Previously,we saw the holy Grail of banking reform was actually a hidden agenda of politics, banking, and big business.The seeds were planted in Indianapolis and now, the game is surely afoot.
The National Monetary Commission in 1908
Informing the public via a predetermined public relation campaign, with surveys and solutions of a predetermined outcome worked well. Keeping the scheme going for a decade took time, effort, and investment.
With the passage of the Aldrich-Vreeland Act in 1908 contained two important but little-known provisions: the emergency currency potential and the establishment of the NMC. The former provision would have expired in 1914 but curiously, was used for the one and only time that year.
However, Aldrich had packed his commission in June of 1908 with senators and representatives but, more significantly, powerful banking leaders.
This junket headed for Europe in the fall, studying and gather information with heads of private European banks and central banks. They concluded European banking was more efficient and the European currencies had more gravitas compared to the dollar. By December,, back in the U.S., Aldrich added Paul Warburg and others to the inner circle. Charles A. Conant was chosen for ‘research and public relations’. Warburg consulted with many academic economists at top-tier universities.
The American Bankers Association recommended a U.S. Central bank along the lines of the German Reichsbank. Hesitant heads of national banks were assured the business model would not be adversely affected by the origin of a U.S. Central bank.
Regional banking districts in the country, under control of a central board, was a recommentation in November, 1909. Throughout this whole era, the Morgan and Rockefeller banking interests had agreed to agree on a central bank. Yes.
Incidentally, William Howard Taft was elected president, a friend of Aldrich and others since 1900. On September 14, 1909, President Taft spoke in Boston and gave a big boost to the notion of a central bank. Wow. And a week later, The Wall Street Journal gave space to various op-eds, unsigned, praising that great idea of ‘elastic currency’ and other benefits. Actually, these letters were crafted by Charles Conant. He also recommended the regulation of interest rates by the central bank as a useful tool. The Washington Bureau of the Associate Press was also co-opted.
Another significant speech by Paul Warburg in New York on March 23, 1910 impressed the Merchants’ Association of New York. They had printed 30,000 copies of the transcript and distributed these far and wide.
For public consumption, a monetary conference in New York in November 1910 presented a specific recommendations for a central bank and an appeal for all part of the country to support the Bill that Alrich would soon craft.
The Private Railroad Car
G. Edward Griffin [1] sets the scene at a New Jersey railroad station like the opening of a thriller movie: it’s 10 p.m. on November 22, 1910 as a handful of important men board a private car. Unlike the numbered cars of the rest of this train, this one has no number, only a small plaque with the inscription “Aldrich”.
The senator greets his guests by first name only – and this rule is adhered throughout the trip and the week at Jekyll Island, Georgia. The private club on the island is part-owned by J.P. Morgan.
The personnel lineup:
- Senator Nelson P.Aldrich
- Paul Warburg, various banking connections
- Abraham Andrew, Assistant Secretary of the U.S. Treasury
- Henry P. Davison, senior partner, J.P. Morgan Co.
- Frank A. Vanderlip, president, National City Bank of New York
- Charles D. Norton, president, First National Bank of New York
- Benjamin Strong, head of Bankers Trust Co.
(The last two are questionable due to differing accounts in the ‘historical record’ but both were in the Morgan camp. Aldrich, incidentally, was a financial partner of J.P. Morgan, and also father-in-law of John D. Rockefeller, Jr.)
If Strong wasn’t there, he surely knew about it – we will hear more of him.
The public did indeed hear something of this secret meeting, but it was in 1935. The Saturday Evening Post carried an article by Vanderlip and the key takeaway was:
If it were to be exposed publicly that our particular group had got together and written a banking bill, that bill would have had no chance whatever of passage by Congress.
Warburg led the argument for a regional structure, presumably cognizant of public mistrust of too much power located in one area. Aldrich wanted an overt central bank with no political meddling. The compromise that was reached became the Aldrich Plan, introduced in Congress in 1912 and 1913.
(On November 5–6, 2010, Ben Bernanke stayed on Jekyll Island to commemorate the 100-year anniversary of the original meeting.)
Alas, the Democrats won the 1912 elections resoundingly. The Republican Aldrich Plan seemed to fall by the wayside.
Shiny new President Woodrow summoned a special session of Congress in April 1913. To seal the importance, he appeared in person, the first president since John Adams to do so. Wilson’s address outlined various approaches to economic policies, banking and currency reform, tariffs, and the income tax.
The 16th Amendment had been ratified on February 3, 1913. Wilson needed that tax to support lower tariffs. A little bit of patronage pressure, and the Revenue Act of 1913 was passed by the House on May 8, 1913; finally it went through the Senate on September 9, 1913.
