WEBVTT NOTE The Immoral Federal Reserve 1 00:00:00.000 --> 00:00:05.000 It's a great time to be talking about the Fed, right? It's all in the news. 2 00:00:05.000 --> 00:00:10.000 Hitherto, I mean, most of the time, all we know about the Fed is it's, you know, it's the name on the bill. 3 00:00:10.000 --> 00:00:16.000 It says Federal Reserve note. And otherwise, we're actually not supposed to be too interested in it. 4 00:00:16.000 --> 00:00:22.000 I think that's deliberate. It's supposed to be very mysterious, very complicated. 5 00:00:22.000 --> 00:00:25.500 This is something other people are handling. We're not supposed to be interested in it. 6 00:00:25.500 --> 00:00:31.500 On the other hand, it's, I would argue, an extremely interesting subject because we're being ripped off. 7 00:00:31.500 --> 00:00:39.500 I mean, it's a giant rip-off operation and the key reason that the Federal Reserve, which is this federal agency in Washington, 8 00:00:39.500 --> 00:00:52.500 its headquarters in Washington, it has subsidiary banks in different cities as one in Atlanta, Cleveland, New York primarily, all other places across the country. 9 00:00:52.500 --> 00:00:58.500 But why it's an immoral operation is it's essentially a giant counterfeiting machine. 10 00:00:58.500 --> 00:01:03.500 Now we know if a private crook has got a counterfeiting machine, these days, of course, it's not a printing press. 11 00:01:03.500 --> 00:01:10.500 I guess it would be a color copying machine is the way they do it. 12 00:01:10.500 --> 00:01:16.500 And if somebody's copying $20 bills and spending those, we all know it's a crime. 13 00:01:16.500 --> 00:01:23.500 and why is it a crime because it's diluting the value of other people's $20 bills and making them worth less. 14 00:01:23.500 --> 00:01:34.500 So what the private counterfeiter does on a very small retail basis, the Federal Reserve does on a huge international basis with far more damage. 15 00:01:34.500 --> 00:01:41.500 So one of the things that happens with the Federal Reserve, by the way this is not an institution that has existed all during American history, 16 00:01:41.500 --> 00:02:11.500 1913, signed into law by Woodrow Wilson, although supported by President Taft before him, it was, the legislation was drawn up in Jekyll Island, Georgia, not that far from here at the private club of J.P. Morgan and we're hearing again the name J.P. Morgan these days, he was the major banker of that era along with John D. Rockefeller Jr. and other representatives of the big banks and they wrote up this, they wrote up the Federal Reserve Act 17 00:02:11.500 --> 00:02:21.500 And the propaganda was that if only we would adopt the Federal Reserve Act, it would prevent the big bankers from doing damage to average Americans. 18 00:02:21.500 --> 00:02:29.500 Of course, it was written by the big bankers in order to enrich themselves and enrich their partner of the government. 19 00:02:29.500 --> 00:02:37.500 So the Federal Reserve immediately started doing what it was founded to do, that is inflate, printing up money, 20 00:02:37.500 --> 00:02:52.500 Literally printing up notes and also expanding bank balances and operating through the either buying or selling Federal Treasury notes in order to enable the government to do all kinds of spending. 21 00:02:52.500 --> 00:02:56.500 It would not be otherwise able to do if it simply had to tax or to borrow. 22 00:02:56.500 --> 00:03:01.500 So the first big inflation took place to fund World War I. 23 00:03:01.500 --> 00:03:10.000 There was an artificial boom similar to what we've experienced since 9-11, then the inevitable bust. 24 00:03:10.000 --> 00:03:16.000 But thank goodness we had a president when the bust came in 1920 and 21, Warren G. Harding, 25 00:03:16.000 --> 00:03:21.500 one of my favorite presidents. He's one of the most hated and dist presidents because he did nothing. 