Post by Quil on Jun 6, 2016 6:59:43 GMT -8
“Why?”
Hark the entreaties of the broken
Souls who have borne usury’s curse,
Debt-money’s train of death and woes.
The huddled betimes scarce awoken
Soon to find wit and will aburst,
The hour, impending, no one knows.
The meek get ready to inherit the earth,
The earth prepares to receive the sky,
The youth anon will discover a future,
The wise, in love, smile – and now you know “Why?”
- Richard Kotlarz
PROLOGUE:
This document constitutes one whole thought. Consequently it must be read to its conclusion to comprehend its meaning. It started out as a list of talking points for a meeting of the local peace coalition with our congressman. The conclave never came off, but the topic swelled with the writing, so I persisted to see where it would go. The target audience was not so much the legislator, but rather my peace-coalition compatriots. I had found myself moving away from the message of the movement in the sense that I was increasingly put off by its negative tenor. The answer to the Iraq War, so it seemed to be saying, was to find and punish those who were to blame. Appropriate accountability notwithstanding, I saw no solution in finger-pointing polemics. I needed for my own inner integrity to write out a strong exoteric critique of the situation from a monetary perspective, but then resolve it in a way that encouraged the reader of whatever stripe to contemplate his or her own role in the matter in a way that came to grips with their own responsibility.
That said, this is a vital story of sweeping scope; a veritable allegory of the gods, if you will. It is appropriate, then, that any tendency for arcane tedium has been avoided, and a bracing tenor of language in the manner of an epic tale embraced. To some readers it may seem at places strident or partisan, but it arrives full-circle, I believe, to a more self-reflective view in the fullness of the narrative. A previous version of this treatise has found a resonance across a spectrum of readers that is deeper and wider than I could possibly have anticipated. What is more, the effort has developed into a personal quest into matters economic in the broadest, most constructive, and (hopefully) visionary sense.
The original version of this document was composed in the autumn of 2003, and so some of the references will seem dated. We as a nation are, supposedly, in the process of “pulling out” now, but leaving military bases, civilian contractors and governmental advisors behind. Revisions have been made where appropriate to maintain the conceptual integrity of the piece, in spite of the somewhat disjointed time references. The major change from the original is the significantly expanded overview of world and U.S. history as it is woven around the thread of money. This comprises a bit over half the treatise, but is absolutely necessary to provide a background for the discussion. Indeed, the fact that it is missing from the common knowledge of our culture literally cripples our ability to discover who we are as a people, how we became that way, and any serious path to the future.
I have endeavored to de-emphasize the political aspects of the war.
Charles Dickens opened his classic novel A Tale of Two Cities with perhaps the most famous of all literary curtain risers (after “In the beginning . . .” that is); i.e. “It was the best of times, it was the worst of times . . .” He was referring specifically to the nascent-industrial England of the late 18th century, but the same can be said of the present epoch. Indeed, the contemporary global civilization has stretched this dichotomy to the most extreme polarity possible.
It can be said that a large portion of humankind at present lives in a cornucopia of unfolding progress, possibilities and richness that fairly beggars the imagination. In the historically-brief last century or two it has plumbed the depths, spanned the heavens, opened the floodgates of material abundance, developed vast technological capabilities, shrunk the world into a global village, exploded the boundaries of artistic expression, enacted sweeping social and political reforms, unlocked the atom, mastered incredible techniques for healing, and approached the mysteries of the creation of life itself. Yet, for all of that, it may be fairly asked if we are not approaching the brink of the incomprehensible suicide of civilization, or even the destruction of earth itself, through any number of possible avenues; be it the spontaneous unraveling of the ecosystem; the overwhelming of the last barriers to infectious pandemics; the revitalization of class, ethnic, racial or religious intolerance; the grinding realities of agricultural, industrial and service labor; a decline of culture; snowballing monetary indebtedness; the ever more maddening pace and dehumanization of modern life; the exhaustion of material resources; the collateral consequences of an imperialist New-World-Order hegemony; nuclear holocaust; or the wrath of an angry creator.
What are we to think of this impossibly contradictory state of affairs? The juxtaposed “best” and “worst” of times is in actuality not a contradiction, but rather an expression of the poles of the overarching paradox. What, then, is the paradox? This may be expressed many ways, but in an outward sense it surely is reflected in the reality that humankind, in this time of vastly expanded financial activity, has not mastered money. In what life does money not exist as the most polarized of love/hate, embraced/condemned, or sought/feared elements? It is indeed the essential riddle of our time.
The fact that the subject is money dictates that the discipline of banking be brought most particularly under the green shade of scrutiny. The problem, though, is by no means limited to those involved overtly in the banking or financial professions. In this modern era, we are all economic creatures, and do in fact mould the form of the economic life with our thoughts, feelings and actions. If the economic cake were sliced along a different cross section, any number of other walks or categories of life could be held up for similar treatment.
If there is a “bottom line” to this story it is that, while different “classes” (a divisive word, to be sure) of society may indeed have their respective economic issues, there is ultimately no us-vs.-them factor in their resolution. This premise is held forth adamantly in the fullness of the following narrative. As fellow sojourners in the earth we are all in this together; both as agents for the problem, and as hopes for the cure. If there is any distinction to be said for people of finance it is that theirs is a special calling in an age when the full blossoming of the economic life is coming providentially to the fore.
In the course of performing any economic activity within the present system I suspect that we all experience on some level an existential split, and stand in our respective ways in the need of liberation and healing. In this time of great historical reckoning and economic unfoldment, the chasm occasioned by matters of money, both between people and within them, can no longer be accommodated. The space for a free dialogue between the mavens of money and body of the social order must be opened up for a bracing, but empathetic discourse. What is respectfully offered below is intended to plant the seed for just that. Clearly, the truth cannot be spared, but in our quest there is no place for attitudes of condescension or recrimination.
Thank you for your thoughtful consideration.
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SHOCK & AWE:
Beginning on March 20, 2003, the American public was subjected to an unprecedented period of Shock-&-Awe war-media immersion. It is time to slow down and examine what has transpired, how it fits into a historical perspective, what it bodes for the future, and what it tells us about ourselves. In my view, a genuine comprehension of the overarching picture of what this war and subsequent occupation represent, is essentially missing. In crucial respects, I hear nary a relevant word on the subject. I propose in this treatise to put on hold the familiar political-speak, posit a new historic/economic/social paradigm from which to reason, and then reconstruct the dialog from a completely fresh point of perspective. This discussion will venture into unfamiliar territory, so it will require of the reader some patience and a suspension of judgment. There is no cultural rapport within which this matter can be properly discussed at present. A new worldview from which to reason will be delineated, and the dialog will be reconstituted in a concise manner in short order. We will then come full-circle back to the subject of the Iraq war, but this time with a new understanding. At least that is the idea. Reiteration of points of the familiar debate will be minimized. Let us begin.
OUT OF THE GARDEN:
In ancient times, mankind awoke to a wondrous cosmos that came into being without the benefit “Money”. According to the Judeo/Christian/Islamic creation story mankind was once united with God in a veritable paradise, the Garden of Eden, where he existed in a state of innocence. He was, however, led astray by a clever spirit, and began to have his own ideas about how things ought to be. A state of estrangement from his Creator, and exclusion from the primordial paradise where all his needs were naturally provided, followed.
Now to meet his needs, mankind experienced it as necessary to establish artificial modes of exchange for energy and materials that occurred outside the natural proximities and flows of the primordial paradise. The most rudimentary form of this was barter, the direct exchange of goods. Eventually barter proved to be too cumbersome, so he came up with the idea to use portable and valuable commodities (precious metals in particular) that could stand in for physical wealth, thereby allowing for greater flexibility of trade.
Finally mankind realized that he could trade in a medium created from his unique powers for abstract numerical thinking. We call it “money.” In a material sense it was a stroke of genius. Ideally it could expedite the free exchange of all things in all places. It even became possible to trade goods of any size or description from opposite sides of the world with no requirement for physical transport whatsoever; only the reassignment of abstract credits in virtual space.
It should be noted that this transition from barter, to precious metals, to abstract monetary credits was not a strictly sequential one. Barter is still practiced, and money goes back to ancient times. It does, however, represent an evolution of the exchange idea, and a progression of the preponderance and sophistication of the manner in which it is practiced.
Each one of these modes of exchange had a shadow manifestation that presented a unique potential for trouble and abuse. To bypass barter, one could forcibly take items from a potential exchange partner. History is rife with tales of conquest and plunder in which the more powerful did just that. The adoption of valuable commodity mediums of exchange introduced the possibility of controlling the physical reality of the trade through manipulation of the medium, instead of overt possession of the goods. It has a legitimate place in history as a transition strategy between physical barter and purely abstract credit transfers, but the mesmerizing allure of precious metals tends to bring out the dark side of human nature. Gold, for example, has a long tradition of being stolen, controlled and hoarded with results that were often deleterious in the extreme. Its process of extraction is associated with a litany of inhumanity. It has provoked whole societies of otherwise decent and principled folk to overrun their more aboriginal brethren in genocidal frenzy to appropriate the shiny treasure they were haplessly sitting upon.
The potential for mischief occasioned by money exceeds that of the other modes of exchange. Because it is amenable to manipulation via abstract numbers, the creation and control of money requires virtually no physical possessions or resources. All that is needed is the de-facto privilege or authority to effect its creation out of thin air, and control the matrix of rules under which it is traded. Yet it holds the potential to dominate the physical economy in its entirety, and the whole range of social, environmental, technological, intellectual, political, and other factors implicit in that.
The power of money creation is an indispensable prerequisite of “sovereignty.” Whoever has the money creation power is sovereign, and the rest is for show. This has long been recognized by rulers of every description. This is not primarily about who spends it, who is wealthy, or who makes the campaign contributions. It is about who has the “sovereign” privilege or authority to create it. All other issues are derivative.
I would assert that the story of whoever exercises the money creation power, the mode of its implementation, and the means of its use or abuse is one of the central threads of history, and all other aspects are woven about it. No army has ever been formidable enough to deploy, nor any king sufficiently divine to reign without its consent and sponsorship. That this includes the present American and British governments, and the military force in the Middle East goes without saying, yet I dare say there is virtually not a word in the popular debate which shows an understanding of the root and why of this, even from the anti-war side. The existence of money is treated as an a priori assumption, and our awareness joins in somewhere in the course of its flow. Much like the wind, our lives are immersed in and buffeted by it, but we know not from whence it comes, nor whither it goes. To be sure, there is a lot of talk about money, but it all falls within the notions of popular debate concerning taxing and spending, military funding, campaign financing, corporate greed, and a host of other ancillary issues, which are not properly understandable without taking into account the role of the money creator.
The non-material nature of money is at once its blessing, and its curse. Ideally it has the potential to be eminently benign and beneficial. The downside is that its abuse can be accomplished in the abstract realm of number. This means that it does not have to physically conquer anything. Indeed, it can control any would-be conqueror. To compound the problem, because its essence is not materially visible, this abuse can be hidden within a multitude of obfuscations, manipulations and mystifications. Taken to its logical extreme, a culture can be so brainwashed that any real comprehension of the history or machinations of the monetary system can be virtually expunged from the common awareness, even as it lays upon the populace a yoke which is crushing, yet so woven into the warp and woof of our individual and collective lives that we cannot detect its presence. When that is accomplished, an entire world of civilized people can be marched off into the adventurism of a mounting world conflagration for reasons that it does not fully comprehend. It is true, there will be good people by the millions who will rise up in protest, but they will be so befuddled about what is actually driving events, that in the end they will be minimally effectual at best; co-opted and used at worst. That is precisely what is happening at present.
HISTORICAL ORIGINS OF THE MONEY GAME:
There is a recurring historical cycle rooted in a perverse practice of money that can be illustrated by going back to ancient Iraq, otherwise known as Babylon. The priests of Baal controlled not only the religious observances, but also the monetary system. They would readily issue enough credit to the farmers in the spring to plant their crops, but they would also insure that come harvest time, there would not be enough money in circulation in the aggregate to retire all the debt incurred during the planting season. Some farmers would do better than others, of course, but it was a mathematical certainty that a portion of them would have to come back hat-in-hand to the priests and ask for a loan to tide them over. They were happy to oblige. The next season the farmers were working not only to cover their costs, but also to pay the “debt” to the priests. This created a compounding debt spiral in which those who were productive eventually lost everything and became indentured servants to the priests who produced nothing, and their civilization collapsed.
This pattern is not exceptional. As stated in the Acres, U.S.A. newspaper, a major alternative economics forum:
“This business of borrowing money into circulation, then withholding more money creation to make payment and debt service impossible, haunted Persia, cursed Greece and Rome, annihilated the defense of Carthage, and presided over death and wars between Deuteronomy and the eve of the 1948 presidential election.”
This process continues on a vastly greater scale today, and it drives virtually all issues, whether they are nominally economic or not.
Between approximately 1500 and 1000 BC the monetary practice of the Mediterranean societies evolved from a cattle-based to a gold-by-weight standard. This was facilitated by that fact that there were great temple cults that possessed gold hoards large enough to control the value of yellow metal. They, in turn, became effectively the bankers of the era (which explains why banks and bankers’ houses have traditionally imitated the pillared architectural style of ancient temples). With the secular control of money to augment their divinely appointed status as the representatives of the gods, these temples wielded a pervasive influence over all facets of society.
“NOMISMA” IN ANCIENT GREECE:
Money in ancient Greece was called “nomisma”, because it attained its status via the agency of the “law,” for which the Greek work is ”nomos.” This was affirmed by Aristotle when he stated, “. . . and this is why it has the name nomisma – because it exists not by nature, but by law (nomos) . . .” Plato demonstrated an acute awareness of the dangers of precious-metal money, and specified a nomisma currency for his mythical Republic.
In the Greek city-states, the power to coin money was in the hands of a political authority that was linked to the temple cult of a favored god. These cults, in turn, often operated internationally as virtual bankers. A division began to emerge because the civil authority (which was tied to the residents of one particular territory) found that it often had different interests that the temple cults (who were more internationally oriented in their perspective). As a result of this struggle for the control of money, resulting in extreme cases in military conflict, an early separation of religion and the state emerged.
The first documented attempt to establish a nomisma money system is related by Greek historian Plutarch in his classic work of parallel biographies, Parallel Lives. In the 8th century BC, the Spartan ruler Lycurgus instituted a constitution, land reform, and other measures aimed at cleaning up a corrupted society. A pivotal part of this campaign was the introduction of a new monetary system that banned the use of gold and silver for domestic currency, and mandated instead the use of iron discs. Moreover, these discs were rendered too brittle for other purposes by dipping them into vinegar while they were hot. Any “intrinsic value” (commodity value of the metal itself) was thereby destroyed, and they became money by “fiat” (a decree of the sovereign which enters into law). This monetary regime worked well, as Sparta emerged as a Hellenic power for over three centuries. Unwisely, it abandoned its iron money around 415 BC after it became entangled in foreign conquests that captured large quantities of gold and silver, but not before Sparta’s salutary experience with money was imitated by other city-states.
By about 600 BC, Athens had slipped into a deep economic crisis due to the usury (“interest” charge) attached to coinage. The class of free small farmers was vanishing, as land ownership become concentrated in the hands of an oligarchy. In many cases, farmers were bound into slavery to satisfy their debts. According to George M. Calhoun, author of Business Life of Ancient Athens:
“Before the introduction of coined money the peasant farmer borrowed commodities and repaid the loan in kind, and . . .was probably able to meet the obligation without great difficulty; but after the introduction of coined money the situation became decidedly more difficult . . . he must take a loan of money (to) purchase his necessary supplies at a time when money was cheap and commodities dear. When a year of plenty came and he undertook to repay the loan (in money), commodities were cheap and money was dear.”
This harvest-time dilemma of having on hand one year’s supply of crop, but essentially only one day’s market in which to sell it to pay his debt, has always been the plight of the farmer, and explains in large measure why farmers, even to the present day, have had a difficult time achieving enough influence in the marketplace to get a fair price for their product.
In a campaign of reforms that revitalized Athens, the ruler Solon cancelled existing debt contracts, and returned land that had been seized. He banned the putting up of personal slavery as security for debts, and bought back and returned to Athens farmers who had been sold into slavery abroad by their creditors to satisfy their debts. To establish a reliable basis for farm income, Solon decreed a floor price for each agricultural product. Coinage was adopted in which the metal in the coin was of less value than the stamp of the sovereign it was impressed with, making it essentially fiat currency established in the law. With Solon’s reforms as a foundation, Athens rose to its zenith as a civilization.
The historic record indicates that the rise of classical Greek culture was in significant part tied to its adoption of sound money practices that eschewed both usury and precious metals as a basis for the issuance of currency. In the end, these salutary measures became subsumed by outside forces, and the preeminence of the Greek culture faded, but not before a great imitator arose to the west.
ROME:
About the time Lycurgus was introducing his brittle iron currency to Sparta, a village in the Italian peninsula adopted the use of a base-metal alloy, bronze (copper, with minor parts of tin and lead), for coinage used in domestic trade. The decision was made by Numa (716-672 BC), Rome’s second king, who considered himself a descendent of the Spartans. In fact, in Parallel Lives, Plutarch described Lycurgus and Numa as parallels. He inaugurated “Pontifex Maximus,” a religious institution that played a prominent role throughout Roman history, and continues to this day in the Catholic Church. After Numi (and he after the Greek nomisma), they called their money “nummi” or “numisma.”
Rome was not short of precious metals it could turn into coins. The adoption of a base metal was a conscious move to isolate the fledgling society from the corrupting influence of the gold and silver hoards of the merchants and the temple cults to the east. This effectively set Rome on a path whereby it was able to develop independently according its own resources, virtues and values. The fatefulness of this move prompted Henry Noel Humphries, author of Ancient Coins and Metals, to write, “The Roman adoption of a national and exclusive coinage produced a revolution in the monetary system of all civilized nations.”
Rome became a republic in 509 BC. It dispatched a delegation to Athens to study the reforms of Solon in 454 BC; some 145 years after they were enacted. The fruit of their investigation found their way into a Roman law of that year which standardized values for coinage, and linked them to commodities in a way that could be readily understood. Upon the foundation of a stable monetary system defined in the law, a legal order emerged which was of such quality that it is still consulted today. It embodied the greatest separation of religion and state that the world had yet seen. As told by Alexander del Mar, the preeminent monetary historian of the 19th century, it was the era of republican Rome’s numerary system:
“. . . during which all that was admirable of Roman civilization saw its origin, its growth and its maturity. When the system fell (i.e. was changed to being gold-based), Rome lost its liberties. The state was to grow more powerful and dreaded, but that state and its people were no longer one.”
It took until 266 BC for Rome to consolidate the Italian peninsula into one commonwealth, just in time to square off against its arch-enemy Carthage in two great conflicts known as the Punic Wars (264-241 BC and 218-201 BC). Carthage was a Phoenician society on the North African coast that acquired its great wealth through trade in goods and precious metals. The epic conflict was fought, not only between armies, but also monetary systems. The Carthagenian armies (led by Hannibal in the second contest) roamed and ravaged the Roman countryside. Rome fought back by demonetizing its nomisma currency in the areas controlled by the invaders in an attempt to cripple the local economy which the enemy was obliged to depend upon in its foraging for supplies. Carthage countered by importing its own precious-metal coinage.
The tactic had momentous consequences. Rome eventually prevailed in the military contest, but the flooding of much of its territory with the foreign precious-metal currency over a prolonged period of time fundamentally altered the culture, and planted the seed for its ultimate destruction. The pre-war republican ideal of self-sacrificing egalitarianism and service to the society was replaced by the “ethics” of avarice. The society became divided between an emerging plutocracy that had become addicted to its precious metal-hoards, and the hard-pressed masses of working people who did not posses such. The farmers were increasingly unable to hold onto their homesteads as they were conscripted into military service in the Legions, and dispatched to remote realms in pursuit of ever greater quantities of metallic treasure, plus captured slaves who would fill the workforce on expanding plantation estates called “latifundia,” which in turn displaced them from the land, thereby completing the circle of disenfranchisement. With the yeomanry and moral fiber of the society lost, a long decline was initiated which eventually consumed the strength of the republic in the debaucheries of empire.
The consequences of the new gold coinage caused the Roman historian Pliny the Elder (23-79 AD) to rue:
“The next crime committed against the welfare of mankind, was on the part of him who was the first to coin a Denarius of gold. . . . would that gold could have been banished forever from the Earth, accursed by universal report, reviled by the reproaches of all the best men, and looked upon as discovered only for the ruin of mankind.”
The breakdown of the Roman monetary system marked the end of the lawful republic. The society was ripe for dictatorship. At age 36, Julius Caesar (100-44 BC) was elected to the position of Pontifex Maximus. After having himself deified at the Temple of Jupiter Amon in Libya, he returned to Rome, not as a mere dictator, but as a god. The control of money was formally vested in the office of Pontifex Maximus, and the separation of religion and state in Rome was thus ended. The Empire officially converted to a gold standard in 45 BC, and the gold/silver ratio was decreed to be 12-to-1 (i.e. it took 12 oz. of silver to equal the value of 1 oz. of gold), a legal formula that remained in force until the fall of Constantinople in 1204 AD.
As soon as gold had been established as the basis for Roman money, Rome’s money supply began draining away to the orient. This was driven by a number of factors, including the importation of luxury goods, religious tithes sent to Jerusalem, and the usury charges on loans from Middle East lenders.
The most relentless force behind the phenomenon, however, was a “secret” that was protected from public scrutiny. Julius Caesar had fixed the gold/silver ratio for the empire by decree at 12-to-1, but in the orient, for reasons not wholly understood, it had long been pegged at about 6 or 7-to-1. This meant that a trader from one market could buy goods with whatever metal currency was cheaper, and sell them in the other in exchange for coinage that was worth roughly twice as much. This was in addition to his normal profit. For trade that met in the middle, the ample spread could be split. Brokers in the Middle East could pocket huge fortunes by exploiting the differential. The net effect for Western Europe was to see its supply of silver coinage disappear to the East, while gold was hoarded, causing a chronically-worsening shortage of currency. The problem could have been relieved by a return to a base-metal coinage established in the law, but this option would have ended the lucrative scheme. The differential between the east/west ratios was in effect from the time of Alexander the Great to the founding of the Bank of England.
The resulting shortage of coinage was relieved periodically by recapturing lost metal in military forays to the east, but still the draining of currency mounted. Finally, the resultant migration of financial power to the east was a major factor in causing the empire to split, with the Emperor Constantine establishing a new capital at Byzantium in 331 AD. From there he supplanted the diminished Pontifex Maximus by creating a new religious/monetary institution, the “Basileus.” This new center of power fiercely guarded its prerogative to control the minting of new money, even against Rome, for the next almost 900 years.
Much has been written about the supposed “fall of the Roman Empire” to barbarian hordes. Some modern historians, however, suggest the barbarians were actually not very numerous, and the physical assets of the empire remained intact right to the end. Could it be that the barbarians were merely the proverbial straw that broke the camel’s back of an empire that did not fall from without, but rotted from within after a long decline initiated by the abandonment of lawful fiat money by Republican Rome? Given the parallels to present situation of the United States (to be delineated below), this is a relevant topic for our time.
THE DARK AGES:
With the establishment of the religious and monetary authority in Byzantium, the Western Empire became a backwater. The system of vassal states set up under Roman governance degenerated into feudalism. As the money supply fled, commerce diminished, until even the form of taxes collected regressed from being in money, to “in kind” (i.e.-accepting for payment firewood, vegetables, chickens, and the like). Moreover, the monopolistic control of the right to strike coinage was enforced by military power to insure that the Basileus had no rivals. Western Europe descended into the “Dark Ages”, as culture fled with the wealth eastward to the Muslim world.
Charlemagne (742-814 AD) had himself crowned king of the Western Empire by Pope Leo on Christmas Day 800 AD. He attempted to revive the West through force of military conquest, and by re-starting and intensifying the mining of precious-metals with a large workforce of captured slave labor. He eventually stopped his own minting of gold coins, likely as a concession to the religious and monetary supremacy of the Basileus, and his new silver coinage drained away to the East as before. The West was left little better off monetarily for all his brutal efforts.
THE CRUSADES:
The West found itself in the position of being religiously eclipsed and economically prostrate. Its only hope for redemption seemed to lay with military incursion into the East, and so the impulse for the Crusades was born. Naturally, the enterprise was billed as a religious war against the infidel (a Christian “Jihad,” if you will), and there was without doubt much genuine religious fervor associated with the cause. Notwithstanding, it behooves us to not lose sight of the reality that the long process that eventually induced the migration of political, religious and economic power to the East had, arguably, a monetary origin. It all started when republican Rome succumbed to the seductive sway of gold.
The Crusades were a complex historical phenomenon, but they embodied one supremely pivotal moment that redirected the course of world history. The assembled army of the 4th Crusade embarked from Venice in June 1202. By the time the force reached its wintering-over quarters on the Adriatic, suspicions concerning the expedition’s true destination broke out into heated disputes. It was only then that the knights were informed that the planned objective for attack was not the Holy Land (via Alexandria), but rather Constantinople and the dreaded Basileus. Many were reluctant, but promises of great booty were made, and these knights on God’s mission were won over. On April 9, 1205 they attacked and took this largest and most splendid city of the Medieval world, and then loosed upon it an orgy of pillaging of fantastic proportions. In the process the great works of art gathered from ancient temples over the nine centuries of its dominance were melted down into coins or bullion.
The demise of the Basileus formally ended the monetary system that had held sway over Europe since the time of Julius Caesar. The fallout was transformative, as the money power slipped from ecclesiastic to secular control. Local rulers all over Europe resumed the minting of gold coinage, and commercial activity rebounded with the introduction of a more plentiful currency. A network of market towns and cities emerged. This renewed economic activity laid the foundation for cultural transformation as well. Fortunately, the great works of Greek philosophy, which had disappeared from Europe during the Dark Ages, were spared from the flames of Constantinople, and brought to the West.
A significant result of the First Crusade was the advent of the Knights Templar, whose avowed mission was to protect pilgrims traveling to and from the Holy Land. They were an order of fighting monks who took vows of poverty, but somehow this monastic order became by the middle of the twelfth century the most wealthy and powerful institution in Christendom, except for the Papacy. The meteoric rise of this of this organization out of such a humble purpose has inspired ever since a feast of speculation. Some have theorized that the organization was merely a façade for a sinister agenda, but the unquestioned courage and sacrifice in battle of the Knights would make that assertion seem simplistic at best.
