At his press conference earlier this week, Fed Chair Jerome Powell said the following… “The public should be confident that we will continue to do our work as we always have, focusing on using our tools to achieve our goals, and, really, keeping our heads down and doing our work,” he added. “That is how we best serve the public.”
Powell’s repeated use of the personal pronoun “our” rates special attention. I don’t think he means it in the collective sense. In this case, “our” means them – not us. Admittedly, his appending claim “…how we best serve the public” is meant to allay fears and present himself and the Fed in a more positive light. Nevertheless, investors and others need to know and understand some things about the Federal Reserve’s origin and purpose.
From The Creature From Jekyll Island (G. Edward Griffin)…
“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.” 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 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.”
PURPOSE OF THE FED
The purpose of the Federal Reserve is to provide a structured system whereby its member banks can create and lend money in perpetuity. The Fed accomplishes this by continually expanding the supply of money and credit.
The Federal Reserve exists for the benefit of the banks and bankers. Its purpose and motivation is not aligned with ours. The Fed’s objective is to facilitate the ongoing creation of money and loans which generate interest income. (see The Federal Reserve – Purpose And Motivation)
Our financial problems are the result of intentional inflation created by the Fed. Cheap and easy credit has exacerbated the fragility of the entire banking system.
Why in the world would the United States Congress approve a bill which authorized the inception of a private institution whose purpose and goals had nothing at all to do with serving the public? Besides, the government (President Andrew Jackson) had promised there would never be another National Bank. Here is why the Federal Reserve exists today…
COLLUSION AND SECRECY
In order to allay the fears of the American public, and convince Congress that it was in the best interests of the country to authorize by law the existence of this ‘private’ institution, it was necessary to effect a campaign at two specific levels: grass roots, i.e., the American public; and, behind closed doors, i.e., politicians and the U.S. government.
The message delivered was that the mission of the Federal Reserve was to actively manage the stages of the economic cycle – recession, depression, recovery, prosperity – and, thus, avoid the extremities of panics and crashes that had plagued the banking industry and put depositors at continual risk. (This has morphed into a two-pronged goal of focusing on 1) maximum employment and 2) stable prices.)
The statement of intention to manage the stages of the economic cycle was born out of necessity. Members of Congress would not vote in favor of any bill authorizing existence of a central bank without their constituents approval. If the American public thought there were benefits that could outweigh their fears, and if enough members of Congress felt similarly, and perceived that public support was sufficient, then possibly the bill would pass.
Support of business and the general public notwithstanding, approval was not assured. In exchange for support by the government (Wilson administration including Treasury officials and others), another secret meeting was held at which an agreement was made that if the Federal Reserve was granted a legitimate birthright, all future government funding was assured.
In other words, the Federal Reserve underwrites and guarantees that the US Treasury/Government will get whatever funds it needs; a promise made over one hundred years ago. (see U.S. Government Is Beholden To The Fed & Vice-Versa)
PRIVATE INTERESTS VS PUBLIC POLICY
So, what did the bankers get out of this? The answer is found in one word. Money.
More specifically, they got control over the money. They were now legally authorized to be everyone’s sugar daddy, and, ostensibly, they had the support of the United States government and its citizens.
Banks lend money to individuals, companies, and governments. They also lend money to countries, revolutionaries, and global conglomerates.
The Fed is not particularly interested in the profitability or welfare of smaller, individual banks, though. It was intended originally that the Federal Reserve could better supervise and contain damages spawned by errant actions of independent banks, but the primary goal was to create an environment that would allows the banks, especially big, power center banks, to operate and function without interruption, and on a hugely, profitable scale.
With the inception of the Fed, the bankers could protect the interests of their elite hierarchy and retain control over the money supply, lending activities, funding their own special interest activities, and make tons of money doing it.
JEROME POWELL VS DONALD TRUMP
President Trump is now demanding (again) that the Fed lower interest rates. This is what Powell had to say about it…
“I am not going to have any response or comment whatsoever on what the President said,” Powell replied. “It is not appropriate for me to do so.”
Fed policy (and purpose) is not designed to support off the wall “demands” by politicians (or investors, for that matter). A similar “demand” was made during Trump’s first term. It went nowhere. Two years into his successor’s term in office, the Fed began raising rates; much to the chagrin of a majority of outspoken enthusiasts from both political parties.
The current difference of opinion between Mr. Powell and President Trump could be entertaining, though.
CONCLUSION
Regardless of claims to the contrary, the Federal Reserve does not exist to serve the public interest. The Federal Reserve is a banker’s bank which exists for the purpose of 1) creating and lending money and 2) collecting interest in perpetuity.
As valid as are the calls to end the Fed, it likely won’t happen. The United States government would lose its pipeline to unlimited funding. The result would be financial and economic pandemonium.
The road ahead, though, will bring financial and economic devastation anyway. Right now, the Fed has everything it can do to handle the unintended consequences of its own errant policies over the past century. Fighting the negative effects of more than one hundred years of intentional inflation is a full-time job. (see Federal Reserve – Conspiracy Or Not?)
Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED