A conspiracy theory classic! Diving deep into the history of banking, "The Creature from Jekyll Island" claims that the unholy union of politicians and "monetary scientists" is responsible for every major conflict from the Civil War to WWII. And let's not forget the international Fabian cabal siphoning off money to weaken the United States and create the One World Government!
So clearly, we're a couple miles into crazy town. But that's not to say that there aren't interesting things to be learned. Part of the appeal of this book is that it presents a (mostly) internally consistent worldview that is completely at odds with the mainstream interpretation of history. As readers, our task is to take this competing narrative seriously and then judge it on its merits.
We can distinguish between two major arguments in this book. The first is a condemnation of the nature of the banking system - the instability of fractional reserve banking and the use of taxation-by-inflation to achieve political objectives. I hadn't thought about the banking system like this before and found it to be a compelling perspective. The second argument is about a global socialist conspiracy to create a New World Order dominated by English elites and the Rothschilds. That part... not so much. I'm going to ignore that dimension of the book for the rest of this review (and is also why I'm giving this book 3 stars rather than 4 or 5). Although I will say that the "Report from Iron Mountain" stuff is fascinating, even if it truly is a hoax.
I read this book because I wanted to - as they say in "All the President's Men" - "follow the money." Griffin does a great job of explaining the complicated money flows that fuel our government. I found myself completely convinced about the moral hazard of the "lender of last resort" and the strategy of having the public pick up the losses with bailouts. I also found Griffin's description of the alliance between policymakers and bankers to be compelling. If there's a central bank that can print money to buy government debt, it doesn't look like the government is debasing currency directly. The bankers are happy because they collect interest on a massive amount of principal that they create out of nothing. The policymakers are happy because they can fund their initiatives without raising taxes. Ultimately, we all end up paying for this with an "inflation tax" that falls disproportionately on the middle class who has much of their net worth in cash rather than in inflation-agnostic real assets.
As I slogged my way through this monster of a book, I appreciated Griffin's acerbic wit, but I worry that it detracts from his credibility. When writing a book so full of bold, contrarian claims, biting sarcasm and cynicism don't do you any favors. I also found myself wondering - if he actually believes all this stuff... why hasn't he started a bank! (And why haven't I??)
I'm not sure I believe Griffin's claim about the Federal Reserve bank oscillating interest rates to cause the Great Depression and then buy up a bunch of real assets for cheap when the borrowers defaulted. But I was reminded of Sven Beckert's description of a very similar mechanism in "Empire of Cotton" that was used by colonizing powers to dispossess indigenous people of their lands. Worth further reading.
Throughout the book, Griffin extensively quotes Chernow's work on the Warburgs and the House of Morgan. Going to have to add those to my list too. I'm also looking for a good counterpoint to this book too, if anyone has any recommendations.
Some of my favorite quotes below:
The magnitude by which reality deviates from the accepted myth is so great that, for most people, it simply is beyond credibility. Anyone carrying this message is immediately suspected of paranoia.
The Federal Reserve System should be abolished for the following reasons:
- It is incapable of accomplishing its stated objectives. (Chapter 1.)
- It is a cartel operating against the public interest. (Chapter 3.)
- It is the supreme instrument of usury. (Chapter 10.)
- It generates our most unfair tax. (Chapter 10.)
- It encourages war. (Chapter 14.)
- It destabilizes the economy. (Chapter 23.)
- It is an instrument of totalitarianism. (Chapters 5 and 26.)
Section I - WHAT CREATURE IS THIS?
Chapter One - THE JOURNEY TO JEKYLL ISLAND
The name of Nelson Aldrich, senator from Rhode Island, was well known even in New Jersey. By 1910, he was one of the most powerful men in Washington, D.C., and his private railway car often was seen at the New York and New Jersey rail terminals during frequent trips to Wall Street. Aldrich was far more than a senator. He was considered to be the political spokesman for big business. As an investment associate of J.P. Morgan, he had extensive holdings in banking, manufacturing, and public utilities. His son-in-law was John D. Rockefeller, Jr. Sixty years later, his grandson, Nelson Aldrich Rockefeller, would become Vice-President of the United States.
riding in the car at the end of their train, were six men who represented an estimated one-fourth of the total wealth of the entire world. This was the roster of the Aldrich car that night: Nelson W. Aldrich, Republican "whip" in the Senate, Chairman of the National Monetary Commission, business associate of J.P. Morgan, father-in-law to John D. Rockefeller, Jr.; Abraham Piatt Andrew, Assistant Secretary of the U.S. Treasury; Frank A. Vanderlip, president of the National City Bank of New York, the most powerful of the banks at that time, representing William Rockefeller and the international investment banking house of Kuhn, Loeb & Company; Henry P. Davison, senior partner of the J.P. Morgan Company; Benjamin Strong, head of J.P. Morgan's Bankers Trust Company;1 6. Paul M. Warburg, a partner in Kuhn, Loeb & Company, a representative of the Rothschild banking dynasty in England and France, and brother to Max Warburg who was head of the Warburg banking consortium in Germany and the Netherlands.
One such island, just off the coast of Brunswick, had recently been purchased by J.P. Morgan and several of his business associates, and it was here that they came in the fall and winter to hunt ducks or deer and to escape the rigors of cold weather in the North. It was called Jekyll Island.
The purpose of this journey was not to hunt ducks. Simply stated, it was to come to an agreement on the structure and operation of a banking cartel. The goal, as is true with all cartels, was to maximize profits by minimizing competition between members, to make it difficult for new competitors to enter the field, and to utilize the police power of government to enforce the cartel agreement. In more specific terms, it was to create a blueprint for the Federal Reserve System.
Ron Chernow writes: The Jekyll Island meeting would be the fountain of a thousand conspiracy theories."
In 1930, Paul Warburg wrote a massive book - 1750 pages in all — entitled The Federal Reserve System, Its Origin and Growth.
Consequently, between 1900 and 1910, seventy per cent of the funding for American corporate growth was generated internally, making industry increasingly independent of the banks. Even the federal government was becoming thrifty. It had a growing stockpile of gold, was systematically redeeming the Greenbacks — which had been issued during the Civil War — and was rapidly reducing the national debt. Here was another trend that had to be halted. What the bankers wanted — and what many businessmen wanted also — was to intervene in the free market and tip the balance of interest rates downward, to favor debt over thrift. To accomplish this, the money supply simply had to be disconnected from gold and made more plentiful or, as they described it, more elastic.
This demand of money by other banks rather than by depositors is called a currency drain.
Historian John Klein tells us that "The financial panics of 1873, 1884, 1893, and 1907 were in large part an outgrowth of ... reserve pyramiding and excessive deposit creation by reserve city ... banks. These panics were triggered by the currency drains that took place in periods of relative prosperity when banks were loaned up. In other words, the "panics" and resulting bank failures were caused, not by negative factors in the economy, but by currency drains on the banks which were loaned up to the point where they had practically no reserves at all. The banks did not fail because the system was weak. The system failed because the banks were weak.
A method had to be devised to enable them to continue to make more promises to pay-on-demand than they could keep. To do this, they had to find a way to force all banks to walk the same distance from the edge, and, when the inevitable disasters happened, to shift public blame away from themselves. By making it appear to be a problem of the national economy rather than of private banking practice, the door then could be opened for the use of tax money rather than their own funds for paying off the losses.
Here, then, were the main challenges that faced that tiny but powerful group assembled on Jekyll Island: How to stop the growing influence of small, rival banks and to insure that control over the nation's financial resources would remain in the hands of those present; How to make the money supply more elastic in order to reverse the trend of private capital formation and to recapture the industrial loan market; How to pool the meager reserves of the nation's banks into one large reserve so that all banks will be motivated to follow the same loan-to-deposit ratios. This would protect at least some of them from currency drains and bank runs; Should this lead eventually to the collapse of the whole banking system, then how to shift the losses from the owners of the banks to the taxpayers.
As with all cartels, it had to be created by legislation and sustained by the power of government under the deception of protecting the consumer. The most important task before them, therefore, can be stated as objective number five: How to convince Congress that the scheme was a measure to protect the public.
With the exception of Aldrich, all of those present were bankers, but only one was an expert on the European model of a central bank. Because of this knowledge, Paul Warburg became the dominant and guiding mind throughout all of the discussions. Even a casual perusal of the literature on the creation of the Federal Reserve System is sufficient to find that he was, indeed, the cartel's mastermind.
A third brother, Max Warburg, was the financial adviser of the Kaiser who became Director of the Reichsbank in Germany. This was, of course, a central bank, and it was one of the models used in the construction of the Federal Reserve System. Incidentally, a few years later, the Reichsbank would create the massive hyperinflation in Germany which wiped out the middle class and the entire economy as well.
In an address before the American Bankers Association the following year, Aldrich laid it out for anyone who was really listening to the meaning of his words. He said: "The organization proposed is not a bank, but a cooperative union of all the banks of the country for definite purposes." Precisely. A union of banks.
Two years later, in a speech before that same group of bankers, A. Barton Hepburn of Chase National Bank was even more candid. He said: "The measure recognizes and adopts the principles of a central bank. Indeed, if it works out as the sponsors of the law hope, it will make all incorporated banks together joint owners of a central dominating power." And that is about as good a definition of a cartel as one is likely to find.
In 1914, one year after the Federal Reserve Act was passed into law, Senator Aldrich could afford to be less guarded in his remarks. In an article published in July of that year in a magazine called The Independent, he boasted: "Before the passage of this Act, the New York bankers could only dominate the reserves of New York. Now we are able to dominate the bank reserves of the entire country."
Since its inception, it has presided over the crashes of 1921 and 1929; the Great Depression of '29 to '39; recessions in '53, '57, '69, '75, and '81; a stock market "Black Monday" in '87; and a 1000% inflation which has destroyed 90% of the dollar's purchasing power.
interest on the national debt is consuming half of our personal income tax; [Note: this doesn't actually seem to be true. 2016 income tax receipts were ~2.5 trillion. National debt interest in 2015 was 223 billion]
That is the scorecard eighty years after the Federal Reserve was created supposedly to stabilize our economy! There can be no argument that the System has failed in its stated objectives.
If an institution is incapable of achieving its objectives, there is no reason to preserve it—unless it can be altered in some way to change its capability. That leads to the question: why is the System incapable of achieving its stated objectives? The painful answer is: those were never its true objectives. When one realizes the circumstances under which it was created, when one contemplates the identities of those who authored it, and when one studies its actual performance over the years, it becomes obvious that the System is merely a cartel with a government facade.
What emerged was a cartel agreement with five objectives: stop the growing competition from the nation's newer banks; obtain a franchise to create money out of nothing for the purpose of lending; get control of the reserves of all banks so that the more reckless ones would not be exposed to currency drains and bank runs; get the taxpayer to pick up the cartel's inevitable losses; and convince Congress that the purpose was to protect the public.
As a banking cartel, and in terms of the five objectives stated above, it has been an unqualified success.
Chapter Two - The Name Of The Game Is Bailout
The game begins when the Federal Reserve System allows commercial banks to create checkbook money out of nothing.
When a borrower cannot repay and there are no assets which can be taken to compensate, the bank must write off that loan as a loss. However, since most of the money originally was created out of nothing and cost the bank nothing except bookkeeping overhead, there is little of tangible value that is actually lost. It is primarily a bookkeeping entry.
The only way to do this and balance the books once again is to draw upon the capital which was invested by the bank's stockholders or to deduct the loss from the bank's current profits. In either case, the owners of the bank lose an amount equal to the value of the defaulted loan. So, to them, the loss becomes very real. If the bank is forced to write off a large amount of bad loans, the amount could exceed the entire value of the owners' equity. When that happens, the game is over, and the bank is insolvent.
The individual and the small businessman find it increasingly difficult to borrow money at reasonable rates, because the banks can make more money on loans to the corporate giants and to foreign governments. Also, the bigger loans are safer for the banks, because the government will make them good even if they default. There are no such guarantees for the small loans. The public will not swallow the line that bailing out the little guy is necessary to save the system. The dollar amounts are too small. Only when the figures become mind-boggling does the ploy become plausible.
It is important to remember that banks do not really want to have their loans repaid, except as evidence of the dependability of the borrower. They make a profit from interest on the loan, not repayment of the loan. If a loan is paid off, the bank merely has to find another borrower, and that can be an expensive nuisance.
One of the reasons banks prefer to lend to governments is that they do not expect those loans ever to be repaid.
As part of the proposal, the borrower will agree to accept the direction of a third-party referee in adopting an austerity program to make sure that none of the new money is wasted. The bank also will agree to write off a small part of the loan as a gesture of its willingness to share the burden. This move, of course, will have been foreseen from the very beginning of the game, and is a small step backward to achieve a giant stride forward. After all, the amount to be lost through the write-off was created out of nothing in the first place and, without this Final Maneuver, the entirety would be written off. Furthermore, this modest write down is dwarfed by the amount to be gained through restoration of the income stream.
One of the standard variations of the Final Maneuver is for the government, not always to directly provide the funds, but to provide the credit for the funds. That means to guarantee future payments should the borrower again default. Once Congress agrees to this, the government becomes a co-signer to the loan, and the inevitable losses are finally lifted from the ledger of the bank and placed onto the backs of the American taxpayer.
The FDIC is usually described as an insurance fund, but that is deceptive advertising at its worst. One of the primary conditions of insurance is that it must avoid what underwriters call "moral hazard." That is a situation in which the policyholder has little incentive to avoid or prevent that which is being insured against. When moral hazard is present, it is normal for people to become careless, and the likelihood increases that what is being insured against will actually happen. An example would be a government program forcing everyone to pay an equal amount into a fund to protect them from the expense of parking fines. One hesitates even to mention this absurd proposition lest some enterprising politician should decide to put it on the ballot. Therefore, let us hasten to point out that, if such a numb-skull plan were adopted, two things would happen: (1) just about everyone soon would be getting parking tickets and (2), since there now would be so many of them, the taxes to pay for those tickets would greatly exceed the previous cost of paying them without the so-called protection. The FDIC operates exactly in this fashion. Depositors are told their insured accounts are protected in the event their bank should become insolvent. To pay for this protection, each bank is assessed a specified percentage of its total deposits. That percentage is the same for all banks regardless of their previous record or how risky their loans. Under such conditions, it does not pay to be cautious. The banks making reckless loans earn a higher rate of interest than those making conservative loans. They also are far more likely to collect from the fund, yet they pay not one cent more.
A voluntary, private insurance program would act as a powerful regulator of the entire banking industry far more effectively and honestly than any political scheme ever could. Unfortunately, such is not the banking world of today.
Chapter Three - Protectors Of The Public
Congress, of course, could not callously ignore these pressing needs. It ordered a retroactive, 13 1/2 per cent pay raise for all union employees. After having added that burden to the railroad's cash drain and putting it even deeper into the hole, it passed the Emergency Rail Services Act of 1970 authorizing $125 million in federal loan guarantees. None of this solved the basic problem, nor was it intended to. Almost everyone knew that, eventually, the railroad would be "nationalized," which is a euphemism for becoming a black hole into which tax dollars disappear forever. This came to pass with the creation of AMTRAK in 1971 and CONRAIL in 1973. AMTRAK took over the passenger services of Penn Central, and CONRAIL assumed operation of freight services. CONRAIL is a private corporation. When it was created, 85% of its stock was held by the government. The rest was held by employees. Fortunately, the government's stock was sold in a public offering in 1987. AMTRAK continues under political control and operates at a loss. By 1998, Congress had given it $21 billion. By 2002, it was consuming more than $200 million of taxes per year. By 2005, it requested an increase in subsidy to $1.8 billion per year. Between 1990 and 2009, it had lost another $23 billion. CONRAIL, on the other hand, since it was returned to the private sector, has been running at a profit — paying taxes instead of consuming them.
