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The History of the Federal Reserve 514

Posted by samzenpus
from the money-makes-the-world-go-round dept.
Michael J. Ross writes "Money plays a key role in modern life; in fact, for some people, nothing is more important than acquiring more of it. Yet most people do not know what money really is, how it is created, how its supply is expanded and contracted, and who benefits from those changes. In the United States, the central figure in this ongoing drama, is our central bank, the Federal Reserve, whose history, power, and effects are explored in G. Edward Griffin's fascinating book The Creature from Jekyll Island: A Second Look at the Federal Reserve." Read on for the rest of Michael's review.
The Creature from Jekyll Island
author G. Edward Griffin
pages 624
publisher American Media
rating 9
reviewer Michael J. Ross
ISBN 0912986212
summary A compelling history and indictment of the Federal Reserve system
For the citizens of the United States and several Latin American countries, the "coin of the realm" is the US dollar, which is, in simple terms, created by the Federal Reserve, a.k.a., the Fed. But who created the Federal Reserve, and why? The subjects of banking in general, and the Federal Reserve in particular, would be considered by most Americans to be dry, boring, and of little importance to their day-to-day life. But those same people are endlessly fascinated by how to make more money (with minimal effort, such as the lottery), how to spend as little of it as possible (coupons never go out of style), and how to maximize one's investment returns. Why this disconnect? Why do Americans care so little about the origins of that which they spend a third of their time pursuing, and seemingly another third spending?

Some of these "salary slaves" may understand that their money serves as a store of wealth and a medium of commercial exchange, which makes possible their daily financial transactions without the need for bartering. But, for the most part, they do not understand the critical importance of what is backing that money, if anything; how that money comes into existence, and what debt offsets it; what entities control the supply and distribution of that money; and how those changes can be used to legally steal purchasing power from victims who may not be entirely unsuspecting, but do not truly comprehend how they are getting ripped off.

The typical American, if he or she has given any thought to the matter, would consider the following statements to be true: The Federal Reserve is federal, i.e., a part of the US government. The Federal Reserve is a reserve, i.e., it has monetary savings of real value. The Federal Reserve serves the public, and is not a cartel of private banks serving itself. The US dollar has real value, i.e., it represents tangible wealth, such as gold securely stored at Fort Knox. Inflation is an increase in prices. Inflation is caused by greedy companies, not the US government or the Federal Reserve.

As G. Edward Griffin makes clear in his book, none of these beliefs are true — regardless of how well entrenched they are in our conventional "wisdom." He also explains why the US government and the Federal Reserve have their own reasons for being in no hurry to eliminate this ignorance. Yet these topics are just a small portion of what is covered in his far-ranging discussion of the theory and history of money and banking, particularly within the United States.

Spanning 624 pages, the material is organized into 26 chapters, which are grouped into six sections: "What Creature Is This?" (the Federal Reserve's shameful birth, and the shenanigans of the Fed, S&Ls, the IMF, and the World Bank), "A Crash Course on Money" (money, gold, debasement, fiat money, fractional-reserve banking, and money creation), "The New Alchemy" (the Rothschilds, J.P. Morgan, and banker financing of wars and revolutions), "A Tale of Three Banks" (America's failed experiments with central banking, and the American Civil War), "The Harvest" (the unconstitutional creation of the Federal Reserve, and its dreadful effects, including the Crash of 1929), "Time Travel into the Future" (current crises caused by central banking, how they can be reversed, future scenarios, and what the individual can do regardless). Every one of the six sections begins with a brief summary, as does every chapter, with every chapter wrapped up with a more extensive summary.

The section summaries also appear in the table of contents, which precedes a preface and the author's acknowledgments. These are followed by a delightful introduction — a piece from the British humor magazine Punch, comprising a rather telling exchange between an unusually honest banker and a soon-to-be-disillusioned bank customer. The book contains three appendices: a summary of the structure and function of the Federal Reserve system; natural laws of human behavior in economics; and whether the M-1 measure of money is subtractive or accumulative. The author also provides an index, as well as an impressive bibliography, reflecting his extensive research on the topics. In addition, the author invites readers to join Freedom Force, an organization dedicated to increasing liberty in the United States, curbing federal totalitarianism, and abolishing the Federal Reserve — all through peaceful participation in government, and the shaping of public policy starting at the grassroots level.

