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Question: Will you support Gavin's new block size limit hard fork of 8MB by January 1, 2016 then doubling every 2 years?
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Author Topic: Gold collapsing. Bitcoin UP.  (Read 2009164 times)
cypherdoc
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May 30, 2015, 06:26:09 PM
 #25141

TPTB, when you get confused...

Your prior post demonstrated how confused you are. I am contemplating whether it is worth even trying to unravel your numerous delusions. Might be better to just stop. Appears hopeless to educate you.

i really don't even have to try.  the evidence is everywhere today.

banks guilty of currency manipulation, banks guilty of Libor manipulation, banks guilty of gold and silver manipulation, banks guilty of money laundering, banks guilty of drug running, banks guilty of not lending, banks guilty of hoarding QE in excess reserves, banks guilty of collusion, banks guilty of outrageous self compensation, banks guilty of illegal lobbying, banks guilty of being opaque, banks guilty of not submitting to audits, banks guilty of liar loans, banks guilty of needless bailouts, etc, etc.
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There are several different types of Bitcoin clients. EWallets are like banks -- a central organization has complete control over your money. You shouldn't put much money in EWallets.
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May 30, 2015, 06:27:41 PM
 #25142

It's not that people want what you think they want, you are making a judgment based on a technology that is being circumvented.

Whether or not a Knowledge Age could alter the incentives people had as serfs is irrelevant to the chasm in front of us on this reset, which Bitcoin does not have the immutable attributes to cross.

We get there with the collective wisdom of the crowd, not by a central authority, Bitcoin is just the last key to completing  the internet.

Thank me in Bits 12MwnzxtprG2mHm3rKdgi7NmJKCypsMMQw
TPTB_need_war
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May 30, 2015, 06:34:19 PM
 #25143

It's not that people want what you think they want, you are making a judgment based on a technology that is being circumvented.

Whether or not a Knowledge Age could alter the incentives people had as serfs is irrelevant to the chasm in front of us on this reset, which Bitcoin does not have the immutable attributes to cross.

We get there with the collective wisdom of the crowd, not by a central authority, Bitcoin is just the last key to completing  the internet.

You are going to reeducate all the 60+ age Boomers (who dominate the political demographics in the West) how to become Knowledge Age workers and abandon their bankrupt retirement plans, all within the next 3 years which is the ETA for the cliff dive into the chasm?

Of course not.

The individual incentives of the People who are voting can not align with your vision of global optimization within the timeframe of the rapidly approaching event horizon of economic collapse and totalitarianism.

Edit: Oxford U. in 2012 predicted 47% of existing jobs would be displaced by automation within 20 years. Thus a majority of the working age population are not ready for the transition to a meritocratic Knowledge Age. Bitcoin can't accelerate this process of adjustment, thus the approaching chasm is unavoidable.

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UltraCoin "Smart" Derivatives: The Future of Money


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May 30, 2015, 06:39:43 PM
 #25144

...

it's just based on the general concept of a swap thus possibly quite different from what many are used to. Think in terms of buying one exposure and paying for it with another. Use tickers to describe each exposure you'd like to buy (receive) and sell (pay) and voila, you've created your first swap contract! Don't use time based tickers that contain dates (ex. options or futures). If you want a high leverage contract based on an underlying or an index, you can use a ticker to access that underlying or index directly (ex 10 year treasury) then use our leverage option to dial in as much gearing as your stomach can handle. Its digital, and its unlimited (theoretically up to 10,000x). This way you avoid theta and time decay issues inherent in options, as well has delta and gamma and sensitivity to volatility. As I mentioned to the guy in the previous post these are swaps, not options. Options are not well suited for bitcoin speculation due to their sensitivity to volatility and bitcoins extreme volatility.

...

This is interesting to me, because conceptually I visualize that replacing a thresholding criteria (which can have aliasing error) with a criteria that is based on an average state over time thus I assume (without digging into the math) removes the aliasing error and thus the unnecessary carrying cost of implied volatility for options. I am not familiar with swaps nor have I studied the math for Black-Scholes implied volatility. Note to self to dig into this concept in the future. This is very important to me if it applies to the carry cost of hedging altcoin volatility.

Reggie afair this is not succinctly communicated on your company website.

Maybe you should clarify it for us "N00bs". Exactly what does HFT have to do with digital OTC swaps, particularly P2P swaps. For the life of me, I can't figure it out and as far as I know I believe I created them.

After several tries of attempting to digest your website in a reasonably quick perusal, the distinction about the focus on swaps was not communicated to me. Normally I am known to have in the 99th percentile of reading comprehension (perhaps will not be the case from here forward because I am skimming and rushing). Perhaps that is because I am not a trader and not familiar with swaps, thus the word takes on its general definition for me, not the financial derivative. So is it my fault or your communication style? I dunno but I am betting on the latter.

I've tried to watch some Youtubes of you speaking in the past, and you do not communicate efficiently to me. I get tired of waiting for you to get to the point. Your writing style here in this forum is more direct to the point.

Note that HFT was not the only concern I enumerated nor are all my concerns (as expressed in "etc") bounded by the enumerated items. I was speaking paradigmatically about the "devil is in the details" and the inherent risks of closed source.


He is a troll, Reggie.

You apparently don't realize that expressing an opinion does not make a person a troll. But calling a person who expresses an opinion a troll, makes you one.

Can you make any point?
I believe you are making my point for me. A) all financial services organizations of any stature have closed sourced clients. B) Even if I did open source the client (and I am not opposed to it, I just need the resources to manage it) you have just admitted that you don't have the expertise to ascertain what risks you were taking through the open source code to begin with. Those familiar with the swaps concept should be able to recognize it off the bat. If you didn't recognize it, it's really not a big deal because I didn't design the product to be used solely by financial engineers and derivatives traders - hence the simplistic interface. My point is it seems as if you are willing to take extreme risk financially as long the client is open sourced. This doesn't compute. Financial institutions have ripped off many more people through financial machinations than software concerns have, trust me on that. Even if the client was open sourced, the bulk of the business logic is still on the server.
I'd love to walk you through the whole system. I feel it's quite impressive, and I believe you will agree with me once you've used it.


