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Edward Griffin
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A Talk by Edward Griffin

Author of The Creature from Jekyll Island


Mr. Griffin is a graduate of the University of Michigan where he majored in Speech Communication. He is the recipient of the Telly Award for Excellence in TV Production. He is the founder of the Cancer Cure Foundation and has served on the board of directors of the National Health Federation and the International Association of Cancer Victims and Friends. He is a contributing editor for the New American Magazine and is President of American Media, a publishing and video production company in southern California.

Edward Griffin:

We'll start way back in history to give some kind of historical perspective to this; we'll go back to the first century BC and the tiny kingdom of Phrygia. There was a philosopher by the name of Epictetus and it was Epictetus who said "Appearances are of four kinds: things either are as they appear to be; or they neither are nor appear to be; or they are but do not appear to be; or they are not and yet appear to be." When I read that statement for the first time, I had a big chuckle over it and I thought for sure that if Epictetus were alive today he would probably be a Harvard professor of money and banking; it sounds like so many explanations that I have read about various aspects of the Federal Reserve System. What he did was he took a fairly simple concept but by the time that he was through explaining it, we didn't have any idea what he was talking about. All Epictetus said was that appearances can sometimes be deceiving. That's all he said but by the time he was through explaining the four different ways in which they can be deceiving, we were left back at the switch somewhere.

Nevertheless, I thought, accidentally perhaps, Epictetus had given me a track to run on so-to-speak. Actually it could be the theme since if there's anything in the world that is deceiving it is the Federal Reserve System. In fact, it is one of those appearances of the fourth kind which are those appearances which are not and yet appear to be. I'm going to use that as sort of a hook on the topic. We'll come back to it from time-to-time and punctuate it if I can remember to do that because it tells us something at the most fundamental level about the Federal Reserve System and that is that appearances can be deceiving.

When I did my research on this topic I came to the startling conclusion that the Federal Reserve System does not need to be audited, it needs to be abolished. This is very intriguing to think we should audit the Fed but I discovered that probably if they audited the Fed it would get a clean bill because it's undoubtedly doing exactly what it's supposed to do according to the law. What it is supposed to do according to the law is justification for abolishing it so all we have to do is understand what the Federal Reserve System is supposed to do and we'll be pretty upset about it. The fact of the matter is that most people haven't the foggiest idea of what it is in fact supposed to do.

I came to the conclusion that the Federal Reserve needed to be abolished for seven reasons. I'd like to read them to you now just so that you get an idea of where I'm coming from, as they say. I put these into the most concise phrasing that I can to make them somewhat shocking and maybe you'll remember them:

The Federal Reserve is incapable of accomplishing its stated objectives.
It is a cartel operating against the public interest.
It's the supreme instrument of usury.
It generates our most unfair tax.
It encourages war.
It destabilizes the economy.
I don't know what you think about those seven points. I know a lot of you folks agree with them right off the bat, but I presume that there are some skeptics here tonight and I hope there are otherwise I am the minister talking to the choir. I know in fact that there are always quite a few skeptics that come to these meetings and frankly you are the folks I'm talking to tonight because once, not too long ago, I was in that same frame of mind. I would've thought to myself those are rather extreme statements, I don't think they can be supported by fact. Though time doesn't permit me to cover all of those seven points here tonight, I would like to splash around on the first four topics for a little while and show you that there is in fact quite a bit of reason for a rational person to conclude that those statements are true.

I think the best place to begin is with the formation of the "creature from Jekyll Island"; the creation of the Federal Reserve. It takes me back to the title of the book "The Creature from Jekyll Island" and anybody that's here thinking that we're going to show a movie which is a sequel to Jurassic Park, you're in the wrong place. The title was designed, of course, to attract attention but it does have a great deal of significance to it. For those of you who have not yet had a chance to delve into this, I should explain to you that Jekyll Island is a real island that's off the coast of Georgia. It was on that island back in 1910 that the Federal Reserve System was created at a highly secret meeting that took place there. What I'd like to do is illustrate to you that the meeting did in fact take place and I'll show some of the documentation that is available for that to prove that the secrecy was extreme and then we'll come face-to-face with the question "why the secrecy"? When things are done in secret quite often there's something to hide and we'll explore what it was that they wanted to hide. Once we've come to an understanding of that, then we'll finally understand a very important aspect of the Federal Reserve System which is not generally understood.

