5.40 Our Current System: How Did We Get Here?
1 Conway, Moncure Daniel, Editor. The Writings of Thomas Paine, Volume 3: 1791– 1804, “Chapter 26: The Decline and Fall of the English System of Finance.” New York and London: G.P. Putnam’s Sons, The Knickerbocker Press. p.309. Accessed on Google Books. https://books.google.com/books?id=-UVHAQAAMAAJ
2 Zarlenga, Ibid. “Causes of the Revolution,” pp 376–386; “Causes of the Civil War,” pp. 453–478.
3 Eisler, Riane. The Chalice and the Blade: Our History Our Future. San Francisco, California: HarperOne, 1988.
4 This statement by Grover Norquist is widely quoted. Here’s just one example: Jeffery, Clara & Monika Bauerlein. “The Job Killers: Why are Republicans determined to snuff the recovery?” Mother Jones, November/December 2011 issue. https://www.motherjones.com/politics/2011/10/republicans-job-creation-kill/
5 Kelly, Marjorie. The Divine Right of Capital: Dethroning the Corporate Aristocracy. San Francisco, CA: Berrett-Koehler Publishers, Inc., 2001.
6 Zarlenga, Ibid. “Chapter 14, U.S. Colonial Moneys,” pp.361–388.
7 Zarlenga, Ibid. “Chapter 14, U.S. Colonial Moneys,” p. 380.
8 Zarlenga, Ibid. p. 405
5.41 The Constitution on Money
9 Johnson, Samuel, A.M. A Dictionary of the English Language in which The Words are deduced from their originals, illustrated in their Different significations by Examples from the best writers. In Two Volumes. London: J. and P. Knapton, MDCCLV, p.404.
10 Webster, Noah. 1828. An American Dictionary of the English Language. Available online: http://webstersdictionary1828.com COIN. http://webstersdictionary1828.com/Dictionary/coin MONEY. http://webstersdictionary1828.com/Dictionary/Money DOLLAR. http://webstersdictionary1828.com/Dictionary/Dollar
5.42 The US Federal Reserve System
11 Federal Reserve. The Federal Reserve Act, as amended, and current is provided @ https://www.federalreserve.gov/aboutthefed/fract.htm
12 Greider, William. Secrets of the Temple: How the Federal Reserve Runs the Country. First Touchstone Edition. New York, NY: Simon & Schuster, 1989, p. 276.
13 Goodfriend, Marvin and Monica Hargraves. “A Historical assessment of the Rationales and Functions of Reserve Requirements.” Economic Review, Federal Reserve Bank of Richmond, March/April 1983. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.438.9989&rep=rep1&type=pdf
14 William, John. “No. 515 – Public Comment on Inflation Measurement and the Chained-CPI (C-CPI).” Shadow Government Statistics. April 8, 2013. http://www.shadowstats.com/article/no-438-public-comment-on-inflation-measurement
15 Federal Reserve Act, Section 10. https://www.federalreserve.gov/aboutthefed/section10.htm
5.43 The Fed’s Own Words
16 US Federal Reserve. The Federal Reserve; Its Purposes and Functions (9th Edition, June, 2005). A Federal Reserve System Publication. A new Edition was issued in 2016, and can be accessed at http://www.federalreserve.gov/pf/pdf/pf_complete.pdf
NOTE: Unless otherwise noted, all quotes in the next few sections are from this document
17 Zarlenga, Ibid. p.406.
5.44 The Fed’s Goals
18 Board of Governors of the Federal Reserve System. F_AQS: “What are the Federal Reserve’s objective in conducting monetary policy?”_ Updated March 21, 2018. https://www.federalreserve.gov/faqs/money_12848.htm
19 Federal Reserve Board of Governors. Finance and Economics Discussion Series, Divisions of Research & Statistics and Monetary Affairs. Seth B. Carpenter and Selva Demiralp. “Money, Reserves, and the Transmission of Monetary Policy: Does the Money Multiplier Exist?” Finance and Economics Discussion Series: 2010–41. Washington D.C., 2010. https://www.federalreserve.gov/PUBS/FEDS/2010/201041/201041pap.pdf
5.45 The Duties of Our Central Bank
20 Well, the bankers didn’t exactly say that. But, they did acknowledge that the private banks and the central banks are the money creators. While these new reports got a lot right, monetary reforms have noted, they got some things wrong, too.