*Link Removed* : The Future of Money! A "Smart", Zero Trust, Peer to Peer, Decentralized derivative layer on top of Bitcoin!!!
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TPTB_need_war
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May 30, 2015, 06:42:39 PM
 #25145

Reggie, open-source maximizes the division-of-labor. I don't need to be the expert on swaps to trust the Linus Law, "given enough eyeballs, all bugs are shallow".

Open-source is very effective at refining due to the Inverse Commons, but not at leadership. For leadership, you need a Linus Torvalds.

I am not asserting what you built is worthless nor even less than impressive. I hope the community can work with you to add value to what ever you've brought of value to the community. And I do hope all parties can profit, most ideally would be within the paradigms that are sustainable in this new Knowledge Age of meritocracy ahead. We have a chasm to cross along the way, so I don't want to presume that certain closed-source business models are not viable now. I am not making such an accusation nor claiming the requisite omniscience.

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May 30, 2015, 06:52:56 PM
 #25146

TPTB, when you get confused...

Your prior post demonstrated how confused you are. I am contemplating whether it is worth even trying to unravel your numerous delusions. Might be better to just stop. Appears hopeless to educate you.

i really don't even have to try.  the evidence is everywhere today.

banks guilty of currency manipulation, banks guilty of Libor manipulation, banks guilty of gold and silver manipulation, banks guilty of money laundering, banks guilty of drug running, banks guilty of not lending, banks guilty of hoarding QE in excess reserves, banks guilty of collusion, banks guilty of outrageous self compensation, banks guilty of illegal lobbying, banks guilty of being opaque, banks guilty of not submitting to audits, banks guilty of liar loans, banks guilty of needless bailouts, etc, etc.

You don't even see that you are writing points that are irrelevant to the points I made.

TPTB_need_war
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May 30, 2015, 07:25:48 PM
 #25147

The People demand fractional reserves debt. If you deny this fact, then let's go down that rabbit hole such as using the 1800s as an example where the People demanded debt from the private, decentralized banks. Otherwise I assume you accept this fact.

you've got it backwards.  debt has been imposed by bankers.  they've tricked everyone into assuming more debt by manipulating interest rates downwards esp since 1980, the last high of 17%.  this is accomplished by money printing to buy UST's.

In the 1800s we had decentralized private banks who were incentivized to issue fractional gold reserves to feed demand for loans by the People.

Fractional reserves exist as a natural feature of the economy where demand for loans and supply of fractional reserves meet (Economics 101).

Even if you argued that killing all the banksters in that era would solve the problem, another set of banks would popup to serve the demand for debt by the People.

I probably won't attempt to unravel your other numerous misconceptions of the issues.

cypherdoc
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May 30, 2015, 08:01:04 PM
 #25148

TPTB, when you get confused...

Your prior post demonstrated how confused you are. I am contemplating whether it is worth even trying to unravel your numerous delusions. Might be better to just stop. Appears hopeless to educate you.

i really don't even have to try.  the evidence is everywhere today.

banks guilty of currency manipulation, banks guilty of Libor manipulation, banks guilty of gold and silver manipulation, banks guilty of money laundering, banks guilty of drug running, banks guilty of not lending, banks guilty of hoarding QE in excess reserves, banks guilty of collusion, banks guilty of outrageous self compensation, banks guilty of illegal lobbying, banks guilty of being opaque, banks guilty of not submitting to audits, banks guilty of liar loans, banks guilty of needless bailouts, etc, etc.

You don't even see that you are writing points that are irrelevant to the points I made.

You don't even see that you made no points whatsoever.
Adrian-x
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May 30, 2015, 08:28:34 PM
 #25149

It's not that people want what you think they want, you are making a judgment based on a technology that is being circumvented.

Whether or not a Knowledge Age could alter the incentives people had as serfs is irrelevant to the chasm in front of us on this reset, which Bitcoin does not have the immutable attributes to cross.

We get there with the collective wisdom of the crowd, not by a central authority, Bitcoin is just the last key to completing  the internet.

You are going to reeducate all the 60+ age Boomers (who dominate the political demographics in the West) how to become Knowledge Age workers and abandon their bankrupt retirement plans, all within the next 3 years which is the ETA for the cliff dive into the chasm?

Of course not.

The individual incentives of the People who are voting can not align with your vision of global optimization within the timeframe of the rapidly approaching event horizon of economic collapse and totalitarianism.

Edit: Oxford U. in 2012 predicted 47% of existing jobs would be displaced by automation within 20 years. Thus a majority of the working age population are not ready for the transition to a meritocratic Knowledge Age. Bitcoin can't accelerate this process of adjustment, thus the approaching chasm is unavoidable.

We're immigrating to the internet, all boomers welcome. Please purchase your tokens at an exchange today.
Co-opt Bitcoin and we still get a proverbial "New World" destroy Bitcoin and it may take another hundred years before we get another opportunity.

Thank me in Bits 12MwnzxtprG2mHm3rKdgi7NmJKCypsMMQw
Erdogan
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May 30, 2015, 09:46:43 PM
 #25150

now that we have money types that can navigate around these monopolies

Which money can resist takeover by centralization?

Sorry I don't see any such money that exists, not even gold.

Bitcoin has resisted takeover so far. A monopoly can not exist in the free market, there is always someone who eats from the edge of your plate. Monopoly can exist only by using violence. I don't see that it can exist in mining. The competition is merciless. The loss of productivity from unfreeness will immediately remove governmental miners from the scene.

