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Damaged goods Saudi Crown Prince MbS remains political thorn in Trump’s side (Video)

The Duran Quick Take: Episode 20.

Alex Christoforou

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US President Donald Trump said his administration plans to stand by Saudi Arabia amid the Khashoggi crisis.

In a statement on Tuesday, Trump said he intends to maintain Washington’s strong ties to Saudi leaders, including Crown Prince Mohammed bin Salman (MbS), despite the “unacceptable and horrible crime” committed against Jamal Khashoggi.

The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris take a quick look at Trump’s decision to stand by the House of Saud and the Crown prince, as US lawmakers on both sides of the aisle, and mainstream media outlets, have denounced Trump’s statement.

Meanwhile a G20 summit looms in Argentina, where MbS will be in attendance sitting side-by-side with other G20 leaders.

Within the Saudi Kingdom Prince Ahmed, King Salman’s only surviving full brother, has returned to Riyadh after 2-1/2 months abroad, in what many analysts believe to be a bid by the exiled brother to wrestle away the throne from the Crown Prince.

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Read Trump’s full statement below:

America First!

The world is a very dangerous place!

The country of Iran, as an example, is responsible for a bloody proxy war against Saudi Arabia in Yemen, trying to destabilize Iraq’s fragile attempt at democracy, supporting the terror group Hezbollah in Lebanon, propping up dictator Bashar Assad in Syria (who has killed millions of his own citizens), and much more. Likewise, the Iranians have killed many Americans and other innocent people throughout the Middle East. Iran states openly, and with great force, “Death to America!” and “Death to Israel!” Iran is considered “the world’s leading sponsor of terror.”

On the other hand, Saudi Arabia would gladly withdraw from Yemen if the Iranians would agree to leave. They would immediately provide desperately needed humanitarian assistance. Additionally, Saudi Arabia has agreed to spend billions of dollars in leading the fight against Radical Islamic Terrorism.

After my heavily negotiated trip to Saudi Arabia last year, the Kingdom agreed to spend and invest $450 billion in the United States. This is a record amount of money. It will create hundreds of thousands of jobs, tremendous economic development, and much additional wealth for the United States. Of the $450 billion, $110 billion will be spent on the purchase of military equipment from Boeing, Lockheed Martin, Raytheon and many other great U.S. defense contractors. If we foolishly cancel these contracts, Russia and China would be the enormous beneficiaries – and very happy to acquire all of this newfound business. It would be a wonderful gift to them directly from the United States!

The crime against Jamal Khashoggi was a terrible one, and one that our country does not condone. Indeed, we have taken strong action against those already known to have participated in the murder. After great independent research, we now know many details of this horrible crime. We have already sanctioned 17 Saudis known to have been involved in the murder of Mr. Khashoggi, and the disposal of his body.

Representatives of Saudi Arabia say that Jamal Khashoggi was an “enemy of the state” and a member of the Muslim Brotherhood, but my decision is in no way based on that – this is an unacceptable and horrible crime. King Salman and Crown Prince Mohammad bin Salman vigorously deny any knowledge of the planning or execution of the murder of Mr. Khashoggi. Our intelligence agencies continue to assess all information, but it could very well be that the Crown Prince had knowledge of this tragic event – maybe he did and maybe he didn’t!

That being said, we may never know all of the facts surrounding the murder of Mr. Jamal Khashoggi. In any case, our relationship is with the Kingdom of Saudi Arabia. They have been a great ally in our very important fight against Iran. The United States intends to remain a steadfast partner of Saudi Arabia to ensure the interests of our country, Israel and all other partners in the region. It is our paramount goal to fully eliminate the threat of terrorism throughout the world!

I understand there are members of Congress who, for political or other reasons, would like to go in a different direction – and they are free to do so. I will consider whatever ideas are presented to me, but only if they are consistent with the absolute security and safety of America. After the United States, Saudi Arabia is the largest oil producing nation in the world. They have worked closely with us and have been very responsive to my requests to keeping oil prices at reasonable levels – so important for the world. As President of the United States I intend to ensure that, in a very dangerous world, America is pursuing its national interests and vigorously contesting countries that wish to do us harm. Very simply it is called America First!

Via The Middle East Eye


Washington Post publisher Fred Ryan called Trump’s comments a “betrayal” of American values, accusing the president of putting his personal relationships and “commercial interests” above US interests.

