Headlines about the Federal Reserve coming to the economic rescue of the United States have dominated media. Consumers can tell the economy isn’t healthy because they pay increasing amounts for such necessities as fuel, groceries, housing and utilities. Headlines would have people believe the Federal Reserve can solve the problem. That confidence might be misplaced, though, because the Federal Reserve is part of the problem.

What is the Federal Reserve? The very name constitutes a contradiction.  he Federal Reserve isn’t federal. There’s no reserve. Moreover, it’s not a bank. 

The story of the Federal Reserve and how it’s gained so much power over the economy has many chapters following an ingenious plan by wealthy financiers. Anthony Sutton — a former research fellow at the Hoover Institution for War, Revolution and Peace — put it this way: “The Federal Reserve System is a legal private monopoly of the money supply operated for the benefit of the few under the guise of protecting and promoting the public interest.” That statement sounds harsh, but history verifies the assertion.

The Federal Reserve dates back to 1910, when seven representatives of wealthy bankers meeting on Jekyll Island in Georgia agreed on a framework much like a banking cartel. As G. Edward Griffin explained in his book, “The Creature from Jekyll Island,” the goal of the group was to maximize profits by minimizing competition between members, make it difficult for new competitors to enter the finance field and use the police power of government to enforce the agreement. This agreement created the blueprint for the Federal Reserve System. This group of bankers was successful in acquiring government support. In 1913, the Federal Reserve Act became law. 

By 1913, there was a lot of competition in the finance sector as an outgrowth of free market interest rates. According to Griffin, “Rates were low enough to attract serious borrowers who were confident of the success of their business ventures and of their ability to repay, but they were high enough to discourage loans for frivolous ventures.” 

Fixing prices to prevent competition is counter to free markets, but that’s what happened. The Federal Reserve System tipped the free market scales in favor of debt over thrift. This can be observed through the bailouts of bankrupt industries. The money to bail out failed industries was made possible by the Federal Reserve System acting as the “lender of last resort” and creating money on the balance sheet, thus weakening the dollar.

The United States federal government has amassed the biggest debt in the history of the world — debt that continues to grow at a relentless rate.
As Nick Giambruno summarized in an article titled “It’s Game Over for the Fed,” “Congress spends trillions more than the federal government takes in from taxes. The Treasury issues debt to cover the difference. The Federal Reserve creates currency out of thin air to buy the debt. In short, this insidious process is nothing more than legalized counterfeiting.”

Every Congress and administration since the early 1900s have recklessly spent more money than was collected in taxes, incurring unsustainable debt.
The Federal Reserve isn’t federal and has no reserve. It’s no bank. But the Federal Reserve has contributed to the serious inflation, devalued money and staggering debt of the United States. 

The root of the financial problems appears to be irresponsible politicians.

Phyllis Hunsinger is founder of the Freedom & Responsibility Education Enterprise Foundation in Grand Junction. The FREE Foundation provides resources to students and teachers in Western Colorado to promote the understanding of economics, financial literacy and free enterprise. A former teacher, principal and superintendent, Hunsinger wrote “Down and Dirty:  A ‘How To’ Math Book.” Reach Hunsinger at phyllis@free-dom.us.com. For more information about the FREE Foundation, log on to the website located at www.free-dom.us.com.