You seem to believe the powers that shouldn't be have divine capabilities. They don't, in fact they are far less competent than the winning actors in the free market. They have to refill their resources all the time, by theft, and they only have the resources the public gives them.

Have some faith.






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May 31, 2015, 02:15:35 AM
 #25151

now that we have money types that can navigate around these monopolies

Which money can resist takeover by centralization?

Sorry I don't see any such money that exists, not even gold.

Bitcoin has resisted takeover so far. A monopoly can not exist in the free market, there is always someone who eats from the edge of your plate. Monopoly can exist only by using violence. I don't see that it can exist in mining. The competition is merciless. The loss of productivity from unfreeness will immediately remove governmental miners from the scene.

Have some faith.

 Huh

Faith in what? Faith in ignoring my analysis?

Have you completely ignored all my upthread posts detailing how the mining in Bitcoin is hopelessly trending to centralized?

Do I need to resummarize all the various reasons? You've forgotten for example the 21 Inc plan, the ongoing Sybil attack on pools, etc..

I just don't understand how I can write 100s of posts, not be refuted and yet some still pretend I didn't write the posts.

Groupthink? Selective comprehension? (difference of opinion due to refusal to comprehend the lack of refutation of my analysis, or reservations about the falsifiability and proof of my analysis)

You seem to believe the powers that shouldn't be have divine capabilities. They don't, in fact they are far less competent than the winning actors in the free market. They have to refill their resources all the time, by theft, and they only have the resources the public gives them.

Bitcoin (the Gavincoin fork) will die with the death of the NWO paradigm. That paradigm will enslave the people who can't make the shift the Knowledge Age, and those in that system will parasite on themselves until they have destroyed themselves. The NWO paradigm is a slow burn of eugenics. I am proposing an anonymous, decentralized crypto-currency to service the fledgling Knowledge Age and leave Bitcoin for the NWO which is was designed for. In the Economic Devastation and One-world reserve currency threads I have detailed my expectation for a bifurcation of the economy into NWO masses (stuck in the Old World Industrial Age, high fixed capital, socialism paradigm) and Knowledge Age future.

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May 31, 2015, 02:24:00 AM
 #25152

it's called Metcalfe's Law.  "value" of the network is squared by every new user.  iCE would rather keep it strangled down to him and his Myrcea buddies.


Not every new user needs direct access to the Mother Blockchain:


I think you've drunk the SideChain cool aid, and now your salary is dependent on the views of your employer.

It's not about what you think other people need (we have central controls to manage that), it's about individuals having freedom to make the best subjective choice.

I would think just like you if I had a product that solved the problem like SC does. In fact I was pushing in the same direction until  Peter Tod released this video. https://youtu.be/cZp7UGgBR0I, I agreed with him for all of 1 day a year ago and Justice I think pointed out very concisely the problems of limiting money velocity was not good for bitcoin. (he was the only critical voice at the time.)

I hope this does not pop up on Reddit.

Interesting. Could you link to that thing where Justus argues about money velocity? I'm not familiar with that.

...

Also, funny you mentioned Peter Todd, he and Gavin were arguing about Blockchain size today.

https://letstalkbitcoin.com/blog/post/lets-talk-bitcoin-217-the-bitcoin-block-size-discussion

I wasn't quite sure what he was talking about when he mentioned "hub and spoke" solutions, but after watching the video, I can visualize what he's getting at, and I think it's the way to go, maybe with side chains, but maybe not. Maybe you could just use alt coins? We've certainly got enough of them, and they don't seem to be going away any time soon.

I think as long as we can remove regulatory barriers to exchanges by using real time transparency audits to prove reserves, we can drive down the friction of exchange. Each alt coin could act as a hub in his model, and bitcoin is the back end clearing house where less frequent, high value transactions take place.


"You have no moral right to rule us, nor do you possess any methods of enforcement that we have reason to fear." - John Perry Barlow, 1996
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May 31, 2015, 02:42:48 AM
 #25153

lol, the network is STILL choked off after all this time.  i don't blame the short sightedness of the guy who just sold us off down to $232 given how strident iCE and his buddies have been about making any progress whatsoever on this block size issue.  i think it's a big mistake as it just gives the rest of us cheaper coins to accumulate as i think a block size increase is inevitable and soon as a result of the stress test:

"Strident?"

I've always been prone to rhetorical bombast; you make it sound as if my writing on the block size issue is some kind of unique outburst.   Cheesy

A better example of 'suddenly strident' is Gavin's backstabbing of his our core devs.  He's initiating a coup because he could not browbeat muster facts and logic sufficient to convince EVEN ONE other core dev.

The existing consensus of committers against 20mb blocks.  But Gavin will only respect a consensus which agrees with him, which is the definition of "strident."   Wink

This 'my way or the highway' stunt is beyond merely strident.  It is an internal attack on Bitcoin, originating from the very top.

Don't blame little old *me* for the stagnant price; instead look to the brain of the fish now rotting from the head down.

This 'stress test' or 'occupy 1mb protest' has only reinforced both sides' confirmation bias.  It changed nobody's mind.

My (and Lukejr's) POV is that it proved the network can cope just fine with being relatively busy or (somewhat bogged down) without chocking.

It is beyond me how that result in any way implies the need to increase the load until something (probably UXTO buffers) begin to degrade or break.

The network is not chocked at zero tps, it's only breathing a little faster than its previous languid pace.  Good exercise, keeps the cardio healthy.   Tongue

Please calm down and stop exaggerating.


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Monero
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TPTB_need_war
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May 31, 2015, 03:04:20 AM
 #25154

This MassesVCGavinNWOCoin vs. DelusionalEarlyAdopterGoldbugCoin battle is going to be interesting.

I still don't see how the latter can expect to win. There will be a giant sucking sound of capital fleeing the latter for the former. The latter has nearly no market nor ecosystem to propose after the media, VCs, GHash.io, etc pull their support. I already refuted the side coins delusion upthread and there was no retort offered.