Meanwhile, the Aldrich Plan was not dead, though that hated Republican name vanished. Representative Carter Glass, chairman of the House Banking and Currency Committee, and Senator Robert Owen, chairman of the Senate’s did a little tinkering here and there. Wilson mandated a central Federal reserve board be appointed by the president – with the consent of the Senate.
There was one thorn in Wilson’s side, his Secretary of State, William Jennings Bryan. The “Cross of Gold” person was still a power in the Democratic Party. The sop to Bryan was that Federal Reserve currency would be a liability of the government – and also, provision for federal loans to farmers.
All this horse trading took time, though, and Wilson had other fish to fry during 1913.
The 17th Amendment (Direct Election of U.S. Senators), ratified and declared, became part of the Constitution on May 31, 1913..
Finally, months in the making, what started as the Glass-Owen bill became the Federal Reserve Act of 1913. It passed the House on December 13 and the Senate, after an all nighter, on December 23. Wilson signed it that morning.
A great year for the Populists, remember they wanted:
- a graduated income tax, direct election of senators
and before long, they got women’s suffrage (19th Amendment), the eight-hour work day, and restricted immigration.
The Federal Reserve System, 1914 and Beyond
Aldrich had convened the Jekyll Island cabal but Warburg was the only expert on the European central bank model. Galbraith asserted that “Warburg has, with some justice, been called the father of the system.”
In the end, everybody won something. Aldrich’s ‘decentralization’ became the regional banks and avoidance of the term ‘bank’ itself inevitably led to the Federal Reserve System nomenclature. And having the Federal Reserve Board in Washington, D.C. implied ‘government’. Smoke & mirrors.
A decade later, the little Orphan Annie comic strip appeared. Did anyone recognize Daddy Warbucks, the self-made billionaire doing good works with his wealth as an avatar of Paul Warburg? Anyway …
Back in the day, the public story was that the Federal Reserve System would stabilize the economy. We’ll see how that worked out.
The real power of the System was – and is – the Federal Reserve Bank of New York. And who was offered the post of governor there? Benjamin Strong. Whether or not he was at Jekyll Island, there is no doubt he had influence, having been the personal auditor for J. P. Morgan, Sr. during the Panic of 1907, and also a long-time friend of Henry Davidson.
Paul Warburg became one of the seven members of the Federal Reserve Board in Washington.
History has a droll way of throwing some unexpected crises – who would have imagined the assassination of an obscure archduke would lead to a worldwide conflagration? Well, that’s the myth, anyhow. That the British mercantilist system might have been under threat from a foreign export power is unthinkiable as a cause for war. Isn’t it?
The outbreak of World War One had one immediate financial side effect: the New York Stock Market closed. Public anxiety was dispelled by the Secretary of the Treasury, using that dormant part of the Aldrich-Vreeland Act. Emergency currency was available, by October 23, 1914, $368,616,990.
In November, the 12 regional banks of the Federal Reserve System had opened and the emergency currency was withdrawn. The FRS was open for business!
England and various European countries had been preparing for war for years. Armies were trained, alliances arranged. But when war occurred, England found itself fiscally bereft. John Pierpoint “Jack” Morgan, Jr. ruled the House of Morgan, his father having died in March, 1913. Jack became the sales representative of British bonds and also the procurement officer for their needed war material. Nice profit on money going and coming!
In 1915, President Wilson removed the ban on private bank lending to foreign allies. The House of Morgan immediately loaned $12,000,000 to Russia and $50,000,000 to France. Meanwhile, the first $12,000,000 British contract arrived, the first of many. The final total would be $3,000,000,000.
Author John Moody, writing in 1919 summed it up:
Not only did Britain and France pay for their supplies with money furnished by Wall Street, but they made their purchases through the same medium … Inevitably the House of Morgan was selected for this important task. Thus the war had given Wall Street an entirely new role. Hitherto it had been exclusively the headquarters of finance; now it became the greatest industrial mart the world had ever known. In addition to selling stock and bonds, financing railroads, and performing other tasks of a great banking centre, Wall Street began to deal in shells, cannon, submarines, blankets, clothing, shoes, canned meats, wheat, and the thousands of other articles needed for the prosecution of a great war.
Large profits and small. A commission for selling $2 billion of Allied stock holdings to buy munitions. The sale of 4,400,000 rifles for $194,000,000. The House of Morgan was both buyer and seller, and no surprise that many of the purchase contracts went to businesses where Morgan was a shareholder.
A reputation as war profiteer does attract some resentment. On July 3, 1915 an intruder stole into Jack’s Long Island mansion and shot him twice in the groin. Jack, however, survived.
