Sunday, October 7, 2007

End the Fed

Central Banking
Pt 1 & 2
-The Jekyll Island Expedition

Warburg's Early Banking Experience

Paul Moritz Warburg (1868-1932), and his brother Felix (1871-1937), came to the United States from Frankfurt in 1902, buying into the partnership of Kuhn, Loeb and Co. with the financial backing of the Rothschilds. They had been trained at the family banking house, M. M. Warburg and Co. (run by their father Moritz M. Warburg, 1838-1910), a Rothschild-allied bank in Frankfurt, Hamburg, and Amsterdam, which had been founded in 1798 by their great-grandfather. Paul (said to be worth over $2.5 million when he died), married Nina Loeb, the daughter of Solomon Loeb (the younger sister of Schiff’s wife); while Felix, in March, 1895, married Frieda Schiff, the daughter of Jacob Schiff.

Their brother Max (1867-1946), a major financier of the Russian Revolution (who in his capacity as Chief of Intelligence in Germany’s Secret Service, helped Lenin cross Germany into Russia in a sealed train) and later Hitler, ran the Hamburg bank until 1938, when the Nazis took over. The Nazis, who didn’t want the Jews running the banks, changed its name to Brinckmann, Wirtz and Co. After World War II, a cousin, Eric Warburg, returned to head it, and in 1970, its name was changed to M. M. Warburg, Brinckmann, Wirtz and Co.

Siegmund Warburg, Eric’s brother, established the banking firm of S. G. Warburg and Co. in London, and by 1956, had taken over the Seligman Brothers’ Bank.

The Warburgs are another good example of how the Illuminati controls both sides of a war. While Paul Warburg’s firm of Kuhn, Loeb and Co. (who had five representatives in the U.S. Treasury Department) was in charge of Liberty Loans, which helped finance World War I for the United States, his brother Max financed Germany, through M. M. Warburg and Co.

Paul and Felix Warburg were men with a mission, sent here by the Rothschilds to lobby for the passing of a central banking law in Congress. Colonel Ely Garrison (the financial advisor to Presidents Theodore Roosevelt and Woodrow Wilson) wrote in his book Roosevelt, Wilson and the Federal Reserve Act: “Mr. Paul Warburg is the man who got the Federal Reserve Act together after the Aldrich Plan aroused such nationwide resentment and opposition. The mastermind of both plans was Alfred Rothschild of London.” Professor E. R. A. Seligman, head of the Economics Department of Columbia University, wrote in the preface of one of Warburg’s essays on central banking: “The Federal Reserve Act is the work of Mr. (Paul) Warburg more than any other man in the country.”

In 1903, Paul Warburg gave Schiff a memo describing the application of the European central banking system to America’s monetary system. Schiff, in turn, gave it to James Stillman, President of the National City Bank in New York City. Warburg had graduated from the University of Hamburg in 1886, and studied English central banking methods, while working in a London brokerage house. In 1891, he studied French banking methods; and from 1892-93, traveled the world to study central banking applications. The bottom line, was that he was the foremost authority in the world on central banking. It is interesting to note, that the fifth plank in the 1848 Communist Manifesto had to do with central banking.

Warburg's father had fully expected that Paul would take charge of his family's banking business along with his brothers Aby and Max, but in 1895 Warburg married an American citizen, Nina Loeb, an accomplished violinist, and began to live part of the year in New York. Six years later, at age 34, he left Germany, took up permanent residency in the United States, and accepted a position as a partner at his father-in-law's firm, Kuhn, Loeb and Co.—one of Wall Street's most important and respected banking houses. While adapting quickly to his new business, he still viewed the United States through the eyes of a European banker and was literally shocked at what he considered the primitive status of banking and financial affairs.

In the early 1900s, the nation was suffering from periodic liquidity crises. These crises or "panics" occurred because the banking system was fettered with a rigid amount of currency that could not meet unusual demands, and a system of reserves that pyramided up to New York. During these panics businessmen and farmers were unable to obtain credit to finance inventories and the production and transportation of crops. The crises spread across the country and converged upon Wall Street, resulting in plunges in the stock market, a large number of bank and business failures, and a further shortage of currency.

Such phenomena deeply affected Warburg, a small unassuming man whose most obvious physical characteristic was a large drooping mustache that gave him more the appearance of a tenor in a barbershop quartet than an important international banker.

While small in stature, however, he was hardly tame or timid in his professional assessment of conditions then prevailing in his new country. "The United States," he said, "is at about the same point that had been reached by Europe at the time of the Medicis." Witnessing first-hand a period of high interest rates — "where call money went up to 25 and 100 percent," he felt compelled to "write an article on the subject then and there for [his] own benefit."

Warburg thought it a bit presumptuous to attempt to educate a country to which he was so new a resident, so when advised by an associate to put the paper aside, he did so and attended to duties at his firm. However, when the same conditions arose in the beginning of 1907, he could hold his tongue no longer, and he began to circulate his writings for the benefit of others as well.

The Panic of 1907

Early in 1907, New York Times Annual Financial Review published Warburg's first official reform plan, entitled "A Plan for a Modified Central Bank," in which he outlined remedies that he thought might avert panics, like the great one that would occur later that year. Furthermore, he identified what he saw as the "evils" of the system in the United States — the "decentralization of reserves and the immobilization of [commercial] paper." To remedy this, he advocated the development of an American discount market and a European-style commercial paper. This system was based partly on a concept known as the "real bills" doctrine, which maintained that the money supply should vary with the short-term "legitimate" needs of business and commerce. By allowing banks to borrow only against short-term loans, the real bills doctrine, in theory, provided liquidity through the discounting (or selling) of loans and at the same time restricted the ability of a central bank to expand the supply of money. Warburg also proposed the creation of a "central reserve" or central bank that would hold the reserve funds of member banks so that collective funds could be made available to a bank in need of liquidity. Both the discounting and reserve concept, he contended, would help make money and credit more elastic and keep interest rates stable.

The Panic of 1907 hit full stride in October. The crash was of such severity that it immediately helped focus public awareness on the problems with the monetary and banking system. Although the issue of a central bank was unpopular because of its connotations of powerful central authority, Congress was now forced to act. The Aldrich-Vreeland Act, passed by Congress in May 1908, provided for the issuance of emergency currency and created a bipartisan National Monetary Commission to study central banking and other alternatives for monetary and banking reform. Warburg would serve this committee and, through his efforts for the commission, achieve an influence on subsequent proposals for reform.

Warburg Meets Sen. Aldrich

Sen. Nelson Aldrich of Rhode Island, chairman of the Senate Finance Committee, was appointed head of the National Monetary Commission. He divided the commission into two groups: one would study the US banking system and compile a report, and the other, headed by the senator himself, would travel to Europe and study the central banking systems in London, Paris and Berlin.

Aldrich was a known advocate of the extant bond-backed currency arrangement, which provided that bank notes could only be issued by national banks on the basis of the amount of US government bonds that were held to back them. However, the 67-year-old Aldrich, who was considered the most influential figure in Congress on financial matters, was committed to exploring new ideas for reform. In 1908, he announced that he would not seek office again and instead would devote his full attention to the currency and banking question.

Meanwhile, Warburg began to enlarge his circle of professional contacts and have his voice heard throughout the country. However, the German banker still didn't have the ear of the man who mattered most — Aldrich.

Aldrich first met Warburg by chance when the senator was preparing for the European trip and visited Kuhn, Loeb and Co. to gather preliminary material about the German banking system. Following that meeting, the German native began writing to Aldrich outlining his proposals, but Aldrich was cool to Warburg's plan and deferred his correspondence to A. Piatt Andrew, a Harvard professor whom Aldrich had appointed official secretary of the National Monetary Commission. As new ideas on banking reform began to crystallize for the senator, Andrew brought the work of Warburg to the senator's attention again and soon Andrew was corresponding with Warburg on behalf of the senator. Warburg was asked to write a study on the "discounting of commercial bills" for the National Monetary Commission, and became an unofficial advisor to the group. However, the banker and the senator still were at loggerheads on the question of what shape the central bank should take in the United States, and on the issue of discounting commercial paper.

In his monograph, "The Discount System in Europe," Warburg declared that the effective utilization of the discount policy was one of the most impressive victories for central banks in Europe during the Panic of 1907. The only structure that is safe, he concluded, is one that provides for effective concentration of cash reserves and their freest use in case of need, enabling banks, when necessary, to turn into cash a maximum of their assets with a minimum disturbance to general conditions. He noted further that a central bank is able to guard the cash reserve of the country and accommodate nonreserve banks by accepting prime security, like bank-accepted bills.

Warburg, in the meantime, continued his campaign on other fronts. He had followed his first New York Times article with a speech at Columbia University on "American and European Banking Methods and Banking Legislation Compared," and privately published a new, more complete proposal for a US banking system, entitled "A Modified Plan for a Central Bank."

In May 1908, the New York Times gave his revised plan prominent coverage. Primarily, Warburg continued to emphasize that the United States must finally develop some sort of central bank system, giving the country an elastic currency based on modern commercial bills payable in gold: a system similar in principle, if not exactly alike in form, to those of the important European central banks. He believed that "no measure that bases currency on a long term basis like the Aldrich-Vreeland Emergency Currency bill, (which allowed banks in regional currency associations to use their aggregate bank balances as the basis for the issuance of currency) can be acceptable." Also, he stressed that issuing notes "must be centralized into a few organs, or if feasible, into one organ to ensure effective expansion and contraction of reserves." The tireless reformer further stated that no central bank could be effective that "vests the powers of a central bank in political officers alone. That power clearly defined, ought to be vested in political officers and businessmen combined, in a way that would render impossible any political or financial abuse." Any hasty decisions on the composition of the directors of a central bank, he said, could stand in the way of the creation of such an organization. Better that those practical and political questions could be worked out after careful consideration.

Warburg's Contribution

The idea of an "elastic currency," which would expand to meet the legitimate needs of business and commerce, was not new. In fact, Warburg himself claimed no originality for the idea, but through his writings, speeches and counsel to others he began to have a greater impact than anyone else. Warburg did, however, succeed in injecting two new ideas into the discussion: first, shifting of emphasis from the currency problem to the reserve problem; and second, advocacy of the principle of rediscounting a new kind of commercial paper.