A better example of 'suddenly strident' is Gavin's backstabbing of his our core devs.  He's initiating a coup because he could not browbeat muster facts and logic sufficient to convince EVEN ONE other core dev.

The existing consensus of committers against 20mb blocks.  But Gavin will only respect a consensus which agrees with him, which is the definition of "strident."   Wink

This 'my way or the highway' stunt is beyond merely strident.  It is an internal attack on Bitcoin, originating from the very top.

Don't blame little old *me* for the stagnant price; instead look to the brain of the fish now rotting from the head down.

You've got that transposed. The core devs are holding the larger market and capital hostage. The masses don't give a fuck about decentralization. The masses are owned by Peter Thiel et al, and thus by proxy they want scaling which is only possible in Bitcoin with centralization (notwithstanding the side chain delusion which I already refutred).

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May 31, 2015, 03:14:43 AM
 #25155

There is no stopping the coming economic collapse. It can be delayed but not prevented. The mass populace will look to the governments and banksters to stop the collapse that they have engineered. The Hagealian Dialectic meal plan is serving sheep for dinner and it will be an all you can eat buffet.

The new Knowledge Age will never arrive in time because the vast majority do not want it. Also it you are thinking that today's youth will adopt the new paradigm think again. This generation of youth is the most brain dead comatose generation to ever come along. They've got smart Devices that allow them to air their life story on social media. They are a lost cause. They are slaves to the machine.

I find your lack of faith disturbing...
https://m.youtube.com/watch?feature=share&v=fW8amMCVAJQ


And, whose generation did my generation have to be parented from again?  Roll Eyes

I saw that video years ago.

I was that dancing guy. That is me. The guy who isn't inhibited and shows up at the party and gets everyone off the couch and onto the dance floor.

Leaders lead. It is just something innate. We aren't afraid. We are confident that we know what is fun or better and just go for it. Sometimes we fail, but don't sulk and just get up and try again.

The youth are more capable of making a transition in the sense that they are young and more flexible, but coinits is also correct in the sense that such transitions take time because there is no way for leaders like me or the dancing guy to interact with all the people in real life. In reality what happens is that any mass movements are co-opted by the existing groupthink inertia (political correctness, powers-that-be, etc).

In short, there is a difference between what I am confident I can do in personal interaction and what I know will scale. Seems many Bitcoin supporters can't make that crucial distinction.

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May 31, 2015, 03:30:00 AM
 #25156

The People demand fractional reserves debt. If you deny this fact, then let's go down that rabbit hole such as using the 1800s as an example where the People demanded debt from the private, decentralized banks. Otherwise I assume you accept this fact.

you've got it backwards.  debt has been imposed by bankers.  they've tricked everyone into assuming more debt by manipulating interest rates downwards esp since 1980, the last high of 17%.  this is accomplished by money printing to buy UST's.

Declining interest rates is all a trick from the banksters and not a natural trend for 5000 years.  Roll Eyes

2. Previously, savings without knowledge were able to provide a positive return on capital, in the 1700s this was about 5% but has steadily declined. Now it is hardly possible to get more than 2%. Taxation by inflation (capital "gains") is the main way how this is accomplished lately.



How can I debate with a person who is implicitly disingenuous because he is ignorant of some important aspects of history. I don't have any personal animosity towards you (so far). I am not saying you are completely ignorant.

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May 31, 2015, 03:51:26 AM
 #25157

So iCE. Are you working for Blockstream?
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May 31, 2015, 03:55:18 AM
 #25158

have you ever read The Creature from Jekyll Island?  great history on the secret meeting of JP Morgan et al where the Fed was hatched

Another history lesson for you:

The Federal Reserve: Part I “The Creature from Jekyll Island”



Quote from: Armstrong
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 for 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 government, and they would love that to happen. Their 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.

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 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.

Morgan proceeded to lock them in his library and told them they have to come up with $25 million to save the banks. It took almost 2 hours. Morgan finally convinced them that they had to bailout the banks to save their own skins. They signed the agreement, and he unlocked the doors and let them leave.

Morgan was saving the nation again, single-handedly. He then turned back to save the NYSE. He knew the problem would be the Marxist inspired Antitrust Laws (Sherman Antitrust Act), and the crusading Marxist/Progressive President Teddy Roosevelt (1858-1919). Breaking up companies that he believed were monopolies became the primary focus of Roosevelt’s administration. To save the day, he would have to see that the Antitrust Laws must yield.

Two men thus traveled to the White House to implore Roosevelt to set aside his Antitrust Laws to save the nation. As typical, Roosevelt’s secretary refused to let them in to discuss the problem. The two men, Frick and Gary of US Steel turned to James Garfield who was Secretary of the Interior at that time and son former President Garfield. They pleaded with him to go to the president directly. Garfield had convinced Roosevelt to review the proposal and Roosevelt was for the first time forced in to a corner. He had to realize a collapse of the NYSE would take place if he did not yield in his anti-corporate beliefs. Roosevelt later lamented:

“It was necessary for us to decide on the instant before the Stock Exchange opened, for the situation in New York was such that any hour might be vital. I do not believe that anyone could justly criticize me for saying that I would not feel like objecting to the purchase under those circumstances.”

Following the near catastrophic financial disaster known as the Panic of 1907, the movement for banking reform picked up steam among Wall Street bankers, Republicans, and a few eastern Democrats. However, much of the country was still distrustful of bankers and of banking in general, especially after Panic of 1907. After two decades of minority status, Democrats regained control of Congress in 1910 and were able to block several Republican attempts at reform, even though they recognized the need for some kind of currency and banking changes. As always, it was more important to further political party power than actually do the right thing for the nation.

In 1912, President Woodrow Wilson (1856–1924) won the Democratic Party’s nomination for president, and in his populist-friendly acceptance speech, he warned against the “money trusts,” and advised that a concentration of the control of credit may at any time become infinitely dangerous to free enterprise. It was the anti-Wall Street agenda.