Great Britain, having burned through the Australian gold, from the 19th century gold rush there, found itself short of money to fund a war. It did the thing that is obvious to every politician: achieve fiat money by golng off the gold standard. Every other country in Europe did also. America maintained a gold standard but not redemption for foreign held dollars.
By the end of the war, every country had inflated its money supply; Germany went eight times the pre-war amount. This explains much of things to come.
The Cunard Lines had turned over their record-breaking Lusitania over to the Admiralty. The speedy ocean lined proved inadvisable to refit into an auxiliary cruiser due to operational expense (910 tons of coal a day!), so it was ordered to continue passenger (and mail) service. On April, 22 1915, the German embassy ordered advertisements in 50 U.S. newspapers, advising prospective passengers that an Atlantic crossing went through a war zone, the seas around the British Isles.. Many of these advertisements were never published …
On May 1, 1915, the Lusitania set out on its final voyage to Liverpool, England. Little did the passengers know there was a hidden cargo of munitions and other material for the British war effort.
At this point in time, the German navy followed the code of limited submarine warfare. Neutral vessels were off limits.
At 1420 hours on May 6, the commander of the U-20, Walther Schwieger, fires one torpedo at a target:
Torpedo hits starboard side right behind the bridge. An unusually heavy detonation takes place with a very strong explosive cloud. The explosion of the torpedo must have been followed by a second one [boiler or coal or powder?]… The ship stops immediately and heels over to starboard very quickly, immersing simultaneously at the bow… the name Lusitania becomes visible in golden letters.
U20 log
The Lusitania sank in only 18 minutes. Few lifeboats were properly launched due to the extreme starboard list.
Of 1,959 passengers and crew, 1,195 perish, including 128 Americans.
Several official inquiries were convened that created enough obfuscation to keep tinfoil hat manufacturers busy to this very day. Prevented testimony, state secrets, crew statements in identical handwriting with similar phrasing; definitely one, no, two, or was it three torpedos. Some closed hearings, other open with no access to some evidence. Two sets of Admiralty papers, depending on the type of hearing. Perjury.
At any rate, Wilson’s immediate response was three diplomatic notes to Germany: strong, stronger, ultimatum. After the second, Secretary of State William Jennings Bryan resigned in protest.
Nonetheless, the American public had been fired up, just not enough for war.
The British were already hinting that, should they lose the war, they would never be able to repay their debt to America. In early 1916, President Wilson sent his personal adviser, “Colonel” Edward Mandell House to London. And why not – House was the shadow power that had arranged Wilson’s nomination for president. House even had two rooms at the White House. And while Wilson sought re-election on the slogan “he kept American out of war”, his adviser consulted with British foreign office officials, notably Sir Edward Grey. Secretary of State William Jennings Bryan had not be told of this unofficial arrangement, nonetheless, he was not stupid.
Mary Baird Bryan, co-author, The Memoris of William Jennings Bryan:
While Secretary Bryan was bearing the heavy responsibility of the Department of State, there arose the curious conditions surrounding Mr. E.M.House’s unofficial connection with the President and his voyages abroad on affairs of State, which were not communicated to Secretary Bryan … The President was unofficially dealing with foreign powers.
U.S. Ambassador Walter Hines Page:
House arrived … [with] the idea of American intervention … a minimum programme of peace – the least the Allies would accept, which, he assumed, would be unacceptable to the Germans …we should plunge into the War, not on the merits of the cause, but by a carefully sprung trick.
(memorandum, February 9, 1916)
On March 9, 1916, President Wilson sanctioned the secret agreement with England and France for the United States of intervene on behalf of the Allies. It seems Wilson and House believed the worthy end, of world peace and a world government, lay through the means of war. They had help: Assistant Secretary of the Navy Roosevelt (the Franklin Delano) urged arming merchant ships in violation of neutrality.
And time passed with America on the sidelines and the Allies accusing Wilson of dragging his feet. Maybe they didn’t understand the U.S. election cycle. The attitude of the British public toward America was “too proud or too scared” and they termed unexploded shells on the front line as “wilsons”.
Both British and German propaganda served to inflame the American public over the next months.
Wilson was narrowly re-elected in 1916. A tipping point happened when Germany attempted to enlist Mexico as an ally, following their new policy. Of unrestricted submaine warfare. This threated American commercial shipping.
On April 2, 1917 in his message to Congress, Wilson spoke of armed neutrality no longer working, “enemies against us at our very doors … unsuspecting communities … and offices of government with spies … criminal intrigues” … and a warning: disloyalty “will be dealt with a firm hand of repression.” And finally, the world must again be safe for democracy.
With fifty representatives and six senators opposted, a declaration of war was passed by Congress on April 4, 1917 and signed by Wilson the April 6.
