The following articles appeared in the October/November 1994 &
December/January 1995 issues of *American Spirit.* For single issues
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The Federal Reserve: Part 1
THE HISTORICAL FIGHT FOR HONEST MONEY IN THE U.S.
by Dr. Martin A. Larson
Dr. Martin A. Larson, now 93 years of age, has spent
many of those years studying the Federal Reserve System
and his published views are studied internationally.
He considers the Federal Reserve System as a critically
destructive deception played on the American people by
an intensely self-serving group. He gave the clearest
explanation we've ever heard in a speech he made at the
Arizona Breakfast Club. (4/79; updated 10/92 -- ed.)
Today I'm going to talk about the Federal Reserve System (FRS), its
origin, its background, its opevation, what it has done and is still
doing, to the American people. I would say, first of all, that,
together with the Internal Revenue Service, it constitutes the twin
instrument for reducing the American people to economic servitude.
It is especially dedicated to the oppression and the destruction of
the middle-class, which is the backbone of our nation, the great
producing element therein, and the only source which can possibly
maintain this country as a Constitutional Republic. Together with
the Internal Revenue Service, the FRS has eslablished a vast system
of extortion, bribery, and tyranny. This has been done in so subtle
a manner that most Americans are not even aware of what is being done
to them. First of all, the Federal Reserve System is not a
governmental financial system. It is privately owned and controlled
by American financiers who are operating in conjunction with
international financiers. It is operated for the profit of the member
banks by taking away from the American citizens a major portion of
their personal production. It is destructive and unconstitutional.
Congress had no authority to turn over to a private organization the
monetary and financial system of the United States. The one great
power which is mandated to Congress -- the control of our monetary
system -- they turned over to a private organization of investors.
In essence, our American government was consciously subverted from
its Constitutional basis.
OUR MONETARY HISTORY
Lets talk about our monetary history. During the Revolution we had a
Continental Congress; it could not grant itself the power to collect
taxes, but it was called upon to finance the Revolutionary War. So
they printed a currency note, called Continentals. The first
Continentals circulated for a short time at par, but within a few
months they went down to forty-for-one, then a thousand-to-one, when
they hit five thousand-to-one, approximately two years later, they
were waste paper.
However, since the government had assumed the responsibility of
issuing this money, the Founding Fathers felt it was their duty also
to redeem this money. As methods of doing this were discussed,
speculators went out and bought millions of dollars of the
Continentals and they began pressing Congress to redeem them at full
par. The Hamiltonians and the bankers wanted them redeemed at full
par.
Jefferson said no, because it would reward the speculators as well as
create a national debt of $400 million; which they had no income to
meet. He therefore suggested that Congress redeem the Continentals
at their original value. The result was that Congress paid $72
million to redeem the Continentals.
Some of the speculators who had bought it up at five thousand-for-one
made large fortunes as did some members of Congress. As a result of
this experience, the Founding Fathers said the country, must
establish a monetary system in which money will retain its value
generation after generation. They wrote two provisions into the
Constitution to guarantee that we would forever have a solid monetary
and financial system in the United States for which the Congress
should be responsible.
These provisions were: Congress shall have the power to coin money
and regulate the value thereof and of foreign coin. That meant that
Congress and only Congress would have the power to declare the value
of the unit of currency. And they did so by saying that a silver
dollar would constitute the unit and that it would consist of 412
1/2 grains of standard silver, 376 grains of pure silver. They also
made provision for the coining of a gold Eagle, that would be worth
approximately ten silver dollars. However, the bankers insisted upon
having the power to control the currency and the monetary system.
Jefferson stood on one side, he wanted a Constitutional currency; but
Alexander Hamilton, who opposed him, became the Secretary of the
Treasury under Washington and was the leading intellectual of what
was known as The Federalist Party, which dominated President
Washington. They were able to put through the first United States
Bank. Basically, it was owned by private interests under government
legislation and authority.