Behind the scenes, the Panic of 1907 revealed the weak underbelly to the American financial system. After the scare that the Panic of 1907 created among the bankers, they demanded reform. The following year, Congress enacted the Aldrich-Vreeland Act of 1908 establishing the National Monetary Commission forming a study group of experts to come up with a nonpartisan solution. They viewed the lack of a central bank in America, in contrast to Europe, as the threat to economic stability among the bankers as filled by J.P. Morgan during that crisis.

A National Monetary Commission formed and the Republican leader in the Senate, Senator Nelson Aldrich (1841-1915) took charge. Aldrich was a brilliant man who was passionate about revising the American financial system. The Commission went to Europe and was duly impressed at how well they believed the central banks in Britain and Germany handled the stabilization of the overall economy and the promotion of international trade. The Commission issued some 30 reports between 1909 and 1912, which preserved a wonderful detailed resource surveying of banking systems of the late 19th and early 20th centuries at that time. These reports examined also the Canadian banking history in addition to the banking and currency systems of Belgium, England, France, Germany, Italy, Mexico, Russia, Switzerland, and other nations. They also provided an excellent review of domestic U.S. financial laws federally as well as state banking statutes. These reports contain essays of contemporary specialists as well as a host of data in tables, charts, graphs, and facsimiles of banking forms and documents. There are also transcripts of relevant political speeches, interviews, and various hearings.

In 1910, Aldrich met with Frank Vanderlip of National City Bank (Citibank), Henry Davison of Morgan Bank, and Paul Warburg of the Kuhn, Loeb Investment House secretly. They met at Jekyll Island, a resort island off the coast of Georgia, to discuss and formulate banking reform, including plans for a form of central banking that would accomplish the role of J.P. Morgan played during the Panic of 1907. They held the meeting in secret because the participants knew that the House of Representatives would reject any plan they generated given the intense hatred of the bankers and Wall Street in the festering Marxist/Progressive atmosphere.

Unfortunately, because this meeting was in secret involving Wall Street, the whole Jekyll Island affair remains cloaked in conspiracy theories. Nevertheless, this intense bias and conspiracy theory has always overestimated both the purpose and significance of the meeting in light of the extensive work of the National Monetary Commission. Reform was essential. However, those two words – political economy – could not be divorced.

Upon his return, Aldrich’s investigation led to his plan in 1912 to bring central banking to the United States with all its promises of financial stability and expanded international roles in trade and money flow. Aldrich knew the dangers of American politics and insisted that control by impartial experts was essential. Placing bankers at the helm rather than politicians was really the only way to proceed. The two words, political economy, had to be divorced in his mind. There was to be absolutely NO political meddling in finance as had been the case under Andrew Jackson (1757-1845). Aldrich asserted that a central bank was essential yet the diversity and size of the United States presented a distinctly different twist to the European situation.

Aldrich concluded that Europe had many countries with diverse economic models. He realized that while the United States needed a central bank, paradoxically it also required simultaneous decentralization to cope with both the economy and the self-defeating American political system. Aldrich appreciated the fact that local politicians and bankers would attack the central banks, as they had the First and Second Bank of the United States. Aldrich introduced his brilliant plan in 62nd and 63rd Congresses (1912 and 1913). As always, the political winds changed and the Democrats in 1912 won control of both of the House and the Senate as well as the White House.

The Aldrich Plan proposed a system of fifteen regional central banks, called National Reserve Associations, whose actions were to be coordinated by a national board of commercial bankers to do NO more than be a lender of last resort as J.P. Morgan had acted during the Panic of 1907. The National Reserve Association would make emergency loans to member banks, they would create money to provide an elastic currency that enabled equal exchanges for demand deposits, and would act as a fiscal agent for the federal government. Congress ended up rejecting Aldrich’s idea, which was defeated in the House as politics superseded the national good. However, his outline did become a model for a future implemented bill. The problem with the Aldrich Plan was that it gave bankers control over the regional banks, a prospect that did not sit well with the populist Democratic Party or with President Wilson. The Democrats and Wilson were fearful that the reforms would grant more control of the financial system to bankers and the politicians could not meddle as they saw fit. The history of the First and Second Bank of the United States was repeating. The political economy cannot be divorced.

The need for a central bank was really far too great and even the Democrats recognized it behind closed doors. Eventually, the Federal Reserve Act passed 43-25 and this altered the actual role of currency. MONEY was now becoming “elastic” for the Federal Reserve would issue currency notes thereby creating a money supply that increases and decreases as the economy expands and shrinks. This new “Elastic Money” would become an essential function of the Federal Reserve System in its early days, where it would regulate the amount of money supply permitted to be in circulation. This was essential due to the wild swings during the 19th century in the economy caused by the chance discoveries of gold in California, Alaska, and silver that disrupted the economy and arbitrarily increased the money supply with nobody in charge.

Effectively, the 20th century saw unrestrained printing of paper dollars caused by political fiscal mismanagement whereas the 19th century was plagued by chance discoveries of precious metals that had the same effects. The California Gold Rush injected a huge wave of inflation because the sheer supply of money increased sharply. The same argument that paper money has caused inflation during the 20th century applied to gold during the 19th century.

Essentially, this new ability to have an Elastic Money Supply became a perceived necessity to ensure that the reserves held in trust by the government were adequate to back the amount of coins and currency permitted to circulate. It was a nonpartisan decision to deal with shifts in the economy whereas politicians could not be responsible no matter what. The Federal Reserve would now prevent excessive conditions that would lead the country into financial chaos and ultimate ruin as nearly took place during the Panic of 1907. The Fed would expand the money supply during periods of economic decline and contract the money supply during economic booms. Of course, the politicians would later seize control of the Fed and ensure it would be party time all the time.

