Professor Murray N. Rothbard wrote about the history of the modern ruling elite in many of his books. The main book is Wall Street, Banks and American Foreign Policy.
Rothbard, however presented most of the history of the ruling elite in scattered articles. Some of them have been posthumously collected into an over 500-page book The History of Money and Banking in the United States.
This excerpted summary is mostly based on those two books but utilizes also Rothbard’s other books and articles listed at the end of this article in the selected bibliography.
This excerpted summary of Rothbard’s writings is a work in progress and more excerpts will be later added. All are welcome to add relevant excerpts from Rothbard’s writings. A timeline and diagrams on the ruling elite are also planned.
The great value of Rothbard’s history of the ruling elite is that it not only presents the Big Picture but also names the names. However, for a layman it might be confusing to be confronted with such a litany of names especially since Rothbard does not always proceed chronologically. The Big Picture is here presented with snippets organized chronologically in order to show how the modern ruling elite developed from the seventeenth century onwards.
Pictures are added to the text. They contain links to more information.
Over 1000 pages are distilled into 142 pages. Furthermore, each subtitle summarises the historical period in question. Therefore, the titles of chapters form a microsummary that presents the following narrative:
I The birth of liberty
II Bankers against liberty
III American Revolution betrayed by bankers
IV Classical liberal/Libertarian war against bankers
V Classical liberalism betrays liberty
VI War of Northern Aggression gives power back to the bankers
VII Anglo-American Establishment takes over the state
VIII Establishment bankers buy the intelligentsia
IX War of the Three Houses
X Truce I: Cartellizing the US banking system
XI Truce II. Cartellizing USA economy with First World War
XII Global Empire of the Anglo-American Establishment
XIII Anglo-American Establishment cartellizes global banking
XIV Trying to cure the Great Depression with more cartellizing
XV War of the Three Houses restarts
XVI Truce III. Cartellizing world economy with Second World War
XVII Rockefellers dominate the Anglo-American Establishment
XVIII Kennedys first submit to, then challenge the Establishment
XIX Three Houses together rule the Global American Empire
XX War of the Three Houses restarts?
XXI Global cartel economy will break up and liberty will triumph
Classical liberalism is based on scholastic natural law thinkers
[S]uch great late sixteenth century Spanish Jesuit scholastics as Suarez and Mariana were contractual natural rights thinkers, with Mariana being positively ’pre-Lockean’ in his insistence on the right of the people to resume the rights of sovereignty they had previously delegated to the king. 1
Levellers were the first libertarians
[The] world’s first self-consciously libertarian mass movement: the Levellers. In a series of notable debates within the Republican Army – notably between the Cromwellians and the Levellers – the Levellers, led by John Lilburne, Richard Overton and William Walwyn, worked out a remarkably consistent libertarian doctrine, upholding the rights of ’self-ownership’, private property, religious freedom for the individual, and minimal government interference in society. 2
Locke develops libertarian theory
Locke’s entire structure of thought in his Two Treatises of Government, written in 1681-82 as a schema for justifying the forthcoming Whig revolution against the Stuarts, was an elaboration and creative development of Leveller doctrine: the beginnings in self-ownership or self-propriety, the deduced right to property and free exchange, the justification of government as a device to protect such rights, and the right of overturning a government that violates, or becomes destructive of, those ends. One of the former Leveller leaders, Major John Wildman, was even close to the Locke-Shaftesbury set during the 1680s. 3
Convergence of the views of radical Whigs and high Tories
Weighing in on the side of John Locke, not only on interest rates but also in a general and comprehensive vision of economic laissez-faire that even surpassed Locke, were two brothers, Dudley and Roger North, who came from a distinguished Tory family. Here was a fascinating convergence of views of a radical Whig, and high Tories and zealous subjects of Charles and James II.
This juncture presaged a later meeting of minds of ’extreme Left’ and ’extreme Right’ during the eighteenth century, when the imperialist-Whig mercantilist one-party Establishment, from 1715 to the 1750s, was opposed on the Left by radical libertarian Commonwealth men and on the Right by the anti-imperialist, Catholic or proto-Catholic opposition, all agreeing on denunciations of the mercantilistic, high tax, high public debt, central banking state. 4
Libertarian movement begins
The libertarian creed emerged from the “classical liberal” movements of the seventeenth and eighteenth centuries in the Western world, specifically, from the English Revolution of the seventeenth century. This radical libertarian movement, even though only partially successful in its birthplace, Great Britain, was still able to usher in the Industrial Revolution, thereby freeing industry and production from the strangling restrictions of State control and urban government-supported guilds. For the classical liberal movement was, throughout the Western world, a mighty libertarian “revolution” against what we might call the Old Order—the ancien régime which had dominated its subjects for centuries. This regime had, in the early modern period beginning in the sixteenth century, imposed an absolute central State and a king ruling by divine right on top of an older, restrictive web of feudal land monopolies and urban guild controls and restrictions.
The result was a Europe stagnating under a crippling web of controls, taxes, and monopoly privileges to produce and sell conferred by central (and local) governments upon their favorite producers. This alliance of the new bureaucratic, war-making central State with privileged merchants—an alliance to be called “mercantilism” by later historians—and with a class of ruling feudal landlords constituted the Old Order against which the new movement of classical liberals and radicals arose and rebelled in the seventeenth and eighteenth centuries.
The object of the classical liberals was to bring about individual liberty in all of its interrelated aspects. In the economy, taxes were to be drastically reduced, controls and regulations eliminated, and human energy, enterprise, and markets set free to create and produce in exchanges that would benefit everyone and the mass of consumers. Entrepreneurs were to be free at last to compete, to develop, to create. The shackles of control were to be lifted from land, labor, and capital alike. Personal freedom and civil liberty were to be guaranteed against the depredations and tyranny of the king or his minions. Religion, the source of bloody wars for centuries when sects were battling for control of the State, was to be set free from State imposition or interference, so that all religions—or nonreligions—could coexist in peace.
Peace, too, was the foreign policy credo of the new classical liberals; the age-old regime of imperial and State aggrandizement for power and pelf was to be replaced by a foreign policy of peace and free trade with all nations. And since war was seen as engendered by standing armies and navies, by military power always seeking expansion, these military establishments were to be replaced by voluntary local militia, by citizen-civilians who would only wish to fight in defense of their own particular homes and neighborhoods. 5
Bankers are statists
Businessmen and manufacturers can either be genuine free enterprisers or statists; they can either make their way on the free market or seek special government favors and privileges. They choose according to their individual preferences and values. But bankers are inherently inclined toward statism.
Commercial bankers, engaged as they are in unsound fractional reserve credit, are, in the free market, always teetering on the edge of bankruptcy. Hence they are always reaching for government aid and bailout.
Investment bankers do much of their business underwriting government bonds, in the United States and abroad. Therefore, they have a vested interest in promoting deficits and in forcing taxpayers to redeem government debt. Both sets of bankers, then, tend to be tied in with government policy, and try to influence and control government actions in domestic and foreign affairs. 6
Bank credit expansion vs. honest 100 percent reserve banks
A .. successful cartel for bank credit expansion occurred in Florence in the second half of the sixteenth century. There, the Ricci bank was the dominant bank among a half dozen or so others, and was able to lead a tight cartel of banks that took in and paid out each other’s receipts without bothering to redeem in specie. The result was a large expansion and an ensuing long-time bank crisis. 7
It is likely that the establishment of the Bank of Amsterdam in 1609, followed by other 100 percent reserve banks in Europe, was a reaction against such bank credit-generated booms and busts as had occurred in Florence not many years earlier.
The Bank of Amsterdam, which kept faithfully to 100-percent reserve banking from its opening in 1609 until it yielded to the temptation of financing Dutch wars in the late eighteenth century, financed itself by requiring depositors to renew their notes at the end of, say, a year, and then charging a fee for the renewal. 8
Statism makes bad money drive out the good money
As an outpost of Great Britain, colonial America of course used British pounds, pence, and shillings as its money. … Unfortunately, by establishing bimetallism, Britain became perpetually subject to the evil known as Gresham’s Law, which states that when government compulsorily overvalues one money and undervalues another, the undervalued money will leave the country or disappear into hoards, while the overvalued money will flood into circulation. Hence, the popular catchphrase of Gresham’s Law: “Bad money drives out good.”
But the important point to note is that the triumph of “bad” money is the result, not of perverse free-market competition, but of government using the compulsory legal tender power to privilege one money above another. 9
Imaginary scarcity of money becomes an excuse for debasement
Constant complaints, both by contemporaries and by some later historians, arose about an alleged “scarcity of money,” especially of specie, in the colonies, allegedly justifying numerous colonial paper money schemes to remedy that “shortage.” In reality, there was no such shortage.
Massachusetts, in 1642, began a general colonial process of competitive debasement of shillings. … The result was to increase the supply of nominal units of account by debasing the shilling, inflating domestic prices and thereby bringing the temporary export stimulus to a rapid end. Finally, the English government brought a halt to this futile and inflationary practice in 1707. 10
Paper money fraud begins
Apart from medieval China, which invented both paper and printing centuries before the West, the world had never seen government paper money until the colonial government of Massachusetts emitted a fiat paper issue in 1690. 11
But Massachusetts found that the increase in the supply of money, coupled with a fall in the demand for paper because of growing lack of confidence in future redemption in specie, led to a rapid depreciation of new money in relation to specie. Indeed, within a year after the initial issue, the new paper pound had depreciated on the market by 40 percent against specie.
By 1692, the government moved against this market evaluation by use of force, making the paper money compulsory legal tender for all debts at par with specie, and by granting a premium of 5 percent on all payment of debts to the government made in paper notes. This legal tender law had the unwanted effect of Gresham’s Law: the disappearance of specie circulation in the colony.
In addition, the expanding paper issues drove up prices and hampered exports from the colony. In this way, the specie “shortage” became the creature rather than the cause of the fiat paper issues. Thus, in 1690, before the orgy of paper issues began, £200,000 of silver money was available in New England; by 1711, however, with Connecticut and Rhode Island having followed suit in paper money issue, £240,000 of paper money had been issued in New England but the silver had almost disappeared from circulation.
Ironically, then, Massachusetts’s and her sister colonies’ issue of paper money created rather than solved any “scarcity of money.” The new paper drove out the old specie. The consequent driving up of prices and depreciation of paper scarcely relieved any alleged money scarcity among the public. But since the paper was issued to finance government expenditures and pay public debts, the government, not the public, benefited from the fiat issue. 12
A detailed study of the effects of paper money in New Jersey shows how it created a boom-bust economy over the colonial period. When new paper money was injected into the economy, an inflationary boom would result, to be followed by a deflationary depression when the paper money supply contracted.
At the end of King George’s War with France in 1748, Parliament began to pressure the colonies to retire the mass of paper money and return to a specie currency. In 1751, Great Britain prohibited all further issues of legal tender paper in New England and ordered a move toward redemption of existing issues in specie. Finally, in 1764, Parliament extended the prohibition of new issues to the remainder of the colonies and required the gradual retirement of outstanding notes. 13
Fractional reserve banking fraud begins
In contrast to government paper, private bank notes and deposits, redeemable in specie, had begun in western Europe in Venice in the fourteenth century. Firms granting credit to consumers and businesses had existed in the ancient world and in medieval Europe, but these were “money lenders” who loaned out their own savings. “Banking” in the sense of lending out the savings of others only began in England with the “scriveners” of the early seventeenth century. The scriveners were clerks who wrote contracts and bonds and were therefore in a position to learn of mercantile transactions and engage in money lending and borrowing.
There were, however, no banks of deposit in England until the civil war in the mid-seventeenth century. Merchants had been in the habit of storing their surplus gold in the king’s mint for safekeeping. That habit proved to be unfortunate, for when Charles I needed money in 1638, shortly before the outbreak of the civil war, he confiscated the huge sum of £200,000 of gold, calling it a “loan” from the owners.
Although the merchants finally got their gold back, they were understandably shaken by the experience, and forsook the mint, depositing their gold instead in the coffers of private goldsmiths, who, like the mint, were accustomed to storing the valuable metal. The warehouse receipts of the goldsmiths soon came to be used as a surrogate for the gold itself. By the end of the civil war, in the 1660s, the goldsmiths fell prey to the temptation to print pseudo-warehouse receipts not covered by gold and lend them out; in this way fractional reserve banking came to England. 14
Bank of England begins fraudulent bailouts
The 1690s were a particularly difficult time for the English government. The country had just gone through four decades of revolution and civil war, in large part in opposition to high taxes, and the new government scarcely felt secure enough to impose a further bout of higher taxation.
And yet, the government had many lands it wished to conquer, especially the mighty French Empire, a feat that would entail a vast increase in expenditures. The path of deficit spending seemed blocked for the English since the government had only recently destroyed its own credit by defaulting on over half of its debt, thereby bankrupting a large number of capitalists in the realm, who had entrusted their savings to the government. Who then would lend anymore money to the English State?
At this difficult juncture, Parliament was approached by a syndicate headed by William Paterson, a Scottish promoter. The syndicate would establish a Bank of England, which would print enough bank notes, supposedly payable in gold or silver, to finance the government deficit. No need to rely on voluntary savings when the money tap could be turned on! In return, the government would keep all of its deposits at the new bank.
Opening in July 1694, the Bank of England quickly issued the enormous sum of £760,000, most of which was used to purchase government debt. In less than two years time, the bank’s outstanding notes of £765,000 were only backed by £36,000 in cash. A run demanding specie smashed the bank, which was now out of business. But the English government, in the first of many such bailouts, rushed in to allow the Bank of England to ”suspend specie payments,” that is, to cease its obligations to pay in specie, while yet being able to force its debtors to pay the bank in full.
Specie payments resumed two years later, but from then on, the government allowed the Bank of England to suspend specie payment, while continuing in operation, every time it got into financial difficulties. 15
Massachusetts Land Bank issues fraudulent irredeemable notes
Very few private banks existed in colonial America, and they were short-lived. Most prominent was the Massachusetts Land Bank of 1740, issuing notes and lending them out on real estate. The land bank was launched as an inflationary alternative to government paper, which the royal governor was attempting to restrict. The land bank issued irredeemable notes, and fear of its unsound issue generated a competing private silver bank, which emitted notes redeemable in silver. The land bank promptly issued over £49,000 in irredeemable notes, which depreciated very rapidly. In six months’ time the public was almost universally refusing to accept the bank’s notes and land bank sympathizers vainly accepting the notes. The final blow came in 1741, when Parliament, acting at the request of several Massachusetts merchants and the royal governor, outlawed both the land and the silver banks.16
Debtors benefit from inflation and creditors lose; realizing this fact, older historians assumed that debtors were largely poor agrarians and creditors were wealthy merchants and that therefore the former were the main sponsors of inflationary nostrums. But, of course, there are no rigid “classes” of debtors and creditors; indeed, wealthy merchants and land speculators are often the heaviest debtors. Later historians have demonstrated that members of the latter group were the major sponsors of inflationary paper money in the colonies.17
American Revolution born in protest against taxes
The central grievance of the American rebels was the taxing power: the systematic plunder of their property by the British government. Whether it was the tax on stamps, or the tax on imports, or finally the tax on imported tea, taxation was central.
The slogan ”no taxation without representation” was misleading; in the last analysis, we didn’t want ”representation” in Parliament; we wanted not to be taxed by Great Britain. The other grievances, such as opposition to general search warrants, or to overriding of the ancient Anglo-Saxon principle of trial by jury, were critical because they involved the power to search merchants’ properties for goods that had avoided payment of the customs taxes, that is for ”smuggled” goods, and trial by jury was vital because no American jury would ever convict such smugglers.18
In making their revolution, then, the Americans cast their lot, permanently, with a contractual theory or justification for government. Government is not something imposed from above, by some divine act of conferring sovereignty; but contractual, from below, by ”consent of the governed.” That means that American polities inevitably become republics, not monarchies. What happened, in fact, is that the American Revolution resulted in something new on earth. The people of each of the 13 colonies formed new, separate, contractual, republican governments. Based on libertarian doctrines and on republican models, the people of the 13 colonies each set up independent sovereign states: with powers of each government strictly limited, with most rights and powers reserved to the people, and with checks, balances, and written constitutions severely limiting state power.19
These 13 separate republics, in order to wage their common war against the British Empire, each sent representatives to the Continental Congress, and then later formed a Confederation again with severely limited central powers, to help fight the British.20
House of Morris leads the way to fraudlent continental notes
To finance the Revolutionary War, which broke out in 1775, the Continental Congress early hit on the device of issuing fiat paper money. The leader in the drive for paper money was Governor Morris, the highly conservative young scion of the New York landed aristocracy. There was no pledge to redeem the paper, even in the future, but it was supposed to be retired in seven years by taxes levied pro rata by the separate states.
Thus, a heavy future tax burden was supposed to be added to the inflation brought about by the new paper money. The retirement pledge, however, was soon forgotten, as Congress, enchanted by this new, seemingly costless form of revenue, escalated its emissions of fiat paper. As a historian has phrased it, “such was the beginning of the ‘federal trough,’ one of America’s most imperishable institutions.”
By the spring of 1781, the Continentals were virtually worthless, exchanging on the market at 168 paper dollars to one dollar in specie. This collapse of the Continental currency gave rise to the phrase, “not worth a Continental.” To top this calamity, several states issued their own paper. 21
House of Morris supports redeeming federal debt
The mass of federal and state debt could have depreciated and passed out of existence by the end of the war, but the process was stopped and reversed by Robert Morris, wealthy Philadelphia merchant and virtual economic and financial czar of the Continental Congress in the last years of the war. Morris, leader of the nationalist forces in American politics, moved to make the depreciated federal debt ultimately redeemable in par and also agitated for federal assumption of the various state debts. The reason for this was twofold: (a) to confer a vast subsidy on speculators who had purchased the public debt at highly depreciated values, by paying interest and principal at par in specie; and (b) to build up agitation for taxing power in the Congress, which the Articles of Confederation refused to allow to the federal government.
The decentralist policy of the states’ raising taxes or issuing new paper money to pay off the pro rata federal debt as well as their own was thwarted by the adoption of the Constitution, which brought about the victory of the nationalist program, led by Morris’s youthful disciple and former aide, Alexander Hamilton.22
The first central bank: The Bank of North America
Robert Morris’s nationalist vision was not confined to a strong central government, the power of the federal government to tax, and a massive public debt fastened permanently upon the taxpayers. Shortly after he assumed total economic power in Congress in the spring of 1781, Morris introduced a bill to create the first commercial bank, as well as the first central bank, in the history of the new Republic.
This bank, headed by Morris himself, the Bank of North America, was not only the first fractional reserve commercial bank in the U.S.; it was to be a privately owned central bank, modelled after the Bank of England. The money system was to be grounded upon specie, but with a controlled monetary inflation pyramiding an expansion of money and credit upon a reserve of specie.
After a year of operation, however, Morris, his political power slipping after the end of the war, moved quickly to end his bank’s role as a central bank and to shift it to the status of a private commercial bank chartered by the state of Pennsylvania. …
When Morris failed to raise the legally required specie capital to launch the Bank of North America, Morris, in an act tantamount to embezzlement, simply appropriated specie loaned to the U.S. by France and invested it for the government in his own bank. In this way, the bulk of specie capital for his bank was appropriated by Morris. 23
Articles of Confederation protected freedom in America
The new federal government formed by the Articles of Confederation was not permitted to levy any taxes upon the public; and any fundamental extension of its powers required unanimous consent by every state government. Above all, the military and war-making power of the national government was hedged in by restraint and suspicion; for the eighteenth century libertarians understood that war, standing armies, and militarism had long been the main method for aggrandizing State power.24
The revolution resulted in governments unprecedented in restrictions placed on their power. But while there was very little institutional resistance in America to the onrush of liberalism, there did appear, from the very beginning, powerful elite forces, especially among the large merchants and planters, who wished to retain the restrictive British “mercantilist” system of high taxes, controls, and monopoly privileges conferred by the government. These groups wished for a strong central and even imperial government; in short, they wanted the British system without Great Britain. These conservative and reactionary forces first appeared during the Revolution, and later formed the Federalist party and the Federalist administration in the 1790s. 25
The United States of America was not meant to be a perpetual union
The hotly contested decision to scrap the Articles of Confederation and to craft a new Constitution demonstrates conclusively that the central government was not supposed to be perpetual, not to be the sort of permanent one-way trap that Grotius had claimed turned popular sovereignty over to the king forevermore.
In fact, it would be very peculiar to hold that the American Revolutionaries had repudiated the idea that a pledge of allegiance to the king was contractual and revocable, and break their vows to the king, only to turn around a few short years later to enter a compact that turned out to be an irrevocable one-way ticket for a permanent central government power. 26
US constitution is against paper money
Article I, section 8 of the new Constitution gave to Congress the power “to coin money, regulate the value thereof, and of foreign coin”; the power was exclusive because the state governments were prohibited, in Article I, section 10, from coining money, emitting paper money, or making anything but gold and silver coin legal tender in payment of debts. (Evidently the Founding Fathers were mindful of the bleak record of colonial and Revolutionary paper issues and provincial juggling of the weights and denominations of coin.) 27
The Whiskey Rebellion eliminated excise taxes
The Whiskey Rebellion has long been known to historians, but recent studies have shown that its true nature and importance have been distorted by friend and foe alike.
The Official View of the Whiskey Rebellion is that four counties of western Pennsylvania refused to pay an excise tax on whiskey that had been levied by proposal of the Secretary of Treasury Alexander Hamilton in the Spring of 1791, as part of his excise tax proposal for federal assumption of the public debts of the several states.
Western Pennsylvanians failed to pay the tax, this view says, until protests, demonstrations, and some roughing up of tax collectors in western Pennsylvania caused President Washington to call up a 13,000-man army in the summer and fall of 1794 to suppress the insurrection. A localized but dramatic challenge to federal tax-levying authority had been met and defeated. The forces of federal law and order were safe.
This Official View turns out to be dead wrong. In the first place, we must realize the depth of hatred of Americans for what was called “internal taxation” (in contrast to an “external tax” such as a tariff). Internal taxes meant that the hated tax man would be in your face and on your property, searching, examining your records and your life, and looting and destroying.
The most hated tax imposed by the British had been the Stamp Tax of 1765, on all internal documents and transactions; if the British had kept this detested tax, the American Revolution would have occurred a decade earlier, and enjoyed far greater support than it eventually received.
Americans, furthermore, had inherited hatred of the excise tax from the British opposition; for two centuries, excise taxes in Britain, in particular the hated tax on cider, had provoked riots and demonstrations upholding the slogan, “liberty, property, and no excise!” To the average American, the federal government’s assumption of the power to impose excise taxes did not look very different from the levies of the British crown.
The main distortion of the Official View of the Whiskey Rebellion was its alleged confinement to four counties of western Pennsylvania. From recent research, we now know that no one paid the tax on whiskey throughout the American “back-country”: that is, the frontier areas of Maryland, Virginia, North and South Carolina, Georgia, and the entire state of Kentucky.
President Washington and Secretary Hamilton chose to make a fuss about Western Pennsylvania precisely because in that region there was a cadre of wealthy officials who were willing to collect taxes. Such a cadre did not even exist in the other areas of the American frontier; there was no fuss or violence against tax collectors in Kentucky and the rest of the back-country because there was no one willing to be a tax collector.
The whiskey tax was particularly hated in the back-country because whisky production and distilling were widespread; whiskey was not only a home product for most farmers, it was often used as a money, as a medium of exchange for transactions. Furthermore, in keeping with Hamilton’s program, the tax bore more heavily on the smaller distilleries. As a result, many large distilleries supported the tax as a means of crippling their smaller and more numerous competitors.
Western Pennsylvania, then, was only the tip of the iceberg. The point is that, in all the other back-country areas, the whiskey tax was never paid. Opposition to the federal excise tax program was one of the causes of the emerging Democrat-Republican Party, and of the Jeffersonian “Revolution” of 1800. Indeed, one of the accomplishments of the first Jefferson term as president was to repeal the entire Federalist excise tax program. In Kentucky, whiskey tax delinquents only paid up when it was clear that the tax itself was going to be repealed.
Rather than the whiskey tax rebellion being localized and swiftly put down, the true story turns out to be very different. The entire American back-country was gripped by a non-violent, civil disobedient refusal to pay the hated tax on whiskey. No local juries could be found to convict tax delinquents. The Whiskey Rebellion was actually widespread and successful, for it eventually forced the federal government to repeal the excise tax.
Except during the War of 1812, the federal government never again dared to impose an internal excise tax, until the North transformed the American Constitution by centralizing the nation during the War Between the States. One of the evil fruits of this war was the permanent federal “sin” tax on liquor and tobacco, to say nothing of the federal income tax, an abomination and a tyranny even more oppressive than an excise.
Why didn’t previous historians know about this widespread non-violent rebellion? Because both sides engaged in an “open conspiracy” to cover up the facts. Obviously, the rebels didn’t want to call a lot of attention to their being in a state of illegality.
Washington, Hamilton, and the Cabinet covered up the extent of the revolution because they didn’t want to advertise the extent of their failure. They knew very well that if they tried to enforce, or send an army into, the rest of the back-country, they would have failed. Kentucky and perhaps the other areas would have seceded from the Union then and there. Both contemporary sides were happy to cover up the truth, and historians fell for the deception. 28
The second central bank: The First Bank of the United States 1791-1811
A linchpin of the Hamiltonian financial program was a central bank, the First Bank of the United States, replacing the abortive Bank of North America experiment. Hamilton’s “Report on a National Bank” of December 1790 urged such a bank, to be owned privately with the government owning one-fifth of the shares.
Hamilton argued that the alleged “scarcity” of specie currency needed to be overcome by infusions of paper and the new bank was to issue such paper, to be invested in the assumed federal debt and in subsidy to manufacturers. The bank notes were to be legally redeemable in specie on demand, and its notes were to be kept at par with specie by the federal government’s accepting its notes in taxes—giving it a quasi–legal tender status. Also, the federal government would confer upon the bank the prestige of being the depository for its public funds. In accordance with Hamilton’s wishes, Congress quickly established the First Bank of the United States in February 1791.
The charter of the bank was for 20 years, and it was assured a monopoly of the privilege of having a national charter during that period. In a significant gesture of continuity with the Bank of North America, the latter’s longtime Bank of North America president and former partner of Robert Morris, Thomas Willing of Philadelphia, was made president of the new Bank of the United States. The Bank of the United States promptly fulfilled its inflationary potential by issuing millions of dollars in paper money. 29
The establishment of the Bank of the United States precipitated a grave constitutional argument, the Jeffersonians arguing that the Constitution gave the federal government no power to establish a bank. Hamilton, in turn, paved the way for virtually unlimited expansion of federal power by maintaining that the Constitution “implied” a grant of power for carrying out vague national goals. The Hamiltonian interpretation won out officially in the decision of Supreme Court Justice John Marshall in McCulloch v. Maryland (1819).
Despite the Jeffersonian hostility to commercial and central banks, the Democratic-Republicans, under the control of quasi-Federalist moderates rather than militant Old Republicans, made no move to repeal the charter of the Bank of the United States before its expiration in 1811 and happily multiplied the number of state banks and bank credit in the next two decades. Thus, in 1800 there were 28 state banks; by 1811, the number had escalated to 117, a fourfold increase. 30
Finally, when the time for rechartering the Bank of the United States came in 1811, the recharter bill was defeated by one vote each in the House and Senate. Recharter was fought for by the Madison administration aided by nearly all the Federalists in Congress, but was narrowly defeated by the bulk of the Democratic-Republicans, including the hard-money Old Republican forces. 31
It is instructive to note that the major forces in favor of recharter were merchants, chambers of commerce, and most of the state banks. Merchants found that the bank had expended credit at cheap rates and had eased the eternal complaint about a “scarcity of money.” Even more suggestive is the support of the state banks, which hailed the bank as “advantageous” and worried about the contraction of credit if the bank were forced to liquidate. 32
But more important than this inflation, and at least as important as the wreckage of the monetary system during and after the war, was the precedent that the two-and-a-half-year-long suspension of specie payment set for the banking system for the future. From then on, every time there was a banking crisis brought on by inflationary expansion and demands for redemption in specie, state and federal governments looked the other way and permitted general suspension of specie payments while bank operations continued to flourish. It thus became clear to the banks that in a general crisis they would not be required to meet the ordinary obligations of contract law or of respect for property rights, so their inflationary expansion was permanently encouraged by this massive failure of government to fulfill its obligation to enforce contracts and defend the rights of property. 33
The Jeffersonian drive toward virtually no government foundered after Jefferson took office, first, with concessions to the Federalists (possibly the result of a deal for Federalist votes to break a tie in the electoral college), and then with the unconstitutional purchase of the Louisiana Territory. But most particularly it foundered with the imperialist drive toward war with Britain in Jefferson’s second term, a drive which led to war and to a one-party system which established virtually the entire statist Federalist program: high military expenditures, a central bank, a protective tariff, direct federal taxes, public works. 34
Third central bank: The Second Bank of the United States 1816–1833
The United States emerged from the War of 1812 in a chaotic monetary state, with banks multiplying and inflating ad lib, checked only by the varying rates of depreciation of their notes. With banks freed from redeeming their obligations in specie, the number of incorporated banks increased during 1816, from 212 to 232.
Clearly, the nation could not continue indefinitely with the issue of fiat money in the hands of discordant sets of individual banks. It was apparent that there were two ways out of the problem: one was the hard-money path, which was advocated by the Old Republicans and, for their own purposes, the Federalists. The federal and state governments would have sternly compelled the rollicking banks to redeem promptly in specie, and, when most of the banks outside of New England could not, to force them to liquidate. In that way, the mass of depreciated and inflated notes and deposits would have been swiftly liquidated, and specie would have poured back out of hoards and into the country to supply a circulating medium. The inflationary experience would have been over. Instead, the Democratic-Republican establishment in 1816 turned to the old Federalist path: a new central bank, a Second Bank of the United States. 34
House of Girard behind the Second Bank
Modeled closely after the First Bank, The Second Bank of the United States was pushed through Congress by the Madison administration and particularly by Secretary of the Treasury Alexander J. Dallas, whose appointment was lobbied for, for that purpose. Dallas, a wealthy Philadelphia lawyer, was a close friend, counsel, and financial associate of Philadelphia merchant and banker Stephen Girard, reputedly one of the two wealthiest men in the country.
Toward the end of its term, Girard was the largest stockholder of the First Bank of the United States, and during the War of 1812 Girard became a very heavy investor in the war debt of the federal government. Both as a prospective large stockholder and as a way to unload his public debt, Girard began to agitate for a new Bank of the United States. Dallas’s appointment as secretary of Treasury in 1814 was successfully engineered by Dallas and his close friend, wealthy New York merchant and fur trader John Jacob Astor, also a heavy investor in the war debt. 35
Starting in July 1818, the government and the Second Bank began to see what dire straits they were in; the enormous inflation of money and credit, aggravated by the massive fraud, had put the Bank of the United States in real danger of going under and illegally failing to sustain specie payments. Over the next year, the bank began a series of heroic contractions, forced curtailment of loans, contractions of credit in the south and west, refusal to provide uniform national currency by redeeming its shaky branch notes at par, and seriously enforcing the requirement that its debtor banks redeem in specie.
Contraction of money and credit by the Bank of the United States was almost unbelievable, total notes and deposits falling from $21.9 million in June 1818 to $11.5 million only a year later. … The result of the contraction was a massive rash of defaults, bankruptcies of business and manufacturers, and liquidation of unsound investments during the boom. … In the dramatic summing up of the hard-money economist and historian William Gouge, by its precipitous and dramatic contraction “the Bank was saved, and the people were ruined.” 36
The new Jeffersonian Master Plan
Horrified at the [statist] results [of his presidential terms], a retired Jefferson brooded at Monticello, and inspired young visiting politicians Martin Van Buren and Thomas Hart Benton to found a new party—the Democratic party—to take back America from the new Federalism, and to recapture the spirit of the old Jeffersonian program. When the two young leaders latched onto Andrew Jackson as their savior, the new Democratic party was born.
The Jacksonian libertarians had a plan: it was to be eight years of Andrew Jackson as president, to be followed by eight years of Van Buren, then eight years of Benton. After twenty four years of a triumphant Jacksonian Democracy, the Menckenian virtually no-government ideal was to have been achieved. It was by no means an impossible dream, since it was clear that the Democratic party had quickly become the normal majority party in the country. The mass of the people were enlisted in the libertarian cause. 37
The Jeffersonian-Jacksonian anti-bank movement
Out of the bitter experiences of the panic of 1819 emerged the beginnings of the Jacksonian movement, dedicated to hard money, the eradication of fractional reserve banking in general, and of the Bank of the United States in particular. 38
The Jacksonians were libertarians, plain and simple. Their program and ideology were libertarian; they strongly favored free enterprise and free markets, but they just as strongly opposed special subsidies and monopoly privileges conveyed by government to business or to any other group. They favoured absolutely minimal government, certainly at the federal level, but also at the state level. They believed that government should be confined to upholding the rights of private property. In the monetary sphere, this meant the separation of government from the banking system and a shift from inflationary paper money and fractional reserve banking to pure specie and banks confined to 100-percent reserves. 39
The new party, the Democratic Party, was largely forged in the mid-1820s by New York political leader, Martin Van Buren, newly converted by the aging Thomas Jefferson to the laissez-faire cause. Van Buren cemented an alliance with Thomas Hart Benton of Missouri and the Old Republicans of Virginia, but he needed a charismatic leader to take the presidency away from Adams and what was becoming known as the National Republican Party. He found that leader in Andrew Jackson, who was elected president under the new Democratic banner in 1828. 40
One of the central grievances of the South .. was the tariff that Northerners imposed on Southerners whose major income came from exporting cotton abroad. The tariff at one and the same time drove up prices of manufactured goods, forced Southerners and other Americans to pay more for such goods, and threatened to cut down Southern exports. The first great constitutional crisis with the South came when South Carolina battled against the well named Tariff of Abomination of 1828. As a result of South Carolina’s resistance, the North was forced to reduce the tariff, and finally, the Polk administration adopted a two-decade long policy of virtual free trade. 41
The Jacksonians eventually managed to put into effect various parts of their free-market and minimal-government economic program, including a drastic lowering of tariffs, and for the first and probably the last time in American history, paying off the federal debt. But their major concentration was on the issue of money and banking. Here they had a coherent program, which they proceeded to install in rapidly succeeding stages. The first important step was to abolish central banking, in the Jacksonian view the major inflationary culprit. The object was not to eliminate the Bank of the United States in order to free the state banks for inflationary expansion, but, on the contrary, to eliminate the major source of inflation before proceeding, on the state level, to get rid of fractional reserve banking. 42
Jacksonian war against the central bank
The Bank of the United States’s charter was up for renewal in 1836, but Jackson denounced the bank in his first annual message, in 1829. The imperious Nicholas Biddle, head of the Second Bank, decided to precipitate a showdown with Jackson before his re-election effort, so Biddle filed for renewal early, in 1831.
The host of National Republicans and non-Jacksonian Democrats proceeded to pass the recharter bill, but Jackson, in a dramatic message, vetoed the bill, and Congress failed to pass it over his veto. Triumphantly re-elected on the bank issue in 1832, President Jackson lost no time in disestablishing the Bank of the United States as a central bank. The critical action came in 1833, when Jackson removed the public Treasury deposits from the Bank of the United States and placed them in a number of state banks (soon labeled as “pet banks”) throughout the country. 43
Biddle continued the chain of control over both Banks of the United States by the Philadelphia financial elite, from Robert Morris and William Bingham, to Stephen Girard and William Jones. 44
Severing the federal government from the banking system
The Jacksonians had no intention of leaving a permanent system of pet banks, and so after the retirement of Jackson, his successor, Martin Van Buren, fought to establish the Independent Treasury System, in which the federal government conferred no special privilege or inflationary prop on any bank; instead of a central bank or pet banks, the government was to keep its funds purely in specie, in its own Treasury vaults—or its “subtreasury” branches—and simply take in and spend funds from there.
Van Buren finally managed to establish the Independent Treasury System, which would last until the Civil War. At long last, the Jacksonians had achieved their dream of severing the federal government totally from the banking system and placing its finances on a purely hard-money, specie basis. 45
Libertarian war against fractional reserve banking
The Democratic Party became ardently hard-money in the various states after the shock of the financial crisis of 1837 and 1839. The Democratic drive was toward the outlawry of all fractional reserve bank paper. Battles were fought also, in the late 1840s, at constitutional conventions of many states, particularly in the west. In some western states, the Jacksonians won temporary success, but soon the Whigs would return and repeal the bank prohibition. 46
The emergence of fraudulent free banking
The Whigs, trying to find some way to overcome the general revulsion against banks after the crisis of the late 1830s, adopted the concept of “free” banking, which had been enacted by New York and Michigan in the late 1830s. From New York, the idea spread outward to the rest of the country and triumphed in 15 states by the early 1850s. On the eve of the Civil War, 18 out of the 33 states in the Union had adopted “free” banking laws.
It must be realized that “free” banking, as it came to be known in the United States before the Civil War, was unrelated to the philosophic concept of free banking analyzed by economists. As we have seen earlier, genuine free banking is a system where entry into banking is totally free; the banks are neither subsidized nor regulated, and at the first sign of failure to redeem in specie payments, a bank is forced to declare insolvency and close its doors.
“Free” banking before the Civil War, on the other hand, was very different. As we have pointed out, the government allowed periodic general suspensions of specie payments whenever the banks overexpanded and got into trouble—the latest episode was in the panic of 1857. 47
Fractional-reserve banking gains total judicial protection in Britain
Government paper, as pernicious as it may be, is a relatively straightforward form of counterfeiting. The public can understand the concept of ”printing dollars” and spending them, and they can understand why such a flood of dollars will come to be worth a great deal less than gold, or than uninflated paper, of the same denomination, whether ”dollar,” ”franc,” or ”mark.” Far more difficult to grasp, however, and therefore far more insidious, are the nature and consequences of ”fractional-reserve banking,” a more subtle and modern form of counterfeiting. It is not difficult to see the consequences of a society awash in a flood of new paper money; but it is far more difficult to envision the results of an expansion of intangible bank credit. 48
We get closer to the nub of the problem when we realize that, historically, there has existed a very different type of ”bank”. In the history of the U. S. grain market, grain elevators several times fell prey to .. temptation, spurred by a lack of clarity in bailment law. Grain elevators issued fake warehouse receipts in grain during the 1860s, lent them to speculators in the Chicago wheat market, and caused dislocations in wheat prices and bankruptcies in the wheat market. Only a tightening of bailment law, ensuring that any issue of fake warehouse receipts is treated as fraudulent and illegal, finally put an end to this clearly impermissible practice. Unfortunately, however, this legal development did not occur in the vitally important field of warehouses for money, or deposit banking.
If ”fractional-reserve” grain warehousing, that is, the issuing of warehouse receipts for non-existent goods, is clearly fraudulent, then so too is fractional-reserve warehousing for a good even more fungible than grain, i.e., money (whether it be gold or government paper). Unfortunately, since bailment law was undeveloped in the nineteenth century, the bankers’ counsel were able to swing the judicial decisions their way. 51
In the final culminating case, Foley v. Hill and Others, decided by the House of Lords in 1848, Lord Cottenham, repeating the reasoning of the previous cases, put it lucidly if astonishingly: The money placed in the custody of a banker is, to all intents and purposes, the money of the banker, to do with as he pleases; he is guilty of no breach of trust in employing it; he is not answerable to the principal if he puts it into jeopardy, if he engages in a hazardous speculation; he is not bound to keep it or deal with it as the property of his principal; but he is, of course, answerable for the amount, because he has contracted.
The argument of Lord Cottenham and of all other apologists for fractional-reserve banking, that the banker only contracts for the amount of money, but not to keep the money on hand, ignores the fact that if all the depositors knew what was going on and exercised their claims at once, the banker could not possibly honor his commitments. In other words, honoring the contracts, and maintaining the entire system of fractional-reserve banking, requires a structure of smoke and mirrors, of duping the depositors into thinking that ”their” money is safe, and would be honored should they wish to redeem their claims. The entire system of fractional reserve banking, therefore, is built on deceit, a deceit connived at by the legal system.
A crucial question to be asked is this: why did grain warehouse law, where the conditions—of depositing fungible goods—are exactly the same, and grain is a general deposit and not an earmarked bundle—develop in precisely the opposite direction? Why did the courts finally recognize that deposits of even a fungible good, in the case of grain, are emphatically a bailment, not a debt? Could it be that the bankers conducted a more effective lobbying operation than did the grain men? 52
Classical liberals defend the institutionalisation of aggression
The young Molinari, however, hit the laissez-faire-oriented Societe d’Economie Politique like a thunderclap in 1849, with his most famous and original work. He delivered a paper expounding, for the first time in history, a pure and consistent laissez-faire, to the point of calling for free and unhampered competition in what are generally called uniquely ’public’ services: in particular, the sphere of police and judicial protection of person and private property. If free competition is better and more efficient in supplying all other goods and services, Molinari reasoned, why not for this last bastion, police and judicial protection – a view that over a century later would come to be called ’anarcho-capitalism’.
Molinari first set forth his view in the Journal des Economistes, the periodical of the Societe, in February 1849. (18) This article was quickly expanded into book form, Les Soirees de la Rue Saint-Lazare, a series of fictional dialogues between three protagonists: the conservative (advocate of high tariffs and state monopoly privilege); the socialist; and the economist (clearly himself). The final, or eleventh, Soiree elaborated further on how his concept of free market protective services could work in practice.
A meeting of the Societe d’Economie Politique in 1849 was devoted to Molinari’s daring new book, the Soirées. Charles Coquelin opined that justice needs a “supreme authority,” and that no competition in any area can exist without the supreme authority of the State.
In a similarly unsupported and a priori fulmination, Frederic Bastiat declared that justice and security can only be guaranteed by force, and that force can only be the attribute of a “supreme power,” the State. Neither commentator bothered to engage in a critique of Molinari’s arguments. Only Charles Dunoyer did so, complaining that Molinari had been carried away by the “illusions of logic,” and maintaining that “competition between governmental companies is chimerical, because it leads to violent battles.”
Dunoyer, instead, chose to rely on the “competition” of political parties within representative government – hardly a satisfactory libertarian solution to the problem of social conflict! He also opined that it was most prudent to leave force in the hands of the State, “where civilization has put it” – this is from one of the great founders of the conquest theory of the State!
Unfortunately, this critical issue was barely treated in the meeting, since the discussion largely centered on Dunoyer’s and the other economists’ criticizing Molinari for going too far in attacking all uses of eminent domain by the State. 77
Degeneration of classical liberalism brings back the Old Order of statism
But the degeneration of liberalism was not merely one of stance and strategy, but one of principle as well. For the liberals became content to leave the war-making power in the hands of the State, to leave the education power in its hands, to leave the power over money and banking, and over roads, in the hands of the State—in short, to concede to State dominion over all the crucial levers of power in society. In contrast to the eighteenth-century liberals’ total hostility to the executive and to bureaucracy, the nineteenth-century liberals tolerated and even welcomed the buildup of executive power and of an entrenched oligarchic civil service bureaucracy. 78
[I]n the late nineteenth century, statism and Big Government returned, but this time displaying a preindustrial and pro-general-welfare face. The Old Order returned, but this time the beneficiaries were shuffled a bit; they were not so much the nobility, the feudal landlords, the army, the bureaucracy, and privileged merchants as they were the army, the bureaucracy, the weakened feudal landlords, and especially the privileged manufacturers.
Led by Bismarck in Prussia, the New Right fashioned a right-wing collectivism based on war, militarism, protectionism, and the compulsory cartelization of business and industry—a giant network of controls, regulations, subsidies, and privileges which forged a great partnership of Big Government with certain favored elements in big business and industry.
Something had to be done, too, about the new phenomenon of a massive number of industrial wage workers—the “proletariat.” During the eighteenth and early nineteenth centuries, indeed until the late nineteenth century, the mass of workers favored laissez-faire and the free competitive market as best for their wages and working conditions as workers, and for a cheap and widening range of consumer goods as consumers. Even the early trade unions, e.g., in Great Britain, were staunch believers in laissez-faire.
New conservatives, spearheaded by Bismarck in Germany and Disraeli in Britain, weakened the libertarian will of the workers by shedding crocodile tears about the condition of the industrial labor force, and cartelizing and regulating industry, not accidentally hobbling efficient competition. Finally, in the early twentieth century, the new conservative “corporate state”—then and now the dominant political system in the Western world— incorporated “responsible” and corporatist trade unions as junior partners to Big Government and favored big businesses in the new statist and corporatist decision-making system. 79
To establish this new system, to create a New Order which was a modernized, dressed-up version of the ancien regime before the American and French revolutions, the new ruling elites had to perform a gigantic con job on the deluded public, a con job that continues to this day. Whereas the existence of every government from absolute monarchy to military dictatorship rests on the consent of the majority of the public, a democratic government must engineer such consent on a more immediate, day-by-day basis.
And to do so, the new conservative ruling elites had to gull the public in many crucial and fundamental ways. For the masses now had to be convinced that tyranny was better than liberty, that a cartelized and privileged industrial feudalism was better for the consumers than a freely competitive market, that a cartelized monopoly was to be imposed in the name of antimonopoly, and that war and military aggrandizement for the benefit of the ruling elites was really in the interests of the conscripted, taxed, and often slaughtered public. 80
To insure the dominance of the new statism over public opinion, to insure that the public’s consent would be engineered, the governments of the Western world in the late nineteenth and early twentieth centuries moved to seize control over education, over the minds of men: over the universities, and over general education through compulsory school attendance laws and a network of public schools. 81
Slavery breaks the Jeffersonian-Jacksonian movement
The Jacksonian libertarians had a plan: it was to be eight years of Andrew Jackson as president, to be followed by eight years of Van Buren, then eight years of Benton. After twentyfour years of a triumphant Jacksonian Democracy, the Menckenian virtually no-government ideal was to have been achieved. It was by no means an impossible dream, since it was clear that the Democratic party had quickly become the normal majority party in the country. The mass of the people were enlisted in the libertarian cause. Jackson had his eight years, which destroyed the central bank and retired the public debt, and Van Buren had four, which separated the federal government from the banking system.
But the 1840 election was an anomaly, as Van Buren was defeated by an unprecedentedly demagogic campaign engineered by the first great modern campaign chairman, Thurlow Weed, who pioneered in all the campaign frills—catchy slogans, buttons, songs, parades, etc.—with which we are now familiar.
Weed’s tactics put in office the egregious and unknown Whig, General William Henry Harrison, but this was clearly a fluke; in 1844, the Democrats would be prepared to counter with the same campaign tactics, and they were clearly slated to recapture the presidency that year. Van Buren, of course, was supposed to resume the triumphal Jacksonian march.
But then a fateful event occurred: the Democratic party was sundered on the critical issue of slavery, or rather the expansion of slavery into a new territory. Van Buren’s easy renomination foundered on a split within the ranks of the Democracy over the admission to the Union of the republic of Texas as a slave state; Van Buren was opposed, Jackson in favor, and this split symbolized the wider sectional rift within the Democratic party. Slavery, the grave antilibertarian flaw in the libertarianism of the Democratic program, had arisen to wreck the party and its libertarianism completely. 53
The War of Northern Aggression
If anti-slavery, prohibitionism, and anti-Catholicism were grounded in fanatical post-millennial Protestantism, the paternalistic big government required for this social program on the state and local levels led logically to a big government paternalism in national economic affairs. Whereas the Democratic Party in the 19th century was known as the ”party of personal liberty,” of states’ rights, of minimal government, of free markets and free trade, the Republican Party was known as the ”party of great moral ideas,” which amounted to the stamping-out of sin. On the economic level, the Republicans adopted the Whig program of statism and big government: protective tariffs, subsidies to big business, strong central government, large-scale public works, and cheap credit spurred by government. 54
In the Republican Party, the ”party of great moral ideas/’ different men and different factions emphasized different aspects of this integrated despotic world-outlook. In the fateful Republican convention of 1860, the major candidates for president were two veteran abolitionists: William Seward, of New York, and Salmon P. Chase of Ohio. Seward, however, was distrusted by the anti- Catholic hotheads because he somehow did not care about the alleged Catholic menace; on the other hand, while Chase was happy to play along with the former Know-Nothings, who stressed the anti-Catholic part of the coalition, he was distrusted by Sewardites and others who were indifferent to the Catholic question. Abraham Lincoln of Illinois was a dark horse who was able to successfully finesse the Catholic question. His major emphasis was on Whig economic statism: high tariffs, huge subsidies to railroads, public works. As one of the nation’s leading lawyers for Illinois Central and other big railroads, indeed, Lincoln was virtually the candidate from Illinois Central and the other large railroads. 55
While it is true that Lincoln himself was not particularly religious, that did not really matter because he adopted all the attitudes and temperament of his evangelical allies. He was stern and sober, he was personally opposed to alcohol and tobacco, and he was opposed to the private carrying of guns. An ambitious seeker of the main chance from early adulthood, Lincoln acted viciously toward his own humble frontier family in Kentucky. He abandoned his fiancee in order to marry a wealthier Mary Todd, whose family were friends of the eminent Henry Clay, he repudiated his brother, and he refused to attend his dying father or his father’s funeral, monstrously declaring that such an experience ”would be more painful than pleasant.” 56
But Lincoln’s major focus was on raising taxes, in particular raising and enforcing the tariff. His convention victory was particularly made possible by support from the Pennsylvania delegation.
Pennsylvania had long been the home and the political focus of the nation’s iron and steel industry which, ever since its inception during the War of 1812, had been chronically inefficient, and had therefore constantly been bawling for high tariffs and, later, import quotas. Virtually the first act of the Lincoln administration was to pass the Morrill protective tariff act, doubling existing tariff rates, and creating the highest tariff rates in American history. 57
In 1861, the Southern states, believing correctly that their cherished institutions were under grave threat and assault from the federal government, decided to exercise their natural, contractual, and constitutional right to withdraw, to ”secede” from that Union. .. The separate Southern states then exercised their contractual right as sovereign republics to come together in another confederation, the Confederate States of America. 58
In his First Inaugural, Lincoln was conciliatory about maintaining slavery; what he was hard-line about toward the South was insistence on collecting all the customs tariffs in that region. … The significance of the federal forts is that they provided the soldiers to enforce the customs tariffs; thus, Fort Sumter was at the entrance to Charleston Harbor, the major port, apart from New Orleans, in the entire South. .. In this way, by manipulating the South into firing first against a federal fort, Lincoln made the South appear to be ”aggressors” in the eyes of the numerous waverers and moderates in the North. 59
The Lincoln Administration and the Republican Party took advantage of the overwhelmingly Republican Congress after the secession of the South to push through almost the entire Whig economic program. Lincoln signed no less than ten tariff-raising bills during his administration. Heavy ”sin” taxes were levied on alcohol and tobacco, the income tax was levied for the first time in American history, huge land grants and monetary subsidies were handed out to transcontinental railroads (accompanied by a vast amount of attendant corruption), and the government went off the gold standard and virtually nationalized the banking system to establish a machine for printing new money and to provide cheap credit for the business elite. And furthermore, the New Model Army and the war effort rested on a vast and unprecedented amount of federal coercion against Northerners as well as the South; a huge army was conscripted, dissenters and advocates of a negotiated peace with the South were jailed, and the precious Anglo-Saxon right of habeas corpus was abolished for the duration. 60
In every other part of the New World, slavery was peacefully bought out by agreement with the slaveholders. But in these other countries, in the West Indies or Brazil, for example, there were no Puritan millennialists to do their bloody work, armed with gun in one hand and hymn book in the other. Sherman’s infamous March through Georgia was one of the great war crimes, and crimes against humanity, of the past century-and-a-half. 61
Confederacy financed by paper money
The Confederacy … financed virtually all of its expenditures through mammoth printing of fiat paper, the Southern version of the greenback. Confederate notes, which were first issued in June 1861 at a sum of $1.1 million, skyrocketed until the total supply of Confederate notes in January 1864 was no less than $826.8 million, an increase of 750.6 percent for three and a half years, or 214.5 percent per year.
Bank notes and deposits in the Confederacy rose from $119.3 million to $268.1 million in this period, so that the total money supply rose from $120.4 million to $1.095 billion, an increase of 1,060 percent—or 302.9 percent per year. Prices in the eastern Confederacy rose from 100 in early 1861 to over 4,000 in 1864, and to 9,211 at the end of the war in April 1865. 63
Union financed by greenbacks, taxes and debt
Of the federal deficits during the war, greenbacks financed 22.8 percent in fiscal 1862, 48.5 percent in 1863, 6.3 percent in 1864, and none in 1865. This is particularly striking if we consider that the peak deficit came in 1865, totaling $963.8 million. All the rest was financed by increased debt.
Taxes also increased greatly, revenues rising from $52 million in 1862 to $333.7 million in 1865. Tax revenues as a percentage of the budget rose from a miniscule 10.7 percent in fiscal 1862 to over 26 percent in 1864 and 1865.
It is clear, then, that the argument of “necessity” in the printing of greenbacks was specious, and indeed the greenback advocates conceded that it was perfectly possible to issue public debt, provided that the administration was willing to see the prices of its bonds rise and its interest payments rise considerably. At least for most of the war, they were not willing to take their chances in the competitive bond market. 64
The Civil War, in short, ended the separation of the federal government from banking, and brought the two institutions together in an increasingly close and permanent symbiosis. In that way, the Republican Party, which inherited the Whig admiration for paper money and governmental control and sponsorship of inflationary banking, was able to implant the soft-money tradition permanently in the American system. 65
House of Cook buys a monopoly in underwriting the federal debt
The first major investment banking house in the United States was a creature of government privilege. Jay Cooke, an Ohio-born business promoter living in Philadelphia, and his brother Henry, editor of the leading Republican newspaper in Ohio, were close friends of Ohio U.S. Senator Salmon P. Chase. When the new Lincoln administration took over in 1861, the Cookes lobbied hard to secure Chase the appointment of Secretary of the Treasury.
That lobbying, plus the then-enormous sum of $100,000 that Jay Cooke poured into Chase’s political coffers, induced Chase to return the favor by granting Cooke, newly set up as an investment banker, an enormously lucrative monopoly in underwriting the entire federal debt. 66
National Banking System cartellizes the banking system
Cooke and Chase then managed to use the virtual Republican monopoly in Congress during the war to transform the American commercial banking system from a relatively free market to a National Banking System centralized by the federal government under Wall Street control. A crucial aspect of that system was that national banks could only expand credit in proportion to the federal bonds they owned—bonds which they were forced to buy from Jay Cooke. 67
Lincoln assassinated by a radical Republican conspiracy
Oddly; even though Lincoln’s killing was clearly a conspiracy; the Establishment has injected into the popular consciousness the image of a lone nut, John Wilkes Booth, declaiming wildly after he shot Lincoln. Moreover, the conspiracy was hushed up, military courts delivering summary justice in secret. There is a substantial revisionist review that the major conspirator was Secretary of War Edwin M. Stanton, who contrived to have every one above him in the line of succession to the presidency shot at (only the assassination of Lincoln was successful). 68
Panic of 1874
Jay Cooke & Co. proved enormously influential in the postwar Republican administrations, which continued their monopoly in underwriting government bonds. 69
By the late 1860s, however, the House of Cooke was expanding everywhere, and in particular, had gotten control of the new Northern Pacific Railroad. Northern Pacific had been the recipient of the biggest federal largesse to railroads during the 1860s: a land grant of no less than 47 million acres.
Cooke sold Northern Pacific bonds as he had learned to sell government securities: hiring pamphleteers to write propaganda about the alleged Mediterranean climate of the Northwest. Many leading government officials and politicians were on the Cooke–Northern Pacific payroll, including President Grant’s private secretary, General Horace Porter.
But in 1873, a remarkable example of poetic justice struck Jay Cooke. The overbuilt Northern Pacific was crumbling, and a Cooke government bond operation provided a failure. (70) The House of Cooke met its well-deserved fate by going bankrupt in the Panic of 1874, a failure helped along by its great rival, the then Philadelphia-based Drexel, Morgan & Co. 71
Return to the gold standard
After passing the Resumption Act in 1875, the Republicans finally stumbled their way into resumption in 1879, fully 14 years after the end of the Civil War. … Return to the gold standard in 1879 was almost blocked, in the last three years before resumption, by the emergence of a tremendous agitation, heavily in the West but also throughout the country, for the free coinage of silver. 72
Except for the acts of 1873 and 1874, labeled by the pro-silver forces as “The Crime of 1873,” silver would have flowed into the United States, and the country would have been once again on a de facto monometallic silver standard. The champions of greenbacks, the champions of inflation, saw a “hard-money” way to increase greatly the amount of American currency: the remonetization of a flood of new overvalued silver. The agitation was to remonetize silver by “the free and unlimited coinage of silver at 16-to-1.”
It should be recognized that the silverites had a case. The demonetization of silver was a “crime” in the sense that it was done shiftily, deceptively, by men who knew that they wanted to demonetize silver before it was too late and have silver replace gold. The case for gold over silver was a strong one, particularly in an era of rapidly falling value of silver, but it should have been made openly and honestly. The furtive method of demonetizing silver, the “crime against silver,” was in part responsible for the vehemence of the silver agitation for the remainder of the century.
Ultimately, the administration was able to secure the resumption of payments in gold, but at the expense of submitting to the Bland-Allison Act of 1878, which mandated that the Treasury purchase $2 million to $4 million of silver per month from then on. 73
The ultimate solution: Pure gold standard
Given parallel standards, the ultimate, admittedly remote solution would be to eliminate the term “dollar” altogether, and simply have both gold and silver coins circulate by regular units of weight: “grain,” “ounce,” or “gram.” If that were done, all problems of bimetallism, debasement, Gresham’s Law, etc., would at last disappear.
While such a pure free-market solution seems remote today, the late nineteenth century saw a series of important international monetary conferences trying to move toward a universal gold or silver gram, with each national currency beginning as a simple multiple of each other, and eventually only units of weight being used. Before the conferences foundered on the gold-silver problem, such a result was not as remote or utopian as we might now believe. 74
The ultimate problem: Fractional reserve banking creates the business cycle
As a general overview of the national banking period, we can agree with Klein that the financial panics of 1873, 1884, 1893, and 1907 were in large part an outgrowth of . . . reserve pyramiding and excessive deposit creation by reserve city and central reserve city banks.
These panics were triggered by the currency drains that took place in periods of relative prosperity when banks were loaned up.
Myth of 1870s Great Depression
And yet it must be pointed out that the total money supply, even merely the supply of bank money, did not decrease after the panic, but merely leveled off. Orthodox economic historians have long complained about the “great depression” that is supposed to have struck the United States in the panic of 1873 and lasted for an unprecedented six years, until 1879. Much of this stagnation is supposed to have been caused by a monetary contraction leading to the resumption of specie payments in 1879. Yet what sort of “depression” is it which saw an extraordinarily large expansion of industry, of railroads, of physical output, of net national product, or real per capita income?
As Friedman and Schwartz admit, the decade from 1869 to 1879 saw a 3-percent-perannum increase in money national product, an outstanding real national product growth of 6.8 percent per year in this period, and a phenomenal rise of 4.5 percent per year in real product per capita. 75
James A. Garfield assassination ushers in the Civil Service system
James A. Garfield was assassinated by someone eternally tarred with the epithet ”disappointed office-seeker.” Another lone nut.
Charles Guiteau was apparently driven off his nut by not getting a job in the Garfield administration, and this was then successfully used by the Establishment to inflict the monstrous Civil Service system on this country protecting every bureaucrat for life in his invasion of the pockets and the liberties of the taxpayer.
Beneficiary? Vice President Chester A. Arthur, A New York corruptionist and protectionist, opposed to Garfield’s relatively laissez-faire wing of the Republican Party. 76
House of Morgan
After 1873, Drexel, Morgan and its dominant figure, J. P. Morgan, became by far the leading investment firm in the U.S. If Cooke had been a “Republican” bank, Morgan, while prudently well connected in both parties, was chiefly influential among the Democrats. 82
The entire Peabody family of Boston Brahmins had long been personally and financially closely associated with the Morgans. A member of the Peabody clan had even served as best man at J.P. Morgan’s wedding in 1865. George Peabody had long ago established an international banking firm of which J.P. Morgan’s father, Junius, had been one of the senior partners. 83
[When] Junius was junior partner the London firm of George Peabody and Company was saved from bankruptcy in the Panic of 1857 by an emergency credit from the Bank of England. The elder Morgan took over the firm upon Peabody’s retirement, and its name was changed to J. S. Morgan and Company. 84
The House of Morgan had always enjoyed strong connections with England. The original Morgan banker, J. Pierpont Morgan’s father Junius, had been a banker in England; and the Morgan’s London branch, Morgan, Grenfell and Company, was headed by the powerful Edward C. “Teddy” Grenfell (later Lord St. Just).
Grenfell’s father and grandfather had both been directors of the Bank of England as well as members of Parliament, and Grenfell himself had become a director of the Bank of England in 1904. Assisting Grenfell as leading partner at Morgan, Grenfell was Teddy’s cousin, Vivian Hugh Smith, later Lord Bicester, a personal friend of J.P. Morgan, Jr.’s.
Not only was Smith’s father a governor of the Bank of England, but he came from the so-called “City Smiths,” the most prolific banking family in English history, originating in seventeenth-century banking. Due to the good offices of Grenfell and Smith, J.P. Morgan and Company, before the war, had been named a fiscal agent of the English Treasury and of the Bank of England. In addition, the House of Morgan had long been closely associated with British and French wars, its London branch having helped England finance the Boer, and its French bank the Franco-Prussian War of 1870–1871. 85
House of Rothschild
The other great financial interest powerful in the Democratic Party was the mighty European investment banking house of the Rothschilds, whose agent, August Belmont, was treasurer of the national Democratic party for many years. 86
Cecil Rhodes organizes the Anglo-American Establishment
In England, Cecil Rhodes had launched a secret society in 1891 with the aim of maintaining and expanding the British Empire to re-incorporate the United States. After the turn of the twentieth century, the direction, organization, and expansion of the society fell to Rhodes’s friend and executor, Alfred Lord Milner. 87
Rockefellers demand entry into the Anglo-American Establishment
By the turn of the century the political economy of the United States was dominated by two generally clashing financial aggregations: the previously dominant Morgan group, which had begun in investment banking and expanded into commercial banking, railroads, and mergers of manufacturing firms; and the Rockefeller forces, which began in oil refining and then moved into commercial banking, finally forming an alliance with the Kuhn, Loeb Company in investment banking and the Harriman interests in railroads.
All the bankers’ presidents
Indeed, much of the political history of the United States from the late nineteenth century until World War II may be interpreted by the closeness of each administration to one of these sometimes cooperating, more often conflicting, financial groupings: Cleveland (Morgan), McKinley (Rockefeller), Theodore Roosevelt (Morgan), Taft (Rockefeller), Wilson (Morgan), Harding (Rockefeller), Coolidge (Morgan), Hoover (Morgan), and Franklin Roosevelt (Harriman–Kuhn, Loeb–Rockefeller). 88
Bankers develop the Leninist theory of capitalist imperialism
By the late 1890s, groups of theoreticians in the United States were working on what would later be called the “Leninist” theory of capitalist imperialism. The theory was originated, not by Lenin but by advocates of imperialism, centering around such Morgan-oriented friends and brain trusters of Theodore Roosevelt as Henry Adams, Brooks Adams, Admiral Alfred T. Mahan, and Massachusetts Senator Henry Cabot Lodge. The idea was that capitalism in the developed countries was “overproducing,” …
Hence, to save advanced capitalism, it was necessary for Western governments to engage in outright imperialist or neo-imperialist ventures, which would force other countries to open their markets for American products and would force open investment opportunities abroad.
Given this doctrine—based on the fallacious Ricardian view that the rate of profit is determined by the stock of capital investment, instead of by the time preferences of everyone in society— there was little for Lenin to change except to give an implicit moral condemnation instead of approval and to emphasize the necessarily temporary nature of the respite imperialism could furnish for capitalists.
Charles Conant set forth the theory of surplus capital in his A History of Modern Banks of Issue (1896) and developed it in subsequent essays. The existence of fixed capital and modern technology, Conant claimed, invalidated Say’s Law and the concept of equilibrium, and led to chronic “oversavings,” which he defined as savings in excess of profitable investment outlets, in the developed Western capitalist world. Business cycles, opined Conant, were inherent in the unregulated activity of modern industrial capitalism. Hence the importance of government encouraged monopolies and cartels to stabilize markets and the business cycle, and in particular the necessity of economic imperialism to force open profitable outlets abroad for American and other Western surplus capital. 89
President Cleveland starts banker imperialism
The enormous influence of the Morgans on the Democratic administrations of Grover Cleveland (1885–89, 1893–97), may be seen by simply glancing at their leading personnel. (90) Grover Cleveland’s cabinets were honeycombed with Morgan men, with an occasional bow to other bankers. 91
The great turning point of American foreign policy came in the early 1890s, during the second Cleveland administration. It was then that the U.S. turned sharply and permanently from a foreign policy of peace and non-intervention to an aggressive program of economic and political expansion abroad. At the heart of the new policy were America’s leading bankers, eager to use the country’s growing economic strength to subsidize and force-feed export markets and investment outlets that they would finance, as well as to guarantee Third World government bonds. 92
Venezuelan border crisis makes US supreme in Latin America
President Cleveland … delivered a virtual war message to Congress in December, but Britain, newly occupied in problems with the Boers in South Africa, decided to yield and agree to a compromise boundary settlement. Insultingly, the Venezuelans received not a single seat on the agreed-upon arbitration commission. In effect, the British, occupied elsewhere, had ceded dominance to the United States in Latin America. 93
Anglo-American Establishment demands an Open Door policy to Asia
Coming late in the imperial game of Asia, and not willing to risk large scale expenditure of troops, the U.S., led by Olney and continued by the Republicans, decided to link up with Great Britain. The two countries would then use the Japanese to provide the shock troops that would roll back Russia and Germany and parcel out imperial benefits to both of her faraway allies, in a division of spoils known euphemistically as the “Open Door.” With Britain leaving the field free to the U.S. in Latin America, the U.S. could afford to link arms in friendly fashion with Britain in the Far East.
A major impetus toward a more aggressive policy in Asia was provided by the lure of railroad concessions. Lobbying heavily for railroad concessions was the American China Development Company, organized in 1895 and consisting of a consortium of the top financial interests in the U.S., including James Stillman of the then Rockefeller-controlled National City Bank; Charles Coster, railroad expert of J. P. Morgan and Co.; Jacob Schiff, head of the New York investment bank of Kuhn, Loeb and Co.; and Edward H. Harriman, railroad magnate. 94
Spanish-American war at behest of American sugar companies
It was time for the U.S. to find more enemies to challenge. The next, and greatest, Latin American intervention was of course in Cuba, where a Republican administration entered the war goaded by its jingo wing closely allied to the Morgan interests, led by young Assistant Secretary of the Navy Theodore Roosevelt and by his powerful Boston Brahmin mentor, Senator Henry Cabot Lodge.
But American intervention in Cuba had begun in the Cleveland-Olney regime. In February 1895, a rebellion for Cuban independence broke out against Spain. The original U.S. response was to try to end the threat of revolutionary war to American property interests by siding with Spanish rule modified by autonomy to the Cubans to pacify their desires for independence. Here was the harbinger of U.S. foreign policy ever since: to try to maneuver in Third World countries to sponsor “third force” or “moderate” interests which do not really exist. The great proponent of this policy was the millionaire sugar grower in Cuba Edwin F. Atkins, a close friend of fellow-Bostonian Richard Olney and a partner of J. P. Morgan and Company.
Ardently backing the pro-war course was Edwin F. Atkins, and August Belmont, on behalf of the Rothschild banking interests. The House of Rothschild, which had been long-time financiers to Spain, refused to extend any further credit to Spain, and instead underwrote Cuban Revolutionary bond issues, and even assumed full obligation for the unsubscribed balance.
During the conquest of Cuba in the Spanish-American War, the United States also took the occasion to expand its power greatly in Asia, seizing first the port of Manila and then all of the Philippines, after which it spent several years crushing the revolutionary forces of the Philippine independence movement. 95
Establishment bankers start monetary imperialism
The leap into political imperialism by the United States in the late 1890s was accompanied by economic imperialism, and one key to economic imperialism was monetary imperialism. … Hence, what the new imperialists set out to do was to pressure or coerce Third World countries to adopt, not a genuine gold coin standard, but a newly conceived “gold-exchange” or dollar standard. …
So that even though these American bankers and economists were all too aware, after many decades of experience, of the fallacies and evils of bimetallism, they were willing to impose a form of bimetallism upon client states in order to tie them into U.S. economic imperialism, and to pressure them into inflating their own money supplies on top of dollar reserves supposedly, but not de facto redeemable in gold. 95
Classical liberals oppose wars and dollar imperialism
[O]pposition to imperialism began with laissez-faire liberals such as Cobden and Bright in England, and Eugen Richter in Prussia.
In fact, the Anti-Imperialist League, headed by Boston industrialist and economist Edward Atkinson (and including Sumner) consisted largely of laissez-faire radicals who had fought the good fight for the abolition of slavery, and had then championed free trade, hard money, and minimal government. To them, their final battle against the new American imperialism was simply part and parcel of their lifelong battle against coercion, statism and injustice—against Big Government in every area of life, both domestic and foreign. 96
Bankers turn economists into statist supporters of cartels
Although it is an outworn generalization to say that 19th century economists were stalwart champions of laissez faire, it is still true that deductive economic theory proved to be a mighty bulwark against government intervention. For, basically, economic theory showed the harmony and order inherent in the free market, as well as the counterproductive distortions and economic shackles imposed by state intervention.
In order for statism to dominate the economics profession, then, it was important to discredit deductive theory. One of the most important ways of doing so was to advance the notion that, to be genuinely scientific, economics had to eschew generalization and deductive laws and simply engage in empirical inquiry into the facts of history and historical institutions, hoping that somehow laws would eventually arise from these detailed investigations. Thus the German Historical School, which managed to seize control of the economics discipline in Germany, fiercely proclaimed not only its devotion to statism and government control, but also its opposition to the abstract deductive laws of political economy. 96
It was a new social science that lauded the German and Bismarckian development of a powerful welfare-warfare state, a state seemingly above all social classes, that fused the nation into an integrated and allegedly harmonious whole. The new society and polity was to be run by a powerful central government, cartelizing, dictating, arbitrating, and controlling, thereby eliminating competitive laissez-faire capitalism on the one hand and the threat of proletarian socialism on the other. And at or near the head of the new dispensation was to be the new breed of intellectuals, technocrats, and planners, directing, staffing, propagandizing, and selflessly promoting the common good while ruling and lording over the rest of society. In short, doing well by doing good. To the new breed of progressive and statist intellectuals, in America, this was a heady vision indeed.
Richard T. Ely, virtually the founder of this new breed, was the leading progressive economist and also the teacher of most of the others. As an ardent postmillennialist pietist, Ely was convinced that he was serving God and Christ as well. 97
As early as 1863, Samuel B. Ruggles, American delegate to the International Statistical Congress in Berlin, proclaimed that ”statistics are the very eyes of the statesman, enabling him to survey and scan with clear and comprehensive vision the whole structure and economy of the body politic.”
Conversely, this means that without these means of vision, the statesman would no longer be able to meddle, control, and plan. 98
Bankers finance the Social Democratic Progressivist movement
Progressivism was a bipartisan movement which, in the course of the first two decades of the twentieth century, transformed the American economy and society from one of roughly laissez-faire to one of centralized statism.
Until the 1960s, historians had established the myth that Progressivism was a virtual uprising of workers and farmers who, guided by a new generation of altruistic experts and intellectuals, surmounted fierce big business opposition in order to curb, regulate, and control what had been a system of accelerating monopoly in the late nineteenth century. A generation of research and scholarship, however, has now exploded that myth for all parts of the American polity, and it has become all too clear that the truth is the reverse of this well-worn fable.
In contrast, what actually happened was that business became increasingly competitive during the late nineteenth century, and that various big-business interests, led by the powerful financial house of J.P. Morgan and Company, had tried desperately to establish successful cartels on the free market. The first wave of such cartels was in the first large-scale business, railroads, and in every case, the attempt to increase profits, by cutting sales with a quota system and thereby to raise prices or rates, collapsed quickly from internal competition within the cartel and from external competition by new competitors eager to undercut the cartel.
During the 1890s, in the new field of large-scale industrial corporations, big-business interests tried to establish high prices and reduced production via mergers, and again, in every case, the mergers collapsed from the winds of new competition.
In both sets of cartel attempts, J.P. Morgan and Company had taken the lead, and in both sets of cases, the market, hampered though it was by high protective tariff walls, managed to nullify these attempts at voluntary cartelization.
It then became clear to these big-business interests that the only way to establish a cartelized economy, an economy that would ensure their continued economic dominance and high profits, would be to use the powers of government to establish and maintain cartels by coercion. In other words, to transform the economy from roughly laissez-faire to centralized and coordinated statism.
But how could the American people, steeped in a long tradition of fierce opposition to government-imposed monopoly, go along with this program? How could the public’s consent to the New Order be engineered?
Fortunately for the cartelists, a solution to this vexing problem lay at hand. Monopoly could be put over in the name of opposition to monopoly! In that way, using the rhetoric beloved by Americans, the form of the political economy could be maintained, while the content could be totally reversed.
Monopoly had always been defined, in the popular parlance and among economists, as “grants of exclusive privilege” by the government. It was now simply redefined as “big business” or business competitive practices, such as price-cutting, so that regulatory commissions, from the Interstate Commerce Commission to the Federal Trade Commission to state insurance commissions, were lobbied for and staffed by big-business men from the regulated industry, all done in the name of curbing “big business monopoly” on the free market.
In that way, the regulatory commissions could subsidize, restrict, and cartelize in the name of “opposing monopoly,” as well as promoting the general welfare and national security. Once again, it was railroad monopoly that paved the way.
For this intellectual shell game, the cartelists needed the support of the nation’s intellectuals, the class of professional opinion molders in society. The Morgans needed a smoke screen of ideology, setting forth the rationale and the apologetics for the New Order. Again, fortunately for them, the intellectuals were ready and eager for the new alliance.
The enormous growth of intellectuals, academics, social scientists, technocrats, engineers, social workers, physicians, and occupational “guilds” of all types in the late nineteenth century led most of these groups to organize for a far greater share of the pie than they could possibly achieve on the free market. These intellectuals needed the State to license, restrict, and cartelize their occupations, so as to raise the incomes for the fortunate people already in these fields. In return for their serving as apologists for the new statism, the State was prepared to offer not only cartelized occupations, but also ever increasing and cushier jobs in the bureaucracy to plan and propagandize for the newly statized society.
And the intellectuals were ready for it, having learned in graduate schools in Germany the glories of statism and organicist socialism, of a harmonious “middle way” between dog-eat-dog laissez-faire on the one hand and proletarian Marxism on the other. Instead, big government, staffed by intellectuals and technocrats, steered by big business and aided by unions organizing a subservient labor force, would impose a cooperative commonwealth for the alleged benefit of all. 99
It was not enough, however, for the new statist alliance of Big Business and Big Intellectuals to be formed; they had to agree, propound, and push for a common ideological line, a line that would persuade the majority of the public to adopt the new program and even greet it with enthusiasm.
The new line was brilliantly successful if deceptive: .. Government policy, led by intellectuals, academics and disinterested experts in behalf of the public weal, was to ”save” capitalism, and correct the faults and failures of the free market by establishing government control and planning in the public interest. In other words, policies, such as the Interstate Commerce Act, drafted and operated to try to enforce railroad cartels, were to be advocated in terms of bringing the Big Bad Railroads to heel by means of democratic government action. 100
And then, should any maverick skeptic arise, who refuses to fall for this hokum and tries to dig more deeply into the economic motivations at work, he will be quickly and brusquely dismissed as an ”extremist” (whether of Left or Right), a malcontent, and, most damning of all, a ”believer in the conspiracy theory of history.” The question here, however, is not some sort of ”theory of history,” but a willingness to use one’s common sense. All that the analyst or historian need do is to assume, as an hypothesis, that people in government or lobbying for government policies may be at least as self-interested and profit-motivated as people in business or everyday life, and then to investigate the significant and revealing patterns that he will see before his eyes.
Fractional reserve banking causes the Panic of 1893 and destroys freedom Democrats
Poor Grover Cleveland — a hard-money, laissez-faire Democrat — was blamed for the panic of 1893, and many leading Cleveland Democrats lost their gubernatorial and senatorial posts in the 1894 elections. The Cleveland Democrats were temporarily weak, and the Southern-Mountain coalition was ready to hand. Seeing this opportunity, William Jennings Bryan and his pietist coalition seized control of the Democratic Party at the momentous convention of 1896. The Democratic Party was never to be the same again.
Pietism pushes Democrats further into statism and imperialism
Then in 1896, with the evangelical conversion of Southern Protestantism and the admission to the Union of the sparsely populated and pietist Mountain states, William Jennings Bryan was able to put together a coalition that transformed the Democrats into a pietist party and ended forever that party’s once proud role as the champion of liturgical (Catholic and High German Lutheran) Christianity and of personal liberty and laissez faire.
The pietists of the 19th and early 20th centuries were all postmillennialist: They believed that the Second Advent of Christ will occur only after the millennium—a thousand years of the establishment of the Kingdom of God on Earth—has been brought about by human effort. Postmillennialists have therefore tended to be statists, with the state becoming an important instrument of stamping out sin and Christianizing the social order so as to speed Jesus’s return.
During the Progressive years, the Social Gospel became part of the mainstream of pietist Protestantism. Most of the evangelical churches created commissions on social service to promulgate the Social Gospel, and virtually all of the denominations adopted the Social Creed drawn up in 1912 by the Commission of the Church and Social Service of the Federal Council of Churches.
The creed called for the abolition of child labor, the regulation of female labor, the right of labor to organize (i.e., compulsory collective bargaining), the elimination of poverty, and an equitable division of the national product. And right up there as a matter of social concern was the liquor problem. The creed maintained that liquor was a grave hindrance toward the establishment of the Kingdom of God on Earth, and it advocated the ”protection of the individual and society from the social, economic, and moral waste of the liquor traffic. World prohibition, after all, was needed to finish the job of making the world safe for democracy.
Bryanites capture and destroy the freedom program of the Democratic party
Throughout the nineteenth century, the Republicans had been mainly a high-tariff, inflationist party, while the Democrats had been the party of free trade and hard money, i.e., the gold standard. In 1896, however, the radical inflationist forces headed by William Jennings Bryan captured the Democratic presidential nomination, and so the Morgans, previously dominant in the Democratic Party, sent a message to the Republican nominee, William McKinley, through Henry Cabot Lodge. Lodge stated that the Morgan interests would back McKinley provided that the Republicans would support the gold standard. The deal was struck.
The worst of all possible monetary standards
Bryanites, much like Populists of the present day, preferred congressional, greenback inflationism to the more subtle, and more privileged, big-bank-controlled variety. The Morgans, in contrast, favored a gold standard. But, once gold was secured by the McKinley victory of 1896, they wanted to press on to use the gold standard as a hard-money camouflage behind which they could change the system into one less nakedly inflationist than populism but far more effectively controlled by the big-banker elites.
In the long run, a controlled Morgan-Rockefeller gold standard was far more pernicious to the cause of genuine hard money than a candid free-silver or greenback Bryanism.
President William McKinley dominated by Rockefellers
William McKinley reflected the dominance of the Republican Party by the Rockefeller/Standard Oil interests. Standard Oil was originally headquartered at Rockefeller’s home in Cleveland, and the oil magnate had long had a commanding influence in Ohio Republican politics.
In the early 1890s, Marcus Hanna, industrialist and high school chum of John D. Rockefeller, banded together with Rockefeller and other financiers to save McKinley from bankruptcy, and Hanna became McKinley’s top political adviser and chairman of the Republican National Committee.
Vice-President Theodore Roosevelt dominated by Morgans
As a consolation prize to the Morgan interests for McKinley’s capture of the Republican nomination, Morgan man Garret A. Hobart, director of various Morgan companies, including the Liberty National Bank of New York City, became Vice-President. The death of Hobart in 1899 left a “Morgan vacancy” in the Vice-Presidential spot, as McKinley walked into the nomination.
McKinley and Hanna were both hostile to Roosevelt, considering him “erratic” and a “Madman,” but after several Morgan men turned down the nomination, and after the intensive lobbying of Morgan partner George W. Perkins, Teddy Roosevelt at last received the Vice-Presidential nomination. It is not surprising that virtually Teddy’s first act after the election of 1900 was to throw a lavish dinner in honor of J. P. Morgan.
Theodore Roosevelt had been a Morgan man from the beginning of his career. His father and uncle were both Wall Street bankers, both of them closely associated with various Morgan dominated railroads. Roosevelt’s first cousin and major financial adviser, W. Emlen Roosevelt, was on the board of several New York banks, including the Astor National Bank, the president of which was George F. Baker, close friend and ally of J. P. Morgan and head of Morgan’s flagship commercial bank, the First National Bank of New York.
At Harvard, furthermore, young Theodore married Alice Lee, daughter of George Cabot Lee, and related to the top Boston Brahmin families. Kinsman Henry Cabot Lodge soon became TR’s long-time political mentor.
McKinley’s suspicious assassination
The sudden appearance of one of the “lone nuts” so common in American political history led to the assassination of McKinley.
Another lone nut was responsible, the ”anarchist” Leon Czolgosz, who, like Guiteau, was quickly tried and executed by the Establishment. Even though Cwlgosz was considered a flake and was not a member of any organized anarchist group, the assassination was used by the Establishment to smear anarchism and to outlaw anarchist ideas and agitation. Various obscure anti-sedition and anti-conspiracy laws trotted out from time to time by the Establishment were passed during this post McKinley assassination hysteria.
Beneficiary? The vaulting to power of Teddy Roosevelt long-time tool of the competing Morgan (as opposed to Rockefeller) wing of the Republican Party.
Theodore Roosevelt attacks Rockefellers
Teddy immediately started using the anti-trust weapon to try to destroy Rockefeller’s Standard Oil and Harriman’s Northern Securities, both bitter enemies of the Morgan world empire.
Furthermore, when Theodore Roosevelt became president as the result of the assassination of William McKinley, he replaced Rockefeller’s top political operative, Mark Hanna of Ohio, with Henry C. Payne as postmaster general of the United States. Payne, a leading Morgan lieutenant, was reportedly appointed to what was then the major political post in the Cabinet, specifically to break Hanna’s hold over the national Republican Party.
It seems clear that replacing Hanna with Payne was part of the savage assault that Theodore Roosevelt would soon launch against Standard Oil as part of the open warfare about to break out between the Rockefeller–Harriman– Kuhn, Loeb camp and the Morgan camp.
Panama invasion at the behest of bankers
Theodore Roosevelt’s greatest direct boost to the Morgan interests is little known. It is well-known that Roosevelt engineered a phony revolution in Columbia in 1903, creating the new state of Panama and handing the Canal Zone to the United States.
The Panama Canal Company’s lobbyist, Morgan-connected New York attorney William Nelson Cromwell, literally sat in the White House directing the “revolution” and organizing the final settlement. We now know that, in 1900, the shares of the old French Panama Canal Company were purchased by an American financial syndicate, headed by J. P. Morgan & Co., and put together by Morgan’s top attorney, Francis Lynde Stetson.
The syndicate also included members of the Rockefeller, Seligman, and Kuhn, Loeb financial groups, as well as Perkins and Saterlee. The syndicate did well from the Panama revolution, purchasing the shares at two-thirds of par and selling them, after the revolution, for double the price.
One member of the syndicate was especially fortunate: Teddy Roosevelt’s brother-in-law, Douglas E. Robinson, a director of Morgan’s Astor National Bank. For William Cromwell was named the fiscal agent of the new Republic of Panama, and Cromwell promptly put $6 million of the $10 million payoff the U.S. made to the Panamanian revolutionaries into New York City mortgages via the real estate firm of the same Douglas E. Robinson.
Battle between Morgans and Rockefellers
After the turn of the century, a savage economic and political war developed between the Morgan interests on the one hand, and the allied Harriman-Kuhn, Loeb-Rockefeller interests on the other. Harriman and Kuhn, Loeb grabbed control of the Union Pacific Railroad and the two titanic forces baffled to a draw for control of the Northern Pacific.
Battle between Rothschilds and Rockefellers
Also, at about the same time, a long-lasting and worldwide financial and political “oil war” broke out between Standard Oil, previously a monopolist in both the crude and export markets outside of the U.S., and the burgeoning British Royal Dutch Shell–Rothschild combine.
And since the Morgans and Rothschilds were longtime allies, it is certainly sensible to conclude—though there are no hard facts to prove it—that Teddy Roosevelt launched his savage anti-trust assault to break Standard Oil as a Morgan contribution to the worldwide struggle.
Furthermore, Mellon-owned Gulf Oil was allied to the Shell combine, and this might well explain the fact that former Morgan-and-Mellon lawyer Philander Knox, TR’s Attorney-General, was happy to file the suit against Standard Oil.
President William Taft a Rockefeller man
Roosevelt’s successor, William Howard Taft, being an Ohio Republican, was allied to the Rockefeller camp, and so he proceeded to take vengeance on the Morgans by filing anti-trust suits to break up the two leading Morgan trusts, International Harvester and United States Steel.
It was now all-out war, and so the Morgans in 1912 deliberately created a new party, the Progressive Party, headed by former Morgan partner, George W. Perkins. The successful aim of the Progressive Party was to bring Theodore Roosevelt out of retirement to run for President, in order to break Taft, and to elect, for the first time in a generation, a Democratic President. The new party was liquidated soon after.
President Woodrow Wilson dominated by Morgans
The Morgan-Progressive Party ploy deliberately ensured the election of Woodrow Wilson as a Democratic President. Wilson himself, until almost the time of running for President, was for several years on the board of the Morgan-controlled Mutual Life Insurance Company. He was also surrounded by Morgan men.
FED planned by The Three Houses
The national banking system provided only a halfway house between free banking and government central banking, and by the end of the nineteenth century, the Wall Street banks were becoming increasingly unhappy with the status quo. The centralization was only limited, and, above all, there was no governmental central bank to coordinate inflation, and to act as a lender of last resort, bailing out banks in trouble. No sooner had bank credit generated booms when they got into trouble and bank-created booms turned into recessions, with banks forced to contract their loans and assets and to deflate in order to save themselves.
Not only that, but after the initial shock of the National Banking Acts, state banks had grown rapidly by pyramiding their loans and demand deposits on top of national bank notes. These state banks, free of the high legal capital requirements that kept entry restricted in national banking, flourished during the 1880s and 1890s and provided stiff competition for the national banks themselves.
The complaints of the big banks were summed up in one word: “inelasticity.” The national banking system, they charged, did not provide for the proper “elasticity” of the money supply; that is, the banks were not able to expand money and credit as much as they wished, particularly in times of recession. In short, the national banking system did not provide sufficient room for inflationary expansions of credit by the nation’s banks.
The Federal Reserve was the outgrowth of … years of planning, amending, and compromising among various politicians and concerned financial groups, led by the major financial interests, including the Morgans, the Rockefellers, and the Kuhn, Loebs, along with their assorted economists and technicians.
Panic of 1907 caused by cartels and inflation
The Panic of 1907 struck in October, the result of an inflation stimulated by Secretary of the Treasury Leslie Shaw in the previous two years.
The Panic galvanized the big bankers to put on a concerted putsch for a Lender of Last Resort in the shape of a central bank. The big bankers realized that one of the first steps in the march to a central bank was to win the support of the nation’s economists, academics, and financial experts. Fortunately for the reformers, two useful organizations for the mobilization of academics were near at hand: the American Academy of Political and Social Science (AAPSS) of Philadelphia, and the Academy of Political Science of Columbia University (APS), both of which comprised leading corporate liberal businessmen, financiers, and corporate attorneys, as well as academics.
Each of these organizations, along with the American Association for the Advancement of Science (AAAS), held symposia on monetary affairs during the winter of 1907-1908, and each called for the establishment of a central bank. The Columbia conference was organized by the distinguished Columbia economist E. R. A. Seligman, who not coincidentally was a member of the family of the prominent Wall Street investment bank of J. & W. Seligman and Company.
Three Houses conspire in Jekyll Island to create the Fed
With the movement fully primed, it was now time for Senator Aldrich to write the bill. Or rather, it was time for the senator, surrounded by a few of the topmost leaders of the financial elite, to go off in seclusion, and hammer out a detailed plan around which all parts of the central banking movement could rally. Someone, probably Henry P. Davison, got the idea of convening a small group of top leaders in a super-secret conclave, to draft the bill. The eager J. P. Morgan arranged for a plush private conference at his exclusive millionaire’s retreat, at the Jekyll Island Club on Jekyll Island, Georgia. Morgan was a co-owner of the club.
On November 22, 1910, Senator Aldrich, with a handful of companions, set forth under assumed names in a privately chartered railroad car from Hoboken, New Jersey to the coast of Georgia, allegedly on a duck-hunting expedition.
The conferees worked for a solid week at the plush Jekyll Island retreat, and hammered out the draft of the bill for the Federal Reserve System. Only six people attended this supersecret week-long meeting, and these six neatly reflected the power structure within the bankers’ alliance of the central banking movement. The conferees were, in addition to Aldrich (Rockefeller kinsman); Henry P. Davison, Morgan partner; Paul Warburg, Kuhn Loeb partner; Frank A. Vanderlip, vice-president of Rockefeller’s National City Bank of New York; Charles D. Norton, president of Morgan’s First National Bank of New York; and Professor A. Piatt Andrew, head of the NMC research staff, who had recently been made an Assistant Secretary of the Treasury under Taft, and who was a technician with a foot in both the Rockefeller and Morgan camps.
The conferees forged the Aldrich Bill, which, with only minor variations, was to become the Federal Reserve Act of 1913. The only substantial disagreement at Jekyll Island was tactical: Aldrich attempted to hold out for a straightforward central bank on the European model, while Warburg, backed by the other bankers, insisted that political realities required the reality of central control to be cloaked in the palatable camouflage of ”decentralization.” Warburg’s more realistic, duplicitous tactic won the day.
Aldrich presented the Jekyll Island draft, with only minor revisions, to the full NMC as the Aldrich Bill in January, 1911. Why then did it take until December, 1913 for Congress to pass the Federal Reserve Act? The hitch in the timing resulted from the Democratic capture of the House of Representatives in the 1910 elections, and from the looming probability that the Democrats would capture the White House in 1912.
The reformers had to regroup, drop the highly partisan name of Aldrich from the bill, and recast it as a Democratic bill under Virginia’s Representative Carter Glass. But despite the delay and numerous drafts, the structure of the Federal Reserve as passed overwhelmingly in December 1913 was virtually the same as the bill that emerged from the secret Jekyll Island meeting three years earlier. Successful agitation brought bankers, the business community, and the general public rather easily into line.
In form as well as in content, the Federal Reserve System is precisely the cozy government-big bank partnership, the government-enforced banking cartel, that big bankers had long envisioned.
Many critics of the Fed like to harp on the fact that the private bankers legally own the Federal Reserve System, but this is an unimportant legalistic fact; Fed (and therefore possible bank) profits from its operations are taxed away by the Treasury. The benefits to the bankers from the Fed come not from its legal profits but from the very essence of its operations: its task of coordination and backing for bank credit inflation. These benefits dwarf any possible direct profits from the Fed’s banking operations into insignificance.
Fed captured by the Morgans
While the establishment of the Federal Reserve System in late 1913 was the result of a coalition of Morgan, Rockefeller, and Kuhn, Loeb interests, there is no question which financial group controlled the personnel and the policies of the Fed once it was established.
But more important than the composition of the Federal Reserve Board was the man who became the first Governor of the New York Federal Reserve Bank and who single-handedly dominated Fed policy from its inception until his death in 1928. This man was Benjamin Strong, who had spent virtually his entire business and personal life in the circle of top associates of J. P. Morgan.
Benjamin Strong was a protégé of the most powerful of the partners of the House of Morgan after Morgan himself, Henry and “Harry” Pomeroy Davison. Strong was also a neighbor and close friend of Davison and of two other top Morgan partners in the then-wealthy New York suburb of Englewood, New Jersey, Dwight Morrow and Thomas W. Lamont. In 1904, Davison offered Strong the post of secretary of the new Morgan-created Bankers Trust Company, designed to compete in the burgeoning trust business.
So close were Davison and Strong that, when Strong’s wife committed suicide after childbirth, Davison took the three surviving Strong children into his home. Strong later married the daughter of the president of Bankers Trust, and rose quickly to the posts of vice president and finally president. So highly trusted was Strong in the Morgan circle that he was brought in to be J. Pierpont Morgan’s personal auditor during the panic of 1907.
When Strong was offered the crucial post of governor of the New York Fed in the new Federal Reserve System, Strong, at first reluctant, was convinced by Davison that he could run the Fed as “a real central bank . . . run from New York.”
World War I saves the Morgans
By 1914, the Morgan empire was in increasingly shaky financial shape. The Morgans had long been committed to railroads, and after the turn of the century the highly subsidized and regulated railroads entered their permanent decline. The Morgans had also not been active enough in the new capital market for industrial securities, which had begun in the 1890s, allowing Kuhn, Loeb to beat them in the race for industrial finance. To make matters worse, the $400 million Morgan-run New Haven Railroad went bankrupt in 1914.
At the moment of great financial danger for the Morgans, the advent of World War I came as a godsend. Long connected to British, including Rothschild, financial interests, the Morgans leaped into the fray, quickly securing the appointment, for J. P. Morgan & Co., of fiscal agent for the warring British and French governments, and monopoly underwriter for their war bonds in the United States.
J. P. Morgan also became the fiscal agent for the Bank of England, the powerful English central bank. Not only that: the Morgans were heavily involved in financing American munitions and other firms exporting war material to Britain and France. J. P. Morgan & Co., moreover, became the central authority organizing and channeling war purchases for the two Allied nations.
The massive U.S. loans to the Allies, and the subsequent American entry into the war, could not have been financed by the relatively hard-money, gold standard system that existed before 1914. Fortuitously, an institution was established at the end of 1913 that made the loans and war finance possible: the Federal Reserve System.
By centralizing reserves, by providing a government privileged lender of last resort to the banks, the Fed enabled the banking system to inflate money and credit, finance loans to the Allies, and float massive deficits once the U.S. entered the war. In addition, the seemingly odd Fed policy of creating an acceptance market out of thin air by standing ready to purchase acceptance at a subsidized rate, enabled the Fed to rediscount acceptance on munitions exports.
In February 1916, Strong sailed to England and worked out an agreement of close collaboration between the New York Fed and the Bank of England, with both central banks maintaining an account with each other, and the Bank of England regularly purchasing sterling bills on account for the New York bank.
In his usual high-handed manner, Strong bluntly told the Federal Reserve Board in Washington that he would go ahead with such an agreement with or without board approval; the cowed Federal Reserve Board then finally decided to endorse the scheme. A similar agreement was made with the Bank of France.
Morgans push America into First World War
Deep in Allied bonds and export of munitions, the Morgans were doing extraordinarily well; and their great rivals, Kuhn, Loeb, being pro-German, were necessarily left out of the Allied wartime bonanza. But there was one hitch: it became imperative that the Allies win the war. It is not surprising, therefore, that from the beginning of the great conflict, J. P. Morgan and his associates did everything they possibly could to push the supposedly neutral United States into the war on the side of England and France. As Morgan himself put it:
We agreed that we should do all that was lawfully in our power to help the Allies win the war as soon as possible.
It is instructive that the British exempted the House of Morgan from its otherwise extensive mail censorship in and out of Britain, granting J.P. Morgan, Jr., and his key partners special code names.
While the Morgans and other financial interests were beating the drums for war, even more influential in pushing the only partially reluctant Wilson into the war were his foreign policy Svengali, Colonel House, and House’s protégé, Walter Hines Page, who was appointed Ambassador to Great Britain. Page’s salary in this prestigious influential post was handsomely subsidized through Colonel House by copper magnate Cleveland H. Dodge, a prominent adviser to Wilson, who benefited greatly from munitions sales to the Allies.
Colonel House liked to pose as an abject instrument of President Wilson’s wishes. But before and after U.S. entry into the war House shamelessly manipulated Wilson, in secret and traitorous collaboration with the British, to push the President first into entering the war and then into following British wishes instead of setting an independent American course.
Morgan man William McAdoo helps Strong take over the FED
After the United States entered the war in the spring of 1917, Benjamin Strong, as head of the Fed, obligingly doubled the money supply to finance the war effort, and the U.S. government took over the task of financing the Allies.
Strong was able to take power in the Fed with the help of and close cooperation from Secretary of the Treasury William Gibbs McAdoo after U.S. entry into the war. … McAdoo himself came to Washington as secretary of the Treasury after having been befriended and bailed out of his business losses by J.P. Morgan, Jr., personally, and by Morgan’s closest associates.
Bernard Baruch leads WIB war collectivism
Bernard Baruch [became the] czar of the collectivized economy as head of the War Industries Board in World War I.
Baruch’s credentials for the task were unimpeachable; an early supporter of the drive toward war, Baruch had presented a scheme for industrial war mobilization to President Wilson as early as 1915. For the rest of his life, Bernard Mannes Baruch sought to restore the lineaments of the wartime model.
During the 1920s and 1930s, Bernard Baruch served as a major inspiration of the drive toward a corporate state; moreover, many of the leaders of this drive were men who had served under him during the heady days of the WIB and who continued to function frankly as ”Baruch’s men” in national affairs.
Baruch, since childhood, had been a protégé of the powerful Guggenheim family, who controlled the American copper industry, but who liked to keep a low political profile and operate through Baruch and his network of operatives.
Eugene Meyer leads WFC war collectivism
When the War Industries Board took over the task of collectivist planning of industry in August 1917, Eugene Meyer, Jr. [became] the virtual “czar” of the copper industry. Meyer differed from Strong and Harrison in not being totally in the Morgan camp.
Meyer’s father, an immigrant from France, had spent all his life in the employ of the French international banking house of Lazard Frères, finally rising to the post of partner of Lazard’s New York branch. Eugene, Jr., early broke out from Lazard on his own and became a successful speculator, investor and financier, an associate of the Morgans, and even more closely an associate of Bernard Baruch and Baruch’s patrons, the powerful Guggenheim family, in virtual control of the American copper industry.
More important for his eventual role in the Hoover administration was Meyer’s crucial part in the War Finance Corporation (WFC). The WFC had been set up by Secretary of the Treasury McAdoo in May 1918, ostensibly to finance industries essential to the war effort. Meyer was named the WFC’s managing director. The WFC massively subsidized American industry.
If the WFC, and for that matter the rest of the apparatus of war collectivism, had been strictly war-related, they all would have been dropped swiftly as soon as the Armistice was signed on November 11, 1918. But on the contrary, Baruch, Meyer, the War Industries Board, and most business leaders were anxious to continue the benefits of collectivism indefinitely after the war was over.
The goals were twofold: price controls to keep prices up during the expected postwar recession; and a permanent peacetime cartelization of American industry enforced by the federal government. Permanent cartelization was endorsed by the U.S. Chamber of Commerce and by the National Association of Manufacturers. President Wilson, however, prompted by Secretary of War Newton D. Baker, insisted on scuttling the WIB by the end of 1918.
Anglo-American establishment redraws the world map in Versailles
As World War I drew to a close, influential Britons and Americans decided that intimate post-war collaboration between the two countries required more than just close cooperation between the central banks. Also needed were permanent organizations to promote joint Anglo-American policies to dominate the postwar world.
The plans of Colonel House and his biased young historians of The Inquiry were put into effect at the peace settlement at Versailles. Germany, Austria-Hungary, and Russia were cruelly dismembered, thus ensuring that Germany and Russia, once recovered from the devastation of the war, would bend their energies toward getting their territories back. In that way, conditions were virtually set for World War II.
Not only that: the Allies at Versailles took advantage of the temporary power vacuum in Eastern Europe to create new independent states that would function as client states of Britain and France, be part of the Morgan/Rothschild financial network, and help keep Germany and Russia down permanently. It was an impossible task for these new small nations, a task made more difficult by the fact that the young historians managed to rewrite the map of Europe at Versailles to make the Poles, the Czechs, and the Serbs dominant over all the other minority nationalities forcibly incorporated into the new countries. These subjugated peoples— the Germans, Ukrainians, Slovaks, Croats, Slovenes, etc.—thus became built-in allies for the revanchist dreams of Germany and Russia.
American entry into World War I in April 1917 prevented negotiated peace between the warring powers, and drove the Allies forward into a peace of unconditional surrender and dismemberment, a peace which, as we have seen, set the stage for World War II. American entry thus cost countless lives on both sides, caused chaos and disruption throughout central and eastern Europe at war’s end, and the consequent rise of Bolshevism, fascism, and Nazism to power in Europe. In this way, Woodrow Wilson’s decision to enter the war may have been the single most fateful action of the twentieth century, causing untold and unending misery and destruction. But Morgan profits were expanded and assured.
Milner’s imperial Kindergarten
The Milner Group dominated domestic planning in Britain during World War I, and particularly the planning for post-war foreign and colonial policy. The Milner Group staffed the British delegation of experts to Versailles. To promote the intellectual agitation for such a policy, the Milners had also set up the Round Table Groups in England and abroad in 1910.
The first American to be asked to join the Round Table was George Louis Beer, who came to its attention when his books attacked the American Revolution and praised the British Empire of the eighteenth century. Such loyalty could not go unrewarded, and so Beer became a member of the Group in about 1912 and became the American correspondent of Round Table magazine. We have seen Beer’s pro-British role as colonial expert for The Inquiry. He was also the chief U.S. expert on colonial affairs at Versailles, and afterward the Milner Group made Beer head of the Mandate Department of the League of Nations.
During the war, Beer, Anglophile Yale historian George Burton Adams, and powerful Columbia University historian James T. Shotwell, an important leader of The Inquiry and head of the National Board for Historical Services, which emitted deceptive propaganda for the war effort, formed a secret society to promote Anglo-American collaboration. Finally, led by Beer for the United States and the head of the Round Table group in England, Lionel Curtis, the British and U.S. historical staffs at Versailles took the occasion to found a permanent organization to agitate for an informally, if not formally, reconstituted Anglo-American Empire.
RIIA & CFR organise and run the Anglo-American Empire
The new group, the Institute of International Affairs, was formed at a meeting at the Majestic Hotel in Paris on May 30, 1919. A six-man organizing committee was formed, three Milnerites from Britain, and three Americans: Shotwell; Harvard historian Archibald C. Coolidge, head of the Eastern European desk of the Inquiry, and member of the Morgan-oriented Boston financial family; and James Brown Scott, Morgan lawyer who was to write a biography of Robert Bacon. The British branch, the Royal Institute of International Affairs, set up a committee to supervise writing a multi-volume history of the Versailles Peace Conference; the committee was financed by a gift from Thomas W. Lamont, Morgan partner.
The American branch of the new group took a while to get going. Finally, the still inactive American Institute of International Affairs merged with a defunct outfit, begun in 1918, of New York businessmen concerned with the postwar world, and organized as a dinner club to listen to foreign visitors. This organization, the Council on Foreign Relations, had as its honorary chairman Morgan lawyer Elihu Root, while Alexander Hemphill, chairman of Morgan’s Guaranty Trust Company, was chairman of its finance committee.
In August 1921, the two organizations merged into the new Council on Foreign Relations, Inc., a high-powered organization embracing bankers, lawyers, and intellectuals. While varied financial interests were represented in the new organization, the CFR was Morgan-dominated, from top to bottom. Honorary president was Elihu Root. President was John W. Davis, Wilson’s Solicitor-General, and now chief counsel for J. P. Morgan & Co. Davis was to become Democratic Presidential candidate in 1924.
President Warring Harding a Rockefeller man
Although there were various groups around President Warren Harding, as an Ohio Republican, he was closest to the Rockefellers, and his secretary of state, Charles Evans Hughes, was a leading Standard Oil attorney and a trustee of the Rockefeller Foundation.
Herbert Hoover’s and Franklin Roosevelt’s first attempt to cartellize the economy
Herbert Hoover was appointed Secretary of Commerce by President Harding under pressure by the Progressive wing of the party, and accepted under the condition that he would be consulted on all the economic activities of the federal government. He thereupon set out deliberately to ”reconstruct America.” The program sketched the outlines of a corporate state; there was to be national planning through ”voluntary” cooperation among businesses and groups under ”central direction.” The Federal Reserve System was to allocate capital to essential industries and thereby eliminate the industrial ”waste” of free markets.
Hoover was only thwarted from breaking the firm American tradition of laissez-faire during a depression by the fact that the severe but short-lived depression of 1920-21 was over soon after he took office. He also faced some reluctance on the part of Harding and the Cabinet.
Although these interventions did not have time to take hold in the 1921 depression, a precedent for federal intervention in an economic depression had now been set, as one of Hoover’s admiring biographers writes, ”rather to the horror of conservatives.”
American Construction Council was founded jointly by Herbert Hoover and Franklin D. Roosevelt in the summer of 1922, with the aim of stabilizing and cartelizing the industry, and of planning the entire construction industry through the imposition of various codes of ”ethics” and of ”fair practice.” The codes were the particular idea of Herbert Hoover. Following the path of all would-be cartelists who are hostile to no one more than the individualistic competitor, Franklin D. Roosevelt, President of the American Construction Council, took repeated opportunity to denounce rugged individualism and profit-seeking by individuals.
President Harding’s suspicious sudden death
Warren Gamaliel Harding, in the camp of the Rockefellers, suddenly died in office. His death was quickly dismissed by the Establishment as of natural causes, but Gaston Means, a Secret Service agent in the Harding White House, wrote a sensational book, The Strange Death of Warren Harding, charging that Harding was poisoned by his wife, for two possible, though somewhat contradictory reasons: (a) Harding’s notorious womanizing, and (b) to spare Harding the scandal of the Teapot Dome revelations, which were just emerging.
Means’s charge was brusquely dismissed on the grounds that he was an unreliable character. Perhaps, but so what? Chief beneficiary of Harding’s death? Vice President Calvin Coolidge, member of the prominent Massachusetts family long in the Morgan ambit. (Another sudden death that replaced a Rockefeller person with a Morgan man?!)
President Coolidge’s cabinet dominated by the Morgans
Coolidge has been misleadingly described as a colorless small-town Massachusetts attorney. Actually, the new president was a member of a prominent Boston financial family, who were board members of leading Boston banks, and one, T. Jefferson Coolidge, became prominent in the Morgan-affiliated United Fruit Company of Boston.
Throughout his political career, furthermore, Coolidge had two important mentors, neglected by historians. One was Massachusetts Republican chairman W. Murray Crane, who served as a director of three powerful Morgan- dominated institutions: the New Haven and Hartford Railroad, AT&T, and the Guaranty Trust Company of New York. He was also a member of the executive committee of the board of AT&T.
The other was Amherst classmate and Morgan partner Dwight Morrow. Morrow began to agitate for Coolidge for president in 1919, and at the Chicago Republican convention of 1920, Dwight Morrow and fellow Morgan partner Thomas Cochran lobbied strenuously, though discreetly behind the scenes, for Coolidge, allowing fellow Amherst graduate and Boston merchant Frank W. Stearns to take the foreground.
Furthermore, when Secretary of State Charles Evans Hughes returned to private law practice in the spring of 1925, Coolidge offered his post to then-veteran Wall Street attorney and former Secretary of State and of War Elihu Root, who might be called the veteran leader of the “Morgan bar.” Root was at one critical time in Morgan affairs, J.P. Morgan, Sr.’s, personal attorney. After Root refused the secretary of state position, Coolidge was forced to settle for a lesser Morgan light, Minnesota attorney Frank B. Kellogg.
Andrew Mellon, the powerful tycoon and head of the Mellon interests, whose empire spread from the Mellon National Bank of Pittsburgh to encompass Gulf Oil, Koppers Company, and ALCOA, was generally allied to the Morgan interests. Mellon was secretary of the Treasury for the entire decade.
1924 election: Morgan man Calvin Coolidge vs. Morgan man John W. Davis
The year 1924 saw the Morgans at the pinnacle of their political power in the United States. President Calvin Coolidge, friend and protégé of Morgan partner Dwight Morrow, was deeply admired by Jack Morgan, who saw the president as a rare blend of deep thinker and moralist. Morgan wrote a friend: “I have never seen any President who gives me just the feeling of confidence in the Country and its institutions, and the working out of our problems, that Mr. Coolidge does.”
On the other hand, the Democratic presidential candidate that year was none other than John W. Davis, senior partner of the Wall Street law firm of Davis Polk and Wardwell, and the chief attorney for J.P. Morgan and Company. Davis, a protégé of the legendary Harry Davison, was also a personal friend and backgammon and cribbage partner of Jack Morgan’s. Whoever won the 1924 election, the Morgans couldn’t lose.
Morgan men Strong and Norman create a fraudulent gold standard
The main collaboration throughout the 1920s, much of it kept secret from the Federal Reserve Board in Washington, was between Strong and the man who soon became Governor of the Bank of England, Montagu Collet Norman.
Norman and Strong were not only fast friends, but had important investment banking ties, Norman’s uncle having been a partner of the great English banking firm of Baring Brothers, and his grandfather a partner in the international banking house of Brown Shipley & Co., the London branch of the Wall Street banking firm of Brown Brothers. Before coming to the Bank of England, Norman himself had worked at the Wall Street office of Brown Brothers, and then returned to London to become a partner of Brown Shipley.
Norman’s mother was the daughter of Mark W. Collet, a partner in the London banking firm of Brown, Shipley and Company, the London branch of the great Wall Street banking firm of Brown Brothers. Collet’s father had been governor of the Bank of England in the 1880s. As a young man, Montagu Norman began working at his father’s bank, and then at Brown, Shipley; in the late 1890s, Norman worked for three years at the New York office of Brown Brothers, making many Wall Street banking connections, and then he returned to London to become a partner of Brown, Shipley.
Intensely secretive, Montagu Norman habitually gave the appearance, in the words of an admiring biographer, “of being engaged in a perpetual conspiracy.” A lifelong bachelor, he declared that “the Bank of England is my sole mistress, I think only of her, and I’ve dedicated my life to her.”
Two of Norman’s oldest and closest friends were the two main directors of Morgan, Grenfell: Teddy Grenfell and particularly Vivian Hugh Smith. Smith had buoyed Norman’s confidence when the latter had been reluctant to become a director of the Bank of England in 1907; more particularly, one of Norman’s best friends was the vivacious and high-spirited wife of Vivian, Lady Sybil. Norman would disappear for long, platonic weekends with Lady Sybil, who inducted him into the mysteries of theosophy and the occult, and Norman became a godfather to the numerous Smith children.
Strong, who had been divorced by his second wife, and Norman, formed a close friendship that lasted until Strong’s death. They would engage in long vacations together, registering under assumed names, sometimes at Bar Harbor or Saratoga but more often in southern France. The pair would, in addition, visit each other at length, and also write a steady stream of correspondence, personal as well as financial.
While the close personal relations between Strong and Norman were of course highly important for the collaboration that formed the international monetary world of the 1920s, it should not be overlooked that both were intimately bound to the House of Morgan. “Monty Norman,” writes a historian of the Morgans, “was a natural denizen of the secretive Morgan world.” He continues:
The House of Morgan formed an indispensable part of Norman’s strategy for reordering European economies. . . . Imperial to the core, he [Norman] wanted to preserve London as a financial center and the bank [of England] as arbiter of the world monetary system. Aided by the House of Morgan, he would manage to exercise a power in the 1920s that far outstripped the meager capital at his disposal.
Creating an even more fraudulent gold-exchange standard
Just as Montagu Norman was the master manipulator in England, he himself was being manipulated by the Morgans, in what has been called “their holy cause” of returning England to gold. Teddy Grenfell was the Morgan manipulator in London, writing Morgan that “as I have explained to you before, our dear friend Monty works in his own peculiar way. He is masterful and very secretive.”
In late 1924, when Norman got worried about the coming return to gold, he sailed to New York to have his confidence bolstered by Strong and J.P. Morgan, Jr. “Jack” Morgan gave Norman a pep talk, saying that if Britain faltered on returning to gold, “centuries of goodwill and moral authority would have been squandered.
The British Labor government fell in early October 1924, and the general election in late October swept a conservative government into power. After carefully listening to Keynes, McKenna, and other critics, and after holding a now-famous dinner party of the major advocates on March 17, the new chancellor of the Exchequer, Winston Churchill, made the final decision to go back to gold on March 20, announcing and passing a gold standard act, returning to gold at $4.86 on April 28, and putting the new gold standard into effect immediately.
The major twist, the major deformation of a genuine gold standard perpetrated by the British in the 1920s, was not the gold bullion standard, unfortunate though that was. The major inflationary camouflage was to return, not to a gold standard at all, but to a “gold-exchange” standard. In a gold-exchange standard, only one country, in this case Great Britain, is on a gold standard in the sense that its currency is actually redeemable in gold, albeit only gold bullion for foreigners. All other European countries, even though nominally on a gold standard, were actually on a pound-sterling standard.
In short, a typical European country, say, “Ruritania,” would hold as reserves for its currency, not gold but British pounds sterling, in practice, bills or deposits payable in sterling at London. Anyone who demanded redemption for Ruritanian “rurs,” then, would receive British pounds rather than gold.
The gold-exchange standard, then, cunningly broke the classical gold standard’s stringent limits on monetary and credit expansion, not only for the other European countries, but also for the base or key currency country, Great Britain itself.
Since all other countries were sucked into the inflationary gold-exchange trap, it seemed that the only nation Britain had to worry about was the United States, the only country to continue on a genuine gold standard. That was the reason it became so vitally important for Britain to get the United States, through the Morgan connection, to go along with this system and to inflate, so that Britain would not lose gold to the United States.
In this way, for a few years Britain could have its cake and eat it too. It could enjoy the prestige of going back to gold, going back at a highly overvalued pound, and yet continue to pursue an inflationary, cheap-money policy instead of the opposite. It could inflate pounds and see other countries keep their sterling balances and inflate on top of them; it could induce other countries to go back to gold at overvalued currencies and to inflate their money supplies; and it could also try to prop up its flagging exports by using cheap credit to lend money to European nations so that they could purchase British goods.
British recession caused by overvalued pound coupled with rigid prices and wages
By the end of 1925, Montagu Norman and the British Establishment were seemingly monarch of all they surveyed. Backed by Strong and the Morgans, the British had had everything their way: they had saddled the world with a new form of pseudo gold standard, with other nations pyramiding money and credit on top of British sterling, while the United States, though still on a gold-coin standard, was ready to help Britain avoid suffering the consequences of abandoning the discipline of the classical gold standard.
But it took little time for things to go very wrong. The crucial British export industries, chronically whipsawed between an overvalued pound and rigidly high wage rates kept up by strong, militant unions and widespread unemployment insurance, kept slumping during an era when worldwide trade and exports were prospering. Unemployment remained chronically high. The unemployment rate had hovered around 3 percent from 1851 to 1914. From 1921 through 1926 it had averaged 12 percent; and unemployment did little better after the return to gold. 400
The blindness of British officialdom to the downward rigidity of wage rates was quite remarkable. .. At last, Leith-Ross admitted that the problem was rigidity of labor costs:
“If our workmen were prepared to accept a reduction of 10 percent in their wages or increase their efficiency by 10 percent, a large proportion of our present unemployment could be overcome. But in fact organized labor is so attached to the maintenance of the present standard of wages and hours of labor that they would prefer that a million workers should remain in idleness and be maintained permanently out of the Employment Fund, than accept any sacrifice. The result is to throw on to the capital and managerial side of industry a far larger reorganization than would be necessary: and until labor is prepared to contribute in larger measure to the process of reconstruction, there will inevitably be unemployment.”
Leith-Ross might have added that the “preference” for unemployment was made not by the unemployed themselves but by the union leadership on their alleged behalf, a leadership which itself did not have to face the unemployment dole. Moreover, the willingness of the workers to accept this deal might have been very different if there were no generous Employment Fund for them to tap.
It was in fact the highly militant coal miners’ union, led by the prominent leftist Aneurin “Nye” Bevan, that was the first to stir up grave doubt about the glory of the British return to gold.
Not only was coal a highly unionized export industry located in the north, but already overinflated coal-mining wages had been given an extra boost during the first Labor government of Ramsay MacDonald, in 1924. In addition to the high wage rates, the miners’ union insisted on numerous cost-raising restrictive, featherbedding practices, some of them resurrected from the defunct postmedieval guilds. These obstructionist tactics helped rigidify the British economy, preventing changes and adaptations of occupation and location, and hampering rationalizing and innovative managerial practices. As Professor Benham trenchantly pointed out:
“Employers who wished to make changes had to face the powerful opposition of organized labor. The introduction of new methods, such as the “more looms to a weaver” system, was resisted. Strict lines of demarcation between occupations were maintained in engineering and elsewhere. A plumber could repair a pipe conveying cold water; if it conveyed hot water, he had to call in a hot water engineer. Entry into certain occupations was rendered difficult. A man can become an efficient building operative in a few months; an apprenticeship of four years was required. British railways could not have their labour force as they chose. A host of restrictions, insisted upon by the Trade Unions, made this impossible.”
By 1925, the year of the return to gold, British coal was already facing competition of rehabilitated, newly modernized, low-cost coal mines in France, Belgium, and Germany. British coal was no longer competitive, and its exports were slumping badly.
It should be noted that Norway and Denmark, who insisted in following the Genoa path of struggling back to gold at a highly overvalued currency, suffered, like Britain, from an export depression throughout the 1920s; whereas Finland, acting on better advice, went back at a realistically devalued rate, and avoided chronic depression during this period. …
Finland acted on the advice of the great classical liberal Swedish economic historian, Professor Eli Heckscher of the University of Stockholm.
Another coup de whiskey to keep the 20’s rolling
The major fruit of the Norman-Strong collaboration was Strong’s being pressured to inflate money and credit in the U.S. throughout the 1920s, in order to keep England from losing gold to the U.S. from its inflationary policies.
Strong gaily told Rist during their meeting that he was going to give “a little coup de whiskey to the stock market.”
Strong also agreed to buy $60 million more of sterling from England to prop up the pound. Pursuant to the agreement with Norman, the Federal Reserve promptly launched its greatest burst of inflation and cheap credit in the second half of 1927.
The stock market had already been booming by the time of the fatal injection of credit expansion in the latter half of 1927. … But now, the massive Fed credit expansion in late 1927 ignited the stock market fire.
Unfortunately, Benjamin Strong was not destined personally to reap the whirlwind. A sickly man, Strong in effect was not running the Fed throughout 1928, finally dying on October 16 of that year. He was succeeded by his handpicked choice, George L. Harrison, also a Morgan man but lacking the personal and political clout of Benjamin Strong.
A few days before leaving office in March 1929, Coolidge called American prosperity “absolutely sound” and assured everyone that stocks were “cheap at current prices.”
1928 election: Morgan man Herbert Hoover vs. Rockefeller man Al Smith
Bankers enraged at Benjamin Strong and the New York Fed’s low-interest policy on behalf of Britain in the 1920s, were led by Melvin A. Traylor, head of the Rockefeller-controlled First National Bank of Chicago.
The Rockefellers had never been England-oriented. Traylor led the Chicago bankers in going to the Democratic convention in 1928 and supporting Al Smith, the Democratic nominee. Averell Harriman, of Brown Brothers, Harriman, solidified his support of the Democratic Party during the same year and for similar reasons.
The Morgans, in the 1928 Republican presidential race, were torn three ways: between inducing, unsuccessfully, President Coolidge to run for a third term; Vice President Charles G. Dawes, who had been a Morgan railroad lawyer and who dropped out of the 1928 race; and Herbert Hoover.
Hoover cabinet dominated by Morgans
In March 1929, Herbert Clark Hoover, who had been a powerful secretary of commerce during the Republican administrations of the 1920s, became president of the United States. While not as intimately connected as Calvin Coolidge, Hoover long had been close to the Morgan interests.
Mellon continued as secretary of the Treasury, with the post of secretary of state going to the longtime top Wall Street lawyer in the Morgan ambit, Henry L. Stimson, disciple and partner of J.P. Morgan’s personal attorney, Elihu Root. Perhaps most important, Hoover’s closest, but unofficial adviser, whom he regularly consulted three times a week, was Morgan partner Dwight Morrow.
Black Friday caused by inflation
Hoover’s method of dealing with the inflationary boom was to try not to tighten the money supply, but to keep bank loans out of the stock market by a jawbone method then called “moral suasion.” This too was the preferred policy of the new governor of the Federal Reserve Board in Washington, Roy A. Young. The fallacy was to try to restrict credit to the stock market while keeping it abundant to “legitimate” commerce and industry.
Despite this attempt to keep the boom going, however, the money supply in the United States leveled off by the end of 1928, and remained more or less constant from then on. This ending of the massive credit expansion boom made a recession inevitable, and sure enough, the American economy began to turn down in July 1929. Feverish attempts to keep the stock market boom going, however, managed to boost stock prices while the economic fundamentals were turning sour, leading to the famous stock market crash of October 24.
Great Depression caused by high tariffs, inflation, rigid prices and raising real wages
The conventional wisdom, of historian and layman alike, pictures Herbert Hoover as the last stubborn guardian of laissez-faire in America. The laissez-faire economy, so this wisdom runs, produced the Great Depression in 1929, and Hoover’s traditional, do-nothing policies could not stem the tide. Hence, Hoover and his hidebound policies were swept away, and Franklin Roosevelt entered to bring to America a New Deal, a new progressive economy of state regulation and intervention fit for the modern age.
This conventional historical view is pure mythology and that the facts are virtually the reverse: that Herbert Hoover, far from being an advocate of laissez-faire, was in every way the precursor of Roosevelt and the New Deal, that, in short, he was one of the major leaders of the twentieth-century shift from relatively laissez-faire capitalism to the modern corporate state. In the terminology of William A. Williams and the New Left, Hoover was a preeminent ”corporate liberal.”
The depression, or what nowadays would be called the “recession,” that struck the world economy in 1929 could have been met in the same way the U.S., Britain, and other countries had faced the previous severe contraction of 1920–21, and the way in which all countries met recessions under the classical gold standard. In short: they could have recognized the folly of the preceding inflationary boom and accepted the recession mechanism needed to return to an efficient free-market economy.
In other words, they could have accepted the liquidation of unsound investments and the liquidation of egregiously unsound banks, and have accepted the contractionary deflation of money, credit, and prices. If they had done so, they would, as in the previous cases, have encountered a recession-adjustment period that would have been sharp, severe, but mercifully short. Recessions unhampered by government almost invariably work themselves into recovery within a year or 18 months.
But the United States, Britain, and the rest of the world had been permanently seduced by the siren song of cheap money. If inflationary bank credit expansion had gotten the world into this mess, then more, more of the same would be the only way out. Pursuit of this inflationist, “proto-Keynesian” folly, along with other massive government interventions to prevent price deflation, managed to convert what would have been a short, sharp recession into a chronic, permanent, stagnation with an unprecedented high unemployment that only ended with World War II. 424-425
Hoover sponsored the highly protectionist Smoot- Hawley Tariff in 1929/30, and he signed the Norris-LaGuardia Act of 1932, which sponsored labor unionism by outlawing contractual agreements not to join unions and greatly curtailing the use of injunctions in labor disputes.
Hoover’s most fateful act was to call a series of White House Conferences with the nation’s leading financiers and industrialists, and induce them to pledge that wage rates would not be lowered and that they would expand their investments.
The wage agreement held firm in the midst of a cataclysmic Depression and unprecedented and prolonged mass unemployment. In fact, since prices were falling rapidly, this meant that the real wage rates of those lucky enough to remain employed were increasing sharply.
In the face of this record of wage maintenance, the unemployment rate rose to twenty-five percent of the labor force by 1933, and to a phenomenal forty-six percent in the leading manufacturing industries.
Cartellizing WFC reborn as RFC
By early September 1931, even before Britain’s abandonment of the gold standard, President Hoover, Eugene Meyer, and the nation’s financial establishment all agreed that America required a massive infusion of more money and credit, under the direction of the federal government. … Hoover … agreed to introduce a bill into Congress to revive the old WFC and expand it for peacetime uses into a new Reconstruction Finance Corporation (RFC).
The RFC was not only patterned after the old War Finance Corporation in philosophy, but also aped its organizational structure and took over many of the WFC’s actual personnel. .. Eugene Meyer spoke repeatedly in military metaphors, and Secretary Mills spoke of the “great war against depression . . . being fought on many fronts,” especially the “long battle . . . to carry our financial structure through the worldwide collapse.” 290
And so too did business and financial leaders rationalize their hasty embrace of collectivism in the Reconstruction Finance Corporation. An illuminating article in the Magazine of Wall Street, summarizing the congressional debate over the RFC bill, noted that big business, “always complaining of public intervention in economic matters,” was now beating the drums for intervention, the RFC being supported by big bankers, industrialists, and railroad presidents. 290
The RFC certainly paid off for these favored business groups. The excuse for the secrecy was that public confidence would be weakened if the identity of the shaky business or bank receiving RFC loans became widely known. But of course these institutions, precisely because they were in weak and unsound shape, deserved to lose public confidence, and the sooner the better both for the public and for the health of the economy, which required the rapid liquidation of unsound investments and institutions.
The RFC bill was passed hurriedly by Congress in January, 1932. The Treasury furnished it with half a billion dollars, and it was empowered to issue debentures up to $1.5 billion. Meyer was chosen to be chairman of the new organization. In the first half of 1932, the RFC extended, in the deepest secrecy, $1 billion of loans, largely to banks and railroads. 48
The railroads received nearly $50 million simply to repay debts to the large banks, notably J. P. Morgan & Co. and Kuhn, Loeb and Co. One of the important enthusiasts for this policy was Eugene Meyer, Jr., on the grounds of ”promoting recovery” and frankly, of ”putting more money into the banks.” Meyer’s enthusiasm might well have been bolstered by the fact that his brother-in-law, George Blumenthal, was an officer of J. P. Morgan & Co., and that he himself had served as an officer of the Morgan bank.
FED inflation counterproductive and deepens the Great Depression
In the meantime, Eugene Meyer was promoting more inflationary damage as governor of the Federal Reserve. … The Fed promptly went into an enormous binge of buying government securities, unprecedented at the time. The Fed purchased $1.1 billion of government securities from the end of February to the end of July, raising its holdings to $1.8 billion. Part of the reason for these vast open market operations was to help finance the then-huge federal deficit of $3 billion during fiscal year 1932.
Thus, we see the grave error of the familiar Milton Friedman monetarist myth that the Federal Reserve either deliberately contracted the money supply after 1931 or at least passively allowed such contraction. The Fed, under Meyer, did its mightiest to inflate the money supply—yet despite its efforts, total bank reserves only rose by $212 million, while the total money supply fell by $3 billion. How could this be?
The answer to the mystery is that the inflationary policies of Hoover and Meyer proved to be counterproductive. American citizens lost confidence in the banks and demanded cash—Federal Reserve notes—for their deposits (currency in circulation rising by $122 million by the end of July), while foreigners lost confidence in the dollar and demanded gold (the gold stock in the United States falling by $380 million in this period). In addition, the banks, for the first time, did not fully lend out their new reserves, and accumulated excess reserves—these excess reserves rising to 10 percent of total reserves by mid-year.
BIS becomes de facto Morgan World Central Bank
1930 .. expansion was also cut short by the fact that the stock market boomlet early in the year had collapsed by the spring. During the year, however, Montagu Norman was able to achieve part of his long-standing wish for formal collaboration between the world’s major central banks. Norman pushed through a new central bankers’ bank, the Bank for International Settlements (BIS), to meet regularly at Basle, and to provide regular facilities for cooperation.
While the suspicious Congress forbade the Fed from joining the BIS formally, the New York Fed and its allied Morgan interests were able to work closely with the new bank. The BIS, indeed, treated the New York Fed as if it were the central bank of the United States.
Gates W. McGarrah resigned as chairman of the board of the New York Fed in February to assume the position of president of the BIS, while Jackson E. Reynolds, a director of the New York Fed particularly close to the Morgan interests, became chairman of the BIS’s organizing committee. Unsurprisingly, J.P. Morgan and Company supplied much of the capital for the new BIS.
Baruch proposes collectivization of the economy with Swopes Plan and NRA
In the spring of 1930, Baruch proposed a peacetime reincarnation of the WIB as a ”Supreme Court of Industry.” In September of the following year, Gerard Swope, head of General Electric and brother of Baruch’s closest confidant Herbert Bayard Swope, presented an elaborated plan for a corporate state that essentially revived the system of wartime planning. At the same time, one of Baruch’s oldest friends, former Secretary William Gibbs McAdoo, was proposing a similar plan for a ”Peace Industries Board.”
After Hoover dismayed his old associates by rejecting the plan, Franklin Roosevelt embodied it in the NRA, selecting Gerard Swope to help write the final draft, and picking another Baruch disciple and World War aide General Hugh S. Johnson— also of the Moline Plow Company—to direct this major instrument of state corporatism. When Johnson was fired, Baruch himself was offered the post.
Not merely the NRA and AAA, but virtually the entire New Deal apparatus—including the bringing to Washington of a host of liberal intellectuals and planners—owed its inspiration to the war collectivism of World War I. The Reconstruction Finance Corporation, founded by Hoover in 1932 and expanded by Roosevelt’s New Deal, was a revival and expansion of the old War Finance Corporation, which had loaned government funds to munitions firms. Furthermore, Hoover, after offering the post to Bernard Baruch, named as first Chairman of the RFC, Eugene Meyer, Jr., an old protege of Baruch’s, who had been managing director of the WFC. Much of the old WFC staff and method of operations were taken over bodily by the new ’agency.
Hoover opposes and Roosevelt accepts bankers push for more cartellization
It is not unusual for revolutions to devour their fathers and pioneers. As a revolutionary process accelerates, the early leaders begin to draw back from the implicit logic of their own life work and to leap off the accelerating bandwagon that they themselves had helped to launch. So it was with Herbert Hoover. All his life he had been a dedicated corporatist; but all his life he had also liked to cloak his corporate-state coercion in cloudy voluntarist generalities.
All his life he had sought and employed the mailed fist of coercion inside the velvet glove of traditional voluntarist rhetoric. But now his old friends and associates—men like his longtime aide and Chamber of Commerce leader Julius Barnes, railroad magnate Daniel Willard, and industrialist Gerard Swope—were in effect urging him to throw off the voluntarist cloak and to adopt the naked economy of fascism. This Herbert Hoover could not do; and as he saw the new trend he began to fight it, without at all abandoning any of his previous positions.
Hoover began to fight back, and to insist that a certain proportion of individualism, a certain degree of the old ”American system,” must be preserved. The Swope and similar plans, he charged, would result in a complete monopolization of industry, would establish a vast governmental bureaucracy, and would regiment society. In short, as Hoover told Henry Harriman in exasperation, the Swope-Chamber of Commerce Plan was, simply, ”fascism.” Herbert Hoover had finally seen the abyss of fascism and was having none of it.
Franklin Roosevelt was to have no such scruples. Hoover’s decision had vital political consequences: for Harriman told him bluntly at the start of the 1932 campaign that Franklin Roosevelt had accepted the Swope Plan—as he was to prove amply with the NRA and AAA. If Hoover persisted in being stubborn, Harriman warned, the business world, and especially big business, would back Roosevelt. Hoover’s brusque dismissal led to big business carrying out its threat. It was Herbert Hoover’s finest hour.
America’s legion of corporate liberals, who found their Holy Grail with the advent of Franklin Roosevelt’s New Deal, never forgave or forgot Herbert Hoover’s hanging back from America’s entry into the Promised Land. To the angry liberals, Hoover’s caution looked very much like old fashioned laissez-faire. Hence Herbert Hoover’s pervasive entry into the public mind as a doughty champion of laissez-faire individualism. It was an ironic ending to the career of one of the great pioneers of American state corporatism.
Federal Deposit Insurance Corporation (FDIC) fraud further cartellizes banking
By the advent of Franklin Roosevelt, the fractional-reserve banking system had collapsed, revealing its inherent insolvency; the time was ripe for a total and genuine reform, for a cleansing of the American monetary system by putting an end, at long last, to the mendacities and the seductive evils of fractional-reserve banking. Instead, the Roosevelt Administration unsurprisingly went in the opposite direction: plunging into massive fraud upon the American public by claiming to rescue the nation from unsound banking through the new Federal Deposit Insurance Corporation (FDIC). The FDIC, the Administration proclaimed, had now ”insured” all bank depositors against losses, thereby propping up the banking system by a massive bailout guaranteed in advance. But, of course, it’s all done with smoke and mirrors.
For one thing, the FDIC only has in its assets a tiny fraction (1 or 2 percent) of the deposits it claims to ”insure.” The validity of such governmental ”insurance” may be quickly gauged by noting the late 1980s catastrophe of the savings and loan industry. The deposits of those fractional-reserve banks had supposedly nestled securely in the ”insurance” provided by another federal agency, the now-defunct, once-lauded Federal Savings and Loan Insurance Corporation. One crucial problem of deposit ”insurance” is the fraudulent application of the honorific term ”insurance” to schemes such as deposit guarantees.
But if no business firm can ever be ”insured,” how much more is this true of a fractional-reserve bank! For the very essence of fractional-reserve banking is that the bank is inherently insolvent, and that its insolvency will be revealed as soon as the deluded public realizes what is going on, and insists on repossessing the money which it mistakenly thinks is being safeguarded in its trusted neighborhood bank. If no business firm can be insured, then an industry consisting of hundreds of insolvent firms is surely the last institution about which anyone can mention ”insurance” with a straight face. ”Deposit insurance” is simply a fraudulent racket, and a cruel one at that, since it may plunder the life savings and the money stock of the entire public.
New Deal anti-Morgan coalition led by Rockefellers
The international monetary system that the House of Morgan helped Great Britain cobble together in 1925 lay in ruins when Britain hastily abandoned the gold-exchange standard in late September 1931. The Morgans tried desperately to keep Britain on gold in 1931, and afterward tried to get their bearings in the newly chaotic monetary arena.
By the time of Roosevelt’s accession to power in the spring of 1933, the Morgans had thrown in the towel on the American gold-coin standard; indeed, the Morgan-oriented leadership at the Treasury, Mills and Ballantine, had been agitating for going off gold considerably earlier.
But the overriding Morgan concern was always their associates and colleagues in England, and they hoped for a rapid return to some kind of fixed-exchange-rate relation to Britain, and perhaps, by extension, to the other major European currencies as well.
The Morgans wanted to reconstruct a regime of monetary internationalism as soon as possible. But for the first time since the turn of the century, the Morgans were no longer dominant over the monetary thinking of American financial and business elites. In the midst of the cauldron of depression, a new economic and monetary nationalism, a desire for domestic inflation untrammelled by international monetary responsibilities, began to take hold.
More generally, the Rockefeller and Harriman forces had been allied against the Morgans since the turn of the century, and now they and other rising financial groups banded together avidly to overthrow and dethrone the financial and political dominance achieved by the House of Morgan during the Republican decade of the 1920s.
Newer Jewish Wall Street investment banking houses, more anti-Morgan than Kuhn, Loeb, were also rising to help challenge Morgan: notably, Goldman, Sachs and Lehman Brothers, the Lehman family contributing New Deal governor of New York Herbert H. Lehman to the American political scene. Furthermore, Jewish retail interests, led by the Boston Filene brothers, were in favor of more inflation and consumer spending; and longtime Filene and retailer attorney Louis D. Brandeis had become powerful in the Democratic Party, and was helping run the New Deal surreptitiously from his seat on the U.S. Supreme Court. Brandeis was a longtime enemy of the Morgans, as attorney for opposing corporate interests, and a dedicated supporter of retail cartels supported by the government.
Moreover, all these financial and industrial groups were swinging notably leftward, not simply in monetary matters, but also in advocating far more government intervention, including promotion of labor unions, than the Morgans were willing to accept. Thus, these anti-Morgan groups, now gathered in the Democratic Party, were happy to form a coalition with left-wing intellectuals, technocrats, economists, and social workers who wished to staff the planning agencies, all to advance their common New Deal and ultra-statist agenda.
Again influential in the new Democratic regime was the veteran speculator and political manipulator Bernard Baruch, who had been czar of the collectivized economy as head of the War Industries Board in World War I, and who yearned to re-establish a similar, collectivist cartelized regime in peacetime, using the depression as the means for achieving this goal.
The early New Deal was dominated by an alliance of the Harrimans, Rockefellers, and various retailers, farm groups, the silver bloc, and industries producing for retail sales (for example, automobiles and typewriters), all of whom were now backing an inflationist and economic nationalist program.
Particularly powerful in the New Deal and in the Democratic Party was the underrated W. Averell Harriman, scion of the great Harriman interests and longtime enemy of the Morgans. Harriman dominated a highly influential new agency set up in the New Deal, the Business Advisory Council (BAC) of the Department of Commerce, which transmitted the influence of the pro-New Deal wing of industry and finance. Also dominant in the BAC was Sidney J. Weinberg of Goldman, Sachs.
Also, brash new ethnic groups rose to challenge Morgan hegemony and were fiercely fought by the Morgans and their controlled New York Fed: these included the Bank of America, a huge new Italian- American-run commercial bank chain in the West; and the rising Irish-American buccaneer Joseph P. Kennedy of Boston, both of whom were Democrats and emphatically outside the WASP Morgan- Republican structure.
Roosevelt cabinet dominated by Rockefellers
The Franklin Roosevelt–Hyde Park–Democrat wing of the Roosevelt family had always been close to their Hudson Valley neighbors, the Astors and the Harrimans, whereas the Oyster Bay–Theodore Roosevelt–Republican wing of the family had always been close to the Morgans.
President Roosevelt’s early monetary appointments sent an important signal of his new orientation and policies. To succeed Meyer, Roosevelt appointed his friend, the young Georgia banker Eugene R. Black, who had been governor of the Federal Reserve Bank of Atlanta. Black’s orientation may be gauged by the fact that, when he left the Fed a year later, he was to spend 16 years climbing up the executive ladder at the powerful Chase National Bank, which by this time had shifted firmly from the Morgan to the Rockefeller. Indeed, for the rest of his working life, Eugene Black was to serve at Chase as protégé of none other than the eminent Winthrop W. Aldrich, chairman of the board at Chase and a close kinsman of the Rockefeller family.
Roosevelt’s first secretary of the Treasury was William H. Woodin, who received the appointment after it was turned down by Melvin Traylor, president of the First National Bank of Chicago, one of the main commercial banks in the Rockefeller orbit. … He had also been a founding director of the County Trust Company of New York, along with the influential Vincent Astor and Herbert H. Lehman. Woodin’s financial associations in New York were therefore in the Harriman- Astor-Lehman-Rockefeller ambit rather than in the Morgan network.
Ill health forced Woodin to resign in December 1933, however, and his place was taken by Henry Morgenthau, Jr., who was to be an important and controversial Treasury secretary for the remainder of Roosevelt’s reign in office. Morgenthau, who rose from undersecretary, was a longtime friend and neighbour of Roosevelt’s, and a gentleman-farmer interested in agriculture. He was backed by his wealthy father, who had been ambassador to Turkey under Wilson, but more important was Henry Jr.’s close links to the powerful investment banking family of Lehman Brothers.
Rockefeller and Rothschild alliance against Morgan
Two fateful monetary steps were taken in 1933 by the incoming Roosevelt administration. The first and most revolutionary deed, accomplished in April, was to go off the gold standard, to confiscate almost all the gold of American citizens and place it under the ownership of the Federal Reserve, to embargo the export of gold and to devalue the dollar to $35 a gold ounce.
In short, Roosevelt was now totally and publicly committed to the entire nationalist Fisher–Committee for the Nation program for fiat paper money, currency inflation, and a very steep “reflation” of prices. The idea of stable exchange rates or an international monetary order would fade away for the remainder of the 1930s, and monetary nationalism, currency blocs, and economic warfare would be the order of the day for the remainder of the decade.
The Committee for the Nation has long been known as the prime mover behind the fiat money and inflationist policy of the early New Deal; what has not been known until recently was the powerful behind-the-scenes role in the committee played by the Rockefeller empire, in conjunction with their longtime international rival, the British Royal Dutch Shell Oil, financed by the Rothschild interests. … Here was a startlingly clear case of Rockefeller (and Royal Dutch Shell) against Morgan.
Attack phase I: Rockefeller takeover of Chase National Bank
The crucial event occurred within the Morgans’ showcase New York institution, the Chase National Bank, a commercial bank with an investment banking arm, Chase Securities. As a result of the 1929 crash, the Rockefeller-controlled Equitable Trust Company was in vulnerable shape, and its new head, Winthrop W. Aldrich, engineered a merger into Chase in March 1930, making Chase the world’s largest bank. Aldrich was the brother-in-law of John D. Rockefeller, and was destined to be for decades the key Rockefeller man in banking as well as in the manipulation of politicians.
A titanic three-year struggle immediately ensued for control of Chase between the Rockefeller and the Morgan forces, who had previously been in charge. … As the conflict came to a climax in late 1932, Lamont found to his horror that several high Chase officials in the Aldrich camp were supporting Roosevelt.
Cementing the closeness of Rockefeller and Chase National to Franklin D. Roosevelt was the crucial role of the shadowy, dominant adviser to President Woodrow Wilson, “Colonel” Edward Mandell House. House, a Democratic politician from Texas, had inherited railroads and other properties in Texas, and, during Wilson’s day, was very close to the Morgans. Now, however, House, a key behind-the-scenes adviser to Roosevelt, had shifted to the Rockefeller orbit, impelled by the fact that his daughter was married to Gordon Auchincloss.
Attack phase II: Pecora hearings
At the end of 1932, Aldrich managed to oust Wiggin as chairman of the board of Chase; and he immediately began to use his perch as president to launch a multipronged and savage attack on the Morgan empire. In the first place, he collaborated fully and enthusiastically with the bitter and raucous Pecora–U.S. Senate Banking and Currency Committee assaults on Wall Street and particularly on the Morgan empire. Aldrich happily fed the Pecora committee data blackening the Wiggin-McCain regime at Chase, and Pecora was able to use such material to vilify demagogically the Morgan and other bankers for activities that were legal and legitimate.
Pecora cultivated a media image of feisty integrity, but more astute observers noted that his angry and glaring searchlight pilloried Republican bankers, but managed to overlook such leading Democratic and pro–New Deal investment bankers on Wall Street as Brown Brothers, Harriman and Lehman Brothers. We know now, too, that President Franklin D. Roosevelt, who, in his inaugural address had ranted against “unscrupulous money changers” and in his first fireside chat to the radio public had oddly blamed investment bankers for the commercial banking crisis, met secretly with Pecora and with Senate Banking Committee Chairman Duncan Fletcher to urge them to go after J.P. Morgan and Company. Ferdinand Pecora was only too happy to oblige.
It was the hysterical atmosphere deliberately generated by the Pecora hearings, particularly Pecora’s assaults on Albert Wiggin’s Chase National Bank and on the Morgans, that created the atmosphere that permitted the coalition of New Deal reformers and Winthrop W. Aldrich’s Rockefeller forces to drive through fateful banking and financial legislation during the “First 100 Days” of 1933, legislation that overturned and destroyed the economic power of the Morgan empire. In particular, the Roosevelt administration managed to pass the Banking Act (Glass-Steagall Act) of 1933 and the Securities Act of 1933.
Upon this defeat, J.P. Morgan and Company made the fateful decision to keep its deposit business and to divest itself of its power center, the investment banking business. The Morgans set up a new Morgan, Stanley and Company to engage in investment banking.
Professor Benston points out that all the provisions of the Banking Act of 1933 helped develop a coherent structure for government cartelization of the banking industry. In the first place, the separation sections, which we have been discussing, helped the commercial bankers get rid of unprofitable securities, and to eliminate the powerful competition of investment bankers for customers’ deposits. As for investment bankers, one-third of them, including J.P. Morgan and Company, hived off that business to stick to deposit banking, leaving the remainder free of their competition. In particular, as we have seen, the Rockefellers rid the commercial banks of unwelcome investment banking competition.
Attack phase III: The securities legislation
The demagogic eruption of the Pecora hearings also led to another New Deal 100 Days measure that both revolutionized and cartelized the securities industry and delivered another body blow to the House of Morgan. This was the Securities Act of 1933, passed in May, followed the next year by its more powerful successor, the Securities Exchange Act of June 1934.
The securities legislation constituted a body blow to the Morgan empire because the Morgans dominated the New York Stock Exchange … by imposing federal regulation and enforcement, they could at one and the same time dominate and cartelize the securities and investment banking industries, while delivering another body blow to the House of Morgan.
But the most important role in drafting and pushing through the securities acts was played by powerful left-liberal theorist, agitator, and shadowy manipulator Felix Frankfurter, a professor at Harvard Law School. An old friend and adviser to Franklin Roosevelt, Frankfurter specialized in seeding his former students and assistants, his “happy hot dogs,” into powerful positions in the federal government. … And standing behind Frankfurter, pulling the strings from his Supreme Court bench, was the even more shadowy master manipulator Louis D. Brandeis, Frankfurter’s mentor from Harvard Law School.
Brandeis was able to violate judicial ethics systematically while on the Court, by putting Frankfurter on permanent retainer on his secret payroll, and using Frankfurter as his agent in the political realm. Brandeis, who had been powerful in the Wilson administration, had been fiercely anti-Morgan for decades, and was a longtime legal representative for retail users of Morgan railroads and utilities, particularly for the Filine interests of Boston.
While the New Deal Left originally wanted security regulation in the hands of the left-dominated Federal Trade Commission (FTC), they were perfectly happy to “compromise” by setting up a specialized Securities and Exchange Commission (SEC). Indeed, Roosevelt cunningly threw a sop to conservatives and moderates by naming his old friend, the Irish-American stock speculator and buccaneer Joseph P. Kennedy, to be chairman of the five-man SEC …
Chernow writes of Joseph Kennedy as a Morgan “hobgoblin,” who had been repeatedly snubbed by J.P. Morgan, Jr., in the late 1920s. In fact, Chernow sees the New Deal clash with Morgan in ethnic terms: “The money changers had indeed been chased from the Temple, by the Irish, the Italians, and the Jews—the groups excluded from WASP Wall Street in the 1920s.”
Attack phase IV: Public Utility Holding Act
The New Dealers completed their financial revolution as well as their successful multipronged assault against the Morgans, with their most implacably radical piece of legislation: the Public Utility Holding Act of August 1935. Urged on by Roosevelt himself, the administration insisted on driving through the drastic “death sentence” clause, abolishing all holding company systems in the public utility industry. …
The public utility holding companies, led by the Morgans, waged a long ferocious political and constitutional battle against the PUHA. …. But all to no avail, as in 1938 the Supreme Court, tamed and denatured by the New Deal, upheld the constitutionality of the Public Utilities Holding Company.
Attack phase V: Banking Act of 1935
On November 10, FDR, impressed by the memo and emboldened by his smashing victory over the Republicans in the November 1934 congressional elections, announced the appointment of Marriner Eccles as governor of the Federal Reserve Board, and he was sworn in a week later. At the same time as his appointment was announced and submitted for confirmation to the Senate, the radical Banking Act of 1935, embodying the Eccles/Currie program, was scheduled to be submitted to Congress.
Like the Bank of America’s A.P. Giannini, Eccles was a Western outsider to the Morgan-dominated Federal Reserve System of the 1920s, and he had conceived a bitter hatred of the Morgan empire, as well as a crusading desire to transform American banking by shifting power in the Fed, once and for all, from the Morgan- and Wall Street–dominated New York Federal Reserve Board to a non-Morgan politically appointed Federal Reserve Board in Washington.
Essentially, Eccles won almost all of his points: the shift of banking control from Morgan’s New York Fed to the non-Morgan Washington politicians had been completed. … decisive act had taken place: open market policy would be initiated in, dominated by, and enforced by the Federal Reserve Board in Washington. 340
The Banking Act of 1935 was important for being the final settled piece of New Deal banking legislation that consolidated all the revolutionary changes from the beginning of the Roosevelt administration. The Morgans tried desperately, for example, to alter the 1933 Glass-Steagall provision, compelling the separation of commercial and investment banking, but this reversion was successfully blocked by Winthrop Aldrich.
Return of the Morgans
It is well not to cry for the Morgans. Though permanently dethroned by the New Deal, they were able to make a comeback by the late 1930s. The great thrust for economic nationalism had subsided, and the Morgans were able to begin to work again for stabilization of exchange rates.
In the fall of 1936, the United States entered into a tripartite agreement with Great Britain and France, the three countries agreeing—not exactly on fixed exchange rates—but on maneuvering to support each other’s exchanges at least within any given 24-hour period. Soon, the agreement, which was to last until World War II, was expanded to include Belgium, Holland, and Switzerland.
As the nations moved toward World War II, the Morgans, who had long been closely connected with Britain and France, rose in importance in American foreign policy, while the Rockefellers, who had little connection with Britain and France and had patent agreements with I.G. Farben in Germany, fell in relative strength.
Secretary of State Cordell Hull, a close longtime friend of FDR’s roving ambassador and Morgan man Norman H. Davis, took the lead in exerting pressure against Germany for its bilateral rather than multilateral trade agreements and for its exchange controls, all put in place to defend a chronically overvalued mark.
In the spring of 1935, the German ambassador to Washington, desperately anxious to bring an end to American political and economic warfare, asked the United States what Germany could do to end American hostilities. The American answer, which amounted to a demand for unconditional economic surrender, was that Germany abandon its economic policy in favor of America.
But particularly significant is the retrospective comment made by Secretary Hull: [W]ar did not break out between the United States and any country with which we had been able to negotiate a trade agreement. It is also a fact that, with very few exceptions, the countries with which we signed trade agreements joined together in resisting the Axis. The political lineup follows the economic lineup.
It was only in 1936, by the good offices of leading Morgan banker Norman Davis, a longtime friend of Roosevelt’s, and of Democrat Morgan partner Russell Leffingwell, that the Morgans would begin to recoup their political losses. The beginning of the return of the Morgans was symbolized by the September 1936 Tripartite Monetary Agreement, partially stabilizing the exchange rates of the currencies of Britain, France, and the U.S., a collaboration that was soon extended to Belgium, Holland, and Switzerland.
These agreements, in addition to the dollar’s still remaining on an international (but not domestic) gold bullion standard at $35 an ounce, set the stage for the Morgan drive organized by Norman Davis, head of Morgan’s Council of Foreign Relations, to bring a new world gold-exchange standard out of the cauldron of World War II. The difference is that this inflationary “Bretton Woods” system would be a dollar, not a sterling, gold exchange standard. Moreover, this inflationary system under the cloak of the prestige of gold, was destined to last a great deal longer than the British venture, finally collapsing at the end of the 1960s.
Old Right organises against the New Deal
The modern conservative movement was born as a reaction against Roosevelt’s New Deal. .. The Liberty League, the major organization opposing the New Deal in its first term, was formed by conservative Democrats… Given the origins of modern conservatism, its nucleus was a necessarily disparate coalition of anti-New Deal forces. The philosophical thrust was provided by libertarians like Mencken and Nock, and the political base was formed by the waning group of classical liberal Democrats like the Liberty Leaguers Albert Ritchie of Maryland and Senator James A. Reed of Missouri.
Most of the opponents, of course, were Republicans, who had never been classical liberals or libertarians. They were led by Herbert Hoover, whose whole political career had been dedicated to foisting the ”government-business alliance” on America. In opposing the New Deal’s leap into a more advanced form of statism, these Republican politicians were forced to use the unfamiliar rhetoric of classical liberalism, in which they had little genuine belief. After all, what other rhetoric was there? So began that grievous disjunction between high-sounding free market and libertarian discourses and actual statist practice that has marked conservatism ever since.
Morgan’s Willkie vs. Rockefeller’s Dewey fight over Republican 1940 nomination
Wendell Willkie’s sudden surprise Republican nomination for president in 1940 was a cleverly engineered Morgan coup in the Republican Party. During that period, Willkie sat on the board of the Morgan-dominated First National Bank of New York. Willkie’s close friends included the inevitable Thomas W. Lamont; Perry Hall, vice president of Morgan, Stanley and Company; George Howard, president of the United was still an officer there. …
It is intriguing that one of Willkie’s two main rivals for the nomination, New York’s Thomas E. Dewey, was all his life virtually in the hip pocket of Winthrop W. Aldrich, the Rockefellers, and the Chase National Bank.
WWII was a coalition war that united the interests of the Three Houses
During the 1930s, the Rockefellers pushed hard for war against Japan, which they saw as competing with them vigorously for oil and rubber resources in Southeast Asia and as endangering the Rockefellers’ cherished dreams of a mass “China market” for petroleum products. On the other hand, the Rockefellers took a non-interventionist position in Europe, where they had close financial ties with German firms such as I. G. Farben and Co., and very few close relations with Britain and France.
The Morgans, in contrast, as usual deeply committed to their financial ties with Britain and France, once again plumped early for war with Germany, while their interest in the Far East had become minimal. Indeed, U.S. Ambassador to Japan, Joseph C. Grew, former Morgan partner, was one of the few officials in the Roosevelt administration genuinely interested in peace with Japan.
World War II might therefore be considered, from one point of view, as a coalition war: the Morgans got their war in Europe, the Rockefellers theirs in Asia. Such disgruntled Morgan men as Lewis W. Douglas and Dean G. Acheson (a protégé of Henry Stimson), who had left the early Roosevelt administration in disgust at its soft money policies and economic nationalism, came happily roaring back into government service with the advent of World War II.
Bretton Woods expands the dollar imperialism
As the United States prepared to enter World War II, it made its economic war aims brutally simple: the ending of the economic and monetary nationalism of the 1930s, and their replacement by a new international economic order based upon the dollar instead of the pound. In the trade area, this meant vigorous U.S. promotion of exports and the reduction of tariffs and quotas against American products (the so-called “open door” for American commerce and investments), and in the monetary sphere, it meant the breakup of national currency blocs, and the restoration of multilateral exchanges with fixed parities based upon the dollar. Even as the United States prepared to enter the war to save Britain, its continuing conflict with the British proclivity for exchange controls and an Imperial Preference bloc remained unresolved.
The resolution of the problem came after lengthy negotiations throughout World War II, culminating in the Bretton Woods Agreement in July 1944. Basically, the agreement was a compromise in which the United States won the main point: a new multilateral world of fixed exchange rates of currencies based on the dollar, while the Americans accepted the British Keynesian insistence on jointly promoting permanent inflationary policies to ensure “full employment.” The United States had achieved the objective expressed by Secretary Morgenthau: “to move the financial center of the world from London to the United States Treasury.”
The dominant role in the critical wartime negotiations leading up to Bretton Woods was played not by the State Department, but secretly by the Council of Foreign Relations (CFR), a highly influential organization of businessmen and experts set up by the Morgans after World War I to promote an internationalist foreign political and economic policy. Private study groups set up by the CFR intermeshed and virtually dictated to parallel study groups established by the sometimes reluctant Department of State. President of the CFR from 1936 until 1944 and director of this effort was none other than Norman Davis, longtime Morgan affiliate and disciple of Morgan partner Henry P. Davison. The Morgans, indeed, were back.
During the war, many Morgan-oriented men who had strongly opposed the economic nationalism of the early New Deal happily came back to help run the World War II and postwar version of the new era: Lewis W. Douglas; Dean Acheson, who had left the New Deal because of its radical monetary measures, was back as assistant secretary of state for monetary affairs; Acheson’s mentor, Henry L. Stimson, was secretary of war; and Stimson’s other disciple, John J. McCloy, in effect ran the war effort as his deputy secretary.
It was McCloy who presided over the decision to round up all Japanese-Americans and place them in concentration camps in World War II, and he is virtually the only American left who still justifies that action. And when the ailing Cordell Hull retired in late 1944, he was replaced as secretary of state by Edward Stettinius, son of a Morgan partner and himself former president of Morgan-dominated United States Steel.
The mysterious death of FDR
FDR’s health had long been swathed in layer after layer of official and medical lies. And when he died, in his fourth term, the official mystery was unprecedented: his coffin was covered, and an autopsy was never performed on the body: All sorts of rumors abounded: that he died of syphilis, or of a gunshot wound, either self-inflicted or inflicted by someone else.
Main beneficiary of FDR’s death was, of course, Harry S. Truman. In broader political terms, a pro-Commie president, manipulated as we know now by brain truster, top foreign policy adviser, and unregistered KGB agent Harry ’the Hop” Hopkins, was suddenly replaced by the first launcher of the Cold War, at the behest of such venerable Establishment ”Wise Men” (as they modestly called themselves): Henry L. Stimson, W Averill Harriman, Dean G. Acheson, and John J. McCloy).
XVII. Rockefellers dominate the Anglo-American Establishment
CFR becomes Rockefeller dominated
After World War II, the .. new prominence of oil made the Rockefellers the dominant force in the political and financial Eastern Establishment.
Since World War II, indeed, the various financial interests have entered into a permanent realignment: the Morgans and the other financial groups have taken their place as compliant junior partners in a powerful ”Eastern Establishment,” led unchallenged by the Rockefellers. In a symbolically important merger, Chase … absorbed Kuhn, Loeb’s flagship commercial bank, the Bank of Manhattan.
The Rockefellers assumed control of the Council of Foreign Relations, the entire shift being neatly symbolized by the new postwar role of John J. McCloy, who was to serve as chairman of the Council of Foreign Relations, of the Rockefeller Foundation, and of the Rockefeller flagship bank, the Chase National Bank. ….
Before and during the war, McCloy, a disciple of Morgan lawyer Stimson, moved in the Morgan orbit; his brother-in-law, John S. Zinsser, was on the board of directors of J. P. Morgan & Co. during the 1940s. But, reflecting the postwar power shift from Morgan to Rockefeller, McCloy moved quickly into the Rockefeller ambit. (WSBAFP p. 35.) The old verities and financial group conflicts of the pre–World War II era had disappeared, and had been transformed into a new world.
It was McCloy … Perhaps the most powerful single figure in foreign policy since World War II, a beloved adviser to all Presidents … who “discovered” Professor Henry A. Kissinger for the Rockefeller forces. It is no wonder that John K. Galbraith and Richard Rovere have dubbed McCloy “Mr. Establishment.”
Old Right organises against American imperialism
World War II [started] the infusion of Catholics into the Right. They became leaders of the isolationist movement in World War. Many Progressive isolationists joined the anti-New Deal coalition. In the turbulence of the great leap further to statism during the war, the latter found themselves becoming sympathetic to free-market economics as well. Senators Borah, Nye, and Wheeler are examples in politics; Harry Elmer Barnes, Frank Hanighen, and John T. Flynn among intellectuals.
The right-wing movement thus emerged after World War II very different from what it had been before. Once opposed to domestic statism, in the name of the free market and personal liberty, it came to encompass not only hostility to war and foreign intervention but also to American statism in the international arena.
Rockefeller man Dewey vs. semi-Rockefeller man Truman in 1948 presidential election
Harvard Dean McGeorge Bundy, who had been part of a high-powered foreign policy team advising Thomas B. Dewey in the 1948 campaign, a virtually all-Rockefeller dominated team headed by John Foster Dulles and including Dulles’s brother Allen, C. Douglas Dillon, and Christian Herter.
Truman cabinet dominated by Rockefellers
A glance at foreign policy leaders since World War II will reveal the domination of the banker elite. Truman’s first Secretary of Defense was James V. Forrestal, former president of the investment banking firm of Dillon, Read & Co., closely allied to the Rockefeller financial group. Forrestal had also been a board member of the Chase Securities Corporation, an affiliate of the Chase National Bank.
Another Truman Defense Secretary was Robert A. Lovett, a partner of the powerful New York investment banking house of Brown Brothers Harriman. At the same time that he was Secretary of Defense, Lovett continued to be a trustee of the Rockefeller Foundation.
Secretary of the Air Force Thomas K. Finlether was a top Wall Street corporate lawyer and member of the board of the CFR while serving in the cabinet.
Ambassador to Soviet Russia, Ambassador to Great Britain, and Secretary of Commerce in the Truman administration was the powerful multi-millionaire W. Averell Harriman, an often underrated but dominant force with the Democratic Party since the days of FDR. Harriman was a partner of Brown Brothers Harriman.
Inflation and price controls push China into communism
One of the major reasons for the downfall of Chiang-kai-Shek, for example, was the fact that, due to national deficits and paper money inflation, China had been suffering, before and during World War II, from a runaway inflation, and Chiang had met the problem by imposing severe price and wage controls. The inevitable result of the controls was grave shortages throughout the country, and, as in so many cases in the past since the Edict of Diocletian in ancient Rome, the government met the problem by escalating the penalties for evading controls.
Chiang, in fact, ended by making an example of black marketeers by executing them publicly in the streets. In this way, he lost his merchant and middle-class support; in contrast, the Communists, whenever they occupied an area of China, ended the monetary expansion and thereby cured the inflation.
The Old Right against the Korean War
The last gasp of the old, classical liberal Right was its militant opposition to the Korean War – as well as the Andrews-Werdel third-party presidential ticket in 1956 .. which had as its foreign policy plank strict nonintervention in the affairs of other nations.
The hard core of the political Right was solidly anti-interventionist throughout the postwar years. Senator Wherry of Nebraska, and in the House such ultras as the libertarian Howard Buffett of Nebraska (Robert Taft’s Midwest campaign manager in 1952), and George Bender of Ohio were opposed to all intervention.
Bender, who collaborated with pacifist scholars and intellectuals, was also fond of referring to Chiang Kai-shek’s regime as ”fascist,” and he considered the Voice of America to be nothing more than ”a vast foreign propaganda machine.” Indeed, the opposition to Truman’s entry into the Korean War consisted almost solely of the Communist party on the left and the ultraconservative Republicans in the House on the right, which led some liberal publications at the time to refer to the Kremlin – Chicago Tribune isolationist axis.
Valiantly, the extreme rightist Republicans, who were particularly strong in the House, battled conscription, NATO and the Truman Doctrine. Consider, for example, Omaha’s Representative Howard Buffett, Senator Taft’s midwestern campaign manager in 1952. He was one of the most extreme of the extremists, once described by The Nation as ”an able young man whose ideas have tragically fossilized.”
Attacking the Truman Doctrine on the floor of Congress, he declared: ”Even if it were desirable, America is not strong enough to police the world by military force. If that attempt is made, the blessings of liberty will be replaced by coercion and tyranny at home. Our Christian ideals cannot be exported to other lands by dollars and guns.”
Howard Buffett was convinced that the United States was largely responsible for the eruption of conflict in Korea; for the rest of his life he tried unsuccessfully to get the Senate Armed Services Committee to declassify the testimony of CIA head Admiral Hillenkoeter, which Buffett told me established American responsibility for the Korean outbreak.
In a widely noted speech at the height of the American defeat in North Korea at the hands of the Chinese in late 1950, conservative isolationist Joseph P. Kennedy called for U.S. withdrawal from Korea. Kennedy proclaimed that “I naturally opposed Communism but I said if portions of Europe or Asia wish to go Communistic or even have Communism thrust upon them, we cannot stop it.” The result of the Cold War, the Truman Doctrine, and the Marshall Plan, Kennedy charged, was disaster—a failure to purchase friends and a threat of land war in Europe or Asia. Kennedy warned that:
half of this world will never submit to dictation by the other half. . . . What business is it of ours to support French colonial policy in Indo-China or to achieve Mr. Syngman Rhee’s concepts of democracy in Korea? Shall we now send the Marines into the mountains of Tibet to keep the Dalai Lama on his throne?
Economically, Kennedy added, we have been burdening ourselves with unnecessary debts as a consequence of Cold War policy. If we continue to weaken our economy “with lavish spending either on foreign nations or in foreign wars, we run the danger of precipitating another 1932 and of destroying the very system which we are trying to save.” Kennedy concluded that the only rational alternative for America is to scrap the Cold War foreign policy altogether: “to get out of Korea” and out of Berlin and Europe.
One obstacle to analyzing the conservative movement of the early postwar years is exclusive concentration on its undoubted political leader, Robert A. Taft. Although both a free-market man and a noninterventionist, Taft, partly due to his addiction to compromise as a way of life, faltered on both counts throughout his career. Second-echelon militants like Wherry and Buffett are far more revealing of the right-wing ideology of the period than is Taft himself.
Taft’s defeat in the bitterly fought 1952 convention was to signal the end of the Old Right as a political force. .. Taft’s death in 1953 was an irreparable blow, and one by one the other Taft Republicans disappeared from the scene.
Eisenhower cabinet dominated by Rockefellers
The Eisenhower administration proved to be a field day for the Rockefeller interests. While president of Columbia University, Eisenhower was invited to high-level dinners where he met and was groomed for President by top leaders from the Rockefeller and Morgan ambits, including the chairman of the board of Rockefeller’s Standard Oil of New Jersey, the presidents of six other big oil companies, including Standard of California and Socony-Vacuum, and the executive vice-president of J. P. Morgan & Co.
Running foreign policy during the Eisenhower administration was the Dulles family, led by Secretary of State John Foster Dulles, who had also concluded the U.S. peace treaty with Japan under Harry Truman. Dulles had for three decades been a senior partner of the top Wall Street corporate law firm of Sullivan & Cromwell, whose most important client was Rockefeller’s Standard Oil Company of New Jersey. Dulles had been for fifteen years a member of the board of the Rockefeller Foundation, and before assuming the post of Secretary of State was chairman of the board of that institution.
Most important is the little-known fact that Dulles’s wife was Janet Pomeroy Avery, a first cousin of John D. Rockefeller, Jr. Heading the super-secret Central Intelligence Agency during the Eisenhower years was Dulles’s brother, Allen Welsh Dulles, also a partner in Sullivan & Cromwell. Allen Dulles had long been a trustee of the CFR and had served as its president from 1947 to 1951. Their sister, Eleanor Lansing Dulles, was head of the Berlin desk of the State Department during that decade.
Perhaps to provide some balance for his banker-business coalition, Eisenhower appointed as Secretary of Defense three men in the Morgan rather than the Rockefeller ambit.
Iranian coup at the behest of oil companies
CIA director and former Standard Oil lawyer Allen W. Dulles flew to Switzerland to organize the covert overthrow of the Mossadegh regime, the throwing of Mossadegh into prison, and the restoration of the Shah to the throne of Iran. After lengthy behind-the-scenes negotiations, the oil industry was put back into action as purchasers and refiners of Iranian oil. But this time the picture was significantly different. Instead of the British getting all of the oil pie, their share was reduced to 40 percent of the new oil consortium, with five top U.S. oil companies (Standard Oil of New Jersey, Socony-Vacuum—formerly Standard Oil of N.Y., and now Mobil—Standard Oil of California, Gulf, and Texaco) getting another 40 percent.