Behind the scenes during this period, the Federal Reserve went into full operation in 1915. They played a significant role in financial Allied and U.S. War efforts (with some help.)
Wilson furthered Democratic values with the agricultural Smith-Lever Act of 1914 and the Federal Farm Loan Act of 1916. He also thwarted a national transportation shutdown by guiding the Adamson Act through Congress which instituted the eight-hour day.
Then there was the Espionage Act of 1917 and the Sedition Act of 1918. A firm hand, yes. Anarchists, Wobblies, communists, anti-war activists, and even newspaper editors were grist for the DoJ mill. Deportation of recent immigrants who opposed the war came with the Immigration Act of 1918. Then there was Wilson’s Committee of Public information, the first official propaganda office.
Wilson’s League of Nations concept came via a speech on January 8, 1918, his Fourteen Points.
Liberty Bonds
We have a war! And on April 24, the 1917 Emergency Loan Act initiated the first of four bond issues. Buy Liberty Bonds! It’s a patriotic duty. A limit of $5 billion was set; $2 billion were sold.
The second, third and forth issues appeared in, respectively, October 1,1917, April 5, 1918, and September 28, 1918.
A poor response to the bonds was met by the Treasury with a sales campaign promoted by Hollywood stars, Boy Scouts, and even a special Army Air Corps elite group that travelled the country. Buy a bond and get to ride in a JN-4 airplane!
Incidentally, that 1917 act is the tool by which U.S. Treasury bonds are issued to this very day.
We will re-visit the fourth Liberty Bond issue in fifteen years.
The active “war to end war” ended on November 11, 1918 with a cease fire. The Treaty of Versailles was signed on June 28, 1919.
In our next exciting episode, we will see the Federal Reserve assistance to restoring the gold standard for the world. Only it wasn’t …
Long post but worth the read, really interesting. I just found this blog and I haven’t been able to stop. Really good stuff on this site.
@ novista
This series has been WORLD CLASS.
I’ll contribute a long commentary regarding Da Fed.
RE
——–
With Da Fed being the most popular Punching Bag these days for all our monetary
problems, its often postulated that if we simply eliminate it, all these
problems would be eliminated. Nothing could be further from the truth of
course. Under most scenarios you can think of, things will get quite a bit
worse. Of course, they are going to get worse anyhow and Da Fed is an
instrument of great Evil, so it must be done away with, but people do need to
realize this won’t reap much in the way of short term benefits.
What Da Fed does, and in fact all CBs do is provide coordination and Central
Planning in a large economic system utilizing Money. Any Bank can go ahead and
print Bank Notes and get a money based economy going anywhere based on the
Assets that bank holds in its “Reserve”. Those assets could be anything from
Gold to Land to Manufacturing Plants to Oil, doesn’t matter what as long as
those assets hold some perceived value in the economy. There must of course be
a SURPLUS in the econmy of the most basic goods first though, because in the
absence of such a surplus nothing else holds any value. IOW, once Food is in
short supply, all the Gold in your basement safe won’t buy it.
In many prior posts I have gone over the principles of how money itself evolves,
so its a good time here to look a bit further into how Central Banking evolved,
and why it became particularly powerful in the Industrial Era.
Everyplace in everytime hasn’t always had a whole bunch of Precious Metals
around to Coin Up and use for Money. The spot might have been plentiful in many
other resources, well into Surplus of the basics, but little in the way of PMs
around. You could take Africa as an example where Cowrie Shells were used for
Money for quite some time, but a better example for our puposes is North America
in the early days of Colonization.
England, France, Portugal and Spain themselves never seemed to have enough Gold
around in those years, since they were always busy with wars against each other
going back to the collapse of the Roman Empire. The coinage they did have was
always necessary to pay soldiers, who generally would take no other form of
Money since it didn’t generally hold value too well in a Wartime scenario.
Besides the soldiers, there was the necessity of purchasing all the Consumables
of a War, Guns, Ammo, Horses, Food for the Soldiers etc. Again, during a time
of War, the folks in control of these resources would only part with them for
payment in specie, not Sovereign Promises which would go bad if the side you
provided the stuff to lost the war. Of course, “Democracy” eventually changed
this dynamic some, which I will explain as we go along here.
So anyhow, the Colonial powers tended to hoard any PMs they got hold of, and
rather than pay for raw materials in specie to their dependent colonies, they
basically just got Credits on the Balance Sheet of the East India Company.
e.g., if you delivered a certain amount of Lumber for instance to the docks, you
had Credit with which to buy more Crosscut Saws and so forth coming back the
other way, thus expanding your Lumber Bizness. However, no Gold is showing up
in your economy this way to use to pay the Lumberjacks, so what do you do here?
