• All governments lie, but disaster lies in wait for countries whose officials smoke the same hashish they give out.

  • I.F. Stone

zaterdag 23 april 2016

The People’s Book Project

A Teaser to ‘The Empire of Poverty’: The First Volume of The People’s Book Project

A Teaser to ‘The Empire of Poverty’: The First Volume of The People’s Book Project
By: Andrew Gavin Marshall
slum
The following is a little teaser to some of the ideas, approach and perspective being pursued through the research and writing of the first volume of The People’s Book Project, ‘The Empire of Poverty.’ Please consider donating to the Project to help these efforts come to fruition.
It’s important to try to understand the global economic and financial system – the banks, corporations, central banks, economic policies (and effects) of governments, trade agreements, the creation and value of currencies, the function of the oft-heard ‘markets’ – as daunting as the task may seem. One might think that they need a degree in Economics in order to understand the complexities of the global economy, to comprehend the correct choices and policies which achieve the desired results. One might think that this is true, but it isn’t. The truth is that if most economists understood the global economy, and knew the ‘correct’ choices to make, we wouldn’t be where we currently are.
Economics – both theory and practice – is an illusion. There are no concrete rules on which to base economic thought; there is no ‘gravity’ to its physics. Economics is not science, it’s sophistry; the sleight of hand, the quick and slick tongue, the wave of the wand, the theatrics of the stage set for all to see, and the effects – as destructive as they may be to the real world and all life within it – are largely hidden from view; the illusion keeps the population enraptured in awe, aspiration, and fear.
This is not to say that there cannot be anything real produced or given growth by what we call ‘economics’: there are of course exchanges made, resources used, products created, lives benefitted, and entire societies and peoples changed. The effects are very real. However, they have a disproportionately destructive, oppressive, and dehumanizing effect upon the vast majority of humanity: they bestow upon a tiny fraction unparalleled power, and thus, dehumanization in another form; while creating a comparably minimal buffer of generally satiated and malleable middle classes, educated well-enough to work and survive the horror show that is the global economic order, but consumed by a culture lacking in substance and meaning, and thus, left morally, psychologically, and intellectually lobotomized, physically paralyzed, and thus, once again, dehumanized.
So our global economic order has the effect of generally dehumanizing all who are subject to its whims and whammies; which is to say, almost everyone, everywhere. Those peoples and societies that are not integrated into the global economy tend to be bombed, invaded, overthrown or droned. Those who remain are doomed to slow death: one in seven people on earth live in urban slums[1] – more than the combined populations of Canada, the United States, and the European Union – while the majority of humanity lives in deep poverty, in hunger, and malnutrition; with 18 million people being killed from poverty-related causes every year, including over 9 million children.[2] Every year.
During the Holocaust, approximately six million Jews were killed. Take that number, add 50% to make 9 million, and just think: this is how many children die every year from poverty. Every year a new Holocaust.
These deaths are preventable. Truly. It has been estimated that less than the yearly Pentagon budget would lift the poorest 3 billion people of the world out of extreme poverty. In fact, in the twenty years following the end of the Cold War in 1991, there were roughly 360 million preventable deaths caused by poverty-related issues, more than the combined deaths of all of the wars of the 20th century.[3]
But this is not our priority. Our priority is that banks and corporations make as much profits as possible, because this – by some unknown and unseen magic – will (it is said) benefit everyone else. It is propagated and believed that this system, as it exists, or even with the proper tinkering and toiling, can represent the totality of life and being on this world; to be humanizing, and to represent ‘human nature’ at its best. But if this system were ‘human nature,’ why would it be so dehumanizing? How many organisms grow by destroying that which their existence depends upon? Parasites, cancers and various diseases can kill the host before transferring to another.
We have no other host to go to. Those who sit atop the global structure know this, which is why they express such an interest in finding new planets to escape to (and presumably, plunder and destroy). The billionaires have given up pretending to care for the world’s billions of people suffering, which is why they are looking to space travel, mining asteroids, and searching for hospitable environments elsewhere.[4] Their long-term ‘exit strategy’ is to abandon ship, not to change the direction we currently traverse.
Are we – as a species – a cancer upon the earth? Looking at the big picture, it may often seem that way. But it is in the small moments, the single acts, exchanged emotions, interacting individuals, in the every day life – those moments of joy, love, wonder – in which we find our own personal meaning, in which we discover that humanity – and human nature – can be so much more than destructive, petty, and pestilent behaviour. We are told we are a society of ‘individuals’ – that we are free, democratic and equal. If that were the case: why are we so isolated? We are individuals, yes, in the physical sense: but we are disconnected from the collective, separated from the species as a whole.