What is known is that the Knights set up a system of credit clearing houses whereby a pilgrim could deposit his funds with the Templars back home, and reclaim them at a Templar agency when they arrived in the Holy Land, thereby protecting him and his money from the hazards of robbery en route. The stellar reputation earned by the order, fairly won by valor on the battlefield and trustworthiness in finance, inspired a wave of bequeathals of land and property in its favor. The fortune and skills thus amassed allowed it to emerge rapidly as the banking power in Europe. But, alas, they became too powerful too fast. King Philip of France, in league with the Pope Clement V, issued orders throughout his kingdom to have all Templars arrested at once on Friday the 13th, October of 1307 (likely source of the Friday-the-13th superstition). By this time there were an estimated 20,000 in Europe, but only ten-percent were fighting knights. They were easily overwhelmed, and subsequently tortured in a brutal inquisition.
A significant number escaped by ship, along with a goodly portion of their treasure. Their destination has been the subject of much speculation, but there is an emerging consensus that they found refuge in Scotland. This may explain why this storied land has been the origin of so many monetary innovators and schemers, such as John Law (a fugitive from English law and professional gambler who, from 1717 to 1720, was given control of the French State-owned bank, and brought the country to its economic knees with his “Mississippi Scheme”), William Patterson (founder of the Bank of England), and Adam Smith (author of the Wealth of Nations). The Templars played a significant role in the Magna Carta, and later showed up in the lodges of Freemasonry, which in turn were influential in the French and American Revolutions.
The city-state of Venice had been an indispensable staging area for the Crusades. It was the only European power with a fleet of ships capable of transporting armies. It had earned its economic niche as middleman for trade between Europe and the Far East. As such, it was privy to the differential in the gold/silver ratio between the East and the West, and worked the spread for its trading advantage.
Venice’s privileged position was due in large measure to its strategic location at the juncture of the overland trade route through Turkey, and the sea route through the Moslem-cleared Arsinoe (now Suez) Canal. This advantage was lost when the Portuguese discovered a new route to India around the southern tip of Africa, and the voyages of Columbus opened trade routes to the west, including to the Orient. These and other factors led to Venice’s decline, but not before it had financed the raising of the level of culture in Italy to the point where the Renaissance became possible.
A factor of note during the Crusades was the contrast between the conduct of Christian and Muslim forces. This was especially highlighted with respect to Saladin the Great (1138-1193), a Kurd born in Takrit (which is, coincidentally, Saddam Hussein’s hometown; a fact that no doubt fed his propensity to proclaim himself the modern Saladin). He united the Muslims to battle the Crusaders. His attitude was reportedly expressed in the advice to his son:
“My son I commend thee to the most high God, the fountain of all goodness. Do his will, for that way lieth peace. Refrain from the shedding of blood; trust not to that; for blood that is spilt never slumbers. Seek to win the hearts of thy people and watch over their prosperity, for it is to secure their happiness that thou art appointed by God and by me.”
Saladin’s ardent admirers have often included Christian biographers, who together with Arabs have celebrated his cultured chivalry. The Crusaders took Jerusalem in 1099 and murdered virtually all of its inhabitants, while boasting that the city was knee-deep in blood. Saladin re-took the city in 1187. He spared its residents and allowed them safe passage to leave, it being a holy city captured by the Muslims in a “just war.”
Upon hearing that his worthy opponent Richard the Lion Hearted was in the area, but with no horse on which to fight, Saladin sent to him a splendid steed. When Richard was wounded, Saladin offered him the services of his personal physician. At another time when he encountered the wives of captured knights he promised to free them if he could find them, and then made good on the promise. It is no wonder that Saladin’s reputation spread throughout Europe, and persists in mythical form to this today.
In contrast, when he captured the city of Acre, Sir Richard slaughtered the 2700 Muslim inhabitants without delay when their ransom was late.
Under the rule of a spreading ecclesiastical kingdom set up by the Christian forces, many horrors transpired. According to Dana Carlton Munro in The Kingdom of the Crusades:
“On more than one occasion the inhabitants were slaughtered after they received safe conduct to leave the city, and their bodies were burned or cut open to secure the gold which they were supposed to have swallowed.”
The contrast of cultures was not lost upon the Christian pilgrims. Munro reports,
“In Asia Minor many a pilgrim became a renegade to the Christian faith because of the good treatment received from Moslems . . . The common people said it was not necessary to capture cities for the Crusades because the Turks are better and more trustworthy than they who kept no faith with God or duty to neighbor.”
My purpose here is not to extol Islam, nor condemn Christianity. In the fullness of the story one could surely find instances of valor and debauchery on both sides. Also, it behooves us to take into account the fierce nature of Saladin the Warrior, and the grace Richard may, perhaps, have demonstrated in his better moments. Other historic episodes show Muslims as being deeply involved in the slave trade, and falling under the spell of precious metals in the course of their conquests. Neither the Christian or Muslim civilizations are bereft of shining moments, or descents into the mire. All this said, there remains an important point to be noted. That is that through what is called in the West the “Dark Ages” and “Medieval Period,” there flourished in the East a superior civilization. Moreover, the West is forever indebted to that society for preserving the fruits of early classical civilization, plus initiating great discoveries of its own. Would there even be a “Western Civilization” as we know it today without that critical service rendered by the Muslim world?
This is an important realization for our time because the era of the Crusades still holds a spell over modern worldviews, especially from the Muslim perspective. As they see it, they were the keepers of civilization until they were invaded and brutalized for no just reason. What is more, there has continued over the centuries since that time a follow-on campaign of conquest, exploitation and humiliation. The British imposed their colonial order. Other European powers made their own incursions into the area. Israel is seen as a toehold and forward base for continuing Western domination. The present military foray into Iraq and Afghanistan is only the latest chapter in the ongoing litany. Taken by itself, this may be a somewhat simplistic view of history, but it is not without merit.
Furthermore, the same monetary forces that set up the conditions for there even being Crusades in the first place are still active in the world, and are indeed driving the conflict in the Middle East today. They would have human life serve the avarice of privately-controlled money, rather than permit lawfully-issued money to serve the commonweal of humanity. The ultimate irony is that the principle by which the situation can be remedied exists at the heart of every authentic ethical and spiritual tradition, including those of Christianity, Islam and Judaism; that is the prohibition against usury [the practice of money earning money, or the forcing of life to serve money (i.e. usury, as in use-you-ery)].
In a limited sense the Crusades did accomplish their objective. That is, they did indeed break up concentration of religious and monetary power of the East, but at what terrible price in blood and horror? The betrayal of their avowed spiritual purpose, and the failure of the West to learn the monetary lessons of the early Greek and Roman experience, sent shock waves into the future that resound to this day. One can only imagine how different the world might be at present if the West had only understood its own historical contribution to monetary evolution.
USURY - THE MORAL DEBATE:
The destruction of the Eastern Empire precipitated a 500-year struggle for the control of the body and soul of men, as represented respectively by money and religion. The significant separation of religion and the state that had been achieved by the classic Greek and republican Roman societies was thoroughly undone in the combined 1200 year reign of the Pontifex Maximus and the Basileus. Now it was the task of Western civilization to rediscover its own lost wisdom. Weighing-in in the argument were Church scholars known as the Scholastics, many of whom were later canonized as saints. They devoted a major share of their attention to economic matters, particularly to the questions of “just price” and “usury.” They saw as their mission the formulation of a moral code to guide the rising practice of commerce. Their primary touchstone was not the Bible, but Aristotle. “The Philosopher,” as the Scholastics reverently called him, left no doubt as to his position on usury:
“The most hated sort (of wealth getting), and with the greatest reason, is usury, which makes gain out of money itself, and not the natural object of it . . . Wherefore of all modes of getting wealth, this is the most unnatural.”
The practice of usury had long been condemned in mankind’s moral and religious codes, but strictly speaking the taking of interest under proper conditions had never been prohibited. The distinction between the two concepts had traditionally hinged upon whether the lender was actually taking significant risk, as opposed to reaping a guaranteed gain, irrespective of the rights or wellbeing of the debtor (by that distinction modern bank-lending practices, whereby money is commonly used to “earn” more money, would generally be characterized as usury). For those who would object that to forego a fixed return on money would be unrealistic, it should be noted that Venice had dominated Europe financially for centuries relying mainly on non-usurious financial lending practices learned from the Muslims. These included the “Societas,” whereby the lender shared in the risk, and the “Collenza,” whereby the working partner in a trading venture went to sea while the investing partner stayed home, and any profits earned were shared, but losses were absorbed by the investing partner. The idea of true partnership between finance and actual wealth creation largely became lost in the subsequent centuries as the capitalist impulse wended its way to more northerly and westerly parts of Europe, and eventually to England.
The Catholic Church was instrumental in holding back usury’s floodgates for centuries. Historian Henrie Pirenne wrote in Medieval Cities:
“The scourge of debts, which in Greek and Roman antiquity so sorely afflicted the people, was spared the social order of the Middle Ages, and it may be that the Church contributed to that happy result.”
In the end, the moral imperative could not hold, as corruption within the Church and the rise of a powerful commercial class swept away the usury prohibition. By the early 16th century the idea that a leading institution could charge “interest” had become widely accepted. As it happened, this period also saw the advent of the Protestant Reformation.
In 1517 Martin Luther posted his “95 Theses” on the door of Castle Church in Wittenburg, Germany, the act widely accredited for initiating the Protestant Reformation. The central theme of the document was to protest the sale of “indulgences,” by which the granting of forgiveness for sins had been turned into a commercial transaction. This practice also constituted a continuing transfer of wealth from its poor constituency to the already wealthy Church. Luther’s espoused blanket prohibitions against charging interest at first, then seemed to be reconciled to its reality for a time, but came back again to a simplistic denunciation of the practice. His confused views on the subject also led, it might be argued, to fits of anti-Semitism. Wrote George O’Brien in An Essay on the Economic Effects of the Reformation:
“Luther tore the whole of his beautiful fabric to the ground, and carried back the teaching on usury to the primitive bare prohibition of all gain on loans, with the inevitable result that it could not be lived up to in the facts of modern life, and that it consequently fell into disrepute.”
The influence of Calvinism dealt a final blow to the usury ban. At the moment of Luther’s momentous protest, John Calvin was a student in Paris. In diametric contrast to the Scholastic/Aristotelian view he argued, “When I buy a field, does not money breed money?” This, of course, overlooks the fact that; no, the life element and the human effort gives the increase, and money arises on the tide of wealth so generated. Calvin’s teachings were seductive in many ways to those who argued for the special interests of the privileged strata of society, as they were amenable to justifying any gain that could be garnered by pressing their advantage. He preached a harsh doctrine of the “elect”, appointed by “(God’s) gratuitous mercy totally irrespective of human merit . . . the remainder have been consigned to eternal damnation by a just and irreprehensible, but incomprehensible judgment.”
Repudiating the efficacy of “good works” naturally tended to break down the rampart of morality that had kept naked usury at bay. Scruples regarding the “just price” were superseded by the prerogatives of competition and the sanctity of the contract, the terms of which were often usury expressed in its most blatant form.
Capitalism became in the main cold and heartless in its practice, but clearly this cannot be attributed simply to the fallout from Church corruption and untoward impulses of Protestantism. A powerful commercial class was emerging that challenged religion for the hearts, minds, and some say souls, of men. New discoveries in science led to revolutions in many areas of life. The earth was no longer the center of the universe; nor was it flat. A rising materialism went hand-in-hand with a heightened sense of individualism. Pursuit of whatever-benefited-oneself became more-and-more the new “standard” of conduct. Religious authority was eclipsed by secular enlightenment, sacred duty by personal freedom, and altruistic sacrifice by gratuitous consumption. Within such a turning over of the social order, it was perhaps inevitable a self-centered monetary principle would have widespread appeal. The near-absolute right of money to earn money, at whatever cost to human life, became the presiding “ethic” upon which the new economic order was based. Fortunately, the effects of naked avarice continue to be ameliorated by the efforts of compassionate souls, including religionists of every faith and humanists of every stripe.
CONQUEST OF THE AMERICAS:
It is likely that Columbus’s fateful voyage of discovery was largely motivated by a quest for a route to the west by which Spain could gain an advantage in the gold-and-silver trade with the Far East. “Unfortunately,” the Americas got in the way, but no matter. As it turned out there was precious metal there to be found aplenty. In Peru gold was so common that it was use for water pipes, tanks, and even planking.
The Spanish Crown was not reticent about what it wanted to get out of the expedition:
“Get gold; humanely if you can, but at all hazards get gold.”
Sir Arthur Helps wrote in The Spanish Conquest of America:
“The first Indians he met with had some few gold ornaments about them. Poor wretches, if they had possessed the slightest gift of prophecy they, would have thrown these baubles into the deepest sea.”
He also estimated that the native population under Spanish rule numbered some 32 million souls, but within forty years an estimated 15 million perished, mainly by being worked to death in the mines. The most notorious of these operations was the silver mine at Potosi, Bolivia, where reportedly millions perished, prompting Fray Antonio de la Calancha to record in 1638, “Every peso coin minted in Potosi has cost the life of 10 Indians who have died in the depths of the mines.”
