My unpublished (100,000 word) book “The Financial Jigsaw”, is being serialised here weekly in 100 Issues by Peter J Underwood, author
Last week closed the Chapter about debt but there will be more about this in the coming Issues. See here for last week: Issue 18 This week we will be examining how central banking works and dispelling some of the myths associated particularly around the Federal Reserve which is the most influential of all the central banks. This is because it controls the US dollar which is used throughout the world as a reserve currency with over 60% of all financial transaction taking place in US dollars.
CHAPTER 4
CENTRAL BANKING
“History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.”
James Madison, Jr. (1751-1836), 4th President of the United States (1809–1817).
“I care not what puppet is placed on the throne of England to rule the Empire. The man who controls Britain’s money supply controls the British Empire and I control the British money supply.”
Nathan Rothschild – Banker; after the Battle of Waterloo
Every country has its own central bank charged with many tasks; the main one is the central control of monetary policy. The most important one in the world is the Federal Reserve of the United States of America (known colloquially as the “Fed”).
There are twelve Federal Reserve Banks which form a major part of the Federal Reserve System and together they divide the nation into Federal Reserve Districts, and were created by the Federal Reserve Act of 1913 (see below). This book, ‘The Creature from Jekyll Island’ describes how the Fed was created in secret:
https://www.amazon.co.uk/Creature-Jekyll-Island-Federal-Reserve/dp/091298645X/ref=dp_ob_title_bk
The Fed banks are jointly responsible for implementing monetary policy set by the Federal Open Market Committee (FOMC). Each Federal Reserve Bank is also responsible for the regulation of the commercial banks within its own particular district, but until the 2008 crisis, investment banks were not part of the Federal Reserve System and operated independently. The situation is not clear cut and more detail can be found in this short article:
https://www.quora.com/Are-central-banks-private-or-state-owned-Is-there-truth-in-the-conspiracies
Most central banks are independent and privately owned, and some shareholders are commercial banks and ultra-rich banking families. The obvious exception is the Bank of England (BoE) which was ‘nationalised’ in 1946 and appears to be controlled by the UK government. It is these banking families who devised, over the centuries, the financial systems we use today throughout the world.
There are a group of six major central banks in the world, each with its own governor who decide and implement global financial policy independent of governments and politicians although every country has a central bank except three: Cuba, North Korea and Iran.
It may come as a surprise that our rulers are not who we are told they are: the politicians and bureaucrats all take some important orders from central bankers. Despite the substantial changes in the world economy during 2009 – 2017, the US Treasury market and Fed continues to exert significant influence over global interest rates regardless of other large economies including UK, China, Japan and Germany. This book: ‘The Web of Debt’ is well worth a read and explains much about how central banks operate:
https://www.amazon.co.uk/Web-Debt-Shocking-Truth-System/dp/0983330859
Yet the fact that national business cycles are not synchronized means that some economies are less well positioned to cope with higher interest rates. When the Federal Reserve was created in 1913 the US President of the day said:
“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.” – Woodrow Wilson, after signing the Federal Reserve into existence in 1913
History of central banking in America
In 1791, the first Secretary of the Treasury of the US, Alexander Hamilton, convinced the then new president George Washington to create a central bank for the country. Secretary of State Thomas Jefferson opposed the idea, as he felt that it would lead to speculation, financial manipulation, and corruption.
He was correct, and in 1811, its charter was not renewed by Congress. America got itself into economic trouble over the war of 1812 and needed money. In 1816, a ‘Second Bank of the United States’ was created. Andrew Jackson took the same view as Jefferson before him and, in 1836, succeeded in getting the bank dissolved.
It wasn’t until 1913 that the leading bankers of the USA succeeded in pushing through a third central bank, the Federal Reserve (The Fed). At that time, critics echoed the sentiments of Messrs Jefferson and Jackson, but their warnings were not heeded. For over 100 years, the USA has been saddled with a central bank, which has been manifestly guilty of speculation, financial manipulation, and corruption, just as predicted by Jefferson all those years ago.