We think and act individually, but do so ignorantly, and arrogantly. Our thoughts and feelings are collected and collated by our commanding culture of irrelevance. The immense gift of a human mind – with all of its possibilities and capabilities, both known and unknown – is largely squandered on pop culture, sports, celebrities, consumer items and entertainment. So long as we remain distracted by the ‘celebration of irrelevance’, we are lobotomized of our meaning.
Is this how you see yourself as an individual? As the world you live in? It’s not an appealing thought. So why, then, do we live in a world in which as individuals we may act morally, purposefully, passionately, and proudly; though as a collective species, we are petty, parasitic, power-mad, pathological, and pretty much evil?
Is it ‘human nature’ that our personal values and priorities are not reflected in the collective – institutionalized – expression of humanity? Or, is it that the way in which our society is constructed, the institutions and ideologies, the policies, programs, priorities and effects of the way in which our world is ordered and altered, is inherently counter to ‘human nature’? In other words: is human nature inherently self-destructive; or, is our constructed human ‘society’ (our global social, political and economic order) inherently destructive to human nature? Does human nature pervert the effects we have upon the world, or do the structures of world order – and power – pervert human nature?
It is this vast disconnect between our personal values and the form they take at the global – collective – level of the species, which is ultimately so dehumanizing. Because power is centralized at the top, and for such a tiny fraction of the species – so much so that there has never been a more unequal and vast ‘Empire of Poverty’ in all of human history, the ‘great inequality’ is not of wealth, but of power.
Wealth is an illusion: a manufactured means to power, a collective delusion. Power is central to human nature. Every person needs power: they need autonomy over their own lives, thoughts, feelings, and decisions. It is central to maturity, it is central to leaving adolescence and becoming an adult, and it is central to finding a sense of self-worth. Understanding oneself is to empower oneself. Power is about possibility, personal fulfillment, passion and purpose. It has individual and social representations. It can be seen – or not – in your own life, but also in the world around us.
A pre-requisite for power is freedom. The process of achieving freedom is, itself, empowering. Once (and if) achieved, it is of immense responsibility to use your new power of freedom wisely, for the effects that it may have upon others and the rest of the world are endless. Power is freedom, quite simply, because slavery is the opposite of both freedom and power: it is the most un-free and the most disempowering personal position to be in.
Freedom is power; power is freedom. If we were actually free, we would have significantly more power. But we don’t. We barely have any control over our own individual lives, let alone the world around us. We leave all that to the others, to those with the proper degrees, the ‘expertise,’ the politicians, the pundits, the ‘right’ people… because they’ve obviously done such a great job of it so far. We remain – as a species, and very often as individuals – neutered from the necessities of individual empowerment, subjected instead to the very-often-arbitrary abuses of power over others.
So if we are not free, what are we? Certainly, we are not slaves, for we have no shackles, bear the brunt of no whips, serve no visible masters. We are, perhaps, slaves of another kind. We are financially, reflexively, intellectually, emotionally and hopelessly and very often spiritually enslaved to the system, as it exists. We are slaves to money. We serve the masters of money, with our time, with our labour and efforts, with our interactions, exchanges, interests, intelligence and aspirations. We are slaves to money.
Our society is built and sustained upon it; and our species is being driven to extinction because of it. The cause and effect of money – or more aptly, debt – slavery, is the distribution of power among the species: too few have too much, and too many have too little. This imbalance of power within the species is leading to our self-destruction, our inevitable extinction if we continue along this path.
Money is both the means and very often – the reason – for continuing down this path, for maintaining this imbalance. While very few have all the money, everyone – and everywhere else – has all the debt. This is not the wondrous ‘free market’ capitalist utopia which is incessantly babbled about, but the very real global feudal dystopia, both cause and effect of the power imbalance and money-system. In feudalism, there is no freedom, only serfdom.
Welcome to our global economic order, serf!
Welcome to the Empire of Poverty.
But it’s not hopeless. The truth is both painful, but also full of possibilities. The truth is that we do have the ability to understand the world we live in, to comprehend our global economic order. We don’t need a degree; we just need honesty.
The illusion that is our economic system is built not upon technical knowledge, but rather, technical language, a highly political language, “designed to make lies sound truthful, murder respectable, and to give a feeling of solidity to pure wind,” as George Orwell defined the term. Our inability to communicate honesty, and thus effectively, about our economic – and indeed, political and social – system is an essential mechanism in maintaining that system.
