5. Centralisation of credit in the banks of the state, by means of a national bank with State capital and an exclusive monopoly.

Article I, Section 8, General Powers of Congress, Paragraph 5, reads as follows:

"To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures."

Retaining its power/authority to fix the Standard of Weights and Measures, the Congress passed the Federal Reserve Bank Act of 1913. In doing so, the Congress gave up, or turned over, its original Constitutional power and authority, 'to coin money and regulate its value', to a privately owned and operated banking authority for the entire nation. That private banking authority is now commonly referred to as the Fed.

Any kind of change to the powers and authority vested in the Congress by the Constitution should never be executed by any action other than an Amendment to the Constitution. A great unknown - what were the shambles or crisis of banking and finance across the nation that may have existed at the turn into the 20th Century, to cause this extraordinary perversion of the U.S. Constitution?

Source No. 4 below provides a read describing how the authors of the Federal Reserve Bank Act of 1913 travelled under cover in darkness to their house retreat on Jekyll Island, Georgia, to prepare the content of that Act.

Source No. 2 below serves to highlight the purposes and functions of the Federal Reserve Board. In doing so, that booklet simplifies descriptions of an otherwise heavy and complicated read of the content of the Federal Reserve Act identified in Source No.1 below.

Source No. 3 below is a brilliant accomplishment of investigative journalism; fully succeeding to provide comprehensive detail of behind the scenes actions of the players involved in running or operating all of the assigned authorities of the Federal Reserve System.

Significance, but moreso, the criticality of need, for the existence of Standards for Weights and Measures, cannot be overestimated. The existence of Standards for Weights and Measures has always been, and, will forever be, the foundation for all scientific material and/or physical advances in all fields of human study and endeavor.

The ultimate interest and function of the Federal Reserve Banking System is to engage in the buying and selling of currencies and debt in both the domestic and international market for money.

Absence of a standard unit of measure for the weight or exchange value of units of currency is perhaps among the greatest of contributers to all the domestic and international social disorders that exist in the world today. The concept of an elastic currency, under which the Fed operates, must be abandoned.

Our interest and objective here is to fix the U.S. dollar as a unit of measure of the cost and worth of human energy, which, by the way, is the measure of the cost and worth of human life.

All of humanity requires a unit of currency, such that its exchange value does not vary or change over time, in spite of changes in population headcounts or population densities. That requirement can be filled within the national boundaries of the United States as a national household, as described in Brief 6.

That problem of absence of a standard unit of measure for the weight or exchange value of units of currency could be fixed (over time) by correcting one existing but significant flaw in the The Federal Reserve Act of 1913. All of the functions and actions of the Federal Reserve Board are predicated on the concept of an 'elastic money supply'.

The concept of an 'elastic' money supply must eventually be abandoned, and replaced with a set of new requirements, as set forth in Brief 6, by amendment to the Federal Reserve Act of 1913.

Primary cause of the Great Depression of the 1930s appears to have been the absence of down payment requirements for the purchase of capital stock.

During the 1920s, down payment requirements for the purchase of capital stock were not stipulated by law. It was during the 1920s that stock purchases were made with as little as ten cents on the dollar, resulting in a stock buying frenzy (by everyone and his brother) that gave that decade its name (The Roaring Twenties).

That stock buying frenzy began in the early twenties, a short time after the end of World War I. With as little as ten cents on the dollar, high volume purchases drove the stock market averages ever higher with a corresponding increase in buyer debt, using the stock as collateral. After eight years of this frenzy, bankers saw the huge liabilities in their portfolios and started calling in the loans. That call-in of loans precipitated all the bankruptcies and foreclosures that shut down all industrial engineering and manufacturing in the United States, creating the high unemployment, misery and destruction of families during that Great Depression.

"For the purpose of preventing the excessive use of credit for the purchase or carrying securities, the Board of Governors of the Federal Reserve System shall ... prescribe rules and regulations with respect to the amount of credit that may be initially extended and subsequently maintained on any security (other than an exempted security)."

So, finally, the Federal Reserve Act was amended to impose and specify down payment requirements for the purchase of stock. Thus, the Fed closed the barn door after the horse had been stolen. There cannot be any conclusion other than the fact that the Great Depression of the 1930s was caused by the Fed and its sin of omission - not previously imposing serious down payment amount requirements for the purchase of capital stock.

Following is a quote from Wikipedia about this Act of Congress :

"The Community Reinvestment Act (or CRA, Pub.L. 95-128, title VIII, 91 Stat. 1147, 12 U.S.C. § 2901 et seq.) is a United States federal law designed to encourage commercial banks and savings associations to meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods.[1][2][3] Congress passed the Act in 1977 to reduce discriminatory credit practices against low-income neighborhoods, a practice known as redlining.[4][5] The Act requires the appropriate federal financial supervisory agencies to encourage regulated financial institutions to meet the credit needs of the local communities in which they are chartered, consistent with safe and sound operation (Section 802.). To enforce the statute, federal regulatory agencies examine banking institutions for CRA compliance, and take this information into consideration when approving applications for new bank branches or for mergers or acquisitions (Section 804.).[6]"

Whereas the Great Depression of the 1930s was caused by the Fed for their sin of omission, the ongoing Great Depression, rearing its ugly head in 2007, was caused by the Democrats in Congress for their sins of commission. This Act (the CRA) imposed requirement on the banking system to lend money to people who lost incomes or did not have incomes sufficient to pay home mortgages. Thus, over a period of years, while home mortgage liabilities held by the banks accumulated, so did job losses accumulate from destruction of manufacturing industries in the U.S., forcing the outsourcing of manufacturing to China, India, Mexico, southeast Asia (and other foreign locations); finally, to the point where banks were forced to begin foreclosures, forcing the creation of unemployment and the current Great Depression (c.2010).

With the beginning of the outsourcing of U.S. manufacturing (as early as the early 60s), investors have not known where to put their money for profit (return from investment).

Figure 51, Circular Flow of Money, illustrates the circular flow of money in the Private sector. This illustration cites the different market options for all investors, including investment bankers, as follows:

1. Stock Market
2. Bond Market
3. Mortgage Market
4. Money Market

Terms and Definitions of Finance Industry's Instruments of Perversion

Over and above the disastrous effects of the Community Reinvestment Act, there is serious concern for contributing complications from the existence of Hedge Funds, Derivatives and Sub-Prime Lending. These are defined as follows:

Hedge Funds

The following is from the Web site of 2008 Magnum Global Investments Ltd.:

A hedge fund is a fund that can take both long and short positions, use arbitrage, buy and sell undervalued securities, trade options or bonds, and invest in almost any opportunity in any market where it foresees impressive gains at reduced risk. Hedge fund strategies vary enormously - many hedge against downturns in the markets - especially important today with volatility and anticipation of corrections in overheated stock markets. The primary aim of most hedge funds is to reduce volatility and risk while attempting to preserve capital and deliver positive returns under all market conditions.

There are approximately 14 distinct investment strategies used by hedge funds, each offering different degrees of risk and return. A macro hedge fund, for example, invests in stock and bond markets and other investment opportunities, such as currencies, in hopes of profiting on significant shifts in such things as global interest rates and countries' economic policies. A macro hedge fund is more volatile but potentially faster growing than a distressed-securities hedge fund that buys the equity or debt of companies about to enter or exit financial distress.

An equity hedge fund may be global or country specific, hedging against downturns in equity markets by shorting overvalued stocks or stock indexes. A relative value hedge fund takes advantage of price or spread inefficiencies. Knowing and understanding the characteristics of the many different hedge fund strategies is essential to capitalizing on their variety of investment opportunities.

It is important to understand the differences between the various hedge fund strategies because all hedge funds are not the same - investment returns, volatility, and risk vary enormously among the different hedge fund strategies. Some strategies which are not correlated to equity markets are able to deliver consistent returns with extremely low risk of loss, while others may be as or more volatile than mutual funds. A successful fund of funds recognizes these differences and blends various strategies and asset classes together to create more stable long-term investment returns than any of the individual funds.

Hedge fund strategies vary enormously - many, but not all, hedge against market downturns - especially important today with volatility and anticipation of corrections in overheated stock markets. The primary aim of most hedge funds is to reduce volatility and risk while attempting to preserve capital and deliver positive (absolute) returns under all market conditions.

The popular misconception is that all hedge funds are volatile - that they all use global macro strategies and place large directional bets on stocks, currencies, bonds, commodities or gold, while using lots of leverage. In reality, less than 5% of hedge funds are global macro funds. Most hedge funds use derivatives only for hedging or don't use derivatives at all, and many use no leverage.

Legally, hedge funds are most often set up as private investment partnerships that are open to a limited number of investors and require a very large initial minimum investment. Investments in hedge funds are illiquid as they often require investors keep their money in the fund for at least one year.

For the most part, hedge funds (unlike mutual funds) are unregulated because they cater to sophisticated investors. In the U.S., laws require that the majority of investors in the fund be accredited. That is, they must earn a minimum amount of money annually and have a net worth of more than $1 million, along with a significant amount of investment knowledge. You can think of hedge funds as mutual funds for the super rich. They are similar to mutual funds in that investments are pooled and professionally managed, but differ in that the fund has far more flexibility in its investment strategies.

The following is from Investopedia, a Forbes Media Company Web site:

In finance, a security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage. Futures contracts, forward contracts, options and swaps are the most common types of derivatives. Because derivatives are just contracts, just about anything can be used as an underlying asset. There are even derivatives based on weather data, such as the amount of rain or the number of sunny days in a particular region.

Derivatives are generally used to hedge risk, but can also be used for speculative purposes. For example, a European investor purchasing shares of an American company off of an American exchange (using American dollars to do so) would be exposed to exchange-rate risk while holding that stock. To hedge this risk, the investor could purchase currency futures to lock in a specified exchange rate for the future stock sale and currency conversion back into euros.

The following is from the Web site of Wikipedia, the free encyclopedia:

Beginning in late 2006, the U.S. subprime mortgage industry entered what many observers have begun to refer to as a meltdown. A steep rise in the rate of subprime mortgage foreclosures has caused more than 100 subprime mortgage lenders to fail or file for bankruptcy, most prominently New Century Financial Corporation, previously the nation's second biggest subprime lender. The failure of these companies has caused prices in the $6.5 trillion mortgage backed securities market to collapse, threatening broader impacts on the U.S. housing market and economy as a whole.

The crisis is ongoing and has received considerable attention from the U.S. media and from lawmakers during the first half of 2007. However, the crisis has had far-reaching consequences across the world. Sub-prime debts were repackaged by banks and trading houses into attractive-looking investment vehicles and securities that were snapped up by banks, traders and hedge funds on the US, European and Asian markets.

Thus when the crisis hit the subprime mortgage industry, those who bought into the market suddenly found their investments near-valueless. With market paranoia setting in, banks reined in their lending to each other and to business, leading to rising interest rates and difficulty in maintaining credit lines. As a result, ordinary, run-of-the-mill and healthy businesses across the world with no direct connection whatsoever to US sub-prime suddenly started facing difficulties or even folding due to the banks' unwillingness to budge on credit lines.

Observers of the meltdown have cast blame widely. Some have highlighted the predatory practices of subprime lenders and the lack of effective government oversight. Others have charged mortgage brokers with steering borrowers to unaffordable loans, appraisers with inflating housing values, and Wall Street investors with backing subprime mortgage securities without verifying the strength of the underlying loans. Borrowers have also been criticized for entering into loan agreements they could not meet.

