The US Federal Reserve System (or the US Central Bank) is a private organization, a joint stock company created by 12 large US private banks. The Fed is in charge of issuing the US dollar. That is, American money is printed by individuals.

However, this strangeness was not always the case, and bankers worked for centuries to get hold of the printing press. Back in the 18th century, big bankers had the idea of how to get their hands on the state money machine. Mayer Amschel Rothschild (1742-1812), the founder of an international dynasty of bankers and entrepreneurs, said: "Give me the ability to control the issuance of money in a country, and I don't care who writes its laws."

At first, the idea of privatizing the money machine seemed ephemeral, but gradually took on a real shape. The bankers perfectly understood the greedy essence of humanity (they knew for themselves), so they understood that everything can be bought for money, and what cannot be bought for money can be bought for a lot of money, including buying a printing press (or getting the Central Bank, which is the same). Those who are incorruptible and get in the way can be eliminated for a small fee. In 1910, a secret meeting of major financial tycoons took place in the possession of J.P. Morgan on Jekyll Island off the coast of Georgia. The meeting participants were looking for ways to solve their main problem - how to establish their own Central Bank.

In the end, they came to the conclusion that in the past they were unlucky because of openness, so now the key to success is stealth. The strength of the conspiracy lies in the fact that it seems to many that it does not exist. But there is no trial - you can turn big frauds with impunity.

The bankers decided to get their own Central Bank through their man in government and the right timing. Such a person was Woodrow Wilson, who expressed his readiness to sign the document on the creation of the Federal Reserve in exchange for financial support for his presidential campaign. On December 23, 1913, when most congressmen were on holiday for the Christmas holidays, the Central Bank Act was pushed through Congress and signed into law by President Wilson. And in order not to advertise that the bank is private, and so that people think that it belongs to the state, it was called Federal - the Federal Reserve. Wilson later regretted what had happened: "I accidentally destroyed my country."

The establishment of the US Federal Reserve is the most audacious scam in the history of mankind, for a small group of bankers acquired a terrible power - the right to print American money. They began to lend this money to banks and the government at interest, printing more and more dollars and making them less and less valuable. Because the government is obligated to repay the debt to the Federal Reserve, the taxes don't go to the government, they are appropriated by the Federal Reserve. So the bankers put their hand in the pocket of every American taxpayer. The Internal Revenue Service (tax) and the Federal Reserve work together. They don't tax their profits, they tax their inflation. And the more inflation they create, the more they rob the population.

Hitler and the National Socialists, who came to power in 1933, thwarted the international banking cartel by issuing their own money. In this they took their cue from Abraham Lincoln, who funded the American Civil War with government-issued paper money called "Greenbacks." Hitler began his national credit program by devising a plan of public works. Projects earmarked for funding included flood control, repair of public buildings and private residences, and construction of new buildings, roads, bridges, canals, and port facilities. The projected cost of the various programs was fixed at one billion units of the national currency. One billion non-inflationary bills of exchange, called Labor Treasury Certificates, were then issued against this cost. Millions of people were put to work on these projects, and the workers were paid with the Treasury Certificates. This government-issued money wasn't backed by gold, but it was backed by something of real value. It was essentially a receipt for labor and materials delivered to the government. Hitler said, "for every mark that was issued we required the equivalent of a mark's worth of work done or goods produced." The workers then spent the Certificates on other goods and services, creating more jobs for more people.

Within two years, the unemployment problem had been solved and the country was back on its feet. It had a solid, stable currency, no debt, and no inflation, at a time when millions of people in the United States and other Western countries were still out of work and living on welfare. Germany even managed to restore foreign trade, although it was denied foreign credit and was faced with an economic boycott abroad. It did this by using a barter system: equipment and commodities were exchanged directly with other countries, circumventing the international banks. This system of direct exchange occurred without debt and without trade deficits. Germany's economic experiment, like Lincoln's, was short-lived; but it left some lasting monuments to its success, including the famous Autobahn, the world's first extensive superhighway.1

