The Federal Reserve and the War on Health Freedom
by Chris Masterjohn
September 5, 2008
The Federal Reserve system plays a central role in the war on health freedom. This is not simply because the Rockefeller Foundation, founded in the same year by the same powerful banking interests, helped bring the current allopathic medical system to power throughout most of the world and almost single-handedly launched the rise of modern industrialized agriculture.
Putting history behind us, the Federal Reserve continues to steal from the poor and middle class and give to the rich, especially to corporations with close ties to the government, such as the pharmaceutical companies who pulled in over $37 billion in sales of cholesterol-lowering statin drugs last year.
It has been the single most important factor enabling the growth of an overblown federal government that has used our tax dollars to enforce the Rockefeller-created medical monopoly and to create propaganda campaigns favoring diets that cause disease and drugs that are needed to cure those diseases. Finally, it is directly responsible for the current economic crisis that is leading to the concentration of the world's means of producing food into fewer and fewer hands.
In This Article:
Federal Reserve System History — How the Federal Reserve System Was Created
The name of the Federal Reserve is deceptive. It is not federal and it probably does not have any reserves. It is a privately owned bank that has a congressionally-granted monopoly on the right to create money out of thin air — something called counterfeiting when anyone else does it — and although it literally stole the nation's gold through government confiscation, it appears to have sold it back to us at an incomprehensible profit.
We would be foolish to consider the creation of the Federal Reserve as anything other than a criminal conspiracy against the public. I have summarized the history of this creation in my review of the Money Masters DVD.
A more comprehensive history by the late Austrian economist and revisionist historian Murray Rothbard can be found here.
The idea of a privately owned central bank was first promoted in the United States by Alexander Hamilton, who thought a "healthy" national debt owed to a central bank would align the government with the interests of the rich. The rich men who owned the bank would support high taxes to pay the interest on the government bonds owned by the bank, and the government, being indebted to them, would do their bidding.
Thomas Jefferson launched the destruction of the first national bank, saying that if we ever allowed private banks to monopolize our money, the large corporations that would grow up around us would deprive us of our prosperity and we would wake up homeless on the continent that our fathers conquered. A second privately owned national bank was destroyed by Andrew Jackson, whose campaign slogan was "Jackson and No Bank."
In 1910, the largest banking interests in the country met in secret on Jeckyll Island, an exclusive membership-only resort island they had purchased a few year earlier. The meeting included, among others, Senator Nelson Aldrich, J.P. Morgan and representatives of his financial trusts, John D. Rockefeller and Frank Vanderlip of the Rockefeller-owned National City Bank, and Paul Warburg and Jacob Schiff of Kuhn, Loeb and Co. They were sworn to secrecy, and went by their first names only so the servants would not know who they were and leak the story to the press. Vanderlip later referred to himself as a "conspirator" in a public article entitled "The First Names Club."
These bankers drafted what eventually became the Federal Reserve Act, creating this banking monopoly in 1913. The name "Federal Reserve" was a total deception. America did not want a "central bank" — it had already destroyed two of them — so they called it a "reserve" instead of a bank, created twelve Federal Reserve Banks to mask the fact that all the power was held in the New York bank, and called it "federal" to mask the fact that it was a privately owned monopoly.
Once World War I began, the government authorized commercial banks to default on their promises to provide gold on demand to the public, whose dollars at the time were literally receipts for gold held by the banks. In the 1930s, after the public's gold had been stolen by the commercial banks, Franklin D. Roosevelt signed an executive order confiscating it into the hands of the United States government. In 1982, Reagan's congressional Gold Commission investigated the possibility of returning to a gold standard and concluded that the US government no longer owned any gold because its ownership had been transferred to the Federal Reserve as collateral on the national debt.
But does the Federal Reserve have any gold reserves? In Gary North's free e-book, The Gold Wars, he presents evidence that the Federal Reserve has leased all its gold out to "bullion banks" who have in turn sold it to the public to turn a profit. If that is true, then the Federal Reserve is not only not Federal, but it is not a Reserve either.
Federal Reserve Inflation — Stealing From the Poor and Middle Class
Centuries ago, gold smiths began holding gold for people and giving them receipts of ownership so they could come back at any time and retrieve the gold. They found, however, that they could make far more profit if they gave out receipts for gold that did not exist. Only a few people at any given time would come back to redeem their receipts for gold, so no one would notice.
