Does the Federal Reserve hear, or even care?

J. Keith Johnson Senior Writer, The Gold Informant
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Every once in a while the Federal Reserve invites American subjects to air out their complaints. Whether it makes even the slightest difference may be up for debate, but I’d expect deaf ears.

James Grant, a writer and economic commentator, recently was gifted this honor. Beginning from a historical perspective with the advent of the Fed, he adroitly brings us right into the middle of the today’s downward spiral.

My only complaint would be that he seems to allow for the validity of the Fed in the first place. Thomas Jefferson had incredible foresight, warning Americans that a central bank would destroy the wealth of the country, enslaving following generations:

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.

Rome didn’t fall to invasion. From the army to the currency, it became soft and manipulative. A coinage that had become the envy of the known world decayed into a worthless token, based on the reputation of the Roman Empire rather than any intrinsic value whatsoever. Stripped of true wealth, the populace was allowed to enjoy a sort of pseudo-wealth for a few generations before their children paid the price of their licentiousness. German deutschmarks were much the same.

Jefferson, clearly understanding the ramifications, warned Americans. Successive efforts were primarily beaten back until the advent of the Federal Reserve a century ago.

Another who understood these perils was Andrew Jackson. As the banksters of his day crawled to him begging for reprieve, he did exactly what our present ruling class should have done when the “too big to fail” crooks came calling:

Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin 50,000 families, and that would be my sin! You are a den of vipers and thieves.

Do I hear an “Amen!”? Oh, that today’s leaders had such fortitude and vision. Instead, they sacrifice the freedoms of the populace on the altar of the elite; firmly in bed with them, and relegating America’s economic and political environment to what some have termed neo-socialism. It’s a corporatism of sorts, with fascist underpinnings that destroy and undermine freedoms on every level.

In closing, while I’d encourage reading Grant’s entire speech, I’ll offer this snippet for your consideration:

One can think of the original Federal Reserve note as a kind of derivative. It derived its value chiefly from gold, into which it was lawfully exchangeable. Now that the Federal Reserve note is exchangeable into nothing except small change, it is a derivative without an underlier. Or, at a stretch, one might say it is a derivative that secures its value from the wisdom of Congress and the foresight and judgment of the monetary scholars at the Federal Reserve. Either way, we would seem to be in dangerous, uncharted waters.

As you prepare to mark the Fed’s centenary, may I urge you to reflect on just how far you have wandered from the intentions of the founders? The institution they envisioned would operate passively, through the discount window. It would not create credit but rather liquefy the existing stock of credit by turning good-quality commercial bills into cash — temporarily. This it would do according to the demands of the seasons and the cycle. The Fed would respond to the community, not try to anticipate or lead it. It would not override the price mechanism — as today’s Fed seems to do at every available opportunity — but yield to it.

And this capitulation through manipulation, my fellow Americans, is robbing our children and grandchildren of freedoms we and our parents took for granted. Eventually the value of Rome’s coinage and reputation reached parity. Is it certain we can expect the same in America? It’s only a matter of time.

J. Keith Johnson is a senior writer for The Gold Informant.