Founding the Federal Reserve

expect to be like, oh gold standard, preserve my wealth, you know, who cares what happens to anything else? My, my, my, my kind of guy was basically like, oh, obviously, you gotta tax me more and spend money like crazy. (upbeat music) - Hello and welcome to the more Freedom Foundation podcast. I'm Rory, in charge of podcasting, and with me as always is Robert Morris. Are you this time? - Not bad, not bad, how you doing, Rory? Have you got any sort of weird links you find out through the Epstein fans? Right, you know what? I actually do kind of wanna go and Google that and see if I come up. I mean, I know this thing. - 'Cause I've heard about, it seems to be mostly like, female like left wingers are getting mentioned, so they're in it, but they're not, they're not talking to anyone. It'll be like Dawkins turns out to be like, scared of strong women and gets annoyed when they like mention him in public and stuff. - Well, it's sort of, I think that certainly the disclosure of the Epstein fans is a good thing. Certainly we should see more disclosed. Certainly we are learning about new crimes and new corruption, is that anything? But I do think that we've gone pretty far in the direction of like moral panic. Like it's gotten quite ridiculous. Like, oh, Trump has been mentioned 38,000 times in the emails, it's like, like a lot of these emails are from the period of time when Donald Trump was running for president. Of course they're talking about Donald Trump. Not to say that Trump doesn't have, you know, isn't a nasty sex criminal. I think that's been documented in a variety of formats and judicial venues. It's just that like, I think we've gone pretty far in the direction of chaotic panic, which honestly, I think kind of serves some of the more subtle stories of corruption. It actually serves to obscure some of the more subtle and interesting stories of corruption that very few news outlets are actually tracking down. But yeah, there's just the level of nonsense and the New York Times has highlighted there's sort of a famous bit where it looks like they're talking about a nine year old, but then the New York Times, among other outlets, has been actually that's a typo. It was a 19 year old they're talking about. Yet you've got Congress people talking about nine year olds. There's a lot of irresponsibility. And a lot of silliness about the sort of controversy where it's at now, not that it isn't documenting incredibly serious, very real corruption. It's disgusting that this sex criminal was at the center of our foreign policy, at the center of our business elites, at the center of our governing elites. It's disgusting and we should talk more about that, but I feel like a lot of people are sort of running down rabbit holes that don't actually have much to yield. Okay. Well, do you want a very slight rabbit hole that slightly affected me? Sure. Do you remember I was saying that I got like banned from our slash word news on Reddit? You hadn't, I think you mentioned that at some point, yeah. So it turns out that Gisley and Maxwell was massive on Reddit and was the first to get a million karma on it. I'm just so glad that she was massive in was our slash word news. Oh, interesting. So yes, it's a very pro Zionist. And I think that's why I got kicked to remember when the Israelis were attacking the eid coming in. Yeah. So I was saying, I was basically saying it. You mean every day for the past two and a half years, you're, yeah. I was just like, oh, maybe they shouldn't attack it. People were saying, oh, well, the Hamas steal the food. So you're technically supporting terrorism and Hamas is like specifically mentioned in it. I don't like, okay, maybe it's like this because of a certain Gisley and, yeah. I mean, there's a lot of, there's a lot of things about our media that, yeah, and that's part of his networks. It seems like drop site news is the only one that wants to mention it. One of the sadder things that I've seen over the past a couple of weeks is people desperately, desperately, desperately trying to tie up steam to Russia where it's like on every single, you know, it's every other email he's working with in an old Israeli Prime Minister. He's setting up a security deal somewhere in Africa for Israel. He's clearly, there was a great tweet that we talked about at some length, I think, in a whole podcast episode. It's like, he wasn't a Mossad agent, like Mossad worked for him. One of the most disgusting things about the Epstein files is it's revealing the way that certain wealthy individuals like Epstein use the agencies of governments and the national interests of places like the United States and Israel as toilet paper for their own use. And yeah, the idea, there's, I'm sure Epstein had tons of connections with Russia. He had infinitely more connections with Israel. With the United States ruling class that were laid, they're entirely inappropriate. I actually want to talk about something else that there are a lot of conspiracy theories about, which is the Federal Reserve. I've been fascinated by the US Federal Reserve. This is the central bank of the United States for years now, mostly sort of like trying to understand it. I think what really did it for me was 2020. And then after 2020 and COVID, and the expansion of the Federal Reserve's role there, looking back at 2008 and the expansion of the Federal Reserve's role in 2008, and just realizing what an important figure the chairman of the Federal Reserve has become and how it's kind of like our more serious president, certainly in the Trump era. It's kind of like the vibe I'm getting from the Federal Reserve, like the president you can trust. And we're actually about to replace that guy since 2018, initially appointed by Donald Trump, despite the fact that Trump really hates him and complains about him all the time. Jerome Powell was reappointed by Joe Biden, has been there for, I guess, completed an eight-year term, and he will now be replaced by Kevin Warsh, a guy that people have very conflicted opinions on, but I don't have. It is interesting that even in the absolutely bat-crazy, bongo Trump's second term, he has been careful to appoint somebody who's not going to be terrifying because this is. - This is very important. This is vitally important. And it's just been this weird thing, though, because whenever a crisis comes up, everyone's like, "What's the Fed going to do?" Like this is kind of. It's certainly in 2008 and 2020, certainly in 2020 when Donald Trump was the president. It's kind of like, "This is our backup president." It was sort of the vibe you're getting. Okay, this is the person who's gonna. And honestly, in 2008, it was George W. Bush, who wasn't much better. He was a little bit more respected than Trump was, but he was also, I think, his approval rating might have been even lower than Trump says today. - Well, yes, Trump isn't in an act of war, a big war. - Not. Yeah. Well, this is going up in about a week and a half after recording this, and Trump could very well be a war with Iran by then. So, who knows? But, yeah, so it's sort of like this backup president role. But what's interesting is we rely on the Federal Reserve, certainly in the financial press, the financial world, if you're big into investing, people live and die by what the Federal Reserve chair says. But I think there's just a lot of nonsense about the history of this institution, the Federal Reserve, what the institution does now, though honestly, it seems like with every crisis, what the institution does expands, and your most paranoid imaginings of what the Fed is up to or probably don't fully encompass what's going on. As part of this book that I'm writing, and sort of American Empire, the first 100 years, and as part of the challenge of that book, and why it's taking me so long, is that I've been really diving in on the history of the Federal Reserve. So today, I just want to go from 1913, when the bank was founded, up until 1935. I just want to talk about some of the details of banking in the United States. And I want to apologize in advance, this might seem boring, this might seem crazy, but it is tremendously important. The figure and the actions of the Federal Reserve chair are as important as the actions of US presidents, if not more so, depending on what's happening. So much in our world system, not just in the United States, relies on what the Federal Reserve does. Some of that is intentional and good, some of that is not, but we need to, I think, have a better sense of the history of this institution to understand really anything in the world. So that's what we're going to try and do today. Are you seeing any mistakes being done now that we're being done before the Federal Reserve was brought up by it? Was it, and I think that is a great place to start, because it is the world before and after the Federal Reserve is just completely different. There are, I mean, my sort of, I guess, standard answer to that question would be cryptocurrencies more broadly, are an idea that are somewhat similar to what the United States tried between 1837 and 1863, which was like, there was no national currency, there was no central bank. But also, didn't the British Empire, they didn't really want Pines leaving the UK? So that's why America kind of had to make its own currencies. That seems like a way of formulating it that I haven't had in my mind. Okay. There's a lot of different ways to interpret, you know, you're talking about pound sterling, you're talking about gold. One of the interesting-- I'm turning, could you imagine that America would have just used the pine, but they didn't? That would be very surprising, considering the attitudes of the US and just like what pound sterling was at that point, the way that. And I think that's what's so confusing about current conversations is like the world before central banking and after central banking is completely different. And like certainly pounds were used. Certainly there were debt, you know, there was debt that was denominated in, you know, I think pound sterling in the United States market before the Federal Reserve, but like the ability of like the Bank of England, circa the 19th century or before 1913 being able to sort of manage or be comfortable with the idea of a country, certainly the country the size of the United States, using the British pound, I think would have been. We live in a time when like dollarization is something that happens both like de facto and de jour, like I was in Cambodia and like everyone was using dollars all the time. That is not actually like the established currency of Cambodia, that's just something that has happened. Believe in El Salvador still today, but like now it's the dollar and Bitcoin, but I think El Salvador is officially dollarized. Something that like only really happens with a very, very small place and that's also in the modern era where like there is something like an El Salvador central bank that can, you know, make a pronouncement like that. Central banking is like a 19th century thing. Like it is an 1800s thing. The gold standard is like an 1800s thing. Sure, people always loved gold. Sure. Was it having this discussion with you or someone else were like Isaac Newton, like, you know, back in the late 1600s or at least 1700s was like managing the gold, you know, the gold content of British currency or what have you. But that's not like a gold standard as it existed in the 19th century. It is not a central bank that has made the commitment to backstop all of the other banks, has made the commitment to manage the currency of a country and starts to have an inner and this is another 19th century thing of central banks having interactions with other central banks. Because a lot of the time people wouldn't have trusted each other. Like I know it isn't the first crusade. It's a lot of like a banking systems, you know, site, but obviously China, like those things. Like, you know, it's easy to, it's just would have been very hard to trust anyone when everything was very physical. So I could understand a lot of countries being very like, no, we'll just look after ourselves. Absolutely. So into the 19th century, like the big banking houses and the big financial powers were actual families, like the Medici banks, the Fugger banks, the big bearings bank initially. And of course, most famously, the Rothschild banks. But also I didn't want individual Sea of America allegedly. We will absolutely get to the panic of 1907 today. Yes. That is exactly what we're going to get there. And it is in the 19th century and in the 19th century in most European and other powers. But in the only in the 20th century in the United States where the governments begin to step into some degree and say, hey, we need something a little more established. And that's sort of where central banking comes from. That's where these, you know, more directly managed currencies, man interest rates and whatnot, start to come into the picture. What's interesting about the United States and the Federal Reserve is that it was really, really late to the party. This became a real dynamic and a really interesting dynamic of European politics across the 19th century. I mean, famously the Bank of England, like really got going. It's sort of the beginning of the 1700s, the Bank of England, nowhere near what the Bank of England is today, nowhere near what the Bank of England was a hundred years ago or 200 years ago, like sort of at the beginning of the 1700s, sort of starts establishing itself as an entity that sort of is managing national debts, currencies, this, that and the other thing. It's in the 19th century where following on from the Bank of England, mostly the other European powers put together some kind of central banking, mostly just to avoid being preyed upon by the Bank of England because these countries acknowledge that like, well, if we don't do this, then we're just going to be run by the British. We're just going to have to really all of our international traders are going to have to rely on the British to handle all their financing, which means that the British banks get a slice, you know, or what have you. The United States, and this is sort of like the thing that's kind of, this is actually more of a 1990s shift. I can't believe it was this late. The United States has like a deep-died part of its character, Hates Banks. Like it's just politically and, you know, and of course, ironically, the fact that we hate banks means that we have vastly, vastly more of them, which made my, so I googled this Canada, obviously, in much smaller country. Canada has 79 banks in the entire country. 