Searching for the Jekyll Island Creature

Searching for the Jekyll Island Creature BY  for Schiff Gold

I spent a little time at Jekyll Island, Georgia, last weekend. I looked hard, but I didn’t find the mythical creature from Jekyll Island. From what I hear, it’s taken up permanent residence in Washington D.C. But I did locate its birthplace.

If you don’t get the reference, I’m referring to the Federal Reserve.

The central bank was conceived during a secret meeting at a private club on Jekyll Island. According to an NPR article, Sen. Nelson Aldrich, chairman of the Senate finance committee, organized the clandestine meeting.

“He told a handful of New York bankers to go on a given night, one by one, to a train station in New Jersey. There they would find a private rail car hitched to the back of a southbound train. To conceal their identities, Aldrich told the bankers to come dressed as duck hunters and to address each other only by first name.”

No. That’s not sketchy at all.

Anyway, the rest, as they say, is history. The plan drawn up during that secret meeting was put into action and today the Fed is running off dollar bills at a dizzying pace in the basement of the Eccles Building.

OK. Not literally. But basically, that’s what’s happening.

At any rate, I wasn’t at a secret meeting on Jekyll Island to hatch a plan to control the world’s financial system. I was hanging out with a bunch of libertarians who would prefer to concoct a plan just to leave you alone.

The Mises Institute held its annual supporters’ summit there.

Given the location, you won’t be shocked to know that there was a lot of discussion about the central bank and its pernicious effects. As I have written, the Fed is the engine that powers the most powerful government in the history of the world.

But the event wasn’t just about the Fed. The broader theme was the danger of centralizing government.

Historian and author Amity Shlaes kicked things off with a talk about Arthur Burns. He was the Federal Reserve chairman appointed by President Richard Nixon. He was supposed to be one of the “good guys.” He was an advocate for free markets, sound money and the gold standard. But over time, Nixon badgered and bullied him into artificially lowering interest rates and signing off on economic “reforms” that included severing the dollar from its last connection to the gold standard. Burns cared more about maintaining his reputation and popularity among the ruling elite than his principles. His position went to his head.

The lesson here is that we aren’t going to fix things by putting “good people” in positions of power. Power corrupts. The problem is a system that places too much power in the hands of corruptible individuals. The solution is to decentralize and limit the power; not in vain attempts to find the right guy to fill certain positions.

That theme carried over through the rest of the event and a number of speakers touched on this subject. Peter Klein talked about the expansion of government during crises, noting that, “The New Deal is a logical extension of policies that came about in World War I.” Tom Woods carried that idea forward in his talk about government shutdowns of the economy in response to COVID-19. Judge Napolitano talked about the constitutionality of a central bank, taking the discussion all the way back to the establishment of the First Bank of the United States over the constitutional objections of James Madison and Thomas Jefferson. His narrative reinforced the sad reality that power often corrupts even those with the best of intentions.

Mises Institute President Jeff Deist tied everything together in his talk about decentralization. He noted that centralized authority leads to neverending fights over control of the power levers, pointing out that “politically vanquished people never really go away.” The only real solution is to split into smaller units and let different groups of people do their own thing. As Deist said, “Political arrangements exist to serve us, not the other way around.”

This captures the essence of the American constitutional system. It was intended to be decentralized with very little power vested in the general government. Most decision-making was intended to happen at the state and local level.

The creature from Jekyll Island has made that virtually impossible. I don’t know that we can ever slay it, but we darn sure need to keep a close eye on it!

Fun on Friday is a weekly SchiffGold feature. We dig up some of the off-the-wall and off-beat stories relating to precious metals and share them with you – with tongue firmly planted in cheek. Click here to read other posts in this series.

 

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Peter Schiff

Mr. Schiff began his investment career as a financial consultant with Shearson Lehman Brothers, after having earned a degree in finance and accounting from U.C. Berkeley in 1987. A financial professional for more than twenty years, he joined Euro Pacific in 1996 and served as its President until December 2010, when he became CEO. An expert on money, economic theory, and international investing, he is a highly sought after speaker at conferences and symposia around the world. He served as an economic advisor to the 2008 Ron Paul presidential campaign and ran unsuccessfully for the U.S. Senate in Connecticut in 2010.