A bailout plan was quickly engineered by Treasury Secretary John B. Connally that guaranteed payment on an additional $250 million in loans — an amount which would put Lockheed 60% deeper into the debt hole than it had been before. But that made no difference now. Once the taxpayer had been made a co-signer to the account, banks had no qualms about advancing the funds. The government now had a powerful motivation to make sure Lockheed would be awarded as many defense contracts as possible and that they would be as profitable as possible. This was an indirect method of paying off the banks with tax dollars, but doing so in such a way as not to arouse public indignation. Other defense contractors which had operated more efficiently would lose business, but that could not be proven. Furthermore, a slight increase in defenses expenditures would hardly be noticed.
The final bailout package was a whopper. Basically, the government took over Continental Illinois and assumed all of its losses. The FDIC took $4.5 billion in bad loans and paid Continental $3.5 billion for them. The difference was made up by the infusion of $1 billion in fresh capital in the form of stock purchase. The bank, therefore, now had the government as a stockholder controlling 80 per cent of its shares, and its bad loans had been dumped onto the taxpayer. In effect, even though Continental retained the appearance of a private institution, it had been nationalized. By 1984, the Federal Reserve and the Treasury had given Continental the staggering sum of $8 billion. By early 1986, the figure had climbed to $9.24 billion and was still rising. While explaining this fleecing of the taxpayer to the Senate Banking Committee, Fed Chairman Paul Volcker said: "The operation is the most basic function of the Federal Reserve. It was why it was founded." With those words, he has confirmed one of the more controversial assertions of this book.
As Sprague admitted, "Small banks pay proportionately far more for their insurance and have far less chance of a Continental-style bailout."
The impact of this inequity is enormous. It sends a message to bankers and depositors alike that small banks, if they get into trouble, will be allowed to fold, whereas large banks are safe regardless of how poorly or fraudulently they are managed.
Since 1984, while hundreds of small banks have been forced out of business, the average size of the banks that remain has more than doubled. It will be recalled that this advantage of the big banks over their smaller competitors was one of the objectives of the Jekyll Island plan.
In October of 2008, Congress passed a $700 billion bailout bill to save the largest banks in the nation, all of which were tottering on the edge of bankruptcy. Congressmen who voted for this had received 54% more in donations from banks than those who voted against it. The White House urged news services to stop using the word 'bailout" and say "rescue" instead. They complied. While the world was stunned by the sheer size of a $700 billion bailout, the reality was even worse. Credit Sights, an independent research firm in New York and London, looked at the total commitment, including deals made by the Federal Reserve and the FDIC that were not widely publicized, and concluded that the real figure was $5 trillion. That represents an additional $16,500 in lost savings and purchasing power for every American.
Among bailout recipients, it is common to see the money used in ways that destroy jobs for the same American taxpayers who pay the bill. During the time when U.S. banks were receiving more than $150 billion from American workers, they were requesting special visas to import 21,800 personnel from other countries to replace Americans in upper echelon jobs, including corporate lawyers, investment analysts, programmers, and human-resource specialists. This disdain for the American work force is partly because of corporate pursuit of maximum profit above all else and partly because decision makers consider themselves to be internationalists, with no special interest in America except as a cash cow to be milked as regularly and thoroughly as possible.
By the end of 2008, bailout of just the financial-services industry during the Bush Administration had reached over $7 trillion, which was ten times the amount originally estimated. It was more than twice the cost of World War II.
Although many voters thought there would be a change under Obama, the handwriting was already on the wall: 90% of the donations to Obama's inauguration fund came from Wall Street firms that received billions in bailout and were anticipating more of the same. They were not to be disappointed.
Henry Paulson (CFR) was the epitome of the fusion between the banking cartel and government. As former CEO of Goldman Sachs, he was instrumental in using the power of his office to destroy three of his old rivals. He arranged the sale of Bear Sterns to JP Morgan Chase, allowed Lehman Brothers to collapse, and forced the absorption of Merrill Lynch by Bank of America, all the while providing a generous bailout for his alma mater, Goldman Sachs. This left only Goldman and Morgan as major investment banks.
The media had framed the debate so that the really important issues were not even part of it. All that was left for the public to think about was how much bailout should be given, who should get it first, and how to limit the bonuses. To "let the corrupt banks fail and let the economy recover in the absence of fraud" was not allowed in mainstream debate.
In December of 2009, Bank of America announced that it had repaid its $45 billion "loan" from the Treasury. Government officials boasted that their actions were vindicated and that taxpayers even made a profit. The media thought it was wonderful and accepted the announcement at face value. The source of the money was said to be cash reserves and the sale of a new stock offering; but there was something very wrong with that picture... The only way the bank could have sizable cash reserves was to receive a confidential infusion from the Treasury - what Mr. Paulson would call a non-disclosable event". In other words, the government may have provided the money to pay itself back, in which case it was an accounting trick, a publicity stunt to fool the public into thinking that bailouts were acts of great statesmanship after all.
In April of 2010, General Motors announced it actually had paid back its loan. But wait! Upon investigation, we discover that it paid back its first bailout with money from the second bailout. None of it came from car sales or even stock sales. The whole thing was a con game to fool the public.
The new reality is that the financial industry and major chunks of the insurance and automobile industries now have been nationalized, which is a soft word for saying they are owned by the government.
The new business model for America is clearly recognizable. Its dominant feature is the merger of government, real estate, and commerce into a single structure, tightly controlled at the top. It is the same model used in Soviet Russia, Nazi Germany, Fascist Italy, and Communist China.
When Senator Bernie Sanders asked if he would provide the names of the financial institutions that received bailouts, Bernanke paused for a moment and then said, flatly, "No!"
Two months later, the IMF announced it was bailing out banks in Greece to the tune of $145 billion, 20% of which was provided by the U.S. American citizens were giving $8 billion to Greek banks.
Chapter Four - Home, Sweet Loan
While the extreme and violent aspects of Communism generally were rejected, the more genteel theories of socialism became popular among the educated elite. It was they who would naturally become the leaders in an American socialist system. Someone had to look after the masses and tell them what to do for their own good, and many with college degrees and those with great wealth became enamored by the thought of playing that role. And so, the concept became widely accepted at all levels of American life — the "downtrodden masses" as well as the educated elite — that it was desirable for the government to take care of its citizens and to protect them in their economic affairs.
In the beginning, many people were able to purchase a home who, otherwise, might not have been able to do so or who would have had to wait longer to accumulate a higher down payment. On the other hand, the FHA-induced easy credit began to push up the price of houses for the middle class, and that quickly offset any real advantage of the subsidy.
We have savings institutions that are controlled by government at every step of the way. Federal agencies provide protection against losses and lay down rigid guidelines for capitalization levels, number of branches, territories covered, management policies, services rendered, and interest rates charged. The additional cost to S&Ls of compliance with this regulation has been estimated by the American Bankers Association at about $11 billion per year, which represents a whopping 60% of all their profits.
Billions of dollars disappeared into defunct projects. In at least twenty-two of the failed S&Ls, there is evidence that the Mafia and CIA were involved.
In February, an agreement was reached between Alan Greenspan, Chairman of the Federal Reserve Board, and M. Danny Wall, Chairman of the Federal Home Loan Bank Board, to have $70 million of bailout funding for Lincoln Savings come directly from the Federal Reserve. This was a major break in precedent. Historically, the Fed has served to create money only for the government or for banks. If it were the will of the people to bail out a savings institution, then it is up to Congress to approve the funding. If Congress does not have the money or cannot borrow it from the public, then the Fed can create it (out of nothing, of course) and give it to the government. But, in this instance, the Fed was usurping the role of Congress and making political decisions entirely on its own.
As Treasury Secretary Nicholas Brady told the press, "No one should assume that the estimates won't change. They will."
When Congress passed FIRREA the previous year to "safeguard and stabilize America's financial system," the staggering sum of $300 billion dollars was authorized to be taken from taxes and inflation over the following thirty years to do the job. Now, Federal Reserve Chairman Alan Greenspan was saying that the true long-term cost would stand at $500 billion, an amount even greater than the default of loans to all the Third-World countries combined.
With the California upstarts out of the way, it was a simple matter to buy up the detested bonds at bargain prices and to bring control of the new market back to Wall Street. The New York firm of Salomon Brothers, for example, one of Drexel's most severe critics during the 1980s, went on to become a leading trader in the market Drexel created.
One would normally expect dozens of politicians to be calling for a large-scale investigation of the ongoing disaster, but there is hardly a peep. The reason becomes obvious when one realizes that savings-and-loan associations, banks, and other federally regulated institutions are heavy contributors to the election campaigns of those who write the regulatory laws. A thorough, public investigation would undoubtedly turn up some cozy relationships that the legislators would just as soon keep confidential.
This comfortable arrangement between political scientists and monetary scientists permits Congress to vote for any scheme it wants, regardless of the cost. If politicians tried to raise that money through taxes, they would be thrown out of office. But being able to "borrow" it from the Federal Reserve System upon demand, allows them to collect it through the hidden mechanism of inflation, and not one voter in a hundred will complain.
After 60 years of subsidizing and regulating the housing industry, how many young people today can afford a home?
Chapter Five - Nearer To Heart's Desire
The game began at an international meeting of financiers, politicians, and theoreticians held in July of 1944 at the Mount Washington Hotel in Bretton Woods, New Hampshire. Officially, it was called the United Nations Monetary and Financial Conference, but is generally referred to today as simply the Bretton Woods Conference. Two international agencies were created at that meeting: the International Monetary Fund and its sister organization, the International Bank for Reconstruction and Development — commonly called the World Bank.
Harry Dexter White was America's chief technical expert and the dominant force at the conference. He eventually became the first Executive Director for the United States at the IMF. An interesting footnote to this story is that White was simultaneously a member of the Council on Foreign Relations (CFR) and a member of a Communist espionage ring in Washington while he served as Assistant Secretary of the Treasury.
Serving as the technical secretary at the Bretton Woods conference was Virginius Frank Coe, a member of the same espionage ring to which White belonged. Coe later became the first Secretary of the IMF.
Furthermore, the World Bank was seen as a vehicle for moving capital from the United States and other industrialized nations to the underdeveloped nations, the very ones over which Marxists have always had the greatest control. They looked forward to the day when we would pay their bills. It has all come to pass.
The International Monetary Fund appears to be a part of the United Nations, much as the Federal Reserve System appears to be a part of the United States government, but it is entirely independent.
One of the routine operations at the IMF is to exchange worthless currencies for dollars so the weaker countries can pay their international bills. This is supposed to cover temporary "cash-flow" problems. It is a kind of international FDIC which rushes money to a country that has gone bankrupt so it can avoid devaluing its currency. The transactions are seldom paid back.
In 1970, the IMF created a new monetary unit called the SDR, or Special Drawing Right.
SDRs are turned into loans to Third-World nations by the creation of checking accounts in the commercial or central banks of the member nations in the name of the debtor governments. These bank accounts are created out of thin air. The IMF creates dollars, francs, pounds, or other hard currencies and gives them to a Third-World dictator, with inflation resulting in the country where the currency originated.... Inflation is caused in the industrialized nations while wealth is transferred from the general public to the debtor country. And the debtor doesn't repay.
The original purpose had been to maintain fixed rates of exchange between currencies; but the IMF has presided over more than two hundred currency devaluations.
We have been told that our nation's trade deficit is a terrible thing, and that it would be better to "weaken the dollar" to bring it to an end. Weakening the dollar is a euphemism for increasing inflation. In truth, America is not hurt by a trade deficit at all. In fact, we are the benefactors while our trading partners are the victims. We get the cars and TV sets while they get the funny money. We get the hardware. They get the paperware.
Based upon the small amount of seed money plus the far greater amount of "credits" and "promises" from governments of the industrialized countries, the World Bank is able to go into the commercial loan markets and borrow larger sums at extremely low interest rates. After all, the loans are backed by the most powerful governments in the world which have promised to force their taxpayers to make the payments if the Bank should get into trouble. It then takes these funds and relends them to the underdeveloped countries at slightly higher rates, making a profit on the arbitrage. The unseen aspect of this operation is that the money it processes is money which, otherwise, would have been available for investment in the private sector or as loans to consumers. It siphons off much-needed development capital for private industry, prevents new jobs from being created, causes interest rates to rise, and retards the economy at large.
One of the policy changes often required by the World Bank as a condition of granting a loan is that the recipient country must hold down its wages. The assumption is that the government has the power — and rightfully should have the power—to set wages! In other words, one of the conditions of its loan is that the state must be omnipotent.
Julius Nyerere, the dictator of Tanzania, is notorious for his "villagization" program in which the army has driven the peasants from their land, burned their huts, and loaded them like cattle into trucks for relocation into government villages. The purpose is to eliminate opposition by bringing everyone into compounds where they can be watched and controlled. Meanwhile the economy staggers, farms have gone to weed, and hunger is commonplace. Yet, Tanzania has received more aid per capita from the World Bank than any other nation.
In the 1980s, the world was saddened by photographs of starving children in Ethiopia, but what the West did not realize was that this was a planned famine. It was modelled after Stalin's starvation program in the Ukraine in the 1930s and Mao's starvation of the peasants in the '40s. Its purpose was to starve the population into total submission to the government, for it is the government which decides who will eat and who will not. Yet, right up to the time Mengistu was overthrown, the World Bank continued to send him hundreds of millions of dollars, with much of it going specifically to the Ministry of Agriculture, the very agency in charge of the resettlement program.
How can the Bank's managers continue in conscience to fund such genocidal regimes? Part of the answer is that they are not permitted to have a conscience. David Dunn, head of the Bank's Ethiopia Desk explained: "Political distinctions are not something our charter allows us to take into account." The greater part of the answer, however, is that all socialist regimes have the potential for genocide, and the Bank is committed to socialism. The brutalities of these countries are all in a day's work for serious socialists who view them as merely unfortunate necessities for the building of their utopia. Lenin said you cannot make an omelet without cracking a few eggs.
The IMF/World Bank is the protégé of the Federal Reserve. It would not exist without the flow of American dollars and the benevolence of American leadership. The Fed has become an accomplice in the support of totalitarian regimes throughout the world. As stated at the beginning of this study, that is one of the reasons it should be abolished: It is an instrument of totalitarianism.
In India, the World Bank funded the construction of a dam that displaced two million people, flooded 360 square miles, and wiped out 81,000 acres of forest cover. In Brazil, it spent a billion dollars to "develop" a part of the Amazon basin and to fund a series of hydroelectric projects. It resulted in the deforestation of an area half the size of Great Britain and has caused great human suffering because of resettlement.
While Nigeria and Argentina are drowning in debt, billions from the World Bank have gone into building lavish new capital cities to house government agencies and the ruling elite. In Zaire, Mexico, and the Philippines, political leaders became billionaires while receiving World Bank loans on behalf of their nations. In the Central African Republic, IMF and World Bank loans were used to stage a coronation for its emperor.
111 In 1981, the average wage for Mexican workers was 31% of the average wage for Americans. By 1989, it had fallen to 10%. Mexico, once one of the major food exporters in the world, was now required to import millions of dollars worth of food grains. This required still more money and more loans. All this occurred while oil prices were high and production was booming. A few years later, when oil prices fell, the failures and shortfalls became even more dramatic.
It was learned in later years that Harry Dexter White was a member of a Communist espionage ring. Thus, hidden from view, there was a complex drama taking place in which the two intellectual founders of the Bretton-Woods accords were a Fabian Socialist and a Communist, working together to bring about their mutual goal: world socialism.