The vast quantities of metal cruelly obtained made Spain wealthy, but poor. Because it relied on plunder for its livelihood and squandered the proceeds on vain extravagances, it lagged behind other European nations in the development of industry and commerce, a lapse which persisted into modern times. Moreover, while Spain fed off the hapless denizens of the Americas, its European rivals grew fat off Spanish galleons. The British Crown even granted charters to “privateers” (essentially “pirates”) for the abject purpose of raiding Spanish shipping.
What is more, for Europe as a whole the surfeit of gold and silver was not a boon without a price. In the words of Del Mar:
“Conquest of the New World arrested the re-growth of the classical conception of money and instead developed the feudal concept into a more monstrous form.”
A BRIEF HISTORY OF ENGLISH MONEY:
England’s location as an outpost on the remote northwest fringe of Europe made it relatively less subject to the caprices of Eastern Empire, and later Papal, control. In addition, being an island nation afforded it a natural unity that was not subject to compromise by shifting frontiers. These factors translated into a degree of isolation from the monetary chaos on the continent.
After the demise of the Western Roman Empire the English economy regressed back to barter, as there was no coinage circulating for two-hundred years. The minting of silver coinage was revived under ecclesiastic control between 800 and 900 AD. In 930 a decree was issued that only one form of coinage would be acceptable for circulation in England; the silver penny. These coins fluctuated considerably in weight and fineness of metal, but were valued by the stamp of the sovereign on the coin, as opposed to the metal’s commodity value, and their trading value remained relatively constant.
Through the Medieval period the monetary power in England remained concentrated in the hands of the King, instead of being divvied up among lesser nobles, and the Crown had a history of using that prerogative in a relatively responsible manner. The result was that England suffered less trauma in its monetary life than the emerging nations on the Continent. Still, it could not remain isolated forever.
A commercial trading class arose which sought to wrest the control of the issuance and retirement of money from the Monarchy so that it might use the franchise for its own private gain based on its ability to control gold and silver stocks. A landmark in this struggle was a legal contest, the Mixt Moneys of Ireland Case. Queen Elizabeth I issued base-metal coinage as legal tender in Ireland in 1600, demonetizing all other coins and requiring that they be returned to the mint. When an Irish debtor attempted to pay off his loan from a London merchant in the new coinage, the merchant sued for payment in gold and silver coin. The Irishman prevailed in court, and the decision had the effect of reinstating in the law a concept of money that had been lost since the end of the Roman republic.
The merchant class loathed the decision, and eventually influenced Parliament into passing the Free Coinage Act of 1666. This effectively put the money-creation-and-control power in the hands of financiers.
In 1667, Charles II countered by issuing a paper near-currency in the form of Royal Exchequer Orders to Pay, for the purpose of paying state expenses. These were a mere step short of being a true fiat money, as they were redeemable for coinage one year after issue by whoever held them. Had these bills been issued without the attachment to coinage, and recognized as lawful money, the English-speaking world would almost certainly have evolved in a far more salutary manner.
As it happened, Charles’ Exchequer Orders suffered from being emitted at too high a denomination for common business, and so were not entirely successful. Moreover, his reign was crippled by an ongoing struggle with the goldsmith bankers. These goldsmiths constituted a rising monetary class that specialized in issuing receipts for people’s gold held in the security of their vaults. Carrying paper was much more convenient than lugging heavy metal, so the receipts themselves came to be circulated as currency in lieu of the gold. The goldsmiths reasoned that since few receipts were actually redeemed for metal in the normal course of business, they need have on hand only a fraction of the gold backing the amount of outstanding paper at any given time. It occurred to them that they could “re-loan” the same gold to additional customers simply by printing more receipts. By this mechanism they effectively began to operate as banks-of-issue, and “fractional reserve” banking was born. Thus, there was at the root of the emergence of modern banking a fundamental fraud, but the scheme functioned smoothly as long as there was not a “run on the bank”; that is, a rush by depositors to redeem their receipts for the gold because they had lost confidence in the institution’s ability to redeem them in the future.
As a sidebar to the goldsmith banker story, it bears mentioning that this group has borne a great onus in the historical reckonings of many would-be monetary reformers. It is easy to find good reason for that assessment, but the whole story is not so simple. It could be argued that they were in effect coming up with a money–creation mechanism that did in fact put a great deal of credit into circulation in an age when that was sorely needed for its own inherent reasons. They operated in a time when the society itself did not have a sufficient sense of the science of money to create an adequate system in the public sphere where it rightly belongs (the same might be said of the situation with respect to money and banking that we find ourselves in today). Were the goldsmith simply a class of scam artists, or were they people who saw a need of the society around them and found a way, however imperfectly, to meet it? The answer is probably both, and all degrees in between. They were, after all, people. It might even be argued (or might not) that had they not initiated such a practice, the evolution of Western society would have been seriously hindered.
In assessing the monetary/economic factor it is important to take into account the entirety of influences that constitute any given situation. The question always is, in a manner of speaking, as broad and complex as life itself. The tendency in economics to isolate a single cause or a mere handful of factors, and then assume that one has a grip on the matter, is the downfall of the “dismal science” (a pejorative phrase often used by economists themselves to characterize the discipline’s dismal record of making accurate assessments). “Alternative” economists are not immune to the same failing. Economic phenomena are always human phenomena, with all the unfathomable perturbations that attend human affairs. They must be understood in the most comprehensive historical and social context possible. The answers are never as simple as identifying the “bad guys.”
Under James II (successor of Charles II), a monarchy already weakened by chronic monetary crisis and war was further crippled by religious strife. James was deposed by William III of Orange (with his wife, Mary Queen of Scotts) in a coup staged from Holland in 1668 that came to be known as the “Glorious Revolution.” This move had heavy backing from the banking class in Holland, and represented in effect the relocation of the nexus of capitalist practice from tiny Holland, to the more promising city of London. The net effects were noted by Sir Archibald Alison in his History of Europe:
“The Prince of Orange brought from the Republic of Holland where it had been already practiced and thoroughly understood the secret of governing popular assemblies and extracting heavy taxes from popular communities . . . his whole effort was directed to gain the majority of the constituencies by corruption and of votes in Parliament by patronage . . . It was then that the national debt began; and government was taught the dangerous secret of providing for the necessities and maintaining the influence of present times by borrowing money and laying its payment on posterity.”
Historian Hippolyte Taine added:
“William 3rd’s reign had been one long series of wars and commercial crises which had so disturbed the country . . . There is a deadness and want of spirit in the nation universally . . . There was nothing to be seen but corruption in high places and brutality among the common people – a group of intriguers leading a populace of brutes.”
THE BANK OF ENGLAND & THE RISE OF COLONIALISM:
The founding of the Bank of England in 1694 represented, effectively, the formal institutionalization of usury. It was chartered as a private corporation authorized to purchase bonds from the monarchy during William III’s desperate reign, in exchange for written-out-of-thin-air currency issued to the Crown. The bonds were then resold to private investors (precisely as in the Federal Reserve’s so-called “Open Market”). In the prospectus for this private company, William Patterson wrote, “The Bank hath benefit of interest on money which it hath created out of nothing.” Nathan Mayer Rothschild (1777 to 1836), who gained control of the Bank of England, boasted famously:
“I care not what puppet is placed upon the throne of England . . . The man that controls Britain’s money supply controls the British Empire, and I control the British money supply.”
The monetary system so established in England extended its hold throughout the world through the phenomenon we call “colonialism.” The object of this venture would be described by its proponents as “capital expansion,” as if it were the spreading of some kind of new wealth, but since its currency was debt-based, the essence of its game was “debt expansion.” This is typical of the corruption or outright reversal of the meaning of language that has been a constant part of the bank-money culture.
The spirit behind the banking system was not to be content with merely impoverishing England, and taking control over dirt-poor serfs. It had a bigger idea. It was no less than world domination. The common bloke in England didn’t need colonies, but he could be forced, conned or enticed into the service of empire. He could be systematically driven into debt (in much the same manner as the farmers of Greece and Rome), and then presented with the option of debtors prison or a one-way passage as a “settler” to Australia. He could be offered relief from a grim, dead-end existence in the industrial slums of England with promises of land and adventure in a new world. He could be entranced with the dreams and prerogatives of empire. In any case, the expansion impulse could be launched on the wings of debt-based money, with the imperative to “earn” the “profit” to roll over that debt and expand its principle base. The first major corporation, the British East India Company, was franchised to promote the proposition, and many more followed.
This process was repeated in similar fashion in other European centers, which in turn embarked on their own expansions, but London remained the core center of the debt-money power base, and does so to a significant extent even today. This explains how a small island nation (which was at chronically at war with even much of its own island), with a modest sized population and minimal resources could expand into a world empire. Much of this has been attributed to the British navy, but it should be noted that a navy is a capital-intensive enterprise. What is more, the ability to land a few sailors on the beaches of vast, strange, and largely inland domains, and then come to dominate them, cannot be attributed to the military advantages of a navy alone. Its real secret is the ability to entice the established native rulers with easy debt money redeemable for flashy goods and the tools of control, and then oblige them to render their fiefdoms safe for capitalist (debt) expansion, and extract the “interest” on that “debt”. The colonial army is then sent in strategically to be an enforcer of the system and a collector for its tribute. This arrangement, in modified form, oppresses the “Third World” no less even to this day.
The dynamic by which central banks extended their control is summed up by British economist Richard Douthwaite:
“Currencies produced by one group for use by another have been instruments of exploitation and control. For example, whenever Britain, France, or one of the other colonial powers took over a territory during the “scramble for Africa” towards the end of the (eighteenth) century, one of the first actions was to introduce a tax on every household that had to be paid in a currency that the conquerors had developed for the purpose. The only way Africans could get the money to pay the tax was to work for their new rulers or supply them with crops. In other words, the tax destroyed local self-reliance, exactly as it was supposed to do . . . Very little has changed. Over 95 percent of the money supply in an industrial country is created by banks lending it into existence. These banks are usually owned outside of our areas, with the result that we have to supply goods and services to outsiders even to earn the account entries we need to trade among ourselves. Our district’s self-reliance has been destroyed just as effectively as it was in Africa, and whatever local economy we’ve been able to keep going is always at the mercy of events elsewhere, as the current world economic crisis is making too clear.”
To be sure, the above summary is a radical contraction of history. It should be stipulated that not everything that transpired under the rubric of colonialism was ostensibly based on money per se (missionary work, for example). It should also be stated that while much of what was done for dishonest motives, not everything was. There were many idealistic efforts (misguided or not) to bring the fruits of Western civilization to the lands and societies influenced, and there were migrations of people’s to colonial lands with their own compelling reasons to seek relief from old world crowding and tyranny. A case could also be made that the cultural exchanges and transformations could have evolved in a more mutually beneficial manner. On the human level, there occurred in the course of events many instances of positive personal endeavor and bonds of affection. The historical questions raised are complex, and I will not attempt resolve them all here. The point I would make is that, however good or bad, all this occurred under the aegis of the debt-money system, and that, in turn, dominated its essential dynamic and character.
IMPERIALISM:
In time the colonial system outgrew its viability. With the rising nationalism and impulse to self-determination of the “third world” it became too difficult and expensive to garrison enough men with guns to impose a foreign order. The colonial powers began to “grant” the colonies their “independence,” but in such a way that it left behind a ruling elite beholden to itself for its wealth, status and means to forcibly remain in power. There was, of course, much lip service about establishing “democratic governments,” but the tacit purpose of such regimes was to enforce “stability” (read “suppression”), set the stage for “business expansion” (read “corporate exploitation”), and keep the world safe for “investment” (read “debt expansion”).
Soon the newly independent nations were drowning in debt, one that their populations had little voice in creating, and one from which they received relatively little benefit (or worse yet, a harvest of destruction and tyranny). In actuality it was often paid back, sometimes several times over, but it could not be rolled over fast enough to overcome the snowballing “interest.” So-called “restructuring” was imposed under the auspices of the International Monetary Fund (IMF) and World Bank. This meant stripping them of any remaining economic sovereignty, disowning the people of their inheritance in the land, resources and infrastructure, and reorganizing the economy as a whole to gear up for producing export crops to cash-flow the ostensible “debt.”
To insure that the social, ideological and economic prostration was total, a new-world-order hegemony was enforced under euphemistic rubrics such as “freedom,” “democracy,” “globalism,” “free trade,” General Agreement on Tariffs and Trade (GATT), North American Free Trade Agreement (NAFTA), World Trade Organization (WTO), and “capitalism.” It became unlawful for even elected officials of the world’s nations (first, second and third world included) to challenge this new order without being overruled by an extra-national tribunal, or overthrown for promoting “communism,” pursuing “unfair trade practices,” or violating “international law and order.”
If any leader of the newly emergent nations refused to go along with the program, he was imprisoned, deposed or assassinated. Better known examples are Patrice Lamumba (the Congo), Jacobo Arbenze (Guatemala), Mohammad Mossadec (Iran), Jean-Bertrand Aristide (Haiti), Salvador Allende (Chile), Jaime Roldós (Ecuador), and Omar Torrijos (Panama). The justification offered was ostensibly that these leaders were “undemocratic,” but the regimes they were replaced by were invariably far more dictatorial. At the same time other governments of the most despotic variety were winked at, “constructively engaged,” or actively supported as long as they went along with the corporate globalist program. If those installed by globalist masters dared to wander off the reservation, they were dealt especially harsh treatment. Prominent examples are Ngo Dinh Diem (Vietnam), Manuel Noriega (Panama), Saddam Hussein, or some say even Adolf Hitler. It didn’t much matter that the countries they were set up to tyrannize were brutally attacked or destroyed in the process of taking them back out. If a popular movement dared to set up anything outside the imperialist model, it was targeted for destruction (including the Sandanistas in Nicaragua, and the Castro government in Cuba). It is commonly thought that the United States lost the war in Vietnam, but the interests that promoted that war, arguably, achieved their objective because Vietnam as a country was effectively destroyed as an alternative model for development in Southeast Asia.
This litany of deceit, plunder and oppression could go on at great length. The examples that can be easily documented from the public record are legion. The historically and politically savvy among us are already aware of many specifics. While it is true that the targeted regimes often had their own egregious flaws (and laudable virtues, if the whole truth be known), that is not what put them in the crosshairs. They challenged the “money power” (the avaricious spirit that vies for the control of money), and that is the only unforgivable sin.
Were the specific rationales for the Iraq War sufficient in the aggregate to justify the military incursion? We have at this remove a preliminary benefit of hindsight on the issues as originally presented, but for the sake of argument let us go back in time to the pre-war starting point. I have to admit to having found at the start a degree of merit in most of the pro-war assertions. Who could not, for example, fail to be moved by the suffering of the Iraqi people and their neighbors during Saddam’s rule? Who could not be concerned by at least the possibility of Saddam having “weapons of mass destruction”? Who could not want him gone? The essence of the problem at hand, however, is not to narrow our field of opinion to fit within the blinders of specific egregious factors because they suit our personal bent of ideology, but rather to expand our vision to encompass the most comprehensive possible understanding of the causes within which the continuing cycles of war and oppression occur. It is only within this context that we can hope to arrest the process. It is on this basis that I stake my position on the anti-war and anti-occupation side. It is incumbent upon others to weigh the matter in their own scales, and arrive at their own conclusions.
While we of anti-war persuasion may on balance remain unconvinced by the arguments of the pro-war camp, we must keep in mind that they are not the enemy. They are fellow citizens who are speaking from their own experience, even as we are expressing ours. A more productive approach is to give advocates for nominally opposing positions their due, and seek the most transcendent understanding on the matter possible. To do that we must ascertain, not only the diversity of opinion, the breadth and complexity of the facts, and the matrix of relationships into which they fit, but also the engine which drives events. On the last count all parties, both pro- and anti-war, have largely failed. Permit me to suggest a concise historical context as follows:
With the emergence of mankind from a Garden-of-Eden harmony, he found it necessary, seemingly, to establish artificial processes of energy and material exchange outside of the perfectly symbiotic natural state of the primordial paradise as a means to survive and manifest his independent will. This had an eminently creative potential, but also a dark one, as the devices so established could be co-opted by spiritual forces inimical to the healthy evolution of human potential. This temptation expressed itself at first by plunder, then by control of commodities used as mediums of exchange (e.g. gold and silver), and finally by the usurpation and manipulation of the abstract concept we call “Money.” The method of monetary abuse is for supremely privileged and secretive interests to seize the sovereign power of money creation, and then “loan” it to the civilization it ostensibly serves on terms such that satisfaction of the resulting “debt” is virtually impossible, and further “debt” creation compounding ad infinitum is inevitable. This is rapidly evolving into an end game in which the domination of the resources and people of the planet is total, right down to the virtual hardwiring of our individual and collective mindsets so that even the occurrence of thought outside of its domain is unlikely. The military incursion into the Middle East is a pivotal stage in that whole process. The agenda is world empire; the pale horse it is riding is debt-money expansion.
Ultimately the debt-money-based globalist order will fail because it is by nature a cancer that will blindly devour the body from which it draws its sustenance. The immutable laws of nature will reassert themselves over the greedy fantasies of endlessly compounding financial usury. Furthermore, there is at the root of human nature a divine spark, a new Phoenix, which will resurrect itself regardless of how submerged our collective memory and self-realization has gotten. The only question is, “How far are we willing to travel down the road to an Armageddon before we wake up?”
If the reply is “Stop; No farther!”, where can we find the inspiration for what to do next? A clue can be found, I suggest, in the oft invoked, but long forgotten American Revolution.
THE REST OF THE AMERICAN REVOLUTION:
As the money power behind the Bank of England sought to spread its corporate order, there were established in North America thirteen quarreling colonies. The intent was to create a source for cheap raw materials. What it had not intended to plant were the seeds of new ideas about mankind having inalienable interests in the rights of the individual, the general welfare of the community and the sovereignty of the people. These ideas germinated in Europe, but could only exfoliate in the relative openness and opportunity of a new world. It also did not reckon with the unique contribution of the aboriginal inhabitants, nor the compounding genius afforded by the uniting of diverse cultural streams into a new nation. The upshot of all of this was that the North American colonies evolved along a trajectory that that was unprecedented in human history.
The colonists reasoned early-on that they could not prosper if they remained dependent on borrowing money from the Bank of England to carry out their commerce. They responded by creating their own money. Some was minted, but most were printed “Bills of Credit.” In fact the paper money issued by these colonies has the distinction of being the first government-authorized paper currency in the Western world, with Massachusetts starting it off in 1690. America was to become the test case for paper-money economics, and was closely watched by the rest of the world. It was an experimental effort, and had its mishaps, but the Colonies gradually became skilled in the use of paper currency. When asked about how he could explain the prosperous condition of the Colonies, Ben Franklin replied:
“That is simple. It is only because in the Colonies we issue our own money. It is called colonial scrip, and we issue it in proper proportion to the demand of trade and industry.”
The Crown set itself in continuous opposition to these unapproved issues and Parliament passed laws in an attempt to curb them. The Currency Act of 1764 banned the extension of legal tender status beyond certain dates, and England assumed the authority to approve or disapprove any laws the Colonies might pass related to new issues. Its foot dragging on such measures effectively deprived the Colonies of their money, and led to the first two now-uncomprehended justifications for breaking with England as set forth in the Declaration of Independence, specifically:
(1) - He has refused his Assent to Laws, the most wholesome and necessary for the public good.
(2) - He has forbidden his Governors to pass laws of immediate and pressing importance unless suspended in their Operation till his assent should be obtained; and when so suspended he has utterly neglected to attend them.
It is interesting to note that the issue of money creation was not mentioned by name in these two items. With respect to the audiences for whom it was intended, both the royal regime in opposition and the body patriotic to be roused, evidently no such explicitness was deemed necessary. The issue of money was already a firmly rooted fixture of the popular political consciousness as the matter about which all else turned. This is telling witness to how far this nation has strayed from its original inspiration, all the sophomoric patriotism of the current political ballyhoo notwithstanding.
We have been subjected to much myth making with regards to the American Revolution. Selected parts have been endlessly quoted and manipulated to promote jingoistic notions, to buttress disingenuous agendas, and ultimately to co-opt our economic and political heritage. Without sufficient historical understanding, even phrases such as “taxation without representation” and the “Boston Tea Party” have come to have a distorted meaning. Closer to the truth was Franklin when he said:
“The Colonies would gladly have borne the little tax on tea and other matters had it not been that England took away from the Colonies (the right to issue) their money, which created unemployment and dissatisfaction.”
Senator Robert Owen, prominent banker and the first chairman of the Senate Committee on Banking and Currency, explained that when the Rothschild-controlled Bank of England heard of the situation in the Colonies:
“They saw that here was a nation that was ready to be exploited; here was a nation that had been setting up an example that they could issue their own money in place of the money coming through the banks. So the Rothschild Bank caused a bill to be introduced in the English Parliament which provided that no colony of England could issue their own money. They had to use English money. Consequently the Colonies were compelled to discard their script and mortgage themselves to the Bank of England in order to get money. For the first time in the history of the United States our money began to be based on debt.”
“Benjamin Franklin stated that in 1 year from that date the streets of the Colonies were filled with unemployed.”
The Crown’s stonewalling of the colonist’s monetary needs also caused an open and widespread violation of the law, even by merchants and statesmen. This resulted in an effective training ground for resisting subjugation, which eventually found expression in Revolution. According to monetary historian Steve Zarlenga, “The skirmishes at Lexington and Concord are considered the start of the Revolt, but the point of no return was probably May 10, 1775 when the Continental Congress assumed the power of sovereignty by issuing its own money.”
Alexander del Mar stated the matter with great force:
“Lexington and Concord were trivial acts of resistance which chiefly concerned those who took part in them and which might have been forgiven; but the creation and circulation of bills of credit by revolutionary assemblies in Massachusetts and Philadelphia, were the acts of a whole people and coming as they did upon the heels of the strenuous efforts made by the Crown to suppress paper money in America, they constituted acts of defiance so contemptuous and insulting to the Crown that forgiveness was thereafter impossible. After these acts there was but one course for the Crown to pursue and that was, if possible, to suppress and punish these acts of rebellion. There was but one course for the Colonies; to stand by their monetary system. Thus the bills of credit of this era, which ignorance and prejudice have attempted to belittle into the mere instruments of a reckless financial policy, were really the standards of the revolution. They were more than this: they were the Revolution itself.”
There is a common “wisdom” that assumes that the eventual failure of the Continental Currency proves that such things should be left to banks. In fact, the oft-repeated phrase “not worth a Continental” arises from this period. The true story, however, indicates quite the contrary. The Continental Congress authorized and printed $241 million, but the British spared no efforts at trying to render it worthless by counterfeiting and distributing this amount many times over (one to two billion). They ran an ad in a British-occupied New York paper that read:
“Persons going into other Colonies may be supplied with any Number of counterfeit Congress-Notes, for the Price of the Paper per Ream. They are so neatly and exactly executed that there is no Risque in getting them off, it being almost impossible to discover, that they are not genuine.”
This “unparalleled piece” prompted George Washington to comment, “. . . no Artifices are left untried by the Enemy to injure us.”
In spite of this, Continental Currency continued to function reasonable well. After three years of war it was still exchanged at $1.75 against $1.00 of coinage. This led and exasperated General Clinton to complain to Lord Germaine, “The experiments suggested by your lordships have been tried, no assistance that could be drawn from the power of gold or the arts of counterfeiting have been left untried, but still the currency . . . has not failed.”
The currency did finally collapse, but not before seeing the new nation through its struggle, prompting Thomas Paine to write, “Every stone in the bridge that has carried us over, seems to have a claim upon our esteem. But this (Continental Currency) was a corner stone, and its usefulness cannot be forgotten.”
Americans are commonly aware that the establishment of the United States brought to the world a new type of democratic order; i.e. personal freedom under the rule of democratically determined law. What is not nearly as widely realized is that it also represented the establishment of a new economic order. It sought to secure not only freedom, but also the means to freedom; i.e. the control of its own money. This is the all-but-forgotten rest of the American Revolution! This was elaborated eloquently in Harmony of Interests, by Henry C. Cary, who was Abraham Lincoln’s economic advisor and the son of Matthew Cary, a close collaborator of Franklin and LaFayette. He stated that there are “Two systems before the world,” and proceeds into a lengthy delineation which concludes:
“One looks to pauperism, ignorance, depopulation and barbarism; the other to increasing wealth, comfort, intelligence, combination of action, and civilization. One looks towards universal war; the other towards peace. One is the English system; the other we may be proud to call the American system, for it is the only one ever devised the tendency of which was that of elevating while equalizing the condition of man throughout the world.”
And what is this “American system” compared to the “English system”? I will choose to call it “Free Enterprise” (the American way) as opposed to “Capitalism” (the Bank of England method). It is imperative that some terms be defined for purposes of this treatise:
“Monetization” is the process by which money is introduced into circulation and regulated. It is the principle that gives the physical economy a monetary dimension so that it can be readily traded. It is the essential power of sovereignty. Without it, “sovereignty” is a hollow concept.
“Usury” is the charge attached to money that is created out of thin air (by the simple mundane act of a banker writing a check) and loaned into circulation via a private banking system. Within present praxis, this applies to virtually the entire money supply. This causes a problem in that the money required to “repay” such “loans” is thereby “borrowed” into existence, but the usury (incorrectly called “interest”) attached to such transactions is not. “Interest” and “usury” are not, as commonly thought, the same essential phenomenon, only taken to different degrees. They are polar-opposite principles. The distinction is crucial.
The usury charge attached to money creation results in a “debt” of the economy as a whole to those private persons who have been awarded the privilege of creating society’s supply of money. True interest, on the other hand, is a charge attached to loans between people of money already in circulation. It does occasion a debt between people, but not of the economy as a whole to any private person or persons. To be sure, the taking of interest can still have its abuses, but one must look at the specific case to ascertain if that is in fact occurring.
“Free Enterprise” is productive economic activity when it is monetized with publicly-issued, usury-free currency that is created and issued in proportion to the needs of trade and industry. Its salient virtues include:
• Money is loaned interest-free or spent into circulation by the monetizing authority; in the American case, the United States Treasury.
• On the Federal level, taxes serve to draw excess money back out of circulation, thereby regulating the money supply. They do not “pay for” anything; the authority to monetize does that.