Ryan said the White House should make public any evidence it may have that would contradict an earlier CIA conclusion that bin Salman ordered the assassination of Khashoggi.

“An innocent man, brutally slain, deserves better, as does the cause of truth and justice and human rights,” Ryan said in a statement Tuesday.

He also called on the US Congress to act where Trump has apparently failed. “In this failure of leadership from President Trump, it now falls to Congress to stand up for America’s true values and lasting interests,” Ryan said.

Washington Post editor Karen Attiah, who edited Khashoggi’s columns at the newspaper, called the White House’s statement “juvenile” and “clumsy”.

She also condemned the US president for repeating a “Saudi lie” in his statement, which Trump used to convey Saudi assertions that Khashoggi was “an enemy of the state” and a member of the Muslim Brotherhood, claims the journalist’s family has refuted as baseless.

In a column published on Tuesday afternoon, Attiah went on to say that Trump’s handling of the crisis emboldens repression and endangers journalists around the world.

“If the administration continues down this path, it will further destroy whatever is left of America’s moral credibility on global human rights and freedom of expression,” she wrote. “It puts truth-seekers and journalists who dare challenge the Saudi regime and other intolerant governments in grave danger, no matter where they live.”

US lawmakers call for MBS to be held accountable

Several members of the US House of Representatives and the US Senate also expressed their dismay at the president’s vow to stand alongside Saudi Arabia despite Khashoggi’s killing.

Bob Corker, the retiring Republican chair of the Senate Committee on Foreign Relations, accused Trump of acting like a public relations agent for the Saudi government.

The incoming US House Intelligence Committee chairman, Adam Schiff, said Trump’s statement harms Washington’s standing in the world.

“To say ‘maybe he did and maybe he didn’t,’ or that we are incapable of finding out the truth, or that knowing the truth our silence can be bought with arms sales, undermines the Presidency, credibility of our intelligence professionals, and our role as a champion of human rights,” the congressman said on Twitter.

Senator Dianne Feinstein, a Democrat from California, said she was “shocked” by the president’s decision not to impose consequences on the Saudi crown prince, also known as MBS, for the murder.

“I plan to vote against any future arms sales and appropriation to Saudi Arabia. I also believe that the United States should consider sanctions against the crown prince and that the Saudi ambassador to the United States should not be allowed to continue in that role,” Feinstein said in a statement.

Left-wing Senator and former presidential candidate Bernie Sanders also condemned Trump’s “rambling and dishonest” statement.

Sanders dismissed the White House’s assertion that Tehran, not Riyadh, is to blame for the war in Yemen.

“Trump is clearly very afraid of the prospect of the Senate delivering a serious rebuke to his policy by voting to end U.S. support for the Yemen war. But that is exactly what we will do when we vote on SJ Res 54 next week,” Sanders wrote on Twitter.

Senior Republican Senator Lindsey Graham said although international diplomacy requires dealing with “bad actors and imperfect situations,” the US should not lose its “moral voice” at the world stage.

“While Saudi Arabia is a strategic ally, the behavior of the Crown Prince – in multiple ways – has shown disrespect for the relationship and made him, in my view, beyond toxic,” Graham wrote on Twitter.

“I firmly believe there will be strong bipartisan support for serious sanctions against Saudi Arabia, including appropriate members of the royal family, for this barbaric act which defied all civilized norms.”

Saudi officials have repeatedly denied that the crown prince had any knowledge of the plan to murder Khashoggi or cover up the crime. Still, human rights groups, journalists, UN experts and others have pointed the finger at MBS, Saudi Arabia’s de facto ruler, saying it’s impossible the crown prince was not involved.

Former CIA chief John Brennan, meanwhile, urged the US intelligence agency to release its finding on the murder, criticising Trump’s dishonesty.

“Since Mr. Trump excels in dishonesty, it is now up to members of Congress to obtain & declassify the CIA findings on Jamal Khashoggi’s death. No one in Saudi Arabia – most especially the Crown Prince – should escape accountability for such a heinous act,” he wrote on Twitter.

Brennan has been an outspoken critic of Trump, and previously had his security clearance revoked by the White House.

Iran’s foreign minister weighs in

Trump also used his statement on Khashoggi and Saudi Arabia Tuesday to criticise the Iranian government, saying strong ties between Washington and Riyadh were necessary in “the fight against Iran”.

Shortly after the US president’s comments were made public, Iranian Foreign Minister Mohammad Javad Zarif said Trump’s decision to bring Tehran into the crisis was “shameful”.