Back in 1910, Jekyll Island was completely privately owned by a small group of millionaires from New York. We're talking about people such as J. P. Morgan, William Rockefeller and their associates. This was a social club and it was called "The Jekyll Island Club." They owned the island and it was where their families came to spend the winter months. There was a magnificent structure there, the clubhouse, which was the center of their social activities. That clubhouse is still there, by-the-way. The island has since been purchased by the state of Georgia, converted into a state park and the clubhouse has been restored and you can visit it. I think you'd be very impressed by it. As you walk through the downstairs corridors you'll come to a door and on the door there is a brass plaque and it says: "In this room the Federal Reserve System was created." This is not a secret anymore; it's a matter of public record. Around the clubhouse there were some cottages as they were called which were built by some of the families to quarter themselves. They're attractive little things; they were magnificent examples of the architecture of the turn of the century. One of the cottages through which they take tours if you're interested in doing that, as I recall the guide told us that there were 14 bathrooms in that cottage--not exactly what we would call a cottage.

The clubhouse is where the Federal Reserve System was created. Let's retell that story in detail and see how it came about. The year was 1910, that was three years before the Federal Reserve Act was finally passed into law. It was November of that year when Senator Nelson Aldrich sent his private railroad car to the railroad station in New Jersey and there it was in readiness for the arrival of himself and six other men who were told to come under conditions of great secrecy. For example, they were told to arrive one at a time and not to dine with each other on the night of their departure. They were told that should they arrive at the station at the same time they should pretend like they didn't even know each other. They were instructed to avoid newspaper reporters at all cost because they were well-known people and had they been seen by a reporter they would've asked questions. Especially if two or three of them had been spotted together, this would've raised eyebrows and they would've asked a lot of questions. One of the men carried a shotgun in a big black case so that if he had been stopped and asked where he was going he was prepared to say that he was going on a duck hunting trip. The interesting thing about that part of the story is that we find out later from his biographer that this man never fired a gun in his life, in fact he borrowed that shotgun just to carry with him on this trip as part of the deception.

Once they got on board the private railroad car this pattern continued. They were told to use first names only, not to use their last names at all. A couple of the men even adopted code-names. The reason for that is so that the servants on board the train would not know who these people were. They were afraid that if the servants would talk about it then the word would leak out and it might get into the press. They traveled for two nights and a day on board this car and they arrived after a 1,000 mile journey to Brunswick, Georgia. From there they took a ferry across the inland straits and they ended up on Jekyll Island in the clubhouse where for the next nine days they sat around the table and hammered out all the important details of what eventually became the Federal Reserve System. When they were done they went back to New York.

For quite a few years thereafter these men denied that any such meeting took place. It wasn't until after the Federal Reserve System was firmly established that they then began to talk openly about their journey and what they accomplished. Several of them wrote books on the topic, one of them wrote a magazine article and they gave interviews to newspaper reporters so now it's possible to go into the public record and document quite clearly and in detail what happened there.

Who were these seven men? The first one I have already mentioned, Senator Nelson Aldrich was the Republican whip in the Senate, he was the chairman of the National Monetary Commission which was the special committee of Congress created for the purpose of making a recommendation to Congress for proposed legislation to reform banking. The public was quite concerned in those days over what was going on in the banking industry; a lot of banks were folding, people were losing their investments in banks, they had broken their promise to guard the depositors assets, there were runs on the bank, banks couldn't give the people their money back. In particular they were concerned over the concentration of wealth in the hands of a few large banks in New York on Wall Street. This is what they called the "money trust" in those days. The money trust was a common phrase. Quite a few politicians had been elected to office on their campaign promise to break the grip of the money trust. President Wilson was one of those politicians that campaigned on that even though Wilson was himself hand-picked by the money trust and financed by the money trust and surrounded by the money trust--all of his advisors and politic cronies. The public didn't know that at the time and it was a popular issue. If you campaigned against the money trust you were quite apt to be elected and that was what I call "the people you love to hate" money trust.

That was one of the purposes of the National Monetary Commission which was to propose legislation to break the grip of the money trust and Aldrich was chairman of that committee. He was also the very important business associate of J. P. Morgan. He was the father-in-law of John D. Rockefeller, Jr. which means that eventually he became the grandfather of Nelson Rockefeller, our former vice-president. You remember his full name was Nelson Aldrich Rockefeller; his middle name being derived from his famous grandfather.

The second important person there was Abraham Andrew who was Assistant Secretary of the Treasury. He later became a Congressman and he was very important in banking circles.

Frank Vanderlip was there. He was the President of the National City Bank of New York which was the largest of all of the banks in America representing the financial interests of William Rockefeller and the international investment firm of Kuhn, Loeb & Company.

Henry Davison was there, the senior partner of the J. P. Morgan Company. Charles Norton was there; he was the President of the First National Bank of New York which was another one of the giants. Benjamin Strong was at the meeting; he was the head of J. P. Morgan's Banker's Trust Company and Benjamin Strong three years later would become the first head of the Federal Reserve System.

Finally, there was Paul Warburg who was probably the most important at the meeting because of his knowledge of banking as it was practiced in Europe. Paul Warburg was born in Germany and eventually became a naturalized American citizen. He was a partner in Kuhn, Loeb & Company and was a representative of the Rothschild banking dynasty in England and France where he maintained very close working relationships throughout his entire career with his brother, Max Warburg, who was the head of the Warburg banking consortium in Germany and the Netherlands. Paul Warburg was one of the wealthiest men in the world. In fact, those of you who are Little Orphan Annie fans will remember Daddy Warbucks. Daddy Warbucks was the characterization of Paul Warburg and everyone at the time was well aware of that fact. I have his photograph in my book and if you compare the photograph to the cartoon drawing you'll see the resemblance between Paul WARburg and Daddy WARbucks. And while we're on the topic of cartoon characters, if you played Monopoly, you remember the drawing of the capitalist with the handle-bar mustache and the cigar? That's J. P. Morgan.

These were the seven men aboard that railroad car who were at Jekyll Island. Amazing as it may seem, they represented approximately 1/4 of the wealth of the entire world. These are the men that sat around the table and created the Federal Reserve System. For the skeptic who's wondering it didn't happen that way surely Griffin is exaggerating to make some kind of a point. Let me put your mind at ease that it did happen that way (perhaps not at ease but in a state of tension).

How do we know? For example, Frank Vanderlip who was at the meeting wrote an article that appeared in the Saturday Evening Post on February 9, 1935 and I'd like to read for you just a short excerpt from that article. This is what Vanderlip said: "I do not feel it is 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 we should 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 railroad terminal on the New Jersey littoral of the Hudson where Senator Aldrich's private car would be in readiness attached to the rear-end of a train to the south. Once aboard the private car we began to observe the taboo that had been fixed on last names. We addressed one another as Ben, Paul, Nelson and Abe. Davison 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've made our mysterious journey significant in Washington, in Wall Street, even in London. Discovery we knew simply must not happen."

Why not? why the secrecy? what's the big deal about a group of bankers getting together in private and talking about banking or even banking legislation. And the answer is provided by Vanderlip himself in the same article. He said: "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." Why not? Because the purpose of the bill was to break the grip of the money trust and it was written by the money trust. And had that fact been known at the get-go, we would never have had a Federal Reserve System because as Vanderlip said it would have had no chance of passage at all by Congress. So it was essential to keep that whole thing a secret as it has remained a secret even to this day. Not exactly a secret that you couldn't discover because anybody can go to the library and dig this out, but it is certainly not taught in textbooks. We don't know any of this in the official literature from the Federal Reserve System because that was like asking the fox to build the henhouse and install the security system.

That was the reason for the secrecy at the meeting. Now we know something very important about the Federal Reserve that we didn't know before, but there's much more to it than that. Consider the composition of this group. Here we had the Morgans, the Rockefellers, Kuhn, Loeb & Company, the Rothschilds and the Warburgs. Anything strange about that mixture? These were competitors. These were the major competitors in the field of investment and banking in those days; these were the giants. Prior to this period they were beating their heads against each other, blood all over the battlefield fighting for dominance in the financial markets of the world. Not only in New York but London, Paris and everywhere. And here they are sitting around a table coming to an agreement of some kind. What's going on here? We need to ask a few questions.

This is extremely significant because it happened precisely at that point in American history where business was undergoing a major and fundamental change in ideology. Prior to this point, American business had been operating under the principles of private enterprise--free enterprise competition is what made American great, what caused it to surpass all of the other nations of the world. Once we had achieved that pinnacle of performance, however, this was the point in history where the shift was going away from competition toward monopoly. This has been described in many textbooks as the dawning of the era of the cartel and this was what was happening. For the fifteen year period prior to the meeting on Jekyll Island, the very investment groups about which we are speaking were coming together more and more and engaging in joint ventures rather than competing with each other. The meeting on Jekyll Island was merely the culmination of that trend where they came together completely and decided not to compete--they formed a cartel.

I need to define that word so that you will know what I mean when I use the word cartel. It is a group of independently owned businesses which come together for the purpose of reducing or eliminating competition between themselves to enhance their profit margin or to secure their positions in the market. They do this by various means one of which is price fixing--no competition on price. There are other means. If we were forming a cartel here I might insist that I get the north and you can have the south and we won't compete. Or I would say I'll produce the gizmo and you can have the widget and we won't compete or we'll share patents and processes and whatever we do we agree to eliminate competition between ourselves. The more layers of agreement that we put one on top of the other, the more we become encased in this cartel structure and we become as one insofar as the market is concerned even though within that grouping we are separately owned.

This is just as true with a banking cartel as it is with any other industry. We come to the conclusion when we analyze the nature of the Federal Reserve System how it operates, read the Federal Reserve Act, place it against the context of the historical background and we come smack to the realization that the Federal Reserve System although it parades around looking as though it's a government operation of some kind, is merely a cartel of banks right under our noses and it is protected by law. I sometimes get the impression that it's been there dangerously operating all these years and we didn't even know it. I saw a video some years ago about the lava tubes in Hawaii. They are very impressive because apparently once in a while the ground will just break out, a hole will fall down and you can look into the hole and you see that there's a river of lava actually flowing just a few feet under your feet and you don't even know it's down there unless something breaks through and you hope you're not on the piece that breaks through. I got the feeling that this is how the Federal Reserve has been operating right under our feet; this cartel has been running and we didn't even know it because that fact has been carefully concealed from us.

Conclusion number 2 about the Federal Reserve System, a very important thing that we didn't know is the cartel. There's even more to it than that. Perhaps the third ingredient is the most important of all and that is the realization that this cartel went into partnership with the government. Now we have hold of something extremely significant. Cartels often go into partnership with governments because they need the force of law to enforce their cartel agreement but in this case they did it in spades.

Whenever a partnership is formed there has to be a benefit to the partners otherwise they don't form it. So we need to ask the question what is the benefit, the payoff, for these two partners? Why did they go into it? Why did the government go into a partnership like this and why does the banking cartel? In answering those questions we finally come to grips with the reality of what this creature from Jekyll Island is. Let's take a look at that; what's the payoff to these two partners? In order to see that we'll have to examine in some detail the mechanism by which the Federal Reserve System creates money. This is a real interesting study. I call it the "Mandrake Mechanism" named after that comic-book character of the 40s, Mandrake the Magician, who could create something out of nothing and then wave his cape and it was back into the void again. That's a pretty descriptive phrase for the way the Federal Reserve System does it.

Let's take a look at it and see how they create money through the Mandrake Mechanism. I am going to do this in a very simplified form. I want to warn you that it's going to sound like it's too simple. It's not. I'm going to strip out all the banking terminology, all the banker language, all the accounting phrases that need to be defined and speak in very plain English that anybody can understand. It may sound to you as though I've simplified it too much and I want to assure you that in spite of the simple language everything I'm going to tell you is absolutely 100% technically accurate. The other thing I want to warn you about is don't try and make sense out of this because it can't be done; this does not make sense and you'll blow a fuse trying to make it make sense. Just remember that it is a scam and if you keep that fact in mind then you'll have no trouble comprehending what's going on.

Here's how it works. It starts with the government side of the partnership, it starts in Congress which is spending money like crazy. It spends far more money than it takes in. It is spending way beyond its income. How can it do that? Basically this is what happens. Let's say Congress needs an extra billion dollars today so it goes to the treasury and says "we want a billion dollars" and the treasury official says "you guys have got to be kidding, we don't have any money here, you spent it all a long time ago, everything that we've taken in taxes you fellows have spent by March." Congress says "we thought that was true but we thought we'd stop by just in case somebody sent some more in." They get together and they go down the street and they get the idea that we'll borrow the money. So they stop at the printing office and they don't print money at the printing office, they print certificates and they're very fancy things with borders on the edge with an eagle across the top and a seal at the bottom and it says "US Government Bond" or "Note" or "Bill" depending on the length of the maturity of it. If you hold it up to the light it really says "IOU" because that's what it is. They print these things up and it looks very impressive and then they offer them to the private sector; they're hoping that people will come up and loan money to the federal government and a lot of people do and are anxious to lend money to their government. Why? Because they've been told by their investment advisors that that's the most sound investment that you can make. Why? We've all heard that these loans are backed by the full faith and credit of the US government. They're not quite sure what that means but it sure sounds good. I'd like to explain for you who are in doubt what that means. The full faith and credit of the US government means that the government solemnly promises to pay back that loan plus interest if it has to take everything you and I have in the form of taxes in order to do it, it's going to do it. It will take everything we have if necessary to hold its pledge. People don't realize that they're putting themselves on the line, they're going to get their own money back minus a substantial handling fee.

Plenty of money is loaned to the government but never enough. Congress needs more money than that. They say not to worry. They go further down the street to the Federal Reserve building. The Fed has been waiting for them, that's one of the reasons it was created. By the time they get inside the Federal Reserve building the officer of the Fed is opening his desk drawer. He knows they're going to be there and he's ready and he pulls out his checkbook and he writes a check to the US Treasury for one billion dollars or whatever the amount is that they need. He signs the check and gives it to the treasury official.

We need to stop here for a minute and ask a question. Where did they get a billion dollars to give to the treasury? who put that money into the account at the Federal Reserve System? The amazing answer is there is no money in the account at the Federal Reserve System. In fact, technically, there isn't even an account, there is only a checkbook. That's all. That billion dollars springs into being at precisely the instant the officer signs that check and that is called "monetizing the debt," that's the phrase they throw at you. That means they just wrote a check, a big rubber check. If you and I were to do that we would go to jail but they can do it because Congress wants them to do it. In fact, this is the payoff, this is the benefit to the government side of this partnership, this is how the government gets its instant access to any amount of money at any time without having to go to the taxpayer directly and justify it or ask for it. Otherwise, they would have to come to the taxpayer and say we're going to raise your taxes another $3,000 this year and of course if they did that, they would be voted out of office real fast. They like the Mandrake Mechanism because it's a no questions asked source of money. You may have noticed that it's been many years since Congress has even discussed what anything costs, it's not an issue. It doesn't make any difference what the cost is because regardless of the overrun they know they can go down the street to the Federal Reserve and by law the officer has to write that big check and give it to them and they're off and running.

