August 30, 2006

The July, 2006 issue of Whistleblower magazine, a monthly publication of WorldNetDaily.com, is devoted to educating its readers about “ America ’s all-powerful banking cartel, the Federal Reserve.”  It relies heavily on articles by G. Edward Griffin and Rep. Ron Paul of Texas to tell us where the Fed came from, how it works, and what we ought to do about it.  Griffin ’s essays are excerpted from his masterwork on the Fed, The Creature from Jekyll Island: A Second Look at the Federal Reserve, while Paul’s articles were previously published on LewRockwell.com.  Together their writing provides a devastating indictment of the Federal Reserve System.

In a lead editorial, editor/publisher Joseph Farah describes the Fed as “a legalized counterfeiting operation -- pure and simple.”  He says further that “rarely in the history of American journalism has this topic been so fully, factually and courageously explored” as it has in this 47-page issue of Whistleblower.  In a section called “Voices from the past,” which runs beneath the articles beginning on page 22, readers are hit with pithy quotes on money and banking from familiar figures in history.  A personal favorite comes from Sir Josiah Stamp, a former central banker in England :

Bankers own the earth.  Take it away from them, but leave them the power to create money and control credit, and with a flick of a pen they will create enough to buy it back.

One of Ron Paul’s articles refers readers to Murray Rothbard’s book, What Has Government Done to Our Money?, for an explanation of the origin of money as the market’s preferred commodity for exchanging up through its takeover and gradual destruction by bankers and politicians.  The July Whistleblower also includes a brief speech Paul delivered on the House floor in 2002 in which he introduced legislation to abolish the Fed.  He includes with his bill Lew Rockwell’s article on the benefits of a genuine gold standard called “Why Gold?”

Griffin on the Fed’s origin and methodology

In the first of his essays, Griffin explains why the world’s leading banking dynasties -- Morgan, Rockefeller, and Kuhn, Loeb -- wanted a central bank and how they had to promote it to win public support and get it through Congress.   Representatives from each banking group, along with two government sponsors, gathered in secret on Jekyll Island , Georgia in 1910 to devise a system that would address the following problems:

1.  How to thwart competition from small banks.

2.  How to create a more “elastic currency.”

3.  How to coordinate the rate of inflation for each of its member banks.

4.  In the event the whole banking system fails, how to make the taxpayers pay for the losses.

5.  “How to convince Congress that the scheme was a measure to protect the public.”

As Griffin writes:

To cover the fact that a central bank is merely a cartel which has been legalized, its proponents had to lay down a thick smoke screen of technical jargon focusing always on how it would supposedly benefit commerce, the public and the nation; how it would lower interest rates, provide funding for needed industrial projects and prevent panics in the economy. There was not the slightest glimmer that, underneath it all, was a master plan which was designed from top to bottom to serve private interests at the expense of the public.

This was, nevertheless, the cold reality, and the more perceptive bankers were well aware of it.

In his other article, Griffin describes in detail the Fed’s practice of converting debt into money, a process he calls the Mandrake Mechanism.  As with all his writing, it is presented with clarity and relevant references, making his call to abolish the Fed all the more compelling.

Overall, this special issue of Whistleblower -- thanks mostly to heavy hitters Griffin and Paul -- fights a good fight against one of the most nefarious scams ever created.  Nor is this WND’s first major assault on the Fed.  In March, 2001, while Alan Greenspan was trying to inflate the economy out of its necessary period of readjustment following the boom of the ‘90s, WND published another issue on the Fed written by Anne Williamson in which she concluded “that [perhaps] somewhere in America’s near future awaits a war that will be fought for no other purpose than to re-establish the financial elite’s profits and the political elite’s pride of place.”  Two years later Bush invaded Iraq to the hosannahs of WND, apparently forgetting the prophetic analysis of a veteran journalist.

Why Milton Friedman?

The July Whistleblower also includes some remarks from Milton Friedman criticizing Federal Reserve policies of the early Thirties, seemingly as part of the argument for abolishing the Fed.  Whistleblower editor David Kupelian tells us that 1) according to the Noble-Prize winning Friedman, who Kupelian openly admires, the Fed caused the Great Depression, and 2) Fed chairman Ben Bernanke admitted the Fed’s culpability in a 2002 speech in honor of Friedman’s 90th birthday.

It sounds like an editorial fit until you examine the details.

Kupelian’s article includes an excerpt from a 2000 PBS interview with Friedman in which he makes a few comments on the relationship between the Fed and the Depression.  The Fed had been established to avoid “what actually happened,” according to Friedman, by which he means the Fed should’ve prevented the recession following the Crash from turning “into a major catastrophe.”  Yet from 1929 to 1933, the Fed allowed the money supply to shrink by a third, he points out.  In Friedman’s view, this was the Fed’s great failing because it triggered bank failures that resulted in heavy losses for millions of people who trusted the banks to keep their money safe.  The Fed had the knowledge and the power to prevent such a calamity, but failed to do so. 

Kupelian quotes Bernanke as telling Friedman, “You’re right, we [brought on the Depression].  We’re very sorry.  But thanks to you, we won’t do it again.”

Let’s clarify Bernanke’s remark.  When he says “thanks to you, we won’t do it again,” he means he’ll follow Friedman’s general advice and try to destroy the dollar at a low and steady rate (which he calls “inflation targeting”), but if the dollar should threaten to recover in value, he’ll bring in the helicopters and dump money in the laps of preferred investors.  The dollar will thus continue on its course to oblivion, but most people won’t notice because it could take years to accomplish, and very importantly, it might postpone an economic collapse.

If the Fed is eager to follow Friedman’s advice, and if Kupelian believes his advice is correct, why is this presented as consistent with the views of Paul and Griffin ?

Friedman is a friend of the Fed.  Paul and Griffin want it abolished.  They will never be the guests of honor at a dinner in which a Fed bigwig apologizes for its very existence.  Furthermore, Friedman likes fiat money.  He rejects gold because people have to dig it out of South Africa only to bury it in Fort Knox -- a waste of real resources.  Both Paul and Griffin want a free market dollar, and when people were “free to choose,” they chose gold and silver.  Yes, they require “real resources,” but they’re worth the price.  As Rothbard notes, gold “must be extracted from the ground, by the same costly process as governs the supply of any other commodities on the market. Essentially the choice is: gold or government.”

Or as Walter Block eloquently states:

[G]old is like an insurance policy.  Just as locks, fences and doors are used to preclude losses from theft -- even though they come only at the expense of real resources -- so, too, does the costly use of gold attain something desirable, namely, protection from statist monetary depredations.

Though marred by the inconsistent discussion of Friedman’s views, the July Whistleblower is a gold mine of information about the founding of the Fed and the intricacies of its counterfeiting process.  Even if you’ve read Griffin ’s book and Paul’s many articles on the Fed, I strongly recommend it.  See WND.com for ordering..