the creature from Jekyll Island by G Edward Griffin chapter one the journey to Jekyll Island the New Jersey railway station was bitterly cold that night flurries of the year's first snow swirled around the streetlights November wind rattled roof panels above the track shed and gave a long mournful sound among the rafters it was approaching 10:00 p.m. and the station was nearly empty except for a few passengers scurrying to board the last southbound of the day the rail equipment was typical for that year of 1910 mostly chair cars that converted into sleepers with cramped upper and lower berths for those with limited funds coach cars were coupled to the front they would take the brunt of the engines noise and smoke that somehow always managed to seep through unseen cracks a dining car was placed between the sections as a subtle barrier between the two classes of travelers by today's standards the environment was drab chairs and mattresses were hard surfaces were metal or scarred wood colors were dark green and gray in their hurry to board the train and escape the chill of the wind few passengers noticed the activity at the far end of the platform at a gate seldom used at this hour of the night was a spectacular sight nudged against the end rail bumper was a long car that caused those few who saw it to stop and stare its gleaming black paint was accented with polished brass handrails knobs frames and filigrees the shades were drawn but through the open door one could see mahogany paneling velvet drapes plush armchairs in a well-stocked bar Porter's with white serving codes were busying them selves with routine chores and there was the distinct aroma of expensive cigars other cars in the station bore numbers on each end to distinguish them from their dull brothers but numbers were not needed for this beauty on the center of each side was a small plaque bearing a single word Aldrich the name of Nelson Aldrich senator from Rhode Island was well known even in New Jersey by 1910 he was one of the most powerful men in Washington DC and his private railway car often was seen at the New York and New Jersey rail terminals during frequent trips to Wall Street Aldrich was far more than a senator he was considered to be the political spokesman for big business as an investment associate of JP Morgan he had extensive holdings in banking manufacturing and public utilities his son-in-law was john d rockefeller jr. 60 years later his grandson Nelson Aldrich Rockefeller would become a vice president of the United States when Aldrich arrived at the station there was no doubt he was the commander of the private car wearing a long fur collared coat a silky top hat and carrying a silver tipped walking stick he strode briskly down the platform with his private secretary Shelton and a cluster of porters behind them hauling assorted trunks and cases no sooner had the senator boarded his car when several more passengers arrived with similar collections of luggage the last man appeared just moments before the final all aboard and he was carrying a shotgun case while Aldrich was easily recognized by most of the travelers who saw him stride through the station the other faces were not familiar these strangers had been instructed to arrive separately to avoid reporters and should they meet inside the station to pretend they did not know each other after boarding the train they had been told to use first names only so as not to reveal each other's identity as a result of these precautions not even the private car porters and servants knew the names of these guests back at the main gate there was a double blast from the engines whistle suddenly the gentle sensation of motion the excitement of a journey begun but no sooner had the train cleared the platform when it shuddered to a stop then to everyone's surprise at reversed direction and began moving towards the station again had they forgotten something was there a problem with the engine a sudden lurch and the slam of couplers gave the answer they had picked up another car at the end of the train possibly the male car in an instant the forward motion was resumed and all thoughts returned to the trip ahead and to the minimal cumference of the accommodations and so as the passengers drifted off to sleep that night to the rhythmic clicking of steel wheels against a rail little did they dream that riding in the car at the end of their train were seven men who represented an estimated one-fourth of the total wealth of the entire world this was the roster of the aldrich car that night first Nelson W Aldrich Republican quote whip in the Senate chairman of the National monetary Commission business associate of JP Morgan father-in-law to john d rockefeller jr. Abraham P Andrew second Assistant Secretary of the United States Treasury third Frank a Vanderlip president of the National City Bank of New York the most powerful of the banks at the time representing William Rockefeller in the international investment banking house of Kuhn Loeb & Company fourth Henry P Davidson senior partner of the JP Morgan company five Charles D Norton president of JP Morgan's first National Bank of New York six Benjamin strong head of JP Morgan's Bankers Trust Company and seven Paul and Warburg a partner in Kuhn Logan company a representative of the Rothschild banking dynasty in England and France and brother to Max Warburg who was the head of Warburg banking consortium in Germany in the Netherlands of wealth centralization of control over financial resources was far advanced by 1910 in the United States there were two main focal points of this control the Morgan Group and the Rockefeller group within