QUESTION: Hello Martin-

Great work and I wish you the best.

One question regarding your recent email alerts from your blog in regards to the “money out of thin air” discussion that was/is going on.

What is your opinion on how G. Edward Griffen’s book, “The Creature From Jekyll Island”, relates to the discussion on the above topic. Do you think he is wrong on his analysis of the Federal Reserve?

Thank you for your time, sir and I look forward to your answer and opinion because it seems that you and him have conflicting opinions.

Regards,

Tim

ANSWER: This is like asking to criticize the Bible since so many people believe every word written in this book. Well here it goes. Thousands of hate e-mails will flood in, but conspiracy myths be damned, they are a cover-up for the real culprit – Congress. Some people hate central banks because of this book, they believe Andrew Jackson was a hero and are oblivious to the fact that he set off a round of wildcat banking that ended in yet another sovereign debt default among the states who then tried to bailout their own banks.

Well, fiction be damned. “The Creature From Jekyll Island” is amateurish at best and another total misrepresentation of the facts and events. It is very one-sided and ignores the real political manipulation of the Fed by the government for their own self-interest. It promotes the very same Marxist/socialistic beliefs from the Progressive Era that gave us the New Deal and robbed every one of their future: altering the family structure in the West forever.

The original design of the Fed was to be private, for banks were to contribute to fund their own bailouts, as JP Morgan had done taking the lead during the Panic of 1907. It was not to be a government bailout operation. The United States had no central bank at that time. There was never any intent to create the institution as it exists today: the original design was altered dramatically by lawyers who never understood the madness of their own minds in their pursuit of power as politicians.

We must also look at the context of the era from which Griffin draws his ideas. We must be EXTREMELY careful with much of what he said is sheer propaganda, directed at the bankers to support the rise of Marxism – the new Progressive Movement. This movement finally succeeded with the New Deal and the Great Depression focusing blame at bankers, when in fact Europe collapsed into a Sovereign Debt Crisis in 1931, which sent the dollar soaring and a capital concentration from around the world made the 1929 high just as the Nikkei peaked in Japan during 1989. To look at this era we absolutely MUST step back and look at the whole situation dispassionately. If we do not put this conspiracy aside, we will never understand what really needs to be reformed.

Before Woodrow Wilson became president, he was the head of Princeton University, and uttered praise for Morgan and his effort to save the banking system during the Panic of 1907. The Marxists were responsible were turning the bankers to evil in an attempt to eliminate freedom. After all, this was the rising sentiment cheering Marxism and demonizing capital focus on the bankers. This was their agenda that we are still plagued by to this day. This book championed the entire Marxist argument without realizing whose side he took.

We must be EXTREMELY careful here for to advocate the end of central banking is to advocate communism. Do not forget that 1917 saw the Russian Revolution and in 1918 the Communist Revolution in Germany that produced their famous hyperinflation. Be careful what you wish for, if it became true you would hand more power to the government, and they would love that to happen. There goes all your freedom and with electronic money, you will be converted to economic slaves for the state, not so different from just living the dream in the Matrix. Ask yourself, do you want the truth or do you prefer to live the dream? Their dream by the way, not yours.

The difference between the bankers of Morgan’s day and today is very different. The crisis unfolded because of the classic mismatch between deposits, which are on a demand basis, and loans, which are long-term like mortgages. When the demands to withdraw exceed available cash (fractional banking), the bank fails. Today, the bankers are traders and have moved to transnational banking to stay liquid abandoning the old days of Morgan when banks were relationship oriented and did not resell the loans they made acting more like brokers.

JPMorgan Chase CEO, Jamie Dimon, told Congress that the bank’s massive loss can be blamed on insufficient risk controls and a failure by traders to understand the bets they were placing. He actually stated that he failed in his management yet retained the job for he was really fully on-board. This is not relationship banking and it is entirely different from the days of J.P. Morgan view of banking. Dimon lobbied Congress to rollback Dodd-Frank so they could continue to trade maintaining their transaction banking model they used to get Congress to repeal Glass-Steagall by the Clinton Administration and now Hillary begs for money from the same people and wants to run the nation as SHE DID before (like Cheney). Thanks to the Clintons, who are always available to the highest bidder, when the banks blow up on trading again, this will bite Congress in the ass for the 2016 elections. I hope that if we understand the problem, we will make the right solution this time if we examine the truth.

Yes, the Fed began effectively as private consortium of banks to accomplish what J.P. Morgan did to rescue the banking system during the Panic of 1907 that saved the day. The banking crisis of that era was not due to people blowing up with their trading as in Transactional Banking today. The Panic of 1907 was the classic mismatch between demand and loans – the fractional banking element.

A period of a temporary cash shortage burst forth during the Panic of 1907. John Pierpont Morgan (1837-1913) saved the day despite receiving criticism for ignoring his great patriotism and contribution to the country. The Panic began when there was an attempt to manipulate the market in United Copper Company, which was a short squeeze that backfired. This was the catalyst, not the cause. The spark ignited the Panic that took place. They borrowed money to buy stock to create the squeeze from the Knickerbocker Trust and suddenly they could not pay back their loans, bringing the bank into failure. J.P. Morgan gathered his associates to examine the books of the Knickerbocker Trust but found it was insolvent and decided not to intervene to stop the run. When it became clear the Knickerbocker Trust would fail, the run spread to other banks and a contagion grew. The Trust Company of America asked Morgan for help. Morgan now brought in First National Bank and National City Bank of New York (later Citi Bank), and the US Secretary of the Treasury. Morgan had a quick audit of the bank and declared that this was where to defend. As the run began, Morgan worked with his associates to sell the assets of the bank to free up cash for the depositors. The bank survived the close of business that day for this is always a CONFIDENCE game.

Morgan knew that this collapse in CONFIDENCE would not end by just saving the Trust Company of America. Morgan now summoned the heads of various banks in New York and kept them until they agreed to provide loans of $8.25 million. Morgan convinced the Treasury to deposit $25 million in NY banks. John D. Rockefeller, the wealthiest man in America, deposited $10 million with City and called the Associated Press to announce his pledge to help the NY banks. Nonetheless, the New York banks then, as now, proved to be their worst enemy. Despite the efforts of Morgan to create this infusion, they were reluctant to lend any money for short-term stock trading. The stock market crashed as a result. By 1:30 pm on October 24th, the president of the NYSE went to tell Morgan the exchange would close early. Morgan was livid. He understood that this would reinforce the Panic and he drew the line and would not allow it. Morgan warned that if the NYSE closed early, it would be catastrophic, to say the least. Once again, he summoned the bankers who arrived by about 2:00 pm and Morgan pretty much yelled at them, warning that as many as 50 stock brokerage firms would fail unless they could raise $25 million within the next 10 minutes! By 2:16 pm, 14 banks pledged $23.6 million to keep the stock exchange alive. The money reached the exchange by 2:30 pm, to finish trading at 3:00 pm. In reality, they only needed to reach $19 million. Despite his hatred for the press who seldom treated him fairly, Morgan gave a rare comment to the press, discussing the matter at hand.



The next day, the NYSE needed more money, but this time Morgan could only raise $9.7 million. Morgan directed the NYSE not to use the money for margin sales or short selling. The exchange made it to the close. Morgan knew he had to turn the minds of the people and to restore their critical CONFIDENCE to stop the Panic. Morgan than formed two committees: one for persuading the clergy to preach calm to their congregations on Sunday, and the other to sell the idea of the claim to the press. Morgan was desperately trying to hold the nation together. Unknown even to his associates, the City of New York could not raise enough money through its bond issue and it informed Morgan that it needed $20 million by November 1st, 1907, or the city would go into bankruptcy. Morgan himself contracted to purchase $30 million in New York City bonds.

On November 2nd, 1907, one of the largest stock exchange brokers, Moore & Schley, was heavily in debt using the Tennessee Coal, Iron & Railroad Co. stock as collateral. The thinly traded stock was under pressure. Their creditors would now surely call their loans. Morgan called another emergency meeting for a proposal put forth that US Steel Corp, would acquire the stock in bulk. Yet another crisis was looming. Runs were now likely to hit two banks on Monday. Morgan summoned 120 banks and told them he would not proceed with the US Steel deal unless they supported the banks.