These ideas were starting to be discussed more seriously throughout the country, and other individuals involved in the banking and currency reform movement began to take note. With both the building momentum of other banking reform advocacy groups and Aldrich's own exposure to the efficient and effective central banking system in Europe, the senator finally opened to these other ideas.

The debate on central banking reform was still in full swing several years after the 1907 Panic. Indeed, it began to heat up, with the American Bankers Association standing opposed to "any form of central bank yet suggested by legislators." Meanwhile, Warburg, Aldrich and several other prominent figures intensified their efforts and began to form an alliance that was to last over the coming crucial years of the banking reform movement.

Aldrich Reconsiders His Position

The European interviews of the National Monetary Commission had a profound influence upon Aldrich. He had a clear plan for reform when he returned from Europe, radically different from his original beliefs. The change in the senator's thinking was so drastic that Aldrich's biographer explained it as an epiphany, saying, "Aldrich was converted on the road to Damascus."

When Aldrich and the National Monetary Commission returned from Europe in the fall of 1908, Aldrich asked Warburg to present his own ideas and answer questions regarding the European interviews at a meeting at New York's Metropolitan Club.

After Warburg's Metropolitan Club testimony, Aldrich pulled the banker aside and told him that he liked his plan for reform but he was being too timid about it. Warburg was surprised to learn that Aldrich, who before his European travels had not favored centralization and had advocated a national currency backed by government bonds, had changed his thinking and envisioned a European-type central bank for the United States. While Warburg now warned the senator against attempts to establish a full-scale central bank in the European sense—believing it politically unrealistic— he was nonetheless encouraged.

A particular key feature of the European systems persuaded the senator to reconsider his thinking. According to commission member Sen. Theodore Burton, the concept of currency backed by commercial assets began to take hold in Aldrich's mind in London, and the interviews in Berlin finally convinced him. Commission Assistant George Reynolds concurred, noting that "the experience and practice of German bankers in meeting the needs of commerce in their country demonstrated to Aldrich the validity of the use of commercial assets as a basis for currency. The idea, formerly so obscure, came home to him in great force from its demonstration in a non-political, practical atmosphere."

While Aldrich's conversion was a welcome one to Warburg and other progressive reformers, the very concept of a European-style central bank was still an anathema to a great many bankers and politicians. Bankers wanted reform that would make the banking system more efficient and better coordinated but were fearful of government interference in the management of a central bank. While Reynolds, as president of the American Bankers Association, had traveled to Europe and had become an intimate of Aldrich, his association was not supportive of reform. Moreover, many politicians believed that the geographic size of the United States and its diverse business conditions warranted a different banking system than those existing in Europe. Complicating the matter further was the fact that any plan to which Aldrich attached himself was sure to be attacked by Democrats and others who believed the senator had only the interest of eastern businessmen and bankers in mind. Aldrich had close ties with J. P. Morgan and other important bankers, and his eldest daughter's marriage to John D. Rockefeller Jr. did not help to dispel this suspicion.

The Jekyll Island Expedition

One evening in early November 1910, Warburg and a small party of men from New York quietly boarded Sen. Aldrich's private railway car, ostensibly for a trip south to an exclusive hunting club on an island off the coast of Georgia.

In addition to Warburg and Aldrich, the others, all highly regarded in the New York banking community, were: Frank Vanderlip, president of National City Bank; Harry P. Davison, a J.P. Morgan partner; Benjamin Strong, vice president of Banker's Trust Co.; and A. Piatt Andrew, former secretary of the National Monetary Commission and now assistant secretary of the Treasury. The real purpose of this historic "duck hunt" was to formulate a plan for US banking and currency reform that Aldrich could present to Congress.

Even Warburg at first questioned the motives of this gathering, not knowing if he was included because the group knew what he preached and was interested in what he had to offer, or if he was to be involved as a conspirator in order to be muzzled. He soon saw that the Jekyll Island conference was pulled together because, as Warburg later wrote, Aldrich was "bewildered at all that he had absorbed abroad and he was faced with the difficult task of writing a highly technical bill while being harassed by the daily grind of his parliamentary duties."

The group was secluded on Jekyll Island for about 10 days. All the participants came to the conference with strong views on the subject and did not agree on the exact shape a US central bank should take. Vanderlip noted: "Of course we knew that what we simply had to have was a more elastic currency through a bank that would hold the reserves of all banks." But there were many other questions that needed to be answered. If it was to be a central bank, how was it to be owned: by the banks, by the government, or jointly? Should there be a number of institutions or only one? Should the rate of interest be the same for the whole nation, or would it be higher in a community that was expanding too fast and lower in another that was lagging? In what open market operations should the bank be engaged?

Warburg realized that he had not been able to persuade the senator that if a central banking organization was to be created, it had to be a modified scheme based on the European models. In fact, Warburg, "the best equipped man there in the academic sense," according to Vanderlip, "was so intense ... and apparently felt a little antagonism towards Aldrich," so that there were some moments of strain that had to be eased by the others. Aldrich had his mind set on a European-style central bank, "a model he seemed loath to abandon," according to Warburg, and the senator strongly believed that the proposed central bank should be kept out of politics. Warburg and the others felt that whatever the theoretical justification for such a central bank, American conditions would require some sort of compromise and that concessions should be made considering government influence and representation. Aldrich, yielding somewhat, allowed that the government should be represented on the board of directors and have full knowledge of the bank's affairs, but a majority of the directors were to be chosen, directly or indirectly, by the members of the association.

Warburg also didn't agree with Aldrich's position on note issuance, conditions of membership of state banks and trust companies, or on the need for a uniform discount rate. Aldrich insisted, however, that a central bank should maintain a uniform rate of discount throughout the United States. He thought such a measure politically wise because it would refute the charges that other "great financial centres" would attempt to establish favorable rates for themselves in different regions to the disadvantage of other localities in the country.

Eventually all of the individuals at the Jekyll Island conference had to modify their views on a central bank plan. Nonetheless, Aldrich got out of the conference just what he intended—a banking scheme that rested upon a consensus of opinion representing the best-informed bankers of this country.

The banking bill the group brought north, which came to be known as the "Aldrich Plan," called for the establishment of a central bank in Washington, to be named the "National Reserve Association," meaning a central reserve organization with an elastic note issue based on gold and commercial paper. The association was to have 15 branches at geographically strategic locations throughout the country. The bank was to serve as fiscal agent for the US government and, by mobilizing the reserves of its member banks, become a lender of last resort to the American banking system. The association as a whole was to serve as a bank of rediscount, that is, it was empowered to discount a second time commercial paper that members of the association had already discounted. By rediscounting, the association could issue new money that might stay in circulation so long as the paper for which it was issued was not redeemed.

No one person was responsible for the final draft bill that was written. It was a record of their composite views. Yet Vanderlip regarded Warburg as having made significant and important contributions to the final result: "As a philosophical student of banking he was first among us at that time." Warburg was satisfied that the Aldrich Plan was not a central bank in the European sense. "It was strictly a bankers' bank with branches under the control of separate directorates having supervision over the rediscount operations with member banks," he said.

Warburg viewed the result of the Jekyll Island meeting as pivotal: "The period during which nonpolitical thought held the leadership in the banking reform movement may be considered as having ended with this conference." Up until then, bank reform had been an educational campaign carried on by individuals and groups; but at that point, the movement assumed a national character. Warburg saw Senator Aldrich as being the standard-bearer of a political proposal for a central bank. Said Warburg: "From then on until the final passage of the Federal Reserve Act, the generalship was in the hands of political leaders, while the role of banking reformers was to aid the movement by educational campaigns and, at the same time, to do their utmost to prevent fundamental parts of the nonpolitical plan from being disfigured by concessions born of political expediency." Aldrich presented his draft plan to the public in January 1911. One year later, on Jan. 19, 1912, the National Monetary Commission presented its report and endorsed the Aldrich Plan.

The Final Campaign

Warburg playfully described himself as a "fanatic" for what he considered sound finance. He was also pragmatic and sensitive to political realities, however. Thus he tempered his approach to a central bank in the United States, and his campaign over the next several years reflected that position. When he saw the roadblocks that lay ahead with Aldrich attempting to sell his plan to a greater part of the country, Warburg began a formal educational campaign to assist. Warburg believed that "beyond doubt, unless public opinion all over the United States could be educated and mobilized, any sound banking reform plan was doomed to fail."

The National Board of Trade appointed Warburg the head of a seven-man committee to set up a national group to promote reform. The group was called The National Citizens League For the Promotion of Sound Banking. It accomplished much of what it set out to do: establishing effective organizations in 45 states, printing a vast amount of educational materials for the businessman and layman alike, and publishing essays in pamphlets and articles in newspapers. Warburg also continued to publish in important journals and lecture before influential groups, doing all he could to help promote sound banking principles and convince larger audiences of the urgency for reform.

The Final Plan — The Federal Reserve Act

Before the Aldrich Plan could be enacted into law, the Democrats won the White House and took control of the Congress in 1912. The Democratic position called for a divisional reserve bank system, with a number of reserve banks or central banking cities. Nevertheless, President Woodrow Wilson believed that the Aldrich Plan was "60-70 percent correct." As a result, the plan became the basis for constructing the Federal Reserve bill, which began to take shape in Congress with the presentation of a bill proposed by Sen. Robert Latham Owen in May 1913.

When the Aldrich bill was rejected and the Democrats began to rework the banking bill, the group of bankers that had worked so hard in support of the Aldrich Plan began to split apart, and many of those bankers refused to consider an alternative plan. Warburg was more conciliatory and remained in contact with prominent Democrats, including Carter Glass, chairman of the House banking committee, and H. Parker Willis, the committee expert, and continued to write and speak on the new legislation. Warburg's reserve and discounting concepts were embraced in the Federal Reserve plan, though the central bank gradually abandoned the emphasis on discounting in favor of open market operations as the major monetary policy tool. Nonetheless, his efforts in educating the country, bringing sound banking techniques to the forefront of debate, were of tremendous importance in final preparation and passage of the Federal Reserve Act.


Warburg's career didn't end with passage of the Federal Reserve Act. In a sense, the close of this chapter marked the beginning of his next important role as a central banker. He was to wield a tremendous influence on the development of the System he worked so hard to help establish. In spite of vehement opposition from many Democrats and populists, President Wilson asked Warburg to become a member of the first Federal Reserve Board.