26 00:03:21.500 --> 00:03:30.200 When 27 00:03:31.500 --> 00:04:01.500 The Federal Reserve inflated all during the 1920s. It didn't show up so much in general prices, although prices stayed stable, which is actually always a dangerous sign because in a free market economy, given the vast increase in production that capitalism provides, and without a money supply that's being artificially increased, prices tend to gently decrease. So when prices are not going up, prices are going down. 28 00:04:01.500 --> 00:04:13.500 The stock market boom, Florida land boom, other kinds of boom that took place in the 1920s, and then again, the bust followed. 29 00:04:13.500 --> 00:04:24.500 Unfortunately, the president at that time was Herbert Hoover, followed by Franklin Roosevelt, who almost like they had a plan, how can we do everything wrong? 30 00:04:24.500 --> 00:04:29.140 How can we do everything that will make sure that instead of being a short, sharp downturn, 31 00:04:29.140 --> 00:04:35.220 and then a chance for restored growth and real prosperity, let's do everything we can 32 00:04:35.220 --> 00:04:41.300 to lengthen and deepen this and turn it into what became, of course, the Great Depression. 33 00:04:41.300 --> 00:04:46.420 It was at least 16 years before we were out of the Great Depression. It was not until 34 00:04:46.420 --> 00:04:52.900 after World War II that the prosperity of 1929 began to be recovered. Probably it was 35 00:04:52.900 --> 00:05:07.900 This was late, probably not until 1946 and 47 even, so this was a horrendous long period of time, 25% unemployment for some of it, of course a horrible war, I mean a lot of other things took place during those years. 36 00:05:07.900 --> 00:05:23.900 Two of the things that both Herbert Hoover and Franklin Roosevelt attempted to do was to hold up prices, to keep prices from falling, and to bail out failing industries, similar to exactly what's going on today. 37 00:05:23.900 --> 00:05:34.900 So because they refused to allow prices to fall, including prices of labor, in the Depression there was a vast deflation, money became more valuable. 38 00:05:34.900 --> 00:06:04.900 So everything should cost less in that kind of a situation, including wages, because money bought more, but the Federal Government did everything possible to keep wages high, thus leading to, again, a 25% unemployment rate, a horrific, horrific unemployment rate, bailed out failing industries, keeping businesses that should go out of business, and allowing those capital and labor resources to be used in productive ways. 39 00:06:04.900 --> 00:06:10.900 The business in operation, artificial like that, is destruction of wealth. 40 00:06:10.900 --> 00:06:19.900 It doesn't actually help the economy, it hurts the economy, although some people, of course, the owners of that particular firm are very happy to be bailed out. 41 00:06:19.900 --> 00:06:24.900 So it took, again, a very long time to get out of that. 42 00:06:24.900 --> 00:06:27.900 We had other booms and busts since then. 43 00:06:27.900 --> 00:06:35.900 Bad time in the 1970s after President Richard Nixon cut the final tie between the dollar and gold. 44 00:06:35.900 --> 00:06:42.900 Ron Paul talks about how this was the one event that got him into politics on August 15th, 1971, 45 00:06:42.900 --> 00:06:47.900 when Nixon said that from now on, he didn't put it in these terms, 46 00:06:47.900 --> 00:06:50.900 from now on the Federal Reserve can print however much money it wants, 47 00:06:50.900 --> 00:06:54.900 can create however much money, there will be no limitation on it. 48 00:06:54.900 --> 00:06:59.900 Before that, there had been some limitation because there was a partial gold standard. 49 00:06:59.900 --> 00:07:07.900 He also put price and wage controls on because prices were going up too high. 50 00:07:07.900 --> 00:07:13.900 This is a separate subject, but when you put price and wage controls on, you artificially hold down 51 00:07:13.900 --> 00:07:20.900 prices and wages that should be going up because at the same time, this is why governments pull that sort of a trick, 52 00:07:20.900 --> 00:07:29.900 They're vastly increasing inflation and indeed that's what Richard Nixon did in the 1970s and we had a bad recession, 53 00:07:29.900 --> 00:07:34.900 we had double-digit interest rates, double-digit price increases, very, very bad time. 54 00:07:34.900 --> 00:07:46.900 That only ended when Paul Volcker, who was the chairman of the Fed in 1980, 79 and 80, and subsequently stopped the inflation. 