Lesson 3: Debt became a way of life with the Federal Reserve

As we all deal with the enormous debt our government is piling up on the American citizens, perhaps it should be a good time to examine why, and where the authority was given to government to do so. Woodrow Wilson, at the insistence of some very well-connected bankers, created and submitted the Federal Reserve Act of 1913. The entire act was completely against the Constitution for the United States. As I have done before, I encourage you the reader and student, to do your research on this topic. Although the Federal Reserve Act was passed in 1913, it took 20 years for the act to come to fruition. When Franklin Roosevelt was sworn in to office in March of 1933, one of his first acts was to create a national bank “holiday”. This was known as the National Emergency declaration of 1933, later known as the War Powers Act of 1933.

This act was created to avoid a bank run on all the gold in each bank. The significance of this was to take all valued backed money out of circulation, and replace it with Federal Reserve notes. Once the Federal Reserve notes were in place, according to the War Powers Act, it made the paying off of debt illegal in this country. The reason for this was what is termed as “fractional banking”. Plainly put, it means that if a bank takes in 100$ in a deposit, it can then lend 1000$ off of that said deposit. Needless to say, to pay debt completely off would mean that there would be no money for the banks to lend or operate from.


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