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In the golden days of radio, on the Edgar Bergen Show, the ventriloquist would ask his dummy, Mortimer Snerd, "How can you be so stupid?" And the answer was always the same. After a moment of deep thought on the part of Mortimer, he would drawl his reply, "Well, it ain't easy!"
Article I, Sections 8 and 10 say:
The delegates were precise in their use of these words. Congress was given
the power to "coin money," not to print it. Thomas M. Cooley's Principles of
Constitutional Law explains that 'to coin money is to stamp pieces of metal
for use as a medium of exchange in commerce according to fixed standards of
value."
That was truly an unfortunate oversight on the part of the document's framers, but they probably never dreamed in their wildest nightmares that their descendants "could be so stupid" as to not understand their intent.
They spoke out
against it in no uncertain terms, and they were adamant that it should never
be tolerated again in America - at either the state or federal level.
PAPER MONEY IN THE COLONIES
Massachusetts was the first to use it as a means of financing its military raids against the French colony in Quebec. The other colonies were quick to follow suit and, within a few years, were engaging in a virtual orgy of printing "bills of credit." There was no central bank involved. The process was simple and direct, as was the reasoning behind it.
As one colonial legislator explained it:
The consequences of this enlightened statesmanship were classic.
Prices skyrocketed, legal tender laws were enacted to force the colonists to accept the worthless paper, and the common man endured great personal losses and hardship. By the late 1750s, Connecticut had price inflated by 800%, the Carolinas had inflated 900%, Massachusetts 1000%, Rhode Island 2300%.1
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.2
1- Paul and Lehrman, p. 23.
WARTIME INFLATION
The following figures speak eloquently for themselves:
Although the economy was devastated by this flood of fiat money, most victims were totally unaware of the cause.
In 1777, the sentiment of a large segment of the population was expressed by the words of one patriotic old lady who said:
The immediate result of this money infusion was the appearance of prosperity.
After all, everyone had more money and that was perceived as a very good thing. But this was quickly followed by inflation as the self-destruct mechanism began to roll. In 1775, the colonial monetary unit, called the Continental, was valued at one-dollar in gold. In 1778, it was exchanged for twenty-five cents.
By 1779, just four years from its issue, it was worth less than a penny and ceased to circulate as money at all.
It was in that year that George Washington wrote:
1. For an overview of expenditures, see
Paul and Lehrman, pp. 26-27.
The saying "Not worth a Continental" has its origin in this gloomy period.
PRICE CONTROLS AND LEGAL-TENDER LAWS
In response, the colonial legislatures and the Continental Congress did what governments always do to prevent it.
They resorted to wage and price controls and to legal-tender laws with harsh penalties for non-compliance. Under one such law, those who refused to accept worthless money were even described as traitors.
It declared:
Rhode Island not only leveled a substantial fine for non-acceptance of its notes but, upon a second offense, an individual lost his citizenship. When this was declared unlawful by a panel of judges, the legislature reacted by dismissing the judges from office.3
Then, as now, those who suffered the most from fiat money were those who held the most trust in government. In 1777 these were mostly the Whigs, for it was they who patriotically held paper money and, as a result, lost their livelihoods and their life savings. The Tories, on the other hand, mistrusting both government and its paper money, passed the bills as quickly as possible in trade for real assets, especially gold.
Consequently, as a group, they weathered the storm fairly well. But they often were derided by their less prudent neighbors as "Torie speculators," "hoarders," and even "traitors."
A year later, in a letter to James Madison, he said:
In February of 1787, Washington wrote to Henry Knox:
1. Quoted by Atwood, p. 3.
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 CONSTITUTIONAL CONVENTION
George Mason from Virginia told the delegates he had a "mortal hatred to paper money."
Previously he had written to George Washington:
James Wilson from Pennsylvania said:
John Langdon from New Hampshire warned that he would rather reject the whole plan of federation than to grant the new government the right to issue fiat money.
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:
An interesting thought.
It stated:
But, after a lively discussion on the matter, the offending provision was voted to be removed from the Constitution by an overwhelming margin.1
Voicing the sentiment of the majority of the delegates, Alexander Hamilton said:
The journal of the Convention for August 16 contains this notation:
1. For an excellent summary of the interplay of ideas between the delegates,
see Edwin Vieira, Jr., Pieces of Eight: The Monetary Powers and Disabilities
of the United States Constitution (New Jersey: Sound Dollar Committee,
1983), pp. 71-76.
The power to issue bills of credit is definitely not delegated to the United States, and it is specifically prohibited to the States.
Therefore, if any power to issue fiat money
legally exists at all, it is reserved for the people. In other words,
individuals and private institutions, such as banks, have the right to issue lOUs and hope that the public will use them as money, but government, at any
level, is clearly prohibited by the Constitution from doing so.
A SUGGESTION FOR YOUR CONGRESSMAN
It would be interesting if each reader of this book would send copies to his or her elected representatives in Washington, or at least a photocopy of this section. Every member of Congress has sworn to uphold the Constitution, and you might attach a short note asking them when they intend to begin.
Otherwise they would face a difficult choice. Either they would have to mutilate logic in order to uphold the present inconsistencies - thus, opening themselves to possible ridicule - or they would have to declare in favor of the Constitution and literally cause the collapse of the entire deficit-spending, central-bank mechanism.
Such an act would take a considerable amount of courage. Not only would they suffer the wrath of the Establishment that is nourished by that mechanism, they also would have to face a bewildered public which, because of lack of knowledge about the Constitution or the nature of money, could easily be convinced that the judges had lost their minds.
Likewise, it is safer for politicians to respond to inquiries of this kind merely by quoting some self-serving government document which makes our fiat monetary system sound quite legal and marvelously constitutional.
To coin money meant to mint precious-metal coins. Period.
The wording of this section of the Constitution can be traced to the original Articles of Confederation which further clarifies the meaning that was generally understood at that time:
THE ORIGIN OF THE DOLLAR
An official commission had been established by the Continental Congress to sample the circulating coins in the country and determine their average value by weight and purity. Charts were published, and all coins of various origin were listed by comparative value. Congress was already "regulating the value of" the nation's money by the time the Constitution was drafted.
How these coins became dollars is an interesting story.
Edwin Vieira tells us:
In 1785, Thomas Jefferson urged the adoption of the Spanish silver dollar as the nation's official monetary unit.
In a pamphlet submitted to the delegates of the Continental Congress, he said:
On July 6, 1785, Congress unanimously voted to adopt the Spanish dollar as the official monetary unit of the United States.
Jefferson realized, however, that this was not sufficient. Although the coin had been one of the most dependable in terms of weight and quality, it still varied in content between issues, and a way had to be found to rate one coin in value against another. That was, after all, the service that Congress was required to render when it was given the power to "regulate the value" of money.
Jefferson came directly to the point when he said:
The logic voiced by Jefferson could not be ignored.
Two years later, after carefully examining the actual weight and fineness of the Spanish dollars currently in circulation, Congress defined the dollar. After ratification of the Constitution, a dollar would contain 371.25 grains of fine silver, and all items in commerce, including other coins, were to be measured in value against that standard.
Secretary of the Treasury, Alexander Hamilton, in his 1791 report to Congress, urged the establishment of a federal mint and also presented a powerful case for maintaining an inviolable standard for the coins to be produced by that mint.
He said:
1. The Debates and Proceedings in the Congress of the United States (J. Gales, compil. 1834), Appendix, pp. 2059,2071-73. Cited by Vieira, pp. 95,97.
BIMETALLISM
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.
It was determined after careful analysis of the free-market that the value of gold at that time was approximately fifteen times the value of silver. The Coinage Act of 1792 accordingly set the relative value of gold-to-silver at fifteen-to-one. It then authorized the federal government to mint gold coins called Eagles, and it specified that their value was ten dollars. In other words, the gold coins would be equal in value to ten silver coins.
Ten silver coins, each of 371.25 grains of fine silver, would contain a total of 3,712.5 grains. The content of the Eagle, therefore, was one-fifteenth that amount, or 247.5 grains of fine gold.
What Congress did do was authorize the minting of a gold coin and arbitrarily fix the value of the gold in that coin at fifteen times the value of the dollar. And it also stated that all silver and gold coins produced in the federal mint were to be legal tender in accordance with their value, based on weight and purity, relative to the standard of the silver dollar.
FREE COINAGE
The government merely performs a technical function of creating the coin and stamping it with its insignia to certify the correct weight and purity. The state's role in this is exactly the same as inspecting the scales in a grocery store or the meter on a gasoline pump.
It is merely fulfilling the Constitutional requirement to set standards and verify the accuracy of weights and measures.
Elgin Groseclose explains:
SOUND MONEY AND ECONOMIC PROSPERITY
The December 16, 1789 edition of the Pennsylvania Gazette declared:
But that was just the beginning.
Historian Douglass North says that,
Louis Hacker describes the period as one,
1. Groseclose, Money and Man, p. 1 67.
Furthermore, the federal deficit, which amounted to twenty-eight per cent of expenditures in 1792, dropped to twenty-one per cent in 1795. By 1802, the deficit had disappeared altogether and had been replaced by a surplus that was almost as large as the government's total spending.
In a letter to Catherine Macaulay Graham, he said:
And in a letter to the American poet and diplomat, David Humphreys, Washington exclaimed:
On the specific subject of paper money without backing by gold or silver, Washington wrote:
1- These letters were written in 1790 and 1791, quoted by At wood, pp. 5-6.
The free market then would have assigned it an exchange value in terms of goods and services, and that automatically would have determined its correct monetary value as a ratio to the silver dollars which were bidding for the purchase of the same items. It was inevitable, therefore, that soon after the "ten-dollar" Eagle was created, the value of gold over silver began to climb higher than the prescribed ratio of fifteen-to-one, and the Eagles ceased to circulate.
In later years, with the discovery of the great gold fields in California and Australia, the process reversed itself, and silver dollars disappeared from commerce.
But, even though this bimetallism led to a discrepancy between the actual conversion ratio and that which the government had prescribed, nevertheless, it took place in the open market and no one was greatly injured by the inconvenience. Throughout it all, there was just one standard: the defined silver content of a dollar. Furthermore, both the silver and gold coins were of intrinsic value and totally honest in their measure.
No nation could do more for the prosperity of its citizens than
that.
SUMMARY
This was the deliberate intent of the Founding Fathers who had bitter experience with fiat money before and especially during the Revolutionary War. In response to the need to have a precisely defined national monetary unit, Congress adopted the Spanish dollar then currently in use and defined the content of that dollar to be 371.25 grains of pure silver.
With the establishment of a federal mint, American silver dollars were issued in accordance with that standard, and gold Eagles also were produced which were then equal in value to ten silver dollars.
Most importantly, free coinage was established wherein Americans were able to convert their raw silver and gold into national coins officially certified by the government as to their intrinsic value. The product of these measures was a period of sound money and great economic prosperity, a period that would come to an end only when the next generation of Americans forgot to read their history and returned to the use of paper money and "bills of credit."
Nowhere in history can one find so many men in one legislative body who understood the fraud inherent in fiat money and the hidden-taxation nature of inflation. There was never such an assembly of scholars and statesmen determined to set a safe course for the nation of their own creation. Literally, they handed us a treasure map. All we had to do was follow it to economic security and national prosperity.
But, as we
shall see in the following sections, that map was discarded when the lessons
of history died out with tlu^se who had lived it.
Chapter Sixteen
It is a surprising fact that the United States had its first central bank even before the Constitution was drafted.
It was chartered by the Continental Congress in the Spring of 1781 and opened its doors the following year. There were great expectations at that time that the province of Canada would soon join the rebel colonies to form a union extending across the entire North American continent. In anticipation of that, the new financial institution was called the Bank of North America.
He was a wealthy Philadelphia merchant who had profited greatly from war contracts during the Revolution. He had carefully studied the secret science of money and, by 1781, was widely considered to be the financial wizard of Congress.
Following the practice of fractional reserve, it was allowed to issue paper promissory notes in excess of actual deposits, but, since some gold and silver had to be held in the vault, there were definite limits to how far that process could go. Bank notes were not forced on the people as legal tender for all debts, public and private, but the government did agree to accept them at their face value in payment of all taxes and duties, which made them as good as gold for that specific purpose.
Furthermore, unlike the central banks of today, the Bank of North
America was not given the power to directly issue the nation's money.
FUNCTIONED AS A CENTRAL BANK
This, plus the fact that they were accepted at face value in payment of all federal and state taxes, plus the further fact that the federal government did not at that time have a functioning money of its own, made these bank notes attractive for use as a circulating medium of exchange. The intended result was that the Bank's paper would be accepted as money, which for a while, it was.
Furthermore, the Bank was made the official depository for all federal funds and it almost immediately loaned $1.2 million to the government, much of which was created out of nothing for that purpose. So, in spite of the limitations placed upon the Bank, and in spite of the fact that it was essentially a private institution, it was intended to be and, in fact, did function as a central bank.
Then, using this as a fractional-reserve base, he simply created the money that was needed for the subscription and loaned it to himself and his associates. Such is the power of the secret science.
One also must conclude that, while the founding fathers were wise on the nature of fiat money created by the government's printing press, they had not yet had extensive experience with the same mechanism hidden behind the obscurities of fractional-reserve banking.
Murray Rothbard details its demise:
1- Rothbard, Mystery, pp. 194-95.
AN END RUN AROUND THE CONSTITUTION
But, while the door may have been closed, the window was still open. Congress was denied the power to print money, but it was not denied the power to borrow it.
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. It is possible that Hamilton, Morris, and other Federalist leaders had hoped to keep the government out of the money-making business, not because it was the constitutional thing to do, but because that would leave the field clear for a central-bank mechanism which, because it was further from public view and political control, could become their own private engine of profit.
It would appear that the only other explanation is that these men were fickle in their views and did not really understand the implications of their acts.
In view of their
brilliance in all other matters, however, it is difficult to muster
enthusiasm for that interpretation.
THE HAMILTON-JEFFERSON CONFLICT
The Federalists gathered around the ideas of Hamilton. The anti-Federalists, later called the Republicans, were attracted to the ideas of Jefferson.1
1. Curiously, the present Democratic Party traces its origin to Jefferson's
Republicans.
Furthermore, he said, even if the Constitution had granted such power, it would be an extremely unwise thing to do, because allowing banks to create money could only lead to national ruin.
Furthermore, while it is true the Constitution did not specifically grant the power to create such a bank, it was, nevertheless, an implied power, because it was needed to accomplish other functions which were granted in the Constitution.
AMERICA'S SECOND CENTRAL BANK IS CREATED
It was modeled closely after the Bank of England, which means it was almost an exact replica of the previous Bank of North America. In fact, as evidence of continuity with the past, the president of the new bank was Thomas Willing, the same man who had been a partner of Robert Morris and president of the old bank.1
And once again, the Bank was made the official depository of all federal funds.
Reminiscent of the Morris scheme in capitalizing the Bank of North America, this federal "investment" was essentially a means whereby federal funds could be used to make up the short-fall of the private investors.
And he was certainly right. The Bank was able to open its doors with less than nine per cent of the private capital required by its charter. The total capitalization was specified at $10 million, which means that $8 million was to come from private stockholders.
However, as John Kenneth Galbraith wryly observed:
1.It is interesting to note that, as a
member of the Continental Congress, Willing had been one of those who voted
against the Declaration of Independence.
THE CREATURE COMES FROM EUROPE
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:
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:
Gustavus Myers, in his History of the Great American Fortunes, is more pointed.
He says:
The Rothschilds, therefore, were not merely investors nor just an important power.
They were the power behind the Bank of the United States! The
significance of the Rothschild power in American finance and politics was
the subject of extensive comment in a previous section, so there is no need
to cover that ground again. It is important here, however, to at least make
a mental note of the fact that the Creature from Jekyll Island is descended
from a species that is not native to this land.