THE FIRST U.S. BANK
The first United States Bank was able to control the currency. It
made loans to whomever they wished. It was financed by the federal
government; it issued the bank notes which were used throughout the
country; and in the end, it gained power of govemment. When the
charter of the first United States Bank expired in 1811, James
Madison was President. He was a close ally of Jefferson and he
killed the Bank. There was no central bank between 1811 and 1816.
However, something occurred within that period which was of great
consequence to the American people and to the fate of this nation.
During the War of 1812-14 it again became necessary to raise large
amounts of money to finance it. The bankers demanded enormous
interest rates. (I have estimated that the bankers made $75 million
from the American Revolution, $125 million from the War of 1812-14,
$3 billion out of the Civil War and $30 billion from the First World
War. The amount of profit they made from the Second World War defies
comprehension. It is in the trillions of dollars.)
As a result of the financing of the War of 1812, the, pressure from
bankers and speculators was so great that Madison was forced to
accept the Second United States Bank, chartered in 1816, for a
twenty-year period. As a result of its establishment, the people in
the country were split into two parties -- those who operated the
financial system of the country, and those who produced the wealth.
In 1828 a man of the people was elected as President of the United
States. When the bankers attempted to renew the charter of the
Second United States Bank in 1832, Andrew Jackson vetoed the
legislation. He withdrew the federal money from the United States
banking system. The result was that this bank dried up; its
resources were gone; and there was no United States Bank after 1836.
There were two years, 1835 and 1836, in which there was no national
debt whatsoever, the only two years in American history when this has
been the fact. And the federal government had so much money on hand
that they really didn't know what to do with it. They began
distributing large amounts to the states, which used it in order to
build universities, to construct canals, to build roads, and a great
many other important projects throughout the nation.
In 1836, there was no central bank in the United States. However, a
situation arose which was not desirable or conducive to the best
interests of the country. There were only state-chartered banks.
There were 12,000 different kinds of currency circulating in the
United States. Every bank issued its own currency, all of them
theoretically based upon specie so that any person who held one of
their notes could obtain silver or gold in return for them. However,
there were about 5,000 different kinds of currency that were either
counterfeit or totally fraudulent. It was a chaotic system, but the
people were so utterly resistant to any central banking authority
that they would not permit the passage of any banking system under a
federal aegis which would permit a central authority to again control
the monetary system of the country. And it wasn't until a great
crisis arose --the Civil War -- that the banks were again able to
accomplish their purpose. It is only when great wars occur or when
crises happen that the bankers are able to obtain the kind of
leverage they want in order to exploit the people and take away from
them most of the gains of their production.
THE CIVIL WAR
The Civil War presented a situation which certainly was an extreme
crisis. Millions of dollars were necessary to pay the soldiers, to
buy the supplies, to create the armies necessary to fight that war,
which lasted for four years. Lincoln, in desperation, went to the
Seaboard bankers and wanted to borrow money. They told him he could
have it at an interest rate of 28%! But Lincoln said, "That is an
outrageous rate of interest, and we'll do something else. We'll
issue a national currency."
So, for fhe first time, the United States Government issued a
national currency which was known as "Greenbacks." There were three
issues of these of $150 million each, for a total of $450 million.
But, the banks were able to persuade Congress to add certain
restrictions to this currency: It could not be used to pay the
interest on the national debt, or to pay taxes, excises, or import
duties. It could only be used to pay the soldiers, and as a means of
exchange between ordinary citizens. So the Greenbacks circulated
side by side with gold and silver, but it didn't take very long
before the Greenbacks dropped to about 30 on the dollar. So these
soldiers, who received their money in Greenbacks, were only able to
obtain 1/30 [ed.] worth of merchandise in return for each dollar of
Greenbacks.