Answer, the Lumber Company starts printing its own notes, which you then can use
to buy your own Crosscut Saw in the Company Store, along with other nicely
produced Goods from Europe also, like Cloth produced on Industrial Looms.
In fact any Gold or Silver that does turn up circulating in the economy gets
sucked OUT of the economy because the King over In Europe will only accept as
Tax Payment what you manage to squeeze out here from immigrants who arrived with
a few Pieces of Eight or Louis D’Ors in their pockets.
Recent immigrants to the FSofA not being quite the money DOPES people are today
realized they could set up their own Banking houses and systems, get some
internal trade going and pretty much avoid Taxation by the King on this. So
laws are passed as to what is allowed to be used as Legal Tender which makes
local trade even more difficult, and Colonists and Pigmen alike are very unhappy
with the situation. Eventually they Revolt and start up a New Country, mainly
so they can control their own commerce, not get taxed to beat the band and yes,
create their own Money also.
The Founding Fathers, the Aristocracy of the New country are well aware of
Monetary issues, so they make some laws on Coinage rules and invest in CONgress
the power to coin money, but this doesn’t stope Banksters from creating Notes
and there still is a remarkable dearth of available PMs to coin up here during
this period In fact I am pretty sure at the end of the Revolutionary War the
new Nation started out in debt to the French and probably Kraut banksters as
well.
So now in the early days of the FSofA you have a very chaotic system of
different Banksters creating Notes for local commerce, a few PMs floating
around, and very POWERFUL Banking interests from the Old Country who want to
gain hegemony over the system. They eventually get Alexander Hamilton to set up
the First Bank of the US, which in due course Fails of course screwing numerous
people. More chaos ensues. Then the Second Bank of the FSofA gets chartered
and things go OK until the late 1840s or so, when there are yet more Banking
problems going on over in Europe. Andy Jackson “kills” the 2nd Bank of the
FSofA, and now we move into the “Free Banking” period which lasts all the way up
until Da Fed is chartered in 1913.
Now, while Pollyanna Free Market Economic History buffs look at this period as
one of great Growth and Freedom, what it really allowed for was a massive grab
of resources by the most powerful Banking Houses over in Europe, and besides
that was a fundamental cause of the Civil War. During the period, the big FSofA
Banking interests consolidated under the Robber Barons, Rockefeller, Carnegie,
Morgan and Mellon. These folks got mega-rich on the backs of Chinese and Irish
they imported over here to build the Railroads, who while they were better off
than they were in their home countries in those years were certainly not living
high on the hog here.
The period also is one in which Crime flourished throughout the land, it was the
heyday of the Gunslingers of the Old West of course. These folks though were
petty thieves compared to the thievery the US Calvary was engaged in as it
cleared the land of Natives and Colonists alike to get rights of way for the
Railroads and gain the Mineral Rights for Oil and Coal containing land.
For J6P of those years, if he was fortunate out living in a Little House on the
Prairie and not in the direct path of the Railroad or sitting on top of an Oil
field, he probably did OK most of the time without much money living close to a
subsitence lifestyle. The various Financial Panics through the years probably
didn’t affect him all that much, although there were certainly “Hard Times”,
where more than the average number of boys left the Farm and took up Gunslinging
and Bank Robbery as a means of making a living. Jed Clampett not withstanding,
anytime some Rube did happen to be living on top of an Oil Field, he was quickly
snookered out of it and if he didn’t sell out his mineral rights to Standard Oil
he bought instead a Ticket to the Great Beyond.
So now you have this Great Nation of the FSofA in the post Civil War years, the
Railroads expanding their tentacles across the once pristine landscape and
Factory towns popping up like Buboes across the Northeast and around the Great
Lakes. Is there any “National Money” really floating around here though? Not
really, the Railroads are all paying the Chinese and Irish in their own Scrip
and so are all the Factory Towns. Lincoln did issue “Greenbacks” and there are
“Dollars” floating around in the larger economies, but even besides the systemic
financial Panics of the period you get many individual bank and company failures
along the way also. The number of times J6P working in some Factory town got
hosed when the Factory closed up and he was left holding a bunch of worthless
Company Scrip to buy goods at the now Outta Biz commpany store is incalculable.
So in this New World where J6P is dependent on Jobs in Industry, he WANTS a
Single Currency good anywhere in the Nation which he can Save if he is a
penurious and industrious sort of fellow, which when his Job in the Company
Store goes south he can still use to buy stuff at some other store in some other
town, where hopefully he can find a new job also paying this Dependable Currency
of the Dollar.
Into this vaccuum in 1913 step our friends the Rockefellers, Rothschilds,
Morgans and Mellons to establish Da Fed after secret meetings on Jekyll Island.
