With all the talk of Operation Twist, and the possibility of QE3, and the power of the Federal Reserve, it seems an ideal time to examine the Federal Reserve System, which was established as the ce Federal Reserve Act in 1913. However, according to a rather large and exhaustive book documenting the Federal Reserve, by G. Edward Griffin, the Fed was conceived during a secret meeting on Jekyll Island. Griffin charts the development of the Federal Reserve, and its effect on the economy, in the book The Creature from Jekyll Island.
Griffin starts this carefully researched and sourced book with the story of a secret meeting that took place in 1910 on Jekyll Island, off the coast of Georgia. In attendance were six men who represented, according to the calculations in the book, one-fourth of the world's wealth at the time. Men associated with, and representing, interests of the Rockefellers, Morgans, Rothschilds and Warburgs met with Republican Senator Nelson W. Aldrich to figure out a way to allow them grow their interests, and to shift the national banking system from one of thrift to one of debt. What they came up with was the Federal Reserve.
In order to organize the story of the Federal Reserve and its effects on the economy in a way that takes the reader on a journey and provides insightful information, Griffin has grouped 26 chapters into six sections. He also includes an appendix with parts. The book is not presented strictly chronologically, but addresses different, related concepts that illustrate the power and effects of the Federal Reserve. Two of the most interesting sections are II and III. Section II presents "A Crash Course On Money" and takes a look at the monetary system, gold based currency and fiat currency, and how it all works together. Section III addresses the "alchemy" of transforming the "lead bullets of war" into an "endless source of gold." Griffin asserts that modern wars have been largely possible by fiat currency, and the Federal Reserve has been central in this effort.
Griffin explains and acknowledges the arguments in favor of the Federal Reserve System, and then refutes them. He looks at the history of bailouts, and the fact that major banks want anything but competition -- and he exposes the cartel nature of the Federal Reserve System as it was conceived by wealthy and powerful men more than a century ago. It seems amazing, when reading this book, that the Fed has survived when America's previous attempts at a central bank failed miserably. It's a fascinating journey into the past, and one that provides a great deal of insight -- whether or not you agree with Griffin that the Federal Reserve ought to be ended.
The Creature from Jekyll Island ends with a look at the possibilities for the future. Griffin presents a pessimistic view, of America's transition to becoming part of a world government of superstates, and takes a look at the possibility of coming hyperinflation. After scaring you with this outlook, he completes the book with "A Realistic Scenario." This chapter lays out a plan for getting rid of the Federal Reserve and bringing our "monetary binge" under control as a nation. But, it won't be easy:
"There is no optimistic scenario. Events have progressed too far for that. Even if we begin to turn things around by forcing Congress to cut spending, reduce the debt, and disentangle from UN treaties, the Cabal will not let go without a ferocious fight. When the Second Bank of the United States was struggling for its life in 1834, Nicholas Biddle, who controlled it, set about to cause as much havoc in the economy as possible...By suddenly tightening credit and withdrawing money from circulation, he triggered a full-scale national depression...The amount of devastation that could be caused by today's Federal Reserve is infinitely greater than what Biddle was able to unleash." (pp.565-66)
Throughout the book, Griffin offers specific reasons for why he thinks the Fed should be abolished. He uses painstaking evidence and research to back up his claims, and finishes up with a plan for getting rid of the Fed -- and its economic controls -- and reverting back to an economy better based in free market principles. His 16-point plan includes defining a "real" dollar in terms of precious-metal content (Griffin prefers silver), retiring Federal Reserve notes and severely reducing the size of government.
While the plan is compelling, I'm not sure how realistic it actually is. It's well and good to talk about retiring federal reserve notes and restoring free coinage, but, really, our monetary system has moved so far beyond basing money in "real" and tangible assets. So much of our money is digital now. Griffin mentions issuing Treasury Certificates 100% backed by hard assets to become the new paper currency, but how many people even use paper currency? So much of the wealth that we have is represented in digital terms, without paper -- much less gold or silver -- changing hands. Griffin mentions electronic transfer systems, and the difficulty of switching to a new monetary system, but doesn't go into great detail about what happens to those who are almost completely digital in their financial transactions, and whose wealth is expressed in digital terms. More details about this part of the transition would definitely be of interest.
Finally, Griffin offers some very sensible advice for preparing for the future -- no matter what the future holds. Getting out of debt, diversifying investments, keeping a cash stash (including old silver coins), and stockpiling food and water to prepare for a worst-case scenario of interrupted delivery systems, are all suggestions that many of us can benefit from.
Overall, The Creature from Jekyll Island is an interesting and insightful book, with the positions of the author backed by careful research and meticulously sourced. Even for those who may not agree with everything the author sets forth, the book offers an interesting journey through modern monetary history.