Under the pressure of the banks, the National Banking Act of 1863 was
passed. This Act permitted private banks to purchase government
bonds with Greenbacks at par; in other words, they could buy a
million dollars' worth of government bonds for a million dollars of
Greenbacks, which they had purchased at 30 on the dollar. So, for
$300,000 in actual investment, they could obtain a million dollars'
worth of government bonds which paid 7% interest in gold. Then the
banks could use the bonds which they obtained at these prices to
issue their own currency up to 90% of the amount of bonds which they
held, and loan out this currency at 10%. Do you comprehend the
enormity of this swindle?
This is the way the Civil War was financed. The bankers offered to
loan money at 28% at the beginning, and now they obtained a good deal
more -- just exactly how much more is difficult to determine, but it
probably amounted to between 30% and 40% annually on their actual
investment. The National Banking Act of 1863 remained on the books
into the beginning of the 20th century. However, the amount of
currency which could be issued by the banks was determined by the
amount of bonds they had in their vaults. Between 1866 and 1912 the
national debt was reduced from $3 billion to approximately $1 billion
and there was, therefore, a much reduced reserve on which to create
the currency and the credit which the banks needed in order to
operate. As the population increased and the economy expanded, the
need for currency and credit became greater and greater.
Occasionally, there were terrible panics. The greatest occurred in
1873, 1893 and in 1907; but there were smaller ones interspersed
among them. When these panics struck, it was like a revolution --
hundreds of thousands of people lost their property, thousands of
workers walked the streets. There was no money. People had
deposited their money in the banks, but the banks were closed.
Then the bankers began working to obtain a kind of currency and a
financial system that would enable them to issue credit in larger
amounts. Year after year, they told the people that if the country
only had a central bank, then there would never have to be a shortage
of currency and there would never be any more panics, or depressions,
or inflation or deflation. We would all have a perfect system on
which to depend in the future. These bankers had been at it a long
time, and they could wait. They knew exactly what they were doing.
And their methods were so subtle, so elaborate, and so secret that
the people would never know how they were robbed.
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The Federal Reserve: Part 2
THE HISTORICAL FIGHT FOR HONEST MONEY IN THE U.S.
by Dr. Martin A. Larson
In November, 1910, a group of the most powerful men in the world and
the leaders of the financial system in the United States met on
Jekyll Island, off the coast of Georgia. The two most important
individuals who took part in this were Senator Nelson Aldrich, the
grandfather of Nelson Rockefeller, and Paul Moritz Warburg from
Germany who had moved to America in 1902, and with Rothschild money,
had purchased a partnership in Kuhn, Loeb & Co. in New York. He then
received an indefinite leave-of-absence with a salary of $500,000 a
year to go up and down the United States to organize opinion in favor
of a banking system based upon that of The Bank of Deutschland. What
these bankers wanted was a system that would be established by the
federal government in which, the federal government would take
complete responsibility for all the obligations issued by the bank.
But the notes issued by the bank would be private paper and
controlled entirely by the banking system. The banks would then be
able to: control the money supply, determine the interest rates, and
what credit would be extended. It would be a system by which they
would achieve total financial control of the country and the people
therein.
The conspirators spent about two weeks on Jekyll Island. It was a
most secret conclave. They went to Georgia from New York in a sealed
train. They used code names. They had a new group of servants who
didn't know who they were. And they battled for about two weeks and
gradually agreed upon certain general principles to serve as the
basis for an American banking system.
When they came back, Senator Nelson Aldrich, who was a stately old
Solon from New England, introduced what he called "the Aldrich
Banking Bill." But, since it stank to high heaven of Wall Street, it
was rejected out of hand and never got to the floor of Congress. But
the wily gentleman from Germany, Paul M. Warburg, knew exactly what
they would have to do in order to accomplish their goal.
"We must take away from this the stigma of private enterprise," he
said. "We must convince the people that it is a government agency.
We must call it the Federal Reserve System. Then everybody will
think that it is a government organization and that it is
constitutional. But actually it will be in the control of the
bankers for their own private benefits." Up for grabs was the
control of the production of millions of Americans. In 1911-12 one
of the greatest political battles in the history of this nation took
place. The battle was between the people, who wanted to preserve a
Constitutional monetary system, and those who wanted a system
controlled privately, by the financiers. The sentiment ran so
strongly against the Wall Street-dominated system that any
politicians who came out in favor of it committed political suicide.