1. Derek Wilson, p. 178.
INFLATION ALL OVER AGAIN
That was made clear by the fact that the maximum rate of interest it was allowed to charge was six per cent. That made it impractical to make loans to anyone except the federal government and a few large, prime-rate borrowers.
And the government wasted no time putting its new central-bank mechanism to work. Having "invested" $2 million at the start, it converted that into $8.2 million borrowed within the next five years. Which means that $6.2 million was created specifically for its use.
In that same five-year period, wholesale prices rose by 72%, which is another way of saying that 42% of everything people had saved in the form of money was quietly confiscated by the government through the hidden tax called inflation.
It was federal debt that allowed the political and monetary scientists to violate the intent of the founding fathers, and it was this same federal debt that prompted Jefferson to exclaim:
Like so many things in the real world, the Bank of the United States was a mixture of evil with some good.
It certainly was not all bad. In colonial times, the state governments printed as much paper money as they pleased, and the loss of purchasing power was, in many cases, total. The Bank, on the other hand, was required to maintain some gold and specie as a base for its pyramid of money.
Even though it was an inverted pyramid with reserves being smaller than the quantity of bank notes, it still represented a boundary to just how far the money supply could be expanded. And that was good.
So, like their counterparts in the Federal
Reserve System of our modern day, they spoke the language of restraint and,
in a few instances, even acted with restraint as well.
WILDCAT BANKS
They were given that name not because they were untamed - although that would have been another good reason to do so - but because they were located in areas so remote in the frontier that it was said their only customers were wildcats.
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.
The wildcatters, however, were not reluctant to sprinkle a few precious-metal coins over the top of nails and let that take care of public relations. In some cases, as state examiners went from bank to bank to check the reserves, the gold would arrive only a few minutes ahead of them, having been rushed from the vault of the bank previously audited.
If the notes were not good enough for the Bank of the United States, they were not good enough for them either. This served as an indirect force of moderation that affected all banks of that time. And that, too, was good.
Galbraith, for example, writes admiringly:
One who is less enamored with the idea of a central bank would be tempted to ask:
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.
They would become the most popular banks and, therefore, the most prosperous. In order to accomplish this, however, they would have to reject the worthless notes of other banks. The public would react as expected, and even the most unscrupulous banks would have to toe the line if they wanted to survive. Moderation would be forced on the entire banking system as a result of open competition within a free market.
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.
AN INSTRUMENT OF PLUTOCRACY
The inflation that it caused by its own activities could have been enlarged even further by the activities of the other banks as well. But, that it could have been worse does not make it good. 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. And it especially did not work against those elite few, the political and monetary scientists, who were making huge profits from the enterprise.
The Bank had done precisely what Hamilton had advocated:
The development of this plutocracy was well described by Governor Morris, the former delegate from New York who had helped to draft the Constitution into its final form.
He had been an assistant to Robert Morris (not related) and was a champion of the concept of a natural aristocracy. So he knew his subject well when he warned:
1- Written on July 2, 1787, in a letter to James Madison. Quoted in "Prosperity Economics/' by W. Cleon Skousen, Freeman Digest, February, 1985, p. 9.
It is tempting for critics of the central-bank mechanism to attribute that to the awakening common sense of the American public. Unfortunately, the picture is not that pleasing. It is true that the Jeffersonian Republicans were eloquently holding forth against the Creature's progenitor, and their influence was substantial.
But there was another group that joined with them which had almost exactly opposite ideas and goals.
The Jeffersonians opposed the Bank because they believed it was unconstitutional and because they wanted a monetary system based only upon gold and silver coin. The other group was made up of the wildcatters, the land speculators, and the empire-building industrialists. They opposed the Bank because they wanted a monetary system with no restraints at all, not even those associated with fractional reserve.
They wanted every local bank to be free to create as much paper money as the public would swallow,, because they would then use that money for their own projects and profit. Indeed, politics does produce strange bedfellows.
When the smoke of battle lifted, the bill for charter renewal had been defeated by one vote in the House and one vote, cast by Vice-President George Clinton to break the tie, in the Senate. And so, on January 24, 1811, the Bank of the United States closed its doors.
The War of 1812 saw to that.
THE WAR OF 1812
The primary cause, we are told, was the British impressments 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.
It was a classic case of the unholy alliance, the cabal, that always develops between political and monetary scientists.
Professor Rothbard gives the details:
1. Rothbard, Mystery, pp. 198-99.
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.
JUGGLING TRICKS AND BANKING DREAMS
Trying to bring the nation to its senses, he never ceased speaking out against the evil of dishonest money and debt:
2. Writings, Library Edition, Vol. XIV, p. 227.
And still, Congress did not listen.
1. Letter to Dr. Thomas Cooper, Sept.
10, 1814, Writings, Library Edition, Vol. XIV, pp. 187-89.
SUMMARY
Modeled after the Bank of England, it was authorized to issue more paper promissory notes than it held in deposits. In the beginning, these notes were widely circulated and served as a national currency. Although the bank was essentially a private institution, it was designed for the purpose of creating money to lend to the federal government, which it did from the start.
On January 24, 1811, the charter was defeated by one vote in the Senate and one in the House. The central bank was gone, but the wildcatters were everywhere.
The government chose to fund the war by encouraging wildcat banks to purchase its war-debt bonds and convert them into bank notes which the government then used to purchase war material. Within two years, the nation's money supply had tripled, and so had prices. 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.
The banks, in turn, promised them they could exchange the paper for their coins whenever they wished.
At the same time, however, through the mechanism of fractional-reserve banking, paper money was created far in excess of the value of the coins held in reserve.
Since the new money had just as much claim to the coins as the old, the bankers knew that, if a sizable percentage of their customers were to request a withdrawal of their coins, that solemn promise simply could not be kept. This, in fact, is precisely what happened over and over again during that period.
My zeal against those institutions was so warm and open at the establishment of the bank of the U.S. that I was derided as a Maniac by the tribe of bank-mongers, who were seeking to filch from the public their swindling and barren gains... Shall we build an altar to the old paper money of the revolution, which ruined individuals but saved the republic, and burn on that all the bank charters present and future, and their notes with them?
For these are to ruin both republic and individuals. This cannot be done. The Mania is too strong. It has seized by its delusions and corruptions all the members of our governments, general, special, and individual.1
1. Lester J. Cappon, ed., The Adams-Jefferson Letters (New York: Simon and Schuster, 1971), Vol. II, p. 424.
Jefferson was right.
Congress had neither the wisdom nor the courage to let the free market clean up the mess that remained after the demise of the first bank of the U.S. If it had, the fraud soon would have become understood by the public, the dishonest banks would have folded, the losses would have been taken, and the suffering would have been ended, perhaps forever. Instead, Congress moved to protect the banks, to organize the fraud, and to perpetuate the losses.
All of this was accomplished in 1816
when a twenty-year charter was given to the Second Bank of the United
States.
THE SECOND BANK OF THE UNITED STATES
Congress unashamedly extracted from the private investors what amounted to nothing less than a bribe in the form of $1.5 million,
The bankers were glad to pay the fee, not only because it was a modest price for such a profitable enterprise, but also because, as before, they received an immediate government deposit of one-fifth the total capitalization which then was used as the base for manufacturing much of the remaining startup capital.
The charter required the Bank to raise a minimum of $7 million in specie, but even in its second year of operation, its specie never rose above $2.5 million.3
Once again, the monetary and political scientists had carved out their profitable niches, and the gullible taxpayer, his head filled with sweet visions of "banking reform," was left to pick up the tab.
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.4
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.
There was also the tiny matter of corruption.
As the Bank's major historian writes:
In economics, every policy carries a consequence, and the consequence of the loose monetary policy of the Second Bank of the United States was that America was introduced to her first experience with what now is called the "boom-bust" cycle.
Galbraith tells us:
The Bank had the advantage over its competitors of a federal charter plus the government's agreement to accept its notes in the payment of taxes.
But the state banks were by no means left out of the game. It was still within their power to create money through 1 fractional-reserve banking and, thus, to further inflate the amount of the nation's circulating currency. Anxious to get in on this action, Pennsylvania chartered thirty-seven new banks in 1817. That same year, Kentucky followed suit with forty new charters.