• Money created and loaned out of the Treasury does not require an “interest” charge to be attached, or if one is levied, the monies collected can be remitted to the Treasury, thereby defraying taxes.
• The economy as a whole remains wealthy by the sum of its actual production. The very existence of a so-called “national debt” becomes a mathematical impossibility.
• The public monetization process lends itself to a transparent, understandable and accountable exercise of national sovereignty through a democratic political process.
• It easily facilitates the increase of circulating money to match the potential of the physical economy to any degree necessary, yet it does not mandate that increase. It can just as easily be contracted as the physical economy becomes more efficient, wealthy and sustainable on a symbiotic basis.
• It is easily and fully capable of actualizing the full material and human potential of the physical economy without inflation, deflation or artificial unemployment.
“Capitalism” (as in “Money-ism”), on the other hand, is the monetization of the physical economy with privately-created, interest-bearing bank notes issued out of the Constitutional power to create money, that has been abdicated by the Federal government to a privileged oligarchy who owns and controls so-called “independent central banks.” Its defects are legion, and include:
• Money is said to be “borrowed” into circulation. The resulting “debt” cannot be fully paid back because only the principle on the “loan” is “borrowed” into existence, but the usury fee, i.e.“interest”, is not.
• The “interest” must be paid out of the principle of subsequent “loans”, so the economy becomes locked into a never-ending cycle of compounding aggregate “debt,” which, within current monetary culture, can never be repaid without extinguishing the money supply.
• “Economic growth” is reflexively touted as a mantra in order to bring new “debt-money” into the economy to roll over the old “debt,” but that also compounds the overall “debt.” It is mathematically impossible to “grow” out of the net public and private “debt” to the economy, as we are, in effect, “growing into it.”
• This compounding “debt” dominates, and eventually sucks the life out of the social/political/economic body it attaches to. The economy attempts to survive for a time by continually expanding into new areas of exploitation in search of an expanding collateral base for the “borrowing” of more money.
• Eventually the land, life and blood of the People becomes mortgaged to private “investors.” The President and entire body of elected representatives are no longer the representatives and executors of a sovereign nation that is fully able to create and issue its own money supply, but are instead relegated to being the receivers in a never-ending bankruptcy reorganization of what is now an enterprise (called the United States), the “debt” contracts and bonds of which reside in the portfolio primarily of an international financial cartel.
Usury-based money becomes the engine that drives inflation, deflation, unemployment, environmental destruction, racism, runaway technology, colonialism, imperialism, war and the host of other ills that plague the world. It is a cancer that corrupts, masquerades as, feeds upon, and eventually destroys the freely engaged enterprise of the people. I realize that this is a sweeping assertion, but I would urge the reader to suspend judgment as the idea is fleshed out below.
I am aware that the way I am defining these terms does not necessarily conform to any orthodox usage, but I would assert that in the realm of economics and finance the language has become so corrupted, loaded and turned on its head that it has become more of a hindrance to sober thinking than a help. Still, it is what we have to work with, and the best will have to be made of the situation by systematically formulating precise definitions, drawing clear images, and exercising rigor of thought as the discussion unfolds. In particular, my definition of “capitalism” is unique, but, I would argue, logical and defensible. The crux of the problem is that, while the Eskimos reportedly have forty-nine words for snow, our language at present has only one, “capitalism,”,\ to describe the myriad perturbations of the economic order that exist around the globe (especially since the demise of “socialism” and “communism”). This paucity of terms is a major impediment to any attempt at clear economic thinking.
Capitalism co-opts and distorts the common sense concepts of free enterprise such as borrowing, debt, loan, interest and many others. Within free enterprise, these practices may still exist between businesses, states, individuals and other microeconomic entities, but are no longer applicable to the Federal macro-economy as a whole. The citizenry is berated constantly in the media that the Federal government must be run according to sound “business” principles, but the Federal government is not by nature a “business.” It is ideally the sovereign macroeconomic entity within which microeconomic enterprises such as businesses operate, notwithstanding that the economy as a whole has effectively become a business in the portfolio of financial “investors” due to the abdication of the money-creation power to an international banking oligarchy. Ultimately capitalism so corrupts the language of a culture that it becomes exceedingly difficult to have a coherent dialog or even thought on economic matters. It becomes effectively invisible as the fundamental unexamined assumptions of our thought processes surrender to its terms.
I realize that this will seem to the reader to be a startling assertion, but in my perception “free enterprise” and “capitalism” are not synonymous terms. Rather, they are diametrically opposed principles, and the founding of this nation and virtually all of its history, even to this very moment, is a litany of the struggle between them. I am widely read, but have never seen or heard free enterprise and capitalism concisely defined and contrasted before, the considerable passionate and erudite criticism of the present monetary system that is extant, notwithstanding.
How can this be? I believe that this collective amnesia bespeaks of the potential of the debt-based money to so dominate a culture that it effectively loses its history, identity and ability to think. “Capitalism” has been planted firmly in our heads as being a term synonymous with a “free-market economy.” A free-market economy is in truth a free enterprise economy; i.e. an economy where those who produce goods and services (along with other consumers) obtain, in the aggregate, monetary credits sufficient to buy the fruits of that production without a residual “debt” of the economy as a whole. Capitalism, in contrast, is a parasite that attaches itself to a free-market economy such that those who produce goods and services (along with other consumers) cannot obtain, in the aggregate, monetary credits sufficient to buy the fruits of that production, except by borrowing increasingly more money from the banks on an ongoing basis. Our text books tell us that the Colonies won the Revolutionary War over 200 years ago, but because we have lost sight of the monetary cause, it is still in progress with the outcome very much in doubt.
Our forbearers were not always so blind. Thomas Jefferson had this to say:
“The Central Bank is an institution of the most deadly hostility existing against the principles and form of our Constitution . . .”
“I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the Government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs.”
“If the American people ever allow the banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied.”
John Adams wrote in a letter to Jefferson:
“All the perplexities, confusion, and distress in America arise, not from defects in the Constitution or confederation, not from want of honor and virtue, so much as from downright ignorance of the nature of coin, credit and circulation.”
THE NEW NATION UNFOLDS:
After a heroic War of Independence announced with a noble Declaration and guided by “founding fathers” of high principles, one might think that the establishment of a free public currency would be a foregone conclusion, but if history teaches anything it is to not underestimate the money power. While the People have on occasion arisen to great heights of purpose and sacrifice, afterwards they understandably tend to turn back to their private lives. The money power, on the other hand, never rests, leading Del Mar to observe ruefully:
“Never was a great historical event (the American Revolution) followed by a more feeble sequel. A nation arises to claim for itself liberty and sovereignty. It gains both of these ends by an immense sacrifice of blood and treasure. Then, when the victory is gained and secured, it hands the national credit (the authority to create money) over to private individuals, to do as they please with it.”
There were strident debates about money at the Constitutional Convention in 1787, but of the champions of sovereign currency, Paine and Jefferson were in France, and Franklin was in failing health. The result is expressed in the Constitution in what is evidently compromised language. Fortunately, it did give Congress the power to “coin money” and “regulate the value thereof.” Unfortunately, it did not delineate the power to issue money in language that was so definitive that it was beyond evasion by those in whose financial interests it was to not see in that way. As a consequence, the conflict between public and bank-issued currencies has plagued the nation throughout its history.
The first Congress lost no time in picking up on the battle. Led by the aristocratic Alexander Hamilton, it authorized in 1791 the first Bank of the United States. According to economics professor Murray Rothbard in The Mystery of Banking, it “was deliberately modeled after the (Rothschild-controlled) Bank of England [parenthesis his],” the very power the Revolution had fought to be free of. The irony was not lost upon Representative James Jackson of Georgia, who noted:
“In the reign of King William, 1706, the policy of the English Parliament laid the foundation of what is called their national debt, (and that by adopting same) it may, for a moment, raise our credit, and increase our circulation by multiplying a new species of currency; but it must hereafter settle upon our posterity a burden which they can neither bear nor relieve themselves from. It will establish a precedent in America that may, and in all probability will, be pursued by that sovereign authority, until it brings upon us that ruin which it has never failed to bring.”
Through an early period wracked by frequent monetary crises, the history of the new nation unfolded. In 1811 the charter for the Bank of the United States came up for a twenty-year renewal, but failed in both houses of Congress by one vote. In 1816, however, a second Bank of the United States was approved. By the time it came up for renewal, President Andrew Jackson was bitterly set against it. In fact one of his campaign slogans was, “Bank and no Jackson, or no bank and Jackson.” Referring to the bankers, he scolded:
“You are a den of vipers. I intend to rout you out, and by the Eternal God I will rout you out. If people only understood the rank injustice of our money and banking system, there would be a revolution before morning!”
He further observed:
“The bold effort the present bank had made to control the government, the distress it had wantonly produced . . . are but premonitions of the fate that awaits the American people should they be deluded into a perpetuation of this institution or the establishment of another like it.” (the Federal Reserve is “another like it")
Congress passed a bill to reauthorize the bank anyway, but in his veto message Jackson declared:
“But if they (the Congress) have . . . power to regulate the currency, it was conferred to be exercised by themselves, and not to be transferred to a corporation. If the bank be established for that purpose . . . Congress have parted with their power for a term of years, during which the Constitution is a dead letter.”
The battle between Jackson and the Bank was of epic proportions, and permanently transformed the political landscape. Before his presidency, politics was almost exclusively a clubby gentleman’s game play out amongst the propertied class. That changed dramatically with Jackson. He found that venue entirely too dominated by the privileged interests, so he appealed directly to the people. He and those associated with his cause initiated the first mass political rallies, the modern political convention, the Democratic Party (as a spin-off from the Jeffersonian Democratic-Republican Party), and in important ways, the modern Presidency, for good or ill.
Though Jackson had turned back the Bank, he had no adequate mechanism to put in its place. His ally and successor, President Martin Van Buren, established the Treasury Department, but the monetary situation remained chaotic. There were hundreds of currencies in circulation, issued by different private banks, which were unevenly or fictitiously backed by precious metals. Banking malfeasance was rampant. Bank failures were common.
In addition, the political party founded by the Jackson/Van Buren movement began to be co-opted by banking interests. Another initiative was called for. On July 6, 1854, the Republican Party was established at a meeting in Jackson, Michigan. The name Republican was chosen because it was the unclaimed half of the Democratic-Republican moniker of Jefferson’s party. Six years later, the party had its first President, Abraham Lincoln.
THE CIVIL WAR:
The exigencies of the Civil War demanded that some way of financing it be found. Though under great pressure to borrow money to finance the war, Abraham Lincoln instead initiated United States Notes, otherwise known as the Greenbacks, which were a Federally-issued usury-free currency. The monetary policies of Lincoln are a generally overlooked, but pivotal part of our history. Indeed, they may have been, even more than his better known proclamations, the crucial factor which allowed the Union to prevail. He had much to say regarding the public-vs.-private issuance of money which we would do well to contemplate today:
“Money is the creature of law and the creation of the original issue of money should be maintained as an exclusive monopoly of National Government.”
“Government possessing the power to create and issue currency . . . need not and should not borrow capital at interest as the means of financing governmental work and public enterprise. The Government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the Government and the buying power of consumers. The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government’s greatest creative opportunity.”
“The taxpayers will be saved immense sums in interest . . . Money will cease to be master and become the servant of humanity. Democracy will rise superior to the money power.”
Congressman Wright Patman commented a century later, “If instead of issuing ‘greenbacks,’ the Lincoln administration had issued the interest-bearing bonds, as urged, naturally, these bonds would still be a part of the Federal debt today.” At compounded interest the amount would be many times greater.
The significance of Lincoln’s monetary policy did not escape notice in certain European quarters, although from an entirely different perspective. There appeared in The London Times during the Civil War the following from Otto Von Bismarck:
“If that mischievous financial policy, which had its origin in the North American Republic (the public issue of usury-free currency) should become indurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and without a debt. It will have all the money necessary to carry on its commerce. It will become prosperous beyond precedent in history of the civilized governments of the world. The brains and wealth of all countries will go to North America. That government must be destroyed or it will destroy every monarchy on the globe.”
In 1876, Bismarck explained further:
“The division of the United States into federations of equal force was decided long before the Civil War by the high financial powers of Europe. These bankers were afraid that the United States, if they remained in one block and as one nation, would attain economic and financial independence which would upset their financial dominance over the world. The voice of the Rothschilds prevailed. They saw tremendous booty if they could substitute two feeble democracies, indebted to the financiers, for the vigorous Republic which was practically self-providing. Therefore, they started their emissaries in order to exploit the question of slavery . . . Lincoln’s personality surprised them. His being a candidate had not troubled them; they thought to easily dupe a woodcutter. But Lincoln read their plots and understood that the South was not the worst foe, but the financiers.”
Lincoln agreed:
“I have two great enemies, the southern army in front of me and the financial institutions in the rear. Of the two, the one in the rear is the greatest enemy.”
In spite of not getting their way on the Greenbacks, the financiers got the National Banking Act of 1863. It was partly in response to a legitimate need for a formal monetary system to avoid the financial chaos the country experienced before the Civil War, but it put the money-making power in the hands of private “National Banks”, and set the stage for the monetary trauma that was to chronically distress the nation after the war. A letter written by the Rothschild Bros. of London to a New York firm of bankers in 1863 read:
“The few who can understand the system (created by the National Banking Act) will either be so interested in its profits, or so dependent on its favors, that there will be no opposition from that class, while on the other hand, the great body of the people mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.”