Optimal monetary policy is supposed to facilitate exchange within the economy to avoid aggregate shocks that affect individuals and economic sectors (industries) unequally. Exchange may be conducted using either bank deposits that some see as “inside money” or “fiat” currency, which some refer to as “outside money” that is created by leverage or fractional banking. A central monetary authority both controls the stock of “outside money” and pursues an interest rate policy that is intended to affect the rate at which private banks create “inside money”. The modern context views it as the optimal monetary policy, requiring management of both interest rates and the quantity of outside money. By controlling interest rates the monetary authority can affect the price level in the short-run and adjust households’ consumption, so they believe, and therefore this provides insurance against unfavorable aggregate shocks to the money supply tempering the boom-bust cycle.

However, the feasibility of manipulating the interest rate policy and the quantity of money, as we will see, is purely a fantasy in the new modern global economy. These concepts quickly proved to be far too parochial. The global economy was about to receive a major shock that would turn it on its head – World War I which began July 28th, 1914 and lasted until November 11th, 1918. The war involved more than 70 million military personnel, including 60 million Europeans, and a loss of more than 9 million soldiers killed in combat. The assassination of Archduke Franz Ferdinand of Austria on June 28th, 1914 was the excuse for the war, but in reality, it was the culmination of centuries of contests for imperialistic power in Europe. Ferdinand was the heir to the Austria- Hungarian Empire throne, which was the remnant of the Holy Roman Empire. This allowed the hatred between many rivals bringing into the conflict the German Empire, Ottoman Empire, Russian Empire, British Empire, French Empire, and Italy. In the end, the Financial Capital of Europe, which migrated from Babylon to Athens, then Rome, Byzantine, Northern Italy centered in Florence/Genoa/Venice, to Amsterdam, and then to London in 1689, now migrated to the United States beginning in 1914.

With World War I, the American politicians began to alter the Fed. Its original design was brilliant. To stimulate the economy and suppress unemployment, they would buy corporate paper. With World War I, Congress ordered the Fed to support the US debt. They would not return to the original design of the Fed set out in 1913.

With the Great Depression, the major banking collapse took place largely due to the Sovereign Debt Default of 1931. Banks failed as money vanished from circulation collapsing the velocity. Asset values collapsed and land, which had sold for $2.50 an acre during the mid-1800s, fell to 10 cents. No degree of limiting fractional banking would save the day when the bond market collapses. We see the huge spike in foreign bonds listed in 1928 on the NYSE, and the collapse as defaults began to rage from 1931 onward.

Franklin Roosevelt, every much a socialist as Teddy even though a Democrat, altered the Fed usurping all power to Washington. The branches remained, but they no longer served the purpose of managing the local economy. It was now one-size-fits-all. It would be Congress who appoints the directors and Fed Chairman, while the technical ownership of a rescue fund for bankers is only there in name, not reality. Goldman Sachs switched tactics and installed its people in the Treasury not for banking, but for trading. They were Obama’s biggest contributors, but make no mistake: Goldman Sachs is a trader, not a bank with branches taking deposits from little old ladies.

Today, the Fed is nothing like its original intended design. This alter was not caused by bankers, but by politicians. Now, it has the authority to take over anything it thinks is too big to fail, which is not limited to banks. It could take over Google, McDonalds, or anything as long as it states it would harm the economy.

We need a central bank, but not one manipulated by government. There should be a simple insurance fund for banks as originally intended without using taxpayers’ money. It should not be restricted to buying government debt. Instead, it should protect jobs by its original focus to buy corporate paper in times of stress. We must look closely at the Fed to see that its manipulation by Congress for political reasons. It was supposed to support government bonds during World War II, but it took until 1951 to rescind.

The Fed is not evil, but rather it is the manipulation of the Fed by politicians. It is use to blame for economy booms and busts while Congress avoids all responsibility. Now, the Fed is stuck in a very difficult situation. It is charges with Keyensian/Marxist ideas of manipulating the economy when its original design was only to deal with a banking crisis.

Tomorrow we will look at the risks we now face from the REALITY of political manipulation of the Fed.

cypherdoc
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May 31, 2015, 03:57:18 AM
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The People demand fractional reserves debt. If you deny this fact, then let's go down that rabbit hole such as using the 1800s as an example where the People demanded debt from the private, decentralized banks. Otherwise I assume you accept this fact.

you've got it backwards.  debt has been imposed by bankers.  they've tricked everyone into assuming more debt by manipulating interest rates downwards esp since 1980, the last high of 17%.  this is accomplished by money printing to buy UST's.

Declining interest rates is all a trick from the banksters and not a natural trend for 5000 years.  Roll Eyes

2. Previously, savings without knowledge were able to provide a positive return on capital, in the 1700s this was about 5% but has steadily declined. Now it is hardly possible to get more than 2%. Taxation by inflation (capital "gains") is the main way how this is accomplished lately.



How can I debate with a person who is implicitly disingenuous because he is ignorant of some important aspects of history. I don't have any personal animosity towards you (so far). I am not saying you are completely ignorant.

WTF did I just say?
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May 31, 2015, 04:04:31 AM
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have you ever read The Creature from Jekyll Island?  great history on the secret meeting of JP Morgan et al where the Fed was hatched

Another history lesson for you:

The Federal Reserve: Part I “The Creature from Jekyll Island”



Quote from: Armstrong
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 for 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 government, and they would love that to happen. Their 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.

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 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.

Morgan proceeded to lock them in his library and told them they have to come up with $25 million to save the banks. It took almost 2 hours. Morgan finally convinced them that they had to bailout the banks to save their own skins. They signed the agreement, and he unlocked the doors and let them leave.

