t was back in the very early 1980s when I decided to go into the Securities Business.  I chose – and was also accepted by – one of America’s oldest, largest and most rapidly growing firms, based in the suburbs of St. Louis.  Among the things that distinguished this company was its training program.  About 80 of us were sent to a motel in Macon, Georgia for a 90 day training program.   That’s right, 9:00 to 5:00, five days a week, with a special dinner program which included further presentations.

     The first thing we were taught is that the “Banks are our enemy.”  The reason is that there is “no real money in America.”  The pieces of paper that we used were just that – pieces of paper.  Our task, as Securities advisors, was to provide Americans with something real – a piece of a company through stock or a bond that was backed by real assets – or was 100% insured, or both!

     Naturally, most of us were astounded.  How could this be, no real money in the USA.  We learned how the Federal Reserve System worked.   We saw how a program that was intended (by Congress) to solve a problem, in fact grew into the system that we have today.  I have tried to put this together in a kind of historical narrative.

     In the old days (before the Federal Reserve System was invented by bankers and approved by Congress), our society was still very agrarian – farms were the backbone of the economy, although there was a growing influence from the relatively new industrial sector.  (Remember that at the beginning of the 20th century the Industrial Revolution was barely 100 years old!)  When people had excess amounts of real cash money, they could either keep them at home, or place them in a bank (Savings & Loan) for safe keeping.  The banks asked for ‘permission’ to lend out these real cash assets to others in need; in return, the bank would pay the depositor some interest.  The bank lent real assets to people who paid back the loan over time, at an interest rate that was shared by the original depositor and the bank. The bank’s share was larger than the original depositor, to cover overhead expenses and to build bank assets for additional loans.  The vast majority of loans were either for real estate or farm related expenses of equipment or stock.