To speak and ‘understand’ this language, at least at a superficial level, usually does require some ‘education’: economists must be trained, so too must political and other social scientists. The artificial separations in their knowledge – (as in, the notion that the economic world exists separate from the political and social world, and thus, must be studied separately) ensures that none who receive a ‘proper education’ achieve a profound understanding of the world. Some may, but they are few and far between, and usually weeded out or co-opted.
Such a ‘proper education’ will allow one to gain enough basic knowledge related to the sector of society in which they aim to explore and advance, and they are given just enough knowledge to do so, but not enough to honestly look at – let alone have the capacity to communicate – the reality of how our global political, social and economic order functions and evolves. They may see problems, make recommendations, propose policies, and they may even do some good, but ultimately – as we still remain on the path toward extinction – they have not, and cannot – do enough.
Few possibilities – few ‘solutions’ – or opportunities, are communicated to the populations that are effected under and by these societies, and by the decisions the few at the top make. People are generally given a small set of options from which to choose, like guessing what’s behind door number one or two, when both are ultimately terrible, and ineffectual (in a positive sense). We put ‘faith’ – however empty – into the hands of politicians, we consume the crap spewed in the media, or we lose ourselves in the vast vacancy that is the ‘substance’ of our culture; a culture of mythology, lies, fantasy, persuasion, punishment, entertainment and manipulation.
Our hope is first in honesty. We can – and must – look honestly at the world for what it is, not what we want or imagine it to be, but what it is. Then, we can – and must – communicate this message, and to do so honestly and directly. This is a human reality, and it must become a part of a collective human knowledge, a shift in understanding, and thus, a change in direction; away from the current-inevitably of extinction, and toward survival. What comes after is for future generations to determine. For now, we must aim to simply survive.
Our goal must first be to begin charting a new path toward survival; this must be the duty of our present living and younger generations, as challenging, demanding and terrifying a responsibility that may be, it is either that, or extinction. And this is not a matter of hundreds or thousands of years away; it could be as soon as decades. If you – like me – are between 18 and 45 – the coming few decades of the world in which you currently live and hope to survive will become increasingly dreadful, destructive, oppressive, and disempowering. We cannot afford to continue kicking the can down the road, delaying – and exacerbating – the inevitable.
There is always hope, not in myths and fantasy, but hidden in reality. In our actions, ideas, in us – as individuals – connecting, interacting, sharing, working and creating together, as collectives, as part of a larger human organism; beginning to act as if we don’t want to self-destruct as a species, creating a new society – a new order – to make the current one obsolete. This is our great challenge. How do we navigate through living within the present existing order, while simultaneously seeking to create a new and alternative order? Moreover, how do we achieve this if it takes nearly all our effort, time and energy to simply survive the present order? To put it as crudely (and honestly) as possible: how the fuck are we supposed to change the world?!
I don’t know the answers. But I think that the best way to get them is to ask honest questions, seek an honest understanding, and to communicate honestly – about ourselves and the world – personally, and globally. This book is my attempt to understand and speak honestly about the world, not to speak in a language that only economists and political scientists or other so-called ‘experts’ can understand, but to speak plainly and directly. This will require me to dedicate some focus in attempting to translate political language into English. I don’t have a degree, and you won’t need one to read this, or to understand it.
The hope, then, that I hold for this book – and the wider book project of which it is apart – is that it presents an accessible and usable collection of knowledge. It is not the book that asks every question, or has ever answer (no books do!), but it is an attempt at taking a different approach to asking and seeking answers to some rather important questions about our world: what is the true nature of our society? How did we get here? Where are we going? Why? And, what can we do to change it?
This is but an introduction to our world, by no means comprehensive or conclusive, simply accessible, honest, and (hopefully) useful.
Andrew Gavin Marshall is a 26-year old researcher and writer based in Montreal, Canada. He is Project Manager of The People’s Book Project, chair of the Geopolitics Division of The Hampton Institute, research director for Occupy.com’s Global Power Project and the World of Resistance (WoR) Report, and hosts a weekly podcast show with BoilingFrogsPost.
Notes
[1]       Mike Davis, Planet of Slums (Verso: London, 2007), pages 151-173.
[2]       Thomas Pogge, “Keynote Address: Poverty, Climate Change, and Overpopulation,” Georgia Journal of International and Comparative Law (Vol. 38, 2010), pages 526-534.
[3]       Ibid.
[4]       Dan Vergano, “Billionaires back ambitious space projects,” USA Today, 13 May 2012:


Federal Reserve 2

History of the Federal Reserve System

From Wikipedia, the free encyclopedia
Federal Reserve Board, 1917
This article is about the history of the United States Federal Reserve System from its creation to the present. 

Central banking prior to the Federal Reserve[edit]

The Federal Reserve System is the third central banking system in United States history. The First Bank of the United States (1791–1811) and the Second Bank of the United States (1817–1836) each had a 20-year charter. Both banks issued currency, made commercial loans, accepted deposits, purchased securities, maintained multiple branches and acted as fiscal agents for the U.S. Treasury.[1] The U.S. Federal Government was required to purchase 20% of the bank capital stock shares and to appoint 20% of the board members (directors) of each of those first two banks "of the United States." Therefore, each bank's majority control was placed squarely in the hands of wealthy investors who purchased the remaining 80% of the stock. These banks were opposed by state-chartered banks, who saw them as very large competitors, and by many who insisted that they were in reality banking cartels compelling the common man to maintain and support them. President Andrew Jackson vetoed legislation to renew the Second Bank of the United States, starting a period of free banking. Jackson staked the legislative success of his second presidential term on the issue of central banking. "Every monopoly and all exclusive privileges are granted at the expense of the public, which ought to receive a fair equivalent. The many millions which this act proposes to bestow on the stockholders of the existing bank must come directly or indirectly out of the earnings of the American people," Jackson said in 1832.[2] Jackson's second term in office ended in March 1837 without the Second Bank of the United States's charter being renewed.
In 1863, as a means to help finance the Civil War, a system of national banks was instituted by the National Currency Act. The banks each had the power to issue standardized national bank notes based on United States bonds held by the bank. The Act was totally revised in 1864 and later named as the National-Bank Act, or National Banking Act, as it is popularly known. The administration of the new national banking system was vested in the newly created Office of the Comptroller of the Currency and its chief administrator, the Comptroller of the Currency. The Office, which still exists today, examines and supervises all banks chartered nationally and is a part of the U.S. Treasury Department.

The Federal Reserve Act[edit]

National bank currency was considered inelastic because it was based on the fluctuating value of U.S. Treasury bonds rather than the growing desire for easy credit. If Treasury bond prices declined, a national bank had to reduce the amount of currency it had in circulation by either refusing to make new loans or by calling in loans it had made already. The related liquidity problem was largely caused by an immobile, pyramidal reserve system, in which nationally chartered rural/agriculture-based banks were required to set aside their reserves in federal reserve city banks, which in turn were required to have reserves in central city banks. During the planting seasons, rural banks would exploit their reserves to finance full plantings, and during the harvest seasons they would use profits from loan interest payments to restore and grow their reserves. A national bank whose reserves were being drained would replace its reserves by selling stocks and bonds, by borrowing from a clearing house or by calling in loans. As there was little in the way of deposit insurance, if a bank was rumored to be having liquidity problems then this might cause many people to remove their funds from the bank. Because of the crescendo effect of banks which lent more than their assets could cover, during the last quarter of the 19th century and the beginning of the 20th century, the United States economy went through a series of financial panics.[3]

The National Monetary Commission[edit]

Prior to a particularly severe panic in 1907, there was a motivation for renewed demands for banking and currency reform.[4] The following year, Congress enacted the Aldrich-Vreeland Act which provided for an emergency currency and established the National Monetary Commission to study banking and currency reform.[5]
Fed Reserve.JPG
The chief of the bipartisan National Monetary Commission was financial expert and Senate Republican leader Nelson Aldrich. Aldrich set up two commissions – one to study the American monetary system in depth and the other, headed by Aldrich, to study the European central-banking systems and report on them.[5]
Aldrich went to Europe opposed to centralized banking but, after viewing Germany's banking system, he came away believing that a centralized bank was better than the government-issued bond system that he had previously supported. Centralized banking was met with much opposition from politicians, who were suspicious of a central bank and who charged that Aldrich was biased due to his close ties to wealthy bankers such as J.P. Morgan and his daughter's marriage to John D. Rockefeller, Jr.[5]
In 1910, Aldrich and executives representing the banks of J.P. Morgan, Rockefeller, and Kuhn, Loeb & Co., secluded themselves for ten days at Jekyll IslandGeorgia.[5] The executives included Frank A. Vanderlip, president of the National City Bank of New York, associated with the Rockefellers; Henry Davison, senior partner of J.P. Morgan Company; Charles D. Norton, president of the First National Bank of New York; and Col. Edward House, who would later become President Woodrow Wilson's closest adviser and founder of the Council on Foreign Relations.[6] There, Paul Warburg of Kuhn, Loeb, & Co. directed the proceedings and wrote the primary features of what would be called the Aldrich Plan. Warburg would later write that "The matter of a uniform discount rate (interest rate) was discussed and settled at Jekyll Island." Vanderlip wrote in his 1935 autobiography From Farmboy to Financier:[7]
Despite my views about the value to society of greater publicity for the affairs of corporations, there was an occasion, near the close of 1910, when I was as secretive, indeed, as furtive as any conspirator. None of us who participated felt that we were conspirators; on the contrary we felt we were engaged in a patriotic work. We were trying to plan a mechanism that would correct the weaknesses of our banking system as revealed under the strains and pressures of the panic of 1907. I do not feel it is any exaggeration to speak of our secret expedition to Jekyl Island as the occasion of the actual conception of what eventually became the Federal Reserve System. … Discovery, we knew, simply must not happen, or else all our time and effort would be wasted. If it were to be exposed publicly that our particular group had gotten together and written a banking bill, that bill would have no chance whatever of passage by Congress. Yet, who was there in Congress who might have drafted a sound piece of legislation dealing with the purely banking problem with which we were concerned?
Despite meeting in secret, from both the public and the government, the importance of the Jekyll Island meeting was revealed three years after the Federal Reserve Act was passed, when journalist Bertie Charles Forbes in 1916 wrote an article about the "hunting trip".[8]
The 1911–12 Republican plan was proposed by Aldrich to solve the banking dilemma, a goal which was supported by the American Bankers’ Association. The plan provided for one great central bank, the National Reserve Association, with a capital of at least $100 million and with 15 branches in various sections. The branches were to be controlled by the member banks on a basis of their capitalization. The National Reserve Association would issue currency, based on gold and commercial paper, that would be the liability of the bank and not of the government. The Association would also carry a portion of member banks’ reserves, determine discount reserves, buy and sell on the open market, and hold the deposits of the federal government. The branches and businessmen of each of the 15 districts would elect thirty out of the 39 members of the board of directors of the National Reserve Association.[9]
Aldrich fought for a private monopoly with little government influence, but conceded that the government should be represented on the board of directors. Aldrich then presented what was commonly called the "Aldrich Plan" – which called for establishment of a "National Reserve Association" – to the National Monetary Commission.[5] Most Republicans and Wall Street bankers favored the Aldrich Plan,[6] but it lacked enough support in the bipartisan Congress to pass.[10]
Because the bill was introduced by Aldrich, who was considered[by whom?] the epitome of the "Eastern establishment", the bill received little support. It was derided by southerners and westerners who believed that wealthy families and large corporations ran the country and would thus run the proposed National Reserve Association.[10] The National Board of Trade appointed Warburg as head of a committee to persuade Americans to support the plan. The committee set up offices in the then-45 states and distributed printed materials about the proposed central bank.[5] The Nebraskan populist and frequent Democratic presidential candidate William Jennings Bryan said of the plan: "Big financiers are back of the Aldrich currency scheme." He asserted that if it passed, big bankers would "then be in complete control of everything through the control of our national finances."[11]
There was also Republican opposition to the Aldrich Plan. Republican Sen. Robert M. LaFollette and Rep. Charles Lindbergh Sr. both spoke out against the favoritism that they contended the bill granted to Wall Street. "The Aldrich Plan is the Wall Street Plan…I have alleged that there is a 'Money Trust'", said Lindbergh. "The Aldrich plan is a scheme plainly in the interest of the Trust". In response, Rep. Arsène Pujo, a Democrat from Louisiana, obtained congressional authorization to form and chair a subcommittee (the Pujo Committee) within the House Committee Banking Committee, to conduct investigative hearings on the alleged "Money Trust". The hearings continued for a full year and were led by the subcommittee's counsel, Democratic lawyer Samuel Untermyer, who later also assisted in drafting the Federal Reserve Act. The "Pujo hearings"[12] convinced much of the populace that America's money largely rested in the hands of a select few on Wall Street. The Subcommittee issued a report saying:[13]
"If by a 'money trust' is meant an established and well-defined identity and community of interest between a few leaders of finance…which has resulted in a vast and growing concentration of control of money and credit in the hands of a comparatively few men…the condition thus described exists in this country today...To us the peril is manifest...When we find...the same man a director in a half dozen or more banks and trust companies all located in the same section of the same city, doing the same class of business and with a like set of associates similarly situated all belonging to the same group and representing the same class of interests, all further pretense of competition is useless.... "[11]
Seen as a "Money Trust" plan, the Aldrich Plan was opposed by the Democratic Party as was stated in its 1912 campaign platform, but the platform also supported a revision of banking laws intended to protect the public from financial panics and "the domination of what is known as the "Money Trust." During the 1912 election, the Democratic Party took control of the presidency and both chambers of Congress. The newly elected president, Woodrow Wilson, was committed to banking and currency reform, but it took a great deal of his political influence to get an acceptable plan passed as the Federal Reserve Act in 1913.[10] Wilson thought the Aldrich plan was perhaps "60–70% correct".[5] When Virginia Rep. Carter Glass, chairman of the House Committee on Banking and Currency, presented his bill to President-elect Wilson, Wilson said that the plan must be amended to contain a Federal Reserve Board appointed by the executive branch to maintain control over the bankers.[11]
After Wilson presented the bill to Congress, a group of Democratic congressmen revolted. The group, led by Representative Robert Henry of Texas, demanded that the "Money Trust" be destroyed before it could undertake major currency reforms. The opponents particularly objected to the idea of regional banks having to operate without the implicit government protections that large, so-called money-center banks would enjoy. The group almost succeeded in killing the bill, but were mollified by Wilson's promises to propose antitrust legislation after the bill had passed, and by Bryan's support of the bill.[11]

