How was the Federal Reserve created?

The Federal Reserve was created in 1910 through a secret meeting of bankers and politicians on Jekyll Island. The bill was later passed by Congress in 1913, disguised as the Federal Reserve Act, after a period of disinformation campaigns.

What is fiat currency and how does it work?

Fiat currency is money backed by nothing tangible, essentially declared legal tender by a government. The US dollar is a fiat currency, meaning its value relies on trust in the American government.

How do central banks create money?

Central banks, like the Federal Reserve, create money by writing checks against no existing deposits, essentially inventing money. Commercial banks also create money when they issue loans, a process known as fractional reserve lending.

What are the consequences of creating money from nothing?

Creating money from nothing leads to inflation, which acts as a hidden tax on the currency's value, making goods and services more expensive over time. It also fundamentally creates debt, as money is introduced as a loan.

How do central banks control the economy?

Central banks control the economy by adjusting the money supply and interest rates. They can induce economic booms and busts, and their policies can distort markets, as seen with the 2008 housing bubble.

Is the debt-based monetary system sustainable?

The current debt-based system requires debt to continually grow for the money supply to exist. If borrowing stops, the money supply shrinks, causing the system to falter. This perpetual growth of debt is seen as bizarre by some.

What alternatives exist to the current monetary system?

Some people are moving their assets into gold, silver, and cryptocurrencies like Bitcoin to reject the debt-based economic system. Historically, Abraham Lincoln attempted a similar approach by issuing government-backed 'greenbacks'.

Key Moments

Who Controls All of Our Money?

ColdFusion

Science & Technology3 min read22 min video

Jun 12, 2017|7,305,609 views|190,311|18,945

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Key Moments

TL;DR

Money creation and control by privately owned central banks, not governments.

Key Insights

Central banks, not governments, create most money by issuing loans and bonds.

The Federal Reserve was secretly established by bankers to control U.S. money supply.

Money creation through loans forms a debt-based system, requiring constant debt growth.

Central banks can manipulate economies through interest rates, causing booms and busts.

The U.S. dollar's global reserve status links all currencies to the Federal Reserve's policy.

Fiat currency, backed by trust rather than tangible assets, dilutes global currency and requires ongoing debt.

THE MYTH OF GOVERNMENT-CONTROLLED MONEY

Contrary to common belief, governments do not fundamentally control the creation or issuance of money. The video posits that money originates from privately owned banking institutions, particularly central banks. This contrasts with the public perception and educational systems, which often leave individuals unaware of the true source and control mechanisms of their finances. The video aims to demystify this complex system, suggesting that understanding it is crucial for comprehending global economic events and the rise of alternative currencies.

THE SECRET ORIGINS OF CENTRAL BANKING

The concept of modern central banking, where private entities issue money, began with the Bank of England in 1694, established to fund government debt. More critically for the U.S. context, the Federal Reserve system was conceived in secret in 1910 by a group of powerful bankers and politicians on Jekyll Island. Their aim was to gain control over the nation's money supply, creating money from thin air and loaning it to the government with interest, a maneuver disguised to appear as a public good.

THE FEDERAL RESERVE: A PRIVATE MONOPOLY

The Federal Reserve Act of 1913, passed secretly, granted a small group of private bankers a monopoly over U.S. money creation. Unlike public entities, the Federal Reserve operates as an independent agency, largely immune to government oversight and public scrutiny. This centralized power allows for the manipulation of the economy through monetary policy, with significant global implications due to the U.S. dollar's position as the world's reserve currency.

THE ERA OF FIAT CURRENCY AND DEBT

Since 1971, when President Nixon removed the U.S. dollar from the gold standard, currencies have become fiat, meaning they are backed by government decree rather than tangible assets like gold. This system, where money is created from nothing, intrinsically dilutes the value of all currencies held as reserves globally. The entire economic framework now relies on trust and the constant creation of debt, as debt has become synonymous with money.