35 of them, only 35 of them are local. So 34 of those banks are like branches of international banks. So that's 35 banks. I looked it up. Ireland has 17. Well, I think it's sort of nearly only has two proper banks that, you know, lo and land out. So that's just so Canada has like, it's got 35 local banks, but probably a lot of those are specialized. We're thinking it's only about six banks that actually, that the vast majority of Canadians actually bank with or what have you. The UK, you know, financial hub of everything, the United Kingdom has around 300 banks, but only about 150 of those are local. How many banks do you think the United States has, really? Well, judging by that, I assume it must be more like a thousand. The United States, as I remember there was that Silicon Valley bank I'd never heard of until it suddenly was potentially going to lose a lot of money. The United States in early 2025 had 4,462 banks. Wow. That's exciting. This is a tremendous decline from just 2008 when there were 7,000 banks in the United States. And in some of the historical periods, I've been reading a lot about to talk about the Federal Reserve around the time of the Great Depression or the 1920s sort of boom, there were 20,000 banks on in the United States. Because I'm looking at this thing here, it says in the 1836 free banking era. Yes. Banks just issued their own bank notes. So there was thousands of different bank notes that I assume a lot went on there, but like all these meme coins. Exactly. And then that's exactly the parallel I was drawing earlier that this is crypto. We actually had in the United States the real existing life of crypto, which was all kinds of private banking everywhere. And it was an incredible catastrophe. At the outset of the, so the United States is founded on massive, massive suspicion of the British crown, the Bank of England, though of course it was very different entity banks. You have a lot of people from say France and Spain and America as well, because I think did Spain not basically find a mountain full of silver that kind of funded everything? And then it collapsed for 200 years? Yes, that was definitely a Spanish approach. But I don't associate, so this attitude goes back long before a large scale migration of other groups. This is a very sort of like old fashioned English. I don't want to pay taxes out of children. Yes, Scott's Irish, that's a thing. But I think it's actually, it's actually something I like about the United States. And it's something the United States is definitely losing, which is just suspicion of the money power. I think certainly as we'll get into with some of the discussions of the Federal Reserve, like this has been taken in some like pretty gross like anti-Semitic directions over the years, some of the foremost critics of the Federal Reserve. Like really, really go in like some gross directions with the Rothschilds and the Varburgs and this, that, nothing. But this attitude long predates the presence of Jewish people like this anti-bank attitude goes back to before we allowed Jewish people to be in banking. So it's like it is, it is an actual I think healthier suspicion of the money power. And I'm not, so there's a couple levels to this anti-Semiticism very bad, which is separate from a broader suspicion of banks, which can be both good and bad. I think it is good. I think that it is like it is a, an obsession with freedom. The reason that there's still 4,000 banks today is that like every town can have its bank. Like there is, I was just thinking I- Is it relatively easy to set up a bank? Because I think in England there was like a, it's like a kind of not a puff piece, but it's like a light-hearted philoma bite at the Bank of Dave, which was basically just a man that was quite wealthy business man, set up his own bank and it was like the first one that was set up in 100 years. Is it much easier to set up a bank in America? Much easier to set up a bank in America. By design, I think a lot of these banks are still chartered by the states. Because, and well this is, this is the crazy thing that kind of blew my mind. I do want to talk mostly about the early 20th century here. But before the 1990s, you could not, if you operated a bank in the United States, you could not open a branch in the next state. Okay. Does that make sense? So basically if you opened in Florida, you just could do Florida. Exactly. and I looked this up specifically because I know that the Bank of America became one of the largest banks in the world before being surpassed by Chinese banks over what it was. And I was like, wait, I'd sort of known that, but I was like, wait a second. So Bank of America became the largest bank in the world by whatever metric. Like only operating in California, and I looked into it this morning, and yeah, sure enough, like, Bank of America was only operating in now, that's incorrect. So it's not, this means that like, it's supposed to be a deposit taking institution like a commercial bank for the public. You can, up until the 1980s and 1990s, you could only do that in one state. But Bank of America, because that had all those resources was making investments all over the world, had business clients all over the world and all over the country. But like up until the 80s and 90s, up until the Reagan era, like, you could really only open, if you wanted to operate a bank that took the deposits and made loans, you could only do that in one state at a time. And that is just, it's just, it's an aspect of US life that is disappearing very quickly. And, you know, in 2008, there were 7,000 banks in the United States. At the beginning of 2025, there were four and a half thousand banks. So they are dying out quite quickly, because they are now being faced with competition since the 80s and 90s from like, I bank with PNC, which is in half the country. JP Morgan is now, has branches throughout the country. So these banks are slowly being killed off, but I just want to talk about this, because it's an indication of just like the generalized attitude in the United States, which I think is quite laudable, which is like, if somebody's going to control my money, I want them to live down the street for me. And I want to like control the laws that govern what happens to this banking institution. And a lot of what's gone really wrong in the Reagan era is taking those governors off and essentially saying, well, now we're going to have these huge national banks that become too big to fail. And it's a real shift that I was sort of just putting together this podcast. And I was, this is sort of a bit of a digression, because I just wanted to illustrate just like how anti-banking the United States is. But yeah, it's just this weird shift. Do you mean more like anti-competition? So the banks can just become big and lazy? Yes, the banks can become big and lazy, but also massively, massively more dangerous. We have since the Great Depression, we've had the Federal Deposit Insurance Corporation, where if a bank screws up, it can be wrapped up and all of its depositors can be protected. But now as we slowly move, not slowly at all, frankly, as we very quickly move from having this very diverse system of a bank on every street corner into having Canada, 5 or 6-Bank banks, we now create this system where those 5 or 6 banks can't fail. And the problems that it leads to, I think it was a very interesting balance in the United States through most of the 20th century, where thanks to the construction of the Federal Reserve, we had massive globe-spanning financial institutions that were tremendously powerful and were able to do the things that were useful for the growth of the United States, there's nothing. Yet at the same time, we also had this very dispersed, much more resilient and durable system of sort of dispersed banking. Now everything, and in an accelerating way, I thought the big lesson of 2008 was supposed to be the too big to fail banks are bad, right? Well, since 2008, we've almost cut the number of banks in the United States and half, which means that all the surviving ones are bigger. So yeah, it's just an interesting thing that's fading away very quickly, and I just don't see people