GREAT BRITAIN: Bank of England. McLeay, Michael, Amar Radia and Ryland Thomas of the Bank’s Monetary analysis Directorate. “Money Creation in the Modern Economy.” Quarterly Bulletin 2014 Q1. https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy
GERMANY: Deutsche Bundesbank. “The Role of Banks, Non- Banks and the Central Bank in the Money Creation Process”. Deutsche Bundesbank Monthly Report, 69/4 (April 2017): 13–33. https://www.bundesbank.de/Redaktion/EN/Downloads/Publications/Monthly_Report/2017/201704_monthly_report.pdf?__blob=publicationFile_ Deutsche Bundesbank. “How Money is Created”. Topics. 4 Apr 2017. __https://www.bundesbank.de/Redaktion/EN/Topics/2017/2017_04_25_how__money_is_created.html?
21 Consumer Financial Protection Bureau. https://www.consumerfinance.gov/
22 United States Congress. S.370: Repeal CFPB Act. Introduced February 14, 2017. An earlier version, S. 1804 was introduced in July 2015 in the 114th Congress. https://www.govtrack.us/congress/bills/115/s370
23 The Republican Party. “The Republican Platform 2016.” Paid for by the committee on Arrangements for the 2016 Republican National Convention. p.3. http://www.gopconvention2016.com https://prod-cdn-static.gop.com/media/documents/DRAFT_12_FINAL-ben_1468872234.pdf
5.46 Who Creates New Money?: A Privileged Elite of Private Bankers
24 Federal Deposit Insurance Corporation. “Historical Timeline 1900–1919.” https://www.fdic.gov/about/history/timeline/1900-1919.html
25 FRED. Economic Research; Federal Reserve Bank of St. Louis. “Commercial Banks in the U.S. (Q4)1983 to (Q4)2017” https://fred.stlouisfed.org/series/USNUM
NOTE: It’s taken me years to write this and I’ve updated information many times. Some changes are stunning. The number of banks reported by the St. Louis FED dropped 8 percent in just 2 years, from 5,309 in 2015 to 4,888 in 2017. The graph is nearly a straight line down. That’s a rapid and exponential monopolization. (And, The FDIC has slightly different numbers…4,918 institutions). https://www5.fdic.gov/hsob/HSOBRpt.asp
26 FRED: Economic Research; Federal Reserve Bank of St. Louis. “5-Bank Asset Concentration for United States (1996–2015).” Updated August 30, 2017. https://fred.stlouisfed.org/series/DDOI06USA156NWDB#0
NOTE: The Canadian Toronto-Dominion Bank has a subsidiary, TD Bank, a Delaware Corporation, 100% owned by foreigners, that is the eighth largest bank in the US, and 100% foreign owned. The Canadian bank, in its 2017 Financial Statement (as filed on November 30, 2017) states it has assets of $1,278,995 million, and $75,190 million in total equity. This is an equity ratio of 5.9%. https://www.td.com/document/PDF/investor/2017/2017-Q4_Annual_Financial_Statements.pdf
The Federal Reserve Statistical Release on large Commercial Banks, as of September 30, 2017, lists TD Bank as the 8th largest bank in the US with $285,495 million in assets. Remember bank assets, less equity, are some form of IOU from the public, that the bank exchanged for their own IOUs in the form of Federal Reserve Notes (our money). This is the money creation process, and foreigners control this chunk of it.
5.47 How is New Money Created: Debt-Credit Creates the Money Supply
27 US Federal Reserve. Federal Reserve Bank of Chicago. “Modern Money Mechanics, Introduction.” Available from Wikisource. https://en.wikisource.org/wiki/Modern_Money_Mechanics/Introduction
28 Fed. Carpenter and Demiralp. Ibid. https://www.federalreserve.gov/PUBS/ FEDS/2010/201041/201041pap.pdf
29 US Federal Reserve. Board of Governors of the Federal Reserve System. “Policy Tools: Reserve Requirements.” https://www.federalreserve.gov/monetarypolicy/reservereq.htm
30 US Federal Reserve. FRASER. “US Depository Institutions Deregulation and Monetary Control Act of 1980. Public Law 96–221. 96th Congress.” https://fraser.stlouisfed.org/content/?filepath=/files/docs/historical/congressional/monetary-control-1980.pdf&title_id=1032
31 Denning, Steve. “Is JPMorgan Too Big and Complex to Manage” Forbes, March 21, 2013. https://www.forbes.com/sites/stevedenning/2013/03/21/is-jpmorgan-too-big-complex-to-manage/#4aca50986994