55 00:07:46.900 --> 00:07:52.900 that, again, was a recession, but we got over it relatively easily. 56 00:07:52.900 --> 00:07:59.900 There was another huge monetary influx, thanks to the Federal Reserve, after 9-11. 57 00:07:59.900 --> 00:08:05.900 The Bush administration, I guess like any politicians, were terrified of a falling stock market. 58 00:08:05.900 --> 00:08:11.900 And so in order to prevent a falling stock market, they turned on the fire hydrant. 59 00:08:11.900 --> 00:08:17.540 I mean, the Fed always inflates at one rate or another, but starting after 9-11, just 60 00:08:17.540 --> 00:08:25.940 a vast output of new money. And one of the things Ludwig von Mises explained this in 61 00:08:25.940 --> 00:08:31.460 1912 in his Theory of Money and Credit, F. A. Hayek, Murray Rothbard and others building 62 00:08:31.460 --> 00:08:37.220 on this, that when a central bank like the Federal Reserve increases the money supply 63 00:08:37.220 --> 00:08:47.220 It decreases the value just like a counterfeiting operation of all the other dollars in existence, but it also does something else that's even worse than that. 64 00:08:47.220 --> 00:08:56.220 And I mentioned one other thing it does, it results in a redistribution of wealth so that when the people who get the new money, the newly printed, the newly created money first, 65 00:08:56.220 --> 00:09:05.220 the government, big bankers, military industrial complex, government contractors in general and so forth, are able to spend that money before it loses value. 66 00:09:05.220 --> 00:09:11.900 of Value, and other people in society, poor people, retired people, rural people is even 67 00:09:11.900 --> 00:09:18.380 an interesting difference there, who give the money last. It's where after it's already 68 00:09:18.380 --> 00:09:24.180 lost its value. So there's in effect a transfer of wealth from sort of the poorest and most 69 00:09:24.180 --> 00:09:30.400 vulnerable sections of society to the richest and most powerful in cahoots with the government. 70 00:09:30.400 --> 00:09:34.300 Another reason the Fed is immoral. But the worst thing that when the Federal Reserve 71 00:09:34.300 --> 00:09:40.300 What does this sort of fire hydrant operation with new money is it creates the business cycle. 72 00:09:40.300 --> 00:09:49.300 Basically what happens is it holds down the interest rates that businessmen borrow for new projects below the market rate. 73 00:09:49.300 --> 00:09:53.300 We saw this since 9-11, very, very low interest rates. 74 00:09:53.300 --> 00:10:01.300 We saw it in housing mortgages, people could get it in construction loans, in all sorts of business loans. 75 00:10:01.300 --> 00:10:05.060 What this leads to is people making mistakes. 76 00:10:05.060 --> 00:10:08.240 They buy houses that really are more than they can afford. 77 00:10:08.240 --> 00:10:11.020 They undertake construction projects 78 00:10:11.020 --> 00:10:13.180 that look like a great idea at the time, 79 00:10:13.180 --> 00:10:16.260 all the condominium buildings in Las Vegas 80 00:10:16.260 --> 00:10:20.260 or in Miami or in California, 81 00:10:20.260 --> 00:10:22.880 that look like just sure profits. 82 00:10:22.880 --> 00:10:24.860 People are gonna be clamoring to move in, 83 00:10:24.860 --> 00:10:26.500 but when the bust comes, 84 00:10:26.500 --> 00:10:29.120 it turns out these were very, very bad ideas. 85 00:10:29.120 --> 00:10:42.120 And an interesting point of this is the economic damage is done during the boom, not during the bust. It's during the boom when these bad decisions are made and then they're cleaned up during the bust. 86 00:10:42.120 --> 00:10:53.120 So once the Federal Reserve has turned on the money hydrant and put out this vast amount of money through the banking system, that's when the damage is done. 87 00:10:53.120 --> 00:11:12.120 So the damage has been done, then your choices are either let a sharp, short correction take place that you can then build for the future or to take the Hoover-Roosevelt Road and try to prevent that from happening and therefore make the recession into a long-lasting depression. 