each orbit was a maze of commercial banks acceptance banks and investment firms in Europe the same process had proceeded even further and had coalesced into the Rothschild group and the Warburg group an article appeared in The New York Times on May 3rd 1931 commenting on the death of George Baker one of Morgan's closest associates it said quote 1/6 that the total wealth of the world was represented by members of the Jekyll Island Club end quote the reference was only to those in the Morgan group members of the Jekyll Island Club it did not include the Rockefeller group or the European finance years when all of these are combined the previous estimates that one-fourth of the world's wealth was represented by these groups is probably conservative in 1913 the year that the Federal Reserve Act became law a subcommittee of the House Committee on currency and banking under the chairmanship of our scene Phu ho of Louisiana completed its investigation into the concentration of financial power in the United States Phu ho was considered to be a spokesman for the oil interests part of the very group under investigation and did everything possible to sabotage the hearings in spite of his efforts however the final report of the committee at large was devastating such was the nature of the wealth and power represented by those seven men who gathered in secret that night and traveled in the luxury of senator outreaches private car destination Jekyll Island as the Train neared its destination of Raleigh North Carolina the next afternoon it slowed and then stopped in the switching yard just outside the station terminal quickly the crew threw a switch and the engine nudged the last car onto a siding where just as quickly it was uncoupled and left behind when passengers stepped on to the platform at the terminal a few moments later their train appeared exactly as it had been when they boarded they could not know that their travelling companions for the night at the very instant we're joining still another train which within the hour would depart southbound once again the elite group of Finance ears was embarked on a thousand mile journey that led them to Atlanta then to Savannah and finally to the small town of Brunswick Georgia at first this would seem that Brunswick was an unlikely destination located on the Atlantic seaboard it was primarily a fishing village with a small but lively port for cotton in lumber it had a population of only a few thousand people but by that time the Sea Islands that sheltered the coast from South Carolina to Florida already had become popular as winter resorts for the very wealthy one such island just off the coast of Brunswick had recently been purchased by JP Morgan and several of his business associates and it was here that they came in the fall and winter to hunt ducks or deer and to escape the rigors of cold weather in the north it was called Jekyll Island when the Aldredge car was uncoupled onto a siding at the small Brunswick station it was indeed conspicuous word traveled quickly to the office of the town's weekly newspaper while the group was waiting to be transferred to the dock several people from the paper approached and began asking questions who were mr. Aldrich's guests why were they here was there anything special happening mr. Davidson who was one of the owners of Jekyll Island and who was well known to the local paper told them that these were merely personal friends and that they had come for the simple amusement of duck hunting satisfied that there was no real news in the event the reporters returned to their office even after arrival at the remote island lodge the secretary continued for nine days the rule for first names only remained in effect full-time caretakers and servants had been given vacation and an entirely new carefully screened staff was brought in for the occasion this was done to make absolutely sure that none of the servants might recognize by sight the identities of these guests it is difficult to imagine any event in history including preparations for war that was shielded from public view with greater mystery and secrecy the purpose of this meeting on Jekyll Island was not to hunt ducks simply stated it was to come to an agreement on the structure and operation of a banking cartel the goal of the cartel as is true with all of them was to maximize profits by minimizing competition between members to make it difficult for new competitors to enter the field and to utilize the police power of government to enforce the cartel agreement in more specific terms the purpose and indeed the actual outcome of this meeting was to create the blueprint for the Federal Reserve System the story is confirmed for many years after the event educators commentators and historians denied that the Jekyll Island meeting ever took place even now the accepted view is that the meeting was relatively unimportant and only paranoid unsophisticated even try to make anything out of it Ron chernow writes quote the Jekyll Island meeting would be the fountain of a thousand conspiracy theories end quote little by little however the story has been pieced together in amazing detail and it has come directly or indirectly from those who actually were there furthermore if what they say about their own purposes and actions does not constitute a classic conspiracy then there is little meaning to that word the first leak regarding this meeting found its way into print in 1916 it appeared in Leslie's weekly and was written by a young financial reporter by the name of BC Forbes who later founded Forbes magazine the article was primarily in praise of Paul Warburg and it is likely that