talk about. - How would a modern version of this bank's escapitism form, do you think, would it be more like digitized banks that are only state-based, or would you like to see that state model only come back? - I think there's a lot of regulation that should just be rolled back. I don't, it's funny. As far as I've fallen from libertarianism, I don't know that it really makes sense that each individual state has its own banks. Maybe that doesn't make sense. So maybe this is inevitable. Maybe this does make more sense. This is, but it does seem like a loss of something important about what makes the United States the United States that is just sort of fading away. Certainly all kinds of scope for digitization and this, that, and the other thing. I, you know, I'm quite snooty about cryptocurrencies and don't learn them very much. But I was, I'm reading this phenomenal book right now. I think it's called The Code of Capital or something along those lines where this legal scholar at Columbia sort of goes through just the whole history of finance. And then she spends, this is a book written in 2018 or there about, you know, I think before COVID and she does spend a whole chapter talking about cryptocurrency and the incredible potential that was there. You know, like, like, yes, like these technologies are interesting, could potentially do good things. But this legal scholar, it's fascinating. This is writing in 2018 or so. She basically says exactly what was going to happen. Like, I think it's pretty likely that all of this is going to end up captured by, you know, a few small, too big to fill banks, which is pretty much what has happened to the crypto industry. So it is interesting to see that perhaps, you know, default hatred, my default hatred of crypto may be a little extreme. However, it has certainly ended up in a, in a, in a nasty place. So this hatred of the, the banks by sort of the United States, this suspicion of the money power was an incredible tension. I think in the early Republic, they talk about Hamiltonian versus Jeffersonian visions of what the United States should be. And Alexander Hamilton was always, you know, he's a New York guy, and they've now famously made a very popular musical about, which is interesting as Hamilton is sort of like, Cohen, it's like the perfect product of like the Clinton Democrat era, you know? They're like, oh, he's exciting 'cause he was an immigrant, but he was also just like, the dude was about banks. Like the guy was about like financial power and wanting to centralize everything. And it's a tension that's not just, you know, I mean in racist and whatever, like there is a tension between that like centralized financial power and like, wait, we want, we're more concerned about individual liberty. Is that in the other thing, the sort of Jeffersonian thing? And the guy who took that Jeffersonian too far in my mind would be Andrew Jackson. - Oh, I was just gonna say, just when you mentioned New York, was one thing to, you know, to create the Federal Reserve was it to get away from a New York pire? - Well, yeah, we're gonna get into that because there were, and I think one of the things that pissed me off enough that I wanted to do this episode is sort of the standard story of how the Federal Reserve was created is raw and kind of, and honestly a little bit anti-Semitic, certainly very anti-Semitic in one book that somebody handed me a couple of years back that I sat and sat down and read. The Federal Reserve was founded out of attention between those New York financial powers. - And so I felt like a question that might come up is-- - So it's not the rest of America trying to break away from New York, it's more like a New York civil war. - It's definitely the rest of the country trying to break away from New York or and also New York trying to break away from London. And it is interesting. So if, you know, how did we end up with a Wall Street and Wall Street was a thing like going back to the 19th century, how did we end up with a Wall Street if the banking sector was so legally divided up until the 1990s? And that's because large companies were built up and those large companies did not have. Though interestingly, we still call competition law in the United States, anti-trust. And that's because the trust, which is now more of a, a slightly, well probably in the aggregate, much more used but used for fewer things, legal piece of architecture was that a lot of the really big businesses of the 19th century did have those kinds of state-by-state limits that banking did. So they had to create these trusts that were, that would put all these individual state companies under a bigger, bigger than that anyway. That's a weird divergence. But New York became sort of the hub for London finance to touch down in the United States throughout the 19th century. And also was where, because in part of that access to London finance was where a lot of the really big companies of the Guilded Age in the United States, the huge national railroad companies, Standard Oil, US Steel, where all those big companies were founded. So New York ended up being, and it was also a huge pool of capital. So if money needed to be lent to a state or to a company anywhere in the country, you would have to go to New York financiers to do that. So New York was this big power that had a ton of control. However, and part of the reasons they had so much corrupt control was that there was no central bank that set standards, that saved financial institutions if they needed saving, that sort of acted as the representative of the United States and the United US dollar in international trade. It simply did not exist because of a choice that was made by Andrew Jackson in 1837. There were two-- National Central Banks, I think the first one mostly just expired, so they did a second one. And Andrew Jackson campaigned against that bank, and then when it expired he did not renew it. So there was no central bank or even national currency in the United States between 1837 and 1863. So there was, that's where the true crypto dream existed, completely private money. And it was catastrophic. 1837 is when he closed the bank and the panic of 1837 launched, I think, the second biggest economic depression of the 19th century. And it was a complete mess. There's a book I read about that's called Nation of Counterfeiters. There was no blockchain back then. People, you know, individual banks would put together their own bills and you, you know, if you ran a country store somewhere, you had to subscribe to like a thousand-page thing saying, this is a real version of the Topeka banks notes. This is a fake version of Topeka bank notes. Look out for that. So it was, it was chaos. It was a really hampered US development. And one of the things that what as is disturbingly often the case, what ended that rather crappy state of affairs was a, which is the United States Civil War. And in this system, I do not understand as fully as perhaps I would like to, but then I don't have to because it doesn't exist anymore. But Abraham Lincoln set up a system of national banks that were nationally chartered and had a relationship with the Treasury Department. Wasn't he running against somebody that then he kind of put in charge of the Treasury because it was kind of his idea? Are we talking, is that, was that Salmon Chase? Was he, he was the first guy, right? He was the first guy. I was, you're talking about team of rivals, but George is Kern's good one. I read that a couple years back, but yeah, so he the national banking system, it's interesting. So apparently these national