Salmon P. Chase [Secretary of State (1861-64), and Chief Justice of the Supreme Court (1864-73)] lamented:
“My agency in promoting the passage of the National Bank Act was the greatest financial mistake of my life. It has built up a monopoly which affects every interest in the country. It should be repealed; but before that can be accomplished, the people will be arrayed on one side and the banks on the other, in a contest such as we have never seen before in this country.”
After the Act’s passage, Lincoln echoed similarly ominous sentiments:
“The money power preys upon the nation in times of peace and conspires against it in times of adversity. It is more despotic than monarchy, more insolent than autocracy, more selfish than bureaucracy. I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. Corporations have been enthroned, an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in a few hands and the republic is destroyed.”
There was also another revealing letter (dubbed the “Hazard Circular”) being circulated among American Bankers by European banking interests during the Civil War concerning the new dispensation with respect to slavery. It read:
“Slavery is likely to be abolished by the war power and chattel slavery destroyed. This, I and my European friends are in favor of, for slavery is but the owning of labour and carries with it the care of the laborers, while the European plan , led by England, is that capital shall control labour by controlling wages.”
And so, it would seem, an attitude was afloat in banking circles that favored a transition to the more refined wage-servitude, in which the laborer was obliged to fend for his own care and sustenance without his employer having to be concerned that he had the means to do so. It was a new sort of “slavery,” without the “benefits,” if you will. This form of exploitation became common, and has persisted and grown in myriad guises until many of the middle class, who thought they were safely past indentured servitude, are now slipping back into it via the dual agencies of falling wages and rising debt. Compounding the problem for those still struggling to extricate themselves from the residual legacy of historical slavery, the blue sky into which their upward economic and social mobility could aspire to soar is fast clouding over.
POST CIVIL WAR:
The post-Civil-War period was a plateau in our history. It was, in many respects, the time of our first emergence as a nation. The changes wrought, patterns formed and dynamics initiated persist in manifold forms to this day. Among other things, Americans for the first time thought of themselves in the main as one country, as opposed to a confederation of semi- autonomous states. Before the conflict, people commonly identified themselves by the state they originated from; after, they reflexively called themselves “Americans.” Before the war people would say, “the United States are;” afterwards “the United States is.” The shared crucible of the internecine struggle engendered a veritable bonding, the bitter divisions of the episode notwithstanding. This sense of kinship was incomplete, to be sure, and there were wounds to be healed. In addition, the new national identity fell short of fully including those “minorities” who were not-male, not-white, not-of-significant-means, and otherwise not-of-the-norm (which altogether constituted a great majority). Even so, a character was established from which we have evolved as a nation and a people.
The nation emerged as the purported “land of the free”, but virtual slavery masqueraded in a new guise. This lamentable irony was captured by Horace Greeley:
“While boasting of our noble deeds, we are careful to conceal the ugly fact that by our iniquitous money system we have nationalized a system of oppression, which, though more refined, is not less cruel than the old system of chattel slavery.”
The banks had endured a setback with Jackson’s veto of the second Bank of the United States and the founding of the Democratic Party. While they did succeed in temporarily breaking up the Union, the overall effort backfired, as the shared struggle forged a new national identity. What is more, the wartime Republican president had overcome that division, in large part by the introduction of a paper fiat currency which was rooted in the commonweal of the nation. The fact that this Federally-issued money functioned well and saw the country through the most extreme of exigencies “threatened” (from the perspective of banking interests) to establish a new socio/economic/political model for the future. The jig would be up, not only in North America, but also worldwide, and the advocates for private-money knew it. Something had to be done. The first order of business in regaining the upper hand was to neutralize the two major parties as effective advocates of a sovereign public currency.
ASSASINATION & CO-OPTION OF THE REBUBLICANS:
The door was opened to the possibility of recapturing the political process by the assassination of Lincoln. This nefarious deed was in fact only one part of a larger plot to murder Vice President Johnson and Secretary of State Seward also, which had the greater goal of destabilizing the federal government. Eight conspirators were eventually tried, with four receiving death sentences, and theories still abound as to who put up the money, gave the orders, and provided the necessary cover and support. It is easy to assume that it was the result of radical southerners avenging, or perhaps still trying to win, the war, though according to some historians the south increasingly saw Lincoln as their best hope in any post-war dispensation. That would, of course, not preclude that a handful of fanatics might think otherwise. Whatever the truth of the matter (and I don’t here pretend to know the whole truth), the snuffing of Lincoln removed a major impediment to the bank-money agenda. Though his successor, Andrew Johnson, was committed to monetary views similar to Lincoln’s, that august moral force that would set the tone for post-war reconciliation, reconstruction and reclamation of national sovereignty was no longer a part of the scene. The coup de grace came when Johnson was undermined by an impeachment attempt that he survived by only one vote. He was replaced as Republican nominee in the next cycle by the more amenable to those who favored a specie-backed currency, Ulysses S. Grant.
ALEXANDER DEL MAR ON BETRAYAL & CO-OPTION OF THE DEMOCRATS:
The next logical step in the destruction of the Greenback was to neutralize the Democratic Party. It had emerged as the natural ally of the People in their battle with the money power. The treacherous campaign to subvert this connection was described in detail by Alexander del Mar in his book A History of Monetary Crimes, as “The Crime of 1868.” As a prominent Democrat and the organizer and director of the Bureau of Statistics (1866-1869), he was a player in the unfolding drama. His first-person account is worth relating in some detail.
The chief protagonist in the intrigue was August Belmont, who was the main Rothschild agent in America at the time. He managed to get himself ensconced in the job of Chairman of the National Committee for the Democratic Party as a reward for bailing out its beggared finances. A key conspirator was Manton Marble. He was the part owner and editor in chief of the New York World newspaper, which had assumed the role of unofficial voice for the Democratic Party, and champion of the Greenbacks.
At issue was the status of the Greenbacks. Banking interests wanted to portray their role as a wartime emergency measure only, and retire them as soon as possible. The plot was thickened by schemes to accomplish this on such terms as would create a windfall profit for the bankers. These primarily involved the redemption of Greenbacks for gold or coinage. The Greenbacks had functioned well, and had therefore become extremely popular with the populace, who wanted to retain them as an institution. In the short run, this threatened the financiers’ windfall. In a larger sense, the essential “threat” the Greenbacks posed was the salutary example they presented. If the issuance of money as a public good based on the sovereignty and enterprise of the People were “indurated down to a fixture,” it would jeopardize the existence of the entire bank-money scheme. The American Revolution would, in an economic sense, be consummated. The will and welfare of the people would at long last, in Lincoln’s words, “. . . rise superior to the money power.”
In concerted campaign orchestrated by Baron James Rothschild from Paris, leaders of the party were blackmailed with ruin if they opposed the bankers’ will. In spite of this, on July 4, 1868 the Democratic National Convention passed a resolution which denied the redemption of the Greenbacks by anything other than “. . . lawful money of the United States” (i.e. more Greenbacks). Furthermore, the convention showed a determination to nominate a candidate for President who supported that very resolution; one George H. Pendleton. Amidst a bitter floor fight, and though he was leading the pack, Pendleton’s name was inexplicably withdrawn on the 22nd ballot, and that of Horatio Seymour substituted in his place. Seymour was an advocate of coin redemption, and thus in line with the bankers’ agenda. They managed to secure Seymour’s nomination, but the rank and file on the floor remained resolute in their support for the Greenback. This created the likelihood that few Democratic members of Congress would vote for redemption by coinage even if Seymour were elected.
The bankers appeared to be checkmated, but they had already made arrangements for an ace-in-the-hole. It was in the form of Manton Marble’s New York World newspaper, an organ which August Belmont controlled, and had foisted upon the party as its mouthpiece-of-record. The strategic value of this asset had been further enhanced by the fact that the party leaders had been cajoled into changing the venue of the national convention from another location to New York in order to bring it more directly under the sway of this paper.
On October 15, mere days before the election, it was widely expected that the Democrats would win handily. With no warning whatsoever, the paper dramatically reversed its editorial position and recommended that the name of Seymour be withdrawn, ostensibly because the party could not win with this nominee at the head of the ticket. The campaign was thrown into chaos. A committee of high party officials convened in Washington DC, and sent messages and an emissary to New York urgently seeking verification, clarification and a rationale for the bizarre action. Their entreaties were met with contemptuous evasions, and the party was not able to recover in time for the polling date. Even so, Seymour garnered 2.6 million votes, compared to 2.9 for the Republican Grant. Upon assuming office, Grant’s first act was to sign the so-called Credit Strengthening Act, which President Johnson had vetoed. It provided for the redemption of government bonds in gold (not Greenbacks).
RELIGIOUS CRUSADE AGAINST THE GREENBACKS:
The subversion of the two major political parties was only the opening salvo in a culture-wide war to undermine the monetary prerogative of the People. The assault by the financiers proceeded on many fronts, most of which focused on the destruction of the only lawful, benign and truly efficacious currency the post-revolutionary nation had yet known; the Greenback.
In the days before Madison Avenue, the heavy lifting of the public relations campaign was assumed by elements of the religious establishment working through churches and universities, especially those of the Calvinist sects. This was, no doubt, in keeping with the dictum of John Calvin himself, who had written, “The people must be kept in poverty in order that they may remain obedient.” Colleges in America at that time were, with few exceptions, religious institutions. At most colleges, ‘political economy’ was taught by clergymen as an aspect of ‘moral philosophy.’
While the defense of slavery throughout the South before the war was to be expected, it was also widespread in the North, and institutions of higher learning played a prominent role. This was instrumental in creating the political climate in which the banker-instigated breakup of the Union was possible. After the war this mindset morphed into a bizarre “Christian” fetishism about the sanctity of gold and silver. Secular lucre (i.e. the Greenbacks) was railed against as a form of demonology, while the supposedly solid virtue of the banking establishment was apotheosized as the guardian of financial probity. Such dubious spiritual exhortations softened the memory, wit and character of the public sufficiently for the money-power agenda to move ahead. Ministers, professors and financiers joined in a concerted effort to once again deny the nation its sovereign right to its own money.
BANKERS’ CAMPAIGN TO DESTROY THE GREENBACKS:
While the National Banking Act of 1863 did restore the power to issue new money to the banks, it did not put it under authority of one central bank. Consequently, as the nation expanded by leaps and bounds, much banking activity grew up outside the control of big money interests. To consolidate their hegemony, a campaign to retire the Greenbacks, de-monetized silver and corner the gold market was initiated. As a result the money supply was sharply curtailed, and a period of contracted credit and deflation ensued. This caused great economic distress in the rural areas, in newly burgeoning industries, along the rapidly expanding frontier, and for anyone who was obliged to pay back a debt with increasingly scarce dollars. The late 19th century was wracked by periodic banker-engineered “panics,” for which these same parties presented themselves as the solution.
There are a number of landmarks in this litany that bear mentioning. The effort to trash the Greenbacks and demonetize silver was designed to bind the American dollar exclusively to gold, which was largely in the possession of European bankers, and would have to be borrowed from them to even have a money supply. Besides the obvious profit-taking involved, the overarching purpose was to effectively return the control of the fledgling nation back to the monetary interests that had always conspired to keep it in debt. It should be noted that the conspiracy to demonetize silver was not strictly an American affair, but a worldwide initiative that decimated even Japan. In the words of the U.S. Treasury Secretary, John G. Carlisle:
“The conspiracy . . . formed here and in Europe to destroy . . . from three-sevenths to one half of the metallic money of the world, is the most gigantic crime of this or any other age.”
One feature of this campaign was the deftly crafted coup that banned the coinage of silver dollars, in a bizarre incident that Del Mar described as “The Crime of 1873.” It was accomplished with such stealth, via two bills with dovetailing language, that virtually no public official was aware of it for almost two years, not even President Grant who signed it into law. The specific intention or effects of the legislation did not become generally known to the nation until it was revealed in a letter to the editor in the Boston Globe in March 1876, after which it exploded into a national scandal. Outrage over the incident vented in public debate that lasted well into the 1890’s.
One effect of “the crime” was to exacerbate a financial collapse that had begun in the fall of 1873, ostensibly triggered by speculation in railroad stocks. In response, a bill was passed by Congress in April 1874 which would have increased the supply of Greenbacks and national bank notes in circulation. President Grant vetoed the bill, an unpopular move that contributed to the Republican loss of the control of Congress in the elections of 1874. The resulting lame-duck session enacted the “Resumption Act” to redeem Greenbacks in gold. There was so much public resentment about the Act that it was nearly repealed by Congress in its 1876 session, failing to pass by one vote in the Senate. The Act was a bust anyway, as people almost universally declined to turn in their Greenbacks when the day arrived.