Hjalmar Schacht, who was then head of the German central bank, is quoted in a bit of wit that sums up the German version of the "Greenback" miracle. An American banker had commented, "Dr. Schacht, you should come to America. We've lots of money and that's real banking." Schacht replied, "You should come to Berlin. We don't have money. That's real banking."
Although Hitler has rightfully gone down in infamy in the history books, he was quite popular with the German people, at least for a time. Stephen Zarlenga suggests in The Lost Science of Money that this was because he temporarily rescued Germany from English economic theory — the theory that money must be borrowed against the gold reserves of a private banking cartel rather than issued outright by the government.3 According to Canadian researcher Dr. Henry Makow, this may have been a chief reason Hitler had to be stopped: he had sidestepped the international bankers and created his own money.

Originally Posted By isingmodel⏩

Originally Posted By dabbmw2002⏩

Originally Posted By Islandboyo⏩

Originally Posted By Islandboyo⏩

Originally Posted By BullittEV⏩

Originally Posted By Islandboyo⏩

Originally Posted By BullittEV⏩

Originally Posted By Islandboyo⏩

Originally Posted By Islandboyo⏩

Originally Posted By Dave22reborn⏩

I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.

Originally Posted By dabbmw2002⏩

Jews did hold prominent financial positions in Europe, which made them ready scapegoats in times of economic crisis. For centuries, so-called court Jews acted as the principal financiers for the European aristocracy’s projects. In the 1760s, one of those court Jews, Mayer Amschel Rothschild, established a banking business in Germany that would eventually grow into a vast international conglomerate and yield one of the largest family fortunes in world history. The Rothschild name became synonymous with Jewish financial power, invoked as shorthand for the secretive and outsized power Jews were alleged to wield over the economic fate of the world. Despite his own Jewish ancestry (his parents converted the family to Protestantism when he was a child) Karl Marx, the philosopher who first popularized the idea that capitalism is inherently exploitative, singled out Jews in particular for their role in promoting it.

As moneylending evolved into institutionalized banking, Jews continued to occupy major positions in the financial world. Across Europe in the 18th and 19th centuries, Jews built a number of influential banks, further feeding anti-Semitic conspiracy theories. With mass Jewish immigration to the United States beginning in the late 19th and early 20th centuries, Jews assumed prominent positions in the growing financial center of New York, establishing Salomon Brothers, Lehman Brothers, Goldman Sachs and others. They also figured prominently in government financial positions. Between 1987 and 2014, the U.S. Federal Reserve was chaired by a succession of three Jews. Four of the eight men who served as U.S. Treasury secretary between 1995 and 2020 were Jewish. Three of the 12 presidents of the World Bank between its founding in 1946 and 2020 have been Jewish. Jews are also significantly overrepresented among the wealthiest Americans. Half of the 10 richest Americans in 2016 were Jewish, according to Forbes, despite Jews making up less than 2 percent of the U.S. population.

The Federal Reserve’s work is mind-bendingly complex. It’s no wonder the institution seems so mysterious.

Whether it’s the belief that the Fed prints money or the idea that having a central bank is unconstitutional, you’ve probably encountered some wild claims when trying to learn about what the U.S. central bank actually does. For the most part, though, these statements are just untrue – but they’re perpetuated by the complicated nature of the job.

The Federal Reserve was created by Congress in 1913 to maintain economic and financial stability throughout the country. The Fed’s rate-setting arm, the Federal Open Market Committee (FOMC), does this most notably by raising or lowering interest rates. After the 2008 financial crisis, the Fed also took on new regulatory roles, acting as a watchdog over the world’s largest financial institutions.

But lots of other assumptions sneak in. Here are nine of the most common myths about what the U.S. central bank does, according to experts, and an explanation for why they’re false

Myth No. 1: The Fed is funded through taxpayer money

Fact: The Fed’s income comes from interest payments on the government securities it owns

You may think that a portion of your taxes goes toward funding the Fed’s operations, but that’s not the case. The Fed doesn’t receive any funding through the congressional budgetary process, according to the board of governors, an intentional part of its design that helps maintain its independence from Congress.