The agreement amongst them is to Charter a new Central Bank which will issue the
Currency they ALL will use in their Company Stores, and which Da Goobermint will
have to Borrow from THEM if it wants to buy anything. Since they now Own most
of what is worth owning by this time and all other New Biznesses are much
smaller than they are, these new biznesses ALSO must use this money rather than
issuing their own Company Scrip. So, even if not directly Owned by JP Morgan,
Mom & Pop Biz is indirectly owned by him because in order to use this Money,
they are paying a 3% Tax on it all the time. This is done on an aggregate level
to keep the system rolling and is partially recycled back into Da Goobermint,
but even just 1% of the entire Production of the country is constantly being fed
into the hands of the few people who hold the stock and control over Da Federal
Reserve, the Central Bank in control of the creation of Currency. How much they
will create at any given time and how it gets lent out all passes through the
Primary Dealers, who then determine how much will be Invested into various types
of Stocks and Bonds being issued out. So the economy is essentially Centrally
Planned by the owners of these Banks and Corporations, and they build out the
economy for their own greatest benefit. Tha greatest benefit comes in the
Monopolization of core Industries producing, well, EVERYTHING. Food production
especially becomes consolidated to the point where it almost becomes impossible
to grow your own food these days.
Now, why, oh why did CONgress and Treasury not simply continue the printing of
Greenbacks and keep Money Production “In House” as the province of the Public,
as opposed to a few powerful Banking Houses? There are numerous reasons for
this, though the biggest one is simply general Ignorance of how money works by
people who are Elected out of the general population, and the ones who are not
Ignorant are already Corrupt and easily bought by Monied interests.
The composition of the House and Senate in 1913 was little different than it is
today, you have some Populist types elected from the Hoi Polloi who are usually
Rubes, and then some (and more all the time of course) Rich folks who buy their
way into office. You know, Michale Bloomberg, Mitt Romney et al. The Rubes are
replaceable Idiots, and they gotta raise money to get reelected and not get
Assassinated on the pages of the Corporate Owned Newspaper, and the Monied
interests are interested in making sure they stay RICH. So in 1913, when the
crew from Jekyll Island presents this “Federal Reserve” Plan, its pretty easy to
get all the Votes necessary in CONgress to approve it, and POOF, here in the
FSofA Central Banking is BORN AGAIN, with yes of course the very same folks
running this system as were running it over in Europe going back to time
immemorial here. Postulate among more than a few people here being that those
folks are actually the Elders of Zion, running the whole system since it began
even predating the Roman Empire and predating Babylon also. In the broadest
sense this just about has to be true, what isn’t real clear is how well
particular family lines held up through so many millenia, but the overall
banking system can be connected up quite well going back through the Medici and
the Catholic Church, then predating that through Roman Banking connections to
Egypt and then from there predating in Egypts Banking connecitons to Persia and
the Mesopotamian Empire.
The insufficient supply of PMs I mentioned early on here was resolved through
the combination of the Bond Market and Parliamentary “Democracy”. While in the
Early days Merchants would only take from a King his Gold in payment for the
various goods and services he needed to Make War, the invention of a Democracy
made Debts which a Nation State took on to make War last indefinitely long. If
a King took on a debt, when the King dies, the debt dies with him. When a
Nation through its “Representative Goobermint” takes on a Debt, it lasts
essentially forever, unless and until the entire Goobermint comes crashing down
in a Revolution, and even then once a New Goobermint is established, in order to
get back into the Good Graces of the Money Lenders, in the Name of the People
the New Goobermint has to accept at least part of the responsibility to pay back
old debts incurred by the last Goobermint. With the establishment of such
“Popular Goobermints”, Bonds became BETTER than Gold, and so in the years since
the Bond Market of Sovereign Debt has been the big driver for Money Creation.
If Sovereigns created Debt FREE money and directly issued Currency, there would
BE no Bond Market, and no way for private Merchants to sieve money from the
population. So it never evolved that way, anytime it started it got squashed
out by those running an already functioning monetary system.
This leads us finally to today, where after lo all these many years the Chickens
come Home to Roost, and the Sovereign Bond Market is in catastrophic failure
mode. Debt has been heaped on Debt, Pyramided and Rehypothecated up many times
over here. “Good as Gold” (better actually) Sovereign Debt is used as
Collateral to borrow against not once, but many times over on the asumption of
course all the bad bets won’t go bad at the same time, forcing Margin Calls from
all corners. Soon as any one of these goes bad though, all the people owning
rehypothecated debt get nervous and call in their loans. So, if you used Greek
Sovereign “good as gold” Bonds upon which to borrow money several times over to
buy a variety of other assets, soon as the Greek Bonds go bad, every Lender who
loaned you some money based on those Greek Bonds sends in the Repo Man.