And that's what William Howard Taft did in 1911 when he came out in
favor of the bankers. But the financiers found just the man they
needed in Princeton, New Jersey. His name was Woodrow Wilson: he was
perhaps the most successful and pious hypocrite in all American
history. He was chosen to institute the Federal Reserve System. He
had made a great many statements in opposition to Wall Street before
and he was thought by the people to oppose anything from that source.
When he was nominated by the Democratic convention, the convention
went on record as absolutely opposed to any banking system that would
be controlled by the financiers or have the blessing of Wall Street.
However, at that time, the Democratic Party was a minority in the
United States and, in spite of the fact that its candidate went up
and down the country, condemning the bankers, the financiers knew
that the Republicans would probably win the election unless they did
something unusual to prevent it. So they picked up Theodore
Roosevelt, who was known as "the great trust-buster," and a great
friend of the people. So he was nominated under "the Bull Moose
Party."
I was a boy of about 13 at that time, and remember the pictures that
I saw of Teddy Roosevelt, going up and down the country, blasting the
bankers and telling them that we have to keep the credit of this
nation in the hands of Congress, and so on.
Understand, now, that both Woodrow Wilson and Theodore Roosevelt were
financed by the bankers whom they condemned. And poor, old William
Howard Taft, who said that the proposed banking system was a good
one, came in a poor third.
That's how it was put over. It was done by lying to the people. I
would say that most of the things that emanate from Washington are
lies, but the worst lies that have ever been told to the American
people were the lies that were told in the campaign of 1912 with both
Theodore Roosevelt and Woodrow Wilson promising that there would be a
monetary system in which there would be no more panics, no more
depressions, no more inflation, no more deflation; that we would have
a currency that could be depended upon under a federal that would
guarantee the integrity of system Constitutional money.
Woodrow Wilson was elected on two platforms: First, that he would
oppose Wall Street bankers and, secondly, that he would keep us out
of war and he did for three or four years, but then, in a reversal,
he became an overt apostle of war. I remember so well his wonderful
speeches telling us how it would be absolutely necessary for us to
enter this war "in order to make the world safe for democracy." What
he was really trying to do was to enable the bankers to collect the
loans they had made to France and England.
The war was financed by the Federal Reserve System. It would have
been lmpossible to pay the expenses of that war without it because
the Federal Reserve Banks and their member banks became brokers for
the sales of bonds. These bond issues were peddled all over the
United States during the war and at the end of the war, a great
Victory Bond issue was vigorously prbmoted which collected more
money. WWI cost close to $40 billion. They raised about $14 billion
through taxes during the war; the other $26 billion was raised by the
sale of bonds and the government went into debt by that amount during
the war.
As soon as the war was over, there was a period of inflation as the
Federal Reserve sold still more bonds. While debates still continued
regarding the Federal Reserve System, there was one man in the
Congress who really understood what was going on. Charles Augustus
Lindbergh, the father of that Lindbergh known as the Lone Eagle." He
said that if you establish a privately controlled system, you will
create the means by which depressions and inflations will be created.
A group of bankers will determine whether we shall have inflation or
deflation. They'll be more powerful than Congress; and they will
make the entire American people their servants.
Well, that's exactly what has happened. At the end of the war, the
Federal Reserve System, in response to inflation, decided to create
deflation. They did it by raising the interest rates and by other
mechanisms which are at the disposal of the Federal Reserve System,
and about a million farmers lost everything they had. Hundreds of
thousands, even millions, of men walked without jobs on the streets
of America. The Ford Motor Company came within a hair's breadth of
going bankrupt.
