This post is part of an ongoing series called “The Intentional Destruction of the USA.” Find out more here.
1913 was a rough year for the USA, and not just because the federal income tax was created. Incredibly, something even worse took place: the founding of the Federal Reserve. What’s wrong with the Federal Reserve?
There are two kinds of banks. “Full-reserve” banks keep all of a customer’s deposit, the money a person lets the bank store, on hand at all times. They charge a storage fee in return. How do they make loans? They need permission to lend any portion of a customer’s deposit, and the customer is paid interest on the money they allow to be lent out.
On the other hand, there are “fractional-reserve” banks. These days, all banks are fractional-reserve. Instead of charging a storage fee, they pay interest on the customer’s deposit. Of course, they only keep a portion of a person’s deposit on hand, while the rest is lent out. What could possibly go wrong?
As it turns out, a lot. Before the Federal Reserve, fractional-reserve banks had to worry about making risky loans. If they made bad investment decisions with other people’s money, they’d be in trouble. When customers believed their bank was misbehaving, a “bank run” happened. Customers rushed to withdraw their money, and the bank typically failed.
Due to a series of rough bank runs in the late 1800s and early 1900s, the stage was set for the Federal Reserve. The Federal Reserve would make loans to banks which were in danger of bankruptcy. This meant that banks didn’t lose money when they messed up. Where did the money come from to bail them out? The Federal Reserve would print it, and this is a serious problem.
When there is more of something around, it tends to be less valuable. Naturally, when the supply of money is increased, the money isn’t worth as much. Every time the printing presses run, your dollars lose more of their purchasing power. Simply put, the Federal Reserve is stealing the value of everyone’s money, so banks don’t have to be accountable for their bad business decisions.
Obviously, banks like this, but governments do too. Indeed, the Federal Reserve often prints money and loans it to the government, which lets governments spend more than they could from taxes alone. Politicians like being re-elected and raising taxes isn’t popular. Printing money lets governments spend uncontrollably.
Ultimately, the Federal Reserve was supposed to protect us from bank failures, but it hasn’t succeeded at all. Just look at the Great Depression, or the recent financial crisis of 2007–2008. In fact, it was a part of the problem. By printing lots of money, the Federal Reserve pushed interest rates down. Normally, interest rates only come down if people save more than they spend. There’s more money for banks to lend out, so loans become cheaper. Businessmen take advantage, and get loans to build more expensive things, like houses. What happens if interest rates were lowered because the Federal Reserve printed tons of money? Well, there isn’t as much demand for expensive items as businessmen think. They can’t make the payments on their loans. They go bankrupt, banks take losses, and the economy tanks.
On several occasions, God condemns unjust weights and measures in the Bible (Leviticus 19:35-36; Proverbs 11:1; Proverbs 20:10). We don’t use weights and measures today, but when the Federal Reserve prints trillions of dollars, that decreases the value of what we use to buy and sell. That’s theft, plain and simple. In addition, it puts the dollar at risk of being completely worthless, and that’s where things can get really dangerous.
For instance, in Germany’s Weimar Republic, the economy was in shambles due to government debt and a largely worthless paper currency. Who was elected to clean up the mess? Adolph Hitler. Could US debt and a worthless dollar lead Americans to accept a world dictator? It’s tough to say, but the Federal Reserve could definitely create the necessary conditions.