The Creature from Jekyll Island is published by American Media, under the ISBNs 0912986212 and 978-0912986210. It first came out in July 1994, and is now in its fourth edition, and its 19th printing. It also has Japanese and German editions, published in February 2005 and August 2006, respectively. On the book's Web page, visitors will find testimonials and comments from readers, updates to the book, a review of the book by Jane H. Ingraham of The New American, and G. Edward Griffin's response to a critique of his book by Edward Flaherty, who holds a Ph.D. in Economics. On that Web page, interested readers can order audio cassettes or CDs of the author's lecture, based upon this book, and produced in 1998.

My only criticisms of the book concern not the material itself, but its production — more specifically, the printing and layout, presumably chosen and thus fixable in the future by the publisher. The generous font size used throughout the volume, makes it easy to read; but the bold text, such as the subheads found in every chapter, is a bit rough-edged — on some pages worse than others. The subheads, already bolded, do not need to be in all uppercase; the publisher should choose one or the other. In addition, the inside margin length is a bit too small, forcing the reader to crack open the book more than should be needed, in order to comfortably read the text closest to the binding. In future editions, some of the space in the outer margin could be used to solve the problem, without any change to the words on each page, and thus the length of the book.

But aside from these minor flaws, this book is to be highly recommended. The Creature from Jekyll Island is a remarkably thorough, detailed, and challenging critique of central banking and America's latest incarnation of it, the Federal Reserve. G. Edward Griffin's precision of language, and his interweaving of the major players and their motives, makes for a most compelling historical study.

Michael J. Ross is a Web developer, freelance writer, and the editor of PristinePlanet.com's free newsletter.

You can purchase The Creature from Jekyll Island from amazon.com. Slashdot welcomes readers' book reviews -- to see your own review here, read the book review guidelines, then visit the submission page.
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The History of the Federal Reserve

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  • Another good read... (Score:5, Informative)

    by dada21 (163177) <adam.dada@gmail.com> on Wednesday September 26, 2007 @03:52PM (#20759241) Homepage Journal
    ...and a free e-book download is What has Government done to our money? [mises.org] by the esteemed Murray N. Rothbard.

    I've read dozens of books (over 30, for sure) on central banking theory, and none of them have given a completely clear and transparent picture of what the Fed really is, what is does, and what it is supposed to do. In the end, all central banks have one customer: member banks (the banks you and I go to), and the central banks have one policy: save their buddies in the member banks against any malinvestment or market change.

    The Fed isn't here to protect the value of OUR money (in fact, since the Fed's creation in 1913, the US dollar is about 95-96% devalued), and it isn't here to protect our investments or savings.
    • Re: (Score:2, Interesting)

      by RealGrouchy (943109)
      For those who prefer audio/video, I suggest the video "Money As Debt", which can be viewed on Google Video [google.com].

      The animation is cheap, but the meat of it is in the audio, which puts in pretty clear terms where money comes from.

      - RG>
      • by Kadin2048 (468275) * <slashdot.kadinNO@SPAMxoxy.net> on Wednesday September 26, 2007 @04:34PM (#20759745) Homepage Journal
        That's an interesting video, and not a bad introduction to how the banking system actually works (as opposed to the oversimplified "they lend out your deposits..." view that most people get as youngsters and never really question). However, I'm not sure that its attempt to spin 'money as debt' as a bad thing is really true.

        If we were stuck on a gold or silver standard, we'd be in real trouble: there just isn't that much gold or silver around to make a a very good currency. We need a currency that can grow as the amount of real assets in circulation grows -- as we as a society and civilization create more valuable stuff, we need a way to pay for it. The debt money system uses all those real assets as the basis for its value, rather than an arbitrarily chosen precious metal.

        In effect, the debt money system, though complicated, is a lot more 'real' than a gold standard. Gold is only valuable because it's shiny and pleasant to look at and you can beat it into useful shapes and it's been used as money for a long time. You can't eat it, you can't live in it, you can't plow a field with it -- aside from some applications in the jewelry and electronics industries, you can't do much of anything with it. But a house, that has real value. A factory has value. A John Deere tractor has value. When people borrow money to pay for these things, the money is created and the newly-created money is backed by the pledged asset. So when I buy a house for $250k, two hundred and fifty thousand new dollars are created, but those dollars are backed by my house; they are, in one sense, actually my house, floating around out there. And then I work, and pay the loan principle back, and basically suck those 'house-dollars' back out of the market and put them back into my house.

        Once you get around the mental shock of realizing that the system doesn't work the way you thought it did, there's a certain elegance to the system. Money is created and destroyed as it's needed to pay for things, rather than there being some fixed amount of it floating around. When we need a lot of capital, it appears; when we don't (and pay off our loans), it goes away. With a fixed amount of gold, you'd have massive inflation/deflation cycles as prices changed in response to the amount of available currency.

        Where you run into serious problems are when banks start making loans to people who don't have enough real assets behind them to cover the amount of money that's being created. IMO, this should be illegal, or at the very least the banks should be held directly responsible for ensuring that the loans they're making are backed by something (real property, or an income stream). If they don't, then they're magicking money into existence that has nothing behind it, and letting it out into the market. That's dangerous business, and the source of our current credit problems.
        • by dada21 (163177) <adam.dada@gmail.com> on Wednesday September 26, 2007 @04:43PM (#20759915) Homepage Journal
          If we were stuck on a gold or silver standard, we'd be in real trouble: there just isn't that much gold or silver around to make a a very good currency. We need a currency that can grow as the amount of real assets in circulation grows -- as we as a society and civilization create more valuable stuff, we need a way to pay for it. The debt money system uses all those real assets as the basis for its value, rather than an arbitrarily chosen precious metal.

          We don't need something that can grow with the economic growth of the country. If we fixed to a gold standard, prices (in gold ounces or grains) would fall softly over time -- soft price declines. This encourages people to save rather than overspend, and only spend on things they need or are sure they want. Soft price declines are GOOD and happened for thousands of years when people used gold as a medium of exchange. This also allows for proper investment as people are not pushed to invest and can watch their savings grow in value even if they hoard their gold in the mattress.

          Instead, we have fiat currency inflation (which just means more money is created than destroyed) which caused soft price increases -- this gives people incentive to spend and not save, even if they don't need or are sure they want something. It also creates malinvestment as people invest "just to protect their savings."

          But a house, that has real value.

          No it doesn't. Buy a home and ignore it for 5 years. The yard gets destroyed, pests and mold destroy the inside, roofs fall apart, windows need replacing, carpet goes stale, dust collects. A house has declining value.

          A factory has value.

          I'm sure all those horse-shoe manufacturing factories in 1889 are still valuable today. I'd say they weren't valuable within 30 years.

          A John Deere tractor has value.

          For about 7 years, at which point it is more costly to buy used than new in terms of lost productivity.

          When people borrow money to pay for these things, the money is created and the newly-created money is backed by the pledged asset. So when I buy a house for $250k, two hundred and fifty thousand new dollars are created, but those dollars are backed by my house; they are, in one sense, actually my house, floating around out there. And then I work, and pay the loan principle back, and basically suck those 'house-dollars' back out of the market and put them back into my house.

          Not quite, because when you have an inflationary fiat economy, people malinvest -- they take the easy new money as quickly as it comes, and that causes prices to rise extravagently. Your $250,000 house bought in 2005 may only be worth $175,000 today -- and if it is in Southern Florda [unanimocracy.com], it may be worth only $125,000. Add to that your property taxes, maintenance, utility cost, and general upkeep, and the house is a terrible investment.

          With a fixed amount of gold, you'd have massive inflation/deflation cycles as prices changed in response to the amount of available currency.

          Inflation just means an increase in the money supply, deflation means a decrease in the money supply. You mean price rise/price decrease. This is _good_, actually, because it benefits the non-hoarders to pick up newly repriced assets that have dropped in value when they need them most, and it benefits hoarders in watching their money become more valuable even without investing.

          Where you run into serious problems are when banks start making loans to people who don't have enough real assets behind them to cover the amount of money that's being created. IMO, this should be illegal, or at the very least the banks should be held directly responsible for ensuring that the loans they're making are backed by something (real property, or an income stream). If they don't, then they're magicking money into existence that has nothing behind it, and letting it out into the market
          • It would be very dangerous to go back to the gold standard. Do you really want to risk having Pussy Galore [wikipedia.org] destroying our monetary system?
          • by Kadin2048 (468275) * <slashdot.kadinNO@SPAMxoxy.net> on Wednesday September 26, 2007 @05:02PM (#20760235) Homepage Journal
            I agree with you on some of the dangers of inflation; however, I disagree about the nature of "value" in an asset.

