G. Edward Griffin. The Creature from Jekyll Island: A Second Look at the Federal Reserve. 5th edition. American Media, 2010. See here to purchase the book.
G. Edward Griffin enrolled in the College of Financial Planning in
Denver and received a Certified Public Planner (CFP) designation in
1989. He is affiliated with the conservative John Birch Society and has
served as the Contributing Editor of its New American magazine. This book criticizes the Federal Reserve System.
Here are some items:
A. As Griffin notes, bankers make money from interest, and this
occurs when they lend money out. Interest accumulates on the debt and is
paid to the bankers. But there are problems with banks loaning out a
lot of money. For one, the money that they are lending out is other
people’s savings. If there is ever a run on the bank and depositors are
demanding their money right then and there, the bank will not be able to
give it to them. As George Bailey said in It’s a Wonderful Life,
the money is not stored in a safe but has been loaned out to other
people. Second, banks take a risk when they loan out money, namely, that
it will not be paid back. According to Griffin, one motive behind the
creation of the Federal Reserve was to enable banks to loan out money
with more impunity, thereby allowing bankers to make more money from
interest. More reckless banks can be bailed out by the Federal Reserve,
which receives money from all of the member banks. The government can
also bail the reckless banks out. Or, if the debtors fail to pay off
their debts, the Federal Reserve can print out more money and lend that
out to the debtors.
B. The problem that occurs when the Federal Reserve prints more money
or releases more money into the system is inflation: the already
existing dollars become debased. Griffin acknowledges that, as he
writes, the United States is not experiencing hyperinflation. He
believes that is due to foreigners taking American dollars out of the
system when Americans buy their products, and foreigners buying up
American debt. If this were to cease, hyperinflation would occur.
C. Historically, Griffin argues, bankers have profited from war
because they get to loan out money to both sides in the conflict.
Ultimately, Griffin contends, their desire is for a one-world
government. Griffin refers to documents that appear to promote a
one-world government. Griffin prominently features an enigmatic 1966
document entitled the “Report from Iron Mountain.” This document
rhapsodizes about how war has historically consolidated nations, and the
author is looking for a different way to control people. As Griffin
acknowledges, nobody knows who wrote this or if the author was being
serious. Griffin believes it comes from within the government
establishment. Griffin also refers to environmentalist documents that
lament the existence of humanity and promote a worldwide redistribution
of wealth. Griffin doubts that the rich and powerful promoters of
environmentalism seriously care about the environment. They invest in
industries that pollute the environment; in the case of Gorbachev, he
presided over the Soviet Union’s horrible environmental policy. For
Griffin, they are merely using the environment as an excuse for moving
towards a one-world government: if people fear environmental disaster,
they will support a global government to redress the problem.
D. Griffin responds to standard historical scenarios. Against the
charge that the Federal Reserve was created to add stability and to
prevent the sorts of panics that preceded its creation, Griffin contends
that many banks prior to the Federal Reserve were behaving
irresponsibly by printing out money and further detaching its value from
metals. They were moving in the opposite direction from the sound money
system that Griffin supports, in short. Moreover, financial disasters
have continued to exist even after the creation of the Federal Reserve.
Against the charge that prominent Wall Streeters feared and opposed the
creation of the Federal Reserve, Griffin contends that this was all for
show, for prominent financiers helped to create the Federal Reserve.
According to Griffin, Teddy Roosevelt and J.P. Morgan shared more common
ground than people think! Griffin challenges conventional explanations
for why financiers financed the Bolshevik Revolution—-e.g., to help one
country over another in World War I—-showing that the financiers were
inconsistent in that case. Griffin seems to think that financiers
supported the Bolsheviks to create a formidable international enemy,
which would result in wars and higher defense budgets; bankers would
provide the money for that. (The Communists, meanwhile, accept
capitalist money for the sake of their own survival, but they hope to
hang the capitalists with the rope that the capitalists provide; Griffin
provides quotes to that effect.) Against the charge that easy credit
was necessary to finance the early economic development and expansion of
the U.S., Griffin speculates that this could have occurred through
economically responsible means, had they been tried. Griffin also offers
some Civil War revisionism. Some of that resembled contemporary
defenses of the Confederacy: that, through tariffs, the North was trying
to reduce the South to economic servitude and dependence on the North,
that the South invested a lot of capital in slavery, and that the South
did not really want slavery, anyway, since people who are paid to work
are more motivated. Griffin is far from being pro-Confederacy, however,
for he states that bankers were also financing the Confederate cause:
some of them supported the creation of a southern empire that would
unite with Latin American nations. Napolean also gets a cameo as a rebel
against the financial establishment, albeit for self-serving reasons.
E. Griffin also responds to what is considered to be conventional
knowledge. For example, the conventional view is that the IMF and World
Bank pressure countries to embrace free market capitalism and austerity
in government spending. Griffin observes, however, that they have lent
to communist countries, and he notes that these lenders give to
governments; such a policy contributes to statism, not a free market.
F. Griffin is critical of various proposals to redress the problems
that he discusses. One proposal is to eliminate the Federal Reserve and
to have the federal government itself print the money. There are also
the proposals of Milton Friedman and supply-side economists, which try
to limit the money supply but still presume that the government should
print out money. The Balanced Budget Amendment will not work because the
Congress can circumvent it in case of an “emergency,” whatever it
defines that to be. What Griffin seems to advocate is a privatized money
system, as people trade in the money that they choose. He thinks people
should trade in metals, however, as that provides more stability.
Griffin also offers a solution as to how banks can store up money while
also lending some out for business development. Griffin is not overly
optimistic that his plans will be effected, for the establishment
fiercely guards its power, but he thinks that reform can come, sometime
down the road. People can throw out the big spenders from Congress, and
they can store up metal coins in case of an emergency.
G. There were parts of this book that were difficult for me to
understand, since I can improve my knowledge of economics. One point
that Griffin reiterates is that debt backs up today’s money and, if that
debt were repaid, the money supply would vanish; therefore, bankers do
not really want the debt to be repaid. I did not entirely follow that.
H. There are some indications in Griffin’s book that things are more
complex than his overall scenario indicates. He acknowledges that the
Federal Reserve wants to limit inflation, since bankers do well when the
economy does well. He states that a significant amount of the federal
debt is owed, not to the Federal Reserve, but to Americans who have
bought bonds; to default on that would hurt their savings. That differs,
somewhat, from his scenario in which the Fed prints out a bunch of
money for the government and would rather that money not be paid back.
I. I have been watching Robert Shiller’s Yale class on financial
markets, the 2011 one. Shiller states that, prior to the FDIC, there
really was no insurance of banks. Griffin argues, however, that people
will naturally gravitate towards banks that are insured, without the
government stepping in. Griffin is highly optimistic about the ability
of laissez-faire capitalism to resolve problems.
J. This is the fifth edition. It has new sections on the 2008
financial crisis. Much of the book focuses on the 1980’s, however, plus
there is one part of the book in which Saddam Hussein is presumed to be
in power in Iraq, and Griffin doubts that will end anytime soon! Some
may have a problem with this format, as it is chronologically
disjointed. I had no problem with it, but I cite it as something to
remember in reading this book.
In conclusion, this book is interesting and well-documented. Griffin
does well to argue that there are people who act for their self-interest
and influence policy to do so; he did not successfully explain,
however, how a one-world government would serve these financial
interests. The book has a lot of the typical John Bircher tropes but
goes deeper and provides more nuance. Each chapter ends with a lucid
summary, which is helpful.
I checked out this book from the library. My review is honest.