The depression had struck so suddenly, so fiercely, that suddenly
there was no money available anywhere. For about a year and a half,
this depression continued and millions of people lost everything they
had. The bank investors, however, rolled in wealth. For about six
or seven years, the Federal Reserve Board decided to permit
prosperity again in the United States. Beginning in 1922 and running
until about 1929, we had an expanding economy. People were borrowing
money, building, constructing, expanding, and going into debt. And
it seemed as though we had a rosy future. We were told that pretty
soon there were going to be two cars in every garage and a chicken in
every pot. Everybody was working.
I was in Detroit at that time and something like 6,000 apartment
buildings were constructed duping those years. Hundreds of thousands
of homes were built. People were making money. They were becoming
prosperous. But banker's do not want a prosperous and educated
middle-class because it might insist upon a Constitutional
government, which would spell the end of their monopoly.
So, in 1926, they decided to expand the stock market. Member banks
of the Federal Reserve System loaned out more than $9 billion for
speculative investments. The result was that the stock market rose
rapidly from about 110 to the 470s. Fortunes were created in a short
time. Then the Federal Reserve Member Banks were told to call in
their loans on speculative stock investments and the stock market
tumbled in October 1929 in a crash the like of which had never been
known before in America or the Western world.
Men who had been millionaires were paupers a week later. There was a
bridge in Akron, Ohio, called "Suicide Bridge," from which 14 or 15
of the wealthiest men in that city had leaped to their deaths. I
would say that 90% of all the real estate in Detroit was foreclosed
for lack of payments on mortgages or contracts.
Remember, this was done by the Federal Reserve System. It has
unlimited power to create Inflatlon or deflation, panics or
depressions, anytime it pleases, by making decisions which are beyond
the reach of Congress and beyond the understanding and influence of
the people.
Another Roosevelt [FDR] arose on the horizon. His career was
probably the most immensely destructive of any person who has ever
appeared on the American scene in this century. To recount the evil
acts that he performed at the bidding of his masters, the bankers of
Wall Street, would fill a book. One of the first things FDR did was
to get the Gold Reserve Act of 1934 passed. Under that Act, all the
gold that belonged to the United States Treasury was given to the
Federal Reserve System: It became a crime for any American citizen to
keep his own gold. This Act raised the price of gold from $22.67 to
$35 an ounce. This money was paid to the miners of gold or to any
foreign investor who sent it over here. But the Americans, who were
forced to turn over their gold, received only $20 in Federal Reserve
notes for a $20 gold piece.
The circulation of gold coins ceased in the United States. And there
was no more redemption of currency in gold. Gold could be mined at
that time for about $12 an ounce.
Between 1934 and 1941, 18,000 tons of gold were purchased by the
Federal Reserve System and placed in the vaults in Fort Knox. It was
owned by the Federal Reserve and the government was simply the
custodian thereof, and American taxpayers paid the storage fees.
The depression worsened. Money became more and more scarce. Money
almost disappeared from the American scene. I would say that about
80% of the people who had private jobs were out of work; governments
were using script to pay their employees. I counted 400 vacant stores
on one street in Detroit in 1934.
And this depression went on, year after year, and there were very few
who had the slightest understanding as to the role of the Federal
Reserve System. Remember, that the group of seven men who operate
the Federal Reserve System could have ended the whole thing in two
weeks if they had wanted to. But they had certain long-range
objectives.
They wanted to liquidate the middle-class. As Andrew Mellon said,
who was then not only Secretary of the Treasury, but also the
President of the Federal Reserve Board: "We shall liquidate the
farmers, we shall liquidate the small businessmen, we shall liquidate
labor, we shall liquidate investments, we shall liquidate the stock
market and then the worthy people will pick up what is left." The
Wall Street bankers bought America. They bought it at 10 on the
dollar. And the American people were again completely denuded of
their savings and labors.
The Federal Reserve System operates over and over again for the
purpose of liquidating the middle-class whenever they become
successful enough to approach independence, to save some money, to
build estates or to consolidate power.
"We would have gladly borne the tax on tea if we [American people]
could have been granted the power to create our own money."
