Prohibition, The Federal Reserve and Income Tax

The conception of what eventually became the Federal Reserve happened in 1910 when seven bankers and economic policy makers had a secret meeting on Jekyll Island, Georgia.  Led by Senator Nelson Aldrich, these men came up with the plan for establishing a private central bank in the United States.  Abraham Andrew, the Assistant Secretary of the Treasury attended, along with several bankers; Frank Vanderlip, President of the National City Bank of New York and representative for the Rockefeller Family.  Henry Davison, senior partner of the J. P. Morgan Company.  Charles Norton, President of the First National Bank of New York which.  Benjamin Strong, head of J. P. Morgan's Banker's Trust Company and later the first head of the Federal Reserve.  Paul Warburg, partner in Kuhn, Loeb & Company and representative for the Rothschild family.

Prior to implementing the income tax in 1913, about a third of the federal treasury came from liquor taxes.  By 1920, the income tax funded about two-thirds of the federal revenue.  The forceful drive towards national prohibition started in 1913 and the 18th amendment was ratified on on January 16, 1919.  Though, by 1913, nine states were already under state prohibition laws.  It seems that either prohibition was engineered to support the implementation of an income tax or the income tax was necessary to make up for the funds lost from prohibition.  The income tax is primarily used to pay off interest to the Federal Reserve.  At the same time, the FED uses artificial interest rate manipulation and control of the amount of available currency to create profits for the banking cartel.  When the bubble they create bursts, the banking cartel buys up our real assets, centralizing their wealth.  As you can see in the image below, roughly %40 of our debt is owed to the Federal Reserve and government accounts.  This got me thinking, could Prohibition, the Federal Reserve and Income Tax all be related?

Who Do We Owe? - Image from the U.S. Debt Clock

Suppose you take out a $300,000 loan for a house at %6 interest to be paid over 30 years.  Without considering property taxes or other expenses, you end up paying $1798.65 a month and $647,514 when your house is finally paid off.  The bank makes $347,514 off of your loan in interest.  If the bank needs to borrow money from the FED to lend to you, they get it at artificially low rates, let's say 2%.  So they need to pay that interest back to the FED, but they still make $248,324 dollars, from little to no effort.  However, the FED has to print that loan and increase the money supply, which devalues the dollar.  Since the Federal Reserve was established in 1913, the U.S. dollar has lost %96 percent of its purchasing power due to inflation.  That means that if a dollar was worth $1 in 1913, it's now worth only 0.04 cents.

Imagine a fictional scenario, there is only $100,000 dollars in circulation, one bank and the Federal Reserve.  $50,000 is being saved in banks and $50,000 is in people's wallets.  The bank decides to loan the $50,000 it has at 6% interest for 30 years.  It is technically not possible for the recipients of this loan to pay the banks back because it would require $107,920 dollars, which is more than the total amount of money in the system.  So the FED has to create more money out of thin air and lend it to the banks to inject into the monetary system.  Let's say the FED created another $100,000 and there is now a total of $200,000 dollars in the system.  It looks like there is more money available, but because that money is Fiat Currency and not related to any physical substance like gold, each dollar would have half the purchasing power.  The banks also need to pay off their loan from the FED but it's the recipients of the initial loan that end up paying the cost, the banks are loosing no money in the deal.  The banks are still making massive profits and the Federal Reserve is helping them do it.  The national debt continues to increase and the value of the dollar continues to decrease as more money is created.  There is no other option but a continual spiral downward and that is just the way it was planned

If you check the money supply on the Federal Reserve's Website you can see that there is about $1.7 trillion dollars in people's pockets and $8.6 trillion dollars if you include savings.  The national debt is currently around $13 trillion.  So even if you took all the money that was available in the United States, you still wouldn't be able to pay off the national debt.

How the National Debt has grown over time.

Visit the U.S. Debt Clock

So why would the banking cartel want to bankrupt the country?  During economic recessions, bankers can snatch up real physical commodities, land and other assets.  They are essentially centralizing any real wealth that is available in our country.  At the same time they beating us into submission through economic manipulation.  When our monetary system totally fails, they will do what they did in 1913, but this time on an international level.  One purpose of the Federal Reserve was to standardize our currency and centralize the banking system, so instead of different states using different currency, the whole country would use the same Federal Reserve Notes.  The next step is to do the same thing with countries around the would and adopt a single international currency with a International Federal Reserve that can manipulate the world economy through interest rates and money supply.  The Euro in Europe was only a test run.  Eventually we will see a single currency for the America's, a single currency for Asia and a perhaps a single currency for the Middle East if we can bomb them into submission.  From there it's just one more step to a New World Order with one international form of money.

Privatizing Profit and Socializing Loss

With all the recent talk about socialism, I think its important to understand how major corporations routinely privatize profits and socialize losses. This concept is not new and dates back at least to the 19th century. It has become blatantly apparent in the 21st century with the tax-payer bailout of the Banking industry. When risky financial speculation creates profit, it is spread among shareholders and CEO’s but when something goes wrong, the losses are spread out among the tax-payers. An example of a negative externality, corporations in the energy sector will pollute the environment and leave the tax-payers with the clean up bill. After the 1987 stock market crash, the Gulf War, the Mexican crisis, the Asian crisis, the LTCM debacle, Y2K, the burst of the internet bubble, and the 9/11 attacks, the Federal Reserve used the “Greenspan Put” to socialize the losses when the speculative bubbles burst. Bernanke, the new Federal Reserve Board chairman, continues to use the same practice.

Essentially, while the rich get even richer through riskier business practices, the rest of us pay for it. The whole system is an ingenious way to steal our money and concentrate that wealth in the hands of ruling elite. We’ve also allowed many industries that should be socialized to be privatized and we are paying for it. Utilities such as water and power, as well as the banking industry and health care, should be socialized because it reduces abusive and risky business practices while at the same time putting any profits directly back into the hands of our government. If properly run, this could drastically reduce the average American’s monthly bills, reduce taxes, curb our ever increasing national debt and improve the general quality of life for American citizens. Many utility companies take in large profits while socializing the expense of maintaining parts of the infrastructure necessary to keep themselves in business. Socializing certain industries is not unheard of in a capitalist society and doesn’t mean that the entire government is socialist. It also does not mean that there can’t be private banks or health insurance companies for “premium” service or care. What it does mean is that those banks and health insurance companies would have to compete with government run companies whose primary goal is a low risk, affordable, stable business instead of a business driven by profit alone.

If, on the other hand, we are so afraid of socialism that we can’t bear to de-privatize the industries that are robbing us blind, we can at least open up to a real free market. By socializing loss and bailing out the banking sector, because these banks are perceived to be “too big to fail,” we are really saying the free market doesn’t work and the government needs to step in. The free market can work if it’s not heavily manipulated and regulated by institutions like the Federal Reserve, government subsidies and corporate tax breaks. If there isn’t an option to be bailed out, risky business practices are uninsurable and less likely to be put into practice. If there is proper federal oversight and regulation, we can avoid dangerous business practices that harm the national economy, the consumer and the environment. If the Fed didn’t control interest rates and money flow, loans and credit would be based on the real market and not a speculated market. We wouldn’t have manufactured booms and busts, instead we would have real market fluctuation, based on periods of saving and spending as well as real supply and demand. (See Austrian Economics for an interesting theory on the boom/bust cycle). Some people are getting really rich off the manipulated market and its not us. Instead we are being robbed blind on a daily basis.