you to one of the most complex but effective institutions in the United States. But don't

worry, I'll explain it all in plain English. Just beside me is a roadmap of where we're

going. Together we'll walk through the Federal Reserve system. Literally. And along the way

I'll show you just what goes on around here and why it's important. By the end of this

tour, you, too will be able to explain the Federal Reserve in plain English.

All our lives we've been told that economics is boring. It's dull. It's not worth the time

it takes to understand it. And all our lives, we've been lied to.

War. Poverty. Revolution. They all hinge on economics. And economics all rests on one

key concept: money.

Money. It is the economic water in which we live our lives. We even call it 'currency';

it flows around us, carries us in its wake. Drowns those who are not careful.

We use it every day in nearly every transaction we conduct. We spend our lives working for

it, worrying about it, saving it, spending it, pinching it. It defines our social status.

It compromises our morals. People are willing to fight, die and kill for it.

But what is it? Where does it come from? How is it created? Who controls it? It is a remarkable

fact that, given its central importance in our lives, not one person in a hundred could

answer such basic questions about money as these.

So if you were planning a family, you'd want to know where babies come from. And this is

a lot about banking. So let me ask you: where does money come from?

Where does the money come from? The government prints it. It's printed off.

How is new money created?

By labor. People work and produce wealth, and the money is supposed to match that wealth.

Where does money come from?

Well I have a pretty different outlook on money. It actually comes from, like, trees,

right?

But why is this? How could we be so ignorant about a topic of such importance? "Where does

money come from?" is a basic, childlike question. So why is our only response the childlike

answer, meant as a joke: "It grows on trees"?

Such a profound state of ignorance could not come about naturally. From the time we are

children, we are curious about the world and eager to learn about the way it works. And

what could lead to a better understanding of the way the world works than a knowledge

of money, its creation and destruction? Yet discussion of this topic is fastidiously avoided

in our school years and ignored in our daily life. Our monetary ignorance is artificial,

a smokescreen that has been erected on purpose and perpetrated with the help of complicated

systems and insufferable economic jargon.

But it doesn't take an economist to understand the importance of money. Deep down we all

know that the wars, the poverty, the violence we see around us hinges on this question of

money. It seems like a thousand piece jigsaw puzzle just waiting to be solved. And it is.

The puzzle pieces, taken together, create an image of the Federal Reserve, America's

central bank and the heart of the country's banking system. Despite its central importance

to the economy, relatively few have heard of it, and fewer still know what it is, despite

the bank's attempts at self-description:

Our economy runs on a complex system of exchange of goods and services in which money plays

a key part. Coin, currency, savings, and checking accounts; the overall supply of money is managed

by the Federal Reserve. Money is the medium through which economic exchanges take place,

and money as a standard of value helps us to set prices for goods and services. The

job of managing money--monetary policy--is to preserve the purchasing power of the dollar

while ensuring that a sufficient amount of money is available to promote economic growth.

The Federal Reserve also promotes the safety and soundness of the institutions where we

do our banking. It ensures that the mechanisms by which we make payments, whether by cash,

cheque, or electronic means, operates smoothly and efficiently.

And in its fiscal role acts as the banker for the United States government.

Now these duties comprise the major responsibilities of our central bank.

But in order to understand the Federal Reserve, we must first understand its origins and context.

We must deconstruct the puzzle.

The first piece of that puzzle lies here, in the White House. This is where the Federal

Reserve Act, then known as the Currency Bill, was signed into law after passing the House

and Senate in late December, 1913.

The New York Times of Christmas Eve, 1913, described the festive scene:

"The Christmas spirit pervaded the gathering. While the ceremony was a little less impressive

than that of the signing of the Tarriff act on Oct. 3 last in the same room, the spectators

were much more enthusiastic and seized every occasion to applaud."

There in the White House that fateful December evening, President Wilson signed away the

last veneer of control over the American money supply to a cartel; a well-organized gang

of crooks so successful, so cunning, so well-hidden that even now, a century later, few know of

its existence, let alone the details of its operations. But those details have been openly

admitted for decades.