It appears President Wilson made a wise decision. Once Warburg was appointed to the board, Secretary of the Treasury William McAdoo, who often clashed with Warburg over policy matters, explained Warburg's appointment this way: "It was thought that his technical knowledge in international finance would be useful. It was useful, in some respects it was invaluable." Benjamin Strong, governor of the Federal Reserve Bank of New York, went even further in his estimation of Warburg. Although Warburg was appointed as a member of the board (not as the chairman or vice chairman), Strong called Warburg "the real head of the board in Washington, so far as knowledge and ability goes."

But the fact that he was at all chosen to serve on the board seems to have been as much a surprise to the European-born banker as to those who took issue with his nomination. Indeed, he first declined the appointment because of the "rampant prejudice in this country against a Wall Street man," and balked at testifying before the Senate banking committee because other nominees had not been asked to do so. However, when World War I erupted in Europe, Warburg decided to waive all personal considerations "in deference to the president's urgent request and in view of the present urgency which render desirable the promptest organization of the Federal Reserve Board," and appeared before a largely antagonistic committee.

With Warburg before them, rather than take advantage of his vast knowledge in central banking to learn how the country would adapt to this new system, the senators chose instead to question the banker on Kuhn, Loeb and Co.'s "money trust" connections. Thus, one of the best opportunities for history to record Warburg's extemporaneous impressions on the final Glass-Owen Federal Reserve bill was lost. But when Warburg was questioned as to his motives for making the sacrifice — financial and otherwise — to become a member of the Federal Reserve Board, the nominee's answer was characteristically to the point:

"When President Wilson asked me [again] whether I would take this [on] and make the sacrifice ... I felt that I had no right to decline it; and I will be glad to make the sacrifice, because I think there is a wonderful opportunity for bringing a great piece of constructive work into successful operation, and it appeals to me to do that."


The end of the Civil War in 1865 ruined the Illuminati’s chances to control our monetary system, as they did in most European countries. So, the Rothschilds modified their plan for financial takeover. Instead of tearing down from the top, they were going to start at the bottom to disrupt the foundation of our monetary system. The instrument of this destruction was a young immigrant by the name of Jacob Schiff.

The Schiff family traced their lineage back to the fourteenth century, and even claimed that King Solomon was an ancestor. Jacob Schiff was born in 1847, in Frankfurt, Germany. His father, Moses Schiff, a rabbi, was a successful stockbroker on the Frankfurt Stock Exchange. In 1865, he came to America, and in 1867, formed his own brokerage firm with Henry Budge and Leo Lehmann. After it failed, he went back to Germany, and became manager of the Deutsche Bank in Hamburg, where he met Moritz Warburg (1838-1910), and Abraham Kuhn, who had retired after helping to establish the firm of Kuhn & Loeb in New York.

Kuhn and Loeb were German Jews who had come to the United States in the late 1840’s, and pooled their resources during the 1850’s to start a store in Lafayette, Indiana, to serve settlers who were on their way to the West. They set up similar stores in Cincinnati and St. Louis. Later, they added pawn broking and money lending to their business pursuits. In 1867, they established themselves as a well-known banking firm.

In 1873, at the age of 26, Jacob Schiff, with the financial backing of the Rothschilds, bought into the Kuhn and Loeb partnership in New York City. He became a full partner in 1875. He became a millionaire by financing railroads, developing a proficiency at railroad management that enabled him to enter into a partnership with Edward Henry Harriman to create the greatest single railroad fortune in the world. He married Solomon Loeb’s oldest daughter, Theresa, and eventually bought out Kuhn’s interest. For all intents and purposes, he was the sole owner of what was now known as Kuhn, Loeb and Company. Sen. Robert L. Owen of Oklahoma indicated that Kuhn, Loeb and Company was a representative of the Rothschilds in the United States.

Although John Pierpont Morgan (1837-1913), the top American Rothschild representative, was the head of the American financial world, Schiff was rapidly becoming a major influence by distributing desirable European stock and bond issues during the Industrial Revolution. Besides Edward H. Harriman’s railroad empire, he financed Standard Oil for John D. Rockefeller (1839-1937), and Andrew Carnegie’s (1835-1919) steel empire. By the turn of the century, Schiff was firmly entrenched in the banking community, and ready to fulfill his role as the point man in the Illuminati’s plan to control our economic system, weaken Christianity, create racial tension, and to recruit members to get them elected to Congress and appointed to various government agencies.

In 1636, Miles, John, and James Morgan landed in Massachusetts, leaving their father, William, to carry on the family business of harness-making in England. Joseph Morgan (J. P. Morgan’s grandfather), successful in real estate and business, supported the Bank of the United States. Junius Spencer Morgan (J. P. Morgan’s father), was a partner in the Boston banking firm of J. M. Beebe, Morgan, and Co.; and became a partner in London’s George Peabody and Co., taking it over when Peabody died, becoming J. S. Morgan and Co.

John Pierpont Morgan, or as he was better known, J. P. Morgan, was born on April 17, 1837. He became his father’s representative in New York in 1860. In 1862, he had his own firm, known as J. Pierpont Morgan and Co. In 1863, he liquidated, and became a partner with Charles H. Dabney (who represented George Peabody and Co.), and established a firm known as Dabney, Morgan and Co. He later teamed up with Anthony J. Drexel (son of the founder of the most influential banking house in Philadelphia), in a firm known as Drexel, Morgan and Co. Morgan also became a partner in Drexel and Co. in Philadelphia. In 1869, Morgan and Drexel met with the Rothschilds in London, and through the Northern Securities Corporation, began consolidating the Rothschild’s power and influence in the United States. Morgan continued the partnership that began when his father acted as a joint agent for the Rothschilds and the U.S. Government.

During the Civil War, J. P. Morgan had sold the Union Army defective carbine rifles, and it was this government money that helped build his Guaranty Trust Co. of New York. In 1880, he began financing and reorganizing the railroads. After his father died in 1890, and Drexel died in 1893, the Temporary National Economic Committee revealed that J. P. Morgan held only a 9.1% interest in his own firm. George Whitney owned 1.9%, and H. B. Davison held 1.2%, however, the Charles W. Steele Estate held 36.6%, and Thomas W. Lamont (whose son, Corliss, was an active communist) had 34.2%. Researchers believe that the Illuminati controlled the company through these shares.

In 1901, Morgan bought out Andrew Carnegie’s vast steel operation for $500,000,000 to merge the largest steel companies into one big company known as the United States Steel Corporation (in which, for a time, the Rockefellers were major stockholders).

A speech by Senator Norris which was printed in the Congressional Record of November 30, 1941, said:

“J. P. Morgan, with the assistance and cooperation of a few of the interlocking corporations which reach all over the United States in their influence, controls every railroad in the United States. They control practically every public utility, they control literally thousands of corporations, they control all of the large insurance companies. Mr. President, we are gradually reaching a time, if we have not already reached that point, when the business of the country is controlled by men who can be named on the fingers of one hand, because those men control the money of the Nation, and that control is growing at a rapid rate.”

The House of Morgan grew larger in 1959, when the Guaranty Trust Co. of New York merged with the J. P. Morgan and Co., to form the Morgan Guaranty Trust Co. They had four branch offices, and foreign offices in London, Paris, Brussels, Frankfurt, Rome, and Tokyo. The firm of Morgan, Stanley, and Co. was also under their control.

In 1906, Frank A. Vanderlip, of the National City Bank, convinced many of New York’s banking establishment, that they needed a banker-controlled central bank, that could serve the nation’s financial system. Up to that time, the House of Morgan had filled that role. Some of the people involved with Morgan were: Walter Burns, Clinton Dawkins, Edward Grenfell, Willard Straight, Thomas Lament, Dwight Morrow, Nelson Perkins, Russell Leffingwell, Elihu Root, John W. Davis, John Foster Dulles, S. Parker Gilbert, and Paul D. Cravath. The financial panics of 1873, 1884, 1893, 1907, and later 1920, were initiated by Morgan with the intent of pushing for a much stronger banking system.

On January 6, 1907, the New York Times published an article by Warburg, called “Defects and Needs of Our Banking System,” after which he became the leading exponent of monetary reform. That same year, Jacob Schiff told the New York Chamber of Commerce, that “unless we have a Central Bank with adequate control of credit resources, this country is going to undergo the most severe and far reaching money panic in history.” When Morgan initiated the economic panic in 1907, by circulating rumors that the Knickerbocker Bank and Trust Co. of America was going broke, there was a run on the banks, creating a financial crisis, which began to solidify support for a central banking system. During this panic, Warburg wrote an essay called “A Plan for a Modified Central Bank” which called for a Central Bank, in which 50% would be owned by the government, and 50% by the nation’s banks. In a speech at Columbia University, he quoted Abraham Lincoln, who said in an 1860 Presidential campaign speech: “I believe in a United States Bank.”

In 1908, Schiff laid out the final plans to seize the American monetary system.
Colonel (an honorary title) Edward Mandell House (1858-1938), the son of British financier Thomas W. House, a Rothschild agent who made his fortune by supplying the south with supplies from France and England during the Civil War, was Schiff’s chief representative and courier; and Bernard Baruch (1870-1965), whose stock market speculating made him a multi-millionaire by the early 1900’s, and whose foreign and domestic policy expertise led Presidents from Wilson to Kennedy to seek his advice; were the two who were relied on heavily by Schiff to carry out his plans. Herbert Lehman was also a close aide to Schiff.

President Woodrow Wilson wrote about House (published in The Intimate Papers of Col. House): “Mr. House is my second personality. He is my independent self. His thoughts and mine are one. If I were in his place, I would do just as he suggested ... If anyone thinks he is reflecting my opinion, by whatever action he takes, they are welcome to the conclusion.” George Sylvester Viereck wrote in The Strangest Friendship in History: Woodrow Wilson and Colonel House: “When the Federal Reserve legislation at last assumed definite shape, House was the intermediary between the White House and the financiers.” Schiff, who was known as the “unseen guardian angel” of the Federal Reserve Act, said that the U.S. Constitution was the product of 18th century minds, was outdated, and should be “scrapped and rewritten.”