The total number of banks grew by 46% in just the first two years after the central bank was created.
Any spot along the road that had,
In that same time frame, the money supply was expanded by an
additional $27.4 million; another taxpayer fleecing of over forty per cent
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?
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.
But stupidity is not a characteristic of the average banker, especially a central banker, and we must conclude that many of the monetary scientists are well aware of the monster's power for destruction.
At best, they just don't care as long as they are safe. And at worst, they perceive that they are in the apple-harvesting business. They deliberately tease and prod the monster in anticipation of his rampage through the village orchards. In the final analysis, of course, it is of little importance whether the shaking of the trees is out of innocence or malice.
The end result is the same. My, how the apples do fall.
Professor Rothbard says:
1. Rothbard, Mystery, pp. 204-05. Also see Galbraith, p. 77.
THE CYCLE IS WORSENED BY GOVERNMENT INTERFERENCE
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. The overall economy will absorb the losses, and commerce at large will continue to prosper. Within an environment of prosperity, even those who have been injured by fraudulent banking would have a good chance for rapid recovery.
But, when a central bank is allowed to protect the fraudulent operators and to force all banks to function the same, the forces of competition can no longer dampen the effect The expansion becomes universal and gigantic. And, of course, so does the contraction. Except for the bankers and the politicians, everyone is injured at the same time; depression is everywhere; and recovery is long delayed.
As historian William Gouge observed:
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.
THE SUPREME COURT UPHOLDS THE BANK
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.
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.
Never mind all that. The Treasury did not print it, therefore, it was not government money.
Here was another end run around the Constitution, executed this time by the very men who were assumed to be its most loyal defenders.
But since the Republican Party had by then abandoned those principles, a new coalition was formed, headed by Martin Van Buren and Andrew Jackson, to resurrect them. It was called the Democratic Party, and one of its agenda items was to abolish the Bank of the United States.
After
Jackson was elected to the Presidency in 1828, he wasted no time in
attempting to build Congressional support for that goal.
NICHOLAS BIDDLE
He was the archetype of the new Eastern Establishment: wealthy, arrogant, ruthless, and brilliant, he had graduated from the University of Pennsylvania at the age of only thirteen, and, as a young man entering business, had fully mastered the secret science of money.
He replied:
As Jackson publicly noted a few months later, this was an admission that most of the state banks existed only at the pleasure of the Bank of the United States, and that, of course, meant at the pleasure of Mr. Biddle.
To criticize the Bank is one thing, but to come down squarely for its elimination altogether would surely cost him many votes. So, Biddle requested Congress to grant an early renewal of the charter as a means of softening Jackson's campaign against it.
The bill was backed by the Republicans led by Senator John Clay and was
passed into law on July 3, just before the election campaigns began in
earnest.
JACKSON OVERRIDES CONGRESS
The President's biographer, Robert Remini, says:
Jackson devoted most of his veto message to three general topics:
Regarding the injustice of a government-sponsored monopoly, the pointed out that the stock of the Bank was owned only by the richest citizens of the country and that, since the sale of stock was limited to a chosen few with political influence, the common man, not only is unfairly excluded from an opportunity to participate, but he is forced to pay for his banking services far more than they are worth.
Unearned profits are bad enough when they are taken from one class of citizens and given to another, but it is even worse when the people receiving those benefits are not even citizens at all but are, in tact foreigners.
Jackson said:
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 bounding 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.
THE BANK CONTROLLED BY FOREIGN INVESTORS
Even though foreign investors technically were not allowed to vote their shares, their financial power was so great that the American investors were clearly beholden to them and would likely follow their instructions.
Jackson concluded:
Jackson saved the greatest passion of his argument for the end. Speaking now, not to Congress, but to the voters at large, he said:
1. Krooss, pp. 26-27.
The
major battles were yet to come.
BIDDLE'S CONTROL OVER CONGRESS
For all practical purposes, Congress was in his pocket. Or, more accurately, the product of his generosity was in the pockets of Congressmen. Following the Rothschild Formula, Biddle had been careful to reward compliant politicians with success in the business world. Few of them were willing to bite the hand that fed them.
Even the great Senator, Daniel Webster, found himself kneeling at Biddle's throne.
Galbraith says:
Webster is a particularly interesting study in how even so-called "great" men can be compromised by an addiction to wealth.
He had always been an advocate of sound money in Congress, yet, as a lawyer on Biddle's payroll, he represented the Bank's position before the Supreme Court in McCulloch v. Maryland. Much of the twisted logic that allowed the Court to end-run the Constitution and destroy sound money came from his pen.
In one of those speeches, Webster echoed the old refrain that the Bank served as a moderating influence on the nation's other banks and then piously proclaimed:
1- Galbraith, p. 80.
In an act of astounding hypocrisy, this speech was distributed widely by the very institution that was designed specifically for creating fractional fiat money, without gold or silver backing, to function as tender in the payment of debts.
Then, as now, most people did not discern between words and actions and believed that this speech, delivered by such a "great" man, was evidence of the Bank's worthiness. Biddle even distributed 300,000 copies of Jackson's veto message, apparently in the belief that many would not read it Obviously^ if the Bank thought it was so bad as to distribute it, it must be bad.1
JACKSON APPEALS DIRECTLY TO THE VOTERS
But Jackson had a secret weapon which had never been used before in American politics. That weapon was a direct appeal to the electorate. He took his message on the campaign trail and delivered it in words well chosen to make a lasting impression on the voter. He spoke out against a moneyed aristocracy which had invaded the halls of Congress, impaired the morals of the people, threatened their liberty, and subverted the electoral process.
The Bank, he said, was a hydra-headed monster eating the flesh of the common man. He swore to do battle with the monster and slay it or be slain by it. He bellowed his position to every crowd he could reach: Bank and no Jackson, or no bank and Jackson.3
1. Remini, Life, p. 234.
His biographer describes the campaign:
Jackson had awakened the indignation of the American people.
When the November ballots were cast, he received a mammoth vote of confidence. He received fifty-five per cent of the popular vote (with thirty-seven per cent for Clay, eight per cent for Wirt) and eighty per cent of the vote in the electoral college. But the war still was not over. Jackson won the election, but the Bank had four more years to operate, and it intended to use those years to sway public sentiment back to its support.
The biggest battles were
yet to come.
JACKSON REMOVES FEDERAL DEPOSITS
1. Remini, Life, pp. 234-35.
Soon after the election, he ordered Secretary of the Treasury, William Duane, to place all new deposits of the federal government into various state banks around the country and to pay current expenses out of the funds still held by the Bank of the United States until that account was drained to zero.
Without the use of federal money, surely the monster would perish. To Jackson's chagrin, however, Duane balked at the order out of a sincere conviction that, to do so, would be disruptive to the economy.
A President could appoint a member of the executive branch only with the consent of the Senate. The Constitution was silent, however, on the matter of dismissal. Did plat, too, require Senate approval? The implication was that it did, but the issue had never been tested.
On October 1, 1833, federal deposits began to move out of the Bank.
With gleeful confidence, he added:
BIDDLE DELIBERATELY CREATES MONETARY CHAOS
Biddle responded, not like a lamb, but more like a wounded lion. His plan was to rapidly contract the nation's money supply and create another panic-depression similar to the one the Bank had created thirteen years earlier. This then could be blamed on Jackson's withdrawal of federal deposits, and the resulting backlash surely would cause Congress to override the President's veto.
Remini tells us:
1. William J. Duane, Narrative and
Correspondence Concerning the Removal of the Deposits and Occurrences
Connected Therewith (Philadelphia: n.p., 1838), pp. 101-03. Quoted by Remini,
Life, p. 264.
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 i 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.
It was his t arrogant removal of
Secretary Duane; it was his foolish insistence for removing the deposits; it
was his obstinate opposition to Congress.
JACKSON IS CENSURED BY THE SENATE
At length, a resolution of censure was introduced into the Senate and, on March 28,1834, it was passed by a vote of 26 to 20. This was the first time that a President had ever been censured by Congress, and it was a savage blow to Jackson's pride. Biddle, at last, had the upper hand.
