I recently had the opportunity to read "The Creature from Jekyll Island" by G. Edward Griffin, a prodigious tome dealing with the circumstances surrounding the creation of the U.S. Federal Reserve System.
I was taken aback by
some of its provocative assertions.
· America joined World
War I largely to help a few bankers profit off the war (despite a long-standing
Monroe doctrine that prohibited our involvement in European affairs)
· The Bolshevik
Revolution of 1917 was supported by international financial interests in order
to destabilize Russia and steal the wealth of the Russian people; and
· So-called
"foreign aid" is merely a clever means of shifting the bad debt incurred
by banks and wealthy financiers to American taxpayers.
The
book is narrated in a notably conspiratorial tone and contains some obvious
contradictions. For example, it contends that President Lincoln was once a
liberator who sought to avoid being goaded into a destructive civil war by
European powers jealous of America’s success, and had designs on colonizing
Mexico. However, the book still raised some very good points that deserve
serious consideration.
One that stood out is
that over successive generations, people with concentrated wealth have
sought to use the American military and the purse power of the taxpayer for
personal gain. In fact, Griffin argues, the creation of the current iteration
of the Federal Reserve System was a political act designed to hide the fact
that a private banking cartel would manage the U.S. currency.
The Federal Reserve,
as Griffin explains, is neither "federal" nor a "reserve."
It is not owned by the federal government, and it does not hold real assets in
reserve. In reality, it is a giant debt factory backed by the "full
faith and credit" of the government, or taxpayers.
One thing is clear. In
the aftermath of the global recession of 2008, America and the world have been
swimming in debt. America’s national debt alone has skyrocketed. While the Fed
continues to justify flooding the market with cheap "reserve notes"
based on the theory that it must supply these notes in order to support asset
prices, the overall effect has been to debase the currency and prolong the pain
of the American people.
As an entrepreneur who
owns real assets — real estate, spectrum licenses and a publishing library,
among others — I was able to benefit, at least on paper, from the Fed’s asset
inflation strategy. I have been able to refinance my debt at attractive rates,
and I've seen asset prices (but not necessarily values) climb. But
others, especially workers (who derive the bulk of their income from
salary instead of capital appreciation) and savers (retirees living on a fixed
income), have lost under this post-recession scheme.
Workers lost because
their spending power diluted drastically over the past 10 years. The costs
of housing and energy have continued to rise in areas where the highest
concentrations of jobs are located. For example, a young college graduate who
wants to earn a high salary in the tech industry has to live in Silicon Valley,
where even a base salary of $100,000 won’t enable them to afford to purchase a
home there. Home prices are so out of line with average salaries that cities
like San Francisco and Los Angeles are seeing an epidemic of homelessness never
experienced since the Great Depression of 1929.
Savers have lost
because the interest income they were counting on earning from their lifetime
of saving has dwindled to less than nothing. These days, in most cases, you
actually have to pay the bank to keep your money there. And so many retirees
have had to tap into their home mortgages or take on additional consumer debt
merely to survive. As America faces the largest retirement boom in its history
— the retiring baby boomers — more than two-thirds of them do not
have enough savings to retire comfortable. And on top of that, the Social
Security system that was to be a back-stop against poverty for older Americans
is practically insolvent.
The unwieldy national
debt also causes friction for entrepreneurs. Governments have sought to
increase taxes, regulations and fees on entrepreneurial activity in order to
service the ballooning debt. This has sucked critical capital out of the system
that entrepreneurs need in order to grow businesses and drive employment. With
consumers still reeling from the great recession, demand for goods and services
is lagging employment growth by a significant margin, further constraining
opportunities for entrepreneurs.
The great project to
rescue the American economy by the Fed has hit an obvious wall. The debt it
used to goose the economy is now gumming up the system and constraining real
growth. The looming question of what actually happens when the debt bubble
finally bursts is one that not even the soberest economists at the Fed have
been able to confront effectively. Unless we deal finally with the false notion
that "central economic planning" can replace actual capitalism as the
driver of American growth, we may be in store for far, far worse.
****Armstrong Williams (@ARightSide)
is author of the brand new book, "Reawakening
Virtues." He served as an adviser and spokesman for
Dr. Ben Carson's
2016 presidential campaign, and is on Sirius XM126 Urban View nightly from 6
p.m. to 8 p.m. Eastern.
**More:
http://thehill.com/opinion/finance/351153-the-federal-reserve-is-setting-america-up-for-economic-disaster