This video just popped up on my Facebook feed and was posted by a self proclaimed economist friend of mine.

TL;DW: Bankers destroy our society by issuing fiat currency and the only way they can sustain their profits is by allowing for mass immigration which is of course is detrimental to our society.

There are several points being made in the video that I cannot address because I simply don't know enough history. So maybe someone else can address those points. It is mostly about how the Rothschild family owns central banks around the world.

1. Central banks are privately owned institutions

"The Federal reserve, other than being able to appoint a minority of members to the Board of Governors in some instances (...) Central banks are mostly independent from national governments"

It seems to me that the video maker is confused about the structure of the Fed. This picture shows how the Fed is organised.

As we can see, the key entities of the Fed are: the Board of Governors, the 12 Reserve Banks and the FOMC.

The Board consists of 7 members, all of them are appointed by the president and confirmed by the Senate. However, I think the video maker's issue was more related to the FOMC as they are the ones conducting monetary policy.

There are 19 participants in the FOMC meetings (7 board members and 12 Reserve Bank presidents). However, only 12 of these members have the right to vote at any given meeting. These are the 7 Board members, the President of the NY Fed (also the vice chair of the FOMC) and four of the Reserve Bank presidents. So even though the Reserve Bank presidents are not democratically elected, they never have the majority vote. The Fed is specifically designed this way in order to grant the majority vote to the politically elected members.

The video makes it seem like the Fed is owned by a bunch of private bankers with their own agendas. First of all, the Fed is not owned by anyone 1 And although it is an independent institution, the Board is elected in a somewhat democratic manner.

Furthermore, the Fed does have a (dual) mandate which was set by Congress. And twice a year they are legally required to provide testimonies before the Senate and the House and report on the state of the economy. This ensures that the Fed is accountable. So the Fed cannot choose its own policy goals. Granted, they have the flexibility to work within a framework but in no way are they like any other profit maximizing firm.

There are many well-researched benefits with having an independent central bank. One of the more important ones being the dangers of political authorities controlling the money supply. For further reading I recommend this speech by John Taylor, specifically section 1.1 to 2.2

2. Money created by central banks is backed by nothing

I suppose this is true to a certain extent. Fiat currency is not backed by a physical asset. It is however, 'backed' by trust. Fiat currency maintains its value because people trust that it is worth what it says it is worth 2. In order to maintain this trust, central banks need to maintain a stable level of inflation and make currency counterfeiting as difficult as possible (most developed countries target 2%). He mentions how fractional reserve lending creates money out of nothing. "It creates money by loaning out money", a certain BoE paper comes to mind. Although the whole "loans create deposits" debate is still ongoing, I would just like to add that if loans create deposits, repaying the loan 'destroys' the newly created money. So it's not like commercial banks can just 'print' money for themselves.

Given this eery image of Ron Paul I believe the video maker is promoting the gold standard. I find this pretty funny given that he quotes Bernanke for saying that the Fed caused the Depression. I wasn't able to find a reliable source of that quote but I certainly wont deny that the Fed isn't partially responsible.

Some economists claim it was caused by excess speculation in the 1920s which eventually resulted in The Great Crash (Galbraith, 1954). Others claim it was a reduction in the money supply that worsened a recession in to a depression (Friedman & Schwartz, 1963). The view of Friedman & Schwartz confirms the failure of the Fed. Contracting the money supply and allowing banks to fail is indeed a failure on the Fed's part. But an important reason for this is the gold standard. Since the USD was backed by gold at the time, banks needed to have enough gold reserves in order to guarantee convertibility. This required central banks to hold large quantities of gold (which contracted the money supply) and this contractionary policy significantly worsened the Depression.

What ended the depression in most countries was leaving the gold standard 3. This almost immediately stopped deflation and allowed central banks to pursue expansionary monetary policy which eventually ended the Depression (FDR's fiscal policy played a significant role as well along with WW2).

So my point is that gold can be used to back currency and pre-WW1 it functioned quite well. This is because central banks "played by the rules". They were supposed to raise their discount rates to speed a gold inflow, and to lower their discount rates to facilitate a gold outflow. Thus, if a country was running a balance-of-payments deficit, the rules of the game required it to allow a gold outflow until the ratio of its price level to that of its principal trading partners was restored to the par exchange rate. This however, requires a lot of cooperation between central banks, and during times of distress, it is very unlikely to happen.

He also mentions how, when banks create money, they enslave people. I think he called it "debt service slavery". He then goes on to say how dangerous household debt is. Rising household debt is indeed a concern for financial stability that needs to be addressed. However, it is not like the banks are forcing people to borrow money. Maybe I am missing something really obvious but high levels of household debt, to me, signals that consumers are very eager to invest or consume something. Granted, it can be detrimental for financial stability but it shows there are profitable investments to be made. Also, showing average household debt levels is a bit misguiding. Household debt to GDP is probably more informative.

The video maker seems to believe that debt, in and of it self, is a bad thing. This is simply not true. Debt is just a way to increase your current consumption beyond your budget constraint. I, as a university student, am going to be in a lot of debt by the time I graduate. However, this is in no way a negative burden for me. It is simply an investment.

Banks want mass immigration in order to maintain profits

I don't even know where to begin on this part. First of all I would like to see some sources about this claim and also some research that shows how banks have profited from mass immigration.

And out of nowhere he claims that immigration keeps labour markets artificially high and depresses wages. I don't know what "artificially high" labour market even means but that they depress wages is not true. This is simply the lump of labor fallacy and it has been proven wrong on numerous occasions. 4 5 6

Now, the studies I have read mostly focus on immigration for work purposes. So the case for refugees might be slightly different (the video maker mentions language and cultural differences as barriers). However, I see no reason why refugees would be less able to contribute to society in the long run given that they are able to integrate in their new countries.

In the short run, an influx of refugees is most probably going to cost society (in terms of fiscal expansion) and this might be what the video maker is referring to when he claims that refugees help banks' profit motives. And I cannot verify nor deny whether this is true, I don't know if banks are involved in some large scale conspiracy.

However, coming from Sweden, my understanding is that a lot of people here are happy to pay this cost for humanitarian reasons (however, opposition is starting to grow).

The Fed was created for the interests of private banks

I get the feeling that the video creator is a conspiracy theorist so he might not believe in the official reasons to why the Fed was created. Before 1913, when the Federal Reserve Act was signed, large private banks acted like de facto central banks. If anything, these banks were operating with their self-interest in mind. When the Federal Reserve Act was signed, President Wilson and Senator Glass' intentions were to create a national institution - responsive to national interests (Bernanke, 2015). The exact opposite reason as claimed by the video maker.

Furthermore, given the dual mandate, semi-annual hearings and numerous audits, I simply cannot understand how the Fed would be able to act in the interest of private banks.