“Mr. Trump bizarrely devotes the FIRST paragraph of his shameful statement on Saudi atrocities to accuse IRAN of every sort of malfeasance he can think of,” Zarif wrote on Twitter.

Zarif then made a dig at Trump’s suggestion – which came over the weekend after a massive, deadly wildfire ravaged parts of California – that Finland prevents wildfires by raking leaves.

“Perhaps we’re also responsible for the California fires, because we didn’t help rake the forests – just like the Finns do?” the Iranian foreign minister asked sarcastically.

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Brigitte MeierRostislav Velka MoravaJim MooneyShaun RameweBarneyRubble Recent comment authors
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Vince Dhimos
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Trump’s response could have been penned by Netanyahu. It is scary to think that there is even one American who beleives in their government for the people and by the people. Even at the time Lincoln said these words, they were not true.

Brigitte Meier
Guest
Brigitte Meier

The “people” were at all times those in power in D.C.

Vera Gottlieb
Guest
Vera Gottlieb

It has become very obvious as to what Trump is standing for: PROFITS…and never mind integrity. Decency. Self-respect. Totally despicable.

Rostislav Velka Morava
Guest
Rostislav Velka Morava

Yes in this, Trump is like the former recent presidents before him. He is not special in this regard.

Brigitte Meier
Guest
Brigitte Meier

America has all these qualities only in words. If you look at the US actions, you would be hardpressed to find any “integrity, decency and self-respect”.

BarneyRubble
Guest
BarneyRubble

Let the country that has not murdered a dissident and butchered his corpse inside a diplomatic facility be the first to cast a sanction.

What?! Who knew all those embassies and consulates had another purpose? Ours have always had a chop-chop room.

Shaun Ramewe
Guest
Shaun Ramewe

~ Swamp-Chump has tried everything he could to slyly help his fellow perverted pro-terrorist sicko-coward Zio-liar war-criminal friend (fiend) but social media has prevented his sneaky side and tricky double-bluff use of fake ZOG-Western MSM from covering this one up with more lies or omitting it altogether this time!! Shame the same didn’t happen when he twice-led the deceitful terror-abetting false-flag campaigns and illicit F-UK-US attacks on anti-terrorist civilians and hero-warrior forces in sovereign resource-rich pro-democracy illegally-invaded Syria!! So ~ Mo been Sawman will likely get abandoned on this one if the public heat gets too much. Boohoo to both… Read more »

Jim Mooney
Guest
Jim Mooney

Tulsi Gabbard said it best: Trump is Saudi Arabia’s bitch 😉

Brigitte Meier
Guest
Brigitte Meier

She forgot to mention in addition to Netanyahu’s bitch.

Brigitte Meier
Guest
Brigitte Meier

For the US, Kashoggi’s murder is really not such a big thing. The US, via Mossad and MeK, murdered several Iranian scientists by tearing their bodies to shreds with bombs for no cause. In addition, the US murders thousands of civilians including children in most atrocious ways by dismembering them with bombs from drones. The US killed many journalists including bombarding Al Jazeera in Iraq. So it should now be morally perturbed by one murdered Saudi journalist? Surely not. It’s business as usual; by Saudi Arabia this time. Of way greater offense to both, the Iranians and the US public,… Read more »

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Macron pisses off Merkel as he tries to sabotage Nord Stream 2 pipeline (Video)

The Duran – News in Review – Episode 177.

Alex Christoforou

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The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris discuss an EU compromise for Nord Stream 2 where EU member states, the EU Parliament, and its Commission will give the bloc more oversight on gas pipelines, with one caveat…the Nord Stream 2 project with Russia will not be threatened by the new regulations in the agreement.

Macron pushed hard to have the new regulations include (and derail) Nord Stream 2, an action which annoyed Angela Merkel, who eventually got her way and delivered another blow to Macron’s failing French presidency.

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Via The Express UK

Angela Merkel hit back at Emmanuel Macron over Russia and Germany’s pipeline project, declaring it would “not be a one-sided dependency”. The German Chancellor explained that Germany will expand its gas terminals with “liquified gas”. Speaking at a press conference, Ms Merkel declared: “Do we become dependent on Russia because of this second gas pipeline? I say no, if we diversify. Germany will expand its gas terminals with liquefied gas.

“This means that we do not want to depend only on Russia, but Russia was a source of gas in the Cold War and will remain one.

“But it would not be one-sided dependency.”

