It is no secret that this author detests the Federal Reserve Bank and believes it should be abolished in favor of a sound monetary system. However, the chances of that happening any time soon are about as good as former president Bush being appointed Secretary of State in a future administration. by Kenn Jacobine
(libertarian)
Sunday, January 25, 2009
So, is there anything Americans can do to hurt the cartelized system and potentially bring it to its knees? Besides electing anti-Fed representatives and senators to Congress, Americans have the ability to take their banking business elsewhere – to non-Federal Reserve credit unions.
For first time readers of this column, I will briefly review the reasons for my disdain of the Fed. In 1913, at the urging of big bankers, Congress created the Federal Reserve System. The system essentially set up a banking cartel in the United States whereby through Fed policies big banks could reap huge profits while the little guy had his purchasing power and savings stolen from him. This was done through interest rate adjustments, a fractional reserve banking scheme and the printing press. Since 1913 Fed policies have been responsible for a http://www.minneapolisfed.org/>95 percent loss in the purchasing power of the dollar. Of course the Fed had http://www.lewrockwell.com/anderson/anderson154.html>accomplices in committing this grand larceny of epic proportions. On April 5, 1933 Roosevelt ended the Gold Standard for domestic holders and in 1971Nixon permanently closed the Gold window for foreigners. Because the supply of money was no longer restricted to the amount of gold in circulation, the Fed could now increase the money supply arbitrarily. And that is exactly what it did
As a related consequence, today, our national debt is $11 trillion and according to President Obama Americans need to get used to budget deficits over $1 trillion a year into the future. Many will say, "well, the national debt doesn't matter". Many pundits and politicians alike seem unfazed by all the spending. But, the debt does matter. Like individuals and businesses, when Uncle Sam's credit runs out and the bills come due Washington will be faced with a choice between default or raising taxes and cutting spending. In light of the current spending spree and Washington's aversion to spending cuts, tax hikes will be hefty and will certainly lead to economic disaster.
Then there are all the bailouts of Fed member banks. These banks and most Americans know who they are, have made horrible lending decisions in the recent past, but through their buddies at the Fed are not suffering the consequences of those decisions. Bernanke pressured the Congress to appropriate money we didn't have to the tune of $850 trillion to bail the banks out. Congress, going against the wishes of 90 percent of the American people, acquiesced. The Fed printed the money. What did we get for our involuntary generosity? No progress toward solving our economic woes and no accountability from the Fed on where the money went.
So, let's get back to our discussion of credit unions. Because of their status they have many advantages for consumers. They are not-for-profit and therefore unconcerned about stockholder equity and exempted from most state and federal taxes. Consequently, credit unions, compared to traditional banks, return their profits to their customers, who are the owners, in the form of lower rate loans and services and higher rate savings accounts.
But, beyond the advantages of using credit unions as a consumer, using them would contribute to hurting the Fed sponsored cartelized banking system and perhaps perpetuate its eventual downfall. First, credit unions are not regulated by the Fed. Second, Fed banks rely on our deposits to make loans. By rechanneling our deposits into safer, more responsible credit unions we take away their ability to make profit (and bad loans). The question then arises, how much further bailout money would the American people tolerate for these failing Fed banks before calling for the Federal Reserve system's abolition?
Third, with less deposits in Fed banks the fractional reserve scheme is tempered in its ability to artificially increase the money supply. It is true that credit unions are held to reserve requirements, but to the best of my knowledge these are minimum requirements. Thus the democratically elected boards of credit unions could keep their reserves at percentages much higher than required by the Fed.
Credit unions, like the rest of us, are feeling the effects of the financial crisis. However, they are not running to Congress looking for handouts from taxpayers. They exist to serve their members and not irresponsible Wall Street fat cats. Many did not participate in sub-prime lending. By transferring the national savings to them and away from Federal Reserve banks, Americans can put a significant hurt on the Federal Reserve system and eventually bring about its demise. For more information about joining a credit union go to: http.www.creditunion.coop/how_to_join.html.
Kenn Jacobine teaches History, English, and Information Technology in a Global Society for the American International School of Lusaka, Zambia. Visit his website at: http://lovesliberty.tripod.com">The View from Abroad.
Did you like this article? If you did, Thumb It! 11
thumbs so far
The views expressed
in this article are those of Kenn Jacobine only and
do not represent the views of Nolan Chart, LLC or its affiliates.
Kenn Jacobine is solely responsible for the contents
of this article and is not an employee or otherwise affiliated
with Nolan Chart, LLC in his/her role as a columnist.
I haven't had an account with a bank in almost 15 years.  The premise behind banks make no sense to me, "we are going to charge you to let us keep your money and make loans with it."  Right before we got married my wife had a wonderful experience with a commerce bank. They screwed up and ended up costing her $150 dollars. Fortunately for me, she didn't let me go to the bank with her when she closed her account...I would have been arrested.
Posted By: Jake, the champion of the constitution
Date: 2009-01-27 05:11:23
Dear Kenn -
While I certainly agree with the banking cartel stuff, it's also important to realize that some FCU's are so big they are well - almost like banks. They fail too. Here is some advice from an earlier article of mine.
First know if your bank(s) or credit unions are FDIC/NCUA insured or not. Over the past 3 months, another 60 banks have lost their FDIC status. If not, get your money and close the account ASAP as it is a sign that the FDIC probably refused to insure it. If yes, you can read the FDIC rules here, the NCUA rules here, and see if any of the exceptions or limits apply to your family.
Second, consider moving your money to multiple banks or credit unions in the event one would fail. This is called diversification of risk. At any bank, you can request their financial statement and check out the status of their loans and deposits. You can check the financial statement of all federal credit unions here. In general, credit unions will be safer than larger banks, mainly since its loans are limited to only the union members, but please be careful. Large banks like Bank of America, Wells Fargo, Citibank, Wachovia, etc. loan out to a wide range of borrowers (both individual and commercial), which are subject to failure due to the housing crisis.
I've used a credit union for about 5 years. When I first started I wasn't aware of the moral implications, they simply offered better service and interest plus checking. Now I'm fully aware of the moral implications and IÂ want to really boycott the big banks. The problem is, the operating money I use in my credit union account is peanuts compared to the money I am paying on my home mortgage (which started with a small bank, then sold to wamu, then bought out by JP Morgan Chase - all within 3 years) I recently inquired with my credit union as to if I refinanced my mortgage through the credit union would it be sold to a big bank. They said they do sell they some of their loans. So basically, until I can buy a home outright all that mortgage money is going to the big banks even if it originates at the credit union. -not much of a protest. Any suggestions?
I asked my credit union the same question and fortunately for me they will not sell my mortgage to another bank. As a matter of fact, they do not even deal with Fannie or Freddie. I suppose some are different. Don't know how to get around that one.
Want to comment on
this article? Leave your comment
here. Your email address is required to track your
comment. However, we will neither publish your email
address nor distribute it to other organizations or
persons. The only reason we might use it would be if
we needed to contact you regarding your comment. All
comments are subject to our
terms of use policy.
