The Beginning of the End of the American Empire
Excerpt from "The Global Economic Crisis"
by Tanya Cariina Hsu
December 4, 2010
The following is a sneak peak of Tanya Cariina Hsu's chapter in the new book from Global Research, "The Global Economic Crisis: The Great Depression of the XXI Century." Order now from Global Research.
"I sincerely believe... that banking establishments are more dangerous than standing armies."–U.S. President Thomas Jefferson; Letter to John Taylor, May 1816
America is dying. It is self-destructing and bringing the rest of the world down with it.Often referred to as a sub-prime mortgage collapse, this obfuscates the real reason. By associating tangible useless failed mortgages, at least something ‘real’ can be blamed for the carnage. The banking industry renamed insurance betting guarantees as "credit default swaps" and risky gambling wagers were called "derivatives". Financial managers and banking executives were selling the ultimate con to the entire world, akin to the snake-oil salesmen from the 18th century but this time in suits and ties. And by October 2008, it was a quadrillion-dollar (that’s 1 000 trillion dollar) industry that few could understand. Propped up by false hope, America is now falling like a house of cards.
The Beginning of the End
It all began in the early part of the 20th century. In 1907, J.P. Morgan, a private New York banker, published a rumor that a competing unnamed large bank was about to fail. It was a false charge but customers nonetheless raced to their banks to withdraw their money, in case it was their bank. As they pulled out their funds, the banks lost their cash deposits and were forced to call in their loans. People therefore had to pay back their mortgages to fill the banks with income, going bankrupt in the process. The 1907 panic resulted in a crash that prompted the creation of the Federal Reserve, a private banking cartel with the veneer of an independent government organization. Effectively, it was a coup by elite bankers in order to control the industry.
When signed into law in 1913, the Federal Reserve would loan and supply the nation’s money, but with interest. The more money it was able to print, the more "income" it generated for itself. By its very nature, the Federal Reserve would forever keep producing debt to stay alive. It was able to print America’s monetary supply at will, regulating its value. To control valuation, however, inflation had to be kept in check.
The Federal Reserve then doubled America’s money supply within five years, and in 1920, it called in a mass percentage of loans. Over five thousand banks collapsed overnight. One year later, the Federal Reserve again increased the money supply by 62 percent, but in 1929, it again called the loans back in, en masse. This time, the crash of 1929 caused over sixteen thousand banks to fail and an 89 percent plunge on the stock market. The private and well-protected banks within the Federal Reserve system were able to snap up the failed banks at pennies on the dollar.
The nation fell into the Great Depression and in April 1933, President Roosevelt issued an executive order that confiscated all gold bullion from the public. Those who refused to turn in their gold would be imprisoned for ten years, and by the end of the year the gold standard was abolished. What had been redeemable for gold became paper "legal tender", and gold could no longer be exchanged for cash as it had once been.
Later, in 1971, President Nixon removed the dollar from the gold standard altogether, therefore no longer trading at the internationally fixed price of 35 dollars. The U.S. dollar was now worth whatever the U.S. decided it was worth because it was "as good as gold". It had no standard of measure and became the universal currency. Treasury bills (short-term notes) and bonds (long-term notes) replaced gold as value, promissory notes of the U.S. government and paid for by the taxpayer. Additionally, gold could not be traced because it was exempt from currency reporting requirements, unlike the fiduciary (i.e. that based upon trust) monetary systems of the West. That was not in America’s best interest.
After the Great Depression, private banks remained afraid to make home loans, so Roosevelt created Fannie Mae. A state-supported mortgage bank, it provided federal funding to finance home mortgages for affordable housing. In 1968, President Johnson privatized Fannie Mae, and in 1970, Freddie Mac was created to compete with Fannie Mae. Both of them bought mortgages from banks and other lenders and sold them on to new investors.