Chapter Six - Building The New World Order
Since this game results in a hemorrhage of wealth from the industrialized nations, their economies are doomed to be brought down further and further, a process that has been going on since Bretton Woods. The result will be a severe lowering of their living standards and their demise as independent nations. The hidden reality behind so-called development loans is that America and other industrialized nations are being subverted by that process. That is not an accident; it is the essence of the plan.
The brain trust for implementing the Fabian plan in America is called the Council on Foreign Relations (CFR).
As for the programmed decline of the American economy, CFR member Samuel Huntington argues that, if higher education is considered to be desirable for the general population, "a program is then necessary to lower the job expectations of those who receive a college education." CFR member Paul Volcker, former Chairman of the Federal Reserve, says: "The standard of living of the average American has to decline.... I don't think you can escape that."
To pave the way for that, Congress passed the Monetary Control Act of 1980 which authorized the Federal Reserve to "monetize foreign debt." That is banker language meaning that the Fed was now authorized to create money out of nothing for the purpose of lending to foreign governments. It classifies those loans as "assets" and then uses them as collateral for the creation of even more money here in the United States. That was truly a revolutionary expansion of the Fed's power to inflate. Until then, it was permitted to make money only for the American government. Now, it was able to do it for any government. Since then it has been functioning as a central bank for the entire world.
This maneuver was hailed in the press as true monetary magic. It would save the Mexican government more than $200 million in annual interest charges; it would restore cash flow to the banks; and — miracle of miracles — it would cost nothing to American taxpayers. The reasoning was that the Treasury bonds were sold at normal market rates. The Mexican government paid as much for them as anyone else. That part was true, but what the commentators failed to notice was where Mexico got the American dollars with which to buy the bonds. They came through the IMF in the form of "foreign-currency exchange reserves." In other words, they were subsidies from the industrialized nations, primarily the United States. So, the U.S. Treasury put up the lion's share of the money to buy its own bonds. It went a half-billion dollars deeper in debt and agreed to pay $3.7 billion more in future payments so the Mexican government could continue paying interest to the banks. That is called bailout, and it does fall on the American taxpayer.
By 1983, Third-World governments owed $300 billion to banks and $400 billion to the industrialized governments. Twenty-five nations were behind in their payments. Brazil was in default a second time and asked for rescheduling, as did Romania, Cuba, and Zambia. The IMF stepped in and made additional billions of dollars available to the delinquent countries.
As summarized by Larry A. Sjaastad at the University of Chicago: There isn't a U.S. bank that would not sell its entire Latin American portfolio for 40 cents on the dollar were it not for the possibility that skillful political lobbying might turn up a sucker willing to pay 50 or 60 or even 90 cents on the dollar. And that sucker is the U.S. Taxpayer.
Red China joined the IMF/World Bank in 1980 and immediately began to receive billions of dollars in loans, although it was well known that she was devoting a huge portion of her resources to military development.
Then there is the question of why China needs the money in the first place. Is it to develop her industry or natural resources? Is it to fight poverty and improve the living standard of her citizens? James Bovard answers: The Bank's defense of its China Policy is especially puzzling because China itself is going on a foreign investment binge. The World Bank gives China money at zero interest, and then China buys property in Hong Kong, the United States, Australia, and elsewhere. An economist with Citibank estimated that China's "direct investment in property, manufacturing and services [in Hong Kong alone] topped $6 billion." In 1984, China had a net outflow of capital of $1 billion. Moreover, China has its own foreign aid program, which has given more than $6 billion in recent decades, largely to leftist governments.
The top Communist leaders have never been as hostile to their counterparts in the West as the rhetoric suggests. They are quite friendly to the world's leading financiers and have worked closely with them when it suits their purposes. As we shall see in the following section, the Bolshevik revolution actually was financed by wealthy financiers in London and New York. Lenin and Trotsky were on the closest of terms with these moneyed interests — both before and after the Revolution. Those hidden liaisons have continued to this day and occasionally pop to the surface when we discover a David Rockefeller holding confidential meetings with a Mikhail Gorbachev in the absence of government sponsorship or diplomatic purpose.
When did Communism depart? We are not quite sure. All we know is that one day we opened our newspapers and it was accomplished. Social Democrats were everywhere. No one could find any Communists. Russian leaders spoke as long-time enemies of the old regime. Peristroika was here. Communism was dead. It was not killed by an enemy. It voted itself out of existence. It committed suicide!
Our premise is that the so-called demise of Communism is a Great Deception — not awfully different from many of the others that are the focus of this volume. We see it as having been stage managed for the purposes outlined previously: the transition to world government. In our view, that scenario is the only one that makes sense in terms of today's geopolitical realities and the only one consistent with the lessons of history.
In 1980, for example, just before Hungary was brought into the IMF/World Bank, her annual per-capita GNP was $4,180. This was a problem, because the policy of the World Bank was to make development loans only to countries that had per-capita GNPs of less than $2,650. Not to worry. In 1981, the Hungarian government simply revised its statistics downward from $4,180 to $2,100.136 That was a drop of 50% in one year, surely one of the sharpest depressions in world history. Everyone knew it was a lie, but no one raised an eyebrow.
Yet, this is not the most serious fault in the transaction. In the case of Russia, the grain was no small item on her list of needs. After repeated failures of her socialist agriculture, she was not able to feed her population. Hungry people are dangerous to a government. Russia needed grain to head off internal revolt far more than the homeowner needed to increase the size of his living room. In other words, Russia had to have the grain, with or without the loan. Without it, she would have had to curtail spending somewhere else to obtain the money, most likely in her military. By giving her the money "to buy grain," we actually allowed her to spend more money on armaments.
A moment's reflection on these events leads us to a crossroads of conscience. We must choose between two paths. Either we conclude that Americans have lost control over their government, or we reject this information as a mere distortion of history. In the first case, we become advocates of the conspiratorial view of history. In the latter, we endorse the accidental view. It is a difficult choice because we have been conditioned to laugh at conspiracy theories, and few people will risk public ridicule by advocating them. On the other hand, to endorse the accidental view is absurd. Almost all of history is an unbroken trail of one conspiracy after another. Conspiracies are the norm, not the exception.
Section II - A Crash Course On Money
Chapter Seven - The Barbaric Metal
This, of course, is the classic mechanism of inflation. Prices do not go up. The value of the money goes down.
Murray Rothbard, professor of economics at the University of Nevada at Las Vegas, says: We come to the startling truth that it doesn't matter what the supply of money is. Any supply will do as well as any other supply. The free market will simply adjust by changing the purchasing power, or effectiveness, of its gold-unit. There is no need whatever for any planned increase in the money supply, for the supply to rise to offset any condition, or to follow any artificial criteria. More money does not supply more capital, is not more productive, does not permit "economic growth.
The free market, if unfettered by politicians and money mechanics, will always maintain a stable price structure which is automatically regulated by the underlying factor of human effort. The human effort required to extract one ounce of gold from the earth will always be approximately equal to the amount of human effort required to provide the goods and services for which it is freely exchanged.
For example, in 1913, the year the Federal Reserve was enacted into law, the average annual wage in America was $633. The exchange value of gold that year was $20.67. That means that the average worker earned the equivalent of 30.6 ounces of gold per year. In 1990, the average annual wage had risen to $20,468. That is a whopping increase of 3,233 per cent, an average rise of 42 per cent each year for 77years. But the exchange value of gold in 1990 had also risen. It was at $386.90 per ounce. The average worker, therefore, was earning the equivalent of 52.9 ounces of gold per year. That is an increase of only 73 per cent, a rise of less than 1 per cent per year over that same period. It is obvious that the dramatic increase in the size of the paycheck was meaningless to the average American. The reality has been a small but steady increase in purchasing power (about 1 per cent per year) that has resulted from the gradual improvement in technology. This and only this has improved the standard of living and brought down real prices — as revealed by the relative value of gold.
And, in ancient Rome, the cost of a finely made toga, belt, and pair of sandals was one ounce of gold. That is almost exactly the same cost today, two-thousand years later, for a hand-crafted suit, belt, and a pair of dress shoes. There are no central banks or other human institutions which could even come close to providing that kind of price stability. And, yet, it is totally automatic under a gold standard.
Within a few months, the silver coins were in dresser drawers and safe-deposit boxes. The same thing has happened repeatedly throughout antiquity. In economics, that is called Gresham's Law: "Bad money drives out good." The final move in this game of legal plunder was for the government to fix prices so that, even if everyone is using only junk as money, they can no longer compensate for the continually expanding supply of it. Now the people were caught. They had no escape except to become criminals, which most of them, incidentally, chose to do. The history of artificially expanding money is the history of great dissatisfaction with government, much lawlessness, and massive underground economy.
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold.... The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the "hidden" confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. Unfortunately, when Greenspan was appointed as Chairman of the Federal Reserve System, he became silent on the issue of gold.
It is an amazing fact of history that the Byzantine Empire flourished as the center of world commerce for eight-hundred years without falling into bankruptcy nor, for that matter, even into debt. Not once during this period did it devalue its money. "Neither the ancient nor the modern world," says Heinrich Gelzer, "can offer a complete parallel to this phenomenon. This prodigious stability...secured the bezant as universal currency. On account of its full weight, it passed with all the neighboring nations as a valid medium of exchange. By her money, Byzantium controlled both the civilized and the barbarian worlds."
LESSON: Whenever government sets out to manipulate the money supply, regardless of the intelligence or good intentions of those who attempt to direct the process, the result is inflation, economic chaos, and political upheaval. By contrast, whenever government is limited in its monetary power to only the maintenance of honest weights and measures of precious metals, the result is price stability, economic prosperity, and political tranquility. Therefore, LAW: For a nation to enjoy economic prosperity and political tranquility, the monetary power of its politicians must be limited solely to the maintenance of honest weights and measures of precious metals.
Chapter Eight - Fool's Gold
The American Heritage Dictionary defines fiat money as "paper money decreed legal tender, not backed by gold or silver." The two characteristics of fiat money, therefore, are (1) it does not represent anything of intrinsic value and (2) it is decreed legal tender.
In truth, our present monetary system is an almost exact replica of that which supported the warlords of seven centuries ago. [In relation to Marco Polo's travels to see the Khan]
It has been shown that, even in colonial times, the classic booms and busts which modern economists are fond of blaming on an "unbridled free market" actually were direct manifestations of the expansion and contraction of fiat money which no longer was governed by the laws of supply and demand.
Wars are seldom funded out of the existing treasury, nor are they even done so out of increased taxes. If governments were to levy taxes on their citizens fully adequate to finance the conflict, the amount would be so great that many of even its most ardent supporters would lose enthusiasm. By artificially increasing the money supply, however, the real cost is hidden from view. It is still paid, of course, but through inflation, a process that few people understand.
LESSON: Fiat money is paper money without precious-metal backing and which people are required by law to accept. It allows politicians to increase spending without raising taxes. Fiat money is the cause of inflation, and the amount which people lose in purchasing power is exactly the amount which was taken from them and transferred to their government by this process. Inflation, therefore, is a hidden tax. This tax is the most unfair of all because it falls most heavily on those who are least able to pay: the small wage earner and those on fixed incomes. It also punishes the thrifty by eroding the value of their savings. This creates resentment among the people, leading always to political unrest and national disunity. Therefore, LAW: A nation that resorts to the use of fiat money has doomed itself to economic hardship and political disunity.
When the banks abandoned this practice and began to issue receipts to borrowers, they became magicians. Some have said they created money out of nothing, but that is not quite true. What they did was even more amazing. They created money out of debt. Obviously, it is easier for people to go into debt than to mine gold. Consequently, money no longer was limited by the natural forces of supply and demand. From that point in history forward, it was to be limited only by the degree to which bankers have been able to push down the gold-reserve fraction of their deposits.
Furthermore, there is no example in history where men, once they had accepted the concept of fractional money, didn’t reduce the fraction lower and lower until, eventually, it became zero.
Chapter Nine - The Secret Science
In spite of these precautions, however, the largest bank at that time, the house of Pisano and Tiepolo, had been active in lending against its reserves and, in 1584, was forced to close its doors because of inability to refund depositors. The government picked up the pieces at that point and a state bank was established, the Banco della Piazza del Rialto. Having learned from the recent experience with bankruptcy, the new bank was not allowed to make any loans. There could be no profit from the issuance of credit. The bank was required to sustain itself solely from fees for coin storage, exchanging currencies, handling the transfer of payments between customers, and notary services. The formula for honest banking had been found.
It wasn't until the Bank of Amsterdam was founded in 1609 that we find a second example of sound banking practices, and the results were virtually the same as previously experienced by the Banco della Piazza del Rialto.
With much of the same secrecy and mystery that surrounded the meeting on Jekyll Island, the Cabal met in Mercer's Chapel in London and hammered out a seven-point plan which would serve their mutual purposes: The government would grant a charter to the monetary scientists to form a bank; The bank would be given a monopoly to issue banknotes which would circulate as England's paper currency; The bank would create money out of nothing with only a fraction of its total currency backed by coin; The monetary scientists then would lend the government all the money it needed; The money created for government loans would be backed primarily by government I.O.U.s; Although this money was to be created out of nothing and would cost nothing to create, the government would pay "interest" on it at the rate of 8%; Government I.O.U.s would also be considered as "reserves" for creating additional loan money for private commerce. These loans also would earn interest. Thus, the monetary scientists would collect double interest on the same nothing.
Rothbard writes: In short, since there were not enough private savers willing to finance the deficit, Paterson and his group were graciously willing to buy government bonds, provided they could do so with newly-created out-of-thin-air bank notes carrying a raft of special privileges with them. This was a splendid deal for Paterson and company, and the government benefited from the flimflam of a seemingly legitimate bank's financing their debts.... As soon as the Bank of England was chartered in 1694, King William himself and various members of Parliament rushed to become shareholders of the new money factory they had just created.
The real point, however, is that, under these circumstances, it is meaningless to talk about a rate of interest. When money is created out of nothing, the true interest rate is not 8% or 9% or even 22%. It is infinity.
In this first official act of the world's first central bank can be seen the grand pretense that has characterized all those which have followed. The Bank pretended to make a loan but what it really did was to manufacture the money for government's use. If the government had done this directly, the fiat nature of the currency would have been immediately recognized, and it probably would not have been accepted at full face value in payment for the expenses of war. By creating money through the banking system, however, the process became mystifying to the general public. The newly created bills and notes were indistinguishable from those previously backed by coin, and the public was none the wiser.
The monetary scientists, of course, are amply paid for this service. To preserve the pretense of banking, it is said they collect interest, but this is misnomer. They didn't lend money, they created it. Their compensation, therefore, should be called what it is: a professional fee, or commission, or royalty, or kickback, depending on your perspective, but not interest.
As a result of this pyramiding effect, prices rose 100% in just two years. Then, the inevitable happened: There was a run on the bank, and the Bank of England could not produce the coin.
It is not surprising, therefore, that, when there was a run on the Bank of England, Parliament intervened. In May of 1696, just two years after the Bank was formed, a law was passed authorizing it to "suspend payment inspecie." By force of law, the Bank was now exempted from having to honor its contract to return the gold.
One of the most outspoken proponents of a true gold standard was a Jewish London stockbroker by the name of David Ricardo.
Who cares if the scheme is destructive? Here is the perfect tool for obtaining unlimited funding for politicians and endless profits for bankers. And, best of all, the little people who pay the bills for both groups have practically no idea what is being done to them.
Lenin was right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.
Chapter Ten - The Mandrake Mechanism
In truth, money is not created until the instant it is borrowed. It is the act of borrowing which causes it to spring into existence. And, incidentally, it is the act of paying off the debt that causes it to vanish.
"Banks are creating money based on a borrower's promise to pay (the IOU)... Banks create money by ‘monetizing' the private debts of businesses and individuals."
