When President Woodrow Wilson created the Federal Reserve bank in 1913, he didn’t realize the whirlwind he had unleashed on the world. Only on his deathbed did Wilson express any regrets in creating our central bank.

The Federal Reserve Act was created in secrecy by a cabal of bankers and politicians. They used fake names to conceal their identities to board a train from the New York City area to a resort island off the coast of Georgia called Jekyll Island to formulate their plans to create the Federal Reserve. (See G. Edward Griffin’s book, The Creature from Jekyll Island, for more information.)

The Federal Reserve Act initially didn’t pass in the Congress. The bankers and politicians realized that the public and their representatives in Congress would naturally be suspicious of a piece of legislation that was crafted by a cartel of New York bankers and was clearly unconstitutional. So, the bankers and politicians who were for the Act decided to fake opposition to the Act. The Act did pass on its second try and was signed into law by President Woodrow Wilson in 1913.

Initially, the Federal Reserve’s harmful effects weren’t too apparent because they still had a very limited charter and upheld the classical gold standard. In other words, they issued currency that was explicitly backed by gold which were essentially gold warehouse receipts. They printed this fact on the bills themselves. (See below.) The problems started when the tie to gold was weakened and then was eventually severed completely in 1971 when President Nixon closed the gold window (Good news: Nixon said it's only temporary!).

Initially, the mandate given to the Federal Reserve (the "Fed") by the Congress didn’t allow the Fed to purchase government bonds (i.e.,Treasury bills, bonds and notes, which is also known as "monetizing the debt"), but this prohibition soon fell away as the country entered World War I and the government needed currency to finance the war.

The Second World War, on the other hand, was largely financed by taxes and by issuing War Bonds, which the population voluntarily purchased to help the war effort. The population had large savings at that time, which naturally occurs under a modified gold standard as the standard of living improves over time, to lend the government billions of dollars to fight the fascists in Europe and Asia in the Second World War. (It is called a "modified" gold standard because FDR banned private ownership of gold in 1933 but foreign banks and governments could still get gold from the U.S. federal government and U.S. banks.)

In the Great Depression during the 1930’s, Franklin Delano Roosevelt abandoned the classical gold standard when he issued Executive Order #6102 that banned private ownership of gold. The population was required to turn in gold coins and bars to the government in exchange for $20 cash per ounce of gold. (The gold bullion depository at Fort Knox in Kentucky was built during this time to house all of the gold confiscated from citizens.) FDR then raised the price of gold to $35.00 per ounce. This inflated the U.S. dollar by 75%, which FDR hoped would counter the effects of the deflation that was devastating the economy during the Great Depression. Because of the many ineffective and harmful New Deal programs that FDR instituted, many of which were declared unconstitutional by the Supreme Court, the economy failed to recover, and a garden-variety recession soon turned into the Great Depression. (See the book, “The Forgotten Depression: 1921: The Crash That Cured Itself” by Jim Grant, for more information about a recession in 1921 that was as bad or worse than the recession that started the Great Depression, but cured itself when the government did nothing except reduce spending.)

The Federal Reserve is called the Federal Reserve for a reason. Back in 1913 when the Federal Reserve was created, the proponents of the Federal Reserve knew the public wouldn’t accept a central bank because the public knew it was unconstitutional. (The public was arguably better educated and more cognizant of the importance of the U.S. Constition back then.) That’s why the Federal Reserve Bank is not called “The Third Bank of the United States” (there were two other central banks that were canceled by presidents in our history) or “The Central Bank of The United States” or "The People's Bank of America." They intentionally mislabeled it “Federal,” to make it sound like a government organization or department, which it is not. They put “Reserve” in the name even though it doesn’t have any reserves; all of its gold was “confiscated” by the U.S. Treasury in 1934 with the Gold Reserve Act of 1934.

The Federal Reserve is actually owned and run by a cabal of about 24 banks and “primary dealers,” who sell government securities like treasury bills and bonds, such as Goldman-Sachs, Citibank, JPMorgan Chase, Bank of America, etc. As its name suggests, it has a primary mission to obscure its functions and deals. It uses jargon and misdirection plays like a high school football coach. The Fed always insists it is independent and transparent, but it has never allowed a full, “forensic” audit of its holdings and deals. It could be argued that Jerome Powell, the current Fed chairman, is more powerful than the president of the United States.

The master or “maestro” (because he played the saxophone in college) of obfuscation was Alan Greenspan, the Fed chair before Ben Bernanke, who once said, “If you understand me, then I’m not doing my job" (or words to that effect). Ironically, Ronald Reagan appointed Greenspan to head the Federal Reserve in 1987 because Greenspan was an acolyte of Ayn Rand and was a "gold bug," who believed that we needed to go back to a gold standard. (See Greenspan's essay in Ayn Rand's book, Capitalism–The Unknown Ideal. Click on the image of this book above to order a copy on AbeBooks.com.) After he was appointed, he started the famous “Greenspan Put,” which put a floor under the stock market, so congresspeople and investors would never suffer any losses on their stock market investments. Greenspan started the process of printing huge amounts of currency to bail out Wall Street and the government. He was directly responsible for the Dot-com Boom and Bust of 2000 and the Housing Bubble and Bust of 2001-2008.

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Here's a history of the currency and how it's changed over the decades: