Federal Reserve

The Federal Reserve, established in 1913, is the central banking system of the United States. Born from financial crisis and designed in secret, the Fed represents the institutional mechanism through which the dollar is managed—and systematically debased.

Genesis in Crisis

The Federal Reserve was created in response to the Panic of 1907, when the collapse of the Knickerbocker Trust Company triggered widespread bank runs and threatened complete financial collapse. With no federal mechanisms to regulate the banking system or provide emergency liquidity, private financiers like J.P. Morgan were forced to intervene to prevent catastrophic economic failure. This crisis demonstrated the vulnerability of an unregulated banking system and provided the impetus for centralized monetary control.

The Jekyll Island Conspiracy

In 1910, Senator Nelson Aldrich organized a clandestine meeting at a remote hunting lodge on Jekyll Island, off the coast of Georgia. The meeting was "held in complete cloak-and-dagger secrecy, with the attendees using assumed names and traveling to the island separately to avoid arousing suspicion." Participants included some of the era's most powerful bankers and financiers: J.P. Morgan, Paul Warburg, Frank Vanderlip, and others. Over nine days, they drafted the blueprint for America's central bank.

The Jekyll Island plan formed the basis for the Federal Reserve Act, passed by Congress in 1913. The Act established a decentralized network of regional Federal Reserve Banks owned by member banks, overseen by a Federal Reserve Board in Washington, D.C., responsible for setting monetary policy.

Structure and Secrecy

The Federal Reserve System was designed to appear decentralized, with regional banks across the country, but power ultimately concentrated in the Board of Governors appointed by the President. "To this day, the Federal Reserve is not a democratic institution. Its policy-making members are political appointees. They govern by committee. Meetings are held in secret."

Monetary Powers

Under the Federal Reserve Act, the Fed was designated as the "lender of last resort," responsible for providing liquidity during financial crises, regulating the money supply, and managing interest rates. The Federal Reserve sets reserve requirements for private banks: "By changing the reserve requirement, the Federal Reserve can literally create and destroy money in the economy at will."

The Fed employs three main monetary policy tools: open market operations (buying and selling government securities), the discount rate (the interest rate for banks borrowing from the Fed), and reserve requirements (the percentage of deposits banks must hold in reserve).

The Debasement Accelerator

Following Nixon's 1971 decision to abandon the gold standard, the Federal Reserve gained unprecedented power to expand the money supply without constraint. Data shows how this watershed moment coincided with dramatic increases in economic inequality, household debt, and asset bubbles. The question posed by the website "WTF Happened in 1971?" reflects growing recognition that severing the dollar from gold fundamentally altered American economic dynamics.

The Federal Reserve's role in enabling government deficit spending through monetary expansion demonstrates that centralized control of money creation inevitably leads to currency debasement and wealth transfer from citizens to the state through inflation.