Instead of taxes, the Fed instead draws its income primarily from the interest it receives on government securities and Treasuries that it purchases through those open-market operations.

Other sources include interest on its investments in foreign currencies, interest on loans provided to depository institutions and fees received in exchange for services provided to depository institutions – such as check clearing, transferring of funds and automated clearinghouse operations.

Myth No. 2: The Fed makes a profit

Fact: After paying its operational expenses, the Fed turns its profits over to the Treasury Department

After paying off its operating expenses, the Fed doesn’t keep its profits. The U.S. central bank returns the entirety of its bottom line over to the U.S. Treasury.

The largest share of the U.S. central bank’s operational expenses fund Fed officials’ salaries. Congress, however, determines how much each Fed board member makes. Chair Jerome Powell made $203,500 in 2019, according to the most recent Fed records, while all other board members made $183,100.

The board reviews the salaries for presidents of each reserve bank, who typically make more than the board of governors and the chair. Officials set those salary ranges based on the cost of labor in each head-office city. Those salaries can also increase, if approved by each regional Fed bank’s board of directors.

For example, San Francisco Fed President Mary Daly made $497,400, according to the Fed’s most recent annual report published in 2021. Meanwhile, St. Louis Fed President James Bullard had a salary of $416,300.

Still, that total pales in comparison to what “people with that level of training and expertise would make on Wall Street,” says W. Michael Cox, economics professor at Southern Methodist University who formerly served as the chief economist at the Dallas Fed.

Myth No. 3: The Fed isn’t audited

Fact: Independent accounting firms audit both the Fed’s board of governors and regional reserve banks

Search for “Federal Reserve” on social media, and you’ll probably encounter this phrase: “Audit the Fed!” The U.S. central bank, however, is audited. Independent accounting firms inspect the financial statements for both the Fed’s Washington, D.C.-based board of governors as well as the 12 regional reserve banks. In 2021, that firm was Klynveld Peat Marwick Goerdeler, or KPMG.

The Office of Inspector General selects who will audit the Fed’s board in addition to arranging its own reviews and investigations relating to the board’s activities and operations, including the Fed’s security and supervision duties that it took on in the aftermath of the financial crisis.

The Fed’s board, meanwhile, picks an independent reviewer to analyze the regional Fed banks’ financial statements. That firm has to remain independent from the Fed in all matters, meaning it can’t advise any of the reserve banks or have any affiliation with the Fed that could impair its impartiality, according to the board.

Those firms put together a report about “compliance and on internal control over financial reporting in accordance with government auditing standards,” according to the Fed. The resulting reports are all published on the board of governors’ website annually.

Other statements reporting on Fed financials include information about every Treasury security that the Fed owns.

Myth No. 4: The Fed is unsupervised

Fact: The Fed makes policy decisions independent of Congress but still reports to lawmakers

Technically, the Fed is independent from Congress, but the extent of that independence only goes as far as letting officials craft monetary policy and set interest rates free from political interference.

Most notably, the Humphrey-Hawkins Full Employment Act of 1978 requires the Fed chair to report semi-annually to both the House of Representatives and Senate on economic and monetary policy developments. That includes progress on the congressional-approved dual mandate of stable prices and maximum employment.

It’s also not uncommon for policymakers to make their opinions about policy known. Legislators including Sens. Elizabeth Warren (D-Ma.) and Bernie Sanders (I-Vt.), for example, sent a Nov. 1 letter to Fed Chair Jerome Powell disapproving of the Fed’s expected 75-basis-point increase.

Along those same lines, Fed officials also travel the country in the interim between meetings, delivering speeches and public remarks to help everyday people and markets understand what they’re doing and why they’re doing it.

“There’s this common idea that the Fed is this secret temple,” Cox says. “But the Fed was created by Congress, and it can be uncreated by Congress.”

Myth No. 5: The Fed prints money

Fact: While the Fed controls the money supply, the job of printing money rests with the Treasury Department

It may seem counterintuitive, but technically the Fed isn’t the entity in charge of printing money. That falls under the U.S. Treasury Department’s domain. Coins come from the U.S. Mint, and paper currency is produced at the Bureau of Engraving and Printing. The Treasury oversees both entities.