2. Quoted by Viola, p. 86.
The censure was by no means indicative of popular sentiment. Even in the
Senate, which was a hotbed of pro-Bank support, a swing of only three votes
would have defeated the measure.
People heard these boasts and they believed him. The turning point came when Governor George Wolf of Pennsylvania, the Bank's home state, came out publicly with a strong denunciation of both the Bank and Biddle. This was like the starting bell at a horse race. With the Bank's home state turned against it, there was no one left to defend it and, literally within days, the mood of the country and of Congress changed.
The first resolution, passed by a vote of 134 to 82, declared that the Bank of the United States "ought not to be rechartered."
The second, passed by a vote of 118 to 103, agreed that the deposits "ought not to be restored." And the third, passed by an overwhelming vote of 175 to 42, called for the establishment of a special committee of Congress to investigate whether the Bank had deliberately instigated the current economic crisis.
It was an overwhelming victory for
Jackson which would be culminated a few years later with the passage of a
resolution in the Senate which formally rescinded the previous vote of
censure.
BIDDLE DEFIES CONGRESS
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 Bank was still alive but had been mortally wounded.
By this time, Jackson had completely paid off the national debt incurred by the War of 1812 and had even run up a surplus. In fact, he ordered the Treasury to give back to the states more than $35 million, which was used for the construction of a wide variety of public works.
The would-be assassin was Richard Lawrence who either was truly insane or who pretended to be insane to escape harsh punishment. At any rate, Lawrence was found not guilty due to insanity.2
Later, he boasted to friends that he had been in touch with powerful people in Europe who had promised to protect him from punishment should he be caught.3
1. Remini, Life, p. 274.
The Bank's charter expired in 1836 and it was restructured as a state bank by the Commonwealth of Pennsylvania. After a spree of speculation in cotton, lavish advances to the Bank's officers, and the suspension of payment in specie, Biddle was arrested and charged with fraud. Although not convicted, he was still undergoing civil litigation when he died.
Within five years, the
establishment was forced to close its doors forever, and America's third
experience with central tanking came to a close.
SOME BAD MIXED IN WITH THE GOOD
But a more balanced view of these events leads to the conclusion that the forces of virtue were not without contamination. Jackson represented the position of those who wanted only gold and silver for the nation's money. But this group was not large enough to match the power of the Bank. He was joined in that battle by many groups which hated the Bank for other, less admirable reasons.
State banks and business interests along the expanding frontier, for example, were not the least interested in Constitutional money. They wanted just the opposite. They viewed the modest restraints of the federal Bank as excessive.
With the federal Bank out of the way, they anticipated no restraints at all. As we shall see in the following section, it is ironic that this is the group that got what it wanted, not the hard-money Jacksonians.
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.
To fully comprehend the significance of that statement, it must be remembered that the plan of the Constitution was for the President to be elected indirectly by the state legislatures, not by the voters at large.
Article 2, Section 1, of the Constitution, therefore, established an electoral college to select the President.
The people may elect their Congressmen, but the electoral college chooses the President. Thus, it was intended that the President would have a different constituency from Congress, and this difference was important to insure the balance of power that the framers of the Constitution worked so hard to create. As a means of keeping government under control, it was a truly brilliant piece of political engineering.
One of the sad facts of history is that good causes often are the occasion for establishing bad precedents. Jackson's fight against the Bank of the United States was one of those events.
At the end of the war, instead of allowing the fraudulent banks to fall and letting the free market heal the damage, Congress decided to protect the banks, to organize the fraud, and to perpetuate the losses. It did this by creating the nation's third central bank called the Second Bank of the United States.
For the first time in our history, the effects began to ricochet across the entire country at once instead of being confined to geographical regions. The age of the boom-bust cycle had at last arrived in America.
He was
called before a special Congressional investigative committee to explain his
actions, the censure against Jackson was rescinded, and the nation's third
central bank passed into oblivion.
As detailed in the previous chapter, by 1836 the hydra-headed monster had been slain and, true to the President's campaign promise, the nation had Jackson and no Bank.
The White House also announced that, in the future, all federal land sales would require full payment in "lawful money," which, of course, meant precious-metal coins.1
Not only were they inadequate by
themselves, they were soon circumvented by the development of new banking
techniques and eventually were dismantled completely by a fickle Congress.
1. Otto Scott, The Secret Six: The Fool as Martyr, Vol. III of The Sacred
Fool Quartet (Columbia, South Carolina: Foundation for American Education,
1979), p. 115.
As people gradually became accustomed to this new method of transferring funds, the importance of bank notes declined. Placing a limit on the issuance of bank notes without any restriction on the creation of demand deposits was an exercise in futility.
1. Rothbard,Mystery, p. HI.
Total money in circulation had risen by eighty-four per cent in just four years.
Then, as inevitable as the setting sun, that portion of the money supply which had been created by fractional-reserve banking - in other words, the part which was backed by nothing - began to contract. Sixteen per cent of all the nation's money totally disappeared in just that first year. Again, men were put out of work, businesses went into bankruptcy, homes and savings were lost. Many banks folded also, but their operators walked away with the spoils.
Only the depositors were left holding the empty bag.
As Groseclose observed, these proposals were,
Since the
proposals presented then are identical to the ones being offered today, and
since each of them was actually tried, it would seem appropriate to inquire
into the actual results of these experiments.
PROPOSAL TO BASE MONEY ON BANK ASSETS
The first of these was that the creation of money should be limited to a ratio of the bank's assets. This was the formula that was tried in the New England states. In Massachusetts, for example, the issuance of bank notes was limited to two times the amount of the bank's capital actually held in the vault.
Furthermore, this could not be in the form of paper money, bonds, securities, or other debt instruments; it had to be strictly gold or silver coin. Also, the banks were limited in the number of small-denomination bank notes they could issue and, in this, Massachusetts served as the model for Jackson's attempted reform at the federal level.
By previous standards, and certainly by the standards that prevail today, this was an exceptionally conservative policy. In fact, even during the previous stress of the War of 1812, when banks were failing by the hundreds across the country, the Massachusetts banks, and most of the other New England banks as well, were able to maintain full payment in specie.
Consequently, the monetary contraction of 1837 "was like a scythe over the crop," says Grosedose, and thirty-two Massachusetts banks collapsed between that year and 1844.1
By 1862, even though the law still limited bank notes lo two times capital, the banks had created $73,685,000 in total money, including checkbook money. This was supported by a base of only $9,595,000 of specie, a reserve of only thirteen per cent.
Massachusetts had
not solved the problem.
PROPOSAL TO PROTECT DEPOSITS WITH A SAFETY FUND
This fund, supported by all the banks, would come to the aid of any member which needed an emergency loan to cover a sudden drain of its reserves. It was the forerunner of today's Federal Deposit Insurance Corporation and related agencies.
The only thing that saved it was that the state agreed to accept the worthless notes of all the defunct banks as payment for canal tolls. In other words, the taxpayers were compelled to make up the difference. When the fund was exhausted, the solvent banks were punished by being forced to pay for the deficits of the insolvent ones. Naturally, this impelled all banks to act more recklessly.
Why not? The up side was that profits would be higher - for a time, at least - and the down side was that, if recklessness got them into trouble, the safety fund would bail them out.
The result was that the system provided a penalty for prudence and an incentive for recklessness; a situation with perfect parallel to that which exists in the banking system today.
Groseclose says:
1. Groseclose, Money and Man, p. 186.
PROPOSAL TO BASE MONEY ON SECURITIES
This was the scheme adopted in the 1850s by Illinois, Indiana, Wisconsin and other Midwestern states. It also set the precedent for the Federal Reserve System sixty years later.
Groseclose continues:
PROPOSAL TO BACK MONEY WITH STATE CREDIT
In other words, instead of raising state revenue through taxes, they found it easier to raise it through inflation.
The bank was belly-up within four years, and the state completely Repudiated its obligations on the bonds. This infuriated the bond polders, particularly the British financiers who had purchased a large portion of the issue.