Morgan was saving the nation again, single-handedly. He then turned back to save the NYSE. He knew the problem would be the Marxist inspired Antitrust Laws (Sherman Antitrust Act), and the crusading Marxist/Progressive President Teddy Roosevelt (1858-1919). Breaking up companies that he believed were monopolies became the primary focus of Roosevelt’s administration. To save the day, he would have to see that the Antitrust Laws must yield.

Two men thus traveled to the White House to implore Roosevelt to set aside his Antitrust Laws to save the nation. As typical, Roosevelt’s secretary refused to let them in to discuss the problem. The two men, Frick and Gary of US Steel turned to James Garfield who was Secretary of the Interior at that time and son former President Garfield. They pleaded with him to go to the president directly. Garfield had convinced Roosevelt to review the proposal and Roosevelt was for the first time forced in to a corner. He had to realize a collapse of the NYSE would take place if he did not yield in his anti-corporate beliefs. Roosevelt later lamented:

“It was necessary for us to decide on the instant before the Stock Exchange opened, for the situation in New York was such that any hour might be vital. I do not believe that anyone could justly criticize me for saying that I would not feel like objecting to the purchase under those circumstances.”

Following the near catastrophic financial disaster known as the Panic of 1907, the movement for banking reform picked up steam among Wall Street bankers, Republicans, and a few eastern Democrats. However, much of the country was still distrustful of bankers and of banking in general, especially after Panic of 1907. After two decades of minority status, Democrats regained control of Congress in 1910 and were able to block several Republican attempts at reform, even though they recognized the need for some kind of currency and banking changes. As always, it was more important to further political party power than actually do the right thing for the nation.

In 1912, President Woodrow Wilson (1856–1924) won the Democratic Party’s nomination for president, and in his populist-friendly acceptance speech, he warned against the “money trusts,” and advised that a concentration of the control of credit may at any time become infinitely dangerous to free enterprise. It was the anti-Wall Street agenda.

Behind the scenes, the Panic of 1907 revealed the weak underbelly to the American financial system. After the scare that the Panic of 1907 created among the bankers, they demanded reform. The following year, Congress enacted the Aldrich-Vreeland Act of 1908 establishing the National Monetary Commission forming a study group of experts to come up with a nonpartisan solution. They viewed the lack of a central bank in America, in contrast to Europe, as the threat to economic stability among the bankers as filled by J.P. Morgan during that crisis.

A National Monetary Commission formed and the Republican leader in the Senate, Senator Nelson Aldrich (1841-1915) took charge. Aldrich was a brilliant man who was passionate about revising the American financial system. The Commission went to Europe and was duly impressed at how well they believed the central banks in Britain and Germany handled the stabilization of the overall economy and the promotion of international trade. The Commission issued some 30 reports between 1909 and 1912, which preserved a wonderful detailed resource surveying of banking systems of the late 19th and early 20th centuries at that time. These reports examined also the Canadian banking history in addition to the banking and currency systems of Belgium, England, France, Germany, Italy, Mexico, Russia, Switzerland, and other nations. They also provided an excellent review of domestic U.S. financial laws federally as well as state banking statutes. These reports contain essays of contemporary specialists as well as a host of data in tables, charts, graphs, and facsimiles of banking forms and documents. There are also transcripts of relevant political speeches, interviews, and various hearings.

In 1910, Aldrich met with Frank Vanderlip of National City Bank (Citibank), Henry Davison of Morgan Bank, and Paul Warburg of the Kuhn, Loeb Investment House secretly. They met at Jekyll Island, a resort island off the coast of Georgia, to discuss and formulate banking reform, including plans for a form of central banking that would accomplish the role of J.P. Morgan played during the Panic of 1907. They held the meeting in secret because the participants knew that the House of Representatives would reject any plan they generated given the intense hatred of the bankers and Wall Street in the festering Marxist/Progressive atmosphere.

Unfortunately, because this meeting was in secret involving Wall Street, the whole Jekyll Island affair remains cloaked in conspiracy theories. Nevertheless, this intense bias and conspiracy theory has always overestimated both the purpose and significance of the meeting in light of the extensive work of the National Monetary Commission. Reform was essential. However, those two words – political economy – could not be divorced.

Upon his return, Aldrich’s investigation led to his plan in 1912 to bring central banking to the United States with all its promises of financial stability and expanded international roles in trade and money flow. Aldrich knew the dangers of American politics and insisted that control by impartial experts was essential. Placing bankers at the helm rather than politicians was really the only way to proceed. The two words, political economy, had to be divorced in his mind. There was to be absolutely NO political meddling in finance as had been the case under Andrew Jackson (1757-1845). Aldrich asserted that a central bank was essential yet the diversity and size of the United States presented a distinctly different twist to the European situation.

Aldrich concluded that Europe had many countries with diverse economic models. He realized that while the United States needed a central bank, paradoxically it also required simultaneous decentralization to cope with both the economy and the self-defeating American political system. Aldrich appreciated the fact that local politicians and bankers would attack the central banks, as they had the First and Second Bank of the United States. Aldrich introduced his brilliant plan in 62nd and 63rd Congresses (1912 and 1913). As always, the political winds changed and the Democrats in 1912 won control of both of the House and the Senate as well as the White House.

The Aldrich Plan proposed a system of fifteen regional central banks, called National Reserve Associations, whose actions were to be coordinated by a national board of commercial bankers to do NO more than be a lender of last resort as J.P. Morgan had acted during the Panic of 1907. The National Reserve Association would make emergency loans to member banks, they would create money to provide an elastic currency that enabled equal exchanges for demand deposits, and would act as a fiscal agent for the federal government. Congress ended up rejecting Aldrich’s idea, which was defeated in the House as politics superseded the national good. However, his outline did become a model for a future implemented bill. The problem with the Aldrich Plan was that it gave bankers control over the regional banks, a prospect that did not sit well with the populist Democratic Party or with President Wilson. The Democrats and Wilson were fearful that the reforms would grant more control of the financial system to bankers and the politicians could not meddle as they saw fit. The history of the First and Second Bank of the United States was repeating. The political economy cannot be divorced.