32 JPMorgan Chase and Company. Annual Report 2014, p.72 https://www.jpmorganchase.com/corporate/investor-relations/document/JPMC-2014-AnnualReport.pdf
5.48 The Tokens: Cash and Digital
33 United States Mint. Department of the Treasury. 2017 Annual Report. pp. 6–9 https://www.usmint.gov/wordpress/wp-content/uploads/2018/01/2017-annual-report.pdf
34 US Federal Reserve. Board of Governors of the Federal Reserve System. “Currency and Coin Services: 2018 Federal Reserve Note Print Order.” Last update: July 11, 2016. https://www.federalreserve.gov/paymentsystems/coin_currency_orders.htm
35 US Federal Reserve. Board of Governors of the Federal Reserve System. “FAQs: How Much Does it Cost to Produce Currency and Coin?” Last update: March 6, 2018 https://www.federalreserve.gov/faqs/currency_12771.htm
36 US Federal Reserve. Board of Governors of the Federal Reserve System. “FAQs: How Long is the Lifespan of U.S. Paper Currency?” Last update: March 2, 2017. https://www.federalreserve.gov/faqs/how-long-is-the-life-span-of-us-paper-money.htm
37 United States Department of Commerce, Bureau of Economic Analysis (BEA). “National Income and Product Accounts Gross Domestic Product, 4th quarter 2011,” and “Annual 2011 (third estimate); corporate profits, 4th quarter 2011 and Annual 2011.” https://www.bea.gov/newsreleases/national/gdp/2012/gdp4q11_3rd.htm
38 Federal Deposit Insurance Corporation (FDIC). “FDIC Quarterly Banking Profile: Annual Income.” https://www.fdic.gov/bank/analytical/qbp/index.html
39 Henry, David. “JPMorgan raises Dimon’s pay 35 percent, but adds strings.” Reuters Business News, January 21, 2016. https://www.reuters.com/article/us-jpmorgan-dimon-compensation/jpmorgan-raises-dimons-pay-35-percent-but-adds-strings-idUSKCN0UZ30C
5.49 How Much Money Have the Banks Created?
40 International Monetary Fund.. “The Growth of Shadow Banking. Figure 2. Drivers of Shadow Banking and Lending by Shadow Banks.” IMF Blog: Insights and Analysis on Economics & Finance. https://blogs.imf.org/2014/10/03/the-growth-of-shadow-banking/
41 FRASER. St. Louis Federal Reserve. “Banking and Monetary Statistics 1914– 1941.” Washington D.C. First printing, November 1943, Second printing (Part I only), August 1976. Table No. 109, p.409. https://fraser.stlouisfed.org/files/docs/publications/bms/1914-1941/BMS14-41_complete.pdf
NOTE: Taking the December 1914 and the December 2017, the growth rate is 8.4 percent. I’ve also figured this using the actual financial reports for those years and come up with 7.8 percent. So, I’ve generally rounded to 8 percent.
42 US Federal Reserve. Board of Governors of the Federal Reserve System. “Money Stock and Debt Measures - H.6 Release.” Last updated: May 24, 2018. https:// http://www.federalreserve.gov/releases/h6/current/default.htm
NOTE: Rounding to billions accounts for the apparent $1 billion discrepancy. The numbers are $13292.8 billion and $13,917.3 billion, which results in a $625 billion increase in the money supply. There are several measures of the money supply. M1, M2, and M3. These represent expanding definitions of what constitute money in the system.
43 Federal Deposit Insurance Corporation. “Industry Analysis: Commercial Banks.” https://www5.fdic.gov/hsob/HSOBRpt.asp
44 United States Federal Reserve System. “Federal Reserve Banks combined Financial Statements, As of and for the Years Ended December 31, 2017 and 2016 and Independent Auditors Report.” p. 5. https://www.federalreserve.gov/aboutthefed/files/combinedfinstmt2017.pdf
45 FRED. Economic Research. Federal Reserve Bank of St. Louis. “Total Equity to Total Assets for Banks.” Updated February 15, 2018. https://fred.stlouisfed.org/series/EQTA
46 US Federal Reserve. “2017 Federal Reserve Annual Financial Report.” p.3. https://www.federalreserve.gov/aboutthefed/files/combinedfinstmt2017.pdf
NOTE: From FDIC data: $16.2 trillion in bank assets multiplied by 11.24 percent equity equals $1.8 trillion of the banks’ assets represent accumulated wealth. From Fed data: $4.45 trillion in Fed assets multiplied by 0.92 percent equity equals $41.39 billion. Combined Assets of $20.7 trillion, less equity of (banks)$1.82 trillion and (Fed) $41.39 billion, equals roughly $18.6 trillion in the reported money supply.
47 US Federal Reserve. “Money Stock and Debt Measures- H.6 Release.” December 2017, not seasonally adjusted M2, $13,917.3 billion. https://www.federalreserve.gov/releases/h6/current/default.htm
5.50 Money Supply Growth Rate: Steady Devaluation of Our Dollar
48 FRED. Federal Reserve Bank of St. Louis. Economic Research. “M2 Money Stock.” https://fred.stlouisfed.org/series/M2
49 US Department of Commerce. Statistical Abstract of the United States 1913, Thirty – sixth Number, Part 2, “Area, Natural Resources, and Population: Table 21. Population of the United States at each Census, 1790 to 1910.” P. 26–27. Bureau of the Census Library. Government Printing Office. Washington, 1914. https://www.census.gov/library/publications/1914/compendia/statab/36ed.html
50 FRED. St. Louis FED. Economic Research. “Population Growth for the United States (SPPOPGROWUSA).” Updated May 16, 2018. https://fred.stlouisfed.org/series/SPPOPGROWUSA
51 US Bureau of Labor Statistics. “Labor Productivity and Costs: FAQs, #3. https://www.bls.gov/lpc/faqs.htm#P03
52 US Bureau of Labor Statistics. “Productivity change in the nonfarm business sector, 1947–2017.” https://www.bls.gov/lpc/prodybar.htm
53 US Bureau of Labor Statistics. “Consumer Price Index Inflation Calculator.” https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1.00&year1=191301&year2=201701
54 Williams, John. “Inflation Calculator.” Shadowstats.com. Retrieved January 2017. It requires a subscription to get the specific data. http://www.shadowstats.com/ inflation_calculator
5.51 The Golden Goose: Government
55 United States Treasury Department. “2017 Financial Report of the United States Government.” p. 50–51. https://www.fiscal.treasury.gov/fsreports/rpt/finrep/fr/17frusg/02142018_FR(Final).pdf
NOTE: Interest paid on securities held by the public was $273 billion, and $99.6 billion was paid for intragovernmental debt.
56 US Federal Reserve. Board of Governors of the Federal Reserve System. “Survey of Consumer Finances.” https://www.federalreserve.gov/econres/scfindex.htm
Note: From 2014 when I first tracked this data to 2017, the top 10% increased their holdings from 75 to 77 percent.
5.52 Conflating Monetary with Economic
57 US Bureau of Economic Analysis. ”National Economic Accounts, Current-dollar and “real” GDP.” https://www.bea.gov/national/index.htm
58 Federal Reserve Board of Governors. The Purposes and Functions of the Federal Reserve Bank. 9th Edition, 2005. This edition has been supplanted by a 10th Edition in February 2018, which I have not had the opportunity to fully review. https://www.federalreserve.gov/aboutthefed/pf.htm
59 Charlie Rose. “Timothy Geithner.” May, 12, 2014. https://charlierose.com/videos/18597
5.53 A Radical Departure
60 Zillow. “United States Home Prices & Values.” Retrieved June, 2018. https://www.zillow.com/home-values/
61 US Department of Treasury. Financial Report of the United States Government. FY 2017: Financial Statements,” p. 55. https://www.fiscal.treasury.gov/fsreports/rpt/finrep/fr/17frusg/FinancialStatements_2017.pdf Financial Report of the United States Government. FY 2008: Financial Statements,” p 39 https://www.fiscal.treasury.gov/fsreports/rpt/finrep/fr/08frusg/08stmt.pdf
62 Pew Research Center: Global Attitudes and Trends. “U.S. Image Suffers as Publics Around the World Question Trump’s Leadership.” http://www.pewglobal.org/2017/06/26/u-s-image-suffers-as-publics-around-world-question-trumps-leadership/
5.54 Sunshine Is the Best Disinfectant
63 FRASER. Annual Report of the Board of Governors of the Federal Reserve System 1914–2016. https://fraser.stlouisfed.org/title/117#2456
64 FRED. “Federal Debt: Total Public Debt (GFDEBTN).” Economic Research. Federal Reserve Bank of St. Louis. Updated March 12, 2018. https://fred.stlouisfed.org/series/GFDEBTN
65 FRED. “M3 for the United States (MABMM301 USA 1895). Updated May 1, 2018. https://fred.stlouisfed.org/series/MABMM301USA189S
NOTE: Curiously, this US FED data is sourced from The Organization for Economic Cooperation and Development, an international agency. The FED itself stopped measuring and recording M3 data in 2006, though M3 is the most accurate indicator of the real size of the money supply.
5.55 Pandora’s Box – Pushing the Boundaries: A New Digital Currency
66 Surane, Jennifer and Christopher Cannon. “Why China’s Payment Apps Give U.S. Bankers Nightmares.” Bloomberg. May 23, 2018. https://www.bloomberg.com/graphics/2018-payment-systems-china-usa/
67 Shatzkin, Mike. “A Changing book business: it all seems to be flowing downhill to Amazon.” The Idea Logical Company. January 22, 2018. https://www.idealog.com/blog/changing-book-business-seems-flowing-downhill-amazon/