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How do the actions of the Federal Reserve affect the economic health of the USA?

Richard Russell, Harry Browne, Glenn Dobbs

Why Gold? Why Now? DVD ProgramFor a free copy of the complete "Why Gold Why Now" DVD program please speak to a Monex Account Representative by calling 1-800-444-8317. This fascinating program features more than a dozen financial experts including well-respected economists, market advisors and commentators, best-selling authors and even a former presidential candidate, who explore the looming economic crisis and along with sharing their forecasts and recommendations. When you discover what is presented in this concise 51 minute program, you'll see why we here at Monex believe it is urgent to consider diversification with precious metals.

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Video Transcript

Host: Just 3 years after signing the Federal Reserve into existence. President Woodrow Wilson made the following statement, "I am a most unhappy man. I have unwittingly ruined my county. A great industrial nation is controlled by a system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all of our activities are in the hands of few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the 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."

Today, more and more economists and financial analysts are warning that, as Woodrow Wilson feared, we have become an industrial nation controlled by our system of credit and this is posing a serious danger to our nation. With overwhelming budget and trade deficits and mountains of money being printed to pay for them. The U.S. now finds itself walking a fine line between economic superpower and a nation slowly sinking in a sea of debt. This legacy of debt, in many ways, can be traced back to the creation of the Federal Reserve in 1913.

Richard Russell: I don't think most people understand where money comes from. You can talk to a Senator and a Congressman and say, "Where does the money come from?" I don't think they know. When the U.S. government needs money, they don't issue money they issue bonds, treasury bonds. The Federal Reserve then takes in the bonds and writes a check out against it; money is created out of the thin air.

Harry Browne: The idea was sold to the American people, and to the Senate, and the Congress that we ought to have a Federal Reserve System in 1913. So we get the Federal Reserve System, there's no Constitutional authority for it, so it was set up to look like a private institution. It's funny, a lot of people say, "The Federal Reserve is really a private bank masquerading as a government agency." When it's just the opposite, it's actually a government agency that was set up to look like a private bank to evade the Constitutional restriction.

Glenn Dobbs: The argument on which the central bank was sold to the American people was that it could be used to prevent market crashes, fluctuations in markets and recessions and depressions. But since it's formation early in the 20th Century, we've actually had more recessions and depressions, if you will, in the United States, than in the previous 100 years.

Richard Russell: Since the Federal Reserve was created in 1913, the purchasing power of the dollar has dropped about 95%. I remember even as a kid buying loaves of bread for a dime, ice cream cones for 3 cents or 5 cents, you could buy yourself a 5 or 6-course dinner for a dollar in New York. In my life, I can see what's happened to the purchasing power of the dollar, it's just being destroyed. To me it's immoral, for people who save their entire lives to find their purchasing power of what they've saved is worth nothing.

Harry Brown: I've heard so many times that the Federal Reserve would never let a deflation happen in this country and that the Federal Reserve will never let this or that. What we do is give too much credit to the Federal Reserve. The Federal Reserve sets interest rates...really? Well then why did they let the prime rate get to 20% in 1980? Do you think any politician in the country wanted a prime rate of 20%? Yet that's what we had despite everything the Federal Reserve did to try to change that to keep the interest rates down. When the time comes, the bottom can fall out no matter what the Federal Reserve is doing.

Glen Dobbs: The Federal Reserve system, as it's presented to the public today, is neither Federal, because it's not part of the government and it's not a reserve system; so it's not federal and it's not a reserve bank. It has very well defined objectives and those objectives actually have very little to do with the prosperity and the welfare of the American people.

Richard Russell: The history of paper currencies all end up as museum pieces, none of them have ever lasted. So if you were to ask me, "What would you leave your great, great, grandkids say 100 years from now or 75 years from now?" The only answer I would give you is gold. Gold will be money; it will be an item of value as far as you can look into the future. There's nothing else I can say that about.

Host: Clearly, the creation of the Federal Reserve led to more and more dollars being printed with those dollars rapidly declining in value. However, from 1913-1971, the dollar was still backed in part by U.S. gold reserves. Then came 1971, when President Richard Nixon was faced with this reality, the U.S. had printed up and spent far more dollars around the world than could possibly be backed by gold. That brings us to our second key historical factor.