Of course, just as we have been taught to find economics boring, we have been taught

that this story is boring. This is the way the Federal Reserve itself tells it:

The United States was facing severe financial problems. At the turn of the century, most

banks were issuing their own currency called "bank notes." The trouble was, currency that

was good in one state was sometimes worthless in another. People began to lose confidence

in their money, since it was only as sound as the bank that issued it. Fearful that their

bank might go out of business, they rushed to exchange their bank notes for gold or silver.

By attempting to do so, they created the panic of 1907.

During the panic, people streamed to the banks and demanded their deposits. The banks could

not meet the demand; they simply did not have enough gold and silver coin available. Many

banks went under. People lost millions of dollars, businesses suffered, unemployment

rose, and the stability of our economic system was again threatened.

Well, this couldn't go on. If the country was going to grow and prosper, some means

would have to be found to achieve financial and economic stability.

To prevent financial panics like the one in 1907, President Woodrow Wilson signed The

Federal Reserve Act into law in 1913.

But this is history as told by the victors: a revisionist vision in which the creation

of a central bank to control the nation's money supply is merely a boring historical

footnote, about as important as the invention of the zipper or an early 20th century hoola-hoop

craze. The truth is that the story of the secret banking conclave that gave birth to

that Federal Reserve Act is as exciting and dramatic as any Hollywood screenplay or detective

novel yarn, and all the more remarkable for the fact that it is all true.

We pick up the story, appropriately enough, under cover of darkness. It was the night

of November 22, 1910, and a group of the richest and most powerful men in America were boarding

a private rail car at an unassuming railroad station in Hoboken, New Jersey. The car, waiting

with shades drawn to keep onlookers from seeing inside, belonged to Senator Nelson Aldrich,

the father-in-law of billionaire heir to the Rockefeller dynasty, John D. Rockefeller,

Jr. A central figure on the influential Senate Finance Committee where he oversaw the nation's

monetary policy, Aldrich was referred to in the press as the "General Manager of the Nation."

Joining him that evening was his private secretary, Shelton, and a who's who of the nation's banking

and financial elite: A. Piatt Andrew, the Assistant Treasury Secretary; Frank Vanderlip,

President of the National City Bank of New York; Henry P. Davison, a senior partner of

J.P. Morgan Company; Benjamin Strong, Jr., an associate of J.P. Morgan and President

of Bankers Trust Co., and Paul Warburg, heir of the Warburg banking family and son-in-law

of Solomon Loeb of the famed New York investment firm, Kuhn, Loeb & Company.

The men had been told to arrive one by one after sunset to attract as little attention

as possible. Indeed, secrecy was so important to their mission that the group did not use

anything but their first names throughout the journey so as to keep their true identities

secret even from their own servants and wait staff. The movements of any one of them would

have been reason enough to attract the attention of New York's voracious press, especially

in an era where banking and monetary reform was seen as a key issue for the future of

the nation; a meeting of all of them, now that would surely have been the story of the

century. And it was.

Their destination? The secluded Jekyll Island off the coast of Georgia, home to the prestigious

Jekyll Island Club whose members included the Morgans, Rockefellers, Warburgs and Rothschilds.

Their purpose? Davison told intrepid local newspaper reporters who had caught wind of

the meeting that they were going duck hunting. But in reality, they were going to draft a

reform of the nation's banking industry in complete secrecy.

G. Edward Griffin, the author of the bestselling The Creature from Jekyll Island and a long-time

Federal Reserve researcher, explains:

What happened is the banks decided that since there was going to be legislation anyway to

control their industry, that they wouldn't just sit back and wait and see what happened

and cross their fingers that it would be OK. They decided to do what so many cartels do

today: they decided to take the lead. And they would be the ones calling for regulations

and reform.

They like the word "reform." The American people are suckers for the word "reform."

You just put that into any corrupt piece of legislation, call it "reform" and people say

"Oh, I'm all for 'reform'," and so they vote for it or accept it.

So that's what they were doing. They decided, "We will 'reform' our own industry." In other

words, "We will create a cartel and we will give the cartel the power of government. We'll

take our cartel agreement so we can self-regulate to our advantage and we'll call it 'The Federal

Reserve Act.' And then we'll take this cartel agreement to Washington and convince those

idiots there to pass it into law."