Warburg let the story out during a conversation with the writer at any rate the opening paragraph contained a dramatic but highly accurate summary of both the nature and purpose of the meeting quote picture a party of the nation's greatest bankers stealing out of New York on a private railroad car under cover of darkness stealthily hiding hundreds of miles south embarking on a mysterious launch sneaking on to an island deserted by all but a few servants living there a full week under such rigid secrecy that the names of not one of them was once mentioned lest the servants learned the identity and disclosed to the world this strangest most secret expedition in the history of American Finance I'm not romancing I'm giving to the world for the first time the real story of how the famous Aldrich currency report the foundation of our new currency system was written in 1930 Paul Warburg wrote a massive book seventeen hundred and fifty pages in all entitled the Federal Reserve System its original growth in this tome he described the meaning and its purpose but did not mention either location nor the names of those who attended but he did say quote the results of the conference were entirely confidential even the fact that there had been a meeting was not permitted to become public and quote then in a footnote he added quote though eighteen years have since gone by I do not feel free to give a description of the most interesting conference concerning which senator Aldrich pledged all participants to secrecy and an interesting insight to Paul Warburg's attendance at the Jekyll Island meeting came 34 years later in a book written by his son James James had been appointed by FDR as director of the budget and during World War two as head of the Office of War Information in his book he described how his father who didn't know one end of a gun from the other borrowed a shotgun from a friend and carried it with him to the Train to disguise himself as a duck hunter this part of the story was corroborated in the official biography of senator Aldrich written by Nathaniel Wright Stevenson quote in the autumn of 1910 six men in addition to Aldrich went out to shoot ducks that is to say they told the world that was their purpose mr. Warburg who was of the number gives an amusing account of his feelings when he boarded a private car in Jersey City bringing with him all the accoutrements of a duck shooter the joke was in the fact that he had never shot a duck in his life and had no intention of shooting any the duck shoot was a blind and quote Stevenson continues with a description of the encounter at Brunswick station he tells us that shortly after they arrived the stationmaster walked into the private car and shocked them by his apparent knowledge of the identities of everyone on board to make matters worse he said that a group of reporters were waiting outside Davison took charge come outside old man he said and I will tell you a story no one claims to know what story was told standing on the railroad ties that morning but a few moments later Davison returned with a broad smile on his face it's all right he said reassuringly they won't give us away Stevenson continues quote the rest is silence the reporters dispersed and the secret of the strange journey was not divulged no one asked him how he managed it and he didn't volunteer the information in February 9th 1935 issue of The Saturday Evening Post an article appeared written by Frank Vanderlip in and he said quote despite my views about the value to society of Greater publicity for the affairs of corporations there was an occasion near the close of 1910 when I was as secretive indeed as furtive as any conspirator I do not feel as any exaggeration to speak of our secret expedition to Jekyll Island as the occasion of the actual conception of what eventually became the Federal Reserve System we were told to leave our last names behind us we were told further that should we avoid dining together on the night of our departure we were instructed to come one at a time and as unobtrusively as possible to the railway terminal on the New Jersey literal of the Hudson where senator Aldridge's private car would be in readiness attached to the rear end of a train for the south once aboard the private car we began to observe the taboo that had been fixed on our last names we addressed one another as been Paul Nelson Abe it is Abraham piata Andrew Davidson and I adopted even deeper disguises abandoning our first names on the theory that we were always right he became Wilbur and I became Orville after those two aviation pioneers the Wright brothers the servants and train crew may have known the identities of one or two of us but they did not know all and it was the names of all printed together that would have made our mysterious journeys significant in Washington in Wall Street and even in London discovery we knew simply must not happen or else our time and effort would be wasted if it were to be exposed publicly that our particular group had gotten together and written a banking bill that bill would have no chance whatever of passage by Congress and quote the structure was pure cartel the composition of the Jekyll Island meeting was a classic example of cartel structure a cartel is a group of independent businesses which joined together to coordinate the production pricing or marketing of their members the purpose of a cartel is to reduce competition and thereby increase profitability this is accomplished through a shared monopoly over their industry which forces the public to pay higher prices for their goods or services than would be otherwise required under free enterprise