It would be bad enough if it was JUST the Greek Sovereign Bonds here, but the
fact is of course it is ALL of them. Pretty much every Sovereign State on earth
INCLUDING the Chinese and Germans has borrowed against the future, based on the
idea of Perpetual Growth of their economies, which as we know cannot possibly
happen in a world of finite resources. Besides that, all the Debt even if not
denominated in the Dominant Fiat denomination of Dollars is integrally connected
through the Bond Market, so when that collapses all the Fiat does also of
whatever denomination no matter who is printing it.
There is sufficient separation here between economies that Euros, Yen, Dollars,
Francs etc can all be printed at various different rates which produces varying
rates of inflation and deflation in these economies, but its really impossible
for anyone of them to truly “Monetize the Debt”. The Debt is actually many
times the amount of currency in existence resultant from fractional banking and
rehypothecation. Helicopter Ben can print a $1T or two a year maybe, but actual
dollar Denominated Debt floating around out there is in the $100s of Ts and
maybe Quadrillions. Try to make good on that through monetization, the world is
swimming in Dollar Bills a mile thick covering the entire globe right up to
Alaska. OK, I’m guessing here, but its a lot of paper anyhow.LOL. So, we come
right back around to the reality that most of this debt is irredeemable and
simply will be flushed down the toilet, but that debt represents MOST of the
Wealth of the top .01% of the World. Allow the Greeks to declare BK and wash
their debt, the Irish will want that too. So will the Italians. So the Bond
Holders don’t want to wash ANYBODY’s debt out here. They will have to of
course, because that which cannot be paid will not be, but they keep stringing
it out here pressing austerity down and squeezing out every last drop possible,
and the populations mostly accept it because economic Collapse and total failure
of the monetary system is WORSE than austerity. At least until the austerity is
SOOO tight you just can’t live anymore anyhow and and its worse than Death to
keep trying to live under it. When more than a certain percentage of the
population reaches that point, then you get your Revolutions. I’ll ballpark
that at around 25%, but that is not a 25% figure of Unemployment. Its a 25%
figure of people with ZERO resources who can’t even get Bennies like transfer
payments and SNAP Cards. We are still well under that here in the FSofA of
course.
Nevertheless, as the Cascade proceeds along here, as first the Greeks go Down
and then the Italians, the collapsing debt will reverberate through the Banking
system, eventually collapsing all the Fiat, as the Bond Market becomes
irretrievably broken. At this point, Money on the International level ceases to
function. this wil be very disruptive obviously to political stability
everywhere, and substituting Gold just won’t work well or for too long even if
tried. As I see it, the only thing which might briefly work in stages is doing
some Credit Money creation a la Ellen Brown, but this only possibly works to
salvage some commerce for a while locally if people still accept this money. In
order to meet the needs of so many people, Da Goobermint would have the tendency
to issue far too much of it and it would hyperinflate. It also would have only
one real source of distribution, that would be from Da Goobermint. So all Jobs
would be Goobermint Jobs. Essentially, its the Soviet Model and it just has
tons of problems associated with it, the most apparent of which is a high level
of corruption. Let’s face it, if you turned CONgress into the Politburo and
gave them the monopoly over issuing money and dishing it out, they would just be
the same type of Power Brokers that the TBTF Banks are now. However, as was the
case with the Soviets, it could stave off a total Mad Max outcome for a while if
undertaken with some degree of success, and would seem to be a likely outcome in
the near term.
The greater problem than Goobermint stepping in here to retake Money Creation
from the hands of the Illuminati is that the collapse will make apparent the
real lack of resources necessary to support 7B people on the planet. Not that
such resources don’t currently exist in aggregate, they still do. Problem is
the new money created won’t function Cross Border in international trade.
Disparate Credit Money issued by varying goobermints is like Scrip issued by
different Companies, it doesn’t buy anything at another company store unless
there is agreed on valuations for the notes. When the Dollar collapses, all
these agreed on valuations go out the window here, and it would be very chaotic,
to say the least.
Still, it holds the system together a while longer if it gets implemented
successfully in some locales by some Goobermints. The issue here is though that
the international trade in Oil and food would be so disrupted by this that many
areas that are not self sufficient would suffer extreme deprivation, aka a good
portion of the population would Starve to Death. This has blowback in terms of
conflict at the borders of all these places, as people on one side of a border
currently starving attempt to get to the other side where people are not doing
too great, but not yet starving. So you get lots of local cross border wars,
along with internal Mad Max issues.
So, as you can see here, bad as the Central Banking paradigm is, once it
collapses you get many more and worse problems which people seek to avoid here.
