amazon.com captured all retailing sales in the United States, tripled those sales, and maintained sizable markups at the same time. Likewise, Nortel, after its fall, could only justifiably be traded at under a dollar-a-share if it were worth less than the land its corporate offices sat on. It has since returned to about $10 a share, where it was before the Federal Reserve pumped up the tech bubble.

If in 1995 you knew what was coming, you could have made quite a profit on the way up, then multiplied that profit with short selling on the way down, then multiplied that profit again as stocks restored themselves to their appropriate values. The owners of the five private banks knew what was coming since they are the ones who instructed the Federal Reserve to flood the US economy with cash and credit, which brought on the stock bubble, and then to soak up the cash and credit, causing the collapse of the bubble. It is far easier to profit as a market speculator (especially one with control over the conditions that deeply affect the markets) than it is to profit the old-fashioned way: by making useful things and selling them. Speculators can drive producers out of business, then purchase at cut rates their productive assets and ideas.

Central banks were invented originally to help governments quickly raise the money needed to finance wars, and it is during wars when banks can make their biggest profits, printing emergency spending money for the government caught up in a mood that spares no expense because of the larger risks of losing wars. Witness Bush's successful $114 billion requisition from Congress for war at a time when health care and education funding in America is seriously depleted, and a staggering trade deficit makes foreign money expensive. That $114 billion will come from the sale of government bonds and other forms of debt underwritten by the credit created at The Federal Reserve. Ka-ching!

It is Mullin's assertion that The Federal Reserve owners, by tightening cash and credit supplies far enough, can create popular resentments that boil over from merely voting someone out of office, to actually identifying scapegoats and building patriotic fervor for war against them. He suggests that the owners of big banks do this routinely, in order to profit from the resulting wars. The man who did more than anyone else to create The Federal Reserve, Paul Warburg, a German, led the official post-WWI US delegation to settle financial accounts in 1918, and faced across the table his own brother, there to lead the German side of the financial negotiations.

The Secrets of the Federal Reserve, though employing mostly research and quotes drawn from official and public sources, like congressional records, has been roundly spurned in the 45 years since it first appeared. It remains the only book ever in post-war Germany to have been, in all available copies, burned-by government decree, no less. The central and crucial facts about business and economy in America and the world presented in this book remain entirely absent from all public discussion in popular media. One may differ on whether it is in the public interest or not that the US central bank is privately owned by a few private banks. But that fact cannot be ignored in any discussion about the day-to-day behaviour of that central bank. Those discussions typically fill a significant portion of business newspapers everyday because the behaviour of the US central bank is so fundamentally important to every economy in the world. All executives serve their shareowners first, and exclusively. Anything else is a breach of their contract. Allan Greenspan, chair of The Federal Reserve, works for a private company majority owned by five private New York banks. That is who he is obligated to serve, not the American public, or even the president or US Congress.

Whatever one might ascribe to the motives of the private owners of the banks that dictate The Federal Reserve's policies, one cannot read the business pages accurately in ignorance of the central fact that cash and credit in America is privatized, and that the supply of cash and credit is controlled in secret by owners of a few private banks who serve none other than their own purposes.

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