Via DW

The EU parliament and its Council are set to adopt new regulations on gas pipelines connecting the bloc members with non-EU countries, the EU Commission announced early on Wednesday.

The upcoming directive is based on a compromise between EU member states and EU officials in Brussels. The bloc leaders agreed to tighten Brussels’ oversight of gas delivery and expand its rules to all pipelines plugging into the EU’s gas distribution network.

“The new rules ensure that… everyone interested in selling gas to Europe must respect European energy law,” EU Energy Commissioner Miguel Arias Canete said in a statement.

For example, owners of pipelines linking EU and non-EU countries would also be required to allow access for their competitors. Brussels would also have more power regarding transparency and tariff regulations.

Russian ambassador slams US

Brussels has repeatedly expressed concern over the controversial Nord Stream 2 project which would deliver Russian gas directly to Germany through a pipeline under the Baltic Sea. Many EU states oppose the mammoth project, and the US claims it would allow Moscow to tighten its grip on the EU’s energy policy.

Berlin has insisted that the pipeline is a “purely economic” issue.

Speaking to Neue Osnabrücker Zeitung daily, Russian ambassador to Berlin, Sergey Nechayev, slammed the US’ opposition as an attempt to “push its competition aside” and clear the way for American suppliers of liquefied gas.

“It’s hard to believe that a country that is destroying the rules of free and fair trade, that is imposing import tariffs on its competition, that is flying slogans like ‘America First’ on its flags and often threatens biggest European concerns with illegal sanctions, is now really concerned about European interests,” the Russian envoy said in remarks published in German on Wednesday.

Last week, France unexpectedly rebelled against the project, but Berlin and Paris soon reached a compromise. Thanks to their agreement, the latest deal is not expected to impede the ongoing construction of Nord Stream 2.

Citing sources from negotiators’ circles, German public broadcaster ARD reported that the deal left room for Germany to approve exceptions from the EU-wide rules.

According to the EU Commission, however, exceptions are “only possible under strict procedures in which the Commission plays a decisive role.”

The Gazprom-backed pipeline is set to be completed by the end of the year.

 

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UK Defence Secretary looking for a fight with both China and Russia (Video)

The Duran Quick Take: Episode 87.

Alex Christoforou

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The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris discuss UK Defence Secretary Gavin Williamson’s idea to deploy hard power against China and Russia, starting with plans to send Britain’s new aircraft carrier to the tense sea routes in the South China Sea.

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“Britain’s Gavin Williamson places Russia & China on notice, I’m not joking,” authored by John Wight, via RT

UK Defence Secretary Gavin Williamson is itching for conflict with Russia and China. He’s not mad. Not even slightly. But he is stupid. Very.

Unlike former fireplace salesman Gavin Williamson, I am no military expert. But then you do not need to be one to understand that while Britain going to war with Russia and China might work as a video game, the real thing would be an exceedingly bad idea.

So why then in a speech delivered to the Royal United Services Institute in London, did Mr Williamson’s argument on the feasibility of the real thing elicit applause rather than the shrieks of horror and demands he be sacked forthwith it should have? This is a serious question, by the way. It is one that cuts through British establishment verbiage to reveal a country ruled not by the sober and doughty political heavyweights of years gone by, but by foaming fanatics in expensive suits

Placing to one side for a moment the insanity of the very concept of Britain deploying hard power against Russia and/or China, the prospect of fighting a war against two designated enemies at the same time is a recipe for disaster. Not satisfied with that, though, Mr Williamson is actually contemplating a conflict with three different enemies at the same time – i.e. against Russia, China, and the millions of people in Britain his government is currently waging war against under the rubric of austerity.

“Today, Russia is resurgent,” Mr Williamson said, “rebuilding its military arsenal and seeking to bring the independent countries of the former Soviet Union, like Georgia and Ukraine, back into its orbit.”

For Mr Williamson and his ilk a resurgent Russia is a bad thing. Much better in their eyes if Russia, after the Soviet era in the 1990s, had remained on its knees as a free market desert; its state institutions in a state of near collapse and tens of millions of its citizens in the grip of immiseration. Yes, because in that scenario Western ideologues like him would have had free rein to rampage around the world as they saw fit, setting fire to country after country on the perverse grounds of ‘saving them’ for democracy.

As it is, he and his still managed to squeeze in a considerable amount of carnage and chaos in the years it did take Russia to recover. The indictment reads as follows: Yugoslavia destroyed; Afghanistan turned upside down; Iraq pushed into the abyss; Libya sent to hell.

