Currency Wars: The Making of the Next Global Crisis by James Rickards

economist who would act as technical adviser to this carefully balanced group of Morgan and Rockefeller interests.
    Aldrich instructed his delegation to meet under cover of darkness at an isolated railway siding in Hoboken, New Jersey, where a private railroad car would be waiting. The men were told to come singly and to avoid reporters at all costs. Once aboard the train, they used first names only so that porters could not identify them to friends or reporters once they left the train; some of the men adopted code names as an extra layer of security. After traveling for two days, they arrived in Brunswick, Georgia, along the Atlantic coast about halfway between Savannah and Jacksonville, Florida. From there they took a launch to Jekyll Island and checked into the exclusive Jekyll Island Club, partly owned by J. P. Morgan. The group worked for over a week to hammer out the Aldrich bill, which would become the blueprint for the Federal Reserve System.
    It still took over three years to pass the Federal Reserve Act, the formal name given to the Aldrich bill based on the Jekyll Island plan. The Federal Reserve Act finally passed with large majorities on December 23, 1913, and went into effect in November 1914.
    The Federal Reserve Act of 1913 contained many features promoted by Aldrich and Warburg designed to overcome traditional objections to a U.S. central bank. The new entity would not be called a central bank but rather the Federal Reserve System. It would not be a single entity but rather a collection of regional reserve banks guided by a Federal Reserve Board whose members would not be picked by bankers but rather by the president and subject to Senate confirmation.
    On the whole, it looked decentralized and under the control of democratically elected officials. Inside the plan, however, was a de facto mechanism much more in line with the true intent of the Aldrich party on Jekyll Island. Actual monetary policy, conducted through open market operations, would be dominated by the Federal Reserve Bank of New York since New York was the location of the major banks and dealers with whom the Fed would do business. The Federal Reserve Bank of New York was run by a board of directors and governor, not selected by politicians but selected by its stockholders, who were dominated by the large New York banks. The result was a “Fed within the Fed,” run by the New York banks and amenable to their goals, including easy credit for bailouts as needed.
    Some of these features were changed by subsequent legislation in the 1930s, which centralized power in the Board of Governors of the Federal Reserve in Washington, D.C., where it resides today. In more recent years the board has been dominated not by bankers but by academic economists and lawyers who ironically seem even more favorably disposed toward easy money and bailouts than the bankers. Yet, at least through the 1920s, the Fed “system” was dominated by the New York Fed under the firm hand of its first governor, Benjamin Strong, who ran the bank from 1914 until he died in 1928. Strong was a protégé of Morgan partner Henry Davison as well as of J. P. Morgan himself. Thus the circle of Morgan influence on the new central bank of the United States was complete.
    History has its echoes. Decades after the Jekyll Island meeting, Frank Vanderlip’s National City Bank and Charles Norton’s First National Bank merged to become the First National City Bank of New York, which later shortened its name to Citibank. In 2008, Citibank was the recipient of the largest bank bailout in history, conducted by the U.S. Federal Reserve. The foundation laid by Vanderlip and Norton and their associates on Jekyll Island in 1910 would prove durable enough to bail out their respective banks almost one hundred years later exactly as intended.

World War I and the Treaty of Versailles—1914 to 1919
     
    The last of the antecedents of Currency War I was the sequence of the Great War, the Paris Peace