Central Banks

This thread relates to the history and theory of Central Banks and to the American Federal Reserve by posters here and on Politics.ie. If you have any thougts about the theory of money and credit print them here. There is a link to a thread on politics.ie where feargach asks a question about money created by Central Banks and where laymen like me put questions to the better informed and where I got some decent replies with nice information and some youtube videos on money, notably The Preacher!
Both youngdan and Akrasia contributed to the p.ie thread.

I lifted youngdan's post from cactus's thread on the dollar. He asks an interesting question about the return to an Irish currency which could be a cue leading to a discussion of the Euro and the European money system and what the Euro means in reality for Irish politics and economics. I think we all accept the Euro without question and we have our standard whines about how prices went up and how it's worth less etc. now but no-one seems to have any real useful angles on it.

Other countries will adopt the Euro in time and I for one would like to have some picture of how their current set-ups will accept the Euro in time.

youngdan wrote:

Getting back to what might happen in Ireland. In a
big downturn just maybe there would be 166 replacements in the Dail.
This would take a sea change in thought but sudden poverty might do it.
Irish politicians feed at the publics expense not just for their own
lives but it is assumed that the next generation is entitled by
birthright. Are there not 3rd generation parasites now. This carryon
has lead to some dimwit TDs far in excess to what any form of natural
selection would produce. The day might come when a return of an Irish
currency will be discussed. The most important thing to understand is
what a central bank does. It allows a government to spend money it does
not have and it allows the owners of the central bank to create money
out of thin air. It is a I'll scratch your back if you scratch my back
and hugely beneficial to both parties. This con job sounds too good to
be true so we will look at what actually happened when the Bank of
England was set up in 1694. The King at the time was faced with the age
old problem of how he was going to get money for war and domestic
spending. He ruled out taxation as being unhealthy. The other method of
old was increasing the money supply. Since there was more or less a
staple supply of silver and gold this meant less metal in each coin so
some metal was clipped from the edges of each coin and the clippings
were melted to produce new coins. To be caught clipping on a private
basis was a capital offence. This is the reason for grooves on the
edges of coins. People could see their coin getting smaller as they
were repeatedly clipped. Some rich bankers offered the King a sweat
deal.They would assume his debts if he would grant them a charter is
issue the currency for the kingdom backed by gold held in their vaults.
They were clear that they would lend the king whatever funds he needed
in the future. The people then were not as doopy as they are today so
the problem was how to make them accept the banknotes. That is where
the legal tender laws came in which made it illegal not to accept
banknotes and mandated thart taxes could only be paid with banknotes.
This created a demand for the banknotes. In time the central bank
realised that the chances of more than a few demanding gold for the
banknote were slim so they were able to issue more banknotes than gold
on deposit and eventually they dropped the link intirely and could
create any amount they wished. The government could borrow all the
money they wished and they were happy. There is no intention of these
government loans being repaid,they are just rolled over. In 1946 the
Bank of England was nationalised because by that time the bankers owned
The Federal Reserve. The Fed issues the US currency and the US treasury
borrows from the Fed and elsewhere and pays interest on this money. Now
if the Treasury were to issue the currency itself it would save about
400 billion dollars a year juice. The public does not grasp that the
Fed is not owned by the government. IF the Fed did not exist the
relationship between deficit spending and inflation would be clearer to
see. So if Ireland in the future brings back it's own currency it is
important that people understand how things work but don't expect rte
to explain it

feargach's P.ie thread on Central Banks

featuring some nifty youtube videos on the theory and history of money

So if our 7 tons of gold was sold, what did we get for it ?

The best video in my mind to watch is The Money Masters. It is on google and is intertaining even if econonics is not ones main interest. I don't exaggerate when I say that it is an eyeopener that will change your outlook on life. Bankers like to speak in terms that try to make it sound that it is beyond the comprehension of ordinary plonks like us. There is even a term for this, it is called Bankspeak. Greenspan was the master of this gobbledegook to the extent that he was able to bamboozle nearly all the congressmen in the testimonies he had to give before the house and senate committees. He was called The Maestro or The Wizzard by the media. I would call him The Bullock shyther. Bernanki does not have this gift of gab so he sounds like an incompetent fool in comparison. He is a professor of economics and is probably way smarter. Greenspan was once a pennyless advocate for a gold backed currency. Now you have him running arround urging the Arabs to dump the dollar and talking down the economy. He is now a straight talker and the Greenspeak is in the past. As for the 7 tons of Irish gold it is a small amount but regardless it belonged to the Irish people. When the ECB sold the tons of gold recently where do you think they got it from. More importantly who do you think has it now. Anyone who was out waiting for the postman to deliver a cheque for their share of the selling price would have suffered a cold wet winter in vain. What has happened here and in the English sales are the biggest thefts in history and the beauty is the victum has no idea that he has been robbed. It is a financial date rape.

The Money Masters - Is this it?

Well that is the start of it but where is the rest of it. I think it is about 90 minutes long and it gets more interesting as it goes on. Akrasia has an interesting take on central banking. His thinking seems to be socialist unless I am mistaken. I would be described as laise-faire. We both agree that the central banks are going to screw us big time.

History of the Federal Reserve (Money Masters)

So who owns the CB of Ireland. Is it privately owned too?

I know nothing about economics (thanks to a terrifying commerce teacher in school) - so be gentle with me please.

Isn't the ability of central banks to print money behind the collapse of economies as much as being behind their ability to stay afloat? I'm thinking of the devaluation of the Zimbabwean dollar under Mugabe...

So what's the mechanism for maintaining a balance? And how important will that be in the current climate? Or are those questions too simplistic?

I dont know the answer to that on the Irish Central Bank. I tried to study this very question some months ago but could not get too much information on it at all. The Bank of England was nationalised in 1946. In Australia the job of being the central bank was given to a big bank called Commonwealth so the shareholders of Commonwealth bank became the owners of the Central Bank. Of note, a couple of weeks before the election there they raised rates to stick it to Howard. The federal reserve shareholders were the bank owned by rockefeller, Morgan and some big London finance houses. The American banks have amalgamated and changed names since then. So basically the owners of the fed are the big money centers which are in turned owned by the shareholders. Bear Sterns had the likes of Lewis as a shareholder so he got the shaft. The majority owners of Morgan have made out fine after gobbling a competitor for 235 million dollars. Now maybe they will fail too but if possible the fed will protect them unless it endangers the golden goose it self. Now if someone can link the entire movie it is actually over 3 hours long but a great view.

Mugabe has the problem the English King had in 1694. Anyone can see that when he puts more currency into circulation then the value will fall by a corresponding amount. That is why the whole system of smoke and mirrors was set up. The fed says that it's job is to control inflation which is total baloney. Prices are rising like a rocket because the money supply must be continually increased to cover deficit spending. If the treasury department just printed up 500 billion even the stupid voters would figure it out. This is where the bond market comes in. The treasury prints up bonds and the foolish people buy them because they are told they are investing and not just loaning Uncle Sam your cash and when it is repaid it is worth a lot less. Money is created when the Fed decides to add to the demand by buying some of these bonds. So they go a buy 10 billion of bonds. They pay for these with a credit added to the account of the treasury. They pay with money that they create out of thin air. The government spends this 10 billion and it goes into the economy. As Henry Cooper would say Just like that. You will hear a lot about the bond market. When inflation becomes glaringly obvious then some investors will sell these bonds. This will raise the interest rates and we are told that this will slow the economy and knock back the inflation rate. The name given to these sellers are Bond Vigilanties and their actions will prevent inflation. This is all totall horseshythe that cnbc and economists will peddle to the gullible public. It is a giant ponzi scheme which can not survive a deflation. Now the people who run this show might decide to have a deflation. This would mean worldwide bankruptsies but they would know this and prepare by selling at the top. The US would have to default on the bonds but the dumb bondholders would get screwed. No problem. The dollar would rise in value when it gets backed by gold and the insiders would clean up. Happy days for them

Kate P wrote:

So what's the mechanism for maintaining a balance? And how important will that be in the current climate? Or are those questions too simplistic?

As well as what youngdan is saying above regarding issuing of bonds (haven't fully grasped that yet I'll admit) I believe there are the mechanisms of fiscal and monetary control through changing tax and interest rates. It should be enough really to keep inflation under control if it is getting out of hand (the govt has fiscal powers, the CB bank monetary). As far as I know they are called micro and macro economics because fiscalism (micro) is changing the prices of cars or adjusting a workers income through tax control thereby affecting demand in some way. The Green Party would be masters at this - they would like to control a lot of stuff.

Monetarism is changing interest rates which affect the macro-economy - business borrowing (my old boss used to say 'money is very cheap now' back in dotcomdays) and house-buying. At the moment it looks like America is trying to stir up demand and a buying frenzy by lowering the price of money. It could work I think if they invest in sustainability - which is not necessarily green but can be) - they need a slow-burn but the risk is that they could hyperinflate... thus people call Bernanke 'helicopter Ben' - spiralling ever upwards ... like the Weimar Republic in Germany just before WWII. eek

I know this from a book I read about ten years ago so let those who know better rub out my errors if they want.

As an addition to the fact that J P Morgan is part owner of the Fed I have just seen that it was up a full 25% on the week. So morgan shareholders are happy and Bear Sterns shareholders, poor Saratoga who declined my advice on pie at 104 dollars included, are sad. I hope he sold because there was ample time when it lingered about 80 and my remarks would be in his mind. I failed to link the full video above if you have more success and tonight I will do my best to talk some on the bond market. Like everything else it can be explained easily enough.

Thanks - following this so far. Will be glad to hear your clarification of the bond situation.
How does it stand up in the 21st century that JPM owns 25% of the fed. Isn't that somekind of insider trading of the highest order?

youngdan wrote:

I failed to link the full video above if you have more success and tonight I will do my best to talk some on the bond market. Like everything else it can be explained easily enough.

That video above is now an hour-long Money Masters I found on youtube (poor quality). That's all they had though.

The full Money Masters is here
http://video.google.com/videoplay?docid=-515319560256183936

3 hours 35 minutes in 15 parts.

Better quality too.

Great job EV. Kate I did not mean the JP Morgan owns 25% of the Fed I meant that the share price of the banking company called JP Morgan rose 25% in price this week. A major rise. It is not known by me at least what share of the fed is owned by Morgan but JP Morgan himself was one of the people who participated in setting it up. In 1906 there was a panic on wall Street and runs on banks. There was no insurance in those days and a panic could be caused by the big boys with ease. Needless to say who strode in to buy and save the day as though, but JP Morgan himself. He cleaned up and looked like a hero to those who didn't figure things out. To prevent panics in the future the idea was planted to adopt a central bank. There was a tradition against central banking here before this and 2 central banks had been set up and abolished as being bad ideas since the revolution. This sly tactic of creating a problem so that you can solve the problem later to mold peoples percecption is called Hegalian Dialectic. The Fed was created in 1913 by a vote in congress when most had gone home for Christmas and President Wilson signed it. Wilson was one of the origonal puppets. He was an academic who was president of Princeton University. He was a genius but like Jimmy Carter he was a complete amadan. His chief adviser and confidant was a man called Colonel House. He was a mega version of Karl Rove and was a British agent. Anyway the plan was for Wilson to run in the 1912 election but the problem was Taft the Republican was going to win easily. So they had Teddy Rosevelt run as a 3rd party called The Bull Moose Party and as a strawman split the republican vote and Wilson won as planned. You will note today that we have not heard anything about Sam Nunn and Hagel forming a bipartisan bid since Romney who was not a puppet was beaten. Wilson later in life realised that he was played for a sucker and lamented that he had destroyed his country. The income tax was brought in at the same time and the origonal American System was finished. Not long afterwords we had the bubble followed by the burst and the bargain buys. The more things change the more they stay the same.

yd,

I found this to be a bit odd, so did some research on it.Not sure what your problem with the set up is to be honest.

youngdan wrote:

Great job EV. Kate I did not mean the JP Morgan owns 25% of the Fed I meant that the share price of the banking company called JP Morgan rose 25% in price this week. A major rise. It is not known by me at least what share of the fed is owned by Morgan

JPMorgan Chase hold shares equal to 6% of their issued capital and reserves, as do all banks incorporated in the US, of one of the regional Reserve Banks. Moreover they are obliged to. What percentage this is of the whole varies. Essentially this is the same thing as all Central Banks do, only in a slightly different fashion. In Ireland the figure is 5% (Central Bank Act) as straight deposits paying interest.The only difference is that in the US the holdings are considered to be shares and have a set dividend of 6%. (1913 Bank Act). Size is also irrelevent as when voting for those members of the board of directors not appointed by the Board of Governors (who in turn are appointed by the President), each bank only has one vote. Moreover this is the only thing they can vote on (some interesting stuff here). One thing that might interest you is that up until 1972, Bank of Ireland (a wholly commercial bank) was also Irelands Central Bank (bit of a conflict of interest).

youngdan wrote:

but JP Morgan himself was one of the people who participated in setting it up.

Well he was a proponant of it, but by the time it was established he was dead.

EDIT: BTW the 1933 Act which fomalised parts of the Fed was the same Act that finally broke up Morgans into JPMorgan, Morgan Stanley and Morgan Grenfell, something that the Morgan family were not best pleased with.

youngdan wrote:

In 1906 there was a panic on wall Street and runs on banks. There was no insurance in those days and a panic could be caused by the big boys with ease.

Could possibly be, particularly since there was no regulation or central control due to a lack of a central bank....
However in this case there is no particular evidence that this happened. Certainly JPM had no direct connection to United Copper, or to the Knickerbocker. You could maybe make a case for him allowing it to fall, but then it wasn't his job to save it.

youngdan wrote:

Needless to say who strode in to buy and save the day as though, but JP Morgan himself. He cleaned up and looked like a hero to those who didn't figure things out.

This bit is entirely irrelevent, it adds no information or analysis, just an indirect bit of innuendo.

youngdan wrote:

To prevent panics in the future the idea was planted to adopt a central bank. There was a tradition against central banking here before this and 2 central banks had been set up and abolished as being bad ideas since the revolution.

Actually the second one was set up within five years of the first one shutting due to the chaos that ensued (from both the closure of the Bank, and the war with Spain). After Jackson refused to extend the charter of the second, the States had their own kind of mini feds in the form of state owned banks.

youngdan wrote:

This sly tactic of creating a problem so that you can solve the problem later to mold peoples percecption is called Hegalian Dialectic.

As above.

youngdan wrote:

The Fed was created in 1913 by a vote in congress when most had gone home for Christmas and President Wilson signed it.

Possibly. Didn't look for anything on this.

youngdan wrote:

Wilson was one of the origonal puppets. He was an academic who was president of Princeton University. He was a genius but like Jimmy Carter he was a complete amadan.

??? Never heard Wilson described like that before, but matter of opinion I suppose. Not very familiar with him.

youngdan wrote:

His chief adviser and confidant was a man called Colonel House. He was a mega version of Karl Rove and was a British agent.

Do you have ANY backup for House being a British agent? The only thing I could find on this was he overshot his powers with an ultimatum to Germany in concert with a British diplomat. The ultimatum was then disowned by both Britain and the US.

youngdan wrote:

Anyway the plan was for Wilson to run in the 1912 election but the problem was Taft the Republican was going to win easily. So they had Teddy Rosevelt run as a 3rd party called The Bull Moose Party and as a strawman split the republican vote and Wilson won as planned.

Except Roosevelt beat Taft. It would have been easier to just run Roosevelt if "they" had that much control. Also the Progressives existed until the 50's, quite a long time for a strawman.

youngdan wrote:

You will note today that we have not heard anything about Sam Nunn and Hagel forming a bipartisan bid since Romney who was not a puppet was beaten. Wilson later in life realised that he was played for a sucker and lamented that he had destroyed his country. The income tax was brought in at the same time and the origonal American System was finished. Not long afterwords we had the bubble followed by the burst and the bargain buys. The more things change the more they stay the same.

Not sure that had much to do with central banks though....

The problem I have with the fed is why should it be allowed to dictate the economy. Who decided that these people have the power to cause boom or bust at their whim and be able to profit by having the knowledge of economic conditions in advance. The rich and connected get bailed out and the middle class are getting killed by inflation. Forget about the working class, how they cope is a mystery. Do you think that some clique should be able to create 200 billion to make good on their own losses while the cost is shafted on to the taxpayer. I don't. You say that Morgan owns such and such a share. The only thing of importance is that the fed bailout the mistakes of the likes of Morgan who as you say are it's owners. It will bailout it's owners every time from Long Term Capital to the Mexican default. The banks get the profit and the taxpayer gets the loss. All the big boys had to do in 1906 was to pull the bids and do a bit of selling to start a panic. I did not say Morgan's job was to prop up the market, he was driving down the market to make a killing. There is no innuendo about what Morgan did. He bought cheap bargains and he looked like a hero. Morgan himself died a few months before the act was passed but he was one of the main cogs. There is no shortage of material on Colonel House for anyone to look up. Wilson was elected with 42% of the vote because it was highly unlikely that he would lose as the other 58% was split. The Bull Moose Party was gone by the 1916 election not to mind the 50s.

youngdan wrote:

The problem I have with the fed is why should it be allowed to dictate the economy. Who decided that these people have the power to cause boom or bust at their whim and be able to profit by having the knowledge of economic conditions in advance.