From its inception, one of the goals of the bank was to create inflation. And, here, it’s important to emphasise the term “goals.” Inflation was not an accidental bi-product of the Fed, it was a goal.
During the last century, the Fed has often stated that inflation is both normal and necessary; yet historically, it has often been the case that an individual could go through his entire lifetime without inflation and without detriment to his economic life. Whenever the American people suffer as a result of inflation, the Fed is quick to falsely remind them that, without it, the country could not function correctly.
Creation of the Bank of England
When the Bank of England was created in 1694, by a Scotsman: William Paterson, he famously said: “The bank hath benefit of interest on all moneys which it creates out of nothing” (William Paterson). In 1977, the BoE set up a wholly owned subsidiary named, “Bank of England Nominees Limited” (BOEN), a private limited company with two of its one hundred £1 shares issued.
The objectives of the company are: “To act as Nominee or agent or attorney either solely or jointly with others, for any person or persons, partnership, company, corporation, government, state, organisation, sovereign, province, authority, or public body, or any group or association of them….” However, it is important to note a technicality: that BOEN is “no longer exempt from company law disclosure requirements”, as the written answer from the Lords’ Hansard on 26 April 2011 makes clear.
This means that BOEN is no longer granted an exemption, under Sec 796 of the Companies Act 2006, to the notification provisions required by Sec 793 as was the case previously. As stated in Hansard, the BOEN is a company set up with the intention of holding shares confidentially on behalf of “Heads of State” and certain others, presumably, HM the Queen and her “immediate family” and certain governmental bodies.
It is clear that the ‘ownership’ of the BoE is at least clouded enough to raise questions about who or what actually benefits (quo bono) from its activities. This book does not intend to draw on the many conspiracy theories which abound in the internet space. Suffice to say that there are very good reasons of national security and sound commercial practice that allows the ownership of the BoE to remain unpublished.
Because the world’s central banking systems are based on the British model perhaps a short history of the BoE will help to fit yet another jigsaw piece into the emerging pattern of banking in general.
England’s crushing defeat by France in the 1690 (Battle of Beachy Head) became the catalyst for England to rebuild itself as a major power. England had no choice but to build a powerful navy if it was to regain global control. No public funds were available, and the credit of William III’s government was so low in London that it was impossible for it to borrow £1,200,000 (at 8%) that the government needed.
In order to raise a loan, rich investors were offered the chance to put up money (i.e. subscribe to shares) in a company created in the name of the Governor and Company of the Bank of England. The bank was given exclusive possession of the government’s money, and was the only ‘limited liability’ corporation allowed to issue bank notes.
The lenders would loan the government cash in the form of gold and also issue notes against government bonds (IOUs issued by the government). The government’s requirement of £1.2m was raised from investors in 12 days; half of this was used to rebuild the Navy.
By way of note; the huge industrial effort needed, from establishing industrial works making essential materials, to agriculture feeding the increased strength of the Royal Navy, started to transform the economy. This helped the new Kingdom of Great Britain (England and Scotland was formally united in 1707) to become a powerful united states. The power of the navy made Britain the dominant world power in the late eighteenth and nineteenth centuries.
The Bank of England (BoE), formerly: “Governor and Company of the Bank of England”, is the central bank of the United Kingdom and the model upon which most modern central banks is based. Established in 1694, it is the second oldest central bank in the world and also acted as the English Government’s banker and remains the banker for HM Government.
The Bank was privately owned and operated from its foundation in 1694 until it was nationalized in 1946. In 1998, the Labour government revised the Bank of England’s charter and it became an independent public organisation, wholly owned by the Treasury Solicitor on behalf of the government, with independence in setting monetary policy. The Bank is one of eight banks authorised to issue banknotes in the United Kingdom but has a monopoly on the issue of banknotes in England and Wales and regulates the issue of banknotes by commercial banks in Scotland and Northern Ireland.
Objectives of the Bank of England
A primary task of a central bank is to act as a lender of last resort to the commercial banks and to raise finance for the government which it does by creating money ‘out of nothing’ via its client commercial banks, which by law it is allowed to do; and loaning the funds to the government in exchange for an IOU – in effect pieces of paper known as bonds or gilts which accumulate over the years and amount to the total debt owed by the government to its taxpayers; it is known as the National Debt.
