Book SummaryThe Creature from Jekyll Island, by G. Edward Griffin

1-Page Summary1-Page Book Summary of The Creature from Jekyll Island

In The Creature from Jekyll Island, Edward Griffin makes a case for abolishing the Federal Reserve, arguing that much of what it does is contrary to the best interests of the American people. The title of the book requires a bit of explanation: According to Griffin, the Federal Reserve System was originally designed as a banking cartel by six influential businessmen who met secretly in 1910 at a hunting lodge on Jekyll Island. Their ideas hatched the “creature” that became the Federal Reserve System.

(Shortform note: While “Jekyll Island” might sound like something out of horror fiction, thanks to the famous novel Dr. Jekyll and Mr. Hyde, the island is a real place in the state of Georgia. It was named after an English financier long before the horror novel was written. Today the island is a state park.)

As an author and filmmaker, Griffin is known as a conspiracy theorist. Among other...

The Creature from Jekyll Island Summary Griffin’s Conspiracy Theories

Griffin feels that too many people dismiss conspiracy theories because they don’t believe that elite groups conspire to undermine institutions or the general public. In his view, explanations based on conspiracy tend to be more credible because they are consistent with human nature.

Humans naturally tend to be self-serving: With relatively few exceptions, they do what they think is most likely to increase their own wealth, power, or happiness. So if they think they can get ahead by forming secret alliances with other influential people (and if they think they can get away with it) then they do it. As such, Griffin believes there are always webs of conspiracy running through and behind the power structures of every civilization. The more we uncover these conspiracies and their intentions, the better we can understand history and current events.

The Bank Cartel Conspiracy

In the case of the Federal Reserve, prominent bankers wanted to form a cartel—a secret coalition that limits competition by standardizing prices and practices across supposedly-competing businesses within an industry. In this way, they hoped to increase their profits and bring the rest of the...

The Creature from Jekyll Island Summary The Fed Facilitates Fraud Through Fractional Lending

Griffin asserts that the Fed facilitates and legalizes fraud by allowing banks to engage in fractional lending. Fractional lending is when a bank keeps only a fraction of its depositors’ money on hand and loans out the rest. Fractional lending is profitable because it allows the bank to loan out more money and to charge interest on it.

But fractional lending is also akin to bluffing: The bank is gambling on the likelihood that only a fraction of its depositors will want to withdraw their money before the loan is repaid, and that this fraction will be no larger than the fraction of their money that the bank kept on hand. Griffin argues that fractional lending is fraudulent because the bank is essentially loaning out money it doesn’t have, making it look like the money is in two places at once.

For example, suppose 100 people each deposit $1,000 in checking accounts at a given bank, so the bank has $100,000 in total deposits. The bank lends out $80,000 to someone, who uses it to purchase something. Suppose the person she purchased it from then deposits the $80,000 in his checking account at the bank. That increases the bank’s total deposits to $180,000, but $80,000 of that...

The Creature from Jekyll Island Summary The Fed Destabilizes the Economy

Griffin notes that helping to stabilize the economy is allegedly a key part of the Fed’s mission, but he argues that, in fact, it tends to destabilize the economy. It does this in two ways.

Amplifying Business Cycles

First, Griffin asserts that by facilitating fractional lending, the Fed amplifies normal cycles of economic growth and contraction, thereby creating economic instability. He argues that if there were no fractional lending, and the money supply was fixed, there would still be fluctuations in the economy, but these business cycles would be much less pronounced than what we see today.

As we’ve discussed, fractional lending creates money out of thin air by loaning out the same money that a bank must keep available for withdrawal. When banks iteratively receive deposits and lend them out, the money gets repeatedly double-counted, so the total amount of money in circulation grows exponentially as long as banks are making loans.

Thus, as Griffin explains, when the economy is growing and businesses are borrowing money to finance new start-ups, the money supply grows rapidly. All the additional money in the economy creates a temporary boom. But as the supply...

The Creature from Jekyll Island Summary The Fed Taxes Us Through Inflation

Griffin asserts that the Fed is responsible for inflation, and he is concerned that inflation constitutes an unfair, hidden tax whereby the American people pay for the government’s expenditures without realizing it.

As Griffin explains, the Fed issues the fiat currency of the United States. Fiat currency, by definition, isn’t backed by gold or silver or any other tangible material, so in principle, there’s no limit on how much currency the Fed can create.

In practice, the Fed creates as much additional currency as the government needs to finance its operations. However, as the supply of US dollars increases, the purchasing power of each dollar decreases, meaning American consumers can’t buy as much with their money—this is inflation. Thus, by creating more currency and causing inflation, the Fed takes purchasing power away from everyone else who owns US dollars.

Griffin concedes that not all deficit spending money comes from the Fed. When the government needs money, it borrows it by issuing bonds. Some of these bonds are bought by private parties, but if Congress issues more bonds than people want to buy, the Fed is legally obligated to buy the rest. And...

The Creature from Jekyll Island Summary The Fed Finances War and Waste

Griffin goes on to assert that by creating as much money as the government wants to borrow, the Fed encourages the government to waste money on projects that voters wouldn’t support if they had to pay for them through taxes (or if they knew that they were paying for them through inflation).

The primary example that Griffin gives of wasteful government spending is war and defense spending in preparation for possible wars.

(Shortform note: The unlimited financing that the Fed provides in time of war can also increase the scale of a war and thus the damage that the war causes, as Saifedean Ammous notes in The Bitcoin Standard while discussing the problems of fiat money. Ammous reasons that under a hard-money standard,...

The Creature from Jekyll Island Summary How to Abolish the Federal Reserve

Based on the problems we’ve discussed, Griffin insists that the Fed should be abolished, but he concedes that simply repealing the law that created the Fed and shutting down the system would be disastrous for the US economy. This is because the economy runs on currency issued by the Fed. If all that currency disappeared, the economy couldn’t function. So Griffin proposes a sequence of actions that would successfully abolish the Federal Reserve System and correct the problems we’ve discussed.

For one thing, since the Fed facilitates government borrowing, Griffin sees the national debt as a problem that needs to be addressed prior to closing it. He proposes having the Fed issue enough money to buy up all the treasury bonds that it doesn’t already own, effectively paying off the national debt with newly issued money.

Of course, the Fed is also responsible for managing America’s fiat currency, so before we can abolish the Fed, we need to abandon fiat currency. Griffin proposes phasing out fiat dollars in favor of a new currency backed by precious metals. We’ll call that new currency “precious metal dollars,” or PMD’s.

Once fiat dollars are fully phased out, the Fed can be shut...

Shortform Exercise: What Would You Do if the Fed Were Abolished?

Imagine that the United States decided to implement Griffin’s plan for abolishing the Federal Reserve. In this exercise, you’ll have a chance to contemplate how that might affect you personally.

As the Fed pays off the national debt, there’s going to be far more dollars in circulation all at once, causing a sudden surge of inflation, or rather devaluation of the fiat US dollar. What do you think you would do to reduce your vulnerability to inflation or devaluation at that time?