The Fed, however, does play a role in determining how much money is in circulation. It adds money – or takes it away – by buying or selling U.S. Treasury securities and other financial instruments. The Fed pays for those securities by crediting funds to the reserves that banks hold in accounts at the Fed. Consequently, that influences how much banks can loan, which in turn determines the volume of bank deposits held by the public, as the St. Louis Fed explains.

The Fed can also serve as a “lender of last resort,” providing credit to banks or other financial firms experiencing financial distress and teetering on the brink of collapse. In a sense, those loans have a lever on the money supply as well, giving banks the ability to offer more funds to consumers.

The Fed also has a hand in circulating that currency once it’s printed. First, it distributes that money to banks. Second, it can choose to take bills directly out of circulation when they appear to be too old or worn out – or even counterfeit, according to the St. Louis Fed.

Myth No. 6: The Fed is privately owned

Fact: Congress set up the Fed to serve public, not private, interests

Americans often mistake the Fed as a privately-owned bank, similar to other financial institutions. To be sure, certain aspects of the Fed System mirror private companies, but Congress created the Fed to serve the public. The ultimate overseers of the Fed are Congress, even if they don’t dictate what the Fed decides to do with monetary policy.

The 12 regional reserve banks operate similarly to a private company in that they have a nine-member board of directors that selects the president and vice presidents who lead it. Yet, to implement checks and balances, the Fed’s board chooses three of those board members; the remaining six are selected by commercial banks that are members of the Fed System.

The other main pillar of the Fed — the Washington, D.C.-based board of governors — is considered an independent government agency. Congress gave the Fed a decentralized structure to ensure policymakers have a perspective on what’s going on across all corners of the country.

Myth No. 7: The Fed’s biggest concern is Wall Street

Fact: Sharp market plunges can be worrisome to the Fed, but only because of how much they can hurt the economy as a whole

At the onset of the pandemic, Fed officials drew major criticism when they decided to inject trillions of dollars worth of cash into a short-term loan agreement exchange known as the “repo market.” Sen. Sanders didn’t help the discourse, posting in a March 2020 tweet: “When we say it’s time to provide health care to all our people, we’re told we can’t afford it. But if the stock market is in trouble, no problem! The government can just hand out $1.5 trillion to calm bankers on Wall Street.”

That’s despite the Fed only injecting cash in the form of short-term loans — meaning, money that immediately had to be paid back — that also wasn’t taxpayer funded. The concerns highlighted just how easily the Fed can look like it only cares about Wall Street.

To be sure, the Fed doesn’t want to see steep and swift market corrections. This isn’t, however, because it wants to protect investors’ bottom lines. Rather, the fear is all about what downdrafts could mean for the economy. Massive sell-offs can weigh on the solvency of businesses, threatening employment and broader economic complications.

Such was the key talking point for Fed and Treasury officials during the financial crisis when both agencies conspired to prevent banks and organizations deemed “too big to fail” from collapsing.

“If we don’t do this tomorrow, we won’t have an economy on Monday,” former Fed Chair Ben Bernanke notably said during the worst of the financial crisis, when he and Treasury Secretary Hank Paulson approached Congress for $700 billion in funds to help unfreeze credit markets.

Myth No. 8: The Fed is unconstitutional

Fact: Congress created the Fed with the Federal Reserve Act of 1913

The Fed is arguably the most powerful central bank in the world. Its decisions on interest rates impact all of the U.S., as well as other countries around the globe.

However, its leading officials are not elected, nor are they considered directly part of the government. This makes some people a bit suspicious about the Fed in general and could be a reason why so many Americans are skeptical about its purpose.

Congress, however, created the Fed more than 100 years ago under President Woodrow Wilson, with the passage of the Federal Reserve Act. Wilson wanted to form a U.S. central bank charged with maintaining economic stability in response to a banking panic just six years earlier. (At the time, private banks and business owners were relied upon to maintain economic stability, flooding the system with capital and cash to keep the financial system afloat.)