competition here were representatives of the world's leading banking consortium Morgan rockefeller rothschild Warburg and Kuhn Loeb they were often competitors and there is little doubt that there was a considerable distrust between them and skillful maneuvering for a favored position in any agreement but they were driven together by one overriding desire to fight their common enemy and that enemy was competition in 1910 the number of banks in the United States was growing at a phenomenal rate in fact it had more than doubled to over 20,000 in just the previous 10 years furthermore most of them were springing up in the south and the West causing the New York banks to suffer a steady decline of market share almost all the banks in the 1880s were national banks which means they were chartered by the federal government generally they were located in the big cities and were allowed by law to issue their own currency in the form of banknotes even as early as 1896 however the number of non national banks had grown to 61% and they already had 54% of the country's total banking deposits by 1913 when the Federal Reserve Act was passed those numbers were 71% non national banks holding 57% of the deposits in the eyes of those duck hunters from New York this was a trend that simply had to be reversed competition also was coming from a new trend in industry to finance future growth out of profits rather than from borrowed capital this was the outgrowth of free-market interest rates which set a realistic balance between debt and thrift rates were low enough to attract serious borrowers who were confident of the success of their business ventures and of their ability to repay but they were high enough to discourage loans for frivolous ventures or those for which there were alternative sources of funding for example one's own capital that balance between debt and thrift was the result of a limited money supply banks could create loans in excess of their actual deposits as we shall see but there was a limit to that process and that limit was ultimately determined by the supply of gold they held consequently between 1900 and 1910 70% of the funding for American corporate growth was generated internally making industry increasingly independent of the banks even the federal government was becoming 50 it had a growing stockpile of gold was systematically redeeming the greenbacks which had been issued during the Civil War and was rapidly reducing the national debt here was another trend that had to be halted what the bankers wanted and what many businessmen wanted also was to intervene in the free market and tip the balance of interest rates downward to favor debt over thrift to accomplish this the money supply simply had to be disconnected from gold and made more plentiful or as they described it more elastic the specter of bag failure the greatest threat however came not from rivals or private capital formation but from the public at large in the form of what bankers call a run on the bank this is because when banks accept a customer's deposit they give and return a balance in his account this is the equivalent of a promise to pay back the deposit anytime he wants likewise when another customer borrows money from the bank he also is given an account balance which usually is withdrawn immediately to satisfy the purpose of the loan this creates a ticking time bomb because at the point the bank has issued more promises to pay on demand than it has money in the vault even though the depositing customer thinks he can get his money at any time he wants in reality it has been given to the borrowing customer and no longer is available at the bank the problem is compounded further by the fact that banks are allowed to loan even more money than they have received a deposit the mechanism for accomplishing this seemingly impossible feat will be described in a later chapter but it is a fact of modern banking that promises to pay often exceed savings deposits by a factor of one to ten and because only about three percent of these accounts are actually retained in the vault in the form of cash the rest having been put into even more loans and investments the bank's promises exceed its ability to keep those promises by a factor of over 300 to 1 as long as only a small percentage of depositors requests their money at one time no one is the wiser but if public confidence is shaken and if more than a few percent attempt to withdraw their funds the scheme is finally exposed the bank cannot keep all its promises and is forced to close his doors bankruptcy usually follows in Duke currency drains the same result could happen and prior to the Federal Reserve System often did happen even without depositors making a run on the bank instead of withdrawing their funds at the tellers window they simply wrote checks to purchase goods or services people receiving those checks took them to a bank for deposit if that Bank happened to be in the same one from which the check was drawn then all was well because it was not necessary to remove any real money from the vault but if the holder of the check took it to another Bank it was quickly passed back to the issuing bank and settlement was demanded between banks this is not a one-way street however while the downtown bank is demanding payment from the Uptown Bank the Uptown Bank is also clearing checks and demanding payment from the downtown bank as long as the money flow in both directions is equal then everything can be handled with the simple bookkeeping but if the flow is not equal then one of the banks will have to actually send money to the other to make up the difference if the amount of