Enactment of the Federal Reserve Act (1913)[edit]

After months of hearings, amendments, and debates the Federal Reserve Act passed Congress in December, 1913. The bill passed the House by an overwhelming majority of 298 to 60 on December 22, 1913[14] and passed the Senate the next day by a vote of 43 to 25.[15] An earlier version of the bill had passed the Senate 54 to 34,[16] but almost 30 senators had left for Christmas vacation by the time the final bill came to a vote. Most every Democrat was in support of and most Republicans were against it.[11] As noted in a paper by the American Institute of Economic Research:
In its final form, the Federal Reserve Act represented a compromise among three political groups. Most Republicans (and the Wall Street bankers) favored the Aldrich Plan that came out of Jekyll Island. Progressive Democrats demanded a reserve system and currency supply owned and controlled by the Government in order to counter the "money trust" and destroy the existing concentration of credit resources in Wall Street. Conservative Democrats proposed a decentralized reserve system, owned and controlled privately but free of Wall Street domination. No group got exactly what it wanted. But the Aldrich plan more nearly represented the compromise position between the two Democrat extremes, and it was closest to the final legislation passed.[6]
Frank Vanderlip, one of the Jekyll Island attendees and the president of National City Bank, wrote in his autobiography:[7]
Although the Aldrich Federal Reserve Plan was defeated when it bore the name Aldrich, nevertheless its essential points were all contained in the plan that was finally adopted.
Ironically, in October 1913, two months before the enactment of the Federal Reserve Act, Frank Vanderlip proposed before the Senate Banking Committee his own competing plan to the Federal Reserve System, one with a single central bank controlled by the Federal government, which almost derailed the legislation then being considered and already passed by the U.S. House of Representatives.[17] Even Aldrich stated strong opposition to the currency plan passed by the House.[18]
However, the former point was also made by Republican Representative Charles Lindbergh Sr. of Minnesota, one of the most vocal opponents of the bill, who on the day the House agreed to the Federal Reserve Act told his colleagues:
"But the Federal reserve board have no power whatever to regulate the rates of interest that bankers may charge borrowers of money. This is the Aldrich bill in disguise, the difference being that by this bill the Government issues the money, whereas by the Aldrich bill the issue was controlled by the banks...Wall Street will control the money as easily through this bill as they have heretofore."(Congressional Record, v. 51, page 1447, Dec. 22, 1913)
Republican Congressman Victor Murdock of Kansas, who voted for the bill, told Congress on that same day:
"I do not blind myself to the fact that this measure will not be effectual as a remedy for a great national evil – the concentrated control of credit...The Money Trust has not passed [died]...You rejected the specific remedies of the Pujo committee, chief among them, the prohibition of interlocking directorates. He [your enemy] will not cease fighting...at some half-baked enactment...You struck a weak half-blow, and time will show that you have lost. You could have struck a full blow and you would have won."[19]
In order to get the Federal Reserve Act passed, Wilson needed the support of populist William Jennings Bryan, who was credited with ensuring Wilson's nomination by dramatically throwing his support Wilson's way at the 1912 Democratic convention.[11] Wilson appointed Bryan as his Secretary of State.[10] Bryan served as leader of the agrarian wing of the party and had argued for unlimited coinage of silver in his "Cross of Gold Speech" at the 1896 Democratic convention.[20] Bryan and the agrarians wanted a government-owned central bank which could print paper money whenever Congress wanted, and thought the plan gave bankers too much power to print the government's currency. Wilson sought the advice of prominent lawyer Louis Brandeis to make the plan more amenable to the agrarian wing of the party; Brandeis agreed with Bryan. Wilson convinced them that because Federal Reserve notes were obligations of the government and because the president would appoint the members of the Federal Reserve Board, the plan fit their demands.[11] However, Bryan soon became disillusioned with the system. In the November 1923 issue of "Hearst's Magazine" Bryan wrote that "The Federal Reserve Bank that should have been the farmer's greatest protection has become his greatest foe."