-- Benjamin Franklin
How is the Federal Reserve System structured? There are 12 branch
banks in the Federal Reserve System. There are seven members of the
Board of Governors. The members are appointed by the President for
14 years, staggered terms and they must be approved by the Senate.
No President, therefore, can out-serve any member he appoints to the
Federal Reserve board. Once these men are in office, they are
absolutely beyond the control of Congress. The Congress has no
control over its operation. Congress can pass any law, but these
seven men can get together and negate the effect of that law. In
fact, during the 30s, Congress attempted several times to do
something about the depression, but the Federal Reserve board negated
the effects of the law through its control of the monetary system.
Congress has the power to abolish the Federal Reserve System and
replace it with something else.
But it has no power to regulate its operation. Each of the 12 banks
of the F.R.S. has nine members on its board of directors. There are
three classes of directors: One class, consisting of three, is
elected by the stockholders of the member banks; three are also
elected by the member banks but are persons who are active in
agriculture, trade, or commerce in the area; three are appointed by
the Federal Reserve board itself. That leaves six of the nine
representing member banks and therefore they have control over the
operation of these banks. So, even though it seems to be a federal
or government system because it is sponsored by the government and
because it is set up by a law that is passed by the government, it is
actually a system of private bankers who operate entirely for their
own benefit.
There is an entity known as the Open Market Committee, which operates
through the New York branch of the Federal Reserve System. Did you
know that the F.R.S. itself has at the present time (1979)
approximately $100 billion worth of government bonds in its vaults.
How does this New York branch of the F.R.S. obtain $1OO billion worth
of government bonds which they buy on the open market? They have an
unlimited checkbook on the U.S. Treasury. Secondly, they have
unlimited power to print any number of Federal Reserve Notes that
they want. And so they purchase this $100 billion worth of bonds,
either by printing Federal Reserve Notes or by writing checks upon
the U.S. Treasury. Did you ever hear of such a thing? False paper
based on false promises. That's the way it operates!
Why are they so anxious to keep these bonds? Because these bonds
serve as the basis for the creation of credit. The Federal Reserve
determines what reserves the member banks must have in order to
create credit. They can set that reserve requirement anywhere from
10 to 26. If the reserve requirement is 10, then for every million
dollars worth of bonds they have in their vaults they can loan out
$10 million of credit. If they set it at 26, they can only loan out
about $4 million. So, if they want to create inflation, they reduce
the reserve requirements and, if they want to create a depression,
they raise the reserve requirements and/or, at the same time, they
generally increase interest rates.
How do the member banks get these bonds? Oh, that's the most
beautiful thing you ever heard of in your life! The member bank will
make an application to the agent of the nearest branch bank of the
Federal Reserve System and say, "We would like to purchase $20
million worth of government bonds." Then the Treasury prints these
bonds and delivers them to the branch bank. The branch bank pays for
them with a check created by the credit based on those same bdnds.
It doesn't cost them a dime! This will continue until the American
people understand how they are being robbed.
IS THERE A SOLUTION TO THE PROBLEM?
A new monetary system has to be established to protect the freedom
our founding fathers meant us to have.
I would say that we must re-establish the kind of Constitutional
system in this country that Jefferson wanted. He said that the
Treasury only, should issue money. He said that all money should be
redeemable either in gold or in silver. And that's the reason
our Founding Fathers put into the Constitution a provision which
says that no state shall make anything but gold and silver tender in
the payment of debts. (Our former Silver Certificate was fully
redeemable for silver on deposit in the US Treasury. That was sound
currency. So was the gold note. Both were honored on demand. But our
present Federal Reserve Notes are not redeemable for the issuers
will give nothing of value for them). If we go back to that kind of
system and do away with fractional reserve banking, we may be
able to re-establish a Constitutional government in the United
States.
"I sincerely believe that banking establishments are more dangerous
than standing armies and that the principle of spending money to be
paid by posterity, under the name of funding, is but swindling on a
large scale."
-- Thomas Jefferson to Eldridge Gerry
January 26, 1799