It was later disclosed that Secretary of State Dulles placed a sharp upper limit on any participation in the consortium by smaller independent oil companies in the United States. In addition to the rewards to the Rockefeller interests, the CIA’s man-on-the-spot directing the operation, Kermit Roosevelt, received his due by quickly becoming a vice-president of Mellon’s Gulf Oil Corp. (WSBAFP p. 41.)
Guatemala Coup at the behest of United Fruit Company
Fresh from its CIA triumph in Iran, the Eisenhower administration next turned its attention to Guatemala, where the left-liberal regime of Jacob Arbenz Guzman had nationalized 234,000 acres of uncultivated land owned by the nation’s largest landholder, the American-owned United Fruit Company, which imported about 60 percent of all bananas coming into the United States. Arbenz also announced his intention of seizing another 173,000 acres of idle United Fruit land along the Caribbean coast. In late 1953, Eisenhower gave the CIA the assignment of organizing a counter-revolution in Guatemala.
Allen W. Dulles had financial connections with United Fruit and with various sugar companies which had also suffered land expropriation from the Arbenz regime. For several years, while a partner at Sullivan & Cromwell, he had been a board member of the Rockefeller-controlled J. Henry Schroder Banking Corporation.
Vietnam War from the start caused by American imperialism
American intervention in Vietnam did not begin, as most people believe, with Kennedy or Eisenhower or even Truman. It began no later than the date when the American government, under Franklin Roosevelt, on November 26, 1941, delivered a sharp and insulting ultimatum to Japan to get its armed forces out of China and Indochina, from what would later be Vietnam. This U.S. ultimatum set the stage inevitably for Pearl Harbor. Engaged in a war in the Pacific to oust Japan from the Asian continent, the United States and its OSS (predecessor to the CIA) favored and aided Ho Chi Minh’s Communist-run national resistance movement against the Japanese. After World War II, the Communist Viet Minh was in charge of all northern Vietnam. But then France, previously the imperial ruler of Vietnam, betrayed its agreement with Ho and massacred Viet Minh forces. In this double cross, France was aided by Britain and the United States.
When the French lost to the reconstituted Viet Minh guerrilla movement under Ho, the United States endorsed the Geneva agreement of 1954, under which Vietnam was to be quickly reunited as one nation. For it was generally recognized that the postwar occupation divisions of the country into North and South were purely arbitrary and merely for military convenience. But, having by trickery managed to oust the Viet Minh from the southern half of Vietnam, the United States proceeded to break the Geneva agreement and to replace the French and their puppet Emperor Bao Dai by its own clients, Ngo Dinh Diem and his family, who were installed in dictatorial rule over South Vietnam. When Diem became an embarrassment, the CIA engineered a coup to assassinate Diem and replace him with another dictatorial regime.
To suppress the Viet Cong, the Communist-led national independence movement in the South, the United States rained devastation on South and North Vietnam alike— bombing and murdering a million Vietnamese and dragging half a million American soldiers into the quagmires and jungles of Vietnam. Throughout the tragic Vietnamese conflict, the United States maintained the fiction that it was a war of “aggression” by the Communist North Vietnamese State against a friendly and “pro-Western” (whatever that term may mean) South Vietnamese State which had called for our aid. Actually, the war was really a doomed but lengthy attempt by an imperial United States to suppress the wishes of the great bulk of the Vietnamese population and to maintain unpopular client dictators in the southern half of the country, by virtual genocide if necessary.
CIA and Buckley turn the isolationist Old Right into the imperialist New Right
The political leaders of the Old Right began to die or retire. Nock and Mencken were dead or inactive, and Colonel Robert McCormick, publisher of the Chicago Tribune, died in 1955. The Freeman, although the leading right-wing journal in the late forties arid early fifties, had never been a powerful force; by the mid-fifties it was weaker than ever. Since the thirties, the Right had suffered from a dearth of intellectuals; it had seemed that all intellectuals were on the left. A disjunction therefore existed between a tiny cadre of intellectuals and writers, and a large, relatively unenlightened mass base. In the mid-1950s, with a power vacuum in both the political and the intellectual areas, the Right had become ripe for a swift takeover. A well-edited, weIl-financed magazine could hope to capture the dazed right wing and totally transform its character.
This is exactly what happened with the formation of National Review in 1955. For National Review, led by Bill Buckley and William Rusher, was a coalition of young Catholics – McCarthyite and eager to lead an anti-Communist crusade in foreign affairs – and ex-Communists like Frank Meyer and William S. Schlamm dedicating their energies to extirpating the God that had failed them.
In a sense, Joe McCarthy heralded the shift when, after his censure by the Senate, he feebly changed his focus in early 1955 from domestic Communism to the championing of Chiang Kai-shek. McCarthy not only shifted the focus of the right to communist hunting. His crusade also brought into the right wing a new mass base. Before McCarthy, the rank-and-file of the right wing was the small-town, isolationist middle west. McCarthyism brought into the movement a mass of urban Catholics from the eastern seaboard, people whose outlook on individual liberty was, if anything, negative.
Joe McCarthy was not himself a right-winger, but came in fact from the moderate, internationalist wing of the Republican party. Even in his book seeking to indict General George Marshall for continuing ”treason” the charges begin no earlier than the middle of World War II. The senator did not use the familiar indictment of Marshall by the right: that he had collaborated in Roosevelt’s alleged plot to provoke the Japanese into attacking Pearl Harbor. McCarthy did not use this charge against Marshall because he had no quarrel with our entry into that war – only with the alleged ”appeasement” of Russia toward the end.
If McCarthy was the main catalyst for mobilizing the mass base of the new right, the major ideological instrument of the transformation was the blight of anti-communism, and the major carriers were Bill Buckley and National Review.
In the early days, young Bill Buckley often liked to refer to himself as an ”individualist,” sometimes even as an ”anarchist.” But all these libertarian ideals, he maintained, had to remain in total abeyance, fit only for parlor discussion, until the great crusade against the ”international communist conspiracy” had been driven to a successful conclusion.
By the 1960 GOP convention, Barry Goldwater had become the political leader of the transformed New Right. Goldwater was and is – an all-out interventionist in foreign affairs; it is both symbolic and significant that Goldwater was an Eisenhower, not a Taft delegate to the 1952 Republican convention.
By 1960, too, the embarrassing extremists like the John Birch Society had been purged from the ranks, and the modern conservative movement was in place. It combined a traditionalist and theocratic approach to ”moral values,” occasional lip service to free-market economics, and an imperialist and global interventionist foreign policy dedicated to the glorification of the American state and the extirpation of world Communism. Classical liberalism remained only as rhetoric, useful in attracting business support, and most of all as a fig leaf for the grotesque realities of the New Right.
In a few brief years the character of the right wing had been totally transformed: Once basically classical liberal, it had become a global theocratic crusade. Such is the lack of acumen and memory among the right-wing masses that few even noted that any shift had occurred.
Kennedy cabinet dominated by Rockefellers
When John F. Kennedy assumed the office of President, the first person he turned to for foreign policy advice was Robert A. Lovett, partner of Brown Brothers, Harriman, even though Lovett had backed Richard Nixon. Kennedy asked Lovett to take his pick of any of three top jobs in the Cabinet..
Invasion of Cuba at the behest of American sugar companies
The strong Rockefeller influence on Kennedy foreign policy is best seen in the fact that the new President continued Allen W. Dulles as head of the CIA. It was at the urging of Dulles that Kennedy decided to go ahead with the CIA’s previously planned and disastrous Bay of Pigs invasion of Cuba. Fidel Castro’s regime had recently nationalized a large number of American-owned sugar companies in Cuba. It might be noted that Dulles’s old law firm of Sullivan & Cromwell served as general counsel for two of these large sugar companies, the Francisco Sugar Co. and the Manati Sugar Co., and that one of the board members of these firms was Gerald F. Beal, president of the Rockefeller-oriented J. Henry Schroder Bank, of which Dulles had once been a director.
Not only that. John L. Loeb of the Loeb, Rhoades investment bank, whose wife was a member of the Lehman banking family, owned a large block of stock in the nationalized Compania Azucarera Atlantica del Golfo, a big sugar plantation in Cuba, while one of the directors of the latter company was Harold F. Linder, vice-chairman of the General American Investors Company, dominated by Lehman Brothers and Lazard Frères investment bankers. Linder was appointed head of the Export-Import Bank by President Kennedy.
Katanga secession attempt organised by Anglo-American Corporation
The CIA was also heavily involved about this time in the shortlived Katanga secession movement in the old Belgian Congo. One of the largest of the American companies in Katanga, and a major backer of the secession movement, was the Anglo-American Corporation of South Africa, one of whose partners was mining magnate Charles W. Engelhard. Engelhard’s investment banker was Dillon, Read, the family firm of Kennedy’s Secretary of the Treasury, C. Douglas Dillon.
Kennedy assassinated by CIA and Johnson
John Fitzgerald Kenned was allegedly assassinated by lone nut Lee Harvey Oswald, who in turn was promptly assassinated by another, independent lone nut: Jack Ruby! This is the shakiest, most convoluted Establishment theory of all: for the two lone nuts had to be independent, couldn’t have known each other so that this kooky official theory could work. So much so in fact that the mysteriously sudden deaths of all those who knew both Oswald and Ruby and who knew that the two were linked, is one of the most powerful counter-indications to the official doctrine.
Here the number of books and investigations rebutting Establishment theory is legion, although orthodox writers still act as if dissenters are somehow tetched: powerful works from such writers as Mark Lane, the bullet-and body revisionism of David Lifton (in his Best Evidence), the work of the smeared Jim Garrison, etc.
Here the case for a new investigation with subpoena power is overwhelming. Not only is there persuasive evidence that the Parkland autopsy report was to say the least deeply flawed, as well as the possibility that the Kennedy body was switched, but also we find that Kennedy’s brain is mysteriously ”missing” from the National Archives.
In every case of a president dying in office the death has been minimized. The invariable rule has been: if a president is not visibly shot, then his death, though sudden, must have been by natural causes. If actually and visibly shot, then the perpetrator must have been a ”lone nut.” God forbid that more than one person might have been involved in the assassination, because that, heaven forfend, would be a ”conspiracy theory” and we all know that the Establishment in the U.S. has virtually outlawed any such theory. Or, at the very least, it has been quite beyond the pale of correct thinking and permissible discourse.
In any murder or suspicious demise, the first suspect that the police investigate is the person who most stands to gain by the death. Who is the beneficiary of granddaddy’s will? Etc. Now, this does not of course mean that the main beneficiary was actually responsible for grandpa’s death. But at least the theory has to be investigated. So why not also in a sudden death of someone who means more to most of us than one wealthy individual: the president of the U.S.? Shouldn’t the vice president always be the first suspect, his whereabouts checked, etc.? So why has this never happened? Why; for example, did not Lyndon Baines Johnson immediately become the first prime suspect in the indubitable murder of John F. Kennedy?
As Texan students of his career know, Johnson was not above using a little hanky-panky to advance his political career. And what about that intrepid Kennedy assassination researcher who, analyzing the motorcade with Zapruder, etc. films, concluded that Lyndon hit the deck of his car 2.7 seconds before the sound of the first shot?
The evidence is now overwhelming that the orthodox Warren legend, that Oswald did it and did it alone, is pure fabrication. It now seems clear that Kennedy died in a classic military triangulation hit, that, as Parkland Memorial autopsy pathologist Dr. Charles Crenshaw has very recently affirmed, the fatal shots were fired from in front, from the grassy knoll, and that the conspirators were, at the very least, the right-wing of the CIA, joined by its long-time associates and employees, the Mafia. It is less well established that President Johnson himself was in on the original hit, though he obviously conducted the coordinated cover-up, but certainly his involvement is highly plausible.
Johnson cabinet seats divided between the Three Houses
Cyrus Vance continued as Johnson’s Secretary of the Army; when he rose to Deputy Secretary of Defense, he was replaced by Vance’s old friend and roommate at Yale, Stanley R. Resor. … After Vance retired as Deputy Secretary of Defense to return to law practice, he was replaced by Johnson’s hard-line Secretary of the Navy Paul Nitze, former partner of Dillon, Read, whose wife was a member of the Rockefeller connected Pratt family.
A fascinating aspect of the Johnson administration was the heavy influence of men connected with the powerful Democratic investment banking house of Lehman Brothers.
Dominican invasion in behest of American sugar companies
While Bunker had served Johnson as Ambassador to the OAS, he continued to sit on the board of the National Sugar Refining Company. In late 1965, Bunker played a crucial role in Johnson’s massive U.S. invasion of the Dominican Republic, an intervention into a Dominican civil war to prevent a victory by left-wing forces who would presumably pose a dire threat to American sugar companies in the republic. As President Johnson’s emissary to the Dominican Republic just after the invasion, Bunker played a decisive role in installing the conservative Hector Garcia-Godoy as president.
Vietnam War run by the Three Houses
One important meeting at which it was decided to escalate the Vietnam War was held in July 1965. The meeting consisted of Johnson, his designated foreign policy and military officials, and three key unofficial advisers: Clark M. Clifford, the chairman of the President’s Foreign Intelligence Advisory Board, and an attorney for the du Ponts and the Morgan-dominated General Electric Co.; Arthur H. Dean, a partner in Rockefeller-oriented Sullivan & Cromwell and a director of the CFR; and the ubiquitous John J. McCloy.
Increasingly, however, the power elite became divided over the morass of the Vietnam War. Under the blows of the Tet offensive in January 1968, Robert McNamara had become increasingly dovish and was replaced as Secretary of Defense by hard-liner Clark Clifford, with McNamara moving gracefully to take charge of the World Bank. But, on investigating the situation, Clifford, too, became critical of the war, and Johnson called a crucial two day meeting on March 22, 1968, of his highly influential Senior Informal Advisory Group on Vietnam, known as the “Wise Men,” made up of all his key advisors on foreign affairs.
Johnson was stunned to find that only Abe Fortas and General Maxwell Taylor continued in the hard-line position. Arthur Dean, Cabot Lodge, John J. McCloy, and former General Omar Bradley took a confused middle-of-the-road position, while all the other elite figures such as Dean Acheson, George Ball, Mc- George Bundy, C. Douglas Dillon, and Cyrus Vance had swung around to a firm opposition to the war.
As David Halberstam put it in his The Best and the Brightest, these power elite leaders “let him (Johnson) know that the Establishment— yes, Wall Street—had turned on the war. . . . It was hurting the economy, dividing the country, turning the youth against the country’s best traditions.” LBJ knew when he was licked. Only a few days afterward, Johnson announced that hewas not going to run for re-election and he ordered what would be the beginnings of U.S. disengagement from Vietnam.
Nixon cabinet dominated by the Rockefellers
The foreign-policy aims of the Nixon administration had a decided Rockefeller stamp. Secretary of State William P. Rogers was a Wall Street lawyer who had long been active in the liberal Dewey-Rockefeller wing of the New York Republican Party. Indeed, Thomas E. Dewey was the main backer of Rogers for the State Department post.
Dewey’s entire political career was beholden to the Rockefeller interests, as was dramatically shown one election year when, in an incident that received unaccustomed publicity, Winthrop W. Aldrich, Rockefeller kinsman who was president of the Chase National Bank, literally ordered Governor Dewey into his Wall Street offices and commanded him to run for re-election. The governor, who had previously announced his retirement into private practice, meekly obeyed. Furthermore, Roger’s law partner, John A. Wells, had long been one of Nelson Rockefeller’s top political aides and had served as Nelson’s campaign manager for President in 1964.
Leading anti-establishment figures assassinated
John F. Kennedy; Malcolm X; Martin Luther King; Robert F. Kennedy; and now George Corley Wallace: the litany of political assassinations and attempts in the last decade rolls on. (And we might add: General Edwin Walker, and George Lincoln Rockwell.
Larry Flynt adds one more name to a growing roster of mysterious and unsatisfactorily explained political assassinations and quasi-assassinations in recent years .. And then, on the possibly political level, there are the murders of Sam Giancana and Johnny Roselli, both supposed to be purely gangland killings of undetermined and trivial origin. .. The very raising of the point about the Mafia is dangerous for the Establishment, because there is much evidence that the Mafia was hip-deep in the Kennedy Assassination itself. So that is not likely to be a well-publicized theory.
In each of these atrocities, we are fed with a line of cant from the liberals and from the Establishment media. In the first place, every one of these assassinations is supposed to have been performed, must have been performed, by “one lone nut” – to which we can add the one lone nut who murdered Lee Harvey Oswald in the prison basement. One loner, a twisted psycho, whose motives are therefore of course puzzling and obscure, and who never, never acted in concert with anyone. (The only exception is the murder of Malcolm, where the evident conspiracy was foisted upon a few lowly members of the Black Muslims. .. The top “conspirator” claims that his fellow convicts had nothing to do with the murder.)
Even in the case of James Earl Ray, who was mysteriously showered with money, false passports, and double identities, and who vainly tried to claim that he was part of a conspiracy before he was shouted down by the judge and his own lawyer – even there the lone nut theory is stubbornly upheld.
It is not enough that our intelligence is systematically insulted with me lone nut theory; we also have to be bombarded with the inevitable liberal hobby horses: a plea for gun control, Jeremiads about our “sick society” and our “climate of violence”, and, a new gimmick, blaming the war in Vietnam for this climate.
Without going into the myriad details of Assassination Revisionism, doesn’t anyone see a pattern in our litany of murdered and wounded, a pattern that should leap out at anyone willing to believe his eyes? For all of the victims have had one thing in common: all were, to a greater or lesser extent, important anti-Establishment figures, and, what is more were men with the charismatic capacity to mobilize large sections of the populace against our rulers. All therefore constituted “populist” threats against the ruling elite, especially if we focus on the mainstream “right- center” wing of the ruling classes. Even as Establishmenty a figure as John F, Kennedy, the first of the victims, had the capacity to mobilize large segments of the public against the center-right Establishment.
And so they were disposed of? We can’t prove it, but the chances of this pattern being a mere coincidence are surely negligible. If the only problem is a “sick society”, a “climate of violence”, and the absence of gun laws, how come that not a single right-centrist, not a single Nixon, Johnson, or Humphrey, has been popped at?
Kissinger a Rockefeller man
But of course the dominant foreign policy figure in both the Nixon and Ford administrations was not William Rogers but Henry A. Kissinger, who was named national security adviser and soon became virtually the sole force in foreign policy, officially replacing Rogers as Secretary of State in 1973.
Kissinger was virtually “Mr. Rockefeller.” As a Harvard political scientist, Kissinger had been discovered by John J. McCloy, and made director of a CFR group to study the Soviet threat in the nuclear age. He was soon made director of a special foreign policy studies project of the Rockefeller Brothers Fund, and from there became for more than a decade Nelson Rockefeller’s chief personal foreign policy adviser.
Only three days before accepting the Nixon administration post, Rockefeller gave Kissinger $50,000 to ease the fiscal burdens of his official post. Nixon and Kissinger re-escalated the Vietnam War by secretly bombing and then invading Cambodia in 1969 and 1970; they could be sure of compliance from Ellsworth Bunker, whom Nixon retained as Ambassador to South Vietnam until the end of the war.
Chile coup run at the behest of American copper companies
Apart from the Vietnam War, the Nixon administration’s major foreign policy venture was the CIA-led overthrow of the Marxist Allende regime in Chile. U.S. firms controlled about 80 percent of Chile’s copper production, and copper was by far Chile’s major export. In the 1970 election, the CIA funneled $1 million into Chile in an unsuccessful attempt to defeat Allende. The new Allende regime then proceeded to nationalize large U.S.-owned firms, including Anaconda and Kennecott Copper and the Chile Telephone Co., a large utility which was a subsidiary of ITT (International Telephone and Telegraph Co.).
Under the advice of Henry Kissinger and of ITT, the CIA funneled $8 million into Chile over the next three years, in an ultimately successful effort to overthrow the Allende regime. Particularly helpful in this effort was John A. McCone, the West Coast industrialist whom Johnson had continued in charge of the CIA. Now a board member of ITT, McCone continued in constant contact by being named a consultant to the CIA on the Chilean question. President Nixon continued Johnson holdover Richard Helms as head of the CIA, and Helm’s outlook may have been influenced by the fact that his grandfather, Gates W. McGarrah, had been the head of the Mechanics and Metals National Bank of New York, director of Bankers Trust, and chairman of the board of the powerful Federal Reserve Bank of New York.
Of the $8 million poured into Chile by the CIA, over $1.5 million was allocated to Chile’s largest opposition newspaper, El Mercurio, published by wealthy businessman Augustin Edwards. Edwards was also, not coincidentally, vice president of Pepsico, a company headed by President Nixon’s close friend Donald M. Kendall. The transaction was arranged at a quiet breakfast meeting in Washington, set up by Kendall, and including Edwards and Henry Kissinger. After the successful overthrow of Allende by a military junta in September 1973, the man who became the first Minister of Economy, Development, and Reconstruction was Fernando Leniz, a high official of El Mercurio who also served on the board of the Chilean subsidiary of the Rockefeller-controlled International Basic Economy Corporation.
China opened up by the Rockefellers
Richard Nixon also established, for the first time, diplomatic relations with Communist China. Nixon was urged to take this step by a committee of prominent businessmen and financiers interested in promoting trade with and investments in China. The group included Kendall; Gabriel Hauge, chairman of Manufacturers Hanover Trust Co.; Donald Burnham, head of Westinghouse; and David Rockefeller, chairman of the Chase Manhattan Bank.
The first envoy to China was the veteran elite figure and diplomat, David K. E. Bruce, who had married a Mellon, and who had served in high diplomatic posts in every administration since that of Harry Truman. After Bruce became Ambassador to NATO, he was replaced by George H. W. Bush, a Texas oil man who had served briefly as Ambassador to the United Nations. More important than Bush’s Texas oil connections was the fact that his father, Connecticut Senator Prescott Bush, was a partner at Brown Brothers, Harriman.
Trilateral commission dominated by the Rockefellers
David Rockefeller, chairman of the board of his family’s Chase Manhattan Bank from 1970 until recently, established the Trilateral Commission in 1973, with the financial backing of the CFR and the Rockefeller Foundation. Joseph Kraft, syndicated Washington columnist who himself has the distinction of being both a CFR member and a Trilateralist, has accurately described the CFR as a “school for statesmen,” which “comes close to being an organ of what C. Wright Mills has called the Power Elite—a group of men, similar in interest and outlook, shaping events from invulnerable positions behind the scenes.” The idea of the Trilateral Commission was to internationalize policy formation, the commission consisting of a small group of multinational corporate leaders, politicians, and foreign policy experts from the U.S., Western Europe, and Japan, who meet to coordinate economic and foreign policy among their respective nations.
David Rockefeller formed the Trilateral Commission, as a more elite and exclusive organization than the CFR, and containing statesmen, businessmen, and intellectuals from Western Europe and Japan. The Trilateral Commission not only studied and formulated policy, but began to place its people in top governmental posts. North American secretary and coordinator for the Trilaterals was George S. Franklin, Jr., who had been for many years executive director of the CFR. Franklin had been David Rockefeller’s roommate in college and had married Helena Edgell, a cousin of Rockefeller. Henry Kissinger was of course a key member of the Trilaterals, and its staff director was Columbia University political scientist Zbigniew Brzezinski, who was also a recently selected director of the CFR.
President Ford continued Kissinger as his Secretary of State and top foreign policy director. Kissinger’s leading aide during the Ford years was Robert S. Ingersoll, Trilateralist from Borg-Warner Corp. and the First National Bank of Chicago. In 1974, Ingersoll was replaced as Deputy Secretary of State by Charles W. Robinson, a businessman and Trilateralist.
Ambassador to Great Britain—and then moved to several other posts—was Elliot Richardson, now a Trilateralist and a director of the CFR. George Bush, Trilateralist, was retained as Ambassador to China, and then became director of the CIA.
Carter dominated by Trilateralists
James Earl Carter and his administration were virtually complete creatures of the Trilateral Commission. In the early 1970s, the financial elite was looking for a likely liberal Southern governor who might be installed in the White House. They were considering Reubin Askew and Terry Sanford, but they settled on the obscure Georgia governor, Jimmy Carter. They were aided in their decision by the fact that Jimmy came highly recommended.
In the first place, it must be realized that “Atlanta” has for decades meant Coca-Cola, the great multi-billion dollar corporation which has long stood at the center of Atlanta’s politico-economic power elite. Jimmy Carter’s long-time attorney, close personal friend, and political mentor was Charles Kirbo, senior partner at Atlanta’s top corporate law firm of King & Spalding.
King & Spalding had long been the general counsel to Coca-Cola, and also to the mighty financial firm The Trust Co. of Georgia, long known in Atlanta as “the Coca-Cola bank.” The longtime head and major owner of Coca-Cola was the octogenerian Robert W. Woodruff, who had long been highly influential in Georgia politics. With Kirbo at his elbow, Jimmy Carter soon gained the whole-hearted political backing of the Coca-Cola interests.
Financial contributors to Carter’s race in the 1971 Democratic primary for governor were: John Paul Austin, powerful chairman of the board of Coca-Cola; and three vice-presidents of Coke, including Joseph W. Jones, the personal assistant to Robert Woodruff. If Pepsi was a Republican firm, Coke had long been prominent in the Democratic Party; thus, James A. Farley, long-time head of the Democratic National Committee, was for thirty-five years head of the Coca-Cola Export Company.
In 1971, Carter was introduced to David Rockefeller by the latter’s friend J. Paul Austin, who was to become a founding member of the Trilateral Commission. Austin was long connected with the Morgan interests, and served as a director of the Morgan Guaranty Trust Co., and of Morgan’s General Electric Co.
Panama Canal Treaty at the behest of bankers
One of the first important Carter foreign policy actions was the negotiation of the Panama Canal treaty, giving the Canal to Panama, and settling the controversy in such a way that U.S. taxpayers paid millions of dollars to the Panama government so they could repay their very heavy loans to a number of Wall Street banks. .. Furthermore, no fewer than 32 Trilaterals were on the boards of the 31 banks participating in a $115 million 10-year Eurodollar Panama loan issued in 1972; and 15 Trilaterals were on the boards of fourteen banks participating in the $20 million Panama promissory note issued in the same year.
Iranian Revolution defeats the Anglo-American Establishment
The Shah murdered 60,000 of his subjects, and tortured countless others at the hands of the dread SAVAK, the secret police, causing Amnesty International to call his bloody reign the worst torture regime in the world. And the Shah is a thief on a mammoth scale. The Shah’s plundering, by the way, is a paradigm example of land theft and of the proper libertarian analysis of this “feudal” act. For the Shah’s father, only fifty years ago, was a bandit who assumed the throne of Iran by conquest, and proceeded to literally steal half the land area of the country and place it into his “private” ownership, mulcting the peasant owners of “rents” to their new feudal overlord. The present Shah simply systematized and expanded his father’s speculations, and converted them from land to dollar wealth.
When radical libertarians speak of justice and land reform, they are always confronted with the rebuttal that land thefts are lost in antiquity, and that titles are so fuzzy that no clear-cut justice can be done. But in the case of Iran none of that is true; the robberies were quite recent, in the memory of many now alive, and the record is all too clear.
Furthermore, the surging hatred of the United States in Iran is all too understandable. For a generation, it was the United States government that propped up the Shah on a massive scale, pouring literally billions in military and economic aid into his coffers. For years, the Shah was considered America’s geopolitical ally and satrap in the Middle East. And when, in the early 1950’s, the Iranians revolted and kicked out the hated Shah, the CIA rushed in to reinstall him in 1953—an action that Americans may have forgotten, but that Iranians have bitterly remembered. The Shah and the United States, the Shah, Kissinger and Rockefeller—all these have been closely linked, not only in the perception of Iranian “fanatics”, but also in reality.
A crucial foreign policy action of the Carter regime was the President’s reluctant decision to admit the Shah of Iran into the U.S., a decision that led directly to the Iran hostage crisis and the freezing of Iranian assets in the U.S. Carter was pressured into this move by the persistent lobbying of David Rockefeller and Henry Kissinger, who might well have realized that a hostage crisis would ensue. As a result, Iran was prevented from pursuing its threat of taking its massive deposits out of Chase Manhattan Bank, which would have caused Chase a great deal of financial difficulty. In politics, one hand washes the other.