Southerners and westerners learned from Wilson that the system was decentralized into 12 districts and surely would weaken New York and strengthen the hinterlands. Sen. Robert L. Owen of Oklahoma eventually relented to speak in favor of the bill, arguing that the nation's currency was already under too much control by New York elites, whom he alleged had singlehandedly conspired to cause the 1907 Panic.[6]
Large bankers thought the legislation gave the government too much control over markets and private business dealings. The New York Times called the Act the "Oklahoma idea, the Nebraska idea" – referring to Owen and Bryan's involvement.[11]
However, several Congressmen, including Owen, Lindbergh, LaFollette, and Murdock claimed that the New York bankers feigned their disapproval of the bill in hopes of inducing Congress to pass it. The day before the bill was passed, Murdock told Congress:
"You allowed the special interests by pretended dissatisfaction with the measure to bring about a sham battle, and the sham battle was for the purpose of diverting you people from the real remedy, and they diverted you. The Wall Street bluff has worked."[21]
When Wilson signed the Federal Reserve Act on December 23, 1913, he said he felt grateful for having had a part "in completing a work ... of lasting benefit for the country,"[22] knowing that it took a great deal of compromise and expenditure of his own political capital to get it enacted. This was in keeping with the general plan of action he made in his First Inaugural Address on March 4, 1913, in which he stated:
We shall deal with our economic system as it is and as it may be modified, not as it might be if we had a clean sheet of paper to write upon; and step-by-step we shall make it what it should be, in the spirit of those who question their own wisdom and seek counsel and knowledge, not shallow self-satisfaction or the excitement of excursions we can not tell.
[23]
While a system of 12 regional banks was designed so as not to give eastern bankers too much influence over the new bank, in practice, the Federal Reserve Bank of New York became "first among equals". The New York Fed, for example, is solely responsible for conducting open market operations, at the direction of the Federal Open Market Committee.[24] Democratic Congressman Carter Glass sponsored and wrote the eventual legislation,[10] and his home state capital of Richmond, Virginia, was made a district headquarters. Democratic Senator James A. Reed of Missouri obtained two districts for his state.[25] However, the 1914 report of the Federal Reserve Organization Committee, which clearly laid out the rationale for their decisions on establishing Reserve Bank districts in 1914, showed that it was based almost entirely upon current correspondent banking relationships.[26] To quell Elihu Root's objections to possible inflation, the passed bill included provisions that the bank must hold at least 40% of its outstanding loans in gold. (In later years, to stimulate short-term economic activity, Congress would amend the act to allow more discretion in the amount of gold that must be redeemed by the Bank.)[6] Critics of the time (later joined by economist Milton Friedman) suggested that Glass's legislation was almost entirely based on the Aldrich Plan that had been derided as giving too much power to elite bankers. Glass denied copying Aldrich's plan. In 1922, he told Congress, "no greater misconception was ever projected in this Senate Chamber."[20]
Wilson named Warburg and other prominent experts to direct the new system, which began operations in 1915 and played a major role in financing the Allied and American war efforts.[27]Warburg at first refused the appointment, citing America's opposition to a "Wall Street man", but when World War I broke out he accepted. He was the only appointee asked to appear before the Senate, whose members questioned him about his interests in the central bank and his ties to Kuhn, Loeb, & Co.'s "money trusts".[5]