By the time they turned their attention to Syria, intent on exploiting an Arab Spring that NATO in Libya transformed into an Arab Winter, Russia had recovered and was able to intervene. It did so in concert with the Syrian Arab Army, Iran and Hezbollah to save the day – much to the evident chagrin of those who, like Gavin Williamson, prefer to see countries in ashes rather than independent of Western hegemony.

As to the facile nonsense about Russia trying to bring Georgia and Ukraine back into its orbit, both countries happen to share a border with Russia and both countries, in recent years, have been used by the UK and its allies as cat’s paws with the eastward expansion of NATO in mind.

It gets worse though: “The Alliance must develop its ability to handle the kind of provocations that Russia is throwing at us. Such action from Russia must come at a cost.”

“Provocations,” the man said. Since British troops have been taking part in exercises on Russia’s doorstep, not the other way round, one wonders if Gavin Williamson wrote this speech while inebriated.

It is Russia that has been on the receiving end of repeated provocations from NATO member states such as the UK in recent times, and it is Russia that has been forced to respond to protect its own security and that of its people where necessary. Furthermore, not only in Russia but everywhere, including the UK, people understand that when you have political leaders intoxicated by their own national myths and propaganda to such an extent as Britain’s Defence Secretary, danger ensues.

The most enduring of those national myths where London is concerned is that the British Empire was a force for good rather than a vast criminal enterprise, that Britain and America won the Second World War together alone, that Iraq had WMDs, and that international law and international brigandage really are one and the same thing.

Perhaps the most preposterous section of the speech came when Mr Williamson tried to fashion a connection between Brexit and Britain’s military strength: “Brexit has brought us to a moment. A great moment in our history. A moment when we must strengthen our global presence, enhance our lethality, and increase our mass.”

Reading this, you can almost hear Churchill turning in his grave. Britain’s wartime prime minister had such as Gavin Williamson in mind when he famously said, “He has all the virtues I dislike, and none of the vices I admire.”

Mr Williamson obviously misread the memo talking up not the opportunity for increased conflict with China after Brexit but trade.

This was not a speech it was a linguistic car crash, one that will forever command an honoured place in compendiums of the worst political speeches ever made. As for Gavin Williamson, just as no responsible parent would ever dream of putting an 10-year old behind the wheel of car to drive unsupervised, no responsible British government would ever appoint a man like him as its Defence Secretary.

In years past, he would have struggled to find employment polishing the brass plate outside the building.

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The Birth Of A Monster

The banking establishment welcomed the Fed with open arms. What gives?

The Duran

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Authored by David Howden via The Mises Institute:


The Federal Reserve’s doors have been open for “business” for one hundred years. In explaining the creation of this money-making machine (pun intended – the Fed remits nearly $100 bn. in profits each year to Congress) most people fall into one of two camps.

Those inclined to view the Fed as a helpful institution, fostering financial stability in a world of error-prone capitalists, explain the creation of the Fed as a natural and healthy outgrowth of the troubled National Banking System. How helpful the Fed has been is questionable at best, and in a recent book edited by Joe Salerno and me — The Fed at One Hundred — various contributors outline many (though by no means all) of the Fed’s shortcomings over the past century.

Others, mostly those with a skeptical view of the Fed, treat its creation as an exercise in secretive government meddling (as in G. Edward Griffin’s The Creature from Jekyll Island) or crony capitalism run amok (as in Murray Rothbard’s The Case Against the Fed).

In my own chapter in The Fed at One Hundred I find sympathies with both groups (you can download the chapter pdf here). The actual creation of the Fed is a tragically beautiful case study in closed-door Congressional deals and big banking’s ultimate victory over the American public. Neither of these facts emerged from nowhere, however. The fateful events that transpired in 1910 on Jekyll Island were the evolutionary outcome of over fifty years of government meddling in money. As such, the Fed is a natural (though terribly unfortunate) outgrowth of an ever more flawed and repressive monetary system.

Before the Fed

Allow me to give a brief reverse biographical sketch of the events leading up to the creation of a monster in 1914.

Unlike many controversial laws and policies of the American government — such as the Affordable Care Act, the Troubled Asset Relief Program, or the War on Terror — the Federal Reserve Act passed with very little public outcry. Also strange for an industry effectively cartelized, the banking establishment welcomed the Fed with open arms. What gives?