However, a forceful explanation as to why money is accepted is that the federal government requires it as payment for tax liabilities. Anticipation of the need to clear this debt creates a demand for the pure fiat dollar.
It is difficult for Americans to come to grips with the fact that their total money supply is backed by nothing but debt, and it is even more mind boggling to visualize that, if everyone paid back all that was borrowed, there would be no money left in existence. That's right, there would be not one penny in circulation—all coins and all paper currency would be returned to bank vaults—and there would be not one dollar in any one's checking account. In short, all money would disappear.
Add up all the bank accounts in the nation, and it would be easy to assume that all that money represents a gigantic pool of assets which support the economy. Yet, every bit of this money is owed by someone. Some will owe nothing. Others will owe many times what they possess. All added together, the national balance is zero. What we think is money is but a grand illusion. The reality is debt.
When banks place credits into your checking account, they are merely pretending to lend you money. In reality, they have nothing to lend.
As Thomas Jefferson observed at the time of his protracted battle against central banking in the United States, "No one has a natural right to the trade of money lender, but he who has money to lend."
As we have already shown, every dollar that exists today, either in the form of currency, checkbook money, or even credit card money — in other words, our entire money supply — exists only because it was borrowed by someone; perhaps not you, but someone. That means all the American dollars in the entire world are earning daily and compounded interest for the banks which created them. A portion of every business venture, every investment, every profit, every transaction which involves money — and that even includes losses and the payment of taxes — a portion of all that is earmarked as payment to a bank. And what did the banks do to earn this perpetually flowing river of wealth? Did they lend out their own capital obtained through the investment of stockholders? Did they lend out the hard-earned savings of their depositors? No, neither of these was their major source of income. They simply waved the magic wand called fiat money.
No matter where you earn the money, its origin was a bank and its ultimate destination is a bank. The loop through which it travels can be large or small, but the fact remains all interest is paid eventually by human effort. And the significance of that fact is even more startling than the assumption that not enough money is created to pay back the interest. It is that the total of this human effort ultimately is for the benefit of those who create fiat money. It is a form of modern serfdom in which the great mass of society works as indentured servants to a ruling class of financial nobility.
The entire function of this machine is to convert debt into money. It's just that simple. First, the Fed takes all the government bonds which the public does not buy and writes a check to Congress in exchange for them. (It acquires other debt obligations as well, but government bonds comprise most of its inventory.) There is no money to back up this check. These fiat dollars are created on the spot for that purpose. By calling those bonds "reserves," the Fed then uses them as the base for creating 9 additional dollars for every dollar created for the bonds themselves. The money created for the bonds is spent by the government, whereas the money created on top of those bonds is the source of all the bank loans made to the nation's businesses and individuals. The result of this process is the same as creating money on a printing press, but the illusion is based on an accounting trick rather than printing trick. The bottom line is that Congress and the banking cartel have entered into a partnership in which the cartel has the privilege of collecting interest on money which it creates out of nothing, a perpetual override on every American dollar that exists in the world. Congress, on the other hand, has access to unlimited funding without having to tell the voters their taxes are being raised through the process of inflation. If you understand this paragraph, you understand the Federal Reserve System.
In other words, the bank borrows a million and can almost double it in one year. That's leverage! But don't forget the source of that leverage: the manufacture of another $9 million which is added to the nation’s money supply.
Without realizing it, Americans have paid over the years, in addition to their federal income taxes and excise taxes, a completely hidden tax equal to many times the national debt! And that still is not the end of the process. Since our money supply is purely an arbitrary entity with nothing behind it except debt, its quantity can go down as well as up. When people are going deeper into debt, the nation's money supply expands and prices go up, but when they pay off their debts and refuse to renew, the money supply contracts and prices tumble.
Who benefits from all of this? Certainly not the average citizen. The only beneficiaries are the political scientists in Congress who enjoy the effect of unlimited revenue to perpetuate their power, and the monetary scientists within the banking cartel called the Federal Reserve System who have been able to harness the American people, without their knowing it, to the yoke of modern feudalism.
Therefore, the sale of government bonds to the banking system is inflationary, but when sold to the private sector, it is not.
Since our money supply, at present at least, is tied to the national debt, to pay off that debt would cause money to disappear. Even to seriously reduce it would cripple the economy. Therefore, as long as the Federal Reserve exists, America will be, must be, in debt.
Make no mistake about it, inflation is a tax. Furthermore, it is the most unfair tax of them all because it falls most heavily upon those who are thrifty, those on fixed incomes, and those in the middle and lower income brackets. The important point here is that this hidden tax would be impossible without fiat money.
Why, then, does the federal government bother with taxes at all? Why not just operate on monetized debt? The answer is twofold. First, if it did, people would begin to wonder about the source of the money, and that might cause them to wake up to the reality that inflation is a tax. Thus, open taxes at some level serve to perpetuate public ignorance which is essential to the success of the scheme. The second reason is that taxes, particularly progressive taxes, are weapons by which elitist social planners can wage war on the middle class.
A man can only be tempted to borrow, he cannot be forced to do so.
August Belmont came to New York in 1837 as the financial agent of the Rothschilds. He funneled vast amounts of capital into American investments, often without anyone knowing whose money he was spending. The purpose of concealment was to blunt the growing anti-Rothschild resentment that was then prevalent in Europe as well as America. When his affiliation became commonly known, his usefulness came to an end and he was replaced by J.P. Morgan.
Jacob Schiff (right) was head of the New York investment firm, Kuhn, Loeb & Co. He was one of the principal backers of the Bolshevik revolution and personally financed Trotsky's trip from New York to Russia. He was a major contributor to Woodrow Wilson's presidential campaign and an advocate for passage of the Federal Reserve Act.
Carroll Quigley was a professor of history at Georgetown University. His book, Tragedy and Hope, revealed that the Council on Foreign Relations (CFR) is an outgrowth of the secret society formed by Cecil Rhodes. He wrote the history of how an international network of financiers has created a system of financial control able to dominate the political systems of all countries through their central banks. He named names and provided meticulous documentation. His book was suppressed.
Section III - The New Alchemy
Chapter Eleven - The Rothschild Formula
Biographer Frederic Morton concluded that the Rothschild dynasty had: "... conquered the world more thoroughly, more cunningly, and much more lastingly than all the Caesars before or all the Hitlers after them."
The banking community had always constituted a "fifth estate" whose members were able, by their control of royal purse strings, to affect important events.
It is generally true that, one man's loss is another man's gain. And even the friendliest of biographers admit that, for more than two centuries, the House of Rothschild profited handsomely from wars and economic collapses, the very occasions on which others sustained the greatest losses.
Benjamin Disraeli, the Prime Minister of England, wrote a book in 1844 called Coningsby. It was a political novel in which the author expressed his views about contemporary issues. One of the strong characters in the book was a financier named Sidonia, but every detail of Sidonia's actions was an exact replica of the real Lord Rothschild, whom Disraeli greatly admired.
Ron Chernow explains: The new alliance [between the monetary and political scientists] was mutually advantageous. Washington wanted to harness the new financial power to coerce foreign governments into opening their markets to American goods or adopting pro-American policies. The banks, in turn, needed levers to force debt repayment and welcomed the government's police powers in distant places. The threat of military intervention was an excellent means by which to speed loan repayment. When Kuhn, Loeb considered a loan to the Dominican Republic, backed by customs receipts, Jacob Schiff inquired of his London associate Sir Ernest Cassel, "If they do not pay, who will collect these customs duties?" Cassel replied, "Your marines and ours.”
If such a man were to survey the world around him, it is not difficult to imagine that he would come to the following conclusions which would become the prime directives of his career: War is the ultimate discipline to any government. If it can successfully meet the challenge of war, it will survive. If it cannot, it will perish. All else is secondary. The sanctity of its laws, the prosperity of its citizens, and the solvency of its treasury will be quickly sacrificed by any government in its primal act of self-survival. All that is necessary, therefore, to insure that a government will maintain or expand its debt is to involve it in war or the threat of war. The greater the threat and the more destructive the war, the greater the need for debt. To involve a country in war or the threat of war, it will be necessary for it to have enemies with credible military might. If such enemies already exist, all the better. If they exist but lack military strength, it will be necessary to provide them the money to build their war machine. If an enemy does not exist at all, then it will be necessary to create one by financing the rise of a hostile regime. The ultimate obstacle is a government which declines to finance its wars through debt. Although this seldom happens, when it does, it will be necessary to encourage internal political opposition, insurrection, or revolution to replace that government with one that is more compliant to our will. The assassination of heads of state could play an important role in this process. No nation can be allowed to remain militarily stronger than its adversaries, for that could lead to peace and a reduction of debt. To accomplish this balance of power, it may be necessary to finance both sides of the conflict. Unless one of the combatants is hostile to our interests and, therefore, must be destroyed, neither side should be allowed a decisive victory or defeat. While we must always proclaim the virtues of peace, the unspoken objective is perpetual war.
Whether ending in victory or defeat, the outcome merely preserved or restored the European "balance of power." And the most permanent result of any of these wars was expanded government debt for all parties.
Chapter Twelve - Sink The Lusitania!
The exigencies of war in Europe required England and France to go heavily into debt. When their respective central banks and local merchant banks could no longer meet that need, the beleaguered governments turned to the Americans and selected the House of Morgan — acting as partners of the Rothschilds — to act as sales agent for their bonds. Most of the money raised in this fashion was quickly returned to the United States to acquire war-sensitive materials, and Morgan was selected as the U.S. purchase agent for those as well. A commission was paid on all transactions in both directions: once when the money was borrowed and again when it was spent. Furthermore, many of the companies receiving production contracts were either owned outright by Morgan holding companies or were securely within his orbit of bank control. Under such an arrangement, it will not be surprising to learn, as we shall in a moment, that Morgan was not overly anxious to see hostilities come to a close. Even the most honorable of men can be corrupted by the temptation of such gigantic flows of cash.
Each month, Morgan presided over purchases which were equal to the gross national product of the entire world just one generation before.
On the surface it is a paradox that Wilson, who had always been a pacifist, should now enter into a secret agreement with foreign powers to involve the United States in a war which she could easily avoid. The key that unlocks this mystery is the fact that Wilson also was an internationalist. One of the strongest bonds between House and himself was their common dream of a world government. They both recognized that the American people would never accept such a concept unless there were extenuating circumstances. They reasoned that a long and bloody war was probably the only event that could condition the American mind to accept the loss of national sovereignty, especially if it were packaged with the promise of putting an end to all wars in the future. Wilson knew, also, that, if the United States came into the war early enough to make a real difference on the battlefield and if large amounts of American dollars could be lent to the Allied powers, he would be in a position after the war to dictate the terms of peace.
On February 9, 1917, Representative Callaway from Texas took the floor of Congress and provided further insight. He said: In March, 1915, the J.P. Morgan interests, the steel, shipbuilding, and powder interests, and their subsidiary organizations, got together 12 men high up in the newspaper world and employed them to select the most influential newspapers in the United States and sufficient number of them to control generally the policy of the daily press.... They found it was only necessary to purchase the control of 25 of the greatest papers.... An agreement was reached; the policy of the papers was bought, to be paid for by the month; an editor was furnished for each paper to properly supervise and edit information regarding the questions of preparedness, militarism, financial policies, and other things of national and international nature considered vital to the interests of the purchasers. Charles S. Mellen of the New Haven Railroad testified before Congress that his Morgan-owned railroad had over one-thousand New England newspaper editors on the payroll, costing about $400,000 annually. The railroad also held almost a half-million dollars in bonds issued by the Boston Herald. This web of control was multiplied by hundreds of additional companies which also were controlled by Morgan and other investment-banking houses.
Thus, the Lusitania became one of the most important carriers of war materials — including munitions — from the United States to England. On March 8, 1915, after several close calls with German submarines, the captain of the Lusitania turned in his resignation. He was willing to face the U-boats, he said, but he was no longer willing "to carry the responsibility of mixing passengers with munitions or contraband."
Under what was called the Cruiser Rules, warships of both England and Germany gave the crews of unarmed enemy merchant ships a chance to take to the lifeboats before sinking them. But, in October of 1914, Churchill issued orders that British merchant ships must no longer obey a U-boat order to halt and be searched. If they had armament, they were to engage the enemy. If they did not, they were to attempt to ram the sub. The immediate result of this change was to force German U-boats to remain submerged for protection and to simply sink the ships without warning. Why would the British want to do such a stupid thing that would cost the lives of thousands of their own seamen? The answer is that it was not an act of stupidity. It was cold blooded strategy. Churchill boasted: The first British countermove, made on my responsibility,... was to deter the Germans from surface attack. The submerged U-boat had to rely increasingly on underwater attack and thus ran the greater risk of mistaking neutral for British ships and of drowning neutral crews and thus embroiling Germany with other Great Powers.
Bryan picked up the telephone and cleared the publication of the advertisement. He promised Viereck that he would endeavor to persuade the President publicly to warn Americans not to travel. No such warning was issued by the President, but there can be no doubt that President Wilson was told of the character of the cargo destined for the Lusitania. He did nothing, but was to concede on the day he was told of her sinking that his foreknowledge had given him many sleepless hours.
One of the officers present in the high-command map room on that fateful day was Commander Joseph Kenworthy, who previously had been called upon by Churchill to submit a paper on what would be the political results of an ocean liner being sunk with American passengers aboard. He left the room in disgust at the cynicism of his superiors. In 1927, in his book, The Freedom of the Seas, he wrote without further comment: "The Lusitania was sent at considerably reduced speed into an area where a U-boat was known to be waiting and with her escorts withdrawn." Further comment is not needed.
The controversy over the ship’s cargo was finally resolved in 2008 when divers moved inside the Lusitania's hull and found millions of rounds of military ammunition. Sam Greenhill, writing for Mail Online, reported: Divers have revealed a dark secret about the cargo carried by the Lusitania on its final journey in May 1915. Munitions they found in the hold suggest that the Germans had been right all along in claiming the ship was carrying war materials and was a legitimate military target.... The diving team estimates that around four million rounds of U.S.-manufactured Remington .303 bullets lie in the Lusitania's hold at a depth of 300 ft.
On April 16, 1917, the United States officially declared war on Imperial Germany. Eight days later, Congress dutifully passed the War Loan Act which extended $1 billion in credit to the Allies. The first advance of $200 million went to the British the next day and was immediately applied as payment on the debt to Morgan. A few days later, $100 million went to France for the same purpose. But the drain continued. Within three months the British had run up their overdraft with Morgan to $400 million dollars, and the firm presented it to the government for payment. The Treasury, however, was unable to put its hands on that amount of money without jeopardizing its own spendable funds and, at first, refused to pay. The problem was quickly solved, however, through a maneuver described at some length in chapter ten. The Federal Reserve System under Benjamin Strong simply created the needed money through the Mandrake Mechanism. "The Wilson Administration found itself in an extremely awkward position, having to bail out J.P. Morgan," wrote Ferrell, but Benjamin Strong "offered to help [Treasury-Secretary] McAdoo out of the difficulty. Over the following months in 1917-18. the Treasury quietly paid Morgan piecemeal for the overdraft." By the time the war was over, the Treasury had lent a total of $9,466,000,000 including $2,170,000,000 given after the Armistice.
The American soldiers fighting in the trenches, the people working at home, the entire nation under arms, were fighting, not only to subdue Germany, but to subdue themselves. That there is nothing metaphysical about this interpretation becomes clear when we observe that the total wartime expenditure of the United States government from April 6, 1917, to October 31, 1919, when the last contingent of troops returned from Europe, was $35,413,000,000. Net corporation profits for the period January 1, 1916, to July, 1921, when wartime industrial activity was finally liquidated, were $38,000,000,000, or approximately the amount of the war expenditures. More than two-thirds of these corporation profits were taken by precisely those enterprises which the Pujo Committee had found to be under the control of the "Money Trust."