money required exceeds a few percentage points of the bank's total deposits the result is the same as a run on the bank by depositors this demand of money by other banks rather than by depositors is called currency drain in 1910 the most common cause of a bank having to declare bankruptcy due to a currency drain was that it followed a loan policy that was more reckless than that of its competitors more money was demanded from it because more money was loaned by it it was dangerous enough to loan ninety percent of their customers savings keeping only one dollar in reserve out of every ten but that had proven to be adequate most of the time some banks however were tempted to walk even closer to the precipice they pushed the ratio to 92 percent 95 percent 99 percent after all the way a bank makes its money is to collect interest and the only way to do that is to make loans the more loans the better and so there was a practice among some of the more reckless banks to loan up as they call it which was another way of saying to push down their reserve ratios bankers utopia if all the banks could be forced to issue loans in the same ratio to their reserves as other banks did then regardless of how small that ratio was the amount of cheques to be cleared between them would balance in the long run no major currency drains would ever occur the entire banking industry might collapse under such a system but not individual banks at least not those who were part of the cartel all would walk the same distance from the edge regardless of how close it was under such uniformity no individual bank could be blamed for failure to meet its obligations the blame could be shifted instead to the economy or the government policy or interest rates or trade deficits or the exchange value of the dollar or even to the capitalist system itself but in 1910 such bankers utopia had not yet been created if the downtown Bank began to loan at a greater ratio to its reserves than its competitors the amount of checks which would come back to it for payment also would be greater thus the bank which pursued a more reckless lending policy had to draw against its reserves in order to make payments to the more conservative banks and when those funds were exhausted it was usually forced into bankruptcy historian John Kline tells us that the financial panics of 1873 1884 1893 and 1907 were a large part an outgrowth of reserve pyramiding an excessive deposit creation by Reserve City banks these panics were triggered by the currency drains that took place in periods of relative prosperity when banks were loaned up in other words the panics and resulting bank failures were caused not by negative factors in the economy but by currency drains on the banks which were loaned up to the point where they had practically no reserves at all the banks did not fail because the system was weak the system failed because the banks were weak this was another common problem that brought these seven men over a thousand miles to a tiny island off the shore of Georgia each was a potentially fierce competitor but uppermost in their minds were the so called panics and the very real 1748 bank failures of the preceding two decades somehow they had to join forces a method had to be devised to enable them to continue to make more promises to pay on demand than they could keep to do this they had to find a way to force all banks to walk the same distance from the edge and when the inevitable disasters happened to shift public blame away from themselves by making it appear to be more of a problem of the national economy rather than of a private banking practice the door then could be opened for the use of tax money rather than their own funds for paying off the losses here then were the main challenges that face the tiny but powerful group assembled on Jekyll Island one how to stop the growing influence of small rival banks and to ensure that control over the nation's financial resources would remain in the hands of those present - how to make the money supply more elastic in order to reverse the trend of private capital formation and to recapture the industrial loan market 3 how to pool the merger the meager reserves of the nation's banks into one large reserve so that all banks would be motivated to follow the same loan to deposit ratios this would protect it least some of them from currency drains and bank runs for should this lead eventually to the collapse of the whole banking system then how to shift the losses from the owners of the banks to the taxpayers the cartel adopts a name everyone knew that the solution to all these problems was a cartel mechanism that had been devised and already put into similar operation in Europe as with all cartels it had to be created by legislation and sustained by the power of government under the deception of protecting the consumer the most important task before them therefore can be stated as objective number five how to convince Congress that the scheme was a measure to protect the public the task was a delicate one the American people did not like the concept of a cartel the idea of business enterprises joining together to fix prices and prevent competition was alien to the free enterprise system it could never be sold to the voters but if the word cartel was not used if the ventures could be described with words which are emotionally neutral perhaps even alluring then half the battle would be won the first decision therefore was to follow the practice adopted in Europe henceforth the cartel would operate as a central bank and even that was to be but a generic expression for purposes of public relations in legislation they