Episode 2. The US Federal Reserve.

“ … We were told to forget each other’s last names and not to eat together the day before we left. We agreed to meet at a specific time at a train station on the coast of the Hudson in New York and also to arrive alone and as discreetly as possible. At the station we were to wait for Senator Aldrich’s personal car attached to the last wagon on the train headed south.”

“When I got to the car, the curtains were closed, and only a faint glimmer of yellow light traced the shape of the windows. Once inside, we observed the taboo on last names and spoke to each other as “Ben,” “Paul,” “Nelson,” “Abe.” … We decided to resort to even greater secrecy and ceased using first names.”

What is this? A description of a meeting of secret agents? A gathering of senior mob bosses? No, these were the words of one of the founders of the Federal Reserve system describing a secret meeting at which the final decision to create the Fed was discussed. It took place in 1910 on tiny Jekyll island in the Atlantic Ocean. In keeping with all the rules of conspiracy, the bankers traveled to the island concealing their names and only increased their anonymity upon arrival.

“Within a week to ten days we were completely isolated from the outside world, we weren’t using telephones or telegraph. We hid on a deserted island. There were a lot of colored servants, but they had no idea who was this Ben or Paul, or Nelson, not to mention Vanderlip, or Davison, and Andrew. All of these names to them about anything not mentioned.” [Frank A. Vanderlip, President, First National City Bank From Farm Boy to Financier. New York: Appleton, 1935.]

Like bandits under the cover of night, the bankers secretly slipped onto this isolated island using coded names and altered appearances. The meeting was held in one of the conference rooms of the hotel now known as the Jekyll Island Club Hotel where the participants agreed upon their plan, and, according to Frank Vanderlip, Senator Aldrich wrote his speech to Congress [ibid]. That man, Nelson Aldrich, proposed the creation of a private central bank in the United States to be called the Federal Reserve System.

But every action needs a reason, so to change the financial model of the country, they also needed a reason – a financial one. The pretext under which the U.S. Senate proposed the Fed, was quite generous, they wanted to create an entity that would deal with financial instability in a professional manner. But, there would need to be some instability in order to justify this measure. So, they created some.

Not a single bank in the world would be left standing if the entirety of its depositors demanded their money back all at once. And if your banker friends refuse credit to this bank and instead demand the immediate repayment of all of the bank’s debt to them, the collapse of this financial institution is inevitable. And thus was carefully organized the crisis that became known as the Panic of 1907. Looking carefully at this crisis, one sees a painfully similar picture – a birthmark of all future crises. They all resemble one another like twins – not because they are caused by the same economic problem, but because they are organized in the same fashion.

An investment bank called the Knickerbocker Trust was selected as the target. It was the third largest player on the market. Suddenly, rumors arose about the bank’s serious problems, and investors began pulling out their money. The head of the Knickerbocker Trust then turned to the leading banker of those days for help – John Pierpont Morgan (J.P. Morgan). But he refused to help despite being on friendly terms with the owner of the troubled bank. Rumors of Morgan’s refusal spurred panic, which came to a peak on October 22, 1907. Between the moment the bank opened its doors until noon, about $8 million was withdrawn by depositors – equal to $50 million today – and the Knickerbocker Trust closed its doors and ceased all payments [http://www.vedomosti.ru/newspaper/article.shtml?2008/10/14/164576, in Russian]. To save their money, depositors rushed to other financial institutions. On October 23rd, the panic spread to the Trust Company of America, the second largest trust in the country. It gave out $16 million of its $60 million of assets in a day. By October 24, the crisis had spread to the New York Stock Exchange. One after another, banks, brokerage houses and trusts began closing and failing (at least seven insolvent banks failed that day) – not only in New York but throughout the country [ibid].

And then, who stepped in to save the day but J.P. Morgan. He, in fact, “saved” the American economy being one of the chief organizers of the crisis. Morgan refused to settle the problems at the outset, gave them time to grow, and then resolutely set to their rapid elimination. He and others poured $25 million into the U.S. financial market and the situation stabilized.