In 1908, Sen. Nelson W. Aldrich (father-in-law of John D. Rockefeller, Jr. and grandfather of Nelson and David Rockefeller) proposed a bill, in which banks, in an emergency situation, would issue currency backed by federal, state, and local government bonds, and railroad bonds, which would be equal to 75% of the cash value of the bonds. It was harshly criticized because it didn’t provide a monetary system that would respond to the seasonal demand, and fluctuate with the volume of trade. Aldrich was the most powerful man in Congress, and the Illuminati’s head man in the Senate. A member of Congress for 40 years, 36 of them in the Senate, he was Chairman of the powerful Senate Finance Committee.

In the House of Representatives, Rep. E. B. Vreeland of New York, proposed the Vreeland Bill. After making some compromises with Aldrich, and Speaker of the House Joseph Cannon, at a meeting in a hotel room at the Arlington House, his bill became known as the Vreeland Substitute. It called for the acceptance of asset currency, but only in cases of emergency, and the currency would be based on commercial paper rather than bonds. It passed in the House, 184 -145; but when it got to the Senate, Aldrich moved against it, and pushed for further compromises. The Aldrich-Vreeland Bill, called the Emergency Currency Act, was passed on May 30, 1908, and led to the creation of the National Monetary Commission, which was made up of members of Congress. Now, any monetary legislation sent to Congress, would have to go through this group first.

The Bill approved by the National Monetary Commission was known as the Aldrich Bill, and formed the legislative base for the Federal Reserve Act. It was introduced as an amendment to the Republican sponsored Payne-Aldrich Tariff Bill, in order to have Republican support. It was based on Warburg’s plan, except it would only have 15 districts; half of the directors on the district level would be chosen by the banks, a third by the stockholders, and a sixth by the other directors. On the National Board: two chosen by each district; nine chosen by the stockholders; and seven ex-officio members to be the Governor, Chairman of the Board, two Deputy Governors, Secretary of the Treasury, Secretary of Commerce and Labor, Secretary of Agriculture, and Comptroller of the Currency. Most people were against the Bill, because it finally identified the banking institution as a central bank, and the Democratic Party opposed it in the 1912 Party platform.

Aldrich was appointed as head of the National Monetary Commission, and from 1908-10, at a cost of $300,000, this 16-man committee traveled around Europe to study the central banking system.

In 1910, Warburg gave a speech entitled, “A United Reserve Bank of the United States,” which called for a United Reserve Bank to be located in Washington, D.C., having the capital of $100 million. The country would be divided into 20 districts, and the system would be controlled by a Board of Directors, which would be chosen by the banking associations, the stockholders, and the government. Warburg said that the U.S. monetary system wasn’t flexible, and it was unable to compensate for the rise and fall of business demand. As an example, he said, that when wheat was harvested, and merchants didn’t have the cash on hand to buy and store a large supply of grain, the farmers would sell the grain for whatever they could get. This would cause the price of wheat to greatly fluctuate, forcing the farmer to take a loss. Warburg called for the development of commercial paper (paper money) to circulate as currency, which would be issued in standard denominations of uniform sizes. They would be declared by law to be legal tender for the payment of debts and taxes.

President Theodore Roosevelt said, concerning the criticism of finding capable men to head the formation of a central bank: “Why not give Mr. (Paul) Warburg the job? He would be the financial boss, and I would be the political boss, and we could run the country together.”

After a conference was held at Columbia University on November 12, 1910, the National Monetary Commission published their plan in the December, 1910 issue of their Journal of Political Economy in an article called “Bank Notes and Lending Power.”

On November 22, 1910, Aldrich called a meeting of the banking establishment and members of the National Monetary Commission, which was proposed by Henry P. Davison (a partner of J. P. Morgan). Aldrich said that he intended to keep them isolated until they had developed a “scientific currency for the United States.”

All those summoned to the secret meeting, were members of the Illuminati. They met on a railroad platform in Hoboken, New Jersey, where they chartered a private railroad car owned by Aldrich to Georgia. They were taken by boat, to Jekyll Island, off the coast of Brunswick, Georgia. Jekyll Island is in a group of ten islands, including St. Simons, Tybee, Cumberland, Wassau, Wolf, Blackbeard, Sapelo, Ossabow, and Sea Islands. Jekyll Island was a ‘hideaway resort of the rich,’ purchased in 1888 by J. P. Morgan, Henry Goodyear, Joseph Pulitzer, Edwin and George Gould, Cyrus McCormick, William Rockefeller (John D. Rockefeller’s brother), William K. Vanderbilt, and George F. Baker (who founded Harvard Business School with a gift of $5 million) for $125,000 from Eugene du Bignon, whose family owned it for a century. Up until the time it was converted into a public resort, no uninvited foot ever stepped on its shores. It was said, that when all 100 members of the Jekyll Island Hunting Club sat down for dinner at the clubhouse, it represented a sixth of the world’s wealth. St. Simons Island, a short distance away, to the north, was also owned by Illuminati interests.

Those attending the meeting at the private hunting lodge were said to be on a duck-hunting expedition. They were sworn to secrecy, even addressing each other by code names or just by their first names. Details are very sketchy, concerning who attended the meeting, but most scenarios agree that the following people were present: Sen. Aldrich, Frank A. Vanderlip (Vice-President of the Rockefeller owned National City Bank), Henry P. Davison (of the J. P. Morgan and Co.), Abram Piatt Andrew (Assistant Secretary of the Treasury, an Assistant Professor at Harvard, and Special Assistant to the National Monetary Commission during their European tour), Paul Moritz Warburg (of Kuhn, Loeb and Co.), Benjamin Strong (Vice-President of Morgan’s Bankers Trust Co.), Eugene Meyer (a former partner of Bernard Baruch, and the son of a partner in the Rothschild-owned Lazard Freres, who was the head of the War Finances Corporation, and later gained control of the Washington Post), J. P. Morgan, John D. Rockefeller, Col. House, Jacob Schiff, Herbert Lehman (of Lehman Brothers), Bernard Baruch (appointed by President Wilson to be the Chairman of the War Industries Board, which gave him control of all domestic contacts for Allied war materials, which enabled him to make $200 million for himself while working for the government), Joseph Seligman (a leading Jewish financier, who founded J. & W. Seligman and Co., who had helped to float bonds during the Civil War, and were known as ‘World Bankers,’ then later declined President Grant’s offer to serve as the Secretary of Treasury), and Charles D. Norton (President of the First National Bank of New York).

About ten days later, they emerged with the groundwork for a central banking system, in the form of, not one, but two versions, to confuse the opposition. The final draft was written by Frank Vanderlip, from Warburg’s notes, and was incorporated into Aldrich’s Bill, in the form of a completed Monetary Commission report, which Aldrich railroaded through Congress by avoiding the term ‘central bank.’ No information was available on this meeting until 1933, when the book The Federal Reserve Act: It’s Origins and Problems, by James L. Laughlin, appeared; and other information, which was supplied by B. C. Forbes, the editor of Forbes Magazine. In 1935, Frank Vanderlip wrote in the Saturday Evening Post: “I do not feel it is any exaggeration to speak of our secret expedition to Jekyll Island as the occasion of the actual conception of what eventually became the Federal Reserve System.”

The banker-initiated mini-depressions, the last of which had occurred in 1907, helped get Congressional support for the Bill, and on May 11, 1911, the National Citizens League for the Promotion of a Sound Banking System, an Illuminati front-organization, publicly announced their support for Aldrich’s Bill. However, the Aldrich Bill was destined for failure, because he was so closely identified with J. P. Morgan. So, the Illuminati went to Plan B, which was the second version hammered out at the Jekyll Island summit. The National Citizens League publicly withdrew their support of the Aldrich Bill, and the move was on to disguise it, so that it could get through Congress.

Once the new version was ready, they were a little apprehensive about introducing it in Congress, because even if it would be passed by Congress, President Taft would veto it, so they had to wait until they could get their own man elected. That man was Woodrow Wilson.

The Democrats, with the exception of Grover Cleveland’s election, had been out of power since 1869. Being a ‘hungry’ Party, the Illuminati found them easier to infiltrate. During the late 1800’s, they began the process of changing the Democrats from conservative to liberal, and the Republicans, from liberal to conservative.

Wilson graduated from Princeton University in 1879, studied law at the University of Virginia, and received his doctorate degree from Johns Hopkins in 1886. He taught Political Science and History at Bryn Mawr and Wesleyan, and in 1902, became President of Princeton. Because of his support of Aldrich’s Bill, when it was first announced, he was supported by the Illuminati in his successful bid as Governor of New Jersey in 1910. The deal was made through Vanderlip agents, William Rockefeller and James Stillman, at Vanderlip’s West Chester estate. The liaison between the Illuminati and Wilson, would be his prospective son-in-law, William G. McAdoo.

Rabbi Stephen Wise, a leading Jewish activist, told an audience at the Y.M.C.A. in Trenton, New Jersey:

“On Tuesday the President of Princeton University will be elected Governor of your state. He will not complete his term of office as Governor. In November, 1912, he will be elected President of the United States. In March, 1917, he will be inaugurated for the second time as President. He will be one of the greatest Presidents in American history.”

Wise, who made this prophetic statement in 1910, later became a close advisor to Wilson. He had good reason to believe what he said, because the deal had already been struck. Wilson wasn’t viewed as being pro-banking, and the Democratic Party Platform opposed a Central Bank, which was now linked to the Republicans and the bankers.

The main problem for the Democrats, was the Republican voting edge, and the Democrat's lack of money. After the Illuminati made the decision to support Wilson, money was no problem. Records showed that the biggest contributors to Wilson’s campaign were Jacob Schiff, Bernard Baruch, Henry Morgenthau, Sr., Thomas Fortune Ryan (mining magnate), Samuel Untermyer, Cleveland H. Dodge (of the National City Bank), Col. George B. M. Harvey (an associate of J. P. Morgan, and editor of the Morgan-controlled Harper’s Weekly, and President of the Harper and Brothers publishing firm), William Laffan (editor of the New York Sun), Adolph Ochs (publisher of the New York Times), and the financiers that owned the New York Times, Charles R. Flint, Gen. Sam Thomas, J. P. Morgan, and August Belmont. All of these men were Illuminati members.