Can’t be avoided forever, but nobody wants it to be TODAY, in My Little Town.
The fact it will inevitably end up with so many people off the cliff and such a
major population reduction makes it impossible to say what will come after this
in the end. It could be enslavement of the remaining population by a few; it
could be a balkanization with many smaller self sustaining populations on an Ag
level, it could be a vast reduction to Primitivism in the Hunter-Gatherer
paradigm, or it could be an Extinction Level Event. We won’t know the answer to
this in our lifetimes, though we may see the beginnings of it to have a better
idea of which way it will go here. What is definitely true though is that when
the Central bank model fails and the Dollar goes the way of the Dinosaur, the
changes will begin in earnest. Root for the End of Da Fed if you wish to, I
certainly do. Realize however that the end of Da Fed is no solution to our
problems, but rather will only bring to the surface many deeper ones embedded in
the monetary sytem.
The End of Da Fed is not the End of our problems. It is not even the Beginning
of the End. It is just the End of the Beginning.
RE
Hi ,RE. How have you been? Still boinking that underage skinny Eskimo girl?
Nice to have you back. Yeah, I know .. you’re not really back. But, you are .. at least for this article.
Nice article! I have no idea whether or not you’re full of shit, or brilliant. That’s because I am pretty clueless when it comes to the creation of money, how it functions, etc. All I do know is that I often don’t have enough of it. lol
Stick around …
“A decade later, the little Orphan Annie comic strip appeared. Did anyone recognize Daddy Warbucks, the self-made billionaire doing good works with his wealth as an avatar of Paul Warburg? Anyway …”
Has anyone taken a close look at the “Mysterious Mr. AM” from that same strip? Think of the bearded, fez-wearing manipulator of officials (turned into monkeys) with French and German accents as “Amschel Meyer” perhaps? Mason “Harold Gray” did some sinister work. Do some deconstruction on Orphan Annie and see what you come up with.
Great read Novista.
Why don’t We the People all chip in a buy our own puppet candidate?
Is that even possible sans MSM backing ?
Thanks Stuck, but I am pretty busy on Reverse Engineering these days, plus I often comment on Economic Undertow and Our Finite World also now. You are always welcome of course.
RE
Thanks, all for comments.
Two more points to consider: US government gives millions to corporations with no strings attached: http://www.collapsenet.com/free-resources/collapsenet-public-access/must-see-videos/item/6207-us-government-gives-millions-to-corporations-with-no-strings-attached
How Swedes and Norwegians broke the power of the 1%: https://www.commondreams.org/view/2012/01/26-3
There was a time when Scandinavian workers didn’t expect that the electoral arena could deliver the change they believed in. They realized that, with the 1 percent in charge, electoral “democracy” was stacked against them, so nonviolent direct action was needed to exert the power for change.
In both countries, the troops were called out to defend the 1 percent; people died.
Many people then found that their mortgages were in jeopardy. (Sound familiar?) The Depression continued, and farmers were unable to keep up payment on their debts. As turbulence hit the rural sector, crowds gathered nonviolently to prevent the eviction of families from their farms.
When the employers’ federation locked employees out of the factories to try to force a reduction of wages, the workers fought back with massive demonstrations.
the misery of the poor became more urgent daily, and the Labor Party felt increasing pressure from its members to alleviate their suffering, which it could do only if it took charge of the government in a compromise agreement with the other side.
This it did. In a compromise that allowed owners to retain the right to own and manage their firms, Labor in 1935 took the reins of government in coalition with the Agrarian Party. They expanded the economy and started public works projects to head toward a policy of full employment that became the keystone of Norwegian economic policy. Labor’s success and the continued militancy of workers enabled steady inroads against the privileges of the 1 percent, to the point that majority ownership of all large firms was taken by the public interest.
The 1 percent thereby lost its historic power to dominate the economy and society. Not until three decades later could the Conservatives return to a governing coalition, having by then accepted the new rules of the game, including a high degree of public ownership of the means of production, extremely progressive taxation, strong business regulation for the public good and the virtual abolition of poverty. When Conservatives eventually tried a fling with neoliberal policies, the economy generated a bubble and headed for disaster. (Sound familiar?)
Labor stepped in, seized the three largest banks, fired the top management, left the stockholders without a dime and refused to bail out any of the smaller banks. The well-purged Norwegian financial sector was not one of those countries that lurched into crisis in 2008; carefully regulated and much of it publicly owned, the sector was solid.
Although Norwegians may not tell you about this the first time you meet them, the fact remains that their society’s high level of freedom and broadly-shared prosperity began when workers and farmers, along with middle class allies, waged a nonviolent struggle that empowered the people to govern for the common good.