88 00:11:12.120 --> 00:11:41.120 So right now, this is the situation we're in, and the Democrats and Republicans seem to be dedicated to the idea of not allowing prices to fall, keeping housing prices up, keeping failing industries in existence, whether it's J.P. Morgan, Morgan Stanley Company, whether it's Goldman Sachs, whether it's General Motors, Chrysler, Ford, they're all wanting to get in on the act and be bailed out. 89 00:11:41.120 --> 00:11:43.620 By the way, it looks like they're bailing out everybody but you. 90 00:11:43.620 --> 00:11:47.620 Just to let you know that they're not taking over your bad debts and paying them. 91 00:11:47.620 --> 00:11:52.620 But all the powerful people connected with the government, they are indeed doing that. 92 00:11:52.620 --> 00:11:59.120 So it's a very scary situation right now. Who knows what they're going to do? 93 00:11:59.120 --> 00:12:04.120 Ron Paul, I was talking to him this morning and he said he'd gone to a dinner meeting 94 00:12:04.120 --> 00:12:07.120 of all the Republican members of the House Banking Committee. 95 00:12:07.120 --> 00:12:08.840 and he said for the first time 96 00:12:08.840 --> 00:12:11.480 they were all saying, hey, what's happening? You know, what is this? 97 00:12:11.480 --> 00:12:13.280 He said normally they're not. 98 00:12:13.280 --> 00:12:16.760 They know everything and they're not asking him, but he said the one thing that struck him was 99 00:12:16.760 --> 00:12:18.880 that they're all terrified. 100 00:12:18.880 --> 00:12:21.360 They're all terrified in Washington. 101 00:12:21.360 --> 00:12:23.000 They're terrified about 102 00:12:23.000 --> 00:12:24.200 not about you, 103 00:12:24.200 --> 00:12:26.660 not about your living standard, not about your family, 104 00:12:26.660 --> 00:12:28.120 not about your savings, 105 00:12:28.120 --> 00:12:29.520 not about your job. 106 00:12:29.520 --> 00:12:32.720 Terrified, of course, about their own power and their own jobs 107 00:12:32.720 --> 00:12:36.440 because this is a very destabilizing situation for the government when it causes 108 00:12:36.440 --> 00:12:38.820 this kind of economic train wreck. 109 00:12:38.820 --> 00:12:39.660 So what are they doing? 110 00:12:39.660 --> 00:12:43.520 Are they letting the short, sharp correction take place? 111 00:12:43.520 --> 00:12:45.900 Or are they, again, they're doing the Hoover Roosevelt thing. 112 00:12:45.900 --> 00:12:48.800 They're trying to keep up housing prices. 113 00:12:48.800 --> 00:12:51.080 They're bailing out failing industries. 114 00:12:51.080 --> 00:12:54.560 To keep a Goldman Sachs in business 115 00:12:54.560 --> 00:12:56.280 when it should go out of business 116 00:12:56.280 --> 00:13:00.120 is, it's a ripoff of the average person. 117 00:13:00.120 --> 00:13:03.840 It's a reward to the very wealthy guys who own the firm. 118 00:13:03.840 --> 00:13:05.700 And it's the destruction of wealth, 119 00:13:05.700 --> 00:13:35.700 the wealth that ought to be being used in a much more effective and productive manner than by the losers who set up these companies and benefited so much from the boom and now want to be saved in the sort of socialism for the rich that the federal government specializes in and of course the Federal Reserve specializes in so here the so in one aspect I would say this looks it looks bleak it looks like they're going to really do more damage to us it looks like 120 00:13:35.700 --> 00:13:38.340 We're all going to be poorer. 121 00:13:38.340 --> 00:13:41.140 Inflation is already running by any honest measure 122 00:13:41.140 --> 00:13:41.940 or double digits. 123 00:13:41.940 --> 00:13:44.820 Any of us who visit a supermarket know that's the case. 124 00:13:44.820 --> 00:13:48.100 This talk about 3%, 4%, 5% inflation is ridiculous. 125 00:13:48.100 --> 00:13:49.620 It's much higher than that. 126 00:13:49.620 --> 00:13:50.820 Maybe it's going to go to what it did 127 00:13:50.820 --> 00:13:51.940 in the Nixon administration. 128 00:13:51.940 --> 00:13:56.580 Maybe we're going to see 18%, 19%, 20% price increases. 