The problem of the voter registration edge was a bit more difficult, but that was a project that the Illuminati had already been working on. The Russian pogroms of 1881 and 1882, in which thousands of Russians were killed; and religious persecution and anti-Semitism in Poland, Romania, and Bulgaria in the early 1890’s, began three decades of immigration into the United States by thousands of Jews. By

the turn of the century, a half-million Jews had arrived to the port cities of New York, Baltimore, and Boston. It was the Democrats who initiated a program to get them registered to vote. Humanitarian committees were set up by Schiff and the Rothschilds, such as the Hebrew Immigration Aid Society, and the B’nai B’rith, so when the Jews arrived, they were made naturalized citizens, registered Democrat, then shuffled off to other large cities, such as Chicago, Philadelphia, Detroit and Los Angeles, where they were given financial help to find a place to live, food, and clothing. This is how the Jews became a solid Democratic voting bloc, and it was these votes that would be needed to elect Wilson to the Presidency.

In 1912, with President William Howard Taft running for re-election against Wilson, the Illuminati needed some insurance. They got it by urging another Republican, former President, Theodore Roosevelt (1901-09) to run on the Progressive ticket. Taft had served as Roosevelt’s Secretary of War (1905-09), and was chosen by Roosevelt to succeed him as President. Now, Roosevelt was running again. Advocating the ‘New Nationalism,’ Roosevelt said: “My hat is in the ring ... the fight is on and I am stripped to the buff.” Identified as ‘anti-business’ because of his stand against corporations and trusts, his proposals for reorganizing the government were attacked by the Illuminati-controlled New York Times as “super-socialism.” His ‘Bull Moose’ Platform said: “We are opposed to the so-called Aldrich Currency Bill because its provisions would place our currency and credit system in private hands, not subject to effective public control.” Frank Munsey and George Perkins, of the J. P. Morgan and Co. organized, ran, and financed Roosevelt’s campaign. A recent example of the same plan that pulled votes away from Taft, in order to get Wilson elected, occurred in the 1992 Presidential election. In a 1994 interview, Barbara Bush told ABC-TV news correspondent Barbara Walters, that the third-party candidacy of independent H. Ross Perot was the reason that Bill Clinton was able to defeat the re-election bid of President George Bush.

The Illuminati were able to get the support of perennial Democratic Presidential candidate, William Jennings Bryan, by letting him write the plank of the Party Platform which opposed the Aldrich Bill. Remember, the second version of the Bill prepared at Jekyll Island was to be an alternative, so public attention was turned against the Aldrich Bill. Wilson, an aristocrat, having socialistic views, was in favor of an independent reserve system, because he didn’t trust the ‘common men’ which made up Congress. However, publicly, he promised to “free the poor people of America from control by the rich,” and to have a money system that wouldn’t be under the control of Wall Street’s International Bankers. In fact, in the summer of 1912, when he accepted the nomination as the Democratic candidate for the Presidency, he said: “A concentration of the control of credit ... may at any time become infinitely dangerous to free enterprise.” According to the Federal Reserve’s historical narrative, the shift in Wilson’s point of view was “a combination of political realities and his own lack of knowledge about banking and finance (and) after his election to the Presidency, Wilson relied on others for more expert advice on the currency question.”

Because of the voting split in the Republican Party, not only was Woodrow Wilson able to win the Presidency, but the Democrats gained control of both houses in Congress.

DEMOCRAT (Wilson) 435 electoral votes 6,286,214 popular votes

PROGRESSIVE (Roosevelt) 88 electoral votes 4,126,020 popular votes

REPUBLICAN (Taft) 8 electoral votes 3,483,922 popular votes

Rep. Carter Glass of Virginia, Chairman of the Banking and Currency Committee, met with Wilson after his election, along with H. Parker Willis (who was Dean of Political Science at George Washington University) of the National Citizens League, to prepare a Bill, known as the Glass Bill, which began taking form in January, 1913. Now Plan B was set into motion. Remember, the National Citizens League, headquartered in Chicago, had already announced their opposition to the Aldrich Bill, now the Wall Street banking interests had come out against the Glass Bill, which was actually the Aldrich Bill in disguise.

The Wall Street crowd was generally referred to as the ‘money trust.’ However, a 1912 Wall Street Journal editorial said that the term ‘money trust’ was just a reference to J. P. Morgan. The suspicion of the ‘money trust’ peaked in 1912, during an investigation by a House banking subcommittee which revealed that twelve banks in New York, Boston, and Chicago, had 746 interlocking directorships in 134 corporations. Rep. Robert L. Henry of Texas said that for the past five years, the nation’s financial resources had been “concentrated in the city of New York (where they) now dominate more than 75 percent of the moneyed interests of America...” On December 13, 1911, George McC. Reynolds, the President of the Continental and Commercial Bank of Chicago, said to a group of other bankers: “I believe the money power now lies in the hands of a dozen men...” The threat from this powerful private banking system was to be ended with the establishment of a central bank.

To avoid the mention of central banking, Wilson himself suggested that the regional banks be called ‘Federal Reserve Banks,’ and proposed a special session of the 63rd Congress to be convened to vote on the Federal Reserve Act. On June 23, 1913, he addressed the Congress on the subject of the Federal Reserve, threatening to keep them in session until they passed it. Wilson got Bryan’s support by making him Secretary of State, and in October, 1913, Bryan said he would assist the President in “securing the passage of the Bill at the earliest possible moment.”

The Glass Bill (HR7837) was introduced in the House of Representatives on June 26, 1913. The revision mentioned nothing about central banking, which was what the people feared. It was believed that Willis had written the Bill, but it was later discovered that Professor James L. Laughlin, at the Political Science Department of Columbia University, had written it, taking special precaution not to clash with the Bryan plank of the Democratic Party Platform. It was referred to the Banking and Currency Committee, reported back to the House on September 9th, and passed on September 18th.

Sen. Robert Latham Owen of Oklahoma, Chairman of the Senate Banking and Finance Committee, along with five of his colleagues, drafted a Bill which was more open-minded to the suggestions of the bankers. A Bill drafted by Sen. Gilbert M. Hitchcock, a Democrat from Nebraska, called for the elimination of the ‘lawful money’ provision, and stipulated that note redemption must be made in gold. It also provided for public ownership of the regional reserve banks, which would be controlled by the government.

In the Senate, the Glass Bill was referred to the Senate Banking Committee, and reported back to the Senate on November 22, 1913. The Bill was now known as the Glass-Owen Bill. Sen. Owen, who opposed the Aldrich Bill, made some additional revisions, in an attempt to keep them from completely dominating our monetary system. Sen. Elihu Root of New York criticized some of these revisions, and some points were modified. It was passed by the Senate on December 19th.

Since different versions had been passed by both Houses, a Conference Committee was established, which was stacked with six Democrats and only two Republicans, to insure that certain portions of the original Bill would remain intact. It was hastily prepared without any public hearings, and on December 23, 1913, two days before Christmas, when many Congressmen, and three particular Senators, were away from Washington; the Bill was sent to the House of Representatives, where it passed 298-60, and then sent to the Senate, where it passed with a vote of 43-25 (with 27 absent or abstaining). An hour after the Senate vote, Wilson signed the Federal Reserve Act into law, and the Illuminati had taken control of the American economy. The gold and silver in the nation’s vaults were now owned by the Federal Reserve. Baron Alfred Charles Rothschild (1842-1918), who masterminded the entire scheme, then made plans to further weaken our country’s financial structure.

Although Wilson, and Rep. Carter Glass were given the credit for getting the Federal Reserve Act through Congress, William Jennings Bryan played a major role in gaining support to pass it. Bryan later wrote: “That is the one thing in my public career that I regret- my work to secure the enactment of the Federal Reserve Law.” Rep. Glass would later write: “I had never thought the Federal Bank System would prove such a failure. The country is in a state of irretrievable bankruptcy.”

Eustace Mullins, in his book The Federal Reserve Conspiracy, wrote:

“The money and credit resources of the United States were now in complete control of the banker’s alliance between J. P. Morgan’s First National Bank, and Kuhn & Loeb’s National City Bank, whose principal loyalties were to the international banking interests, then quartered in London, and which moved to New York during the First World War.”

The Reserve Bank Organization Committee, controlled by Secretary of the Treasury, William Gibbs McAdoo, and Secretary of Agriculture David F. Houston (who along with Glass, later became Treasury Secretaries under Wilson), was given $100,000 to find locations for the regional Reserve Banks. With over 200 cities requesting this status, hearings were held in 18 cities, as they traveled the country in a special railroad car.

On October 25, 1914, the formal establishment of the Federal Reserve System was announced, and it began operating in 1915.

Col. House, who Wilson called his “alter ego,” because he was his closest friend and most trusted advisor, anonymously wrote a novel in 1912 called Philip Dru: Administrator, which revealed the manner in which Wilson was controlled. House, who lobbied for the implementation of central banking, would now turn his attention towards a graduated income tax. Incidentally, a central bank, providing inflatable currency; and a graduated income tax, were two of the ten points in the Communist Manifesto for socializing a country.

It was House who hand-picked the first Federal Reserve Board. He named Benjamin Strong as its first Chairman. In 1914, Paul M. Warburg quit his $500,000 a year job at Kuhn, Loeb and Co. to be on the Board, later resigning in 1918, during World War I, because of his German connections.

Central Banking-Pt.2--Stock Markets Crash

The stock market crash that began on a black Friday in October 1929 and deepened in the ensuing months had immediate repercussion in Europe. Indeed, even before this, the superheated boom in stock prices that marked the bull market of 1928 siphoned money from Europe. The pricking of the bubble sent shock waves throughout the world.

Large exports of American capital had helped sustain Europe, besides providing an outlet for American surpluses of capital, during the 1920s. Investment in European bonds now contracted sharply and swiftly, as banks that were "caught short" with too many of their assets invested in securities desperately tried to raise money. By June 1930, the price of securities on Wall Street was about 20 percent, on average, of what it had been prior to the crash; between 1929 and 1932 the Dow-Jones average of industrial stock prices fell from a high of 381 to a low of 41!

The American market for European imports also dropped sharply as the entire American economy went into shock; and, to compound trouble, congress insisted on passing a high tariff law in 1930, against the advice of almost all economists. Effective operation of the international economy required that the United States import goods to allow foreign governments to pay for American loans. Moreover, the raising of tariffs set off a chain reaction as every government tried to protect itself against an adverse trade balance leading to currency deterioration. The result was a drying up of world trade that further fueled the economic downturn. The Americans, additionally, continued to insist upon repayment of war debts, until finally in 1931 a general moratorium was declared. Well might Europeans complain of American blindness, but these events only exposed Europe's vulnerability.

an economic depression was by no means a novelty. Severe and prolonged ones had afflicted the world in 1873-1878 and 1893-1897. others had been shorter. They were usually preceded by a speculative and inflationary boom. A typical boom had immediately followed the war, in 1918-1919, giving way o a short and sharp slump in 1921-1922, which had in turn led to the general prosperity of the years up to late 1929.

The exceptions to this we already know: Great Britain remained in a kind of chronic slump, which was the result of her loss of overseas markets and which was intensified by her refusal to devalue the pound in the 1920s. Germany had experienced the strange agony of the massive inflation, climaxing in 1923, because of the continuing struggle with France over war reparations. The Communist revolution had largely cut Russia off from the world economy, despite its limited toleration of capitalism from 1921 to 1928. Carving up the Hapsburg monarchy left Austria a charity case, and in 1931 a fresh wave of economic disasters started with the failure of the Austrian central bank.

These exceptions may seem more numerous than the rule, but the United States and most parts of Europe did enjoy relatively favorable economic conditions between 1924 and 1930. But it turned out that this prosperity rested on American loans and American markets, which now almost vanished. A European economy still recovering from the trauma of the war and its aftermath was too frail to weather this storm.

More on the Federal Reserve Act

The Banking Act of 1935 amended the Federal Reserve Act, changing its name to the Federal Reserve System, and reorganizing it, in respect to the number of directors and length of term.

Headed by a seven member Board of Governors, appointed by the President, and confirmed by the Senate for a 14 year term, the Board acts as an overseer to the nation’s money supply and banking system.

The Board of Governors, the President of the Federal Reserve Bank in New York, and four other Reserve Bank Presidents, who serve on a rotating basis, make up the Federal Open Market Committee. This group decides whether or not to buy and sell government securities on the open market. The Government buys and sells government securities, mostly through 21 Wall Street bond dealers, to create reserves to make the money needed to run the government. The Committee also determines the supply of money available to the nation’s banks and consumers.

There are twelve Federal Reserve Banks, in twelve districts: Boston (MA), Cleveland (OH), New York (NY), Philadelphia (PA), Richmond (VA), Atlanta (GA), Chicago (IL) , St. Louis (MO), Minneapolis (MN), Kansas City (KS), San Francisco (CA), and Dallas (TX). The twelve regional banks were set up so that the people wouldn’t think that the Federal Reserve was controlled from New York. Each of the Banks has nine men on the Board of Directors; six are elected by member Banks, and three are appointed by the Board of Governors.

They have 25 branch Banks, and many member Banks. All Federal Banks are members, and four out of every ten commercial banks are members. In whole, the Federal Reserve System controls about 70% of the country’s bank deposits. Ohio Senator, Warren G. Harding, who was elected to the Presidency in 1920, said in a 1921 Congressional inquiry, that the Reserve was a private banking monopoly. He said: “The Federal Reserve Bank is an institution owned by the stockholding member banks. The Government has not a dollar’s worth of stock in it.” His term was cut short in 1923, when he mysteriously died, leading to rumors that he was poisoned. This claim was never substantiated, because his wife would not allow an autopsy.

Three years after the initiation of the Federal Reserve, Woodrow Wilson said:

“The growth of the nation ... and all our activities are in the hands of a few men ... We have come to be one of the worst ruled; one of the most completely controlled and dominated governments in the civilized world ... no longer a government of free opinion, no longer a government by conviction and the free vote of the majority, but a government by the opinion and duress of a small group of dominant men.”

In 1919, John Maynard Keynes, later an advisor to Franklin D. Roosevelt, wrote in his book The Economic Consequences of Peace:

“Lenin is to have declared that the best way to destroy the capitalist system was to debauch the currency ... By a continuing process of inflation, governments can confiscate secretly and unobserved, an important part of the wealth of their citizens ... As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless...”

Congressman Charles August Lindbergh, Sr., father of the historic aviator, said on the floor of the Congress: “This Act establishes the most gigantic trust on Earth ... When the President signs this Act, the invisible government by the Money Power, proven to exist by the Money Trust investigation, will be legalized ... This is the Aldrich Bill in disguise ... The new law will create inflation whenever the Trusts want inflation ... From now on, depressions will be scientifically created ... The worst legislative crime of the ages is perpetrated by this banking and currency bill.” Lindbergh supposedly paid for his opposition to the Illuminati. When there appeared to be growing support for his son Charles to run for the Presidency, his grandson was kidnapped, and apparently killed.

Rep. Henry Cabot Lodge, Sr. said of the Bill (Congressional Record, June 10, 1932):

“The Bill as it stands, seems to me to open the way to vast expansion of the currency ... I do not like to think that any law can be passed which will make it possible to submerge the gold standard in a flood of irredeemable paper currency.”

On December 15, 1931, Rep. Louis T. McFadden, who for more than ten years served as Chairman of the Banking and Currency Committee in the House of Representatives, said: “The Federal Reserve Board and banks are the duly appointed agents of the foreign central banks of issue and they are more concerned with their foreign customers than they are with the people of the United States. The only thing that is American about the Federal Reserve Board and banks is the money they use...” On June 10, 1932, McFadden, said in an address to the Congress:

"We have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks ... Some people think the Federal Reserve Banks are United States Government institutions. They are not Government institutions. They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign customers ... The Federal Reserve Banks are the agents of the foreign central banks ... In that dark crew of financial pirates, there are those who would cut a man’s throat to get a dollar out of his pocket ... Every effort has been made by the Federal Reserve Board to conceal its powers, but the truth is the FED has usurped the government. It controls everything here (in Congress) and controls all our foreign relations. It makes and breaks governments at will ... When the FED was passed, the people of the United States did not perceive that a world system was being set up here ... A super-state controlled by international bankers, and international industrialists acting together to enslave the world for their own pleasure!”

On May 23, 1933, McFadden brought impeachment charges against the members of the Federal Reserve:

“Whereas I charge them jointly and severally with having brought about a repudiation of the national currency of the United States in order that the gold value of said currency might be given to private interests...

I charge them ... with having arbitrarily and unlawfully taken over $80,000,000,000 from the United States Government in the year 1928...

I charge them ... with having arbitrarily and unlawfully raised and lowered the rates on money ... increased and diminished the volume of currency in circulation for the benefit of private interests...

I charge them ... with having brought about the decline of prices on the New York Stock Exchange...

I charge them ... with having conspired to transfer to foreigners and international money lenders, title to and control of the financial resources of the United States...

I charge them ... with having published false and misleading propaganda intended to deceive the American people and to cause the United States to lose its independence...

I charge them ... with the crime of having treasonably conspired and acted against the peace and security of the United States, and with having treasonably conspired to destroy the constitutional government of the United States.”

In 1933, Vice-President John Garner, when referring to the international bankers, said: “You see, gentlemen, who owns the United States.”

Sen. Barry Goldwater wrote in his book With No Apologies: “Does it not seem strange to you that these men just happened to be CFR (Council on Foreign Relations) and just happened to be on the Board of Governors of the Federal Reserve, that absolutely controls the money and interest rates of this great country. A privately owned organization ... which has absolutely nothing to do with the United States of America!”

Plain and simple, the Federal Reserve is not part of the Federal Government. It is a privately held corporation owned by stockholders. That is why the Federal Reserve Bank of New York (and all the others) is listed in the Dun and Bradstreet Reference Book of American Business (Northeast, Region 1, Manhattan/Bronx). According to Article I, Section 8 of the U.S. Constitution, only Congress has the right to issue money and regulate its value, so it is illegal for private interests to do so. Yet, it happened, and because of a provision in the Act, the Class A stockholders were to be kept a secret, and not to be revealed. R. F. McMaster, who published a newsletter called The Reaper, through his Swiss and Saudi Arabian contacts, was able to find out which banks held a controlling interest in the Reserve: the Rothschild Banks of London and Berlin; Lazard Brothers Bank of Paris; Israel Moses Seif Bank of Italy; Warburg Bank of Hamburg and Amsterdam; Lehman Brothers Bank of New York; Kuhn, Loeb, and Co. of New York; Chase Manhattan Bank of New York; and Goldman, Sachs of New York. These interests control the Reserve through about 300 stockholders.

Because of the way the Reserve was organized, whoever controls the Federal Reserve Bank of New York, controls the system, About 90 of the 100 largest banks are in this district. Of the reportedly 203,053 shares of the New York bank: Rockefeller’s National City Bank had 30,000 shares; Morgan’s First National Bank had 15,000 shares; Chase National, 6,000 shares; and the National Bank of Commerce (Morgan Guaranty Trust), 21,000 shares.

A June 15, 1978 Senate Report called “Interlocking Directorates Among the Major U.S. Corporations” revealed that five New York banks had 470 interlocking directorates with 130 major U.S. corporations: Citicorp (97), J. P. Morgan Co. (99), Chase Manhattan (89), Manufacturers Hanover (89), and Chemical Bank (96). According to Eustace Mullins, these banks are major stock holders in the FED. In his book World Order, he said that these five banks are “controlled from London.” Mullins said: “Besides its controlling interest in the Federal Reserve Bank of New York, the Rothschilds had developed important financial interests in other parts of the United States ... The entire Rockefeller empire was financed by the Rothschilds.”

A May, 1976 report of the House Banking and Currency Committee indicated: “The Rothschild banks are affiliated with Manufacturers Hanover of London in which they hold 20 percent ... and Manufacturers Hanover Trust of New York.” The Report also revealed that Rothschild Intercontinental Bank, Ltd., which consisted of Rothschild banks in London, France, Belgium, New York, and Amsterdam, had three American subsidiaries: National City Bank of Cleveland, First City National Bank of Houston, and Seattle First National Bank. It is believed, that the Rothschilds hold 53% of the stock of the U.S. Federal Reserve.

Each year, billions of dollars are ‘earned’ by Class A stockholders, from U.S. tax dollars which go to the FED to pay interest on bank loans.

The Coinage Act of 1792 established a dollar consisting of 371.25 grains of pure silver, but was later replaced with a gold dollar consisting of 25.8 grains of gold. In 1873, the Coinage Act was passed, prohibiting the use of Silver as a form of currency, because the quantity being discovered was driving the value down. In 1875, after temporarily suspending gold convertibility during the Civil War greenback period, the U.S. was put more firmly on the gold standard by the Gold Standard Act of 1900. From 1900 to 1933, gold was coined by the U.S. Mint, and our paper currency was tied into the amount of gold held in the U.S. Treasury reserves.

In July, 1927, the directors of the Bank of England, the New York Federal Reserve Bank, and the German Reichsbank, met to plan a way to get the gold moved out of the United States, and it was this movement of gold which helped trigger the depression. By 1928, nearly $500 million in gold was transferred to Europe.

President Franklin D. Roosevelt accepted the advice of England’s leading economist, John Maynard Keynes (1883-1946), a member of the Illuminati, who said that deficit spending would be a shot in the arm to the economy. Most of the New Deal spending programs to fight economic depression, were based on Keynes theories on deficit spending, and financed by borrowing against future taxes. In 1910, Lenin said: “The surest way to overthrow an established social order is to debauch its currency.” Nine years later, Keynes wrote: “Lenin was certainly right, there is no more positive, or subtler, no surer means of overturning the existing basis of society than to debauch the currency ... The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million is able to diagnose.”

A Presidential Executive Order by Roosevelt on April 5, 1933, required all the people to exchange their gold coins, gold bullion, and gold-backed currency, for money that was not redeemable in precious metals. The Gold Reserve Act of 1934, known as the Thomas Amendment, which amended the Act of May 12, 1933, made it illegal to possess any gold currency (which was rescinded December 31, 1974). Gold coinage was withdrawn from circulation, and kept in the form of bullion. Just as the public was to return all their gold to the U.S. Government, so was the Federal Reserve. However, while the people received $20.67 an ounce in paper money issued by the Federal Reserve, the Reserve was paid in Gold Certificates. Now the Federal Reserve, and the Illuminati, had control of all the gold in the country.

In 1934, the value of gold increased to $35 an ounce, which produced a $3 billion profit for the Government. But when the price of gold increases, the value of the dollar decreases. Our dollar has not been worth 100 cents since 1933, when we were taken off of the Gold Standard. In 1974, our dollar was worth 22-1/2 cents, and in 1983 it was only worth 38 cents. In 2002, it took $13.88 to buy what cost $1.00 in 1933. Since our money supply had been limited to the amount of gold in Treasury reserves, when the value of the dollar decreased, more money was printed.

The first United Nations Monetary and Financial Conference, held in Bretton Woods, New Hampshire, from July 1 to July 22, 1944, which was under the direction of Harry Dexter White (CFR member, and undercover Russian spy), established the policies of the International Monetary Fund. Its goals were to strip the United States of its gold reserves by giving it to other nations; and to merge with their industrial capabilities; as well as their economic, social, educational and religious policies; to facilitate a one-world government.

Because of paying off foreign obligations and strengthening foreign economies, between 1958 and 1968, the amount of gold bullion in the possession of the U.S. Treasury dropped by 52%. Of the amount remaining, $12 billion was reserved by law for backing the paper money in circulation. Our money had been backed by a 25% gold reserve in accordance to a law that was passed in 1945, but it was rescinded in 1968. The amount of gold slipped from 653.1 million troy ounces in 1957, to 311.2 million ounces in 1968, which according to the Treasury Department, was due to sales to foreign banking institutions, sales to domestic producers, and the buying and selling of gold on the world market to stabilize prices. This was a loss of 341.9 million troy ounces. In August, 1971, gold was used only for world trade, because foreign countries wouldn’t accept U.S. dollars. As of November, 1981, sources had indicated that the gold reserve had dropped to 264.1 million troy ounces.

Title 31 of the U.S. Code, requires an annual physical inventory of our gold supply, but a complete audit was never done, so officially, nobody knows what has occurred. After World War II, America had 70% of the World’s supply of loose gold, but today, we may have less than 7%. Sen. Jesse Helms seemed to think that the OPEC nations have our gold, while others believe that 70% of the world’s gold supply is being held by the World Bank, which is dominated by the financial grip of the Rothschilds and the Rockefellers.

Main Causes of the Great Depression

The Great Depression was the worst economic slump ever in U.S. history, and one which spread to virtually all of the industrialized world. The depression began in late 1929 and lasted for about a decade. Many factors played a role in bringing about the depression; however, the main cause for the Great Depression was the combination of the greatly unequal distribution of wealth throughout the 1920's, and the extensive stock market speculation that took place during the latter part that same decade. The maldistribution of wealth in the 1920's existed on many levels. Money was distributed disparately between the rich and the middle-class, between industry and agriculture within the United States, and between the U.S. and Europe. This imbalance of wealth created an unstable economy. The excessive speculation in the late 1920's kept the stock market artificially high, but eventually lead to large market crashes. These market crashes, combined with the maldistribution of wealth, caused the American economy to capsize.

The "roaring twenties" was an era when our country prospered tremendously. The nation's total realized income rose from $74.3 billion in 1923 to $89 billion in 19291. However, the rewards of the "Coolidge Prosperity" of the 1920's were not shared evenly among all Americans. According to a study done by the Brookings Institute, in 1929 the top 0.1% of Americans had a combined income equal to the bottom 42%2. That same top 0.1% of Americans in 1929 controlled 34% of all savings, while 80% of Americans had no savings at all3. Automotive industry mogul Henry Ford provides a striking example of the unequal distribution of wealth between the rich and the middle-class. Henry Ford reported a personal income of $14 million4 in the same year that the average personal income was $7505. By present day standards, where the average yearly income in the U.S. is around $18,5006, Mr. Ford would be earning over $345 million a year! This maldistribution of income between the rich and the middle class grew throughout the 1920's. While the disposable income per capita rose 9% from 1920 to 1929, those with income within the top 1% enjoyed a stupendous 75% increase in per capita disposable income7.

A major reason for this large and growing gap between the rich and the working-class people was the increased manufacturing output throughout this period. From 1923-1929 the average output per worker increased 32% in manufacturing8. During that same period of time average wages for manufacturing jobs increased only 8%9. Thus wages increased at a rate one fourth as fast as productivity increased. As production costs fell quickly, wages rose slowly, and prices remained constant, the bulk benefit of the increased productivity went into corporate profits. In fact, from 1923-1929 corporate profits rose 62% and dividends rose 65%10.

The federal government also contributed to the growing gap between the rich and middle-class. Calvin Coolidge's administration (and the conservative-controlled government) favored business, and as a result the wealthy who invested in these businesses. An example of legislation to this purpose is the Revenue Act of 1926, signed by President Coolidge on February 26, 1926, which reduced federal income and inheritance taxes dramatically11. Andrew Mellon, Coolidge's Secretary of the Treasury, was the main force behind these and other tax cuts throughout the 1920's. In effect, he was able to lower federal taxes such that a man with a million-dollar annual income had his federal taxes reduced from $600,000 to $200,00012. Even the Supreme Court played a role in expanding the gap between the socioeconomic classes. In the 1923 case Adkins v. Children's Hospital, the Supreme Court ruled minimum-wage legislation unconstitutional13.

The large and growing disparity of wealth between the well-to-do and the middle-income citizens made the U.S. economy unstable. For an economy to function properly, total demand must equal total supply. In an economy with such disparate distribution of income it is not assured that demand will always equal supply. Essentially what happened in the 1920's was that there was an oversupply of goods. It was not that the surplus products of industrialized society were not wanted, but rather that those whose needs were not satiated could not afford more, whereas the wealthy were satiated by spending only a small portion of their income. A 1932 article in Current History articulates the problems of this maldistribution of wealth:

We still pray to be given each day our daily bread. Yet there is too much bread, too much wheat and corn, meat and oil and almost every other commodity required by man for his subsistence and material happiness. We are not able to purchase the abundance that modern methods of agriculture, mining and manufacturing make available in such bountiful quantities14.

Three quarters of the U.S. population would spend essentially all of their yearly incomes to purchase consumer goods such as food, clothes, radios, and cars. These were the poor and middle class: families with incomes around, or usually less than, $2,500 a year. The bottom three quarters of the population had an aggregate income of less than 45% of the combined national income; the top 25% of the population took in more than 55% of the national income15. While the wealthy too purchased consumer goods, a family earning $100,000 could not be expected to eat 40 times more than a family that only earned $2,500 a year, or buy 40 cars, 40 radios, or 40 houses.

Through such a period of imbalance, the U.S. came to rely upon two things in order for the economy to remain on an even keel: credit sales, and luxury spending and investment from the rich.

One obvious solution to the problem of the vast majority of the population not having enough money to satisfy all their needs was to let those who wanted goods buy products on credit. The concept of buying now and paying later caught on quickly. By the end of the 1920's 60% of cars and 80% of radios were bought on installment credit16. Between 1925 and 1929 the total amount of outstanding installment credit more than doubled from $1.38 billion to around $3 billion17. Installment credit allowed one to "telescope the future into the present", as the President's Committee on Social Trends noted18. This strategy created artificial demand for products which people could not ordinarily afford. It put off the day of reckoning, but it made the downfall worse when it came. By telescoping the future into the present, when "the future" arrived, there was little to buy that hadn't already been bought. In addition, people could not longer use their regular wages to purchase whatever items they didn't have yet, because so much of the wages went to paying back past purchases.

The U.S. economy was also reliant upon luxury spending and investment from the rich to stay afloat during the 1920's. The significant problem with this reliance was that luxury spending and investment were based on the wealthy's confidence in the U.S. economy. If conditions were to take a downturn (as they did with the market crashed in fall and winter 1929), this spending and investment would slow to a halt. While savings and investment are important for an economy to stay balanced, at excessive levels they are not good. Greater investment usually means greater productivity. However, since the rewards of the increased productivity were not being distributed equally, the problems of income distribution (and of overproduction) were only made worse. Lastly, the search for ever greater returns on investment lead to wide-spread market speculation.