banks, which were distinct from state chartered banks, did produce a uniform currency, but like they would be signed by the heads of each of the individual banks and would like would have the, so it was like, you'd have like a US dollar, but it would be, it would be like the, the Topeca Kansas national bank or whatever. And it was maybe just like a currency that only banks would use with each other and then they would issue a different currency of their own to its civilians. Well, I mean, there's certainly bank notes. There's so much, there's so much complexity there, Ruri, that I don't fully understand that I'm just going to stop talking about it. But the idea of like a US dollar that was uniform does not date just back to the Federal Reserve in 1913. It dates back to 1863. But there was still a bunch of stuff that was missing because we didn't want to, because of, because the US hates banks. We didn't want to have one lender of last resort. We didn't want to have one big overarching bank that had, you know, power over all this sort of thing. Certainly getting a national currency that was somewhat uniform helped in this tremendous boom that the United States experienced after the Civil War. This is like the moment probably that is the closest analog to what China's experienced over the past 20 years in US history. Just this insane boom where like everything goes up by a factor of five. And whereas before the Civil War, you really could have like all of your banks and most of your businesses were just like being operated as partnerships in one place and like sure there were factories, but they were, you know, it wasn't as big a deal. It's in this period between the Civil War and World War One 1913 where the United States just really, sorry, World War One is 1914. The founding of the Federal Reserve is 1913. This really like US- Good timing considering. Really good timing. And in the book that I'm writing, I mean, I just talk about how World War One and Federal Reserve are, you know, come about within a year of each other and are tremendously important in the timing where I can spiritually mind it. The timing is incredibly fortuitous because what World War One does for the United States is it flips the books with Britain. Britain, you know, everybody in the world owed the UK all kinds of money, you know, was the the creditor nation. And certainly the US owed, you know, a tremendous amount of money in the UK and World War One flips that over. But if we hadn't had a Federal Reserve to sort of manage that relationship to some degree and it's actually an open question how well managed, actually, I don't think it's an open question, it's a closed question, it was badly managed. But if there hadn't been a Federal Reserve there to manage that relationship, then there wouldn't really, it would have been much, much harder to recover from World War One in any way. And the United States wouldn't have been able to exert power the way that it did in the 1920s and 30s and 40s. And the rest of the time that that Federal Reserve had not come along at exactly the right time. So, but it was this interesting experience. So by the late 1800s, I really need to nail down in my head exactly what these years are because somebody said so. But I think it is like by it's of course an estimate, GDP standard, you know, this is all these are all estimates. But I think by the 1880s or the 1890s, the United States had a larger economy than the United Kingdom by the by 1910s or even the 1900s, the United States had a larger economy than the entire British Empire. But it didn't matter because the, I mean, it mattered, it mattered a lot. But the British controlled finance in the United States because the United States had chosen not to control finance in the United States. The, you know, the UK banks, the Bank of England, London financiers were the big, you know, controlled the commanding heights of the US economy. US is building out these these continental railroads and shipping companies and oil and this, that, and the other thing and the British investors own like the lion's share of it. US traders, US companies are beginning in a huge way to step out into the the international arena selling their goods. But the merchants, the US merchants have to deal with in-pound sterling. They have to deal with British financing, especially in a time before the internet. The, you know, the trade is uneven. You have to, and this is a really key insight of this book, "Dollars and Dominion," which sort of talks about the, the sort of outset of US banks sort of stepping into the world in the 20th century. It really points out how there's just this one sort of kind of obscure thing called a bankers acceptance, which basically means that you've got a transaction between a buyer and a seller. It's like over time and what all British traders have been able to do for decades and what all American traders had to do as well is if you wanted to sort of, okay, you've got a commitment that somebody's going to pay you for something. But what if you want the money now? You could just sell it through some confusing way through a bank on London, you know? Like so basically the essentially selling the debt kind of? Yes. And like the Bank of England would sort of backstop that. And of course, the Bank of England by sort of discounting that paper would get like, would get a little slice of that. And just made it really, really easy for British merchants and British banks to expand all over the world. The United States didn't have that until 1913. And we have it. So there's this book starts off with this fascinating description of the International Banking Corporation, which is before 1907, before 1913, before the Federal Reserve where like basically all these obscenely wealthy, some of the wealthiest people in human history are like, why can't we like do basic international trade without like cowtowing to these guys in F and London? So they found the International Banking Corporation, which is the first US-attempted international banking. And this is just an indicator of how insane it was. It did not have like a particularly direct relationship with the US government. It was chartered by the state of Connecticut. Oh, just Connecticut. Yeah, just Connecticut. And it was not like a through like they did some forms. Let's have a bank. You know, it was like a like a piece of legislation from the, you know, Connecticut. And it gave them all kinds of weird privileges or whatnot. Okay. But it was just this like very ad hoc kind of mess of an organization and the contrast between the IBC and what was possible after the establishment of the Federal Reserve is like night and day. And at that point truly, so like the United States was already trying to build a physical empire. And it is kind of a, it's I call it sort of the era of Me Too Empire. It's just sort of like actually, no, I guess Me Too has a different connotation post 2017. But it's like sort of like like a child like like, oh, I want to be part of it too. Like just to sort of like catch up like a sort of more Spartacus kind of thing. No, Spartacus has like a dignified connotation. Right. No, this is like a like an annoying child who wants to tag along. Like so basically we were, we, you know, with the Spanish-American war, we like take over a lot of the Caribbean territories in Asia and start being really brutal to people in sort of our near abroad, sort of Latin America would have you. But like we went through this process without actually, you know, using British banks. So it was sort of just kind of ridiculous. And then the Federal Reserve sort of