Central banks act as counterparty to the commercial banks by assisting in overnight reconciliations of the commercial banks’ balances. The central bank can also borrow funds from their commercial bank clients which are called ‘deposits’ but are in fact loans to the central bank upon which is paid interest at the going rate.
Central banks also make loans to their commercial bank clients overnight during the balancing process or as lender of last resort. The central bank also stands in if a commercial bank is at risk of becoming insolvent when it can arrange for the troubled bank to be taken over by another stronger one. In times of crisis when there may be many banks in difficulty it will often arrange for a ‘bad bank’ to be set up allowing all the bad loans to be consolidated into one place and ensuring the troubled banks remain in business.
This is how the banks’ ‘musical chairs game’ begins because investors, who are now holding these government bonds, can use them as security to borrow more money from financial institutions (often in the City of London) and speculate (gamble) with it in risky markets and known as re-hypothecation.
Now that the financial institutions have possession of the bonds, they can actually ‘sell or lend’ them back to the central bank under QE conditions using the magic of the central banking system! It works so long as nobody stops the ‘music’. This merry-go-round of money is known as ‘repurchase agreements’ or shortened to ‘repos’ which was briefly noted in Chapter 3.
The Central Bank’s Central Bank
In the 21st century bankers effectively rule our world. Silently, without much public fuss or discussion, a new ruling class has arisen in the richer industrialised nations. These men and women are unelected and tend to keep in the shadows unlike their mouthpieces, the politicians.
These people are the world’s central bankers. Approximately every six weeks they meet in Basel, Switzerland, for secret discussions on monetary policy and global financial strategic planning where they work together to perpetuate the global system of banking and finance.
Basel is also the home of the Bank for International Settlements (BIS) of which you have probably never heard. It is an organisation of central banks which “fosters international monetary and financial cooperation”, serves as a bank for central banks and is not accountable to any single nation or government. It provides banking services only to central banks and other connected international organizations. The website is here: https://www.bis.org/
The BIS was established by an inter-governmental agreement in 1930 by the Rothschild Family and was originally intended to facilitate reparations imposed on Germany by the Treaty of Versailles at the end of the First World War The book “Lords of Finance” by Liaquat Ahamed describes in detail this process. https://www.amazon.co.uk/Liaquat-Ahamed/e/B001KD0PL0
According to its charter, shares in the bank could be held by individuals and non-governmental entities and enjoy immunity in all the contracting states. It is now wholly owned by BIS members (central banks) but still operates in the private market as a counterparty, asset manager and lender for central banks and international financial institutions. Profits from its transactions are used, among other things, to fund the banks other international activities including dealings in gold.
The decisions made at the central banks and BIS meetings affect the entire world and yet the public generally has no idea what these banks do. These bankers now wield at least as much influence over the lives of ordinary citizens as prime ministers and presidents of the past.
Since the financial crisis in 2008, these central bankers have so far saved the world’s economy from total collapse but at the same time have created potentially more problems through quantitative easing (QE) policies that are effectively creating money out of nothing.
The quantities involved are gargantuan: over 20 trillion US dollars denominated in dollars, euro, Yen, UK Pounds as well as other smaller countries’ currencies. At the end of 2016, the balance sheets of the world’s largest central banks, those of the G20 nations and the Eurozone, including Sweden and Switzerland, totaled 21.4 trillion US dollars according to Bank of Canada calculations from publicly available data. A public information site is worth noting: https://www.brookings.edu/research/think-tank-20-the-g-20-and-central-banks-in-the-new-world-of-unconventional-monetary-policy/
To be continued next Saturday
The US Central Bank is like an Ice Berg; since it is not audited, the Evil we see is only a fraction of it’s total Evil. Unknown billions of dollars go out it’s “backdoor” to purchase Businesses, CEOs, Media, Professors, Clergy, Politicians and other Criminals etc.
You are so right Robert. This video will explain how it works for the Brits in cahoots with the Fed et al: