Today in 1913, The Federal Reserve Act was signed into law by Woodrow Wilson. One of the most deplorable laws in the history of the United States, the act allowed for a cartel of banks to establish a legalized monopoly on the printing of currency, assured the continual artificial manipulation of interest rates, and perpetuated the most inequitable and callous of all taxes – inflation.
Many of the founders were adamantly opposed to central banks for these precise reasons. Thomas Jefferson wrote that he considered such banks to be more dangerous than standing armies, and wrote that paper was the “ghost of money, and not money itself.” James Madison was equally disturbed by the emissions of paper money under the Articles of Confederation, remarking that “restraints against paper emissions and violations of contracts are not sufficient.” Under that system, the disastrous paper money experiment of the Continentals, along with inflationary state bills of credit, had produced an economic calamity.
Roger Sherman made a motion in the Philadelphia Convention which would restrict the coining of money to Congress, and also prohibit both the federal government and the states from issuing paper money. Sherman considered the occasion to be an ample opportunity “for crushing paper money.” With very few friends of paper money in the convention, his motion was carried by a strong majority of eight states in favor. A few months later, Thomas McKean celebrated that the Constitution put “an end put on the pernicious speculation upon paper emissions.”
The Federal Reserve Act was concocted largely in secret on an island off the coast of Georgia known as Jekyll Island, a property owned by JP Morgan. There, a secret commission of private bankers and Senator Nelson Aldrich drew up the proposed outline for the plan that would become the act in 1910.
The Federal Reserve has since monopolized the printing of money despite the Constitution’s explicit requirement that only Congress has the power to coin money and prohibition against paper emissions, injected mass quantities of fiat money into the market, which has depreciated the value of currency as a whole, spurred numerous boom/bust cycles, and created unsustainable, artificial markets due to a massive series of mal-investments.