allowed like the United States to really sort of become the United States. So what happened? You had mentioned JP Morgan earlier. So throughout the 19th century, there's just a series of these crippling financial panics as the stakes get higher and higher. So the country gets richer and richer. More and more people are no longer just living on farms. They're living in factories that close every time there's a financial panic that still a very small percentage of the population, but more people are involved in actually buying and selling securities and stocks and bonds and such. And the amounts of money involved here, getting bigger and bigger. And then in 1907, we have the panic of 1907, that's I've read a whole book about. Fascinating book, the panic of 1907 because it was written in 2007. So it's like the last moment before the 2008 financial crisis, where they were already talking about how the housing market was collapsing. They just didn't realize how bad it was gonna be. - Yeah, 2007 is sort of like, I feel like 2007 might be like last year and this might be the year that it's going to go. - Who knows, anything's possible. Anything's but, so the panic of 2007 is just fascinating stories. This is what you were referring to, like JP Morgan, literally one guy. - 'Cause we know it as like a giant institution, no, but it was literally just our guy who was very rich. - It was our guy who was very rich, but also had international relationships. He's like this sort of last example of like the Medici or what have you, like this sort of personal approach to banking and as is brought up in this book is referred to as a Medici multiple times at the time. And it was interesting so the classic story that we all get of the panic of 1907 is like he just locks everybody in his library, all the richest people in the United States and says, all right, we're solving this and this sort of walks through the minutia of that. And I didn't realize it wasn't like a single evening, it was multiple weeks of this guy going between his home and then his office down on Wall Street and just managing this collapse of the US economy related to, I mean, there's a variety of possibilities as to what led to that, the earthquake, San Francisco earthquake of 1906, sort of tightness of funding, the gold standard again comes in for a fair amount of blame here. But after 1907, when people realized that the crisis was averted by this one guy, people were happy, people were excited that, you know, things had not gone wrong, but people were also like, this is not like one guy should not be deciding whether the entire US economy rises or falls. And there were a whole bunch of other pressures. Like interest rates were not unified across the United States before the Federal Reserve and before World War I. Like they were not, like nothing was predictable. Like there was just no control of any of this sort of thing. And yes. - And also a lot of the sort of speculation that you get today is also happening here and there's all sorts of stupid things people are investing in. And it just feels like humans haven't really changed much in some regard. - They haven't. They are always investing in stupid things. - For sure. - And there's something new technology that will make everything else redundant and just give me your money now. - Yeah. So the standard story of the founding of the Federal Reserve is that in 1907 this thing happens. People are like, we probably need something. - And then in 1910 a sinister cabal of bankers take a train to an island in Georgia where they cook up at the Federal Reserve which then becomes the law of the land. And this is effing nonsense. Like, and what was so disappointing aspect of this book was they do a really great job of like talking about JP Morgan, the panic of 1907, like really compelling stuff, like the Copper King. It's like a fun, sleazy business story. But they're also like really like complicated stuff. Like, oh, the collateral of a large brokerage wasn't working. Like they do a really great job. And then when it comes to time to talk about the Federal Reserve that's basically the story they tell. Like, 1907 happened. 1910 a bunch of sleazy bankers come up with a plan. And then in 1913 that plan becomes law of the land. And like that is like the shorthand that everybody gets. And it's nonsense. Like there was broad based acceptance after 1907 that something had to be done. Something different had to be done. In 1908 there was congressional legislation basically putting together a commission to examine this stuff. Now, the 1910 group was a secret group of people that met and because the USA's banks and it did include a bunch of folks. But the plan that they put together was a plan that had been publicized by people who were at Jekyll Island three years prior. And that plan with minor alterations did become the recommended plan of the 1912 commission. And that plan promptly failed. Like that is not what the Federal Reserve became. In fact, the Federal Reserve that we got was much more in keeping with the-- I mean, it was a tremendous violation of it. But it was much more in keeping with the traditional suspicion of the money power that you have in the United States. This whole idea of having 12 separate Federal Reserve banks in different regions, not in the Jekyll Island plan. This whole idea of like there being a federal board that's overseeing this whole system, not in the Jekyll Island. You know, there was a centralized-- they wanted a more centralized-- much more centralized system, but they didn't want it run by the federal government. They wanted it run by a bunch of bankers in New York, essentially, or in Washington, D.C. But a centralized system with branching, this, that, nothing. So basically the Jekyll Island plan, if you're writing 20 pages on the formation of the Federal Reserve, yeah, you should mention the fact that a bunch of bankers went to Jekyll Island and came up with a plan that had something to do with the formation of the Federal Reserve. But it seems like in every one-page description of how the Federal Reserve came about. They mentioned the cabal of bankers. And if it's a particular kind of publication, they focus on the Jewish ones. Because I heard it was there, so it was far away from New York, because I had too much control. Well, the Jekyll Island-- we was a bunch of New York. It was a bunch of New York bankers and some congresspeople, I think, who went down to Georgia just to basically be away. And there were elements of like that do sound very shady and refund to talk about. Like they didn't give anybody their names and they didn't tell them where they were going. But this is because the US hate spanks. But it's worth mentioning and talking about, if you have a 10-page description of the founding of the Federal Reserve. But if you have one page, and this is the only thing you point to, it just sets the-- it's just not accurate. This was the-- I mean, just as simple as it was Democrats that put the Federal Reserve through a Democratic president, Woodrow Wilson. And this was very much a repub-- the Jekyll Island plan was very much the Republican version of this plan. So it's just frustrating to me that this very conspiratorial-- and yes, in a book that somebody handed me a couple of years back, that was the secrets of the Federal Reserve. It's very anti-Semitic, which is unfortunately at the base of a lot of the way that people talk about these institutions. And it's just nonsense. The Jekyll Island plan did not become the Federal Reserve. The Federal Reserve was something that was argued over for another three years