Any rational person would call this fraud. But this is what our banks do today, and we call it "fractional reserve banking." Only today our banks are holding reserves of cash instead of gold and lending out more digital money than they have. The Federal Reserve, for its part, simply creates electronic money credits on a computer. The money comes out of nowhere as if by magic, and leaks into the economy.
How does that affect you and me? Simple. The more dollars there are chasing the same number of goods and services, the less and less our dollar is worth.
So if we have less wealth, where does the wealth go? After all, money is not wealth; it just purchases wealth. So where does the actual wealth — goods and services and control over productive capital — go?
The wealth simply gets shifted from the people who earned it to certain politically favored industries.
While the Federal Reserve is able to generate digital money out of thin air, it is required to turn most of the profit back to the government. For example, Fortune reported that the Fed made $52 billion in profits in 2009 but returned $46 billion back to the government, using $4.6 billion to shore up its own capital and paying out only $1.4 billion as dividends to its private owners. So the Federal Reserve itself does not significantly profit from the system.
The first to rake in large profits are the banks, because when the Federal Reserve pumps newly created money into their accounts, they are allowed to create ten-fold more. Moreover, by acting as a "lender of last resort," the Fed stabilizes the entire institution of fractional-reserve banking. Ordinarily, it would not be safe for banks to lend out ten times more money than they have, but if the Fed can be counted on to prop up the system, banks can make huge profits without the natural risk such fraudulent business would otherwise entail.
The other major profiteers are the corporations favored by the government and the Federal Reserve who get to use the money first. If Congress borrows money from the Federal Reserve to pay for the cholesterol-lowering statin drugs included in the prescription drug plan passed a few years ago, then those pharmaceutical companies get to spend the money first while it still has all its present value. Then, as the money slowly trickles through the economy eventually making its way into your paycheck, it loses its value.
So wealth is transferred from people who earn it to banks, corporations with government contracts, and corporations that conduct transactions directly with the Federal Reserve.
The web site of the Bureau of Labor Statistics (BLS) offers an "inflation calculator." You can use it to calculate the loss of the purchasing power of the dollar over time. It is available here:
BLS Inflation Calculator
It takes over $22 to purchase what $1 purchased in 1913. That means that the dollar has lost over 95 percent of its purchasing power since the Federal Reserve was formed. 95 percent of the wealth did not disappear. The wealth was transferred from the people who hold weaker dollars to the people who make new dollars and who get to spend the new dollars before their value declines.
The decline in purchasing power did not happen evenly over this period. Between 1913 and 1970, after which Nixon erased the last vestige of a gold standard, the dollar lost 75 percent of its purchasing power or on average 2.4 percent per year. Between 1971 and 2008, the dollar lost 82 percent of its purchasing power or on average 4.7 percent per year.
After World War II and until 1971, foreign central banks could redeem their dollars for gold. Since the dollar was "as good as gold" to foreigners, we were able to export our inflation to foreign banks and governments and divide it up among the world. Nixon closed this "gold window" in 1971, and prices have risen in America like never before ever since.
We can see this clearly if we look at the consumer price index over the course of the twentieth century:
The blue line is the consumer price index. As you can see, it takes off like a jet in 1971.
Americans may find it harder and harder to get by in many respects, but most of us have lots of flashy technology. Average U.S. citizens have far more wealth than we did just a few years ago when it comes to the quality of our computers, televisions, cell phones, IPods, and other such electronic gadgets. Why? Technology is the one sector of the economy where the productivity increases so rapidly that this increase outpaces the increase in the money supply. Thus, prices go down over time instead of up, while new and better products constantly bump older ones out of the market.
When it comes to technology, prices go down over time and the wealth "trickles down" to most of us. When it comes to food or virtually any other commodity, prices go up and the big financial institutions swallow up the little guys.
Consider, for example, the conglomeration of the agricultural industry. The loss of small farms to industrialized conglomerates has been going on for decades, but now huge financial institutions are buying up the world's means of producing food like never before. The New York Times recently reported:
Huge investment funds have already poured hundreds of billions of dollars into booming financial markets for commodities like wheat, corn and soybeans.
But a few big private investors are starting to make bolder and longer-term bets that the world's need for food will greatly increase - by buying farmland, fertilizer, grain elevators and shipping equipment. . . .
"It's going on big time," said Brad Cole, president of Cole Partners Asset Management in Chicago, which runs a fund of hedge funds focused on natural resources. "There is considerable interest in what we call 'owning structure' - like United States farmland, Argentine farmland, English farmland - wherever the profit picture is improving."
Wealth disparity is not inherently evil. Free markets tend to put more money in the hands of people who save and invest rather than consume, and who do so wisely and productively. Much of the "wealth" that is owned by the wealthy is tied up as productive investments that increase the number or quality of jobs, goods, and services available to the rest of us.
The extreme concentration of wealth that we see in our society, however, is not driven by the free market, is not just, and is not beneficial. It is driven by the Federal Reserve's monopoly on the money supply and its Congressionally authorized right to steal from the poor and middle class to enrich itself, to enrich the banks that borrow from it, and to enrich the corporations to whom it and the United States Government grant special favor. This monopoly on money is leading to a monopoly on the food supply and the means of basic survival.
Understanding the Federal Reserve System — How it Controls Interest Rates
The following article is a very good brief (six-page) introduction to the history of Federal Reserve policy:
"The Greenspan Fed in Perspective"
by Roger W. Garrison
We hear a lot about the Federal Reserve "adjusting interest rates," but what this mostly means is controlling the money supply. The Fed does this in three ways:
- Directly adjusting the discount rate.
- "Targeting" the federal funds rate.
- Changing the reserve requirement.
The discount rate is the interest rate at which the Federal Reserve lends money to other banks. If it lowers this rate, banks borrow more money and then lend it out at a profit. If it raises this rate, banks borrow less money and thus lend out less money.
The federal funds or "fed funds" rate is the interest rate at which banks lend to each other on an overnight basis to meet the reserve requirement, which itself is set by the Federal Reserve. The Federal Reserve does not set the fed funds rate directly, but influences it by injecting new money into the reserves of other banks or siphoning money off from those reserves. As the supply of any good goes up, its price goes down. Thus, when the Fed injects new money into the reserves of other banks, the interest rate — the price of borrowing that money — goes down.
The reserve requirement is the percentage of money a bank lends out that the bank must actually have. The legality of "fractional reserve banking" allows banks to loan out money that they do not even have, which is money that does not even exist. This is a form of fraud, and creates a system where there is more debt in existence than there is money to pay back that debt.
The individual bank is not at liberty to lend out however much fraudulent non-existent money it wants. It must comply with the reserve requirement set by the Federal Reserve. If the Fed says this rate is ten-to-one, then a given bank can only loan out ten times more money than it owns. If the Fed changes the rate to eleven-to-one, every bank can thus counterfeit about ten percent more money than it was previously able to, thus increasing the money supply, decreasing interest rates, and further robbing the public of the purchasing power of its dollars.
The Federal Reserve has the right to create new money. It does this by creating digital money, electronic credits on a computer screen. It injects this money into its chosen sectors by purchasing treasury bills, called T-Bills, from the United States Treasury, from banks, or from other corporations.
The United States Treasury issues T-Bills when Congress spends more money than it takes in through taxes. In other words, they are a result of deficit spending. They are the means by which the government borrows money.
Banks, corporations, and private individuals (whether domestic or foreign) can buy these T-Bills. So can the Federal Reserve. The difference is that when banks, corporations, and private individuals buy them, they do so with money that is already in existence. When the Federal Reserve buys them, it creates digital money out of nothing, thus injecting new money into the economy.
When the Federal Reserve injects money into the banking industry, it does the same thing. It creates digital money out of nothing and purchases T-Bills from them.
Whoever sells their treasury bills to the Federal Reserve gets to spend the new money, created out of thin air, before it loses its value. By the time it finds its way into our paychecks, it has already lost some of its value. So, deficit spending by the government allows the Federal Reserve to transfer wealth from people who have earned it to whichever banks and corporations it buys treasury bills from, or whichever corporations the government contracts with and pays using newly borrowed, newly created money.
The Federal Reserve and the Welfare State — Alan Greenspan on Gold and Economic Freedom
As described in my review of the Money Masters DVD, privately owned central banks are a critical component of any warfare state. The public will rarely consent to pay the astronomical amount of taxes that a war costs. After the founding of the Bank of England, England waged four huge wars in a century, plunging itself into massive debt, driving it to tax the American colonies. After the founding of the Federal Reserve in 1913, America fought two world wars in which all sides were financed by the same international banking industry that owned the Federal Reserve and the Bank of England.
As pointed out by Alan Greenspan, any large, intrusive government, whether it is a warfare state or a welfare state, requires a money-out-of-nothing currency. Thus, advocates of an overbearing state have always exhibited "an almost hysterical antagonism" to the use of gold or other precious metals as money.
Alan Greenspan was chairman of the Federal Reserve from 1987 until he retired in 2006. Surprisingly, he wrote an excellent essay in 1966 on this subject:
"Gold And Economic Freedom" by Alan Greenspan
Many people believe that since we have massive corporations whose single motive is profit, we need an equally large government to prohibit them from abusing the public. But if we did not have fractional reserve banking, more bluntly called legally sanctioned fraud, would we have such giant corporations?
If we did, they would be entirely different in character because they would have built their wealth only through providing useful goods and services to consumers, rather than through the robbery of the poor and middle class faciliated by the Federal Reserve.
In all likelihood, however, business operations would be much smaller without fraudulent banking.
Thomas Jefferson, a great opponent of Hamilton's privately owned central bank, wrote the following:
If the American people ever allow private banks to control their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their prosperity until their children will wake up homeless on the continent their fathers conquered.
After all, as described in The Money Masters, it was the Rothschilds who funded the American industrial and financial monopolies of the nineteenth century, and the Rothschilds built their fortune first through fractional reserve banking and then through lending to the British warfare state. These monopolies grew into the financial powers that created the Federal Reserve in 1913.
The Welfare State and the War on Cholesterol
The American welfare state has directly facilitated the war on cholesterol, the war on good food, and the war on health freedom. Beginning on page 4 of his New York Times article, "What If It's All Been a Big Fat Lie?" Gary Taubes discusses the political story behind these wars, from the McGovern Committee to the National Institutes of Health, including the hundreds of millions of tax dollars spent to finance them.
Between the 1950s and the 1980s, the Big Business-Big Government partnership began recommending the public substitute polyunsaturated fatty acids (PUFA) for saturated fatty acids. This was not only a boon to the vegetable oil industry, but was a huge boon to the American disease care system, in large part brought to power through the Rockefeller Foundation by the same banking interests that created the Federal Reserve.
Research going back to the late 1940s and early 1950s had shown that unsaturated fats in the diet were responsible for the vulnerability of laboratory animals to toxins and their susceptibility to experimentally induced diabetes. As described in my PUFA Report, "How Essential Are the Essential Fatty Acids?" later research showed that even small amounts of PUFA in the diet caused large increases in the susceptibility of lab animals to cancer.
The term "welfare state" is thus a misnomer. Whereas the "warfare state" appropriately refers to the military-industrial complex that President Eisenhower warned us about in 1961, the "welfare state" describes a government-industrial complex that wages war against the welfare of the public under the guise of promoting its welfare.
Like the privately owned central banks financed both sides of both world wars, the medical-industrial complex finances both sides of the public health wars — the side that provides the dietary advice that causes disease, and the side that provides drugs to cure those diseases.
Can We Abolish the Federal Reserve? — Beware, JFK Already Tried
We would be very naive to believe that we could abolish the Federal Reserve easily. It would take a grass-roots movement that was rooted in the population far beyond the boundaries of the federal government. It will never come from any politician.
The people who own the national debt have a lot of power. The national debt is almost $9.7 trillion. Hundreds of billions of tax dollars per year are spent on interest payments to the bearers of government bonds — such as the bankers who own the Federal Reserve.
On June 4, 1963, President John F. Kennedy issued Executive Order 11110. The order allowed the United States Treasury to issue dollars ("Treasury Notes") directly instead of borrowing dollars ("Federal Reserve Notes") from the Federal Reserve at interest. The dollars would be silver receipts redeemable for silver in the Treasury's possession. All told, the Treasury used the order to introduce nearly $4.3 billion of silver-backed debt-free dollars into circulation.
John F. Kennedy was assassinated five months later on November 22, 1963.
I will leave it to everyone's imagination whether this was coincidence or a cause-and-effect relationship, but suffiice it to say, the banking industry cannot assassinate millions of people voluntarily trading in gold, silver, or other forms of currency.
Of course, the government can harass people who attempt to establish banks with gold and silver reserves like it did to Franklin Sanders. But over time, when We the People recognize that government money is a sham and a tool of a monopoly banking industry that has hijacked our government and used it to rob us of our liberty and prosperity then the Federal Reserve's money will fall into disuse.
The bankers, in fact, may have shot themselves in the foot by leasing all their gold to bullion banks. Technically these bullion banks owe the Federal Reserve, International Monetary Fund, and other central banks physical gold, but the public to whom they have sold it does not owe that gold to anyone.
Should We Support a Return to the Gold Standard? No.
Should we support a return to the gold standard?
No. A gold standard would be a government-enforced legal tender (that is, a currency everyone is forced to accept as payment) putatively exchangeable for gold. This would be much better than what we have, but certainly not ideal.
What if a farmer wanted to be paid in pig bones? In hockey pucks? In pearls of barley?
Well, most of us would consider this "bartering." But the only thing that distinguishes money from goods used in bartering is that that the money has nearly universal appeal and can be exchanged without the need for advertising or the need to pay a fee.
Left to the voluntary exchanges of men and women living freely, gold, silver, and notes for their receipt would probably constitute the main media of exchange. Allowing individuals to accept the payment of their choice allows the market a greater degree of flexibility to react to the needs and desires of the people acting within it at any given time.
The fact that many gas stations, where they are allowed to, are currently offering cheaper prices for cash than for credit cards is a testament to this fact — the consumer needs cheaper gas and the gas station wants to avoid fees from the credit card companies and perhaps wants a reserve of real cash if its owners worry about the shape of the current digital money economy.
A few days ago, a store owner sold me a gallon of water for $1.65 when the actual price was $1.89. I only had 65 cents in change, but he was low on change so preferred to give me a discount instead of taking two dollar bills and losing some of his change back to me. I suppose that was a type of "black market" transaction since it violated the government's equilibration of one dollar bill to 100 cents in change — its "change standard." But it was valuable to each of us.
Before the bankers convinced Congress to ban the use of silver as money in the nineteenth century, adopting an exclusive "gold standard," the common man had much more power relative to the banking industry because silver was abundantly available and he could have the government mint coin his silver into currency.
Would money work without government-enforced legal tender laws? Thomas Jefferson thought it would. In a 1798 letter, he described his desire for a constitutional amendment that would prohibit the federal government from borrowing and his wish to "deny their power of making paper money or anything else legal tender." The or anything else is critical. Jefferson thought there should be no legal tender.
There is no government-backed "mouse standard," but I just bought a new mouse that is perfectly compatible with my computer, even though it was made by a totally different manufacturer. There is no government-backed "light bulb standard," but I buy light bulbs from a variety of different manufacturers and they always fit into my lamp sockets.
Is everything compatible with everything? No, there are compatability issues in computers, light bulbs, and any other set of products that consumers need to be aware of, but by and large free people sort these things out among themselves. It is in the interest of profit-seeking corporations, open source software advocates who simply wish to see the advance of technology, and charitable organizations who wish to selflessly help other people that the goods and services free women and men make have basic usefulness in relationship to each other.
Money is quite the same. Food is quite the same. Health is quite the same.
All three of these areas would look very different if they were not dominated by cartels that hijack government to use it against the public for their own profit.
The Power in Each of Us
Are we powerless against these cartels? Only insofar as we choose to be powerless out of our own apathy. Only insofar as we keep voting for their candidates, accepting their counterfeit dollars, taking their dietary advice, buying the drugs that cure the diseases the dietary advice causes, believing that their warfare/welfare state promotes the good of humanity, and looking at someone in need and failing to help because we believe that helping is the government's job.
We can believe otherwise, and do otherwise, and therein lies our power.