Soviet invasion of Afganistan deposed a fanatical communist regime
Afghanistan may be gauged by the fact that that land-locked and barren land had been a Russian client state since the late nineteenth century, when clashes of British and Russian (Czarist) imperialism came to draw the Afghan-Indian border where it is today. (An unfortunate situation, since northwest and western Pakistan is ethnically Pushtu—the majority ethnic group in Afghanistan, while southwestern Pakistan is ethnically Baluchi: the same group that populates southern Afghanistan and southeastern Iran.) Ever since, the King of Afghanistan has always been a Russian tool, first Czarist then Soviet—to the tune of no bleats of outrage from the United States.
Then, in 1973, the King was overthrown by a coup led by Prince Mohammed Daud. After a few years, Daud began to lead the Afghan government into the Western, pro-U.S. camp. More specifically, he came under the financial spell (i.e. the payroll) of the Shah of Iran, the very man much in the news of late. Feeling that they could not tolerate a pro-U.S. anti-Soviet regime on it borders, the Russians then moved to depose Daud and replace him with the Communist Nur Taraki, in April 1978. Ever since then, Afghanistan has been under the heel of one Communist ruler or another; yet nobody complained, and no American president threatened mayhem.
The reason for the Soviet invasion is simple but ironic. For the problem with Hafizullah Amin, the prime minister before the Soviet incursion, was that he was too Commie for the Russians. As a fanatical left-Communist, Amin carried out a brutal program of nationalizing the peasantry and torturing opponents, a policy of collectivism and repression that fanned the flames of guerrilla war against him. Seeing Afghanistan about to slip under to the West once again, the Soviets felt impelled to go in to depose Amin and replace him with an Afghan Communist, Babrak Karmal, who is much more moderate a Communist and therefore a faithful follower of the Soviet line.
FED becomes omnipotent money machine
Over the years, all early restraints on Fed activities or its issuing of credit have been lifted; indeed, since 1980, the Federal Reserve has enjoyed the absolute power to do literally anything it wants: to buy not only U.S. government securities but any asset whatever, and to buy as many assets and to inflate credit as much as it pleases. There are no restraints left on the Federal Reserve. The Fed is the master of all it surveys.
The Federal Reserve System is accountable to no one; it has no budget; it is subject to no audit; and no Congressional committee knows of, or can truly supervise, its operations. The Federal Reserve, virtually in total control of the nation’s vital monetary system, is accountable to nobody—and this strange situation, if acknowledged at all, is invariably trumpeted as a virtue.
Fed Chairman, the charismatic Paul Volcker, was a long-time prominent servitor of the Rockefeller Empire, having been an economist for the Rockefellers’ Exxon Corporation, and for their headquarters institution, the Chase Manhattan Bank. Fed Chairman, Alan Greenspan, was, before his accession to the throne a member of the executive committee of the Morgans’ flagship commercial bank, Morgan Guaranty Trust Company.
Reagan cabinet dominated by Rockefellers
While Ronald Reagan’s early campaigning included attacks on the Trilateral Commission, the Trilateralists have by now been assured that the Reagan administration is in safe hands. The signal was Reagan’s choice of Trilateralist George Bush, who had also become a director of the First International Bank of London and Houston, as Vice-President of the United States, and of Reagan’s post-convention reconciliation visit to Washington and to the home of David Rockefeller.
Reagan’s most influential White House aides, like James A. Baker, had been top campaigners for Bush for President in 1980. The most influential corporate firm in the Reagan administration is the California-based Bechtel Corporation. Bechtel vice president and general counsel Caspar Weinberger, a Trilateralist, is Secretary of Defense, and fellow top Bechtel executive George Shultz, former board member of Borg-Warner Corp., General American Transportation Corp., and Stein, Roe & Farnham Balanced Fund, is Secretary of State.
1984 Election dominated by Trilateralists
It is hard to see how the Trilateralists can lose in the 1984 elections. On the Republican ticket they have George Bush, the heir apparent to Ronald Reagan; and in the Democratic race the two front-runners, Walter Mondale and John Glenn, are both Trilateralists, as is Alan Cranston of California. And, as a long shot, John Anderson of the “National Unity Party” is also a Trilateral member. To paraphrase a famous statement by White House aide Jack Valenti about Lyndon Johnson, the Trilateralists and the financial power elite can sleep well at night regardless of who wins in 1984.
George H.W. Bush betrayed by neocons
The neoconservatives, after having been dominant under Reagan, grew to detest George Bush toward the end of the Bush Administration. And so the tightly organized neocon ranks, extraordinarily well-funded and represented way out of proportion to their numbers in the ranks of journalists and syndicated columnists (a common quip is that there are 33 neocons in this country of whom 32 are syndicated columnists), openly or quietly threw their weight behind Bill Clinton, leading the Backstabbing Faction of the Republican Party.
In fact, it was mainly the neocons, headed by their ”left” faction who are nominal Democrats, such as columnist Ben Wattenberg and the media-hyped Democratic Leadership Council, who persuaded the American public that Bill Clinton was really not a bad Old Liberal but a centrist New Democrat.
Bill Clinton betrayed the neocons
After Bill Clinton assumed power [he] betrayed his neocon supporters. In two ways: first, his policies, driven by his Gorgon spouse, were much Harder Left than the neocons had been led to believe. (Yes, everyone, even neocons, makes mistakes.) But secondly, and more important, Clinton appointed almost none of the neocons to high office. Instead, the multi-cultural, multi-gendered Hard Left got the appointments. And patronage, of course, is the key to politics and to power. Nothing is more dangerous than a neocon scorned. And so, the neocons joined the rest of the American public in revolt against the hated Clintons.
Bill Kristol segued neatly from his Bush-era job as chief of staff (”control”) of Vice-President Quayle, to head of the new, munificently-funded ”Project for the Republican Future.” Kristol is chairman of the tiny board of directors of the Project, which also includes National Review publisher Thomas Rhodes, and, most significantly, Michael S. Joyce, head of the extremely wealthy Bradley Foundation of Milwaukee.
Neocons triumphant in 1994 congressional elections
On November 8, the American people carried through a mighty and glorious revolution against Big Government and its embodiment in King William (Jefferson Blyth IV ”Clinton”). But what we got for our pains is Big Government headed by yet another King William (Kristol). A left-liberal (Socialist) in the guise of a New Democrat (Social Democrat) was replaced by a neoconservative (Social Democrat) in the guise of a conservative.
Officially, of course, our new Maximum Leader is Newt Gingrich, whose seat on the throne was hardly warm before he had maneuvered to grab more House power than any Speaker since the notorious Joe Cannon. Newt is a neoconservative (Social Democrat, wacko techno-futurist division), in the guise of a fiery revolutionary quasi-libertarian. In actuality, however, we are now being ruled by a duumvirate, by two kings, a two-headed monster: King Newt and King Kristol. Newt is the nominal chief, the outside front man who deals with the media and the public; William is the shadowy inside man, the ”theoretician” who sets the public policy agenda and cracks the whip over the ”intellectuals,” policy wonks, and strategists of the Republican Party.
There are advantages and disadvantages to each role, and who plays what is a function of many factors, including personal temperament. Gingrich, as the politician who gets elected, clearly loves the open exercise of power. Kristol, as the ”intellectual” in this division of labor, is better suited for the inside handing down of the policy line to pundits, think-tankers, and the battery of neocon syndicated columnists.
One advantage to the intellectual slot is that the front man-politician gets the glory but also takes all the heat. Gingrich has already been subject to a lot of media ”scrutiny” (the current euphemism for hostile profiles and articles) mainly by hard leftists outside the ”mainstream” left center-right center neocon-social democrat spectrum. But Bill Kristol has gotten no scrutiny whatsoever, and to my knowledge has never been subjected to this process. King William has become a king beyond criticism for one reason: because the general public has no idea of Kristol’s enormous new power in tandem with Gingrich.
Neocons ordered the Republicans to pass Gatt-WTO
No sooner had William set up shop at the Project in Washington, than he began to issue ukases and edicts to his mailing list of God knows how many tens (hundreds?) of thousands, which includes every Republican, conservative, or libertarian leader or institution of any prominence. Strange to relate, his orders to the Republican/Official Con/Official Libertarian troops always seem to be obeyed. When the Clinton health plan took shape, King William issued a decree to the Republicans to close ranks and – sorta – oppose it. Sure enough, they did. Fortunately, the Clintonians stuck stubbornly to their Hillary-Ira Magaziner Hard Left health plan, so that Congress wound up passing nothing, nothing being a whale of a lot better than Kristol’s soft-core alternative. Before the election, moreover, William Kristol managed to ”persuade” Jack Kemp and Bill Bennett to cut their own potential presidential throats by coming out strongly against Proposition 187, thereby going against, not only the overwhelming mass of the public, but also against Governor Pete Wilson and the bulk of the California Republican Party. ..
When the American people voted on November 8, they were not consciously voting to elevate William Kristol to Supreme Power. Indeed, the vast majority of the American public, fortunately for their peace of mind, have never heard of William Kristol. But such are the wonders of the Guided Democracy that the neocons have arranged for us, that is what has happened.
No sooner had the election been won, than Bill Kristol leaped to assume the reins of command. The first order of business of the Betrayers of the Revolution was to rush Gatt-WTO through the lame-duck Democrat Congress. It should occasion no surprise that one of Kristol’s first decrees after the election was to order the Republicans to ”Pass Gatt-Quickly!” Of course, the Republicans, including the ”libertarian revolutionary” Gingrich, hastened to obey.
Neocons push Republicans further into socialism and imperialism
After succeeding in suppressing Bob Dole’s abortive attempt to delay Gatt in order to gain more concessions from Clinton, King K. turned his attention to shaping up the conservative intellectual front. On December 16, he headed a panel of Official Con/Left Libertarian think-tankers on ”What to Kill First: Agencies to Dismantle, Programs to Eliminate, and Regulations to Stop.” Despite previous bold talk by Kristol and the others about ”principle” and rolling back the welfare state, left Libertarian think-tankers, under King William’s watchful guidance, decided to suddenly ”mature,” to ”grow in stature,” to ”accept the responsibilities of power,” as the liberal media always like to dub sellouts to statism. Except for Wall Street’s favorite, capital gains tax cut, no calls came for cuts in taxes, only their ”limitation,” in effect, the stopping or slowing down of tax increases. No appeals rose up for abolishing any agency or program. The merger of neoconservatism and left-libertarianism, of Official Conservatives and Libertarians is now virtually complete.
King K. followed up this panel with a foreign policy panel a few days later. The ”spectrum” on foreign policy was narrowed to one tiny band of ”bipartisan” neocon interventionists and warmongers, including former Defense Department biggie Paul Wolfowitz, and former State Department heavies Robert Kagan and Robert Zoellick, topped off by the sinister syndicated columnist Charles Krauthammer. How’s that for a broad range of ”Republican” opinion?
And yet, in all of the commentary on the election by the conservatives and libertarians, only one person has broken into print with sharp criticisms of King Kristol. As might be expected, that person is our very own paleo point man, my colleague Lew Rockwell. Writing in the Washington Times (”Striking the Pose on Welfare Reform,” Dec. 4) Lew revealed William Kristol’s repeated post-election denunciations of any attempt to carry out a revolution or genuine rollback of the Welfare State.
Modern global economy is a cartel run by Big Banks and Big Business
Ever since the acceleration of statism at the turn of the twentieth century, big businessmen have been using the great powers of State contracts, subsidies and cartelization to carve out privileges for themselves at the expense of the rest of the society. It is not too farfetched to assume that Nelson Rockefeller is guided far more by self-interest than he is by woolly-headed altruism. It is generally admitted even by liberals, for example, that the vast network of government regulatory agencies is being used to cartelize each industry on behalf of the large firms and at the expense of the public.
But to salvage their New Deal world-view, liberals have to console themselves with the thought that these agencies and similar “reforms,” enacted during the Progressive, Wilson, or Rooseveltian periods, were launched in good faith, with the “public weal” grandly in view. The idea and genesis of the agencies and other liberal reforms were therefore “good”; it was only in practice that the agencies somehow slipped into sin and into subservience to private, corporate interests. But what Kolko, Weinstein, Domhoff and other revisionist historians have shown, clearly and thoroughly, is that this is a piece of liberal mythology.
In reality, all of these reforms, on the national and local levels alike, were conceived, written, and lobbied for by these very privileged groups themselves. The work of these historians reveals conclusively that there was no Golden Age of Reform before sin crept in; sin was there from the beginning, from the moment of conception. The liberal reforms of the Progressive-New Deal-Welfare State were designed to create what they did in fact create: a world of centralized statism, of “partnership” between government and industry, a world which subsists in granting subsidies and monopoly privileges to business and other favored groups.
In the long run cartels will fall and liberty will triumph
Our contention here is that history made a great leap, a sea-change, when the classical-liberal revolutions propelled us into the Industrial Revolution of the eighteenth and nineteenth centuries. For in the preindustrial world, the world of the Old Order and the peasant economy, there was no reason why the reign of despotism could not continue indefinitely, for many centuries. The peasants grew the food, and the kings, nobles, and feudal landlords extracted all of the peasants’ surplus above what was necessary to keep them all alive and working. As brutish, exploitative, and dismal as agrarian despotism was, it could survive, for two main reasons: (1) the economy could readily be maintained, even though at subsistence level; and (2) because the masses knew no better, had never experienced a better system, and hence could be induced to keep serving as beasts of burden for their lords.
But the Industrial Revolution was a great leap in history, because it created conditions and expectations which were irreversible. For the first time in the history of the world, the Industrial Revolution created a society where the standard of living of the masses leapt up from subsistence and rose to previously unheard-of heights. The population of the West, previously stagnant, now proliferated to take advantage of the greatly increased opportunities for jobs and the good life.
The clock cannot be turned back to a preindustrial age. Not only would the masses not permit such a drastic reversal of their expectations for a rising standard of living, but return to an agrarian world would mean the starvation and death of the great bulk of the current population. We are stuck with the industrial age, whether we like it or not.
But if that is true, then the cause of liberty is secured. For economic science has shown, as we have partially demonstrated in this book, that only freedom and a free market can run an industrial economy. In short, while a free economy and a free society would be desirable and just in a preindustrial world, in an industrial world it is also a vital necessity. For, as Ludwig von Mises and other economists have shown, in an industrial economy statism simply does not work. Hence, given a universal commitment to an industrial world, it will eventually—and a much sooner “eventually” than the simple emergence of truth—become clear that the world will have to adopt freedom and the free market as the requisite for industry to survive and flourish.
It was this insight that Herbert Spencer and other nineteenth-century libertarians were perceiving in their distinction between the “military” and the “industrial” society, between a society of “status” and a society of “contract.” In the twentieth century, Mises demonstrated (a) that all statist intervention distorts and cripples the market and leads, if not reversed, to socialism; and (b) that socialism is a disaster because it cannot plan an industrial economy for lack of profit-and-loss incentives, and for lack of a genuine price system or property rights in capital, land, and other means of production. In short, as Mises predicted, neither socialism nor the various intermediary forms of statism and interventionism can work. Hence, given a general commitment to an industrial economy, these forms of statism would have to be discarded, and be replaced by freedom and free markets. 396
In the Western world, too, State capitalism is everywhere in crisis. .. And finally, these crises can only be alleviated by getting the government out of the picture. All we need are libertarians to point the way.
Understanding the history of the ruling elite is the key to freedom
It is also important for the State to inculcate in its subjects an aversion to any outcropping of what is now called “a conspiracy theory of history.” For a search for “conspiracies,” as misguided as the results often are, means a search for motives, and an attribution of individual responsibility for the historical misdeeds of ruling elites.
If, however, any tyranny or venality or aggressive war imposed by the State was brought about not by particular State rulers but by mysterious and arcane “social forces,” or by the imperfect state of the world—or if, in some way, everyone was guilty (“We are all murderers,” proclaims a common slogan), then there is no point in anyone’s becoming indignant or rising up against such misdeeds. Furthermore, a discrediting of “conspiracy theories”—or indeed, of anything smacking of “economic determinism”—will make the subjects more likely to believe the “general welfare” reasons that are invariably put forth by the modern State for engaging in any aggressive actions.
Below are listed books and articles from Murray Rothbard that most directly deal with the development of the ruling Anglo-American elite. The most relevant books are listed first. This list is a work in progress.
Wall Street, Banks, and American Foreign Policy. Burlingame, Calif: Center for Libertarian Studies, 1995.
A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005.
What Has Government Done to Our Money? Auburn, Ala.: Ludwig von Mises Institute, 2005.
The Case Against the Fed. Auburn, Ala.: Ludwig von Mises Institute, 1994.
For A New Liberty: The Libertarian Manifesto. New York: Collier Books, 1978.
Murray N. Rothbard in Llewellyn H., Rockwell, Jr., ed., The Irrepressible Rothbard (Auburn, Ala.: Mises Institute, 2000).
An Austrian Perspective on the History of Economic Thought, Vol. I-II: Economic Thought Before Adam Smith. Brookfield, Vt.: Edward Elgar, 1995.
Conceived in Liberty, Vol. I-IV: A New Land, A New People, The American Colonies in the
Seventeenth Century. New Rochelle, N.Y.: Arlington House Publishers, 1975-1979.
America’s Great Depression. Auburn, Ala.: Ludwig von Mises Institute, 2000.
The Panic of 1819: Reactions and Policies. Auburn, Ala.: Ludwig von Mises Institute, 2007.
America’s Two Just Wars: 1775 and 1861. John V. Denson, ed. The Costs of War: America’s Pyrrhic Victories , 2nd edition. New Brunswick, N.J.: Transactions Publishers, 1998, p. 127.
World War I as Fulfillment: Power and the Intellectuals. The Costs of War: America’s Pyrrhic Victories. John V. Denson, ed. New Brunswick, N.J.: Transaction Publishers, 1999.
The Federal Reserve as a Cartelization Device: The Early Years, 1913–1930. Barry Siegel, ed., Money in Crisis. San Francisco, Calif.: Pacific Institute for Public Policy Research, and Cambridge, Mass.: Ballinger Publishing, 1984.
Whiskey Rebellion. The Free Market. September 1994.
War Collectivism in World War I. Ronald Radosh and Rothbard, eds., A New History of Leviathan. New York: E.P. Dutton, 1972, pp. 66–110.
Confessions of a Right-Wing Liberal. Ramparts, VI, 4, June 15, 1968. https://mises.org/library/confessions-right-wing-liberal
The End of Economic Freedom in America. Libertarian Forum. Vol III, NO. 8, September, 1971.
Another Lone Nut? The Libertarian Forum. Vol VI, NO. 6-7, June-July, 1972.
Assassinations Revisionism? The Libertarian Forum. Volume XI, NO. 2, March-April, 1978.
The Iran Threat. The Libertarian Forum. Volume XII, NO.5, September-October, 1979.
Requiem for the Old Right. Inquiry (October 27, 1980), pp. 24–27. https://mises.org/library/requiem-old-right
1 Murray N. Rothbard. An Austrian Perspective on the History of Economic Thought, vol. 1: Economic Thought Before Adam Smith. Brookfield, Vt.: Edward Elgar, 1995. P. 313.
2 Ibid. 313.
3 Ibid. 316.
4 Ibid. 323.
5 Murray N. Rothbard. For A New Liberty: The Libertarian Manifesto. New York: Collier Books, 1978. P. 2-3.
6 Murray N. Rothbard. Wall Street, Banks, and American Foreign Policy. Burlingame, Calif: Center for Libertarian Studies, 1995. P. 1.
7 Murray N. Rothbard. The Case Against the Fed. Auburn, Ala.: Ludwig von Mises Institute, 1994. p. 54
8 Murray N. Rothbard. The Case Against the Fed. Auburn, Ala.: Ludwig von Mises Institute, 1994. p. 44.
9 Murray N. Rothbard. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005. P. 47-48.
10 Ibid. P. 48.
11 Ibid. P. 51. 12 Ibid. P. 52-53.
13 Ibid. P. 54.
14 Murray N. Rothbard. The Case Against the Fed. Auburn, Ala.: Ludwig von Mises Institute, 1994. P. 59.
15 Ibid. P. 60.
16 Murray N. Rothbard. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005. P. 56-57.
17 Ibid. P. 58.
18 Murray N. Rothbard. “America’s Two Just Wars: 1775 and 1861.” John V. Denson, ed. The Costs of War: America’s Pyrrhic Victories , 2nd edition. New Brunswick, N.J.: Transactions Publishers, 1998, p. 127.
19 Ibid. 125.
20 Ibid. 126.
21 Murray N. Rothbard. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005. P. 60.
22 Ibid. 62. 23 Ibid. 63.
24 Murray N. Rothbard. For A New Liberty. The Libertarian Manifesto. P. 6.
25 Ibid. p. 8.
26 Murray N. Rothbard. “America’s Two Just Wars: 1775 and 1861.” John V. Denson, ed. The Costs of War: America’s Pyrrhic Victories , 2nd edition. New Brunswick, N.J.: Transactions Publishers, 1998, p. 126.
27 Murray N. Rothbard. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005. P. 65
28 Murray N. Rothbard. Whiskey Rebellion. The Free Market. September 1994. https://www.lewrockwell.com/2013/03/murray-n-rothbard/the-people-won-this-famous-tax-revolt/
29 Murray N. Rothbard. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005. P. 68
30 Ibid. 70.
31 Ibid. P. 71.
32 Ibid. P. 72.
33 Ibid. P. 73.
34 Ibid. P. 83.
35 Ibid. 84.
36 Ibid. 88-89.
37 Murray N. Rothbard. For A New Liberty: The Libertarian Manifesto. New York: Collier Books, 1978. P. 9.
38 Ibid. 90.
39 Ibid. 91.
40 Ibid. 92.
41 Murray N. Rothbard. “World War I as Fulfillment: Power and the Intellectuals.” John V. Denson, ed., The Costs of War: America’s Pyrrhic Victories. New Brunswick, N.J.: Transaction Publishers, 1997. Second expanded edition, 1999. P. 127.
42 Murray N. Rothbard. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005. P. 93
43 Ibid. 93.
44 Ibid. 92.
45 Ibid. 104.
46 Ibid. P. 112.
47 Ibid. P. 112-113.
48 Murray N. Rothbard. The Case Against the Fed. Auburn, Ala.: Ludwig von Mises Institute, 1994. P. 29-30.
49 Ibid. P. 33.
50 Ibid. P. 38.
51 Ibid. P. 42.
52 Ibid. P. 44.
53 Murray N. Rothbard. For A New Liberty: The Libertarian Manifesto. New York: Collier Books, 1978. p. 9-10.
54 Murray N. Rothbard. “America’s Two Just Wars: 1775 and 1861.” John V. Denson, ed. The Costs of War: America’s Pyrrhic Victories , 2nd edition. New Brunswick, N.J.: Transactions Publishers, 1998, pp. 128-129. 55 Ibid. p. 130.
56 Ibid. 132.
57 Ibid. 130.
58 Ibid. 126.
59 Ibid. 131.
60 Ibid. 131-132.
61 Murray N. Rothbard. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005. P. 129.
62 Murray N. Rothbard. “America’s Two Just Wars: 1775 and 1861.” John V. Denson, ed. The Costs of War: America’s Pyrrhic Victories , 2nd edition. New Brunswick, N.J.: Transactions Publishers, 1998, p. 133.
63 Murray N. Rothbard. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005. P. 131.
64 Ibid. 131.
65 Ibid. 123.
66 Murray N. Rothbard. Wall Street, Banks, and American Foreign Policy. Burlingame, Calif: Center for Libertarian Studies, 1995. P. 2.
67 Ibid. p. 2.
68 Llewellyn H., Rockwell, Jr., ed., The Irrepressible Rothbard. Auburn, Ala.: Mises Institute, 2000. P. 264.
69 Murray N. Rothbard. Wall Street, Banks, and American Foreign Policy. Burlingame, Calif: Center for Libertarian Studies, 1995. P. 2.
70 Murray N. Rothbard. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005. P. 156.
71 Murray N. Rothbard. Wall Street, Banks, and American Foreign Policy. Burlingame, Calif: Center for Libertarian Studies, 1995. P. 2.
72 Murray N. Rothbard. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005. P. 156-157.
73 Ibid. 158.
74 Ibid. 110.
75 Ibid. 154.
76 Llewellyn H., Rockwell, Jr., ed., The Irrepressible Rothbard. Auburn, Ala.: Mises Institute, 2000. P. 264.
77 Murray N. Rothbard. An Austrian Perspective on the History of Economic Thought, vol. 2: Classical Economics. Brookfield, Vt.: Edward Elgar, 1995. Pp. 453-457.
78 Murray N. Rothbard. For A New Liberty: The Libertarian Manifesto. New York: Collier Books, 1978. P. 18.
79 Ibid. 12.
80 Ibid. p. 13.
81 Ibid. p. 13-14.
82 Murray N. Rothbard. Wall Street, Banks, and American Foreign Policy. Burlingame, Calif: Center for Libertarian Studies, 1995. P. 2.
83 Murray N. Rothbard. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005. P. 193.
84 Murray N. Rothbard. The Case Against the Fed. Auburn, Ala.: Ludwig von Mises Institute, 1994. P. 93.
85 Murray N. Rothbard. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005. P. 369-370.
86 Murray N. Rothbard. Wall Street, Banks, and American Foreign Policy. Burlingame, Calif: Center for Libertarian Studies, 1995. P. 2.
87 Ibid. P. 29.
88 Murray N. Rothbard. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005. P. 188.
89 Murray N. Rothbard. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005. P. 209-210.
90 Murray N. Rothbard. Wall Street, Banks, and American Foreign Policy. Burlingame, Calif: Center for Libertarian Studies, 1995. P. 3.
91 Murray N. Rothbard. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005. P. 4.
92 Murray N. Rothbard. Wall Street, Banks, and American Foreign Policy. Burlingame, Calif: Center for Libertarian Studies, 1995. P. 4-5.
93 Ibid. p. 7.
94 Ibid. p. 9.
95 Murray N. Rothbard. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005. P. 219-220.
96 Murray N. Rothbard. “World War I as Fulfillment: Power and the Intellectuals.” in The Costs of War: America’s Pyrrhic Victories, by John V. Denson, ed. New Brunswick, N.J.: Transaction Publishers, 1999. P. 278
97 Ibid. p. 279.
98 Ibid. P. 286.
99 Murray N. Rothbard. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005. P. 192.
100 Murray N. Rothbard. The Case Against the Fed. Auburn, Ala.: Ludwig von Mises Institute, 1994. P. 88.
101 Ibid. p. 89.
102 Ibid. p. 252.
103 Ibid. p. 252.
104 Ibid. p. 254.
105 Ibid. p. 258.
106 Murray N. Rothbard. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005. P. 10.
107 Ibid. 189.
108 Murray N. Rothbard. Wall Street, Banks, and American Foreign Policy. Burlingame, Calif: Center for Libertarian Studies, 1995. P. 10.
109 Ibid. pp. 10-11.
110 Ibid. p. 10.
111 Ibid. p. 13.
112 Murray N. Rothbard in Llewellyn H., Rockwell, Jr., ed., The Irrepressible Rothbard (Auburn, Ala.: Mises Institute, 2000). P. 265.
113 Murray N. Rothbard. A History of Money and Banking in the United States: The Colonial Era to World War II. Auburn, Ala.: Ludwig von Mises Institute, 2005. P. 192.
114 Murray N. Rothbard. Wall Street, Banks, and American Foreign Policy. Burlingame, Calif: Center for Libertarian Studies, 1995. P. 13.
115 Ibid. 14.
116 Ibid. 14.
117 Ibid. 14.
118 Ibid. 14.
119 Ibid. 14-15.
120 Ibid. 17. [Rothbard gives a list of Morgan men.]
Footnotes to be continued.