Between 1915 and 1920, the money supply doubled from $20.6 billion to $39.8 billion. Conversely, during World War I, the purchasing power of the currency fell by almost 50%. That means Americans unknowingly paid to the government approximately one-half of every dollar that existed. And that was in addition to their taxes. This massive infusion of money was the product of the Mandrake Mechanism and cost nothing to create. Yet, the banks were able to collect interest on it all.
Chapter Thirteen - Masquerade In Moscow
One of the greatest myths of contemporary history is that the Bolshevik Revolution in Russia was a popular uprising of the downtrodden masses against the hated ruling class of the Tsars. As we shall see, however, the planning, the leadership, and especially the financing came entirely from outside Russia, mostly from financiers in Germany, Britain, and the United States.
In the February 3, 1949, issue of the New York Journal American, Schiff's grandson, John, was quoted by columnist Cholly Knickerbocker as saying that his grandfather had given about $20 million for the triumph of Communism in Russia.
It is through this front group, called the Council on Foreign Relations, and its influence over the media, tax-exempt foundations, universities, and government agencies that the international financiers have been able to dominate the domestic and foreign policies of the United States ever since.
Chapter Fourteen - The Best Enemy Money Can Buy
The fact is that Lenin and Trotsky were not sent to Russia to overthrow the anti-Semitic Tsar. Their assignment from Wall Street was to overthrow the revolution.
In 1922, the Soviets formed their first international bank. It was not owned and run by the state as would be dictated by Communist theory, but was put together by a syndicate of private bankers. These included, not only former Tsarist bankers, but representatives of German, Swedish, and American banks. Most of the foreign capital came from England, including the British government itself. The man appointed as Director of the Foreign Division of the new bank was Max May, Vice President of Morgan's Guaranty Trust Company in New York.
From the beginning of Hitler's rise to power, German industry was heavily financed by American and British bankers. Most of the largest U.S. Corporations were knowingly invested in war industries. I.G. Farben was the largest of the industrial cartels and was a primary source of political funding for Hitler. It was Farben that staffed and directed Hitler's intelligence section and ran the Nazi slave labor camps as a supplemental source of manpower for Germany's factories. Farben even hired the New York public relations firm of Ivy Lee, who was John D. Rockefeller's PR specialist, to help improve Hitler’s public image in America. Lee, incidentally, had also been used to help sell the Soviet regime to the American public in the late 1920s.
During the Allied bombing raids over Germany, the factories and administrative buildings of I.G. Farben were spared. The U.S. War Department, which determined bombing priorities, was liberally staffed with men, who in civilian life, had been associates of the investment firms previously mentioned. For example, Under Secretary of War at that time was Robert P. Patterson. James Forrestal was Secretary of the Navy and later became Secretary of Defense. Both men had come from Dillon Read and, in fact, Forrestal had been president of that firm.
With the termination of the Lend-Lease program, it was necessary to invent new mechanisms for the support of Soviet Russia and her satellites. One of these was the sale of much-needed commodities at prices below the world market and, in fact, below the prices that Americans themselves had to pay for the same items. This meant, of course — as it did in the case of Lend Lease — that the American taxpayer had to make up the difference. The Soviets were not even required to have the money to buy these goods. American financial institutions, the federal government, and international agencies, which are largely funded by the federal government, such as the International Monetary Fund and the World Bank—lent the money to them. Furthermore, the interest rates on these loans also are below the market requiring still additional subsidy by American citizens. And that is not all. Almost all of these loans have been guaranteed by the United States government, which means that if — no, make that when — these countries default in their payments, the gullible American public is once again called upon to make them good. In other words, the new mechanism, innocently and deceptively referred to as "trade," is little more than a thinly disguised means by which members of the Round Table who direct our national policies have bled billions of dollars from American citizens for an ongoing economic transfusion into the Soviet bloc—and continue to do so now that the word Soviet has been changed to the less offensive Democratic Socialism. This enables those regimes to enter into contracts with American businessmen to provide essential services. And the circle is complete: From the American taxpayer to the American government to the "socialist" regime to the American businessman and, ultimately, to the American financier who funded the project and provided the political influence to make it all possible.
When David Rockefeller was asked about the propriety of providing funding for Marxist and Communist countries which are openly hostile to the United States, he responded: "I don't think an international bank such as ours ought to try to set itself as a judge about what kind of government a country wishes to have." Wishes to have? He was talking about Angola where the Marxist dictatorship was forced upon the people with Cuban soldiers and Soviet weapons!
WASHINGTON — For months, the Reagan Administration has been using federal funds to repay Polish loans owed to U.S. banks, and the bill for this fiscal year may amount to $400 million, Deputy Secretary of Agriculture Richard E. Lyng said Monday.... "They (the Polish authorities) have not been making payments for at least the last half of the last year," Lyng said. "When they don't make a payment, the U.S. Department of Agriculture makes a payment."... Lyng said the U.S. Government paid $60 million to $70 million a month on guaranteed Polish loans in October, November, December, and January—and "we will continue to pay them."
The hard fact is that American taxpayers unknowingly have been making monthly bank payments on behalf of Communist, socialist, and so-called Third-World countries for many years.
The American government-industrial complex provided the Soviets with the money, technology, and the actual construction of two of the world's largest and most modern truck plants. The Kama River plant and the Zil plant produce over 150,000 heavy duty. trucks per year—including armored personnel carriers and missile launchers—plus 250,000 diesel engines, many of which are used to power Soviet tanks. Forty-five per cent of the cost of this project came from the U.S. Export-Import Bank, an agency of the federal government, and an equal amount from David Rockefeller's Chase Manhattan Bank. The Soviets put up only ten per cent. The loan, of course, was taxpayer-guaranteed by the U.S. Export-Import Bank which, at the time, was under the direction of William Casey. Casey later was appointed as head of the C.I.A. to protect America from global Communism. (Are you beginning to get the picture?)
How is China expected to pay for all this "trade"? Very simple. By 1996, China had become the largest single recipient of guaranteed loans and subsidies from the World Bank.
Politicians are fond of talking about the necessity of preserving world peace, and trade, we are told, is one of the best ways to do it. The implication is that this is a time of peace. In truth, we live in one of the most war-torn eras the world has ever seen. No continent today, except Antarctica, is free from war. There are from 25 to 40 military struggles going on somewhere every day of the year. There have been more than 150 armed conflicts since the end of World War II with the death count already in excess of 20 million and rising. We cannot help noticing that this also has been a period of rising government debt and the global creation of fiat money.
As mentioned previously, the talent pool for the implementation of this strategy has been the Council on Foreign Relations. In 1996, the Managing Editor of the CFR's journal, Foreign Affairs, was Fareed Zakaria, who offered the following rationalization: Yes, it's tempting to get rid of Saddam. But his bad behavior actually serves America's purposes in the region.... If Saddam Hussein did not exist, we would have to invent him.... The end of Saddam Hussein would be the end of the anti-Saddam coalition. Nothing destroys an alliance like the disappearance of the enemy.... Maintaining a long-term American presence in the gulf would be difficult in the absence of a regional threat.
Fifth Reason To Abolish The System There are few historians who would challenge the fact that the funding of World War I, World War II, the Korean War, and the Vietnam War was accomplished by the Mandrake Mechanism through the Federal Reserve System. An overview of all wars since the establishment of the Bank of England in 1694 suggests that most of them would have been greatly reduced in severity, or perhaps not even fought at all, without fiat money. It is the ability of governments to acquire money without direct taxation that makes modern warfare possible, and a central bank has become the preferred method of accomplishing that.
Section IV - A Tale Of Three Banks
Chapter Fifteen - The Lost Treasure Map
The first colonial experience with fiat money was in the period from 1690 to 1764. Massachusetts was the first to use it as a means of financing its military raids against the French colony in Quebec.
The situation was so out of hand that, beginning in 1751, the British Parliament stepped in and, in one of those rare instances where interference from the mother country actually benefited the colonies, it forced them to cease the production of fiat money. Henceforth, the Bank of England would be the only source. What followed was unforeseen by the promoters of fiat money. Amid great gloom about "insufficient money," a miracle boom of prosperity occurred. The forced use of fiat money had compelled everyone to hoard their real money and use the worthless paper instead. Now that the paper was in disgrace, the colonists began to use their English and French and Dutch gold coins once again, prices rapidly adjusted to reality, and commerce returned to a solid footing. It remained so even during the economic strain of the Seven-Years War (1756-1763) and during the period immediately prior to the Revolution. Here was a perfect example of how an economic system in distress can recover if government does not interfere with the healing process.
$650 million created in five years on top of a base of $12 million is an expansion of the money supply of over 5000%.
Just three months prior to the opening of the convention, Washington voiced his reasons for rejecting the notion of fiat money. In answer to the complaint that there was not enough gold coin (specie) to satisfy the needs of commerce, he replied: The necessity arising from a want of specie is represented as greater than it really is. I contend that it is by the substance, not the shadow of a thing, we are to be benefited. The wisdom of man, in my humble opinion, cannot at this time devise a plan by which the credit of paper money would be long supported; consequently, depreciation keeps pace with the quantity of the emission, and articles for which it is exchanged rise in a greater ratio than the sinking value of the money. Wherein, then, is the farmer, the planter, the artisan benefited? An evil equally great is the door it immediately opens for speculation, by which the least designing and perhaps most valuable part of the community are preyed upon by the more knowing and crafty speculators.
Thomas Paine, although not a delegate to the Convention, had written the previous year that he was strongly opposed to fiat money, which he called counterfeiting by the state, and he especially abhorred legal tender laws which force people to accept the counterfeit. He said: "The punishment of a member [of a legislature] who should move for such a law ought to be death."
The first draft of the Constitution was copied in large measure from the original Articles of Confederation. When it was taken up for consideration by the delegates, therefore, it contained the old provision that had caused so much chaos. It stated: "The legislature of the United States shall have the power to borrow money and emit bills of credit." But, after a lively discussion on the matter, the offending provision was voted to be removed from the Constitution by an overwhelming margin. Voicing the sentiment of the majority of the delegates, Alexander Hamilton said: "To emit an unfunded paper as the sign of value ought not to continue a formal part of the Constitution, nor ever hereafter to be employed; being, in its nature, repugnant with abuses and liable to be made the engine of imposition and fraud."
Note in the preceding quotation that Hamilton referred to both gold and silver coins, not merely silver. That is because it was precisely at this time that Congress began to consider a bimetallic coinage. In retrospect, this was a mistake for, throughout history, bimetallism has never worked well very long. It always has led to confusion and, ultimately, the disappearance as money of one of the metals. This is because there is always a subtle shifting of the relative values between gold and silver—or any other two metals for that matter—depending on constantly changing supply and demand. We may set a value ratio of one to the other that is quite acceptable today but, eventually, that ratio will no longer reflect reality. The metal which grows in value over the other will be hoarded or possibly even melted down because it will bring a higher price as metal than it will as money.
Oh yes, another thing. It set the death penalty for anyone who debases the nation's coinage; a law which, if enforced today, would wipe out the House of Representatives, the Senate, the managerial level of the Treasury Department, and the Presidency as well.
Chapter Sixteen - The Creature Comes To America
The Bank of North America was fraudulent from the very start. The charter required that private investors provide $400,000 for the initial subscription. When Morris was unable to raise that money, he used his political influence to make up the shortfall out of government funds. In a maneuver that was nothing less than legalized embezzlement, he took the gold that had been lent to the United States from France and had it deposited in the Bank. Then, using this as a fractional-reserve base, he simply created the money that was needed for the subscription and lent it to himself and his associates. Such is the power of the secret science.
A fitting epilogue to this story was written two hundred years later when, in 1980, the First Pennsylvania Bank of Philadelphia, the "oldest bank in the nation," was bailed out by the FDIC.
Then, as now, the mysteries of banking vocabulary were not revealed to the average man, and it was difficult to understand how privately-issued bank notes could serve precisely the same purpose as printing-press money — with precisely the same disastrous results. That being the case, the monetary and political scientists decided to end run the Constitution. Their plan was to establish a bank, to give that bank the power to create money, to lend most of that money to the government, and then to make sure the IOUs are accepted as money by the public. Congress, therefore, would not be emitting bills of credit. The bank would do that. Thus, the First Bank of the United States was conceived. The proposal was submitted to Congress in 1790 by Alexander Hamilton who, at that time, was Secretary of the Treasury. Hamilton, incidentally, was a former aide to Robert Morris, founder of the Bank of North America, so in that sense his role in this matter is not surprising. What is surprising is the fact that Hamilton had been a staunch supporter of a sound currency during the Constitutional Convention. This is hard to reconcile, and one must suspect that, even the most well intentioned of men can become corrupted by the temptations of wealth and power.
Nothing could be more polarized than the opposing ideas of these two men: JEFFERSON: "A private central bank issuing the public currency is greater menace to the liberties of the people than a standing army." "We must not let our rulers load us with perpetual debt." HAMILTON: "No society could succeed which did not unite the interest and credit of rich individuals with those of the state." "A national debt, if it is not excessive, will be to us a national blessing."
Who were these private investors? Their names do not appear in the published literature, but we can be certain they included the Congressmen and Senators — and their associates — who engineered the charter. But there is an interesting line in Galbraith's text that hints at another dimension to the composition of this group. On page 72 of Money: Whence It Came, Where It Went, he states matter-of-factly: "Foreigners could own shares but not vote them." What a story is hidden behind that innocuous statement. The blunt reality is that the Rothschild banking dynasty in Europe was the dominant force, both financially and politically, in the formation of the Bank of the United States. Biographer, Derek Wilson, explains: Over the years since N.M. [Rothschild], the Manchester textile manufacturer, had bought cotton from the Southern states, Rothschilds had developed heavy American commitments. Nathan ... had made loans to various states of the Union, had been, for a time, the official European banker for the US government and was a pledged supporter of the Bank of the United States. Gustavus Myers, in his History of the Great American Fortunes, is more pointed. He says: Under the surface, the Rothschilds long had a powerful influence in dictating American financial laws. The law records show that they were the power in the old Bank of the United States. The Rothschilds, therefore, were not merely investors nor just an important power. They were the power behind the Bank of the United States!
Wildcat banks were not noted for meticulous accounting or business practices. Like all banks at that time, they were required to keep a certain portion of their deposits on hand in the form of gold or silver coin. To engender public confidence in their faithfulness to that obligation, it was common practice to keep the vault door open so a keg or two of gold coins could be viewed during business hours—not altogether different from the modern practice of financial institutions advertising how many billions in assets they hold but never mentioning the size of their liabilities.
One who is less enamored with the idea of a central bank would be tempted to ask: If those state banks were so "good," why did they need assistance in keeping faith with their depositors? The whole idea of a "lender of last resort," which is accepted as sacred dogma today, is based on the assumption that it is perfectly acceptable for the entire banking system to be fraudulent. It is assumed that any single bank or cluster of banks could at any time become "besieged by their note holders or other creditors." Therefore, it is prudent to have a central bank to take what meager reserves there are within the system and rush them from bank to bank, if not minutes before the examiner arrives, at least before the customers do.
To assume that only a federally-chartered central bank could have brought moderation into the monetary system is to believe that only politicians, bureaucrats, and agencies of government can act with integrity, a shaky notion at best.
As it was, the Bank was the means by which the American people lost forty-two per cent of the value of all the money they earned or possessed during just those five years. We must not forget, either, that this confiscation of property was selective. It did not work against the wealthy classes which were able to ride the wave of inflation aboard the raft of tangible property which they owned.
