The US economy: In private hands

Mayer Amschel Bauer Rothschild, the father of world banking, once avowed, "Give me control of a nation's money and I care not who makes its laws." This is why, probably, the power of issuing and controlling money remains in the hands of governments in all nations... except the US. In America, astonishingly, the Federal Reserve System – or the Federal Reserve Corporation (FRC) – is nothing but an association of many private bankers, the so-called US president-appointed seven “Board of Governors”, and twelve regional Federal Reserve Banks (which again are headed by private bankers). It’s unbelievable that such a body with significant private interests is authorised to design the nation’s monetary policy, apart from other critical duties.

However, the transformation didn't take place overnight. Article 1 of the Constitution of the US back in the 1700s gave power to the Congress to print money. But Woodrow Wilson (the 28th US President) made an agreement with private American bankers where, in exchange for funds for his Presidential election, he promised to pass the Federal Reserve Act. The Act was finally passed in 1913 (during Christmas eve, in order to avoid opposition as most of the Senators were on leave). This gave the FRC sole power to print dollars – which means that whenever US needs money, it actually borrows from the Federal Reserve against a fixed interest rate. Since then, America is paying heavily with each passing day.

The federal debt has increased with time. In 1910, just before the Act was passed, the federal debt was $1 billion, $12.40 per American; and just after six years of the law in 1920, the debt increased to $24 billion or $228 per citizen. The debt increased to a whopping $8 trillion in 2005.

Reportedly, the government paid $321 billion as interest on federal debt to FRC in 2004. In 2011, though the public debt, as per the Government, is $14.57 trillion, the actual debt of US is estimated to be as high as $70 trillion.

Irrespective, the more critical issue is that the Act gives excessive power to private entities in deciding the monetary policies of the economy.

Digest this – the Federal Reserve Bank of New York (the largest of the 12 regional Federal Banks) has seven board members, all heads of private entities. There’s a much renowned statement of the US Court of Appeals for the Ninth Circuit, which confirmed that the [Federal ]Reserve Banks “are not federal instrumentalities for purposes of the FTCA [the Federal Tort Claims Act], but are independent, privately owned and locally controlled corporations." Shocking this might be, but even Indra Nooyi from Pepsi was on the board of the New York Federal Reserve till two years ago. Worse, independent audits are not allowed to assess FRC’s monetary policies and other critical aspects. Neither does the FRC have to ever reveal the names of entities to whom it has provided financial guarantees. Bloomberg Corporation even took the FRC to court to force them to reveal the details – though Bloomberg won at the trial court, the case is pending in higher courts.

Many economists argue that even when the US had quality and skilled manpower during 1930s, it went through the Great Depression because of these very bankers who created artificial shortages of money to ensure their interest earnings increased. For instance, during recession, there was no money to run industries but just after it recovered, US made billions of investment in arms and ammunitions and donated billions to its allies. Similarly, Bush never faced budget crunches while invading Iraq and Afghanistan. Clearly, it’s time we passed a Federal Reserve Transparency Act – or accept that US is no better than China when it comes to national accounting.