By the early twentieth century, America’s banking system was in a shambles. Fractional-reserve banks faced with “runs” (which didn’t have to be runs with the pandemonium that usually accompanies them, but rather just banks having insufficient cash to meet daily withdrawal requests) frequently suspended cash redemptions or issued claims to “clearinghouse certificates.” These certificates were a money substitute making use of the whole banking system’s reserves held by large clearinghouses.

Both of these “solutions” to the common bank run were illegal as they allowed a bank to redefine the terms of the original deposit contract. This fact notwithstanding, the US government turned a blind eye as the alternative (widespread bank failures) was perceived to be far worse.

The creation of the Fed, the ensuing centralization of reserves, and the creation of a more elastic money supply was welcomed by the government as a way to eliminate those pesky and illegal (yet permitted) banking activities of redemption suspensions and the issuance of clearinghouse certificates. The Fed returned legitimacy to the laws of the land. That is, it addressed the government’s fear that non-enforcement of a law would raise broader questions about the general rule of law.

The Fed provided a quick fix to depositors by reducing cases of suspensions of their accounts. And the banking industry saw the Fed as a way to serve clients better without incurring a cost (fewer bank runs) and at the same time coordinate their activities to expand credit in unison and maximize their own profits.

In short, the Federal Reserve Act had a solution for everyone.

Taking a central role in this story are the private clearinghouses which provided for many of the Fed’s roles before 1914. Indeed, America’s private clearinghouses were viewed as having as many powers as European central banks of the day, and the creation of the Fed was really just an effort to make the illegal practices of the clearinghouses legal by government institutionalization.

Why Did Clearinghouses Have So Much Power?

Throughout the late nineteenth century, clearinghouses used each new banking crisis to introduce a new type of policy, bringing them ever closer in appearance to a central bank. I wouldn’t go so far as to say these are examples of power grabs by the clearinghouses, but rather rational responses to fundamental problems in a troubled American banking system.

When bank runs occurred, the clearinghouse certificate came into use, first in 1857, but confined to the interbank market to economize on reserves. Transactions could be cleared in specie, but lacking sufficient reserves, a troubled bank could make use of the certificates. These certificates were jointly guaranteed by all banks in the clearinghouse system through their pooled reserves. This joint guarantee was welcomed by unstable banks with poor reserve positions, and imposed a cost on more prudently managed banks (as is the case today with deposit insurance). A prudent bank could complain, but if it wanted to use a clearinghouse’s services and reap the cost advantages it had to comply with the reserve-pooling policy.

As the magnitude of the banking crisis intensified, clearinghouses started permitting banks to issue the certificates directly to the public (starting with the Panic of 1873) to further stymie reserve drains. (These issues to the general public amounted to illegal money substitutes, though they were tolerated, as noted above.)

Fractional-Reserve Free Banking and Bust

The year 1857 is a somewhat strange one for these clearinghouse certificates to make their first appearance. It was, after all, a full twenty years into America’s experiment with fractional-reserve free banking. This banking system was able to function stably, especially compared to more regulated periods or central banking regimes. However, the dislocation between deposit and lending activities set in motion a credit-fueled boom that culminated in the Panic of 1857.

This boom and panic has all the makings of an Austrian business cycle. Banks overextended themselves to finance the booming industries during America’s westward advance, primarily the railways. Land speculation was rampant. As realized profits came in under expectations, investors got skittish and withdrew money from banks. Troubled banks turned to the recently established New York Clearing House to promote stability. Certain rights were voluntarily abrogated in return for a guarantee on their solvency.

The original sin of the free-banking period was its fractional-reserve foundation. Without the ability to fund lending activity with their deposit base, banks never would have financed the boom to the extent that it became a destabilizing factor. Westward expansion and investment would still have occurred, though it would have occurred in a sustainable way funded through equity investments and loans. (These types of financing were used, though as is the case today, this occurred less than would be the case given the fractional-reserve banking system’s essentially cost-free funding source: the deposit base.)

In conclusion, the Fed was not birthed from nothing in 1913. The monster was the natural outgrowth of an increasingly troubled banking system. In searching for the original problem that set in motion the events culminating in the creation of the Fed, one must draw attention to the Panic of 1857 as the spark that set in motion ever more destabilizing policies. The Panic itself is a textbook example of an Austrian business cycle, caused by the lending activities of fractional-reserve banks. This original sin of the banking system concluded with the birth of a monster in 1914: The Federal Reserve.

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