would devise a name that would avoid the word bank altogether and which would conjure the image of the federal government itself furthermore to create the impression that there would be no concentration of power they would establish regional branches of the cartel and make that a main selling point Stephenson tells us quote Eldrich entered this discussion at Jekyll Island and ardent convert to the idea of a central bank his desire was to transplant the system of one of the great European banks say the Bank of England bodily to America end quote but political expediency required that such plans be concealed from the public as John Kenneth Galbraith explained it quote it was his Aldridge's thought to outflank the opposition by having not one central bank but many in the word bank would itself be avoided with the exception of Aldrich all of those present were bankers but only one was an expert in the European model of a central bank because of this knowledge Paul Warburg became the dominant and guiding mind throughout all of the discussions even a casual perusal of the literature on the creation of the Federal Reserve System is sufficient to find that he was indeed the cartels mastermind Galbraith says quote Warburg has with some justice been called the father of the system end quote professor Edwin Selig on a member of the international banking family of J and W Seligman and head of the department of economics at Columbia University writes that quote in its fundamental features the Federal Reserve Act is the work of mr. Warburg more than any other man in the country and quote the real Daddy Warbucks Paul Moritz Warburg was a leading member of the investment banking firm of M and Warburg & Company of Hamburg Germany and Amsterdam the Netherlands he had come to the United States only nine years previously soon after arrival however and with funding provided mostly by the Rothschild group he and his brother Felix had been able to buy partnerships in the New York investment banking firm of Kuhn Loeb & Company while continuing his partners in Warburg of Hamburg within 20 years Paul would become one of the wealthiest men in America with an unchallenged domination over the country's railroad system at this distance in history it is difficult to appreciate the importance of this man but some understanding may be had from the fact that the legendary character Daddy Warbucks in the comic strip Little Orphan Annie was a contemporary a commentary on the presumed benevolence of Paul Warburg and the almost magic ability to accomplish good through the power of his unlimited wealth a third brother max Warburg was the financial advisor of the Kaiser and became director of the Reichsbank in Germany this was of course a central bank and it was one of the cartel models used in the construction of the Federal Reserve System the Reichsbank incidentally a few years later would create the massive hyperinflation that occurred in Germany wiping out the middle class and the entire German economy as well Paul Warburg soon became well known on Wall Street as a persuasive advocate for a central bank in America three years before the Jekyll Island meeting he had published several pamphlets one was entitled defects and needs of our banking system and the other was a plan for modified central bank these attracted wide attention in both financial and academic circles and set the intellectual climate for all future discussions regarding banking and legislation in these treatises Warburg complained that the American monetary system was crippled by its dependency on gold and government bonds both of which were in limited supply what America needed he argued was an elastic money supply that could be expanded and contracted to accommodate the fluctuating needs of Commerce the solution he said was to follow the German example whereby banks could create currency solely on the basis of commercial paper which is banker language for IOUs from corporations Warburg was tireless in his efforts he was featured as a speaker before scores of influential audiences and wrote a steady stream of published articles on the subject in March of that year for example the New York Times published an 11 part series written by Warburg explaining and expounding what he called the Reserve Bank of the United States the message was plain for those who understood most of Warburg's writing and lecturing on this topic was eyewash for the public to cover the fact that a central bank is merely a cartel which has been legalized its proponents had to lay down a thick smokescreen of technical jargon focusing always on how it would supposedly benefit commerce the public and the nation how it would lower interest rates provide funding for the needed industrial projects and prevent panics in the economy there was not the slightest glimmer that underneath it all was a master plan which was designed from top to bottom to serve private interests at the expense of the public this was nevertheless the cold reality and the more perceptive bankers were well aware of it in an address before the American Bankers Association the following year Aldridge laid it out for anyone who was really listening to the meaning of his words he said quote the organization proposed is not a bank but a cooperative union of all the banks of the country or for definite purposes end quote precisely a union of banks two years later in a speech before that same group of bankers a Burton Hepburn of chase National Bank was even more candid he said quote the measure recognizes and adopts the principles of a central bank indeed if it works out as the sponsors of the law hope it will make all incorporated