            Something can have substantial value, even if it's not the sort of thing you can leave sitting around idle and come back to later.

            A tractor has substantial value not in the same way a pile of gold bricks does, but because it performs a function. It represents a potential income stream to a farmer, which is why a farmer might want to own one. Thus the farmer goes to a bank and takes out a loan against the tractor, in order to purchase it. For the bank to make this loan, they want to ensure that the farmer isn't an idiot, and that he'll pay back the value of the tractor either faster than it depreciates (or he has some other assets that won't depreciate as quickly, in order to secure the loan). If they think this is the case, they can then go and create a pile of 'tractor-dollars', dollars that are backed by that tractor. Those dollars only stay in the system until the farmer pays off the loan, and assuming the loan was intelligently made, there should never be more tractor-dollars sloshing around than the tractor is actually worth (either in literal terms or as an income stream).

            The same holds true for a factory, or anything else that helps create an income stream. Just because it's not a stable asset doesn't mean it's valueless; as long as you can predict the depreciation, you can still use it as collateral, and if you can use it as collateral, you can use it as the basis for new money. (As long as you trust the government to enforce the lien and let the bank repossess it, of course -- the real basis for debt banking is the threat of force by people with guns.)

            I also agree that banks have been supremely irresponsible with their lending practices, but I don't think that full-reserve banking is really the best solution. There are rules that need substantial tightening, but there's nothing inherently wrong with letting a bank use mortgaged assets as part of its reserves, as long as the value of those assets over time is computed, the loans made accordingly, and there's a iron-hard willingness by the government to liquidate those assets in the event of a default by the borrower.
            • Re: (Score:3, Interesting)

              by dada21 (163177)
              I agree with you on some of the dangers of inflation; however, I disagree about the nature of "value" in an asset.

              Oh, I definitely agree that some of the assets you listed have value to SOME individuals, but there is generally NO asset that is valuable to all individuals -- except for gold, which I can not believe that another individual would not covet or desire if offered in trade for a profitable outcome (for both parties). Tools, to me, are not positive-income assets for all. Houses can be tools (for
          • Re: (Score:3, Interesting)

            by pugugly (152978)
            More precisely, inflation means the money supply is increasing more quickly than the actual goods and services available in the economy, and vice versa - You can increase the money supply as much as you want as long as the underlying economy is (in reality) expanding at the same rate.

            Any kind of hard standard however means that the money supply is disconnected from the actual underlying economy - it's linked to the actual reserve - a quickly expanding economy means, perforce, deflation and vice versa, which
    • by Anonymous Coward on Wednesday September 26, 2007 @04:01PM (#20759347)
      Part of the job of the Fed is to increase the money supply at an appropriate rate, since mild inflation tends to be good for the economy and deflation tends to be disastrous.

      Add up mild inflation over the course of a century, and yes, you will find that the dollar has lost 95% of its value - but you'll also find the largest, most impressive economic expansion in the history of the world.
      • by Citizen of Earth (569446) on Wednesday September 26, 2007 @04:37PM (#20759809)

        Part of the job of the Fed is to increase the money supply at an appropriate rate, since mild inflation tends to be good for the economy and deflation tends to be disastrous.

        The _real_ economy also tends to increase by a few percent each year, so the money supply needs to be increased a few percent each year to compensate for this (or else there would be deflationary pressure because of real growth).

        • by Colin Smith (2679)

          The _real_ economy also tends to increase by a few percent each year, so the money supply needs to be increased a few percent each year to compensate for this (or else there would be deflationary pressure because of real growth).

          Exactly... The UK money supply: 14% per year at the moment. The US supply? 10%? 20% 30% Who knows just now. There's a general theory that they dropped the figures so they could "monetise" the US debt, and there's trillions of that to go through.

          Whatever it is, it's much higher than real growth.

      • by Colin Smith (2679)

        Part of the job of the Fed is to increase the money supply at an appropriate rate, since mild inflation tends to be good for the economy and deflation tends to be disastrous.

        Mild inflation and disastrous deflation are a feature of fractional reserve banking. The system expands gradually until it reaches a peak, then collapses over a short period. It's the fractional reserve system which makes deflation disastrous. You're right that is the job of the Fed. However. There's no need for inflation or deflation.

        but you'll also find the largest, most impressive economic expansion in the history of the world.