and then put in place. And also, the Federal Reserve that was put in place in 1913 is emphatically not the Federal Reserve that we have today. There are a lot of survivals from the 1913 plan that still exists today. Is there still the 12 regional banks? There's still the 12 regional banks, which are hilarious. I would highly recommend just looking up a map of the 12 regional banks and what they cover. Because if you know what the US economy-- Oh, it's like-- No. Yeah, it is lab. I think there might actually be two of the 12 banks might be in Missouri, which is just-- Oh, yeah, yeah. So basically-- Because they're basically New England, but then you have nearly one half of America. Yeah. So of the banks, I think 11 of the 12 are-- or maybe there's a Denver one, I don't know. 11 of the 12 are on the east side of the Mississippi or something like that. And you have San Francisco, which is meant to cover the entire-- The fourth largest economy in the world. Yeah, the entire-- Because the second closest one is Dallas. Dallas, yeah. Which made sense in 1913. Oh, yeah, at the time with the population. So I think what is interesting about that is it's sort of the fact that we've held on to this construction of regional banks. Regional Fed banks should let on that the regional Fed banks are not as important as they once were. Should they be reset to like, recenter them to where their population locations would be now? If they had any real utility worry-- Oh, OK. Yes, we should do that. But they mostly just have sort of traditional-- I mean, they have real powers. They are responsible for regulating banks in their region to some degree, though that reaches with every financial crisis, the exact-- and there's a whole bunch of other competing bureaucracies. I mean, they're not powerless. They're not meaningless. But they are so baked in that like, it's sort of-- it would be kind of a pointless reform at this point. And of course, as we talked about at the outset, bank, the number of banks in the country are following my hundreds every year. less so through bank failures than through mergers and acquisitions. Their importance gets less and less. However, in the first 22 years of the Federal Reserve system, they were tremendously important. Up until like the mid-1920s, they would set their own interest rates. They had very real powers. So they have multiple interest rates within America? Yes, up until I think this was expected to. They wanted to harmonize eventually, but they expected it would take decades. The amount of money that World War I fire-hosed into the US economy. It was sort of incredible. I think I read somewhere that JP Morgan, the bank, I think JP Morgan, the guy, died in 1913, interestingly. A lot of coincidences here. But his son and his partner is, I think became like the main purchasing agents for the French and British armies during World War I. Just because that's where so many of their supplies were coming from. The amount of money that was coursing through the Federal Reserve system, I believe, allowed interest rates to be harmonized more quickly. I don't understand what any of that means, but that is what I read. So, and I think into the 1920s, so in the 1920s and much more damageingly in the beginning of the 1930s, it wasn't entirely clear who held the most power in the Federal Reserve bank system. Was it the Federal Board in Washington DC? Was it each of these 12 banks? And remember, this isn't a much more dispersed banking system. So, these 12 banks have more power and more influence. The most influential figure of the first 15 years of the Federal Reserve's existence is not the chairman of the Board in Washington DC. I don't know if it was the governor or the president, it switched in 1935. But the head of the New York Federal Reserve bank was a guy named Benjamin Strong. Benjamin Strong is like kind of a forest-gump character, but also because he's kind of brilliant. He was in the Jackal Island meeting in 1910. Because some people are referring to Epstein as like the evil of forest-gump. So, this would be a good guy Epstein. And also a good, okay, a good forest-gump. And also unlike Epstein, seems to have actually been intelligent. He was also JP Morgan, the guy JP Morgan's, like sort of like go to Auditor during the panic of 1907. So, he was the guy who would be like, we're going to save this bank. We're not going to save this bank for JP Morgan. So, this is a very smart guy, the head of the New York Federal Reserve bank. And because of the strength of his personality, yes, the strength of his connections, the fact that he was in New York. The head of the New York bank is still a more powerful, institutionally more powerful guy. I think there's like the open market committee rotates between the banks or something like that. But the New York head is always on the committee. He's sort of like the Security Council, the UN. Like the New York head is always part of the Security Council, the other members rotate. That gets into detail we don't have time for. Benjamin Strong is tremendously powerful. There's this great book called The Lords of Finance talking about how in the 1920s, when the United States has been thrust into this role of dominant power in the United States. Not the 1940s, it was actually the 1920s. Benjamin Strong was making decisions and running the Federal Reserve Bank not just in service to the United States, but also in service to like keeping the Bank of England afloat. Like there's a great line in that book, The Lords of Finance, where Montague Norman, the head of the Bank of England said, "All right, we've decided with the Prime Minister that we're going to go back on the gold standard because during World War I, everybody got off of it." I better go to the US and talk to Benjamin Strong about this. That is where power relations were. Potentially one of the greatest strategies of the 20th century is that Benjamin Strong died in 1928. Very young, relatively young, I guess he was in his 50s. But when he died, the Federal Reserve System that nobody quite knew how to run that had been sort of run by Benjamin Strong, who was also running World Finance, died in 1928. And I think we all know what happened in 1929, which is the stock market crash that really destroyed the world. So you said that finance was a bit like XKCD, clean software to be like. That was just some tiny, weird bit of software that was made 30 years ago, keeping all of the internet up. There was just one guy that knew how to run the world. Yeah, pretty much. It was like Benjamin Strong's tubercular lungs that were holding up the entire world. That's obviously an oversimplification. There were hundreds of pressures. You can definitely make a different case that Benjamin Strong's management of the Federal Reserve in service. He probably made money cheaper than it should have been to keep the Bank of England capable of restoring the gold standard. So that might have led to the insane stock market boom in the United States to proceed to the collapse. So yeah, you can say bad things about Benjamin Strong too. But had he been there when the Great Depression got started, the chances are that things wouldn't have fallen into such incredible disarray. They fell into pretty incredible disarray. And in the early 1930s, interestingly, surprisingly, there were very few bank failures at the beginning of the Great Depression. That's a very key distinction. So in the panic of 1907, it's like, oh, stock markets, wobbly, all the banks are going to start failing. This is how panics usually went. In 1929 and 1930, banks were kept pretty stable. Or what have you? Then