The devastating effect upon the state and its people is described by Henry Poor:
THE MIRAGE OF FREE BANKING
The name is an insult to truth. What was called free banking was merely the conversion of banks from corporations to private associations. Aside from no longer receiving a charter from the state, practically every other aspect of the system remained the same, including a multitude of government controls, regulations, supports, and other blocks against the free market.
George Selgin reminds us that,
The free banks were no less fraudulent than the chartered banks. The old custom was revived of rushing gold coins from one bank to another just ahead of the bank examiners, and of "putting a ballast of lead, broken glass and (appropriately) ten-penny nails in the box under a thinner covering of gold coins." When one such free bank collapsed in Massachusetts, it was discovered that its bank note circulation of $500,000 was backed by exactly $86.48.
Professor Hans Sennholz writes:
For banking to have been truly free, the states would have had to do only two things:
By enforcing banking contracts, the executives of any bank which failed to redeem its currency in specie would have been sent to prison, an eventuality which soon would have put a halt to currency over-issue.
By stepping out of the picture and dropping the pretense of protecting the public with a barrage of rules, regulations, safety funds, and guarantees, people would have realized that it was their responsibility to be cautious and informed. But, instead, the banks continued to enjoy the special privilege of suspending payment without punishment, and the politicians clamored to convince the voters that they were taking care of everything.
In balance, the prudent banker was pushed aside by the mainstream and became but a footnote to the history of that period.
INDUSTRIAL EXPANSION IN SPITE OF DISHONEST BANKING
The great canals were dug, the railroads pushed back the frontier, boom towns sprang up along the way, prairies were turned into agricultural land, and new businesses followed in their wake. Much of this expansion was facilitated by a flood of fraudulent money created by the banks. Apologists for fractional-reserve banking have been prone to look at this development and conclude that, in net balance, it was a good thing.
The fact that some people were cheated in order for others to prosper did not seem to be important. America just wouldn't have grown and prospered without funny money.
Galbraith, for example, exudes:
1. Galbraith, p. 85.
William Greider continues this rationale:
This, of course, is a classic example of the failure of liberal economics.
When evaluating a policy, it focuses only on one beneficial consequence for one group of people and ignores the multitude of harmful effects which befall all other groups. Yes, if we look only at the frontiersmen who acquired new ranches and established new business, the fractional-reserve system looks pretty good.
But, if we add in to the equation all the financial losses to all of the people who were victimized by the system - what Galbraith calls "an involuntary contribution" and what Greider lightly dismisses as "froth" - then the product is zero at best and, in terms of morality, is deeply in the negative.
Had these destructive convulsions been absent, as most of them would have been under a less chaotic system, there likely would have been fewer business starts, but a greater number would have finished, and it is entirely possible that the West would have been won even faster than it was.
THE UNION IN JEOPARDY
There is no time in American history in which there was more economic conflict between segments of the population than there was prior to the Civil War. It is not surprising, therefore, that this period led directly into the nation's bloodiest war, made all the more tragic because it pitted brother against brother.
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. It may have been a moral issue in the North where prosperity was derived from the machines of heavy industry, but in the agrarian South, where fields had to be tended by vast work forces of human labor, the issue was primarily a matter of economics.
Even after the outbreak of war in 1861, Lincoln confirmed his previous stand.
He declared:
It may come as a surprise to learn that, by strict definition, Abraham Lincoln was a white supremacist.
In his fourth debate with Senator Stephen Douglas, he addressed the subject bluntly:
This is not to say that Lincoln was indifferent to the institution of slavery, for he felt strongly that it was a violation of personal and national morality, but he also knew that slavery was gradually being swept away all over the world - with the possible exception of Africa itself - and he believed that it would soon disappear in America simply by allowing the natural forces of enlightenment to work their way through the political system.
He feared - and rightly so - that to demand immediate and total reform, not only would destroy the Union, it would lead to massive bloodshed and more human suffering than was endured even under slavery itself.
He said:
If Lincoln's primary goal in the War was not the abolition of slavery but simply to preserve the Union, the question arises:
2. ibid. p.438.
LEGAL PLUNDER, NOT SLAVERY, THE CAUSE OF WAR
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.
Not surprisingly, there was no duty applied to cotton which, presumably, 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.
A fact often overlooked in this episode is that the cost of a slave was very high, around $1,500 each. A modest plantation with only forty or fifty slaves, therefore, had a large capital investment which, in terms of today's purchasing power, represented many millions of dollars. To the South, therefore, abolition meant, not only the loss of its ability to produce a cash crop, but the total destruction of an enormous capital base.
They felt that a complete and sudden abolition of slavery with no transition period would destroy their economy and leave many of the former slaves to starve - all of which actually happened in due course.1
1. See "No Civil War at All; Part One/' by William Mcllhany, Journal of Individualist Studies, Winter, 1992, p. 41.
That was the situation that existed at the time of Lincoln's campaign and why, in his speeches, he attempted to calm the fears of the South about his intentions. But his words were mostly political rhetoric, Lincoln was a Republican, and he was totally dependent on the Northern industrialists who controlled the Party.
Even if he had wanted to - and there is no indication
that he did - he could not have reversed the trend of economic favoritism
and protectionism that swept him into office.
MEXICO AND THE MONROE DOCTRINE
Those forces were rooted in Europe and centered around the desire of France, Spain, and England to control the markets of Latin America. Mexico was the prime target. This was the reason the Monroe Doctrine had been formulated thirty-eight years previously.
President James Monroe had put the European nations on notice that the United States would not interfere in their affairs, and that any interference by them in American affairs would not be tolerated. In particular, the proclamation said that the American continents were no longer to be considered as available for colonization.
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 strategy was simple but effective.
Within months after the first clash of arms between North and South, France had landed troops in Mexico. By 1864, the Mexicans were subdued, and the French monarch installed Ferdinand Maximilian as the puppet emperor.
The Confederacy found a natural ally in Maximilian, and it was anticipated by both groups that, after the successful execution of the War, they would combine into a new nation - dominated by the financial power of Rothschild, of course. At the same time, England moved eleven-thousand troops into Canada, positioned them menacingly along the Union's northern flank, and placed the British fleet onto war-time alert.1
1. Catton and Ketchum, p. 250. Also Otto Eisenschiml, The Hidden Face of the
Civil War (New York: Bobbs-Merril, 1961), p. 25.
SUMMARY
None dealt with the real problem, which was fractional-reserve banking itself. They concentrated instead on proposals on how to make it work. All of these proposals were tried and they failed.
The South also had a similar trade with Europe, and that was an annoyance to the North. Europe was selling many products at lower prices, and the North was losing market share. Northern politicians passed protectionist legislation butting import duties on industrial products. This all but stopped the importation of European goods and forced the South to buy from the North at higher prices. Europe retaliated by curtailing the purchase of American cotton.
That hurt the
South even more. It was a classic case of legalized plunder, and the South
wanted out. Meanwhile, there were powerful forces in Europe that wanted to see America embroiled in civil war.
If she could be split into two hostile countries, there would be less obstacle to European expansion on the North American continent. France was eager to capture Mexico and graft it onto a new empire which would include many of the Southern states as well. England, on the other hand, had military forces poised along the Canadian border ready for action. Political agitators, funded and organized from Europe, were active on both sides of the Mason-Dixon line.
The issue of slavery was but a ploy.
America had become the target in a ruthless game of world economics and
politics.
That would pave the way for their .further colonization of Latin America without fear of the Americans being able to enforce the Monroe Doctrine. And so it was that, within a few months after the outbreak of war between North and South, France landed troops in Mexico and, by 1864, had installed Maximilian as her puppet monarch. Negotiations were begun Immediately to bring Mexico into the war on the side of the Confederacy.
England moved her troops to the Canadian border
in a show of strength. America was facing what appeared to be a checkmate
from the powers in Europe.
RUSSIA ALIGNS WITH THE NORTH
Tsar Alexander II - who, incidentally, had never allowed a central bank to be established in Russia 1 - notified Lincoln that he stood ready to militarily align with the North. Although the Tsar had recently peed the serfs in his own country, his primary motivation for coming to the aid of the Union undoubtedly had little to do with emancipating the slaves in the South.
England and France had been maneuvering to break up the Russian empire by splitting off Finland, Estonia, Latvia, Poland, Crimea, and Georgia. Napoleon III, of France, proposed to Great Britain and Austria that the three nations immediately declare war on Russia to hasten this dismemberment.
The significance of this move was explained by Russian-born Carl Wrangell-Rokassowsky:
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.
Not only did the Union army face repeated defeats on the battlefield, but enthusiasm from the people at home was badly sagging. As mentioned previously, at the outset this was not a popular war based on humanitarian principle; it was a war of business interests. That presented two serious problems for the North. The first was how to get people to fight, and the second was how to get them to pay.
Both
problems were solved by the simple expediency of violating the Constitution.
THE EMANCIPATION PROCLAMATION
The Emancipation Proclamation was primarily a move on the part of Lincoln to fan the dying embers of support for the "Rich-man's war and the poor-man's fight," as it was commonly called in the North. Furthermore, it was not an amendment to the Constitution nor even an act of Congress. It was issued, totally without constitutional authority, as the solitary order of Lincoln himself, acting as Commander-in-Chief of the armed forces.
After having emphasized over and over again that slavery was not the reason for war, Lincoln later explained why he changed his course and issued the Proclamation:
The rhetoric of the Proclamation was superb, but the concept left a great deal to be desired.
Bruce Catton, writing in the American Heritage Pictorial History of the Civil War explains:
1. Quoted by Charles Adams, Fight, Flight, Fraud: The Story of Taxation (Curacao, The Netherlands: Euro-Dutch Publishers, 1982), p. 229.
As long as the war had been viewed as an attempt on the part of a government to put down rebellion, there was nothing sacred about it, and there was no stigma attached to helping either side. But now that freedom was the apparent issue, no government in Europe - least of all England and France - dared to anger its own subjects by taking sides against a country that was trying to destroy slavery.
After 1862 the chance that Europe would militarily intervene on behalf of the Confederacy rapidly faded to zero. On the propaganda front, the South had been maneuvered into a position which could not be defended in the modern world.
But this did not last. Northerners may have disapproved of slavery in the South but, once the bloodletting began in earnest, their willingness to die for that conviction began to wane. At the beginning of the war, enlistments were for only three months and, when that period was over, many of the soldiers declined to renew.
Lincoln faced the embarrassing
reality that he soon would have no army to carry on the crusade.
RAISING ARMIES ON BOTH SIDES
But the only way to get them to fight in a war in which they have no perceived personal interest is either to pay them large bonuses and bounties or to force them to do so by conscription. It is not surprising, therefore, that both methods were employed to keep the Union army in the field.
Furthermore, although the Constitution specifies that only Congress can declare war and raise an army, Lincoln did so entirely on his own authority.
In 1862 it passed a conscription law which placed exclusive control over every male citizen between the ages of eighteen and thirty-five into the hands of the Confederate President. As in the North, there were important loopholes. The owner or overseer of twenty slaves, for example, could not be called into military service.
In all
fairness, it must be noted that many did not take advantage of this
exclusion. In contrast to the North, soldiers perceived that they were
fighting for the defense of their families, homes, and property rather than
for an abstract cause or for a cash bounty.
REBELLION IN THE NORTH
Historian James Horan describes the mood:
Federal troops eventually had to be called in to put down anti-draft riots in Ohio and Illinois.
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. Even if the pretended crusade had been genuine, it was a bad exchange.
On the income side of the ledger, taxes covered only about eleven per cent of that figure. By the end of the war, the deficit had risen to $2.61 billion.
That money had to come from
somewhere.
INCOME TAXES AND WAR BONDS
By today's standards it was a small bite, but it was still an extremely unpopular measure, and Congress knew that any additional taxes would further fan the flames of rebellion.
The state banks were anxious to step into that role; but, by this time, most of them had already defaulted in their promise to pay in specie and were in no position to manufacture further money, at least not money which the public would be willing to accept.
Derek Wilson tells us:
Belmont had placed large amounts of Rothschild money into the bonds of state-sponsored banks in the South. Those bonds, of course, had fallen in value to practically zero.
As the war shifted in favor of the North, however, he began to buy up as many additional bonds as he could, paying but a few pennies on each dollar of face value. It was his plan to have the Union force the Southern states at the end of the war to honor all of their pre-war debt obligations - in full.
That, of course, would have been a source of gigantic speculative profits to the Rothschilds.
Meanwhile, on the northern side of the Mason-Dixon Line, Belmont became the chief agent for the sale of Union bonds in England and France. It was rumored that, when Belmont called on President Lincoln and personally offered Rothschild money at 27½ per cent interest, he was rudely thrown out of the office.
The story is doubtful, but it represents a larger truth. Profiting from war and placing money on both sides of the conflict were exactly the kind of maneuvers for which the Rothschilds had become famous throughout Europe and were now practicing in America.
The only options remaining were,
For Lincoln and the Republicans who controlled Congress, the choice Was never seriously in doubt.
The money was never
declared legal tender, and that probably was the basis on which it was
defended as constitutional.
THE GREENBACKS
In 1862, Congress authorized the Treasury to print $150 million worth of bills of credit and put them into circulation as money to pay for its expenses. They were declared as legal tender for all private debts but could not be used for government duties or taxes. The notes were printed with green ink and, thus, became immortalized as "greenbacks."
Voters were assured that this was a one-time emergency measure, a promise that was soon broken. By the end of the war, a total of $432 million in greenbacks had been issued.
Eight years later, as Chief Justice of the Supreme Court, he declared that they were unconstitutional.
Had he changed his mind? Not at all.
When he endorsed them, the nation was at war. When he declared them unconstitutional, it was at peace. It was merely another example of the universal trait of all governments in time of war.
That trait was presented in a previous section as the premise of the Rothschild Formula:
The pressure for issuance of greenbacks originated in Congress, but Lincoln was an enthusiastic supporter.
His view was that:
It would appear that Lincoln objected to having the government pay interest to the banks for money they create out of nothing when the government can create money out of nothing just as easily and not pay interest on it.
If one ignores the fact that both of these schemes are forbidden by the Constitution and is willing to tolerate the plunder-by-inflation that is the consequence of both, then there is an appealing logic to the argument.
The
politicians continue to have their fiat money, but at least the banks are
denied a free ride.
LINCOLN'S MIXED VIEW OF BANKING
Early in his political career, he had been a friend |of the banking industry and an advocate of easy credit. As a [member of the Whig political party in the 1830s - before becoming a Republican in his campaign for the Presidency - he had been a supporter of Biddle's Second Bank of the United States.1
During his famous debates with Senator Stephen Douglas, one of the points of contention between the two was that Lincoln defended the Bank and advocated its reestablishment. Furthermore, after becoming President, he took the initiative in requesting Congress to reestablish central banking.
And that was precisely what Secretary
Chase was preparing to establish.
It said:
THE NATIONAL BANKING ACT
The structure was similar to the Bank of the United States with the exception that, instead of one central bank with power to influence the activities of the others, there were now to be many national banks with control over all of them coming from Washington. Most banking legislation is sold to the public under the attractive label of reform.
The National Banking Act was one of the rare exceptions. It was promoted fairly honestly as a wartime emergency scheme to raise money for military expenses by creating a market for government bonds and then transforming those bonds into circulating money.
Here is how it worked:
The one shortcoming of the system, at least from the point of view of the manipulators, was that, even though the bank notes were widely circulated, they were not classified as "lawful" money.
In other words, they were not legal tender for all debts, just for taxes and duties. Precious-metal coins and greenbacks were still the country's official money. It was not until the arrival of the Federal Reserve System fifty years later that government debt in the form of bank notes would be mandated as the nation's official money for all transactions - under penalty of law.
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 loaned 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:
1. Galbraith, p. 90.
As pointed out in a previous section, that is essentially the situation which exists today.
Every dollar of our currency and checkbook money was created by the act of lending. 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.
THE HIDDEN COST OF WAR
During the war, the purchasing power of the greenbacks fell by 65%. The money supply increased by 138%. Prices more than doubled while wages rose by less than half. By that mechanism, Americans surrendered to the government and to the banks more than half of all the money they earned or held during that period - in addition to their taxes.
Financial conditions in the South were even worse. With the exception of the seizure of about $400,000 in gold from the Federal mint at New Orleans, almost all of the war was funded by the printing of fiat money.
Confederate notes increased in volume by 214% per year, while the volume of all money, including bank notes and check-book money, rose by over 300% per year. In addition to the Confederate notes, each of the Southern states issued its own fiat money and, by the end of the war, the total of all notes was about a billion dollars. Within the four-year period, prices shot up by 9,100%.
After Appomattox, of course, Confederate notes and bonds alike were totally worthless.
But especially in the North, because they did not understand the secret science of money, Americans not only paid the hidden tax but applauded Congress for creating it.
It contained an amazingly frank and boastful summary:
LINCOLN'S CONCERN FOR THE FUTURE
In a letter to William Elkins the following year he said:
1. Quoted by Owen, pp. 99-100.
In reviewing Lincoln's role throughout this painful chapter of history, it is impossible not to feel ambivalence.
On the one hand, he declared war without Congress, suspended the writ of habeas corpus, and issued the Emancipation Proclamation, not as an administrative executive carrying out the wishes of Congress, but as the Commander-in-Chief of the armed forces. Furthermore, the Proclamation was not issued out of humanitarian motives, as popular history portrays, but as a maneuver to generate popular support for the war.
By participating in the issuance of the greenbacks, he violated one of the most clearly written and important sections of the Constitution. And by failing to veto the National Bank Act, he acquiesced in the delivery of the American people back into the hands of the international Cabal, an act which was similar in many ways to the forcible return of captured runaway slaves.
Lincoln believed that he had to violate part of the Constitution in order to save the whole. But that is dangerous reasoning. It can be used in almost any national crisis as the excuse for the expansion of totalitarian power. There is no reason to believe that the only way to save the Union was to scrap the Constitution.
In fact, if the Constitution had been meticulously observed from the very beginning, the Southern minority could never have been legally plundered by the Northern majority and there likely would have been no movement for secession in the first place. And, even if there had been, a strict reading of the Constitution at that point could have led the way to an honorable and peaceful settlement of differences.
The result would have been, not only the
preservation of the Union without war, but Americans would be enjoying far
less government intervention in their daily lives today.
WITH MALICE TOWARD NONE
While his political compatriots were howling for economic vengeance against the South, the President stood firmly against it.
"With malice toward none" was more than a slogan with him, and he was willing to risk his political survival on that one issue. The reason he had vetoed the Wade-Davis emancipation bill was because it would have applied a lien against Southern cotton at the end of the war to the benefit of New England textile manufactures.
The cotton also would have been taken as security to pay off Southern debt which had been contracted before the war, thus providing the funds to buy back at face value all of the bonds which had been purchased at discount by Rothschild's agent, August Belmont. Such defiance of the financiers and speculators undoubtedly required great courage.
The Republicans, on the other hand, had incorporated into the Wade-Davis bill the provision that each seceded state was to be treated like a conquered country. Political representation was to be denied until fifty-one per cent, not ten per cent, had taken an oath.
Former slaves were given the right to vote - although women had not yet gained that right even in the North - but, because of their lack of education and political awareness, no one expected them to play a meaningful role in government for many years to come. Furthermore, those taking the oath had to swear that they had never taken up arms against the Union. Since almost every able-bodied white male had done so, the effect would have been to deny the South political representation for at least two generations.
So, when Lincoln vetoed the bill, his own Party bitterly turned against him.
The politicians within that group also looked forward to further consolidating their power and literally establishing a military dictatorship.1
The other group was smaller in size but equally dangerous. It consisted of hothead Confederate sympathizers - from both South and North - who sought revenge.
Later events revealed that both
of these groups had been involved in a conspiratorial liaison with an
organization called the Knights of the Golden Circle.
KNIGHTS OF THE GOLDEN CIRCLE
Two of its better known members were Jesse James and John Wilkes Booth. It was organized by George W.L. Bickley who established its first "castle" in Cincinnati in 1854, drawing membership primarily from Masonic lodges. It had close ties with a secret society in France called The Seasons, which itself was a branch of the Illuminati.2
After the beginning of the war, Bickley was made head of the Confederacy's secret service, and his organization quickly spread throughout the border and Southern states as well.
In fact, the Northern anti-draft riots mentioned previously were largely the result of the planning and leadership of this group.4
In the South,
1. For highly readable accounts of this movement, see Theodore Roscoe, The
Web of Conspiracy: The Complete Story of the Men Who Murdered Abraham
Lincoln (Engle-wood Cliffs, New Jersey: Prentice-Hall, 1959); also Claude G.
Bowers, The Tragic Era: The Revolution after Lincoln, (New York: Houghton
Mifflin, 1957).
In partnership with Maximilian, the Knights hoped to establish a Mexican-American empire which would be an effective counter force against the North.
In fact, the very name of the organization is based on their goal of carving an empire out of North America with geographical boundaries forming a circle with the center in Cuba, and its circumference reaching northward to Pennsylvania, southward to Panama.
After the war,
it went further underground and remnants eventually emerged as the Ku Klux
Klan.
JOHN WILKES BOOTH
On the face of it, that is an absurd story. But, when the (voluminous files of the War Department were finally declassified and put into the public domain in the mid 1930s, historians were shocked to discover that there are many facts in those files which end credence to the legend.
The first to probe these amazing records was Otto Eisenschiml whose Why Was Lincoln Murdered? was published by Little, Brown and Company in 1937. The best and most readable compilation of the facts, however, was written twenty years later by Theodore Roscoe.
In the preface to this work, e states the startling conclusions which emerge from those long-hidden files:
1. Roscoe, p. vii.
Izola Forrester was the granddaughter of John Wilkes Booth.
In her book entitled This One Mad Act, she tells of discovering the secret records of the Knights of the Golden Circle which had been carefully wrapped and placed in a government vault many decades ago and designated as classified documents by Secretary Stanton. Since the assassination of Lincoln, no one had ever been allowed to examine that package.
Because of her lineage to Booth and because of her credentials as a professional writer, she was eventually permitted to become the first person in all those years to examine its contents.
Forrester recounts the experience:
Here at last was a link with my grandfather.
I knew that he had been a member of the secret order founded by Bickley, the Knights of the Golden Circle. I have an old photograph of him taken in a group of the brotherhood, in full uniform, one that Harry's daughter had discovered for me in our grandmother's Bible. I knew that the newspapers, directly following the assassination, had denounced the order as having instigated the killing of Lincoln, and had proclaimed Booth to have been its member and tool.
And I was reminded again of those words I had heard from my grandmother's lips, that her husband had been "the tool of other men."'
We shall probably never know with certainty the extent to which any of these groups may have been involved in Lincoln's assassination, but we do know that there were powerful forces within the federal government, centered around Secretary of War Stanton, which actively concealed evidence and hastily terminated the investigation.
Someone was protected.
SUMMARY
America's bloodiest and most devastating war was fought, not over the issue of freedom versus slavery, but because of clashing economic interests. At the heart of this conflict were questions of legalized plunder, banking monopolies, and even European territorial expansion into Latin America.
The boot print of the Rothschild formula is unmistakable across the graves of American soldiers on both sides.
Tsar Alexander was assassinated a few years later by a member of the People's Will, a Nihilist secret society in Russia with rumored ties to financiers in New York City, specifically, Jacob Schiff and the firm of Kuhn, Loeb & Company.
Furthermore, by using government bonds as backing for the money supply, it locked the nation into perpetual debt.
The foundation was firmly in place, but the ultimate structure still Heeded to be erected. The monetary system was yet to be concentrated into one central-bank mechanism, and the control was yet to be taken away from the politicians and placed into the hands of the bankers themselves.
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