The Creature from Jekyll Island: A Second Look at the Federal Reserve
by G. Edward Griffin, first published 1994.
Notes and Thoughts on the first three chapters.
The Creature from Jekyll Island is astounding in its implications. It reveals that the money lending game is essentially between banks, with debt fueling the pump. Powered by individual as well as government debt taken on in taxpayers’ names, it makes me wonder whether unborn taxpayers can be obligated by federal debt. Also, if the Fed were abolished, might all this artificial debt cancel itself out?
The book starts with a cameo of a secret meeting on Jekyll Island, Georgia, in 1910 that led to the Federal Reserve Act in 1913. Nelson Aldrich, Senator from Rhode Island and father-in-law to John D. Rockefeller, Jr., hosted the private rail trip for six other movers and shakers in the banking and finance industries. These men were to arrive at the train station separately, go by first names only, and say they were going duck hunting. The regular staff at JP Morgan’s Jekyll Island Club was given a vacation. Carefully selected others served the men while they were there.
The men were: 1. Aldrich, who was also Republican “whip” in the Senate, chair of the National Monetary Commission, and a business associate of J. P. Morgan; 2. Abraham Piatt Andrew, Assistant Secretary of the US Treasury; 3. Frank A. Vanderlip, president of the National City Bank of New York, the most powerful bank at the time, and representing William Rockefeller and the international investment banking house of Kuhn, Loeb, and Company; 4. Henry P. Davison, senior partner at JP Morgan Company; 5. Charles D. Norton, president of JP Morgan’s First National Bank of New York; 6. Benjamin Strong, head of JP Morgan’s Trust Company; 7. Paul M. Warburg, partner in Kuhn Loeb and Company, a member of the Rothschild banking dynasty in England and France, and brother of Max Warburg, head of the Warburg banking consortium in Germany and the Netherlands.
When Griffin says the Fed creates money out of nothing, he is not entirely accurate. Rather, the Fed creates debt out of nothing to lend to Congress and calls it money, because it is backed by congressional promises of future taxpayer earnings (through the income tax, established earlier the same year, 1913). The incredible credit is then passed off as currency, and no one is the wiser.
Until now. The lie continues that US taxpayers are obligated by congressional guarantees, but we are not morally obligated to pay that debt. Unfortunately, since their strategy has included putting everyone on the payroll—in one form or another—everyone is implicated in the scam and terrified of its inevitable unraveling.
Obviously the easiest solution is for individuals to get out of debt. When debts are paid off, the money vanishes into the red hole it came from, the money supply shrinks, and deflation gives everyone except banks, debtors, and governments—the biggest debtors of all–more buying power.
Griffin gives a good summary at the end of each chapter, thereby simplifying this 600 page tome.
Chapter 1: “The Journey to Jekyll Island” tells how the skeleton of the Federal Reserve System was worked out at Jekyll Island in 1910 by RI Senator Nelson Aldrich and six other men representing the most powerful banking interests in the Western world. These included US banks under JP Morgan and John D. Rockefeller; English and French banks under Kuhn, Loeb and Company, representing Rothschild interests in Europe; and Germany and Netherlands banks by the powerful Warburg family.
Author Griffin refers to it as a banking cartel, in which powerful competitors align to prevent other competition and use the government’s police power to enforce their monopoly. Griffin hints without actually saying that descendants of these five banking dynasties still control the Fed. These are Morgan, Rockefeller, Rothschild, Warburg, and Kuhn-Loeb.
He says the Jekyll Island meeting had five objectives: 1. Stop the growing competition from the nation’s other banks; 2. Obtain a franchise to create money through debt; 3. Get control of all the banks’ reserves so the more reckless ones would not be exposed to currency drains and bank runs; 4. Get taxpayers to cover the cartel’s losses; 5. Convince Congress the purpose was to protect the public.
Chapter 2: “The Name of the Game is Bailout.” The crucial point is that all the money created through the banking system since the Federal Reserve Act is backed only by debt, primarily by Congress’ obligating taxpayers’ future earnings. A defaulted loan, thereby, costs the bank little in tangible value. Therefore, the goal is to continue receiving interest on the loan by lending more (future) money to cover it. This is especially true with large loans. With extremely large loans the cartel gets the federal government to guarantee the loan, should the borrower default. If this tactic fails and the bank is forced into insolvency, the FDIC is used to pay off depositors. Small banks pay disproportionately for this “insurance” and are least likely to be bailed out, should disaster hit.
Because money is created out of nothing for the purpose of lending, huge sums are dispersed through the economy, devaluing the existing currency and causing inflation.
Griffin does not say that the income tax, passed earlier in the same year, 1913, was the funding source by which the federal government would pay perpetual interest to the Fed on the national debt. This method mirrored the 1790-1791 creation of the whiskey tax and the nation’s first central bank, a double whammy on taxpayers, devised by Alexander Hamilton and George Washington. (This from Alexander Hamilton, by Ron Chernow, 2004)
Chapter 3: “Protectors of the Public.” This chapter gives multiple examples of previous federal bailouts, beginning with Penn Central in 1970, Lockheed in 1970, the Commonwealth Bank of Detroit in 1974, New York City in 1975, Chrysler in 1978, the First Pennsylvania Bank of Philadelphia in 1979, and Chicago’s Continental Illinois in 1982. Continental was the first electronic bank run. It was the nation’s seventh largest bank at the time, with $42 billion in assets, with multiple loans out to high-risk business ventures and foreign governments. Here the Federal Reserve becomes the “lender of last resort,” meaning it creates money out of nothing to cover, in this case, $4.5 billion in bad loans, and passing costs on to taxpayers in the form of inflation.
And this book has 26 chapters. Stay tuned . . .