The point of the Fed is it dictates the speed of the economy. As for profiting, you are aware that the stock-holders receive a fixed 6% dividend regardless of what the fed earns on the side (if anything)? That goes to the Treasury. Which brings us on to "having the knowlege of economic conditions". Who does? decisions such as injecting money into the ecomony is Board of Governors driven. And they are presidential appointments.

youngdan wrote:

The rich and connected get bailed out and the middle class are getting killed by inflation. Forget about the working class, how they cope is a mystery. Do you think that some clique should be able to create 200 billion to make good on their own losses while the cost is shafted on to the taxpayer. I don't. You say that Morgan owns such and such a share. The only thing of importance is that the fed bailout the mistakes of the likes of Morgan who as you say are it's owners. It will bailout it's owners every time from Long Term Capital to the Mexican default. The banks get the profit and the taxpayer gets the loss. All the big boys had to do in 1906 was to pull the bids and do a bit of selling to start a panic. I did not say Morgan's job was to prop up the market, he was driving down the market to make a killing. There is no innuendo about what Morgan did. He bought cheap bargains
and he looked like a hero. Morgan himself died a few months before the
act was passed but he was one of the main cogs.

I know this has been mentioned before YD, but who owns the banks? A direct serious question. I would be very surprised at this stage if there were a single major bank still in the hands of an individual or collection of individuals. and again regarding 1906, yes they could have. But I still haven't seen anything to say they did.

youngdan wrote:

There is no shortage of material on Colonel House for anyone to look up.

I did a google on Colonel House British Agent. And you're right the following webites say he was an agent:

www.biblebelievers.org.au/ (New World Order, everyone appears to have been a British Agent including Morgan Rockefeller etc)
www.citizensforaconstitutionalrepublic.com/ (here the New World Order appears to have become the Power Elite)
www.ronpaulkc.com/forum (the above article cutand pasted)
www.godlikeproductions.com/forum (first article cut and pasted)
debatt.aftenposten.no/ (during a discussion about Hitle being a British Agent)
www.savethemales.ca/ (House is a Rothchilds agent for the British and the US is still a crown colony only its secret now. BTW Morgan is also only an agent for the Rothchilds, and the YMCA Scouts and Red Cross are part of the conspiracy. I kid you not, this one is worth reading.)
www.the7thfire.com/new_world_order/illuminati/ (copy of the one above)

youngdan wrote:

Wilson was elected with 42% of the vote because it was highly unlikely that he would lose as the other 58% was split. The Bull Moose Party was gone by the 1916 election not to mind the 50s.

Be a surprise to Robert La Follette who ran for president in 1924, Robert La Follette, Jr who was a senator from the mid 30's to 1946 (it was actually Joe McCarthy who defeated him) or Henry A. Wallace who ran for president in 1948.

Recommended reading anyone?

Mike I am talking about The Bull Moose Party which existed just for one election cycle of 1912. Saying a fella running as a Progressive in 1924 is running on the Bull Moose Party is like saying Obama who calls himself Progressive is running on the Bull Moose Party ticket. People can come to their own conclusions about Colonel House but the bottom line line is Wilson signed the Reserve and income tax into law which is what the bankers desired. The federal reserve makes a profit and returns a good portion to the treasury. This is peanuts for public consumption. Billions was won and lost last week and if Saratoga had known in advance he could have sold Sterns and bought Morgan. Lasr Tuesday week the market rose 400 plus points with the surprise announcement of the 200 billion loan facility. If I had known that in advance I would have made a mint. Why do you think Blair is after getting the million dollar a year job in NY and another in London. Surely you don't think it is because he can read a company financial report better than anyone else

Kate. The book I prefer for plain talking is The Creature from Jeckyl Island. It is a subject that was designed to be confusing and dull so the public would not have an understanding of it. This book is easy reading. The easiest thing is to watch the 3 1/2 hour video that is linked earlier.

Kate P wrote:

Recommended reading anyone?

Limited reading experience here but as a historian of economics, John Kenneth Galbraith is widely regarded as the commentator and most accesibly populariser on the pre-dotcom era anyway. As a general read his History of Economics covers a lot but the book more relevant to this theme would be Money:Whence it Came Where it Went. A book of his I have yet to read in the Great Crash of 1929 (I think that's the name)

I've also read The Affluent Society and The New Industrial State although it was a decade ago... I haven't read much besides instead of some New Age green economics from around the same time. Maybe JKGalbraith was plenty for the classical side.

I thought you were going away ?