Before the Federal Reserve, there were two central banks in the U.S. The First Bank of the United States lasted from 1791 until 1811, and the Second Bank of the United States existed between 1816-1841.

Myth No. 9: The Fed can prevent recessions

Fact: The Fed can’t prevent recessions, but it often causes them

The Fed adjusts borrowing costs to achieve its economic goals: Stable prices and maximum employment. But the risks surrounding monetary policy are often asymmetrical. Higher rates can often push the economy into a recession (as many consumers and businesses fear during the current high-inflation era), but the Fed is often ill-equipped to prevent a downturn.

Case in point: The coronavirus pandemic. Even though the Fed cut interest rates three times in 2019 to help prolong the expansion, it didn’t save the U.S. economy from its eventual demise when a novel virus started spreading across the globe.

While the Fed can slash interest rates to help heal the financial system, lower rates are never a panacea. Businesses and consumers often need time to recover before the U.S. economy gets back on track. And as was the case during the coronavirus pandemic, exogenous shocks that have nothing to do with monetary policy often can still harm the goals the Fed is working toward.

Bottom line

Even though the Fed’s role is complex, it has one of the most profound impacts on your wallet, likely more than any other financial policymaker in Washington, D.C. Understanding how the Fed works and how it impacts you can help arm you with the knowledge you need to make better, more-informed financial decisions.

Originally Posted By gachase21⏩

Lengthy article with some backstory to the era


https://www.federalreservehistory.or.../liberty_bonds
Cont.

Financing a war by borrowing need not be inflationary if the public diverts income away from consumption to purchase bonds. Higher saving as a share of income would necessarily mean lower consumption. Such a change in saving behavior, however, would be difficult to engineer and far from certain. A high rate of return on the war bonds would be unlikely to work. High rates might tempt some to take momentary advantage and save more. But there is also an opposite effect. With high interest rates, a household’s wealth would accumulate more rapidly. With that mechanism working on behalf of the saver, less saving from current income would be required to ultimately reach a target level of wealth. The two opposite tendencies would tend to cancel each other. Another problem with offering a high interest rate on the war bonds is that it might divert funding away from investments in physical capital when the war effort warranted an increase in productive capacity.

It is unclear if McAdoo understood that offering high rates of interest would not work. In any case, he was opposed to high rates because that would be a sign of weakness and would reward the rich – the very group the income tax was designed to target. He chose to keep the interest rates competitive with the current return on comparable assets. To many observers, a massive bond sale on these terms seemed to be an imprudent gamble. The worry expressed by bankers and bond dealers at the time was unanimous: the bonds might not sell without the promise of an extra-attractive return. Moreover, the critics pointed out, only a few Americans had any direct knowledge about bonds, and fewer still actually owned any.

It was at this point that McAdoo conceived of the Liberty Loan plan. It had three elements. First, the public would be educated about bonds, the causes and objectives of the war, and the financial power of the country. McAdoo chose to call the securities “Liberty Bonds” as part of this educational effort. Second, the government would appeal to patriotism and ask everyone – from schoolchildren to millionaires -- to do their part by reducing consumption and purchasing bonds. Third, the entire effort would rely upon volunteer labor, thereby avoiding the money market, brokerage commissions, or a paid sales force. The Federal Reserve Banks would coordinate and manage sales, while the bonds could be purchased at any bank that was a member of the Federal Reserve System.

To the war planners, the appeal of borrowing funds from the public was that it would be good for morale. Individuals could demonstrate their support for the war by purchasing bonds. Indeed, during the bond campaigns, purchasers were given buttons to wear and window stickers to display, thus advertising their patriotism. If bond sales were strong, if the offering was oversubscribed, that would demonstrate American resolve.

