Debunking the Federal Reserve
Conspiracy Theories (and other financial myths)



i. Why bother addressing conspiracy theories?
 
In his book, The Faith Healers, James Randi describes himself as an angry man.  He is disturbed that people claiming fraudulently to heal medical conditions merely by their touch are  stealing millions of dollars from the weak and credulous every year.  Some of this flim-flam can have serious medical consequences.  The worst part, in Randi's mind, is that they get away with it.

I am an angry man, too.  My anger is directed toward people who originate, distribute, and promote conspiracy theories based on little or no evidence, or on complete fabrications. Although this transgression does not present the same threat to the public safety as that of the faith healer charlatans, the bogus conspiracy theories serve to generate unfounded fear of a fictitious enemy.  Specifically, I direct my anger and efforts on this web page toward the Federal Reserve conspiracy theorists.  Until now, they have gotten away with it.

Who are these theorists?  There are many, but Eustace Mullins (Secrets of the Federal Reserve) and Edward Griffin (The Creature from Jeckyll Island) are the ones seemingly cited the most.  An internet search of the words "federal reserve conspiracy" will yield enough results to keep you busy for several days -- solid evidence that Mullins, Griffin, et al have influenced many people, especially in fringe political groups.  There are many other authors such as Jim Marrs, Tom Schauf, Gary Allen, Jacques Jaikaran, and Gary Kah, who promote many of the same ideas in Mullins' and Griffin's work.

They have collectively influenced two fringe groups in modern America scene:  The so-called patriot-militia clubs and some evangelical Christians.  The patriot groups cite the Fed conspiracy hypotheses as yet another example of a government out of control, trying to manipulate every aspect of its citizens' life.  Evangelical Christians have a strong belief in the rapture interpretation of the second coming of Christ, which is supposed to be preceded by the domination of the globe by the anti-Christ and his one-world government, aka, the New World Order.  The Fed is supposed to be a key part of this plot, and so these types of Christians are eager to view the Fed as part of their end-time prophecy.  In The New World Order Pat Robertson repeats with high fidelity the arguments of Mullins. Obviously, Robertson did little or no research to check Mullins' claims before he passed them along to his followers, who are likely to accept as true most anything Robertson has to say.

I have three big problems with Fed conspiracy myth-makers.  First, their research is remarkably poor.  As I investigated their claims, I found their arguments at many times inconsistent and self-contradictory, containing numerous factual errors, embellishments, and outright fabrications.  The sources for some of their most serious charges were undocumented, unverifiable, and at best, dubious.  When I began checking their research, I was startled at how easy it was to refute many of their basic premises with information readily available in most any public library or the internet.  If their arguments can be countered so easily and with information available to anyone, then why did the conspiracy authors themselves not uncover the same things when they did their research?  I can only speculate on that answer, but at the very least it is poor research -- a clear case of selection bias: Report the information that supports the thesis, ignore the data that does not.

The second problem I have with the Fed conspiracy myths is that others promote them without checking on the validity of the claims.  If a reader chooses to believe the conspiracy theories, then that is his business.  It seems to me if he decides to pass along these myths, then he has a responsibility to do some minimal investigation to verify the claims.  Probably few, if any, have actually done this because if they had, then like myself, they would have found that a mere cursory examination of the evidence would cast considerable doubt on the conspiracy claims.

The third problem I have with them is that they divert valuable resources from solving real problems.  The conspiracy theorists have obviously motivated many people to political action who might otherwise be politically inert.  This is good.  Unfortunately, the efforts of these new activists are being directed at a problem which does not appear to exist.  What a waste!

I first became interested in the Fed conspiracy myths around 1994.  I encountered them in the internet Usenet groups, probably alt.conspiracy first.  I thought them so bizarre that they could not possibly be true.  Eventually, I decided after noting their persistent appearance and how many people seemed to believe them that they warranted closer scrutiny.  They make some very serious allegations.  If they were true, then I would feel compelled to oppose the Fed actively.  If they were false, then I would feel equally compelled to debunk the bogus theories.  The latter has happened and is the genesis of this collection of essays.

Some Fed conspiracy believers, when they found they could not refute my counterpoints on a factual basis, have accused me of working for the Fed or of being a "lap dog" or an "apologist" for the Fed and the Establishment.  Nonsense.  I do not and never have worked for any part of the Federal Reserve system.  It is not my opinion that  the Fed is a perfect institution, nor do I think the concept of central banking is fully consistent with a market economy.  Along with many other economists I sometimes have legitimate criticisms of how the Fed operates and how it conducts policy.

A healthy debate about the Fed, central banking, and the financial system is desirable.  Such a debate should take as its point of departure a basis in fact, not paranoid conspiratorial fantasy.  I do not criticize the Fed conspiracy myths to defend the Fed; I do so to enhance the quality of the public's debate about it.  If drawing   attention to the mistakes and falsehoods of the conspiracy myths is being an apologist, then I proudly count myself as one.

I did not produce this web page to convince the conspiracy myth-makers that their beliefs are wrong.  They and their hard-core followers exhibit an "irrational faith;" no amount of contradictory evidence will cause them to change their mind.  Instead, this page was written for the person who is curious about these subjects but who has not yet made up his mind.  There are plenty of sites on the internet that promote the Fed conspiracy myths, but precious few that present any counter-arguments.  This site performs that service.

I do not know whether the Fed is involved in a conspiracy -- perhaps it is.  I cannot disprove a negative statement.  All I can do is examine the validity and accuracy of a given Fed conspiracy hypothesis.  The ones examined on this page are the most popular ones I have encountered in the conspiracy press.  Most of them have turned out to be completely false.   Others are highly unlikely.  None have proven to be accurate.

I encourage students of this subject to be skeptical of both the conspiracy myths and of the counter-arguments presented here.  My essays are referenced thoroughly with sources available in most any public or university library or on the internet.  Research the topic yourself.


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