Chapter Sixteen.qxp
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The Mystery of Banking
percent of its notes/gold.)1 Thus, since gold reserves were centralized from the national banks to the Fed, it could pyramid further on top of them. All national banks were forced to become members of the Federal Reserve System, while state banks had a voluntary choice; but nonmembers could be controlled because, in order to get cash for their customers, they had to keep deposit accounts with member banks who had access to the Fed.
FIG. 16.1 — THE FEDERAL RESERVE PYRAMID
Figure 16.1 depicts the new inverted pyramid created by the Federal Reserve System in 1913. Nonmember banks pyramid on top of member banks, which in turn pyramid on top of the Fed, which pyramids its notes and deposits on top of its centralized gold hoard. The new central bank, being an arm of the federal
1Since the establishment of the Federal Reserve System, the reserve requirement limits on the Fed itself have been progressively weakened, until now there is no statutory limit whatsoever on the Fed’s desire to inflate.