        You're aware the monetary system hasn't changed since the Bank of England was created in 1694? Or the fact that fractional reserve banking was practised for centuries before

      • by malsdavis (542216)
        "impressive economic expansion in the history of the world"

        That is an extremely subjective statement if ever I saw one!

        How can you say it is more impressive than say the Roman Empire's utter transformation of Europe and Asia Minor, or the British Empire's transformation of world trade. After all, it was their empire which combined with the industrial revolution is what started this whole globalization thing - which is what you appear to be referring to (otherwise the dollar's valuation is meaningless).

        In re
    • in fact, since the Fed's creation in 1913, the US dollar is about 95-96% devalued

      With almost all of that devaluation beginning with the closure of the gold window [wikipedia.org] by Nixon in 1971 and the creation of political fiat money (money with no commodity backing) in its place. The problem with political money is that it creates a tremendous incentive for people to engage in risky behaviors because they believe that the government will use its power over the money supply to "ease the pain" or bail them out of tig
      • Taxpayers never share in gains, but somehow we are expected to "take one for the team" when there are loses?

        Yes yes yes...I'd put this along side people who insist on building in areas known to be extremely risky (i.e. frequently flood prone areas, weak hillsides) yet expect the other taxpayers to bail them out if they get hit. The prudent get stuck with the bill. Fine, you can use my tax dollars to cover your ass as long as I get to use your beach house occasionally.

        The result of the monetary policy of our nation has been nearly continuous punishment of savers through inflation

        I love how they make sure they discourage you by taxing the interest on savings.

    • You're right--if you put dollars in your mattress in 1913, they would be 95% devalued today. (Although actually, they would be 100% devalued today because that physical design is no longer accepted.)

      On the other hand if you'd put your money into Ford stock in 1913, today that stock would be far more valuable than it was during that time. The truth is that the only true stores of wealth are assets. Dollars are not assets--they are currency. They are handy for exchanges, but are not wealth themselves.

      You don'
  • in 4, 3, 2, 1... (Score:3, Informative)

    by niloroth (462586) on Wednesday September 26, 2007 @03:56PM (#20759267) Homepage
    Waiting for some idiot to post a link to the Zeitgeist movie's section on the federal reserve. Seriously hoping it doesn't happen, but i have a strange feeling that at least one person on here has fallen victim to the allure of spooky music mixed with insane and unfounded assertions.
    • by rucs_hack (784150)
      speaking as someone waiting for Audible to add it to their catalog, I can certainly fall asleep waiting for it.

      Its been several days, and its still not out, dammit.
    • by Colin Smith (2679)
      Austrian Economist: Ludwig Von Mises.

      Terry Pratchett's protagonist: Moist von Lipwig

       
  • by ScentCone (795499) on Wednesday September 26, 2007 @04:02PM (#20759355)
    No nerdly discussion about the history of money would be complete without a slavish recommendation to read Neal Stephenson's Baroque Cycle. Which, indeed, one should. ADHD raised-on-MTV types needn't bother, but it's pure gold. (+5 self-referental humor!)
  • by brundlefly (189430) on Wednesday September 26, 2007 @04:05PM (#20759389)

    There are plenty. [amazon.com] Many people do not consider this book to be a balanced discussion of the subject matter at hand. This type of controversy should be mentioned in any prominent book review.

  • ..only a concept.
  • Not news for nerds. News for economists, maybe. And I guess you could call economists nerds, sort of, but not in the IT way. So, no, not news for nerds.

    Stuff that matters? Yeah, I guess, sort of. But not from an IT perspective, or even the persective of someone who is more concerned about computers than money.

    Why is this review here?

    Oh, I forot. Slashdot is Digg now.

    Sorry, my fault.
    • about the world around you. It's not as if any of this stuff will ever affect you.

      Unless you want to buy a house. Or a car. Or food. Or anything, really.

      I mean, computers come free anyway. Computing time was never so costly that they ever had to divvy it up by time slices or something. And IT should never have to be affected by monetary concerns. Unlimited budgets for our departments are a good thing. Or at least were until the tech bubble crashed some years back....
      • by Dun Malg (230075)

        about the world around you. It's not as if any of this stuff will ever affect you.

        Unless you want to buy a house. Or a car. Or food. Or anything, really.