It is important to remember that every financial crisis stems from a lack of funds. Money appears, and the crisis is over.

The best firefighter is always the arsonist himself.

A hidden toy in a dark room is always found fastest by those who know where it lies.

Banks began to issue certificates – “substitute money” – in order to increase the money supply. Sam Morgan backed the placement of bonds from the city of New York, thus saving it from bankruptcy. The authority of John Pierpont was very high, “It is well known that his word was a fails-safe for any securities.” [А. Greenspan. Age of Turbulence, М., Penguin Press HC, 2007, с.38]

In “saving the country” J.P. didn’t forget to bring home the bacon: under the pretext of saving its life, he acquired a railway company, Tennessee Coal, Iron and Railroad, which was facing imminent bankruptcy and threatened to take down many brokers who owned its shares. And although President Roosevelt opposed the creation of monopolies, in this case, he looked the other way.

The Panic of 1907 caused a drop in a number of economic indicators. The stock market fell by 37 percent, at least 25 banks and 17 trusts went bankrupt, commodity prices fell by 21 percent, production for the year fell by 11 percent, while unemployment rose from 2.8 percent to 8 percent. Many institutions also suffered. Morgan came out of the crisis with indisputable gains: knowing in advance about the crisis that he himself created, he sold the shares he bought up cheap for big profit while still earning big from having bought into the right companies going into the crisis. But the banker’s biggest windfall was in the capital of public credibility. All had become convinced that had it not been for Morgan’s timely intervention the crisis would have reached a full-scale crash. In June 1908 economic indicators were on the rise again. At Princeton University, the “hero” was even honored by new U.S. President Woodrow Wilson, “All this trouble could be averted if we appointed a committee of six or seven public spirited men like J. P. Morgan to handle the affairs of our country,”

And actions followed words. In order to understand the causes of the sudden crisis, the National Monetary Commission was founded. [The Aldrich-Vreeland Act of May 30, 1908] Its job was to examine the state of affairs in the banking system and make recommendations to Congress. Of course, the committee was staffed primarily by the friends and cohorts of Morgan, the “savior.” Senator Nelson Aldridge was appointed as committee chairman. [Nelson Aldridge (Nelson Wilmarth Aldrich) was trying for a reason. His daughter was married to banker John Rockefeller Jr.. His grandson already had the name of Nelson Aldridge Rockefeller, who later became U.S. vice president under Gerald Ford. No one knows the real names of the owners of the Fed – all published lists – this is just speculation. But the most likely among the “lucky” is the Morgans, Rockefellers, the Wartburg.] The Commission went to work – it’s easy to guess that its primary conclusion was the “understanding” of a need to create structures designed to regulate the financial system and prevent further crises. This eventually led to a mysterious meeting of bankers on Jekyll Island, where they decided that the time had come for the establishment of the Fed.

The Federal Reserve System was presented as a panacea for all financial ills. The new institution was created supposedly only to regulate commercial banks making sure they didn’t get lost in playing the stock market. And in order for it regulate efficiently, the regulator had to be independent …

In December 1913, Nelson Aldridge brought the bill on the Federal Reserve System to the floor of the U.S. Senate. Without going into the tedious details of the vote, it is worth noting that only one congressman spoke out against the bill. The bearer of the “horrible” last name Senator Gilbert M. Hitchcock agreed with the need for a financial services regulator, but unexpectedly proposed amendments to the law, which would have missed the heart of the issue for the bankers. He proposed that the Federal Reserve be made a public, rather than private monopoly, and the power to issue currency would have rested with the Treasury Department again. However, for reasons unknown to us today, the Hitchcock amendments were rejected and the bill passed quickly. The U.S. President signed it into law in the same year, the last week of 1913. [John Pierpont Morgan did not quite live to see the creation of his brainchild. He died in Rome on 31 March 1913. His empire was succeeded by his son … John Pierpont Morgan. Same name as father and son led to confusion in describing the events, many authors, it seems, believed that the founder of the Fed found the elixir of eternal youth and longevity.]

Hurrying off for Christmas turkey dressed up as elks, the senators didn’t particularly bother with financial truths. Those who understood what kind of a revolution in world history the creation of the Federal Reserve would be were persuading their colleagues of the wisdom of the decision. And the bankers were ecstatic.
“Overall, this is a wonderful bill that has done much to bring stability to our banks and currency,” [New York Times, Senate, December 20, 1913] said Edmund D. Hulbert, vice president of Merchants Loan and Trust Company.

It will “lead to the adjustable currency, which will save us from these panics,” agreed his colleague V.M. Gabliston, chairman of the First National Bank of Richmond.

“The adoption of this financial legislation will have a positive impact on the entire nation, but will also facilitate trade. It appears we are entering an era of general economic prosperity,” [E. Satton «The Power of the Dollar»] American National Bank President Oliver J. Sands beamed.

The sweet words, that accompanied the launch of the Federal Reserve held no bearing on reality. The Fed was not created to protect against future crises. In fact the opposite was true, it was created to initiate them at the right time. America was once subjugated as Europeans arrived with firearms and forged armor that could not be pierced by the spears and arrows of the Indians. Similarly, at the beginning of the 20th century, bankers received the instrument, with which they could dominate over this blessed land. Having control over the issuance of the U.S. dollar, the secret owners of the Fed’s typewriter could make presidents rise and fall and completely manipulate the policies of the United States of America …

The best way to hide something is to set it out in the open. All the information on the Fed is absolutely available. No need for conspiracy theories – go online and visit the Fed’s official website: www.federalreserve.gov Go there and click on the link “History” on the left. There you’ll see the story the creation of the “little enterprise” and even portraits of its heroes: J.P. Morgan and Nelson Aldrich. Then click the link labeled “Structure and Functions,” and you will be invited to take the “Structure Tour” – a short virtual voyage through the Fed, the narrator, whose voice resembles that of announcers for science fiction films, begins the story. Watch, listen. It’s hard to believe the Fed really exists. It’s hard to imagine that the world was made this way. But it’s a fact. You just need to be able to read, watch and analyze.
Pay close attention to the phrase “The Fed is a mixture of public and private elements.” [http://www.federalreserveeducation.org/fed101/structure/]

Even the Fed doesn’t claim that it is a government structure! Of course, it doesn’t elaborate on this “mixture” business. Like, what percentage of it is “private” and what percentage “public” is nowhere to be found. …
It’s all so banal and simple, despite the tangled system. Long before the founding of the Federal Reserve, the ancient poet Virgil spoke of this very thing “Accursed thirst for gold! What dost thou not compel mortals to do?”

Nothing has changed.

And so we now know that the U.S. dollar does not belong to the United States. But the miracles do not end there..

Do you know what are the denominations of dollars?

Usually people say: 1, 5, 10, 20, 50, 100.

All true. More advanced users add the rare two-dollar bill. It is considered a numismatic rarity, and usually leaves circulation as soon as it enters the hands of a person who understands its value.

What other denominations do you know?

Very few answers to this question. It turns out that there are a number of banknotes that most people don’t know exist. Dollars come in $500, 1000, 5000, 10,000 and 100,000. No one knows them for one simple reason – they are prohibited to be exported outside the United States according to the country’s currency laws. Banknotes of $100,000 (issued with gold certification in 1934) have never gone into circulation and are only used for transactions between the Federal Reserve banks. Have you seen one?

Do you know what, or rather, who is represented by the largest dollar bill? Whose portrait is emblazoned on the 100,000 note? To answer this question will not be difficult if you remember that the money of the United States is not printed by the government. The Federal Reserve has its heroes, its own scale of values, their “pets” in the dark forest of American history.

On the hundred thousand dollar bill, the highest denomination is the face of the 28th President of the United States Woodrow Wilson – the very president who signed the Federal Reserve Act and created the Fed [http://money.dmd.ru/description/dollars/]. According to the printing machines of the Federal Reserve, he was the greatest leader in American history.