banks together joint owners of a central dominating power and quote and that is about as good a definition of a cartel as anyone is likely to find in 1914 one year after the Federal Reserve Act was passed into law senator Aldrich could afford to be less guarded on his remarks in an article published in July of that year at a magazine called the independent he boasted quote for 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 and quote myths accepted as history the accepted version is that the Federal Reserve was created to stabilize our economy one of the most widely used text books on this subject says it sprang from the panic of 1907 with it's alarming epidemic of bank failures the country was fed up 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 1953 57 69 75 and 80 1 a stock market black Monday in 87 and a 1000% inflation which has destroyed 90% of the dollars purchasing power let's 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 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 mechanisms 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 Savings and Loan associations are failing larger numbers than ever before interest on the national debt is consuming at least half of our tax dollars heavy industry been largely replaced by overseas competitors we're facing an international trade deficit for the first time in our history seventy-five percent 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 just make a little note here that was as of the mid-1990s so 20 years later the problem has only gotten worse first reason to abolish the system that is the scorecard 80 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 and 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 the 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 stated 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 it's true objectives when one realized the circumstances under which it was created when one contemplates the identities of those who authored it and when one studies the 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 all employment higher productivity low inflation in 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 this view is not encouraged by establishment institutions and publishers it has become their apparent mission to convince the American people that the system is not intrinsically flawed it merely has been in the hands of bumbling oafs for example William Greider was a former assistant managing editor for the Washington Post his book secrets of the temple was published in 1987 by Simon & Schuster it was critical of the federal reserve because of its failures but according to Grider these were not caused by any defect in the system itself but merely because the economic factors were so complicated that the good men who have struggled to make the system work have just not yet been able to figure it all out but don't worry folks they're working on it this is exactly the kind of powderpuff criticism which is acceptable in our mainstream media yet Grider's own research points to an entirely different interpretation speaking of the system's origin he says quote as new companies prospered without Wall Street so did the new regional banks that handled their funds New York's concentrated share of the bank deposits was still huge about half the nation's total but it was declining steadily Wall Street was still the biggest kid on the block but less and less able to bully the others this trend was a crucial fact of history a misunderstood reality that completely alters the political meaning of the Reform legislation that created the Federal Reserve at the time the conventional wisdom in Congress widely shared and sincerely espoused by progressive reformers was that a government institution would finally harness the quote money trust and quote disarm its powers and established broad Democratic control over money and credit the results were nearly the opposite the money reforms enacted in 1913 in fact helped to preserve the status quo to stabilize the old order money center banks would not only gain dominance over the new central bank but would also enjoy new insulation against instability and their own decline once the Fed was in operation the steady diffusion of financial power halted Wall Street maintained its dominant position and even enhanced it end quote Anthony Sutton former research fellow at the Hoover Institution for war Revolution and peace and also a professor of economics at California State University Los Angeles provides a somewhat deeper analysis he writes quote Warburg's revolutionary plan to get American society to go to work for Wall Street was astonishingly simple even today academics theoreticians covered their blackboards with meaningless equations and the general public struggles in bewildered confusion with inflation in the coming credit collapse while the quite simple explanation of the problem goes undiscussed and almost entirely uncompromising monopoly of the money supply operated for the benefit of the few under the guise of protecting and promoting the public's interest end quote the real significance of the journey to Jekyll Island and the creature that was hatched there was inadvertently summarized by the words of Paul Warburg admiring biographer Harold Kellogg quote Paul M Warburg is probably the mildest mannered man that ever personally conducted a revolution it was a bloodless revolution he did not attempt to rouse the populace to arms he stepped forth armed simply with an idea and he conquered that's the amazing thing a shy sensitive man he imposed his idea on a nation of a hundred million people end quote end of chapter one you