Accord of 1951 between the Federal Reserve and the Treasury Department[edit]

Main article: 1951 Accord

Post Bretton-Woods era[edit]

In July 1979, Paul Volcker was nominated, by President Carter, as Chairman of the Federal Reserve Board amid roaring inflation. He tightened the money supply, and by 1986 inflation had fallen sharply.[28] In October 1979 the Federal Reserve announced a policy of "targeting" money aggregates and bank reserves in its struggle with double-digit inflation.[29]
In January 1987, with retail inflation at only 1%, the Federal Reserve announced it was no longer going to use money-supply aggregates, such as M2, as guidelines for controlling inflation, even though this method had been in use from 1979, apparently with great success. Before 1980, interest rates were used as guidelines; inflation was severe. The Fed complained that the aggregates were confusing. Volcker was chairman until August 1987, whereupon Alan Greenspan assumed the mantle, seven months after monetary aggregate policy had changed.[30]

2001 recession to present[edit]

From early 2001 to mid-2003 the Federal Reserve lowered its interest rates 13 times, from 6.25 to 1.00%, to fight recession. In November 2002, rates were cut to 1.75, and many interest rates went below the inflation rate. On June 25, 2003, the federal funds rate was lowered to 1.00%, its lowest nominal rate since July, 1958, when the overnight rate averaged 0.68%. Starting at the end of June 2004, the Federal Reserve System raised the target interest rate and then continued to do so 17 straight times.
In February 2006, Ben Bernanke was appointed by President George W. Bush as the chairman of the Federal Reserve.[31]
In March 2006, the Federal Reserve ceased to make public M3, because the costs of collecting this data outweighed the benefits.[32] M3 includes all of M2 (which includes M1) plus large-denomination ($100,000 +) time deposits, balances in institutional money funds, repurchase liabilities issued by depository institutions, and Eurodollars held by U.S. residents at foreign branches of U.S. banks as well as at all banks in the United Kingdom and Canada.

2008 subprime mortgage crisis[edit]

Due to a credit crunch caused by the sub-prime mortgage crisis in September 2007, the Federal Reserve began cutting the federal funds rate. The Fed cut rates by 0.25% after its December 11, 2007 meeting and disappointed many individual investors who expected a higher rate cut: the Dow Jones Industrial Average dropped by nearly 300 points at its close that day. The Fed slashed the rate 0.75% in an emergency action on January 22, 2008 to assist in reversing a significant market slide influenced by weakening international markets. The Dow Jones Industrial Average initially fell nearly 4% (465 points) at the start of trading and then rebounded to a more tolerable 1.06% (128 point) loss. On January 30, 2008, eight days after the 75 points decrease, the Fed lowered its rate again, this time by 50 points.[33]
On August 25, 2009, President Barack Obama announced he would nominate Bernanke to a second term as chairman of the Federal Reserve.[34]
In October 2013, Janet Yellen was nominated to succeed Ben Bernanke as the chairperson of the Federal Reserve.
In December 2013, the Fed raised its benchmark interest rates by a quarter of a percentage point to between 0.25 and 0.50 percent, after 9 years of an unchanged and stable very low interest rate.[35]