Referring to the circular flow of money illustrated in Figure 51 above, that circular flow derives from the billions of buy and sell transactions taking place on a daily basis. Enter Hedge Funds, Derivatives and Sub-Prime Lending. These are paper instruments used by the large institutional investors, or most wealthy investors, who invest in the aforesaid markets to make a profit.

Questions: Is it possible that computer modeling and use of these paper instruments as tools for investing during the late '80s and '90s, caused all assets, liabilities and capital involved in all of those market investments to be bundled? - thereby causing a loss of identity of who owns what, and who owes what to whom? - causing a choking or constriction of the flow of money through the banks, forcing execution of bank bailouts to make money available for lending?

Unbelievable - bringing to mind a line from the Rhyme of the Ancient Mariner, "Water, water, everywhere and not a drop to drink." Translation: "Money, money everywhere and not a dime to lend."

When and by whom did such instruments as Hedge Funds, Derivatives and Sub-Prime Lending originate? This observer has not been able to find an answer. Perhaps some knowledgeable viewer, or financial market insider, could answer that question.

The following are the original purpose and objectives of the Federal Reserve Act of 1913:

1. Provide an elastic currency

2. Consolidate all banking transactions

3. Improve supervision of banking

This act extended the following objectives of management by government:

4. Economic stability and growth (provided you can define what is meant by economic stability and growth)

5. High level of employment

Four years short of one hundred years of a power existence (1913-2009), objective number 2. above is the only one of the five objectives accomplished by the Fed.

This observer does not join others in their cry to abolish the Fed, or to have it audited. Who would do the auditing and what would the auditors be auditing?

The Fed performs functions vital to continuous and uninterrupted circular flow of money as the primary depository for funds of all levels of government. If the Fed didn't do it, who would?

Further, the Fed controls three tools of monetary policy - open market operations, the discount rate and reserve requirements. It is beyond the scope of this website to describe them. But you can Google 'federalreserve.gov' to learn about each one - but be prepared for a very severe challenge of mental gymnastics.

It is sufficient to point out that, the borrowing and the lending that occurs within the Federal Reserve System on a daily basis is subject to different rates of interest. Question: Why are the many different sources or avenues for borrowing or lending required to fix the rate of interest?

For whatever amount of the national money supply that may exist at any given point in time, the natural law of demand and supply functions to drive the sale price of all goods, products and services of the marketplace.

Now, it has become apparent to this observer that, all the money changers in the world, in all of the different central banks of the world, hold to a concept that the natural law of demand and supply applies equally to the demand and supply of money. That, my dear Friends, is a monetary policy as old as humanity itself, and is at the root of causes for the existence of tyrannies of financial oppression. Such a monetary policy does not serve the grand objective of stability in the market place. Such a monetary policy serves only the money changers in the temple and the on-going Marxist socialist attack against free market capitalism.

One last comment on fixing units of currency for measurement of all exchange values: The carpenter could not build a house, or anything else, if the rod or ruler he uses to make measurements kept changing size/dimension.

1. "The Federal Reserve Act" (Approved December 23, 1913), As Amended Through 1971, with an Appendix containing provisions of certain other Acts of Congress that affect the Federal Reserve System. Compiled under the Direction of the Board of Governors of the Federal Reserve Banking System

Copy of the Federal Reserve Act and The Federal Reserve System Purposes and Functions may be obtained from Publication Services, Division of Administrative Services, Board of Governors of the Federal Reserve System, Washington DC 20551.

Sources 2. through 4. below provide extensive background behind this Act of Congress:

2. "The Federal Reserve System", Purposes and Functions, by the Board of Governors, Washington, D.C., Sixth Edition, September 1974
3. "Secrets Of The Temple", 'How the Federal Reserve Runs the Country', Copyright 1987 by William Greider
4. "The Creature from Jekyll Island", a 'Second Look at the Federal Reserve', Copyright 1998, 1995 and 1994 by G. Edward Griffin.

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