Yet there was a risk. Poor sales would be a sign of weak support and insufficient patriotism. To avoid a failure to sell the entire bond issue, the government arranged to sell them in a series of brief but intense campaigns by subscription. The first campaign was announced on April 28, 1917, twenty-two days after the declaration of war. The first offering of bonds was to be for $2 billion and promising a 3.5 percent rate of return. That was slightly below the rate paid by savings banks on customers’ deposits (which ranged between 3.5 and 4 percent) or the yield on high-grade municipal bonds (3.9 to 4.2 percent). The fear was that individuals with preexisting savings accounts or municipal bond holdings would use those funds to purchase Liberty Bonds if the bonds’ promised return was greater than what a savings account was earning. Such a rearrangement of portfolios would not have increased saving or reduced consumption. McAdoo also knew that financial institutions would resist mightily any competition for their deposits from the government.

Originally Posted By gachase21⏩

The bonds were negotiable, with coupons cashable every six months. Although their term was thirty years, they were callable after fifteen. The lowest denomination available was $50.5 This, it seemed to some, would put them out of reach for the general public. The average compensation of a production worker in manufacturing was approximately 35 cents per hour at the time. Fifty dollars would require two weeks of wages. But there was an obstacle to issuing lower denominations: the government did not want to deal with the administrative cost of tracking ownership, so it designated Liberty Bonds as “bearer bonds.” These are securities that belong to whoever is holding them at the time rather than one registered owner. Had bearer bonds been issued in small denominations, they could be used like currency to purchase goods, thereby defeating McAdoo’s reason for refusing to print money. They would be money.

McAdoo found another way to make the bonds affordable. He introduced an installment plan. Even the poorest could purchase “War Thrift Stamps,” which cost only 25 cents.6 The Treasury Department called them “little baby bonds,” and like the Liberty Bonds, they earned interest. The stamps were pasted on a card until sixteen had been collected, at which point they were exchanged for a $5 stamp called a “War Savings Stamp.” These were affixed to a “War-Savings Certificate” which also earned interest. When ten $5 stamps were collected, the certificate could be exchanged for a $50 Liberty Bond. The key to this scheme was that the certificate was registered to its owner and could be cashed only by the person whose name was inscribed on the certificate. That made the certificate non-negotiable.

Fears of inadequate demand were proved unwarranted. The first loan was oversubscribed by 50 percent, with more than four million subscribers accepted. Nationally, that would represent about one in every six households. Subscribers for the smallest amounts were given priority. Large subscribers were rationed. According to the New York Times, John D. Rockefeller, who pledged $15 million, was allotted only “something over $3 million.” Fifty percent of the bonds sold were for the lowest face value, $50; another one-third of those sold were for the $100 bond.

In all, there were four Liberty Loan drives initiated during the war and a fifth “Victory Loan” announced after the armistice. The second Liberty Loan, for $3 billion, was open for six weeks and concluded on November 15, 1917. The third and fourth drives were each about a month long in April ($3 billion) and October ($6 billion) of 1918. Because interest rates on alternative assets had risen, the rates on the subsequent loans were increased to keep them competitive, to 4 percent on the second loan and 4.25 percent on the third and fourth. All five campaigns were oversubscribed. Purchasers of the first 3.5 percent bonds could exchange their securities for the new higher-yielding bonds.

The loan drives were the subject of the greatest advertising effort ever conducted. The first drive in May 1917 used 11,000 billboards and streetcar ads in 3,200 cities, all donated. During the second drive, 60,000 women were recruited to sell bonds. This volunteer army stationed women at factory gates to distribute seven million fliers on Liberty Day. The mail-order houses of Montgomery Ward and Sears-Roebuck mailed two million information sheets to farm women. “Enthusiastic” librarians inserted four-and-one-half million Liberty Loan reminder cards in public library books in 1,500 libraries. Celebrities were recruited. Charlie Chaplin, Mary Pickford, and Douglas Fairbanks, certainly among the most famous personalities in America, toured the country holding bond rallies attended by thousands.7

This elaborate effort was conducted by a home-grown propaganda ministry called the “Committee on Public Information.” The propaganda campaign was essential, not just to sell bonds, but to sell the war. Public sentiment before 1917 was not only against American involvement in the war, but it was not even united on which European military to root for. Running for reelection in 1916, Wilson had adopted the campaign slogan “He kept us out of war,” and he pushed his argument for noninvolvement relentlessly. Wilson’s Republican opponent, Charles Evans Hughes, was also for peace. So, not surprisingly, his administration needed a major campaign to persuade the public of the necessity and the legitimacy of military action against Germany. This was a challenge because American involvement was not predicated on a desire for territory or revenge but on an intangible ideal. When asking for war on April 2, 1917, Wilson framed the war’s objective: “The world must be made safe for democracy.”