And that basically was the strategy. It was a brilliant strategy. Of course we see it

happening all the time, certainly in our own day today we see the same thing happened in

other cartelized industries. Right now we're watching it unfold in the field of healthcare,

but at that time it was banking, alright?

And so the banking cartel wrote their own rules and regulations, called it "The Federal

Reserve Act," got it passed into law, and it was very much to their liking because they

wrote it. And in essence what they had created was a set of rules that made it possible for

themselves to regulate their industry, but they went even beyond that. In fact, it's

clear to me when I was reading their letters and their conversation at the time, and the

debates, that they never dreamed that Congress would go along and also give them the right

to issue the nation's money supply. Not only were they now going to regulate their own

industry, which is what they started out as wanting to do, but they got this incredible

gift that they didn't dream would be given to them (although they were negotiating for

it), and that was that Congress gave them the authority to issue the nation's money.

Congress gave away the sovereign right to issue the nation's money to the private banks.

And so all of this was in The Federal Reserve Act, and the American people were joyous because

they were told, and they were convinced, that this was finally a means of controlling this

big creature from Jekyll Island.

Amazingly enough, they were successful, not just in conspiring to write the legislation

that would eventually become the Federal Reserve Act, but in keeping that conspiracy a secret

from the public for decades. It was first reported on in 1916 by Bertie Charles Forbes,

the financial writer who would later go on to found Forbes magazine, but it was never

fully admitted until a full quarter century later when Frank Vanderlip wrote a casual

admission of the meeting in the February 9, 1935 edition of The Saturday Evening Post:

"I was as secretive—indeed, as furtive—as any conspirator.[...]I do not feel it is any

exaggeration to speak of our secret expedition to Jekyll Island as the occasion of the actual

conception of what eventually became the Federal Reserve System."

Over the course of their nine days of deliberation at the Jekyll Island club, they devised a

plan so overarching, so ambitious, that even they could scarcely imagine that it would

ever be passed by congress. As Vanderlip put it,

"Discovery [of our plan], we knew, simply must not happen, or else all our time and

effort would be wasted. If it were to be exposed publicly that our particular group had got

together and written a banking bill, that bill would have no chance whatever of passage

by Congress."

So what, precisely, did this conclave of conspirators devise at their Jekyll Island meeting? A plan

for a central banking system to be owned by the banks themselves, a system which would

organize the nation's banks into a private cartel that would have sole control over the

money supply itself. At the end of their nine day meeting, the bankers and financiers went

back to their respective offices content in what they had accomplished. The details of

the plan changed between its 1910 drafting and the eventual passage of the Federal Reserve

Act, but the essential ideas were there.

But ultimately, this scene on Jekyll Island, too, is just one piece of a larger puzzle.

And like any other puzzle piece, it has to be seen in its wider context for the bigger

picture to become visible. To understand the other pieces of the puzzle and their importance

in the creation of the Federal Reserve, we have to travel backward in time.

The story begins in late 17th century Europe. The Nine Years' War is raging across the continent

as Louis XIV of France finds himself pitted against much of the rest of the continent

over his territorial and dynastic claims. King William III of England, devastated by

a stunning naval defeat, commits his court to rebuilding the English navy. There's only

one problem: money. The government's coffers have been exhausted by the waging of the war

and William's credit is drying up.

A Scottish banker, William Paterson, has a banker's solution: a proposal "to form a company

to lend a million pounds to the Government at six percent (plus 5,000 "management fee")

with the right of note issue." By 1694 the idea has been slightly revised (a 1.2 million

pound loan at 8 percent plus 4000 for management expenses), but it goes ahead: the magnanimously

titled Bank of England is created.

The name is a carefully constructed lie, designed to make the bank appear to be a government

entity. But it is not. It is a private bank owned by private shareholders for their private

profit with a charter from the king that allows them to print the public's money out of thin

air and lend it to the crown. What happens here at the birth of the Bank of England in

1694 is the creation of a template that will be repeated in country after country around

the world: a privately controlled central bank lending money to the government at interest,

money that it prints out of nothing. And the jewel in the crown for the international bankers

that creates this system is the future economic powerhouse of the world, the United States.