There in a nutshell is the reason the government likes the Mandrake Mechanism--easy instant access to any amount of money of any kind without the taxpayer being involved directly in the loop. But what about the banking side? This is where it really gets interesting. Let's go back to that billion dollar check. The treasury official deposits the check into the government's checking account and all of a sudden the computers start to click and it shows that the government has a billion dollar deposit meaning that it can now write a billion dollars in checks against that deposit which it starts to do real fast. For the sake of our analysis, let's just follow $100 out of that billion in a check that for some reason they write to the fellow that delivers the mail to our door. The postal worker gets a check for $100 and he looks at this thing and he can't imagine in his wildest dreams that that money didn't exist two days ago anywhere in the universe. It's spendable so he wouldn't even care if you told him. He deposits it now into his personal checking account. Now we're finally out of the Federal Reserve and out of the government's check and we're into the private banking system. We're in finally to that part of the partnership which is involved in the cartel. A $100 deposit has now been made in the local bank and the banker sees that and runs over to the loan window and opens it up and says "attention, everybody, we have money to loan, someone just deposited $100." Everyone is overjoyed at that because that's one of the reasons they come to the bank, they come to borrow money. That's a sign of national health if you're in debt so they're anxious to know that the bank has money to loan, they line up for these loans. They heard the banker and they say $100 that's not very much and he says not to worry we can loan up to $900 based on that $100 deposit. How can that be done? It gets complicated the way they do it and I'll tell you in very simple terms. The Federal Reserve System requires that the banks hold no less than 10% of their deposits in reserve. The bank holds 10% of that $100 in reserve, $10, and it loans this first fellow in line $90. What does he do with it? He wants to spend it so he puts it into his checking account. In fact it probably goes directly into his checking account. Let's assume that they gave it to him and he puts it back, when he puts it back it's a deposit isn't it?

Only a $100 deposit but $900 in loans and that deposit is still there. Where did the $900 come from and the answer is the same--there was no money. This springs into existence precisely at the point at which the loan is made. Notice the difference, an important distinction is when the money is created out of nothing for the government it is spent by the government. On the banking side, however, when it's created out of nothing it's not spent by the banks it is loaned by the banks to you and to me and we spend it. Notice that when they loan it to us we have to pay them interest on it. Think about this for a minute. This money was created out of nothing and yet they collect interest on it which means that they collect interest on nothing. Not too shabby! What a concept, why didn't I think of that! I wish I had a magic checkbook like that where I could just write checks all day long and didn't have to have any money any place just checks, loan it to you folks and you're silly enough to pay me interest on it. That's how it works.

Now you see what the benefit is to the banking cartel for being involved in this Federal Reserve System, interest on nothing. The process doesn't end there, however. It has consequences to you and to me. I've heard some people say "isn't that interesting, these fellows are sure smart, I guess they deserve to be rich." It's as though we're out of the loop, it doesn't affect us any, they got rich but we're ok. Well no, they got rich alright but they got it by taking it from us. How does that work? Let's follow this.

This newly created money goes out into the economy and it dilutes down the value of the dollars that were already out there. It's like pouring water into a pot of soup, it dilutes the soup. So by throwing more and more money into the economic soup out there the money gets weaker and weaker and weaker and we have the phenomenon called inflation which is the appearance of rising prices. I emphasis the word "appearance" because in reality prices are not rising at all. What we're seeing is that the value of the dollar is going down, that's the real side of the equation. If we had real money based on gold or silver or anything tangible that couldn't just be created out of thin air, it could be based on microphones, that they couldn't just create with the stroke of a pen, you would see then that prices would remain stable over a long period of time.

To illustrate that point, it's interesting to know that if we had lived in ancient Rome with a one ounce gold coin we would've been able to buy a very fine toga, a hand-crafted belt and a pair of sandals--that was the price in Rome. Today, if we have a one ounce gold coin what can we buy with it? We can go into any men's store and buy a very fine suit, a hand-crafted belt and a pair of shoes. The price of these items hasn't changed in thousands of years when expressed in terms of real money but when expressed in terms of these things we carry around in our pockets called Federal Reserve notes which is not really money at all, fiat money anyway, the prices keep going up and up and up because the value of those units keeps going down and down and down because they keep making more and more and more of them and dumping them into the economic soup.