The War of 1812 was one of the most senseless wars in history. The primary cause, we are told, was the British impressment into their navy of American sailors on the high seas to assist in the war against Napoleonic France. But the French had done exactly the same thing to assist in the war against England, yet their acts were ignored. Furthermore, the British had already rescinded their policy regarding American seamen before the war was underway, which means that the cause of the war had been removed, and peace could have been restored in honor if Congress had so wanted. One must conclude that the pro-banking interests in the United States actually wanted the conflict because of the profits that could be realized from it. As evidence of this is the fact that the New England states, which were home to the seamen who had been impressed into service, were firmly against the war, while the Western and inland Southern states, which were home to the myriad of wildcat banks, howled loudly for a clash of arms. In any event, the war was unpopular with the average citizen, and it was out of the question for Congress to obtain funding for armaments through an increase in taxes. So the government needed the state banks to create that money outside the tax structure and came to their rescue to protect them from the discipline of the free market. It was a classic case of the unholy alliance, the cabal, that always develops between political and monetary scientists.
The state banks had created enough instant money for the federal government to raise the debt from $45 million to $127 million, a staggering sum for the fledgling nation. Tripling the money supply, with no appreciable increase in goods, means the value of the dollar shrank to about one-third its former purchasing power. By 1814, when the depositors began to awake to the scam and demanded their gold instead of paper, the banks closed their doors and had to hire extra guards to protect officials and employees from the angry crowds. Once again, the monetary and political scientists had succeeded in fleecing the American public of approximately 66% of all the money they held during that period, and that was on top of the 42% fleecing they got a few years earlier by the Bank of the United States.
It is a wise rule never to borrow a dollar without laying a tax at the same instant for paying the interest annually and the principal within a given term. ... We shall consider ourselves unauthorized to saddle posterity with our debts, and morally bound to pay them ourselves. ... The earth belongs to the living, not the dead.... We may consider each generation as a distinct nation with a right to ... bind themselves, but not the succeeding generation. ... The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating.
Chapter Seventeen - A Den Of Vipers
Another important continuity between the old and the new Bank was the concentration of foreign investment. In fact, the largest single block of stock in the new Bank, about one-third in all, was held by this group. It is certainly no exaggeration to say that the Second Bank of the United States was rooted as deeply in Britain as it was in America.
In the past, the effect of this inflationary process always had been the gradual evaporation of purchasing power and the continuous transfer of property from those who produced it to those who controlled the government and ran the banks. This time, however, the process took on a new twist. Gradualism was replaced by catastrophism. The monetary scientists, with their hands firmly on the controls of the money machine, now began to throw the levers, first one way, and then the other. The expansion and then deliberate contraction of the money supply literally threw the nation into economic convulsions. Why wait for the apples to fall when the harvest can be hastened simply by shaking the tree? In 1818, the Bank suddenly began to tighten its requirements for new loans and to call in as many of the old loans as possible. This contraction of the money supply was justified to the public then exactly as it is justified today. It was necessary, they said, to put the brakes on inflation. The fact that this was the same inflation the Bank had helped to create in the first place, seems to have gone unnoticed.
It is widely believed that panics, boom-bust cycles, and depressions are caused by unbridled competition between banks; thus the need for government regulation. The truth is just the opposite. These disruptions in the free market are the result of government prevention of competition by the granting of monopolistic power to a central bank. In the absence of a monopoly, individual banks may operate in a fraudulent manner only to a limited extent and for a short period of time. Inevitably, they will be exposed by their more honest competitors and will be forced out of business. Yes, their depositors will be injured by the bankruptcy, but the damage will be limited to a relatively few and will occur only now and then. Even geographical regions may be hard hit on occasion, but it will not be a national tragedy with everyone brought to their knees.
Competition between the national Bank and the state banks during this period had been moved from the open field of the free market to the closed arena of politics. Free-market competition had been replaced by government favoritism in the form of charters which granted the right of monopoly. A federal charter was clearly better than one issued by a state, but the states fought back fiercely with what weapons they possessed, and one of those was the power to tax. Several states began to levy a tax on the paper notes issued by any bank doing business within their borders which was not also locally chartered. The intent, although pretended to be the raising of state revenue, was really to put the federal Bank out of business. When the Bank refused to pay such a tax to the state of Maryland, the issue was taken to the Supreme Court in 1819 as the celebrated case of McCulloch v. Maryland. The Chief Justice at that time was John Marshall, a leading Federalist and advocate of a strong, centralized federal government. As was expected, the Marshall Court carefully tailored its decision to support the federal government's central bank. The narrow issue upon which the constitutionality of the Bank was decided was not whether Congress had the power to directly or indirectly emit bills of credit or otherwise convert debt into money. If that had been the issue, the Court would have been hard pressed to uphold the Bank, for that not only is expressly prohibited by the Constitution, it is precisely what the Bank had been doing all along, and everyone knew it. Instead, the Court focused upon the narrow question of whether or not the Bank was a "necessary and proper" means for Congress to execute any other constitutional powers it might have. From that perspective, it was unanimously held that the Bank was, indeed, constitutional.
Jackson decided to place his entire political career on the line for this one issue and, with perhaps the most passionate message ever delivered to Congress by any President, before or since, he vetoed the measure. The President's biographer, Robert Remini, says: "The veto message hit the nation like a tornado. For it not only cited constitutional arguments against recharter — supposedly the only reason for resorting to a veto — but political, social, economic, and nationalistic reasons as well." Jackson devoted most of his veto message to three general topics: (1) the injustice that is inherent in granting a government- sponsored monopoly to the Bank; (2) the unconstitutionality of the Bank even if it were not unjust; and (3) the danger to the country in having the Bank heavily dominated by foreign investors.
Regarding the issue of constitutionality, he said that he was not bound by the previous decision of the Supreme Court, because the President and Congress had just as much right to decide for themselves whether or not a particular law is constitutional. This view, incidentally, was not novel at that time. It is only in relatively recent decades that people have begun to think of the Supreme Court as being specifically authorized to pass on this question. In fact, as Jackson correctly pointed out in his veto message, the founding fathers created a government with power divided between the executive, legislative, and judicial branches, and that the purpose of this division was, not merely to divvy up the chores, but to balance one branch against the other. The goal was not to make government efficient but to deliberately make it inefficient. Each President and each legislator is morally bound, even by oath, to uphold the Constitution. If each of them does not have the power to decide in conscience what is constitutional, then taking an oath to uphold it has little meaning.
Jackson saved the greatest passion of his argument for the end. Speaking now, not to Congress, but to the voters at large, he said: It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth cannot be produced by human institutions. In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society — the farmers, mechanics, and laborers — who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their Government. There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favor alike on the high and the low, the rich and the poor, it would be an unqualified blessing. In the act before me there seems to be a wide and unnecessary departure from these just principles.
Biddle, therefore, decided to use the American people as sacrificial pawns in the giant chess match for the Bank's survival. The resulting economic chaos is not difficult to imagine. Biddle's contraction of the money supply was executed at a particularly vulnerable moment. Business had been expanding as a result of the Bank's prior easy credit and now was dependent on it. Also, the tariff came due at precisely this time, placing still more demand for cash and credit. Losses were sustained everywhere, wages and prices sagged, men were put out of work, companies went bankrupt. By the time Congress reconvened in December, in what was called the "Panic Session," the nation was in an uproar. Newspapers editorialized with alarm, and letters of angry protest flooded into Washington. As the pressure continued to build in Congress, it began to look as though Biddle's plan would work. In the public eye, it was Jackson who was solely responsible for the nation's woes. It was his arrogant removal of Secretary Duane; it was his foolish insistence on removing the deposits; it was his obstinate opposition to Congress.
When the investigating committee arrived at the Bank's doors in Philadelphia armed with a subpoena to examine the books, Biddle flatly refused. Nor would he allow inspection of correspondence with Congressmen relating to their personal loans and advances. And he steadfastly refused to testify before the committee back in Washington. For lesser mortals, such action would have resulted in citations of contempt of Congress and would have carried stiff fines or imprisonment. But not for Nicholas Biddle. Remini explains: The committeemen demanded a citation for contempt, but many southern Democrats opposed this extreme action, and refused to cooperate. As Biddle bemusedly observed, it would be ironic if he went to prison "by the votes of members of Congress because I would not give up to their enemies their confidential letters." Although Biddle escaped a contempt citation, his outrageous defiance of the House only condemned him still further in the eyes of the American public.
But Jackson went further than that. More than any other President before him, and rivalled by only a few since, he changed the character of American politics. He led the nation away from the new concept of diffused powers, carefully worked out by the founding fathers, back toward the Old-World tradition of concentration and monarchy. By strongly challenging the right of the States to secede from the Union, he set into motion a concept that, not only would lead to civil war, but which would put an end forever to the ability of the states to check the expanding power of the federal government. No longer was the Union to be based on the principle of consent of the governed. It was now to be based on force of arms, And through the manipulation of voter passion on the Bank issue, he changed the perception of the role of President from public servant to national leader.
Chapter Eighteen - Loaves And Fishes And Civil War
Money, based on the full faith and credit of the state, met similar fates in Illinois, Kentucky, Florida, Tennessee, and Louisiana. When the state bank collapsed in Illinois in 1825, all of the "full-faith" bank notes left in its possession were ceremoniously burned at the public square. Another bank was formed in 1835 and collapsed in 1842. So devastating were these experiences that the Illinois Constitution of 1848 stipulated that, henceforth, the state should never again create a bank or own banking stock.
There are many popular myths about the cause of the War Between the States. Just as the Bolshevik Revolution is commonly believed to have been a spontaneous mass uprising against a tyrannical aristocracy, so, too, it is generally accepted that the Civil War was fought over the issue of slavery. That, at best, is a half-truth. Slavery was an issue, but the primary force for war was a clash between the economic interests of the North and the South. Even the issue of slavery itself was based on economics.
The South, being predominantly an agricultural region, had to import practically all of its manufactured goods from the Northern states or from Europe, both of which reciprocated by providing a market for the South's cotton. However, many of the textiles and manufactured items were considerably cheaper from Europe, even after the cost of shipping had been added. The Southern states, therefore, often found it to their advantage to purchase these European goods rather than those made in the North. This put considerable competitive pressure on the American manufacturers to lower their prices and operate more efficiently. The Republicans were not satisfied with that arrangement. They decided to use the power of the federal government to tip the scales of competition in their favor. Claiming that this was in the "national interest," they levied stiff import duties on almost every item coming from Europe that was also manufactured in the North. Not surprisingly, there was no duty applied to cotton which, presumedly, was not a commodity in the national interest. One result was that European countries countered by stopping the purchase of U.S. cotton, which badly hurt the Southern economy. The other result was that manufacturers in the North were able to charge higher prices without fear of competition, and the South was forced to pay more for practically all of its necessities. It was a classic case of legalized plunder in which the law was used to enrich one group of citizens at the expense of another. [Note: Empire of Cotton claims that Britain was importing 85% of its cotton from the US South on the eve of the Civil War]
The global chess match between Lincoln on the one side and England and France on the other was closely watched by the other leaders of Europe. One of the most candid observers at that time was the Chancellor of Germany, Otto von Bismarck. Since Bismarck was, himself, deeply obligated to the power of international finance, his observations are doubly revealing. He said: The division of the United States into federations of equal force was decided long before the Civil War by the high financial powers of Europe. These bankers were afraid that the United States, if they remained in one block and as one nation, would attain economic and financial independence, which would upset their financial domination over Europe and the world. Of course, in the "inner circle" of Finance, the voice of the Rothschilds prevailed. They saw an opportunity for prodigious booty if they could substitute two feeble democracies, burdened with debt to the financiers,... in place of a vigorous Republic sufficient unto herself. Therefore, they sent their emissaries into the field to exploit the question of slavery and to drive a wedge between the two parts of the Union.... The rupture between the North and the South became inevitable; the masters of European finance employed all their forces to bring it about and to turn it to their advantage.
Chapter Nineteen - Greenbacks And Other Crimes
Knowing that war was being considered by his enemies, Tsar Alexander decided to play a chess game of his own. In September of 1863, he dispatched his Baltic fleet of war ships to Alexandria, Virginia, and his Asiatic fleet to San Francisco. The significance of this move was explained by Russian-born Carl Wrangell Rokassowsky: No treaty was signed between Russia and the United States, but their mutual interest, and the threat of war to both, unified these two nations at this critical moment. By dispatching his Baltic Fleet to the North American harbors, the Tsar changed his position from a defensive to an offensive one. Paragraph 3 of the instructions given to Admiral Lessovsky by Admiral Krabbe, at that time Russian Secretary of the Navy, dated July 14th, 1863, ordered the Russian Fleet, in case of war, to attack the enemies' commercial shipping and their colonies so as to cause them the greatest possible damage. The same instructions were given to Admiral Popov, Commander of the Russian Asiatic Fleet. The presence of the Russian Navy helped the Union enforce a devastating naval blockade against the Southern states which denied them access to critical supplies from Europe. It was not that these ships single-handedly kept the French and English vessels at bay. Actually there is no record of them even firing upon each other, but that is the point. The fact that neither France nor England at that time wanted to risk becoming involved in an open war with the United States and Russia led them to be extremely cautious with overt military aid to the South. Throughout the entire conflict, they found it expedient to remain officially neutral. Without the inhibiting effect of the presence of the Russian fleet, the course of the war could have been significantly different.
In New York City, when the first names of the draft were published in the papers on July 12, mobs stormed the draft offices and set fire to buildings. The riots continued for four days and were suppressed only when the federal Army of the Potomac was ordered to fire into the crowds. Over a thousand civilians were killed or wounded.
To control that insurrection, Lincoln ignored the Constitution once again by suspending the right of habeas corpus, which made it possible for the government to imprison its critics without formal charges and without trial. Thus, under the banner of opposing slavery, American citizens in the North, not only were killed on the streets of their own cities, they were put into military combat against their will and thrown into prison without due process of law. In other words, free men were enslaved so that slaves could be made free.
but the Rothschild consortium in Britain was both able and willing. It was during this time that the Rothschilds were consolidating their new industrial holdings in the United States through their agent, August Belmont. Derek Wilson tells us: "They owned or had major shareholdings in Central American ironworks, North American canal construction companies, and a multiplicity of other concerns. They became the major importers of bullion from the newly discovered goldfields."
When a national bank purchased government bonds, it did not hold on to them. It turned them back to the Treasury which exchanged them for an equal amount of "United States Bank Notes" with the bank's name engraved on them. The government declared these to be legal tender for taxes and duties, and that status caused them to be generally accepted by the public as money. The bank's net cost for these bonds was zero, because they got their money back immediately. Technically, the bank still owned the bonds and collected interest on them, but they also had the use of an equal amount of newly created bank-note money which also could be lent out at interest. When all the smoke and mirrors were moved away, it was merely a variation on the ancient scheme. The monetary and political scientists had simply converted government debt into money, and the bankers were collecting a substantial fee at both ends for their service.
The National Banking Act of 1863 required banks to keep a percentage of their notes and deposits in the form of lawful money (gold coins) as a reserve to cover the possibility of a run. That percentage varied depending on the size and location of the bank but, on an average, it was about twelve per cent. That means a bank with $1 million in coin deposits could use approximately $880,000 of that ($1 million less 12%) to purchase government bonds, exchange the bonds for bank notes, lend out the bank notes, and collect interest on both the bonds and the loans. The bank could now earn interest on $880,000 lent to the government in the form of coins plus interest on $880,000 loaned to its customers in the form of bank notes. That doubled the bank's income without the inconvenience of having to increase its capital. Needless to say, the bonds were gobbled up just as fast as they could be printed, and the problem of funding the war had been solved.