        I mean, computers come free anyway. Computing time was never so costly that they ever had to divvy it up by time slices or something. And IT should never have to be affected by monetary concerns. Unlimited budgets for our departments are a good thing. Or at least were until the tech bubble crashed some years back....

        Now you're just being an ass. You sound like congress torturing the commerce clause to invent authority to pass laws about shit that ain't their business. Yeah, anything can be said to be related to anything else if you loosen the definition enough.

    • Re:What the...? (Score:4, Insightful)

      by UbuntuDupe (970646) on Wednesday September 26, 2007 @04:22PM (#20759597) Journal
      Yeah, normally, you have to wait for a thread to tangent about money to have one of these discussions. A book about the Federal Reserve just doesn't seem appropriate for /.

      Nevertheless, I'm going to comment:

      The review claims that a number of statements are false. I mostly disagree:

      The Federal Reserve is federal, i.e., a part of the US government.

      It's a semantics game to claim otherwise. The Fed chairman is appointed by "the government", charterd by the government, and designated to achieve US domestic policy goals, and subject to being shut down if it acts too crazily. It is given significant autonomy by congress. Does that make it "not part of the government"? Okay, then I guess the federal courts aren't either.

      The Federal Reserve is a reserve, i.e., it has monetary savings of real value.

      The federal reserve has cash holdings. Cash has real value. Don't believe me? Go offer it in an exchange.

      The Federal Reserve serves the public, and is not a cartel of private banks serving itself.

      Kind of. Given its autonomy, it could achieve nefarious goals. However, members are required to basically give up any financial holdsing that could lead to a conflict of interest.

      The US dollar has real value, i.e., it represents tangible wealth, such as gold securely stored at Fort Knox.

      It is true that money is only a *claim* on real wealth; that, in other words, money flows in the opposite direction as wealth. However, you can in fact trade your money for real wealth; in that sense, it has real value.

      Inflation is an increase in prices.

      Usage determines meaning, and this is exactly how most people use the term "inflation" (in the economics sense).

      Inflation is caused by greedy companies, not the US government or the Federal Reserve.

      Under the definition the author wants to use, yes, the US gov. and Fed cause inflation. They're not the only cause of general price increases. There are also supply shocks.
      • by lgw (121541)

        The federal reserve has cash holdings. Cash has real value. Don't believe me? Go offer it in an exchange.

        The Fed does keep both gold and foreign currency around (I used to live next door to a fed branch, it was quite heavily fortified). However, its value is a trivial fraction of the currency in circulation, which itself is a fraction of the money supply.

        I think the point is: the US Dollar is not in any way backed by the holdings of the Fed. Instead it's backed by the government's ability to tax the people. Seriously, I trust the government to rasie taxes *way* more than I trust it to hold onto something o

    • by metlin (258108)
      Umm, it says News for Nerds, not necessarily News for IT Nerds.

      If you have worked with any kind of finance/economics, you would know that it is all nothing but math. Probability and statistics, linear and dynamic programming, machine learning techniques, data mining techniques and so on and so forth.

      Secondly, that was a rather interesting review. For those of who have been reading Slashdot over the years, we are now in positions where we deal with this thing called the Real World. Given that state of the US
  • I hope this isn't too painfully stupid or off point: how does one open a bank? I don't think that is a title in the Dummies series yet and I have been periodically curious about it. How realistic is it for a small group of people or a community to start a bank or credit union?

    • by aminorex (141494)
      I once looked into it, and it doesn't look too hard, but it will take about $500,000 to start. You might raise that in a limited partnership with friends and family.

  • real value? (Score:4, Insightful)

    by Lord Ender (156273) on Wednesday September 26, 2007 @04:14PM (#20759495) Homepage

    ...The US dollar has real value, i.e., it represents tangible wealth, such as gold securely stored at Fort Knox.
    Gold has almost no real value. You can do very little with it other than make jewelry. Yet, like fiat currency, people have become collectively convinced that it is valuable. Because of this, we spend countless resources digging it up from the ground, then burying it back underground. If we actually started USING the 95% of the worlds gold that wastes away in vaults, the value of gold would be almost nothing due to inflation (19x increase in supply).

    Real value is power--the ability to control other people (aka labor). Whether the medium is gold coins or paper money or tootsie pops, what you are trading when you exchange money is labor.

