How the American People Have Lost Sovereignty, Part Two
In the first article the gradual rise of the Corporate Personhood was detailed, showing how there is a correlation between the rights that corporations have gained over the years through Supreme Court rulings and limitations placed upon legislators when trying to create laws for the benefit of society, for fear of lawsuits by corporations. In this article the Federal Reserve will be analyzed, showing that the federal government gave up sovereignty over money policy in a completely unconstitutional way.
The Federal Reserve was created in 1913 by Congress, and signed by Woodrow Wilson, as a way to centralize the banking system, which the Democrats had promised to do if elected. The problem is that the Constitution puts that responsibility on Congress;
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;
· To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;”
The Constitution was never amended to transfer this responsibility, let alone to a private corporation. In all likelihood this is because there would be far too much opposition. It was a shameful abrogation of the sovereign power of the people by those who were merely holding the reigns for a brief time. Wilson and his Democrats decided to ignore the Constitutional implications, since they did not even attempt to amend the Constitution, and the Supreme Court has again proven to be stewards of the people in the way that a wolf is a steward of sheep.
The first thing that needs to be understood, for its importance cannot be understated, is that the Federal Reserve is a privately owned corporation that pays dividends to stockholders. In order to be a bank in the United States, the bank must purchase stock in the Federal Reserve. Federal Reserve stocks are not available to people, though many of the banks who own stock in the Federal Reserve are publicly traded corporations, and those stocks can be owned by people. Although the Federal Reserve is a private corporation, it also has to deal with the government in certain ways. The President chooses who the Federal Reserve Chairman is, though he must pick from choices provided by the Federal Reserve, and the Chairman must report to Congress and the Government Accountability Office. Congress can advise the Chairman of the Federal Reserve, but he can ignore that advice without repercussions.
The Chairman of the Federal Reserve gets to set monetary policy, and he does this in two basic ways. One, he sets the rate which banks must hold depositors money on hand. In other words, if the rate is set at 10%, then a bank can lend out 90% of the money that is deposited in the bank, but must keep 10% on hand, in case depositors wish to withdraw money. In this way banks only have to keep a percentage of their customers’ money, and the rest can be leant out for interest, which creates the illusion that there is more money in the system than there really is, because the money that is lent out eventually makes its way back into a bank, which then lends out 90%, repeating the process over and over again. This is called fractal reserve lending, and it is, at the logical heart of it, a pyramid scheme. It works so long as people believe it will work. Once people lose faith it falls apart rapidly.
The second way the Federal Reserve controls monetary policy is by setting the federal funds rate, which is the rate of interest that banks who are part of the Federal Reserve can borrow money from the Federal Reserve. When a bank needs money, it borrows it from the Federal Reserve. The interest rate is normally ridiculously low (.25% for 2013). Banks turn around and lend this money out to people at a much higher rate. The money that the Federal Reserve lends to the banks is created when the banks ask for it. When this is done the Federal Reserve tacks on a fee for the transaction (about 6%), and that accounts for the profits of the Federal Reserve. At the end of the year all of the profits are sent back to the Treasury…except for 6%, which is paid out as dividends to the stockholders (aka the banks). The same banks that borrowed the money from the Federal Reserve own the Federal Reserve. So they borrowed from themselves; in reality adding more US dollars to the system, thereby lessening the value of all the dollars that were already in existence…and making six percent on the deal on top of everything else.
If this analysis were true, we should expect that the US dollar would have lost value continuously since the creation of the Federal Reserve, as that six percent tacked on at the creation of currency slowly erodes the value of that currency. That is indeed the case. The US dollar has lost over 60% of its value compared to the British pound since the creation of the Federal Reserve one hundred years ago.
Unfortunately corruption is the mortar that holds the Federal Reserve System together. Banks have manipulated their positions on the boards of the Federal Reserve to funnel money into their corporate coffers, at the expense of the American economy. Jamie Diamond was the CEO of JP Morgan-Chase at the same time that he was on the Federal Reserve board, and while on the board of the Federal Reserve he orchestrated a bailout of JP Morgan-Chase. There can be no clearer indication that there is a conflict of interest. In the same time period Lehman Brothers was allowed to file chapter 11. Of course, the CEO of Lehman Brothers, Joe Gregory, did not sit on the Federal Reserve board.
The Constitution clearly assigns responsibility for monetary policy to Congress. The Constitution has clearly not been amended to allow that responsibility to be transferred, in all likelihood because the American people would not stand for it if they understood what was being done. The Federal Reserve constantly erodes the value of US currency with the six percent profit that is sent to Federal Reserve stockholders (banks), and is not bound by policy expectations of the elected government. If Congress and the President decide on one course of action, but the Federal Reserve disagrees with that course, it can work against the intent of the elected government. The President can remove the sitting Chairman and choose a new one…but the Federal Reserve selects the people that the President gets to choose from.
What is interesting is that no one has challenged the legitimacy of the Federal Reserve at the Supreme Court level. It seems highly unlikely that it could survive such a challenge…though the history of the United States Supreme Court is one of a long list of awful decisions that have eroded the power of the American democracy. The reality is that a small cadre of insiders is calling the shots for America’s financial system. They disguise their actions out in the open, using byzantine logic and industry-specific jargon to confuse people, all the while eroding the foundation of American society.