in 1931, 32, 33, the entire banking system collapsed. But I think you can actually credit the Federal Reserve for initially keeping the banks okay. I think you can also complain about how the Hoover administration in tandem with the Federal Reserve stuck to the gold standard among many other mistakes that they make. Wasn't the gold standard relatively modern? People talk about it like this ancient tradition that goes back millennia when it was about 30 years or so. Something like that. So the exact details of that are not present in my mind at this moment. But yeah, people have always liked gold. And it has always been better to have a currency that was not debased generally. But as far as like a gold standard that like the head of the Bank of England needs to like fly off, sorry, not fly off, needs to take a boat to New York to ask Benjamin Strong about. Yeah, that's like that's a 1860s, 70s sort of thing. Huge controversy when the United States went on to the gold standard. I think in the 1880s or 90s, there's this big cross of gold speech that was made up of the gold standard. The gold speech that William Jennings Bryan makes sort of a weird thing that sticks in my mind somehow. I don't know why the way a lot of 19th century politicians do not. But 19th and 20th century politician. 1935, there is a banking act that switches up the Federal Reserve in a serious way. Basically, it makes the, it nowhere makes the modern Federal Reserve of 2025 because the modern Federal Reserve of 2025 has a ton of history and powers that it has taken over a series of financial crises. But the general setup where the chairman of the Federal Reserve is the important person is what we owe to the 1935 Banking Act. And a guy named Mariner Eccles who's probably after Benjamin Strong actually, like he's certainly like, he's one of the most influential figures in the Federal Reserve. The Federal Reserve is named after Mariner Eccles. And he's just, just this insane character. You're familiar with Keynesianism? Yes, yes. The idea that governments should spend, well, I'm on many other things oversimplified. The idea that governments should spend money in downturns or whatever. And all these things I could make follies just to give people something to do. Yes. Yes. Was that bear, beary money for people to dig up? Was that his? I think that's an over, it's funny, I was reading a Twitter thread on exactly that where I think that's a bit of an over simplification or something along those lines. But I'm not sure I quite understood that Twitter thread either. So just to caveat it, the fascinating thing is that Keynes didn't really like his big, he's a general treatise on money interest, something or other. Came out in the mid to late 1930s and this guy Mariner Eccles, who was a fabulously wealthy Mormon banker out of Utah, who's generally like this guy who you would expect to be like your standard gold standard, preserve my wealth. Who cares what happens to anything else? Or a guy was basically like, oh, obviously you got to tax me more and spend money like crazy. So he's basically they describe him as a guy who like came up with Keynesian is amount of zone like he'd apparently never read Keynes and was just like we need to spend as much money as possible. He ended up being FDR's guy at the Federal Reserve from 1935 on. So it's really interesting about this period from 1935 to 1951, is there is no Federal Reserve independence throughout the rest of the Great Depression and World War II. The Federal Reserve just did whatever the president wanted and that's sort of an interesting thing. I don't fully understand yet. So might be a good place to stop. So you're looking forward to Donald Trump bringing this back? Yes, 100%. I think clearly Donald Trump is the guy to end Fed independence. But Fed independence is basically something that started with the Fed Treasury Accord in 1951, which is also something. I do not adequately understand. But we'll have to talk about that, you know, at some time a couple of years from now when I read enough to understand the Fed Treasury Accord of 1951. So, well, yeah, it's very complicated, but do you think that was a positive episode? Yeah, I mean, it's an interesting episode. Yeah, I think the Fed Reserve is tremendously complex, tremendously powerful, and is going to be a key part of, you know, everything that goes forward. So I think it's important that just as people who want to improve the state of the United States of the world, it is important that we just have a better sense of what the Federal Reserve is, was might be. I think, you know, what's interesting is like looking at this, and I think a lot of the reason why people ignore Federal Reserve stuff, I don't really like studying, is like, we want it to be boring. We want it to be stable. We want it to make sense. It is boring in terms of complexity and whatnot, but I think something that pushes you people off isn't that it's boring. It's that it's kind of terrifying. That like, well, I always feel like a lot of these things, it's like driving, say, a forklift, it's not that complicated, but it's incredibly dangerous. Exactly. Well, this is both complicated, for me. Anyway, this is both complicated and dangerous. But what's interesting about it is like, so it is so dependent on personalities. That's why it's so important that Jerome Powell seems to have had a good head on his shoulders and people are so worried about Kevin Warsh, even though a lot of people seem to think he's fine. It's important stuff that is nowhere near as settled as we'd like, that nobody understands as well as we'd like. Like, you know, economists with Nobel prizes and PhDs, multiple PhDs and did it are like, we're all, although we think maybe this is it. And on the one hand, that's terrifying. On the other hand, it's like an indicator that like nothing about the way that the world works has to be the way that the world works. All of this is so contingent. Like, the great depression, really, it's severity does depend to some degree. I'm like the tuberculosis that Benjamin strong had like the way that things work does not have to be like Donald Trump is terrifying because he's smashing norms everywhere. This is that the other thing, but it also does provide an opportunity to like rebuild something that is better or makes more sense or maybe more just or might work for a broader class of people than the way that other systems have. And I think that actually understanding how the Fed has developed and having a better sense of what the Fed is today can be terrifying. But it can also give a real sense of hope to a real sense of just opportunity, you know. So you consider Trump to be like a bulldozer that like something wonderful may be built from in the in the future after he's destroyed everything. You know, when you actually say it, I'm a lot less confident, I'll be honest, but anything's possible, Rory. Anything's possible. On that wonderful note, let's hope for. I mean, honestly, Rory, I feel like the episode after this one is probably going to be talking about War with Iran. So it's not going to be epic at all. Just do it. Get a little downer in there at the end, you know. Yes. Let's hope America hasn't gone to War with Iran. Yes, let's hope that that'd be nice. Catch you next time. All right. Rob has also started a substack at the MorrisDoctorin.substack.com. We also have a Patreon just search the More Freedom Foundation. Rob has an ex, aka Twitter @RoboLaw and we're also on YouTube. Rob's written a book avoiding the British Empire, what it was and how the US can do better. Music provided by Kevin McLeod.