    Inflation does not tax the poor: They have no cash savings.
    Inflation does not tax the middle class: They keep their assets in real-estate and mutual funds.
    Inflation forces everyone else to invest in something, because hoarding money isn't good for the economy.

    I'm sick of all the "money is a scam" articles on the internet recently.
    • by Mr Pippin (659094)
      Inflation forces everyone else to invest in something, because hoarding money isn't good for the economy
      That, or it's an example of Gresham's Law http://en.wikipedia.org/wiki/Gresham's_Law [wikipedia.org] in action.
    • Re: (Score:3, Insightful)

      by dada21 (163177)
      Gold has almost no real value. You can do very little with it other than make jewelry. Yet, like fiat currency, people have become collectively convinced that it is valuable. Because of this, we spend countless resources digging it up from the ground, then burying it back underground. If we actually started USING the 95% of the worlds gold that wastes away in vaults, the value of gold would be almost nothing due to inflation (19x increase in supply).

      Gold is one of the only elements that does not deteriorate
      • Re: (Score:3, Funny)

        by Lord Ender (156273)
        Looking at your website, it seems you publish some sort of gold newsletter. Surprise, surprise.

        First, your physics is completely wrong. Radioactive elements are the only ones that decay.

        Second, your assertion that all new gold is used in industry is highly questionable. Most gold is hoarded underground and not used for ANYTHING--a senseless waste of resources.

        You are correct that my one-sentence definition of "value" is an oversimplification. But your assertion that ANY physical object has some sort of inhe
    • by vlad_petric (94134) on Wednesday September 26, 2007 @04:34PM (#20759755) Homepage
      ... to electronics at least. Gold has high conductivity, malleability, ductility, resistance to oxidation and is also not toxic to humans.
    • Re: (Score:3, Interesting)

      by CodeBuster (516420)
      Gold has almost no real value. You can do very little with it other than make jewelry.

      The difference is that fiat currency can be arbitrarily increased by politicians with ease whereas increasing the available gold supply requires more time and effort and thus tempers the ability of politicians to pull the inflation ripcord whenever it is politically expedient to do so. The essential qualities of a commodity that serves as a store of value are rarity, durability, easy divisibility, and the general ease
      • Re: (Score:3, Insightful)

        by 808140 (808140)
        The Fed is not a part of the government in the sense you seem to think it is. History has shown that when politicians are allowed to print money, they do, and in large quantities. Which is why modern central banks like the Fed and the ECB are not beholden to the interests of democratically elected politicians. Hell, if that had been the case, Paul Volker would have been in pretty deep shit. Thankfully, the prevailing attitudes of the day had no bearing on what he knew needed to be done and the result wa
  • by klenwell (960296) <klenwell@@@gmail...com> on Wednesday September 26, 2007 @04:22PM (#20759609) Homepage Journal
    I was a lit major in school but often found myself led stangely enough to the subject of money, currency in particular, as it's a subject that seems to have had much more relevance in people's everyday life in that past than it does now. I find the Federal Reserve, especially the institution of FDIC after the Great Depression, one of the greatest innovations of the 20th century. As Milton Friedman points out, it effectively ended the terrible plague of bank runs that wracked economies in the past.

    To get a sense how invisible money as an instrument is to most people in modern stable economies, you can look at the plays of Shakespeare and all the reference to coinage and especially "debased" currency during the period. One of the most insightful history books I've read is E.C. Challis's The Tudor Coinage. It really gives you a sense of how much we take a stable currency, as the bedrock for a stable economic system, for granted.

    Anyway, if you have any curiosity about that subject at all, you can check out this article:

    http://links.jstor.org/sici?sici=0013-0117(196712)2%3A20%3A3%3C441%3ATDOTC1%3E2.0.CO%3B2-H [jstor.org]

    I've been looking for a good stimulating non-fiction read. I think I'll pick up G. Edward Griffin's book. Thanks for the review.
    • Redaction (Score:3, Informative)

      by klenwell (960296)
      Just noticed this section in the review:

      The author also provides an index, as well as an impressive bibliography, reflecting his extensive research on the topics. In addition, the author invites readers to join Freedom Force, an organization dedicated to increasing liberty in the United States, curbing federal totalitarianism, and abolishing the Federal Reserve -- all through peaceful participation in government, and the shaping of public policy starting at the grassroots level.