That's still not the end of the process. We lost some purchasing power through this process called inflation. We lost something and very few people ask the question "who got it"? It's as though nobody got it, we all lost it, it's like it evaporated and went up to heaven somewhere. No, somebody got it. For every loser there's a winner. Or I should say for every fifty losers there's one winner that gets it all. Somebody got it. Who? Those people that got our lost purchasing power are the ones who were right up at the point where the fresh money was injected into the economic pot of soup. The ones that got the money first gained because they had full purchasing power at that instant when the money was created. By the time they spent it and gave it to you and you spent it on something and gave it to him and by the time that it got out to the edge of the pot where most of us are it's diluted. The ones that were right up at the nozzle got our lost purchasing power. Who are they? Obviously the government was up there first. Remember the billion dollar check, the very beginning of this process went to the government and they spent it instantly and that money went out into the economy and that was the beginning of this ripple effect. Who else? The next ones were the people who were up at the loan window. They got the money that was freshly created by the banking system because they were the borrowers. We all know that in times of inflation borrowers gain, this is no mystery. We've been told and advised to borrow money and stay up to the hilt in debt because you borrow in dollars but because of inflation you can pay back with 50 cent pieces.

So everybody knows about this part of it. What they forget is that the alleged benefits of doing this are surrendered to the bank in the form of interest payments. They're really not gaining that much. The gain that they are getting through the inflation process they're having to give to the bank in the form of interest on nothing. And it seems that they're gaining because they have these paper profits. The value of this real estate is going up and up and up or the value of my stock is going up and up and up but it's all paper. As far as purchasing power is concerned it's not going up, up, up at all. Nevertheless they're still having to pay for that illusion in the form of interest payments on nothing.

Then comes the inevitable contraction of the economy. People don't realize that the economy moves traditionally like a sawtooth--it goes up gradually for a long period of time and seems like forever it's going to go up, you can plan on it forever and don't worry about it and then clunk! it falls down very quickly and then it starts the next long climb and people forget that every once in a while it comes down very abruptly. When it contracts people are extended out there and they can't service their debt and make the payments and they lose their assets.

Another interesting thing about this is that when the bank loans you money which it created out of nothing, it costed nothing to make it, it wants something from you. It wants you to sign on the dotted line and pledge your house, your car, your inventory, your assets so that in case for any reason you cannot continue to make your payments they get your marbles, they get all of your assets. They're not going to lose anything on this. Whether it's expansion or contraction, inflation or deflation the banks are covered and we like sheep go right along with it because we haven't figured it out, we don't know that this is a scam. Of course we have no choice either right now because it's all enforced by law. We have no escape. We have no choice but it's even better that we don't understand it because we can't complain about it either. There you have it.

The two groups that got our lost purchasing power--is anyone surprised?--the two members of the partnership, the government and the banking cartel. The two groups that comprise the Federal Reserve System.

This lost purchasing power which is going from us to them is a tax. We don't think of it as a tax but it is. We have no escape from it. In fact, it's more a tax than the income tax or the excise tax which you can escape in one way or another. You can't escape this one. There are no deductions, no exemptions, everyone pays it and it is the most cruel, unfair tax of all because it falls most heavily on those who can least afford to pay it. It falls on those on fixed incomes, those who are retired. Anyone who has saved their money is paying this tax in direct proportion to the degree to which they have been frugal. It's a tax even though we don't think of it as that and it's time to think of it as that. It's a tax that goes from us to the government and to the banking cartel.

Let's summarize. What is the benefit to the members of the partnership? The government benefits because it is able to tax the American people any amount it wishes through a process which the people do not understand called inflation. They don't realize they're being taxed which makes it real handy when you're going for re-election. On the banking side they're able to earn perpetual interest on nothing. I emphasis the word "perpetual" because remember when the loan is paid back it's turned around and loaned out to somebody else. Once that money is created the object of the bank is to stay "loaned up" as they say. In reality the banks can never stay 100% loaned up and that ratio varies a lot but the objective is to stay loaned up to whatever extent is possible. Generally speaking once this money is created in the loan process it is out there in the economy forever, perpetually earning interest for one of the members of the banking cartel which created that money.

There you have in a condensed form a crash course on the Federal Reserve System and I can assure you that you know more about the Federal Reserve than you would probably if you enrolled in a four year course in economics because they don't teach this reality in school.

So what, they say? Can you imagine that? I knew when I wrote this book and it got out that there would be some objection to it but I never dreamed what it would be. I couldn't think of any objection to it, I thought what are they going to say, what are the defenders of the Federal Reserve System going to say to me? I figured they were going to try and pick some error that I had made in some technical issue and try and make me look like a buffoon. But I never dreamed that the only opposition, at least that I've run into so far, is the question "so what"?