129 00:13:56.580 --> 00:13:58.820 That's making us all poorer 130 00:13:58.820 --> 00:14:00.740 because our money buys less and less 131 00:14:00.740 --> 00:14:03.220 and has many other bad effects too. 132 00:14:03.220 --> 00:14:11.220 So that's not good. Will they actually make this a very, very long and deep procession? It's possible. 133 00:14:11.220 --> 00:14:20.220 On the bright side of things, and I think there always is a bright side, I mentioned this is a very destabilizing thing for the government. 134 00:14:20.220 --> 00:14:26.220 Here they have held themselves out as the, they talk about the people on Wall Street pretending to be masters of the universe. 135 00:14:26.220 --> 00:14:31.220 In Washington D.C. they think they're masters of the universe. They think they can do anything. 136 00:14:31.220 --> 00:14:38.220 I think they can wage the magic money wand and cure any problem, but it's not true. 137 00:14:38.220 --> 00:14:44.220 And I think that one of the reasons they're terrified is they've always thought the Federal Reserve could always take care of anything. 138 00:14:44.220 --> 00:14:52.220 By monetary depreciation, by the destruction of the dollar, by bailing out people, could always fix things, paper over the problem, keep things going, 139 00:14:52.220 --> 00:14:57.220 and they'd all still be enjoying their jobs and their power in Washington. 140 00:14:57.220 --> 00:15:16.220 This time they're worried. It may be that the Fed can't do it. It may be that this vast bailout, and probably we're talking much more than $700 billion, or talking undoubtedly over a trillion dollars, that we're looking at probably the first trillion dollar federal budget deficit in effect. 141 00:15:16.220 --> 00:15:22.700 so the effects of this are very very bad even aside from from from our own lives 142 00:15:22.700 --> 00:15:27.340 it probably means at least potentially means the end of the dollar is the world 143 00:15:27.340 --> 00:15:32.500 reserve currency which is a major prop of the the federal government's 144 00:15:32.500 --> 00:15:36.700 activities all over the world make make those much more difficult but it also it 145 00:15:36.700 --> 00:15:41.660 also undermines legitimacy governments are always very concerned about 146 00:15:41.660 --> 00:15:46.360 about Legitimacy, making people feel that they should obey them. 147 00:15:46.360 --> 00:15:48.000 Anything that undermines that legitimacy, 148 00:15:48.000 --> 00:15:50.680 they very much dislike. 149 00:15:50.680 --> 00:15:53.640 So the fact that they're all scrambling around, 150 00:15:53.640 --> 00:15:58.680 as Tom Woods mentioned, so 7% of the American people 151 00:15:58.680 --> 00:16:00.920 endorse this bailout, and 93% of us 152 00:16:00.920 --> 00:16:04.000 think it's a terrible idea, and rightly so. 153 00:16:04.000 --> 00:16:05.340 So here they're about to do something 154 00:16:05.340 --> 00:16:07.720 that virtually everybody thinks is a ripoff, 155 00:16:07.720 --> 00:16:10.160 and they're right, it is a ripoff, 156 00:16:10.160 --> 00:16:14.960 Something that also is not going to work even by their own standards. 157 00:16:14.960 --> 00:16:17.200 So they're being undermined. 158 00:16:17.200 --> 00:16:18.600 They're very worried. 159 00:16:18.600 --> 00:16:23.000 It may make it difficult for them to do exactly what they want to do. 160 00:16:23.000 --> 00:16:26.240 It certainly is going to make it impossible for them to do what they think 161 00:16:26.240 --> 00:16:30.920 they're going to do in terms of fixing everything. 162 00:16:30.920 --> 00:16:32.680 So I guess we've got interesting times ahead. 163 00:16:32.680 --> 00:16:38.220 In some sense, Wall Street has seized the Treasury Secretary's office. 164 00:16:38.220 --> 00:17:08.220 So under this new bailout bill, the Treasury Secretary, who is a representative of Wall Street, Henry Paulson, former CEO of Goldman Sachs, now using taxpayer money to bail out with many billions of dollars, his former and probably future employer, I don't know how he used to own 500 million dollars of Goldman Sachs stock, does he still? I don't know, but I'm suspicious. So here he is enriching himself, enriching his pals, 165 00:17:08.220 --> 00:17:13.220 and not being able to be questioned by any court in this bill. 166 00:17:13.220 --> 00:17:18.220 Nothing the Treasury Secretary does in terms of bailouts can be questioned by any court under any circumstances. 