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The Federal Reserve System

The following excerpts are taken from the book “War On Gold” by Antony C. Sutton:

“In the United States, the Federal Reserve System is a private monopoly of legal tender granted by Congress and upheld by the Courts, rather than a government monopoly. Inflation of the note issue is solely the responsibility of the Federal Reserve, as is the manipulation and expansion of the gigantic debt pyramid.

Governmental influence is minimal; not even a General Accounting Office audit of the books is permissible. The Federal Reserve System has absolute power to issue notes and create credit and to do this for its own private profit, without accounting to Congress or anyone else. Is is quite a remarkable system – the monopoly to end all monopolies!

How did this magnificent banking cornucopia ever receive the sanction of Congressional approval, and how does the Federal Reserve System evade investigation and audit? Oddly enough, very few factual studies have been made of the pressures and power plays that brought the system in to being and which have carefully protected the system from public probes.

The financial panic of 1907 was used by Congress as an excuse to form a National Monetary Commission. For two years this Commission roamed Europe studying European banking, at a cost to American taxpayers of $300,000. Out of this junket came a series of studies which promoted the concept of a private central bank for the United States.

The groundwork for the Federal Reserve System was laid at an unpublicized meeting at the J.P. Morgan Country Club on Jekyl Island, Georgia in November 1910. Senator Nelson Aldrich, bankers Frank Vanderlip (president of National City Bank and representing Rockefeller and Kuhn Loeb interests), Henry P. Davison (senior partner J.P. Morgan) and Charles D. Norton (president of Morgan’s First National Bank), met in secret to decide how to foist a central bank system on the United States. Others at the meeting were Paul Moritz Warburg, the German banker, and Benjamin Strong (a Morgan banker who later became first Governor of the Federal Reserve Bank of New York). Out of the Jekyl Island cabal came a basic bill passed by Congress and signed into law by President Woodrow Wilson as the Federal Reserve Act of 1913.

What does this Federal Reserve System do? The system creates money. It does so both as currency (Federal Reserve notes) and through its ability to influence the level of bank reserves, by creation of bank credit. The great virtue of this system, as seen through the eyes of the Fed itself, is that it provides “elasticity.” Six decades of this “elasticity,” the Fed claims, have produced growth in the economic system. FRS apologists compare this to pre-1913 when, it is argued, the money system could not grow because of an “inelastic currency.” The latter assertion is subject to considerable disagreement, but, more importantly, the cost of an elastic currency has been depreciation of money and a monumental debt structure that is now in danger of collapse. In fact, the arguments put forward by the Federal Reserve System in favour of its operation do not differ from arguments put forward for other debt-creation schemes several centuries ago.

In addition to a monopoly over the money system, the Federal Reserve exerts influence through the “revolving door” of New York-Washington appointments. Officials of the FRS frequently are appointed to the executive branch in Washington. Having determined U.S. policy, they then return to New York to reap the benefits.”

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