Maldistribution of wealth within our nation was not limited to only socioeconomic classes, but to entire industries. In 1929 a mere 200 corporations controlled approximately half of all corporate wealth19. While the automotive industry was thriving in the 1920's, some industries, agriculture in particular, were declining steadily. In 1921, the same year that Ford Motor Company reported record assets of more than $345 million, farm prices plummeted, and the price of food fell nearly 72% due to a huge surplus20. While the average per capita income in 1929 was $750 a year for all Americans, the average annual income for someone working in agriculture was only $27321. The prosperity of the 1920's was simply not shared among industries evenly. In fact, most of the industries that were prospering in the 1920's were in some way linked to the automotive industry or to the radio industry.

The automotive industry was the driving force behind many other booming industries in the 1920's. By 1928, with over 21 million cars on the roads, there was roughly one car for every six Americans22. The first industries to prosper were those that made materials for cars. The booming steel industry sold roughly 15% of its products to the automobile industry23. The nickel, lead, and other metal industries capitalized similarly. The new closed cars of the 1920's benefited the glass, leather, and textile industries greatly. And manufacturers of the rubber tires that these cars used grew even faster than the automobile industry itself, for each car would probably need more than one set of tires over the course of its life. The fuel industry also profited and expanded. Companies such as Ethyl Corporation made millions with items such as new "knock-free" fuel additives for cars24. In addition, "tourist homes" (hotels and motels) opened up everywhere. With such a wealthy upper-class many luxury hotels were needed. In 1924 alone, hotels such as the Mayflower (Washington D.C.), the Parker House (Boston), The Palmer House (Chicago), and the Peabody (Memphis) opened their doors25. Lastly, and possibly most importantly, the construction industry benefited tremendously from the automobile. With the growing number of cars, there was a big demand for paved roads. During the 1920's Americans spent more than a $1 billion each year on the construction and maintenance of highways, and at least another $400 million annually for city streets26. But the automotive industry affected construction far more than that. The automobile had been central to the urbanization of the country in the 1920's because so many other industries relied upon it. With urbanization came the need to build many more apartment buildings, factories, offices, and stores. From 1919 to 1928 the construction industry grew by around $5 billion dollars, nearly 50%27.

Also prospering during the 1920's were businesses dependent upon the radio business. Radio stations, electronic stores, and electricity companies all needed the radio to survive, and relied upon the constant growth of the radio market to expand and grow themselves. By 1930, 40% of American families had radios28. In 1926 major broadcasting companies started appearing, such as the National Broadcasting Company. The advertising industry was also becoming heavily reliant upon the radio both as a product to be advertised, and as a method of advertising.

Several factors lead to the concentration of wealth and prosperity into the automotive and radio industries. First, during World War I both the automobile and the radio were significantly improved upon. Both had existed before, but radio had been mostly experimental. Due to the demands of the war, by 1920 automobiles, radios, and the parts necessary to build these things were being produced in large quantities; the work force in these industries had been formed and had become experienced. Manufacturing plants were already in place. The infrastructure existed for the automotive and radio industries to take off. Second, due to federal government's easing of credit, money was available to invest in these industries. Thanks to pressure from President Coolidge and the business world, the Federal Reserve Board kept the rediscount rate low.

The federal government favored the new industries as opposed to agriculture. During World War I the federal government had subsidized farms, and payed absurdly high prices for wheat and other grains. The federal government had encouraged farmers to buy more land, to modernize their methods with the latest in farm technology, and to produce more food. This made sense during that war when war-ravaged Europe had to be fed too. However as soon as the war ended, the U.S. abruptly stopped its policies to help farmers. During the war the United States government had paid an unheard of $2 a bushel for wheat, but by 1920 wheat prices had fallen to as low as 67 cents a bushel29. Farmers fell into debt; farm prices and food prices tumbled. Although modest attempts to help farmers were made in 1923 with the Agricultural Credits Act, farmers were generally left out in the cold by the government.

The problem with such heavy concentrations of wealth and such massive dependence upon essentially two industries is similar to the problem with few people having too much wealth. The economy is reliant upon those industries to expand and grow and invest in order to prosper. If those two industries, the automotive and radio industries, were to slow down or stop, so would the entire economy. While the economy did prosper greatly in the 1920's, because this prosperity wasn't balanced between different industries, when those industries that had all the wealth concentrated in them slowed down, the whole economy did. The fundamental problem with the automobile and radio industries was that they could not expand ad infinitum for the simple reason that people could and would buy only so many cars and radios. When the automotive and radio industries went down all their dependents, essentially all of American industry, fell. Because it had been ignored, agriculture, which was still a fairly large segment of the economy, was already in ruin when American industry fell.

A last major instability of the American economy had to do with large-scale international wealth distribution problems. While America was prospering in the 1920's, European nations were struggling to rebuild themselves after the damage of war. During World War I the U.S. government lent its European allies $7 billion, and then another $3.3 billion by 192030. By the Dawes Plan of 1924 the U.S. started lending to Axis Germany. American foreign lending continued in the 1920's climbing to $900 million in 1924, and $1.25 billion in 1927 and 192831. Of these funds, more than 90% were used by the European allies to purchase U.S. goods32. The nations the U.S. had lent money to (Britain, Italy, France, Belgium, Russia, Yugoslavia, Estonia, Poland, and others) were in no position to pay off the debts. Their gold had flowed into the U.S. during and immediately after the war in great quantity; they couldn't send more gold without completely ruining their currencies. Historian John D. Hicks describes the Allied attitude towards U.S. loan repayment:

In their view the war was fought for a common objective, and the victory was as essential for the safety of the United States as for their own. The United States had entered the struggle late, and had poured forth no such contribution in lives and losses as the Allies had made. It had paid in dollars, not in death and destruction, and now it wanted its dollars back.33

There were several causes to this awkward distribution of wealth between U.S. and its European counterparts. Most obvious is that fact that World War I had devastated European business. Factories, homes, and farms had been destroyed in the war. It would take time and money to recuperate. Equally important to causing the disparate distribution of wealth was tariff policy of the United States. The United States had traditionally placed tariffs on imports from foreign countries in order to protect American business. However these tariffs reached an all-time high in the 1920's and early 1930's. Starting with the Fordney-McCumber Act of 1922 and ending with the Hawley-Smoot Tariff of 1930, the United States increased many tariffs by 100% or more34. The effect of these tariffs was that Europeans were unable to sell their own goods in the United States in reasonable quantities.

In the 1920's the United States was trying "to be the world's banker, food producer, and manufacturer, but to buy as little as possible from the world in return."35 This attempt to have a constantly favorable trade balance could not succeed for long. The United States maintained high trade barriers so as to protect American business, but if the United States would not buy from our European counterparts, then there was no way for them to buy from the Americans, or even to pay interest on U.S. loans. The weakness of the international economy certainly contributed to the Great Depression. Europe was reliant upon U.S. loans to buy U.S. goods, and the U.S. needed Europe to buy these goods to prosper. By 1929 10% of American gross national product went into exports36. When the foreign countries became no longer able to buy U.S. goods, U.S. exports fell 30% immediately. That $1.5 billion of foreign sales lost between 1929 to 1933 was fully one eighth of all lost American sales in the early years of the depression37.

Mass speculation went on throughout the late 1920's. In 1929 alone, a record volume of 1,124,800,410 shares were traded on the New York Stock Exchange38. From early 1928 to September 1929 the Dow Jones Industrial Average rose from 191 to 38139. This sort of profit was irresistible to investors. Company earnings became of little interest; as long as stock prices continued to rise huge profits could be made. One such example is RCA corporation, whose stock price leapt from 85 to 420 during 1928, even though it had not yet paid a single dividend40. Even these returns of over 100% were no measure of the possibility for investors of the time. Through the miracle of buying stocks on margin, one could buy stocks without the money to purchase them. Buying stocks on margin functioned much the same way as buying a car on credit. Using the example of RCA, a Mr. John Doe could buy 1 share of the company by putting up $10 of his own, and borrowing $75 from his broker. If he sold the stock at $420 a year later he would have turned his original investment of just $10 into $341.25 ($420 minus the $75 and 5% interest owed to the broker). That makes a return of over 3400%! Investors' craze over the proposition of profits like this drove the market to absurdly high levels. By mid 1929 the total of outstanding brokers' loans was over $7 billion41; in the next three months that number would reach $8.5 billion42. Interest rates for brokers loans were reaching the sky, going as high as 20% in March 192943. The speculative boom in the stock market was based upon confidence. In the same way, the huge market crashes of 1929 were based on fear.

Prices had been drifting downward since September 3, but generally people where optimistic. Speculators continued to flock to the market. Then, on Monday October 21 prices started to fall quickly. The volume was so great that the ticker fell behind44. Investors became fearful. Knowing that prices were falling, but not by how much, they started selling quickly. This caused the collapse to happen faster. Prices stabilized a little on Tuesday and Wednesday, but then on Black Thursday, October 24, everything fell apart again. By this time most major investors had lost confidence in the market. Once enough investors had decided the boom was over, it was over. Partial recovery was achieved on Friday and Saturday when a group of leading bankers stepped in to try to stop the crash. But then on Monday the 28th prices started dropping again. By the end of the day the market had fallen 13%45. The next day, Black Tuesday an unprecedented 16.4 million shares changed hands46. Stocks fell so much, that at many times during the day no buyers were available at any price47.

This speculation and the resulting stock market crashes acted as a trigger to the already unstable U.S. economy. Due to the maldistribution of wealth, the economy of the 1920's was one very much dependent upon confidence. The market crashes undermined this confidence. The rich stopped spending on luxury items, and slowed investments. The middle-class and poor stopped buying things with installment credit for fear of loosing their jobs, and not being able to pay the interest. As a result industrial production fell by more than 9% between the market crashes in October and December 192948. As a result jobs were lost, and soon people starting defaulting on their interest payment. Radios and cars bought with installment credit had to be returned. All of the sudden warehouses were piling up with inventory. The thriving industries that had been connected with the automobile and radio industries started falling apart. Without a car people did not need fuel or tires; without a radio people had less need for electricity. On the international scene, the rich had practically stopped lending money to foreign countries. With such tremendous profits to be made in the stock market nobody wanted to make low interest loans. To protect the nation's businesses the U.S. imposed higher trade barriers (Hawley-Smoot Tariff of 1930). Foreigners stopped buying American products. More jobs were lost, more stores were closed, more banks went under, and more factories closed. Unemployment grew to five million in 1930, and up to thirteen million in 193249. The country spiraled quickly into catastrophe. The Great Depression had begun.

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