167 00:17:18.220 --> 00:17:21.220 And it even gives him power in a sense independent of the President. 168 00:17:21.220 --> 00:17:29.220 So it's in effect Wall Street taking over permanently, I guess, the office of the Secretary of the Treasury. 169 00:17:29.220 --> 00:17:33.220 Barack Obama said if he were elected President, he would want to keep Henry Paulson on, 170 00:17:33.220 --> 00:17:44.020 John, either as Treasury Secretary or as some sort of overseer to continue the bailout into his administration. 171 00:17:44.020 --> 00:17:49.020 Barack Obama's biggest donors are from Wall Street. John McCain's biggest donors are from Wall Street. 172 00:17:49.020 --> 00:17:53.420 So we've sort of got Wall Street candidate A and Wall Street candidate B. 173 00:17:53.420 --> 00:18:02.420 But I think that, my guess is that their power is going to be massively undermined even though they think they're increasing their power. 174 00:18:02.420 --> 00:18:32.420 I think that it's actually going to be undermined and I think it's just a slight crack in the climate of opinion which for so long has been the Federal Reserve can do no wrong, Federal Reserve is wonderful, Federal Reserve is necessary to civilize life, and all the rest of the things that are either explicitly or implicitly taught to us. Federal Reserve is now being undermined in people's minds. It's also engaging in a seizure of regulatory power. They want to take over other regulatory agencies, centralize all regulatory power within the central bank. 175 00:18:32.420 --> 00:18:45.420 It's an alarming thing. It's maybe another thing like the Great Society or the New Deal or what Nixon did with ending the gold standard. 176 00:18:45.420 --> 00:18:54.420 It's a tremendously interesting period of history to be living in. But I don't think all the news is bad, I think because they can't do what they want to do. 177 00:18:54.420 --> 00:18:58.220 No politician wants to believe that such a thing is economic law. 178 00:18:58.220 --> 00:19:04.220 They all think they should be king canoed and be able to order the tide not to come in, but they can't do it. 179 00:19:04.220 --> 00:19:11.420 There are economic laws. If A, then B. Certain things follow from certain things they do. 180 00:19:11.420 --> 00:19:15.720 They think that by just using the power of the gun or the power of the printing press, 181 00:19:15.720 --> 00:19:21.620 they can prevent bad consequences from happening, including bad consequences for themselves, but they can't. 182 00:19:21.620 --> 00:19:38.620 So this is a revolutionary moment. People in this country are, I think for the first time, open to hearing about the Fed, about the Treasury, about what's wrong with the whole financial system, which is also based on banks that are inherently bankrupt because of fractional reserves. 183 00:19:38.620 --> 00:19:47.620 Your money's not in the bank. If a significant number of customers go to a bank to try to get their money out, the bank has to close its doors, unless it's bailed out by the Federal Government. 184 00:19:47.620 --> 00:19:54.620 So the whole system is very, very shaky. It's revolutionary. Maybe everything is going to go for the worst. 185 00:19:54.620 --> 00:20:02.620 I tend to think that's not going to be the case, although they are. The fact that it's absolutely true that we're all going to be poorer. 186 00:20:02.620 --> 00:20:08.620 Maybe not some of the people on Wall Street. They'll do very well. But average Americans are going to be poorer. 187 00:20:08.620 --> 00:20:11.620 I think we need to know who to blame in this situation. 188 00:20:11.620 --> 00:20:22.620 And the villain right at the top of the list is the Central Bank of the United States, the Federal Reserve, now headed by Ben Bernanke, previously headed by Alan Greenspan. 189 00:20:22.620 --> 00:20:33.620 And their most recent crimes, the vast monetary inflation that they undertook in response to 9-11. 190 00:20:33.620 --> 00:20:35.620 Thank you very much. 191 00:20:35.620 --> 00:20:37.620 Thank you very much.