In the Introduction to this article series I called the mega-banks the belly of the beast. And indeed they are. The ‘big six’ mega-banks in this country are Goldman Sachs, JP Morgan Chase, Citibank, Bank of America, Morgan Stanley, and Wells Fargo. As the reader will see, the term ‘mega-bank’ is not hyperbole. In March of 2016 the big six reported total assets as follows:
JP Morgan Chase – $2.424 Trillion
Bank of America – $2.185 Trillion
Wells Fargo – $1.849 Trillion
Citigroup – $1.801 Trillion
Goldman Sachs $ 878 Billion
Morgan Stanley – $ 808 Billioni
This is absolutely staggering. Together these six institutions report a combined total assets of $9.945 Trillion. How massive is this number? The list of largest U.S. Banks which is the source of these figures included not just the top six biggest banks but the top 62. The banks ranked 7 through 62 have a combined total assets of $5.977 Trillion – a mere 60 percent of the combined assets of the big six!
According to the International Monetary Fund, the Gross Domestic Product for the United States in 2016 will be an estimated $18.558 Trillion.ii This means that the combined holdings of the big six mega-banks is an astonishing 53.6 percent of the U.S. GDP!
In May of 2015 Vermont Senator Bernie Sanders wrote the following on his Official Senate website:
The six largest U.S. financial institutions today have assets of some $10 trillion, an amount equal to almost 60 percent of gross domestic product. They handle more than two-thirds of all credit card purchases, control nearly 50 percent of all bank deposits, and control over 95 percent of the $240 trillion in derivatives held by commercial banks.iii
(I would insert here parenthetically that the U.S. National Debt is up over $8 Trillion under the Obama Administration.)
So how did we get here? How did so much get concentrated into the hands of so few? At the heart of America’s political and economic history is a fascinating story involving sound money, fiat currency, and the struggle over the power of the purse. Unfortunately this history is unknown to most Americans.
In 1787 Philadelphia, two of the most important questions facing the delegates at the Constitutional Convention were:
Who would control the power of the purse for our young nation?
What would be the nature of our national money / currency?
The text of the Constitution is very clear on both points. Article I Section 8 of the Constitution is clear:
The Congress shall have Power To…coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and measuresiv
As to the first question, Congress was granted the power of the purse. Notice that the Constitution “does not mention the need for a central bank, nor does it explicitly grant the government the power to create one.”v Importantly, the Tenth Amendment states:
“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”vi
Article I Section 8 taken together with the Tenth Amendment precludes the possibility of Congress creating a central bank. This is crucial to understand! A central bank is a private institution with private interests. The delegates at the Constitutional Convention knew that such private interests would come before the interest of the United States and the American people. They knew from history and from common sense that the commercial interests of such a private institution would quickly become entangled with political interests, leading in turn to a powerful ruling class and an enriched political elite. Included in such private interests are other banks and financial institutions. We’ll come back to this.)
If the framers of the Constitution were crystal clear as to who would/should wield the power of the purse, they thundered in near unanimity regarding the nature of our money – the U.S. Dollar. Referring back to Article I Section 8, notice the precise language:
“ The Congress shall have Power To…coin Money”
I like this concise definition of coining from Quora.com:
“To coin is to make coins by stamping metal, so to coin money means to manufacture money.”vii
Continuing, Congress also had the power to:
“regulate the Value [of coin / money], and fix the Standard of Weights and measures.”
The original U.S. Dollar was a coin backed by silver – a very precisely defined amount of silver (371.25 grains).viii Also noticed that congress was to coin money, not currency. So what’s the difference, you may ask? Isn’t this just semantics?
Actually no it’s not.
Money has intrinsic value that is stable over time – it is backed by gold, or in the case of the original U.S. Dollar silver. Currency, on the other hand, is a debt that is printed on paper having an agreed upon value. The paper note itself has no inherent value in and of itself. Printing currency is a confidence gam – it creates an economic system that is based on debt.
Paper money printed out of nowhere is rightly called fiat currency. (Fiat means formal authorization or degree.) When an economic pinch arises, governments rarely show restraint. They succumb to the temptation of printing more bills, which works in the short term but further injures the economy in the long term. Fiat currency – printing paper bills out of thin air that are backed by nothing – leads to inflation, a lower standard of living for the average person, and economic destabilization. The inevitable inflation can be called a hidden tax because as more currency is printed, the value of existing currency decreases. The supply of currency increases and demand for it decreases. Or, looking at it another way, the purchasing power of the currency goes down, causing prices go up.
If one looks at the U.S. Constitution, the context in which it was created, and the writings of the delegates at the Constitutional Convention (and others), it is unmistakably clear that the Founding Fathers fundamentally rejected printing paper bills (fiat currency) in the strongest terms imaginable. The following quotes taken from G. Edward Griffin’s iconic work The Creature from Jekyll Island (absolutely essential reading) will make this clear:
George Mason said that he had a “mortal hatred to paper money.” He wrote George Washington, “They may pass a law to issue paper money, but twenty laws will not make the people receive it. Paper money is founded upon fraud and knavery.”
Thomas Paine called fiat currency ‘counterfeiting by the state’
G. Edward Griffin writes that New Hampshire’s John Langdon “warned that he would rather reject the whole plan of federation than to grant the new government the right to issue fiat money.”
And my favorite, Deleware’s George Reed stated that issuing fiat currency “would be as alarming as the mark of the beast in Revelation.”
Unfortunately it did not take our young Republic long to dismiss the advice of our Founding Fathers. America’s first de facto central bank, the First Bank of the United States, was chartered in 1791 – despite the vehement opposition of Thomas Jefferson and James Madison.
Jefferson famously wrote,
“A private central bank issuing the public currency is a greater menace to the liberties of the people than a standing army.”
In the next installment we’ll take a closer look at how corporations (including banks and financial institutions like the big six mega banks) grow up around private central banks, and how these corporations use their wealth and power to wield political influence. In this type of system corruption inevitably follows.
iiInternational Monetary Fund World Economic Database, April 2016 http://www.imf.org/external/pubs/ft/weo/2016/01/weodata/weorept.aspx?pr.x=44&pr.y=16&sy=2016&ey=2020&scsm=1&ssd=1&sort=country&ds=.&br=1&c=111&s=NGDPD%2CNGDPDPC%2CPPPGDP%2CPPPPC&grp=0&a=
vWhy do some people claim the Federal Reserve is unconstitutional? http://www.investopedia.com/ask/answers/082115/why-do-some-people-claim-federal-reserve-unconstitutional.asp
viiiG. Edward Griffin, The Creature from Jekyll Island, pg. 319.