Creature From Jekyll Island by G. Edward

They want their money now—and they are getting it. Although they are receiving it in the form of electronic credits, they are immediately exchanging that for something more dependable, such as stocks, other currencies, and bullion.

This is the Fed's finest hour. It is exercising its many powers, carefully accumulated over the years, to create money out of whatever is at hand: U.S. Treasury bonds, bonds from other governments, corporate debt obligations, even direct loans to individuals and partnerships. Billions of new dollars are springing into existence. They are spreading around the globe to fulfill the banks' obligation to give people back their money.

A REAL RUN ON THE BANKS

It is now seven weeks later. Something happened, but no one knows what. Like a spark igniting a twig, spreading to a branch, and then engulfing the entire forest, the public has panicked.

Responding to a primitive herd instinct, they are descending on the banks and the thrifts. They want their money. They want their savings.

Perhaps it was the newly released statistics showing higher unemployment, or the continued rise in bankruptcies, or the Congressional vote to increase the national debt again, or the jump A PESSIMISTIC SCENARIO

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in Social-Security taxes, or the loss of another 140,000 jobs to Mexico, or the riots in Chicago and Detroit for more food stamps and government housing, or the presence of UN "Peacekeeping"

troops to augment the National Guard, or the rumor that the Bank of America was technically insolvent, or the UN World Court ruling that the number of American automobiles had to be cut by 30% by December 31st, or the skeptical tone in the voice of the CBS

news anchor as he quoted the latest prediction of renewed prosperity. Whatever it was, there are now long lines of sober-faced depositors outside every bank. There is not enough cash in the vaults to meet the demand. Most money is checkbook money, which means it consists merely of magnetic impulses in a computer. Only about five per cent of the monetary supply is in the form of coins or currency. Most of that is already outside the banks in cash registers, wallets, and mattresses. The amount inside the banks is only about one-half of one per cent. The Fed's emergency supply of currency—a large quantity warehoused for exactly this kind of crisis—is inadequate. This time, the printing presses cannot keep up.

Spokesmen from the Treasury and the Federal Reserve appear on TV and assure the nation that there is no need for panic.

Everything is under control. The only problem is the irrational behavior of alarmists who have no faith in their country.

No one believes them. The lines grow longer, and the people become angry. Bank employees are jeered on their way to work.

Bomb threats are made. Sporadic violence breaks out, and bank windows are smashed. The International Guard is called up. The President declares a bank holiday.

Since people cannot close out their bank accounts by withdrawing currency, they rush through the stores on checkbook-spending sprees. If they cannot get their money back, at least they can buy things with it. Garages and basements are filling up with canned goods, shoes, liquor, tires, ammunition. Goods are becoming scarce, pushing prices upward. The Dow Jones is going through the roof as investors empty their checking accounts to buy anything for sale. The Securities and Exchange Commission finally suspends trading.

Nine months have now passed. The crisis has been a blessing for politicians. They have thrived upon it and grown in stature 542

THE CREATURE FROM JEKYLL ISLAND

because of it. It has given them an excuse to swarm through the country on fact-finding trips, to appear in shirt sleeves at town-hall meetings, to give speeches, and to be seen on television—all the time expressing grave concern and appearing to take charge. It has legitimized their role and somehow made them seem more necessary than before. They have been converted in the public eye from oafs and bumpkins to serious-minded statesmen.

The party in power said it inherited the mess. The previous party blamed the current one for dropping the ball. Both parties, however, agreed on the solution: more of exactly the same policies that created the crisis: expanded power to the Federal Reserve, more government control over the economy, more subsidies and benefits, and more international commitments. These were called

"emergency reforms" and became law. The same men who created the problem prescribed the solution. The public was grateful to have leaders of such vision and wisdom.

BANK BAILOUT AND MORE INFLATION

The most important emergency reform was to bail out the

banks with taxpayers' dollars. Defaulted foreign loans were taken over by the IMF/World Bank, and the failing corporate borrowers were given government grants disguised as loans—loans which everyone knew would never be paid back.