I was on the Pat Buchanan radio show about a month ago and they have a cohost which is usually a representative of the opposing point of view and this day they had a fellow by the name of Barry Lind(?) who was an ACLU type high-powered intellectual and I was kind of nervous thinking here it comes, I'm going to get it now and I'm going to be made a fool of right in front of all these millions of people out there in radio land. I was really worried. It's kind of hard on these radio shows to get your point across as they don't let you speak like you folks let me do here. The lion's share of the time goes to Buchanan and then the cohost gets his shot and then the commercials come in and you've got three minutes to say your whole thing and they're always interrupting you. I made my little shot as best I could and it was Barry Lind's turn and he looked at me and he said: "Well, what you say is true, but so what?" I couldn't believe it. And then he capped it with, which is the real argument: "We're living well aren't we?"

This is an interesting question and I have run into that repeatedly since then. What are you complaining about? we're living well aren't we? And the implication is that without this scam we couldn't be living well, without this scam somehow we'd be still crawling around in caves. We wouldn't have society with a high standard of living, we wouldn't have any of the things that we cherish without this scam, that's the whole implication. So how do you answer that? So what?

First of all, we are not living that well. People like Barry Lind are undoubtedly living very well and there are plenty of people in the system who are living very well. Generally those are the ones who are up at the nozzle where this new money is coming into the system or they're involved in the government or they have government subsidies of they're close to the nozzle. For most people, away from the nozzle, it's not going so well, we're not living that well. It is a matter of fact that the only reason that America has been able to maintain the appearance of a high standard of living since the Federal Reserve System has gotten into full swing, especially after WWII, is because of the shift towards two family incomes. It now takes two working people to just maintain the semblance of where we used to be with one person working in the family. And in spite of the two family income real wages are down for the common man today, real wages in terms of the number of hours a person must work in order to acquire the necessities of life. Young couples who are living on a single income now have a lower standard of living than their parents did. The net worth of the average household is falling. The leisure time for the average American is shrinking. The percentage of families who own their own homes is dropping. The age at which a family acquires its first home is rising. The number of families that are counted in the middle class is falling. The number of people below the poverty line is rising. Personal bankruptcies today are about three times what they were in the 1960s and over 90% of Americans are broke at the age of 65. So we're not living well at all as a result of this creature.

Furthermore, there's another thing wrong with it. That is that when you have a money supply based upon thin air it not only expands but it contracts. If it were based on gold or silver or microphones, the money supply couldn't expand and contract because there they are but when it's politically motivated it can contract and that is the core cause of all of the booms and busts that have plagued America for so many years. In other words, this is the concept behind the recession and the depression and that is another thing that's wrong with it.

The third thing that's wrong with it is that it is dishonest. You don't really need anything more than that do you? Even if it were the element that was creating our prosperity, even if it didn't cause recessions and depressions the fact that it is fraud, the fact that it is deception, it's dishonest and theft is really a good enough reason in my opinion to get rid of it. That's what's wrong with this scam.

Let's go back to Jekyll Island. They had an interesting problem there which was what to call their creature. This partnership between government and banks which we've been discussing was not new with the Federal Reserve System. In fact, it was a concept that was created in Europe in the 16th century. It was perfected with the formation of the Bank of England in 1694 and from that point forward all of the governments of Europe had used this Mandrake Mechanism. They didn't call it the Mandrake Mechanism, of course, they called it a "central bank," that's the technical phrase for this partnership. If you want to look it up in a textbook or encyclopedia you'll find it under the heading "Central Bank."

From the Bank of England forward all the governments of Europe had central banks for a very good reason. The kings and princes of Europe had learned from hard experience that they could raise the taxes of their subjects only so high and then they had a revolt on their hands and they tended to lose their jobs (and heads). It appears that that natural level was about 40-43%; people will tolerate taxes up to about 40-43% and then they start digging in their heels and they just won't allow it to go any further. But with the central bank mechanism in place the lid was off. Now these governments could tax their people 50%, 60%, 70% and in some cases 80% of everything they produced and they did not have a revolt on their hands. They did not have resentment because the people didn't know that they were paying a tax. They knew that prices were going up, but they didn't understand why, they didn't know who was getting their lost purchasing power.

It was a nifty arrangement for these governments. It was at that point in history that governments' wars began to heat up. They always had wars but they were relatively small things because wars are expensive and the people won't pay more than 40% for everything including wars. But now that they had a way to tax higher than that, they could engage in very expensive wars. It's at that point in history that Europe plunged headlong into continuous war and big, very, very expensive wars. The people paid for them uncomplainingly through the process of inflation.

So when it came time to transplant this concept to America these seven men on Jekyll Island knew very well that they were creating a central bank; that was the reason that Paul Warburg was so valuable because he was the man with the intense knowledge, the detailed technical knowledge of how central banks operate. But they had a problem. How could they conceal that from the American people because Congress was already on record as saying they did not want a central bank in America. I don't think they knew what that phrase really meant, but they knew that Europe had them, whatever they were, and we didn't want any. They said in America if we're going to have banking reform we don't want what they do over in Europe, we want something that is unique for America and its principles and economy.