For the task of molding public opinion, Wilson turned to an investigative journalist, George Creel, who staffed the Committee on Public Information with psychologists, fellow journalists, artists, and advertising designers. The committee developed many of the techniques now associated with modern advertising. The magazine illustrator Howard Chandler Christy drew Liberty as an attractive young woman dressed in a see-through gown cheering on the troops. The man now regarded as the “father of public relations,” Edward Bernays, also worked for Creel, pioneering the techniques of manipulating and managing public opinion based on the theories of mass psychology. The committee appealed to innate motives: the competitive (which city would buy the most bonds), the familial (“My daddy bought a bond. Did yours?”), guilt (“If you can’t enlist, invest”), fear (“Keep German bombs out of your home”), revenge (“Swat the Brutes with Liberty Bonds”), social image (“Where is your Liberty Bond button?”), gregariousness (“Now! All together”), the impulse to follow the leader (President Wilson and Secretary McAdoo), herd instincts, maternal instincts, and – yes – sex. Bernays’s uncle was Sigmund Freud.

By war’s end, after four drives, twenty million individuals had bought bonds. That is pretty impressive given that there were only twenty-four million households at the time. More than $17 billion had been raised. In addition, the taxes collected amounted to $8.8 billion. Almost exactly two-thirds of the war funds came from bonds and one-third from taxes. This was a time when $17 billion was an almost unthinkably large number. An equal share of gross domestic product today would amount to $6.3 trillion. Most of McAdoo’s bonds were purchased by the public, 62 percent of the value sold by one estimate. A government survey of almost 13,000 urban wage-earners conducted in 1918 and 1919 indicated that 68 percent owned Liberty Bonds. It seems undeniable that the emotional advertising campaign effectively produced a broad and strong desire to do one’s part for the war effort by participating in this way. After the war, McAdoo’s assistant in fiscal matters, Assistant Secretary Russell Leffingwell, described the loan campaigns “as the most magnificent economic achievement of any people. … the actual achievement of 100,000,000 united people inspired by the finest and purest patriotism.”

McAdoo had taken a gamble when he depended on faith that Americans could be induced to save more heavily than they would otherwise. He won that gamble. Saving rates shot up during the war and then returned close to their pre-war levels following the end of hostilities. Consumption as a percent of personal income fell during the war, by roughly 10 percentage points. McAdoo’s faith in and reliance upon borrowing during a time of emergency proved the value of deficit spending and emboldened those who later advocated fiscal policy to fight business recessions and unemployment. McAdoo’s belief that public opinion could be changed and mobilized to provide the will and the way to achieve great things provides a continuing foundation for an optimistic, progressive, and democratic view of our free-market capitalist economy.

Originally Posted By Islandboyo⏩

Originally Posted By Islandboyo⏩

As the Fed keeps raising interest rates through this same mechanism, the amount paid to commercial banks will only mushroom. You can forgive analysts for not discussing this; it was not even mentioned in the Fed’s Dec. 16 announcement.

As the Fed pays commercial bankers more in interest payments, there is dollar-for-dollar less for the Treasury; in other words, for a given level of federal expenditures, the deficit is that much higher. Therefore, the U.S. taxpayer is subsidizing commercial banks to not make loans to their customers—or rather bribing them to charge their customers higher interest rates on loans. And, the U.S. taxpayer is going deeper into debt to provide this bank subsidy.

This is but one aspect of the farce that is today’s Fed policy. In addition, we actually don’t know the full extent of or the precise recipients of the Fed’s asset purchases and bailouts as its balance sheet exploded from about $900 billion in August 2008 to almost $4.5 trillion today.