Galbraith says gloomily: Rarely has economic circumstance managed more successfully to confound the most prudent in economic foresight. In numerous years following the war the Federal government ran a heavy surplus. It could not pay off its debt, retire its securities, because to do so meant there would be no bonds to back the national bank notes. To pay off the debt was to destroy the money supply.
If all debt were repaid, our entire money supply would vanish back into the inkwells and computers. The national debt is the principal foundation upon which money is created for private debt. To pay off or even greatly reduce the national debt would cripple our monetary system. No politician would dare to advocate that, even if surplus funds were available in the Treasury. The Federal Reserve System, therefore, has virtually locked our nation into perpetual debt.
On June 25, 1863, exactly four months after the National Bank Act was signed into law, a confidential communique was sent from the Rothschild investment house in London to an associate banking firm in New York. It contained an amazingly frank and boastful summary: The few who understand the system [bank loans earning interest and also serving as money] will either be so interested in its profits or so dependent upon its favors that there will be no opposition from that class while, on the other hand, the great body of people, mentally incapable of comprehending,... will bear its burdens without complaint.
The Order of the Knights of the Golden Circle was a secret organization dedicated to revolution and conquest. Two of its better known members were Jesse James and John Wilkes Booth... In 1863 the group was reorganized as the Order of American Knights and, again the following year, as the Order of the Sons of Liberty. Its membership then was estimated at between 200,000 and 300,000. After the war, it went further underground and remnants eventually emerged as the Ku Klux Klan.
Alan Greenspan (above), was an eloquent spokesman for the gold standard and a critic of the System's subservience to the banking cartel. That was in 1966. After he became a director of J.P. Morgan & Company and was appointed Chairman of the Federal Reserve in 1987, he became silent on these issues and did nothing to anger the Creature he now served. Like Bryan, even the best of men can be corrupted by the rewards of politics.
John Kenneth Galbraith (above), well-known historian and professor at Harvard, has verified that he was asked to be a part of the team that put together The Report from Iron Mountain, a think-tank study commissioned by the Defense Department. The purpose of the study was to explore novel ways of keeping the masses in subservience. When a copy of the Report was leaked to the press, the government claimed it was a hoax. Galbraith confirmed that it was totally authentic. [Note: Seems to be pretty clear that this was actually a hoax. Fascinating controversy though... what was Galbraith thinking??]
Section V - The Harvest
Chapter Twenty - The London Connection
When J.P. Morgan, Sr., died in 1913, people were shocked to learn that his estate was valued at only $68 million, a paltry sum compared to the fortunes held by the Vanderbilts, Astors, and Rockefellers. It was even more unbelievable when Jack Morgan died in 1943 and left an estate valued at only $16 million. A small amount had been transferred to members of their families prior to their deaths, but that did not account for the vast fortunes which they visibly controlled during their lives. Surely, there had been a bookkeeping sleight-of-hand. On the other hand, it may have been true. When Alphonse Rothschild died in Paris in 1905, it was revealed that his estate contained $60 million in American securities. The Rothschilds in Britain undoubtedly held an equally large bloc. Furthermore, manly of these securities were handled through the House of Morgan. The possibilities are obvious that a major portion of the wealth and power of the Morgan firm was, and always had been, merely the wealth and power of the Rothschilds who had raised it up in the beginning and who sustained it through its entire existence.
Several emergency therapies were administered. The first was to use the Financial Committee of the League of Nations — which England dominated — to require all the other European nations to follow similar inflationary monetary policies. They were also required to establish what was called the "gold exchange standard," a scheme whereby all countries based their currency, not on gold, but on the pound sterling. In that way, they could all inflate together without causing a disruptive flow of gold from one to the other, and England would act as the regulator and guarantor of the system. In other words, England used the power of her position within the League of Nations to establish the Bank of England as a master central bank for all the other central banks of Europe. It was the prototype for what the Cabal now is doing with Federal Reserve and the World Bank within the framework of the United Nations.
There are several ways the life blood of one nation can be transfused to another. The most direct method, of course, is to make an outright gift, such as the bizarre American ritual called foreign aid. Another is to make a gift disguised as something else, such as needlessly stationing military bases abroad for the sole purpose of bolstering the foreign economy, or granting a loan to a foreign government at below market rates or—worse—with the full expectation that the loan will never be repaid. But the third way is the most ingenious of them all: to have one nation deliberately inflate its currency at a rate greater than the other nation so that real purchasing power, in terms of international trade, moves from the more inflating to the less inflating nation. This is a method truly worthy of the monetary scientists. It is so subtle and so sophisticated that not one in a thousand would even think of it, much less object to it. It was, therefore, the ideal method chosen in 1925 to benefit England at the expense of America. As Professor Rothbard observed: In short, the American public was nominated to suffer the burdens of inflation and subsequent collapse [the crash of 1929] in order to maintain the British government and the British trade union movement in the style to which they insisted on becoming accustomed.
Galbraith speaks with soft phrases to cushion a harsh reality. What he is saying is that the purpose of the meeting was to finalize a plan whereby the Governor of the Federal Reserve System was to deliberately create inflation in the U.S. so that American prices would rise, making U.S. goods less competitive in world markets and causing American gold to move to the Bank of England.
It** is one of the least understood realities of modern history that many of America's most prominent political and financial figures — then as now — have been willing to sacrifice the best interests of the United States in order to further their goal of creating a one-world government.**
Chapter Twenty-One - Competition Is A Sin
Having a lender of last resort is the only way a bank can create money out of nothing and still be protected from a potential "run" by its customers. In other words, it is the means by which the public is forced to pay a hidden tax of inflation to cover the shortfall of fractional-reserve banking. That is why the so-called virtue of a lender of last resort is taught with great reverence today in virtually all academic institutions offering degrees in banking and finance. It is one of the means by which the system perpetuates itself.
Henry P. Davison, who was a Morgan partner, put it bluntly when he cold a Congressional committee in 1912: "I would rather have regulation and control than free competition." John D. Rockefeller was even more to the point in one of his often repeated comments: "Competition is a sin."
To convince Congress and the public that the establishment of a banking cartel was, somehow, a measure to protect the public, the Jekyll Island strategists laid down the following plan of action:
- Do not call it a cartel nor even a central bank.
- Make it look like a government agency.
- Establish regional branches to create the appearance of decentralization, not dominated by Wall Street banks.
- Begin with a conservative structure including many sound banking principles knowing that the provisions can be quietly altered or removed in subsequent years.
- Use the anger caused by recent panics and bank failures to create popular demand for monetary reform.
- Offer the Jekyll Island plan as though it were in response to that need.
- Employ university professors to give the plan the appearance of academic approval.
- Speak out against the plan to convince the public that Wall Street bankers do not want it.
If not using the word bank was essential to the Jekyll Island plan, avoiding the word cartel was even more so. Yet, the cartel nature of the proposed central bank was obvious to any astute observer. In an address before the American Bankers Association, Aldrich laid it out plainly. He said: "The organization proposed is not a bank, but a cooperative union of all the banks of the country for definite purposes."
Half truths and propaganda notwithstanding, the organizational structure proposed by the Aldrich Bill was similar in many ways to the old Bank of the United States. It was to have the right to convert federal debt into money, to lend that money to the government, to control the affairs of regional banks, and to be the depository of government funds. The dissimilarities were in those provisions which gave the Creature more privilege and power than the older central bank. The most important of these was the right to create the official money of the United States. For the first time in our history, the paper notes of a banking institution became legal tender, not only for public debts, but for private ones as well. Henceforth, anyone refusing to accept these notes would be sent to prison.
If anyone doubted that such a trust really existed, their skepticism was abruptly terminated when LaFollette publicly charged that the entire country was controlled by just fifty men. The monetary scientists were not dismayed nor did they even bother to deny it. In fact, when George F. Baker, who was a partner of J.P. Morgan, was asked by reporters for his reaction to LaFollette's claim, he replied that it was totally absurd. He knew from personal knowledge, he said, that the number was not more than eight!
As Congressman Lindbergh explained: Ever since the Civil War, Congress has allowed the bankers to completely control financial legislation. The membership of the Finance Committee in the Senate and the Committee on Banking and Currency in the House, has been made up of bankers, their agents and attorneys. These committees have controlled the nature of the bills to be reported, the extent of them, and the debates that were to be held on them when they were being considered in the Senate and the House. No one, not on the committee, is recognized ... unless someone favorable to the committee has been arranged for.
These hearings were conducted largely as a result of the public accusations made by Congressmen Lindbergh and Senator LaFollette. Yet, when they requested to appear before the Committee, both of them were denied access. The only witnesses to testify were the bankers themselves and their friends.
To carry the message to the voters, it was decided that representatives from the world of academia should be enlisted to provide the necessary aura of respectability and intellectual objectivity. For that purpose, the banks contributed a sum of $5 million to a special "educational" fund, and much of that money found its way into the environs of three universities: Princeton, Harvard, and the University of Chicago, all of which had been recipients of large endowments from the captains of industry and finance. It was precisely at this time that the study of "economics" was becoming a new and acceptable field, and it was not difficult to find talented but slightly hungry professors who, in return for a grant or a prestigious appointment, were eager to expound the virtues of the Jekyll Island plan. Not only was such academic pursuit financially rewarding, it also provided national recognition for them as pioneers in the new field of economics. Galbraith says: Under Aldrich's direction a score or more of studies of monetary institutions in the United States and, more particularly, in other countries were commissioned from the emergent economics profession. It is at least possible that the reverence in which the Federal Reserve System has since been held by economists owes something to the circumstance that so many who pioneered in the profession participated also in its [the System's] birth. The principal accomplishment of the bank's educational fund was to create an organization called the National Citizens' League. Although it was entirely financed and controlled by the banks under the personal guidance of Paul Warburg, it presented itself merely as a group of concerned citizens seeking banking reform. The function of the organization was to disseminate hundreds of thousands of "educational" pamphlets, to organize letter-writing campaigns to Congressmen, to supply quotable material to the news media, and in other ways to create the illusion of grass-roots support for the Jekyll Island plan.
Both men had been Wilson's classmates at Princeton University. When Wilson returned to Princeton as a professor in 1890, Dodge and McCormick were, by reason of their wealth, University trustees, and they took it upon themselves to personally advance his career. Ferdinand Lundberg, in America's Sixty Families, says this: For nearly twenty years before his nomination Woodrow Wilson had moved in the shadow of Wall Street.... In 1898 Wilson, his salary unsatisfactory, besieged with offers of many university presidencies, threatened to resign. Dodge and McCormick thereupon constituted themselves his financial guardians, and agreed to raise the additional informal stipendium that kept him at Princeton. The contributors to this private fund were Dodge, McCormick, and Moses Taylor Pyne and Percy R. Pyne, of the family that founded the National City Bank. In 1902 this same group arranged Wilson's election as president of the university. A grateful Wilson often had spoken in glowing terms about the rise of vast corporations and had praised J.P. Morgan as a great American leader. He also had come to acceptable conclusions about the value of a controlled economy. "The old time of individual competition is probably gone by," he said. "It may come back; I don't know; it will not come back within our time, I dare say." H.S. Kenan tells us the rest of the story: Woodrow Wilson, President of Princeton University, was the first prominent educator to speak in favor of the Aldrich Plan, a gesture which immediately brought him the Governorship of New Jersey and later the Presidency of the United States. During the panic of 1907, Wilson declared that: "all this trouble could be averted if we appointed a committee of six or seven public-spirited men like J.P. Morgan to handle the affairs of our country."
Chapter Twenty-Two - The Creature Swallows Congress
The Republican President, William Howard Taft, was up for reelection. Like most Republicans of that era, his political power was based upon the support of big-business and banking interests in the industrial regions. He had been elected to his first term in the expectation that he would continue the protectionist policies of his predecessor, Teddy Roosevelt, particularly in the expansion of cartel markets for sugar, coffee, and fruit from Latin America. Once in office, however, he grew more restrained in these measures and earned the animosity of many powerful Republicans. The ultimate breach occurred when Taft refused to support the Aldrich Plan. He objected, not because it would create a central bank which would impose government control over the economy, but because it would not offer enough government control.
However, when Teddy Roosevelt returned from his latest African safari, he was persuaded by Morgan's deputies, George Perkins and Frank Munsey, to challenge the President for the Party's nomination. When that effort failed, he was then persuaded to run against Taft as the "Bull Moose" candidate on the Progressive Party ticket. It is unclear what motivated him to accept such a proposition, but there is no doubt regarding the intent of his backers. They did not expect Roosevelt to win, but, as a former Republican President, they knew he would split the Party and, by pulling away votes from Taft, put Wilson into the White House.
Some historians, while admitting the facts, have scoffed at the conclusion that deception was intended. Ron Chernow says: "By 1924, the House of Morgan was so influential in American politics that conspiracy buffs couldn't tell which presidential candidate was more beholden to the bank."
In short, most of Roosevelt's campaign fund was supplied by the two Morgan hatchet men who were seeking Taft's scalp.
Experience has shown that the most practicable method of getting hold of a political party is to furnish it with money in large quantities. This brings the big money-giver or givers into close communion with the party leaders. Contact and influence do the rest.
Throughout the campaign, Taft was portrayed as the champion of big business and Wall Street banks—which, of course, he was. But so were Roosevelt and Wilson. The primary difference was that Taft, judged by his actual performance in office, was known to be such, whereas his opponents could only be judged by their words. The outcome of the election was exactly as the strategists had anticipated. Wilson won with only forty-two per cent of the popular vote, which means, of course, that fifty-eight per cent had been cast against him. Had Roosevelt not entered the race, most of his votes undoubtedly would have gone to Taft, and Wilson would have become a footnote. As Colonel House confided to author George Viereck years later, "Wilson was elected by Teddy Roosevelt."
Colonel House, who had been educated in England and whose father represented England's merchant interests in the American South, had come into public life through the London Connection. It will be recalled from previous chapters that, perhaps more than any other person in America, he had helped maneuver the United States into World War I on the side of a desperate Britain and, by so doing, had also rescued the massive loans to Britain and France made by the Morgan interests. Not only had he been responsible for Wilson's nomination at the Democratic convention, but had become the President's constant companion, his personal adviser, and in many respects his political superior. It was through House that Wilson was made aware of the wishes of the Money Trust, and it was House who guided the President in every aspect of foreign and economic policy. An admiring biographer, Arthur Smith, writing in the year 1918, says that House "holds a power never wielded before in this country by any man out of office, a power greater than that of any political boss or Cabinet member." more recent biographer, George Viereck, was not exaggerating when he described House as "Chief Magistracy of the Republic," "Super-ambassador," "The pilot who guided the ship."
The new President admitted "he knew nothing" about banking theory or practice. Glass made the same confession to Colonel House in November, and this vacuum is of the utmost significance. The entire banking reform movement, at all crucial stages, was centralized in the hands of a few men who for years were linked, ideologically and personally with one another.
It was important for the success of the Glass Bill to create the impression it was in response to the views of a broad cross section of the financial community. To this end, Glass and his committee staged public hearings for the announced purpose of giving everyone a chance for input to the process. It was, of course, a sham. The first draft of the Bill had already been completed in secret several months before the hearings were held. And, as was customary in such matters, Congressman Lindbergh and other witnesses opposing the Jekyll Island plan were not allowed to speak.