The problem before these men on Jekyll Island is what to call the central bank so that nobody would know it was a central bank. And they theorized over this and this was their strategy: they said first let's give it a name and we'll add the word "Federal" to it to make it sound like it's government. Then we'll add the word "Reserve" to make it seem like there are reserves somewhere, like it was a banking concept. We'll add the word "System," a very important word even though it may seem obscure now because remember in those days the concern was the concentration of financial power in New York so they had to sell the idea of a system of regional banks which would diffuse that power all over the nation. First they talked about ten regions and then they said that wasn't enough, twelve regions, we'll have twelve banks. And we'll build big buildings out there in all of those regions so the local yokels can go and look at the building and say "golly we've got one of those out here." Diffusion of power away from New York; you can go and touch the building. The word "System" was very important.

When you look at it you realize that what they created there was not federal, there are no reserves, it's not a system at all in the sense of diffusion of power and these Federal Reserve banks aren't even banks. On all four words we're dealing with appearances of the fourth kind. It was brilliant strategy.

The next thing was to sell this creature to the public. The first draft of the Federal Reserve Act as it was presented to Congress was called the Aldrich Bill named after the sponsor, Senator Nelson Aldrich. This was against the good advice of Paul Warburg. He said: "Nelson, don't put your name on that bill because you are so identified with big business interests that Congress will vote it down; the people will not accept it." And apparently Aldrich's ego was too big. He must've said: "Well no, after all I'm highly respected in the Senate and I am the Chairman of the National Monetary Commission" and for whatever reason he insisted that his name be on the bill. It appears that he wanted to go down in history as the originator of the Federal Reserve System. Warburg was right. When the bill was introduced Congress put thumbs-down on it. "The Bill of Big Business."

They took the bill back for it was just a minor setback, they scrambled the paragraphs around a little bit, took Aldrich's name off real fast and they found a couple of Democrats to sponsor the bill. This was different. Everybody knew that the Republicans represented big business but they also knew that Democrats represented the common man, the little guy, the fellow on the assembly line (like Ted Kennedy). They found a couple of millionaire Democrats to sponsor the bill. They found Carter Glass in the House and Senator Robert Owen who himself was a banker. Now it was the Glass-Owen bill and it was totally different and acceptable.

The next thing, Aldrich and Vanderlip began to give speeches and interviews to newspaper reporters condemning the bill. They said: "This bill will be ruinous to banking. It will be terrible for the country." By the time the common man read that in his newspaper he said: "Oh golly, I guess these big bankers don't like the bill very much so it must be pretty good."

These fellows were not stupid. You have to give them credit. They didn't get to be where they were by being country bumpkins. They understood politics, they understood mass psychology and they played their cards exceedingly well. Meanwhile these same individuals out of their own pockets were paying the price for the costs of bringing up what they called grassroots study clubs all over the country. They sponsored these clubs and they held public meetings and printed brochures and pamphlets extolling the virtues of the Federal Reserve System. They gave large amounts of money to some of the better known universities in America; they created newly formed departments of economics with that money; they hand picked their own people to be the professors to head up those departments and then those professors with all of their academic credentials gave speeches and wrote scholarly essays extolling the virtues of the Federal Reserve System. And then at the insistence of Paul Warburg who was forever the master strategist, they added several very sound provisions to the Federal Reserve Bill. By that I mean they added some provisions which seriously restricted the ability of the Federal Reserve to create money out of nothing. Warburg's associates said, "Paul, what are you doing? We don't want those in there this is our bill." And his response was this, he said, "Relax fellas, don't you get it? Our object is to get the bill passed. We can fix it up later." Those were his exact words. "We can fix it up later." He was so right. It was because of those provisions that they won over the support of William Jennings Bryan the head of the Populist Movement, the last hold-out against the bill. Bryan was concerned that this would be an instrument for ruining the nation's money supply but when he saw those provisions he said, "Oh well, those are good provisions, I guess I can support the bill now" never dreaming that this was temporary. Everything is temporary in politics. When people go to sleep things can get changed.

Warburg was right and they fixed it up later. The Federal Reserve Act since it was passed has been amended over 100 times. Every one of those provisions were long ago removed and many more have been added which greatly expand the power and reach of the Federal Reserve System to create money out of nothing. With this kind of professional strategy and deception these people were real professionals and the public didn't stand a chance. It is no surprise that popular support was finally gained for the bill and on December 22, 1913 the bill was passed by Congress and the following day was signed into law by President Wilson and the creature from Jekyll Island finally moved into Washington, DC.
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Thank you, Mr. Griffin.

Your article is very informative.

We appreciate you.
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