The need for a central bank was really far too great and even the Democrats recognized it behind closed doors. Eventually, the Federal Reserve Act passed 43-25 and this altered the actual role of currency. MONEY was now becoming “elastic” for the Federal Reserve would issue currency notes thereby creating a money supply that increases and decreases as the economy expands and shrinks. This new “Elastic Money” would become an essential function of the Federal Reserve System in its early days, where it would regulate the amount of money supply permitted to be in circulation. This was essential due to the wild swings during the 19th century in the economy caused by the chance discoveries of gold in California, Alaska, and silver that disrupted the economy and arbitrarily increased the money supply with nobody in charge.

Effectively, the 20th century saw unrestrained printing of paper dollars caused by political fiscal mismanagement whereas the 19th century was plagued by chance discoveries of precious metals that had the same effects. The California Gold Rush injected a huge wave of inflation because the sheer supply of money increased sharply. The same argument that paper money has caused inflation during the 20th century applied to gold during the 19th century.

Essentially, this new ability to have an Elastic Money Supply became a perceived necessity to ensure that the reserves held in trust by the government were adequate to back the amount of coins and currency permitted to circulate. It was a nonpartisan decision to deal with shifts in the economy whereas politicians could not be responsible no matter what. The Federal Reserve would now prevent excessive conditions that would lead the country into financial chaos and ultimate ruin as nearly took place during the Panic of 1907. The Fed would expand the money supply during periods of economic decline and contract the money supply during economic booms. Of course, the politicians would later seize control of the Fed and ensure it would be party time all the time.

Optimal monetary policy is supposed to facilitate exchange within the economy to avoid aggregate shocks that affect individuals and economic sectors (industries) unequally. Exchange may be conducted using either bank deposits that some see as “inside money” or “fiat” currency, which some refer to as “outside money” that is created by leverage or fractional banking. A central monetary authority both controls the stock of “outside money” and pursues an interest rate policy that is intended to affect the rate at which private banks create “inside money”. The modern context views it as the optimal monetary policy, requiring management of both interest rates and the quantity of outside money. By controlling interest rates the monetary authority can affect the price level in the short-run and adjust households’ consumption, so they believe, and therefore this provides insurance against unfavorable aggregate shocks to the money supply tempering the boom-bust cycle.

However, the feasibility of manipulating the interest rate policy and the quantity of money, as we will see, is purely a fantasy in the new modern global economy. These concepts quickly proved to be far too parochial. The global economy was about to receive a major shock that would turn it on its head – World War I which began July 28th, 1914 and lasted until November 11th, 1918. The war involved more than 70 million military personnel, including 60 million Europeans, and a loss of more than 9 million soldiers killed in combat. The assassination of Archduke Franz Ferdinand of Austria on June 28th, 1914 was the excuse for the war, but in reality, it was the culmination of centuries of contests for imperialistic power in Europe. Ferdinand was the heir to the Austria- Hungarian Empire throne, which was the remnant of the Holy Roman Empire. This allowed the hatred between many rivals bringing into the conflict the German Empire, Ottoman Empire, Russian Empire, British Empire, French Empire, and Italy. In the end, the Financial Capital of Europe, which migrated from Babylon to Athens, then Rome, Byzantine, Northern Italy centered in Florence/Genoa/Venice, to Amsterdam, and then to London in 1689, now migrated to the United States beginning in 1914.

With World War I, the American politicians began to alter the Fed. Its original design was brilliant. To stimulate the economy and suppress unemployment, they would buy corporate paper. With World War I, Congress ordered the Fed to support the US debt. They would not return to the original design of the Fed set out in 1913.

With the Great Depression, the major banking collapse took place largely due to the Sovereign Debt Default of 1931. Banks failed as money vanished from circulation collapsing the velocity. Asset values collapsed and land, which had sold for $2.50 an acre during the mid-1800s, fell to 10 cents. No degree of limiting fractional banking would save the day when the bond market collapses. We see the huge spike in foreign bonds listed in 1928 on the NYSE, and the collapse as defaults began to rage from 1931 onward.

Franklin Roosevelt, every much a socialist as Teddy even though a Democrat, altered the Fed usurping all power to Washington. The branches remained, but they no longer served the purpose of managing the local economy. It was now one-size-fits-all. It would be Congress who appoints the directors and Fed Chairman, while the technical ownership of a rescue fund for bankers is only there in name, not reality. Goldman Sachs switched tactics and installed its people in the Treasury not for banking, but for trading. They were Obama’s biggest contributors, but make no mistake: Goldman Sachs is a trader, not a bank with branches taking deposits from little old ladies.

Today, the Fed is nothing like its original intended design. This alter was not caused by bankers, but by politicians. Now, it has the authority to take over anything it thinks is too big to fail, which is not limited to banks. It could take over Google, McDonalds, or anything as long as it states it would harm the economy.

We need a central bank, but not one manipulated by government. There should be a simple insurance fund for banks as originally intended without using taxpayers’ money. It should not be restricted to buying government debt. Instead, it should protect jobs by its original focus to buy corporate paper in times of stress. We must look closely at the Fed to see that its manipulation by Congress for political reasons. It was supposed to support government bonds during World War II, but it took until 1951 to rescind.

The Fed is not evil, but rather it is the manipulation of the Fed by politicians. It is use to blame for economy booms and busts while Congress avoids all responsibility. Now, the Fed is stuck in a very difficult situation. It is charges with Keyensian/Marxist ideas of manipulating the economy when its original design was only to deal with a banking crisis.

Tomorrow we will look at the risks we now face from the REALITY of political manipulation of the Fed.

What the heck is with you and your fetish for Armstrong? One would think you're him.

Talk about centralizing ones ideas. He's a nutcase and I lost all respect for him once he started promoting all his conferences incessantly.
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