      On second thought, maybe not

  • A good video on the subject is From Freedom to Fascism ( http://www.freedomtofascism.com/ [freedomtofascism.com]) You can purchase the DVD for a $1. The movie cites the book and includes some video commentary from the Author of Creature from Jekyll Island. If you are alarmed about what you learn you may want to consider throwing some support behind Congressmen Ron Paul, who is running for president. He entered politics because of his concerns about monetary policy and the Federal Reserve. He is currently the ranking chair of
  • by prxp (1023979)
    Where does money come from? It depends on your currency. In the case of Dollar, it comes from the FED, the one and olnly source for dollar bills. How does money get distributed among the nation? Through the Baning infrastructure which lends money to people and companies and gets interest in return. How banks get money? From the FED! And not the magic happens: Summing up: 1) FED prints money (the paper itself is legal tender, no need for gold to back it up) 2) FED lends this paper to the Banks 3) FED get
    • by mpapet (761907)
      Not really. The dollar gets its value from what other currency holders are willing to pay for it using another currency.

      Books like this disguise the fundamentally boring/abstract issues that few American citizens, want to deal with, much less so the politicians that represent them in any way shape or form. The outcome of these issues is all but the richest Americans will be poorer. Sadly everyone will be standing around yelling "something must be done!" sooner or later. When the time long ago passed when
  • From reading the summary, I don't believe this book tells you at all how to make money.
    I expect ink, green and the new multi-colors, to be all over my fingers by the end of it.

    I often dream of winning the lottery. Then I can spend the majority of the time learning what to do with the money. Another, almost perhaps, equal grind as my current day job.
  • As one who knows... (Score:4, Informative)

    by Anonymous Coward on Wednesday September 26, 2007 @05:09PM (#20760301)
    I've been an employee at one of the twelve Federal Reserve Banks for eight years. During employee orientation, they asked us noobs what we knew about the Fed. I was the only one in the room with more than a rudimentary knowledge. They educate the new hires, AND they educate the public. We employees are almost always explaining what the Fed is (or myth-busting assumptions about the Fed).

    • The Federal Reserve System is the collective title for the Federal Reserve Board of Governors and the twelve member banks.
    • The Board of Governors IS a government agency; the district Federal Reserve Banks are not.
    • The Federal Reserve Banks are owned by member banks in each Federal Reserve District.
    • Federal Reserve District boundaries were established based on population and economic centers at the time of the Federal Reserve Act (that's why they seem weighted toward the east coast).
    • The Federal Reserve Board has been given responsibility by Congress to oversee and manage monetary policy, distribute currency, and to ensure depository institution compliance with various regulations.
    • The Federal Reserve Banks act under delegated authority (from the Board of Governors) to ensure that member banks in their districts comply with regulatory standards and other sound banking practices. This is the function that sends bank examiners (auditors) out to supervised institutions to review bank lending practices, risk portfolios, and overall management. If not for these guys, we never would have had "It's a Wonderful Life" (which features bank examiners as the pseudo-villans).
    • Each Federal Reserve Bank has its own board, made up of representatives from the banking and business communities within the district. This board, aided by research conducted by the Reserve Banks or within the market, works to understand the local/regional economy. Reserve Banks then bring their views and concerns to the Federal Open Market Committee.
    • The Federal Open Market Committee (FOMC) is a twelve member board that includes seven members of the Federal Reserve System's Board of Governors, the president of the Federal Reserve Bank of New York, and four presidents from the remaining eleven Reserve Banks (who serve one-year, rotating terms).
    • Federal Reserve Banks serve as banks to banks, making available overnight loans to cover transfers between institutions, and holding required reserve funds for member banks (reserve funds are cash reserves each member bank must maintain--they were designed to prevent liquidity in the event of a bank-run event like that which occurred in the 1930s).
    • Federal Reserve Banks conduct community outreach and educational activities, both for bankers and community groups, to educate them regarding pertinent topics, especially the Consumer Reinvestment Act, minority issues and banking, reaching underserved populations.
    • Federal Reserve Bank employees are not Federal employees.


    There's much more I could say, but that's an example of the type of information I pass on to friends and neighbors all the time when they hear that I work "at the Fed."
     
    [I'm posting anonymously just in case my employer might think this post violates some policy or other. I don't think it does, because this is public information, but I rather like working here, so I'll play it safe.]

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