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Though
still a week shy of its centennial anniversary, the US Federal Reserve
will hold a celebration this afternoon...
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December 16, 2013
Sovereign Valley Farm, Chile
Though still a week shy of
its centennial anniversary, the US Federal Reserve will hold a
celebration this afternoon in Washington DC.
(They're even live-streaming
it... http://www.ustream.tv/federalreserve)
Just imagine the scene-- a
bunch of current and former central bankers slapping each other on the
back, congratulating one another for a job well done over the last 100
years.
Of course, you and I know
this is total nonsense... as is the concept of our modern monetary system
in which we award total control of the money supply to a tiny central
banking elite.
Human beings are fallible. We
are not gods. Yet we practically deify central bankers and entrust them
with the power to manipulate markets, control prices around the world,
and effectively dominate the economy.
This system has proven to be
foolish and destructive.
While the Fed engages in its
self-aggrandizement this afternoon, there is another far more important
anniversary today-- the Boston Tea Party.
It was this day in 1773 that
dozens of men dumped 342 chests of tea from 3 ships into the water. But
what a lot of people don't realize is that it started with bankers.
In 1771, London banker
Alexander Fordyce of the banking house Neal, James, Fordyce and Down
thought himself infallible too.
Fordyce had made a fortune as
a speculator, and he enjoyed his opulent wealth. He held magnificent
estates in Surrey, Roehampton, and Scotland, and once blew 14,000 pounds
(several million dollars today) running for parliament.
There was only one problem:
Fordyce began making his bets using other people's money. And when his
bet on the East India Company didn't work out, Fordyce's bank used
customer deposits to cover their losses.
By June 1772, the bank could
no longer keep up the charade. And within days their collapse caused a
cascade of other bank failures as far as Edinburgh and Holland.
With a crisis unfolding, the
government forced the central bank to intervene in a way that was eerily
similar to the 2008 financial crisis.
Just like 2008,
too-big-to-fail companies got bailed out... including the East India
Company itself. The East India Company was a bit like General Motors a
few years ago-- it was obvious they were in financial straits.
And as part of the bailout,
the British parliament soon passed the Tea Act-- an attempt to flood the
colonies with the East India Company's stockpiles of excess tea.
The Tea Act had another
purpose, though-- to assert parliament's right to tax the colonies. And
this is what ultimately led to the Tea Party on December 16, 1773.
John Adams wrote in his diary
that the destruction of the tea was 'daring' and 'intrepid', and that to
ignore the Tea Act would be like submitting "to Egyptian
taskmasters, to [burdens], Indignities, to Ignominy, Reproach and
Contempt, to Desolation and Oppression, to Poverty and Servitude."
Britain's harsh reaction to
the Tea Party further escalated tensions with the colonists, and it
wasn't long afterward that the first shots were fired.
Given the prominent role of
bankers and bailouts in the American Revolution, it's ironic that the
Federal Reserve has chosen to hold its centennial celebration today.
And as they all slap each
other on the back today extolling the Fed's 'successes', one can only
hope that the arrogance and pomposity of the current system will lead to
a new revolution-- this time a revolution of the monetary system and a
return to the principles of sound money.
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