Review: The Creature from Jekyll Island

jekyllislandIn 2008 whatever residual trust I had in American democratic institutions was irrevocably shattered by the larcenous and criminal bank bailout. If you recall the bailout, the infamous “crap sandwich”, was overwhelmingly opposed by the public, initially rejected by Congress, but stuffed down our throats anyway. The sky was falling! The banks had to be saved or the world would end. At the time I knew the failure of half a dozen of world’s largest banks would be a disaster – for bankers – and many innocent bystanders, but it was hardly world ending. Asteroids weren’t falling, super volcanoes weren’t erupting, nukes weren’t detonating, in the worst case we would have a short sharp, parasite cleansing, depression followed by the growth of new financial institutions. This is exactly what happened – in Iceland: the only country that refused to bail out their banks. The reward for poor judgment, bad planning and mendacious behavior should be failure. Of course that is not what happened. That ultimate get out of jail free institution, The Federal Reserve, kicked into high gear and rescued a host of institutions that should no longer be with us. It was a complete undemocratic travesty.

I thought the 2008 bailout was an exception; that the entire outrageous chain of events was pulled out of the asses – of asses – on the fly. Edward Griffin’s “crazy” history of the Federal Reserve, written more than a decade before 2008, clearly shows that the only exceptional thing about 2008 was scale.  The Federal Reserve has been saving banker’s butts for a century. As long as we have, fiat currency, fractional reserve banking and central banks like the Federal Reserve we’ll have, massive government debts, never-ending inflation, (money creation), and the relentless insidious transfer of the costs of bank screwups to an unsuspecting and stupid public. This is the way the system is supposed to work! Griffin’s footnotes make it clear this was completely understood by the originators of the Federal Reserve over a century ago. In short, the “Jekyll island creature” has pulled off the biggest bank job in history.

Most of The Creature from Jekyll Island recounts the fascinating history of central banking in the United States with entertaining asides into the longer history of money. For millennia “money” was largely precious metals: Gold and Silver.  There are good, very long-standing historical reasons,  for this. Even today, given the choice between a pile of paper dollars and the equivalent amount of Gold, most of us would still take the Gold. You would think something that has functioned for five thousand years as global money would be good enough for central bankers but Gold, in the duplicitous language of bankers and their economist fanboys, is insufficiently elastic. What this means is that Gold cannot be created and destroyed by banker will alone.  Barbaric old unreactive Gold, forged in the collision of neutron stars, and unevenly dispersed in the interstellar medium, is just too damn hard to acquire and use as money. What’s needed is something that can be “poofed” into being on demand.

On course the problem with poofed, or fiat, money is getting poor dumb suckers to accept it. That’s where the legal tender laws come in.  Central bankers are only one side of the bailout ballet. The bankers need the power of the state, with its ability to imprison and execute anyone that balks at taking colored paper for Gold, or gets the silly idea that they can print some colored paper themselves, to really work the fiat magic. In return the state gets preferential access to newly created, tax levy free, funds to piss away on vote-buying boondoggles. It’s a great system for bankers, politicians and their many blood sucking ticks. It’s a shame the rest of us get inflation raped paying for it.

Griffin ends his book with two flights of conspiratorial lunacy: one pessimistic and the other realistic. If you’re wondering, Griffen holds there is no optimistic scenario. We’re in for a world of economic butt-hurt when the creature dies. The pessimistic scenario is basically 1984 central banker style and the realistic outlines the economic disruptions required to return to a silver based dollar. Griffin is a better historian than a science-fiction writer and Jekyll would be a better book without the last two chapters.

Finally, I disagree that there is no optimistic scenario, but I can forgive Griffin for not seeing one twenty years ago. In 1994 there were no new ideas about money: just the same old fiat crap served up on plastic credit cards. In 2014 we have Bitcoin. I hold that the ideas in Bitcoin are the first genuine monetary innovations in many decades. The Bitcoin network demonstrates how a “nonpoofed” form of sound money can work without governments or central bankers. Economists are fond of quoting Gresham’s law: “Bad money drives out good.”  With ideas it’s the exact opposite: “Good ideas drive out bad.” Let’s hope the exceedingly bad Federal Reserve idea succumbs to better ideas like Bitcoin as soon as possible.