HOW MONEY IS CREATED: CENTRAL AND COMMERCIAL BANKS

Central banks, like the Federal Reserve, create money by essentially writing checks against accounts that have no funds, effectively inventing money. Commercial banks also create money when they issue loans, typing digits into computer systems rather than using existing deposits. This process, known as fractional reserve lending, allows banks to lend out significantly more than they possess in reserves, further expanding the money supply.

CONSEQUENCES OF DEBT-BASED MONEY

The creation of money through debt leads to inflation, which is presented as a hidden tax on future generations, as the value of money decreases over time. This means prices for goods and services inevitably rise. The system necessitates continuous borrowing to maintain the money supply; if debt stops growing, the money supply shrinks, potentially destabilizing the economy. Examples like the 2008 housing crisis illustrate how central bank policies, such as low-interest rates, can distort economies.

THE GLOBAL REACH AND POTENTIAL ALTERNATIVES

The central banking model, originating from England and the US, has been adopted worldwide, with few exceptions like North Korea, Iran, and Cuba. Even countries like Afghanistan, Iraq, and Libya, which previously lacked central banks, are now under this system. The video touches upon emerging movements, including a rejection of the debt-based system in favor of gold, silver, and cryptocurrencies like Bitcoin, suggesting a potential shift away from traditional financial control.

Mentioned in This Episode

●Supplements

●Software & Apps

●Organizations

●Books

●Concepts

●People Referenced

Common Questions

The Federal Reserve, a privately owned entity established in 1913, controls the US money supply. It operates independently of the government and has the power to create money out of thin air and influence interest rates.

Topics

Fiat Currency Debt-based Economy Bank Secrecy Financial System Origin

Mentioned in this video

finance

Fiat Currency

Money backed by nothing tangible, essentially declared as legal tender by a government's decree ('let it be done' in Latin). Its creation dilutes the currency supply of other nations whose reserves are backed by the US dollar.

People

Frank Van Der Biesen

President of the National City Bank of New York, quoted about the secrecy and furtiveness surrounding the creation of the Federal Reserve bill.

William Paterson

Scottish banker credited as the brainchild behind the establishment of a privately owned bank to issue money to the government, leading to the first modern central banking system in England.

Paul Tucker

Deputy Governor of the Bank of England, quoted stating that banks extend credit by simply increasing a borrowing customer's current account balance.

Nelson Aldrich

Senator who ordered a private train car for a secret meeting that resulted in the creation of the Federal Reserve system.

Mariner Eccles

Former Governor of the Federal Reserve, quoted stating that without debt, there would be no money in the system.

Graeme Towers

Former Governor of the Central Bank of Canada, quoted stating that banks create new credit, deposits, and money every time they make a loan.

G. Edward Griffin

Author of 'The Creature from Jekyll Island,' a book recommended for understanding the history of the Federal Reserve.

James Garfield

U.S. President in 1881, quoted stating that whoever controls the volume of money in a country is the absolute master of its industry and commerce.

Mike Maloney

Recommended for his 'Hidden Secrets of Money' YouTube series as a good starting resource for research on the economy.

Media

Saturday Evening Post

A publication where a quote from Frank Van Der Biesen about the secretive nature of the Federal Reserve's creation was published.

Legislation & Policy

Federal Reserve Act

The legislation that established the Federal Reserve System in the United States, drafted in 1913.

American War of Independence

Benjamin Franklin cited this war's prime reason as a battle over who controlled and issued the money for the colonies.

Concepts

Debt-based monetary system

The current economic system where money is created through debt, requiring continuous borrowing to maintain the money supply.

2008 housing bubble

A major economic crisis resulting from excessive borrowing and inflated housing prices, linked to the Federal Reserve's monetary policy.

Dot-com bubble

An economic event in the early 2000s linked to the recession Alan Greenspan attempted to fight by lowering interest rates.

Organizations

Federal Reserve System

Created in December 1910 during a secret meeting on Jekyll Island, it became the central banking system of the United States. It is described as an independent agency with significant power over the nation's money supply.

Boston Federal Reserve

Quoted stating that when the Federal Reserve writes a check, it is creating money, unlike individuals who need funds in their account.