In his autobiography, Treasury Secretary William McAdoo offers this view: Bankers fought the Federal Reserve legislation — and every provision of the Federal Reserve Act — with the tireless energy of men fighting a forest fire. They said it was populistic, socialistic, half-baked, destructive, infantile, badly conceived, and unworkable.... These interviews with bankers led me to an interesting conclusion. I perceived gradually, through all the haze and smoke of controversy, that the banking world was not really as opposed to the bill as it pretended to be. That is the key to this entire episode: mass psychology. Since Aldrich was recognized as associated with the Morgan interests and Vanderlip was President of Rockefeller's National City Bank, the public was skillfully led to believe that the "Money Trust" was mortally afraid of the proposed Federal Reserve Act. The Nation was the only prominent publication to point out that every one of the horrors described by Aldrich and Vanderlip could have been equally ascribed to the Aldrich Bill as well. But this lone voice was easily drowned by the great cacophony of deception and propaganda.
Years later, Paul Warburg would explain further: While technically and legally the Federal Reserve note is an obligation of the United States Government, in reality it is an obligation, the sole actual responsibility for which rests on the reserve banks.... The government could only be called upon to take them up after the reserve banks had failed. Warburg's explanation should be carefully analyzed. It is an incredibly important statement. The man who masterminded the Federal Reserve System is telling us that Federal Reserve notes constitute privately issued money with the taxpayers standing by to cover the potential losses of those banks which issue it. One of the more controversial assertions of this book is that the objectives set forth at the Jekyll Island meeting included the shifting of the cartel's losses from the owners of the banks to the taxpayers. Warburg himself has confirmed it.
Bryan was no match for the Jekyll Island strategists and he accepted the "compromises" at face value. Had there been any lingering doubts in his mind, they were swept away by gratitude for his appointment as Wilson's Secretary of State.
Chapter Twenty-Three - The Great Duck Dinner
When the Federal Reserve Act was submitted to Congress, many of its most important features were written in vague language. Some details were omitted entirely. That was a tactical move to avoid debate over fine points and to allow flexibility for future interpretation. The goal was to get the bill passed and perfect it later. Since then, the Act has been amended 195 times, expanding the power and scope of the System to the point where, today, it would be almost unrecognizable to the Congressmen and Senators who voted for it.
Seventy per cent of the cost of World War I was paid by inflation rather than taxes, a process that was orchestrated by the Federal Reserve System. This was considered by the Fed's supporters as its first real test, and it passed with flying colors.
Before Alan Greenspan was appointed as Chairman of the Federal Reserve by President Reagan in 1987, he had served on the Board of the J.P. Morgan Company. Before that, however, he had been an outspoken champion of the gold standard and a critic of the System's subservience to the banking cartel. In 1966 he wrote: When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us.... The "Fed" succeeded: it stopped the gold loss, but it nearly destroyed the economies of the world in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market—triggering a fantastic speculative boom.... As a result, the American economy collapsed. After his appointment to the Fed , Greenspan became silent on these issues and did nothing to anger the Creature he now served.
During the war, prices for agricultural products rose to an all-time high, and so did profits. Farmers had put part of that money into war bonds, but much of it had been placed into savings accounts at banks within the farming communities, which is to say, mostly in the Midwest and South. That was unacceptable to the New York banks which saw their share of the nation's deposits begin to decline. A way had to be devised to reclaim that money. The Federal Reserve System, which by then was the captive of the New York banks, was pressed into service to accomplish the deed. Few of those country banks had chosen to become members of the Federal Reserve System. That added insult to injury, and it also provided an excuse for the Fed to wage economic war against them. The plan was neither complex nor original; it had been used many times before by central bankers. It was (1) extend easy credit to the farmers to lure them into heavy debt, and then (2) create a recession which would decrease their income to the point where they could not make payments. The country banks then would find themselves holding non-performing loans and foreclosed property which they could not sell without tremendous losses. In the end, both the farmers and the banks would be wiped out. The banks were the target. Too bad about the farmers.
The purchase of securities by the Fed (with checks that have no money to back them) creates money; the sale of those securities extinguishes money. Although the Fed is authorized to buy and sell almost any kind of security that exists in the world, it is obligated to show preference for bonds and notes of the federal government. That is the way the monetary scientists discharge the commitment to create money for their partners, the political scientists. Without that service, the partnership would dissolve, and Congress would abolish the Fed.
Banker's acceptances are contracts promising payment for commercial goods scheduled for later delivery. They usually involve international trade where delays of three to six months are common. They are a means by which a seller in one country can ship goods to an unknown buyer in another country with confidence that he will be paid upon delivery. That is accomplished through guarantees made by the banks of both buyer and seller. First, the buyer's bank issues a letter of credit guaranteeing payment for the goods, even if the buyer should default. When the seller's bank receives this, one of its officers writes the word "accepted" on the contract and pays the seller the amount of the sale. The accepting bank, therefore, advances the money to the seller in expectation of receiving future payment from the buyer's bank. For this service, both banks charge a fee expressed as a percentage of the contract. Thus, the buyer pays a little more than the amount of the sales contract, and the seller receives a little less.
Although bankers' acceptances were commonly traded in Europe, they were not popular in the United States. Before the Federal Reserve Act was passed, national banks had been prohibited from purchasing them. A market, therefore, had to be created. The Fed accomplished this by setting the discount rate on acceptances so low that underwriters would have been foolish not to take advantage of it. At a very low discount, they could acquire short-term funds which then could be invested at a higher rate of return. Thus, acceptances quickly became plentiful on the open market in the United States. But who would want to buy them at a low return? No one, of course. So, to create that market, not only did the Federal Reserve set the discount rate artificially low, it also pledged to buy all of the acceptances that were offered. The Fed, therefore, became the principal buyer of these securities.
The world of acceptance banking was the private domain of the financial elite of Wall Street. Behind the American image, however, was a full partnership with investors from Europe. Total capital of the IAB's American shareholders was $276 million compared with $271 million from foreign investors. A significant portion of that was divided between the Warburgs in Germany and the Rothschilds in England. Just how large and free-flowing was that river of acceptance money? In 1929, it was 1.7 trillion-dollars wide. Throughout the 1920s, it was over half of all the new money created by the Federal Reserve—greater than all the other purchases on the open market plus all the loans to all the banks standing in line at the discount window.
Approximately 70% of the cost of war had been financed by debt. Murray Rothbard reminds us that, on the eve of depression in 1928, ten years after the end of war, the banking system held more government bonds than during the war itself. That means the government did not pay off those bonds when they came due. Instead, it rolled them over by offering new bonds to replace the old. Why? Was it because Congress needed more money? No. The bonds had become the basis for money in circulation and, if they had been redeemed, the money supply would have decreased. A decrease in the money supply is viewed by politicians and central bankers as a threat to economic stability. Thus, the government found itself unable to get out of debt even when it had the money to do so, a dilemma that continues to this day.
Nevertheless, the public still has the final say. If no one wants to borrow their money, the game is over.
The public has always been interested in free corn.
The other side of the coin is that, for every seller, there was a buyer. The insiders who had moved their investments into cash and gold were the buyers. It must be remembered that falling stock prices didn't necessarily mean that there was anything wrong with the stocks. Those representing solid companies were still paying dividends and were good investments—at a realistic price. In the panic, prices had tumbled far below their natural levels. Those who had the cash picked them up for a small fraction of their true worth. Giant holding companies were formed for that task, such as Marine Midland Corporation, the Lehman Corporation, and the Equity Corporation. J.P. Morgan set up the food trust called Standard Brands. Like the shark swallowing the mackerel, the big speculators devoured the small.
Section VI - Time Travel Into The Future
Chapter Twenty-Four - Doomsday Mechanisms
By 2006, gross interest payments on the national debt were running $406 billion per year. That consumed about 17% of all federal revenue. It now represents the government's largest single expense; greater than defense; larger than the combined cost of the departments of Agriculture, Education, Energy, Housing and Urban Development, Interior, Justice, Labor, State, Transportation, and Veterans' Affairs.
In 2006, interest on the national debt was already consuming 39% of all the revenue collected by personal income taxes [Note: I'm seeing a number more like 10% when I try to dig up these numbers]
Nearly twice as many people now work for government than for manufacturing companies in the private sector. There are more bank regulators than bankers, more farm-bureau workers than farmers, more welfare administrators than recipients. More citizens receive government checks than those who pay income taxes.
It has been said that we need not worry about interest on the national debt because "We owe it to ourselves." Let's take a look at who owes what to whom. The Fed, for many years, held only about 9% of the national debt. Agencies of the federal government held 28%. Foreign investors owned approximately 43% (2002 figures), and private-sector investors in the U.S. held the balance. By 2010, foreign investors had lost confidence in the U.S. ability to make good on its IOUs and ceased to bid on Treasury auctions. The Fed was obligated to monetize the difference (create money out of nothing) and, by August, was "purchasing" 80% of the debt. It is partly true that "We owe it to ourselves" but it is more accurate to say that all of us owe it to some of us. The some of us are private investors, seeking income that is exempt from state income taxes, and large institutions such as banks, corporations, insurance companies, and investment funds. With institutions, the money represents pooled assets belonging to thousands of small investors. So, a major portion of the interest on the national debt does, indeed, accrue to the benefit of a large sector of the American people. That's the good news. The bad news is that the government obtains every cent of the money it pays to us by confiscating it from us in the first place. If it is true that we owe it to ourselves, then it is also true that we pay it to ourselves. The money goes out of one pocket back into the other—minus a handling fee. The government takes $1,000 from us in taxes and inflation and gives us back $350. The so-called "benefit" to the public is an illusion. And more bad news: When people purchase government bonds, there is less money available for investment in private industry. It is well known that government credit "crowds out" private credit. The result is that the productive side of the nation is handicapped by unfair competition for investment capital. To obtain new money for growth, private companies must pay higher interest rates. These are passed on to the consumer in the form of higher prices. Many companies are forced to curtail their plans for expansion, and potentially new jobs are never created. Some companies are forced out of business altogether, and their employees are put out of work. The economy is always retarded by government debt. The larger the debt, the greater the damage.
But it is not difficult to imagine future conditions under which bond holders would decide not to renew. What would happen if the stability of the government were to be questioned, or if the productive capacity of the United States were to be challenged by massive terrorist attacks? In order to pay off those bonds on maturity, the Treasury would have to issue new ones. The Federal Reserve would have to purchase the new bonds with fiat money. Therefore, foreign-held federal debt is a ticking time bomb. If it should ever have to be picked up by the Fed, the inflationary impact on our country would be staggering.
A study by the AFL-CIO in 1977 revealed that, in spite of wage increases in terms of dollars, the real wages of the average American—in terms of what he can buy with those dollars—were going down. That trend was confirmed in 1980 by the U.S. Census Bureau. In 1992, the Consumers' Union analyzed how many hours one had to work to buy common items compared to thirty years previously. The report concluded: The average U.S. household has maintained its living standard largely because families are working more hours. Millions of women entered the work force in the past 25 years. In 1970, about 21 million women worked full time. Now that figure is over 36 million. That has helped to keep family buying power fairly stable. But for many families, it now represents the labor of two earners rather than one.
But The New World Order that is now incubating at the United Nations is an entirely different creature. Its members represent just about every dictator and warlord in the world. Its philosophy is built upon the socialist doctrine that all good flows from the state. Those who do not conform must be bent to the government's will or be eliminated. It cannot oppose totalitarianism for the simple reason that it is totalitarianism.
The Report from Iron Mountain concludes that there can be no substitute for war unless it possesses three properties. It must (1) be economically wasteful, (2) represent a credible threat of great magnitude, and (3) provide a logical excuse for compulsory service to the government.
Another possible surrogate for the control of potential enemies of society is the reintroduction, in some form consistent with modern technology and political processes, of slavery.... It is entirely possible that the development of a sophisticated form of slavery may be an absolute prerequisite for social control in a world at peace. As a practical matter, conversion of the code of military discipline to a euphemized form of enslavement would entail surprisingly little revision; the logical first step would be the adoption of some form of "universal" military service.
The final candidate for a useful global threat was pollution of the environment. This was viewed as the most likely to succeed because it could be related to observable conditions such as smog and water pollution—in other words, it would be based partly on fact and, therefore, be credible. Predictions could be made showing end-of-earth scenarios just as horrible as atomic warfare. Accuracy in these predictions would not be important. Their purpose would be to frighten, not to inform. It might even be necessary to deliberately poison the environment to make the predictions more convincing and to focus the public mind on fighting a new enemy, more fearful than any invader from another nation-or even from outer space. The masses would more willingly accept a falling standard of living, tax increases, and bureaucratic intervention in their lives as simply "the price we must pay to save Mother Earth." A massive battle against death and destruction from global pollution possibly could replace war as justification for social control. Did the Report from Iron Mountain really say that? It certainly did—and much more. Here are just a few of the pertinent passages: When it comes to postulating a credible substitute for war ... the "alternate enemy" must imply a more immediate, tangible, and directly felt threat of destruction. It must justify the need for taking and paying a "blood price" in wide areas of human concern. In this respect, the possible substitute enemies noted earlier would be insufficient. One exception might be the environmental-pollution model, if the danger to society it posed was genuinely imminent. The fictive models would have to carry the weight of extraordinary conviction, underscored with a not inconsiderable actual sacrifice of life.... It may be, for instance, that gross pollution of the environment can eventually replace the possibility of mass destruction by nuclear weapons as the principal apparent threat to the survival of the species. Poisoning of the air, and of the principal sources of food and water supply, is already well advanced, and at first glance would seem promising in this respect; it constitutes a threat that can be dealt with only through social organization and political power.... It is true that the rate of pollution could be increased selectively for this purpose.... But the pollution problem has been so widely publicized in recent years that it seems highly improbable that a program of deliberate environmental poisoning could be implemented in a politically acceptable manner. However unlikely some of the possible alternative enemies we have mentioned may seem, we must emphasize that one must be found of credible quality and magnitude, if a transition to peace is ever to come about without social disintegration. It is more probable, in our judgment, that such a threat will have to be invented.
In the final analysis, it makes little difference. The important point is that The Report from Iron Mountain, whether written as a think-tank study or a political satire, explains the reality that surrounds us.
How many times does it have to be explained? The environmental movement was created by the CFR. It is a substitute for war that they hope will become the emotional and psychological foundation for world government.
Chapter Twenty-Five - A Pessimistic Scenario
The essential act of war is destruction, not necessarily of human lives, but of the products of human labor. War is a way of shattering to pieces, or pouring into the stratosphere, or sinking into the depths of the sea, materials which might otherwise be used to make the masses too comfortable, and hence, in the long run, too intelligent....
Chapter Twenty-Six - A Realistic Scenario
Every year, a few concerned Congressmen submit a bill to investigate or audit the Federal Reserve System. They are to be commended for their effort, but the process has been an exercise in futility. Their bills receive little or no publicity and never get out of committee for a vote. Even if they did receive serious attention, however, they could actually be counterproductive.
In the past, the banks have enjoyed a bountiful cash flow from interest on money created out of nothing. That will change. They will have to make a clear distinction between demand deposits and time deposits. Customers will be informed that, if they want the privilege of receiving their money back on demand, their deposit of coins or Treasury Certificates will be kept in the vault and not lent to others. Therefore, it will not earn interest for the bank. If the bank cannot make money on the deposit, then it must charge the depositor a fee for safeguarding his money and for checking services. If the customer wants to earn interest on his deposit, then he will be informed that it will be invested or lent out, in which case he cannot expect to get it back any time he wants. He will knowingly put his money into a time deposit with the agreement that a specified amount of time must pass before the investment matures.
We must eradicate the species. The species is collectivism. Collectivism is the concept that the group is more important than the individual and that government is justified in any act so long as it is claimed to be for the greater good of the greater number. That is the foundation upon which the Federal Reserve is built and it is the foundation for literally every other modern assault against our liberty. Collectivism is the enemy of freedom, and we must launch a pro-active crusade against it. Not to do so is to surrender without a fight.