In 1878 a bill was passed to re-monetize silver, over President Hayes’ veto. It was a relatively benign measure since the silver to be monetized would come from American mines. A later measure would cause $378 million in new silver dollars to be coined, which was nearly the number of Greenbacks in circulation. The problematic aspect of the re-monetization initiative came in 1890 with the passage of the Sherman Act, which required the government to purchase on a monthly basis far more silver than American mines could produce. The only way it could be satisfied was to buy from Europe’s recently de-monetized hoards. This developed into a shell-game in which silver was bought with Treasury notes, which the Europeans redeemed for gold, which then had to be borrowed back at interest to maintain the redeemability of the notes. The American public was thereby fleeced for millions of dollars. This act was repealed in 1893.One feature of this campaign was the deftly crafted coup that banned the coinage of silver dollars, in a bizarre incident that Del Mar described as “The Crime of 1873.” It was accomplished with such stealth, via two bills with dovetailing language, that virtually no public official was aware of it for almost two years, not even President Grant who signed it into law. The specific intention or effects of the legislation did not become generally known to the nation until it was revealed in a letter to the editor in the Boston Globe in March 1876, after which it exploded into a national scandal. Outrage over the incident vented in public debate that lasted well into the 1890’s.
EMERGENCE OF THE POPULIST MOVEMENT:
Having been thwarted in their attempts to work through the major parties, many supporters of lawful United States currency formed splinter parties, the rallying cries of which became “Greenbackism” and “Free Silver.” These, in turn, formed the political core of the “Populist” movement. It is difficult for the present-day citizen to realize just how important monetary issues were to the electorate. The scourge of late 19thcentury deflation caused Benjamin Anderson, an early 20th century theorist, to observe:
“Nor is the tremendous agitation over bimetallism, involving a literature so great that no man could dream of reading it all, involving great political movements, presidential campaigns, great congressional debates, repeated legislation, international conferences, etc. for 20 years, to be explained on any other ground than that the world felt practical, important, and unpleasant effects on industry and trade from the inadequacy of the money supply.”
The upshot of the co-option of the major parties, and subsequent attempts to address it by third parties, was that the political will for genuine monetary reform was hopelessly splintered and confused. The sentiment for the monetization of silver on the part of many populists was an understandable response to the draconian contraction of a money supply limited by gold, but it also partook of some of the same defects in definition and function that plagued the yellow metal. The movement was obsessed with the monetization problem, but did not understand money well enough. As a fractured pro-Greenback majority grew, the Republicans supported the bankers, the Democrats were co-opted, and not surprisingly, bank notes again gained ascendancy as currency. There were, however, prominent dissenting voices even within the major parties. Republican President James Garfield declared:
“Whoever controls the volume of money in any country is absolute master of all industry and commerce . . . And when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.”
Three-time presidential candidate for the Democratic Party, Williams Jennings Bryan, declared in his famous Cross-of-Gold speech:
“The gold standard has slain its tens of thousands. If they ask us why we do not embody in our platform all the things that we believe in, we reply that when we have restored the money of the Constitution, all other necessary reforms will be possible, but until this is done there is no other reform that can be accomplished.”
And concluded:
“Having behind us the commercial interests and the laboring interests and all the toiling masses, we shall answer their demands for a gold standard by saying to them, you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.”
FARMERS & LABOR GET ORGANIZED:
The Grange movement was successful in bringing about measures to regulate monopolistic railroad and grain warehouse practices. In addition, the birth of the cooperative extension service, rural free mail delivery, and the farm credit system (a network of borrower-owned cooperative lending institutions and related service organizations) were largely due to Grange lobbying. It joined forces with the Knights of Labor, which were founded in 1869, and grew into one of the most influential labor organizations of the 19th century. Together they became the champions of “progressive era” causes, which included the demand for an end to child and convict labor, equal pay for women, a “progressive income tax,” and the cooperative employer-employee ownership of mines and factories.
Perhaps the most important initiative to emerge out of the Grange was the Farmer’s Alliance, a movement designed to help farmers bring their product to market at a fair price by forming agricultural cooperatives that would eliminate the middleman. Their most notable proposal was the Subtreasury Plan. This called for the establishment of federal warehouses for storage of nonperishable crops so that they could be released to the market in a gradual way that didn’t undercut prices. Farmers would pay nominal charges for handling, storage, and insurance. In addition, they would be allowed to borrow up to 80 percent of the local market price on the products deposited, while the annual interest rate on these loans would be held to 2 percent or less. The program would be funded with newly-printed money, until the volume of circulating currency reached fifty dollars per capita, a volume associated with the prosperous war years.
The Subtreasury Plan failed to be enacted in the late 19th century “populist” era, but it did serve as a model for the WWII farm-parity legislation (describe below) that was instrumental in pulling the economy out of the Depression, financing WWII, and setting up the United States as the preeminent “superpower.” It also represented an advancement in monetary thinking, in that the issuance of new money would be coordinated scientifically with the actual production of the land and labor, with due consideration being given to assure the producer a price for his product that would cover his production costs, yield a profit sufficient to pay his livings expenses, and provide the seed money for another round of production.v
MANIFEST DESTINY:
The newly rejoined Union expanded westward under the banner of “Manifest Destiny.” It was a period known for inhumane disregard for the aboriginal inhabitants that were deemed to be in the way. I would assert that this was not an inherent result of the American Revolution, but rather an aberrant dynamic that violated it in form and spirit. While it was true that the nation was destined to unfold westward in ways that would cause transcendent changes, it was also founded on inspired principles in large part inherited from its aboriginal inhabitants and the more inspired contributions of its diverse immigrant cultures.
A more fitting model for its inception might be the Quaker vision of a “Holy Experiment,” as established by William Penn, the founder of Philadelphia and the Pennsylvania Colony. The King had granted Penn the land, but he still treated the native inhabitants as the legal owners, and purchased it from them at fair market value. Penn established no forts or garrisons, and resorted to no violence in staking his claim. The Quakers regarded the red men as brethren who worshiped the same Great Spirit. The result was the “Long Peace” that endured for 70 years, and was undisturbed by hostility or armed conflict. The Quaker Colony initiated many of the practices that were to become hallmarks of the ethos that makes us proud to distinguish ourselves as Americans. This included a pro-active open-door immigration policy, an extraordinary welcoming of religious diversity, a self-image as a “melting pot” of disparate peoples, free tracts of land to immigrants (thus pioneering the policy of “homesteading”), free public education, an elected government, and the first written constitution with provisions for an amendment process. The Quaker experiment greatly influenced later personages who were seminally influential in the founding and shaping of the new nation, including Ben Franklin and Ralph Waldo Emerson.
Other streams of culture and creativity which originally or eventually augmented this founding impetus included the contributions of Africans, Hispanics, Scotts and Irish, mainland Europeans, Asians, Jews, Muslims and others. In addition there arose in virtually all areas of creativity and endeavor a spirit and genius that seemed to arise essentially from the American soil itself. All this combined in an alchemy that produced a rich and robust culture, one which virtually all parts of the world find enticing. Potentially, America is truly a “city on the hill.” This opens up the possibility of a whole new, or should we say lost, vision for this country that is outside the purview of this treatise. It is a story of immense beauty and power, but it is yet to be fully told.
The perverse chapters in the unfolding of the America’s “Manifest Destiny” were not so much a result of any genetic evil nature on the part of immigrant settlers as they fled the tyranny of the “Old World” to find life in the “New,” but was more a product of the lust for precious metals (gold especially), and the injection of European bank-money which financed the Robber Barons as they pushed their relentless rails, concomitant enterprises, venal politics, and racist doctrines across the land. Corrupt money dominated the dynamic and character of the westward growth, much as for the colonial expansion in the rest of the world.
THE FEDERAL RESERVE ACT:
The half-dozenth or so banker-caused financial “panic” since the Civil War occurred in 1907, and provoked a public outcry for monetary reform. In response, Congress established the National Monetary Commission in 1908, naming to it a number of representatives of the international banking establishment. They toured Europe for two years at taxpayer’s expense, and then held a super-secret meeting at Jekyll Island, Georgia at a hunting club owned by J.P. Morgan (the main representative of the Rothschild bank in America). Years later when the meeting was public knowledge, the New York Times noted that “One-sixth of the total wealth of the world was represented by the members of the Jekyll Island Club.” Among the five people present were Senator Nelson Aldrich (maternal grandfather of Nelson Rockefeller), and Paul Warburg, a German banker. It was there that the essence of what later became the Federal Reserve Act was formulated. It was authored mainly by Warburg, but was represented to Congress as the Aldrich Bill. It was defeated in 1911, in part due to the promise of a veto by President Taft. The bankers then induced Theodore Roosevelt to enter the next Presidential contest under the so-called Progressive “Bull Moose” Party, thus splitting the Republican vote and insuring Taft’s defeat.
This set the stage for the passage of the Federal Reserve Act. It appears that the defeated Aldrich bill was repackaged with minimal modifications and reintroduced as the Glass Bill, after Chairman of the House Banking and Currency Committee, Carter Glass. The issue was joined in a momentous contest. Glass commented that “nothing in (President) Jackson’s battle against the U.S. Bank Charter” surpassed the intensity of the battle over the Federal Reserve Bill. The Bankers were publicly against it, but that was a PR ploy orchestrated by the money-power interests behind the scenes, and designed to dupe the public into thinking that it was inimical to the interests of the hated Wall Street bankers.
The opposition to the bankers’ agenda by champions of a stable public currency was passionate and principled, but divided. They held differing views on whether the bill as proposed would give the bankers the balance of power they so much dreaded. Representative Charles Lindbergh, Sr. of Minnesota and Senator Elihu Root of New York both opposed the bill, but Senate Banking Committee Chairman Robert Owen, then Secretary of State William Jennings Bryan, and President Woodrow Wilson each supported it.
Central to the story is the role of the President. By most accounts he was a decent and well-meaning man, but in the condescending words of J. Laurence Laughlin (the University of Chicago professor who was chief propagandist for the Aldrich bill), “It goes without saying that . . . Mr. Wilson was not an expert on money and banking.” He was besieged on all sides, but he had his principles and held his ground. In one famous incident, Chairman Glass pressed Wilson to appoint at least minority banker representation on the Federal Reserve Board. As Senator Owen tells it, “After a discussion of two hours, approximately, the President coincided with my contention that the Government should control every member of the Board on the ground that it was the function of the government to supervise this system, and no individual, however respectable should be on this Board representing private interests.” Undaunted, Glass led a delegation of bankers to the White House to protest the President’s decision. Wilson asked them, “Will one of you gentlemen tell me in what civilized country of the Earth there are important government boards of control on which private interests are represented?” After what Glass described as a “painful silence,” Wilson continued, “Which of you gentlemen thinks that railroads should select members of the Interstate Commerce Commission?” Glass later admitted, “There could have been no convincing reply to either question.”
On June 23, 1913, the President made clear his intent to a joint session of Congress:
“And the control of the system of banking and of issue which our new laws are to set up must be public, not private, must be vested in the Government itself, so that the banks may be the instruments, not the masters, of business and of individual enterprise and initiative.”
There was a large contingent in Congress who supported Wilson’s sentiments, but were opposed to the bill because they feared it gave the bankers enough leverage to take over the system. Congressman Lindbergh, leader of the opposition in the House, declared in a speech from the floor:
“This act establishes the most gigantic trust on earth, such as the Sherman Antitrust Act would dissolve if Congress did not by this act expressly create what by that act it prohibited. When the President signs this act the invisible government by the money power, proven to exist by the Money Trust investigation, will be legalized.”
“The greatest crime of Congress is its currency system. The schemiest legislative crime of all the ages is perpetuated by this new banking and currency bill”.
In the Senate, Elihu Root gave a widely acclaimed three-hour speech, that even Glass admitted was the most memorable part of the debate, in which he reasserted the Constitutional duty of the Congress to control the currency, and objected that Section 16 of the Act delegates an unlimited power to issue currency to the Federal Reserve Board of Governors.
Notwithstanding strong and eloquent opposition, the Federal Reserve Act passed and was signed by Wilson into law on December 23, 1913 (a Christmas-impending time chosen, evidently, to insure that many members in opposition were not present). A new era in American history had begun. By this act the Congress had officially abrogated its Constitutional legislative responsibility to create money to a private corporation. This is confirmed years later, in 1957, in an illustrative exchange between Bruce Spence, chairman of the House Banking and Currency Committee, and William McChesney Martin, chairman of the Federal Reserve Board of Governors:
Chairman: When we delegate power to an agency, without any standards or limitations or definitions or restrictions, it is a legislative power that we delegate.
Mr. Martin: That is what I conceive . . .
Chairman: We have delegated that to the Federal Reserve
Mr. Martin: That is correct, sir.
Chairman: Without restrictions or standards.
Mr. Martin: Oh, yes, indeed.
I would argue that “Federal” and “Reserve” are deceptive terms that mask the true nature of the institution. They would be more accurately translated “Private” and “Corporation.”
It wasn’t long before those who had supported the Federal Reserve Act began to have doubts. In 1916, Wilson lamented:
“I have unwittingly ruined my country . . . A great Industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the Nation, therefore, and all our activities are in the hands of a few men . . . We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world – no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of small groups of dominant men.”
William Jennings Bryan wrote:
“That is the one thing in my public career that I regret – my work to secure the enactment of the Federal Reserve Law.”
Senator Owen said:
“The people did not know the Federal Reserve Banks were organized for profit-making. They were intended to stabilize the credit and currency supply of the country. That end has not been accomplished. Indeed, there has been the most remarkable variation in the purchasing power of money since the System went into effect.”
Even Carter Glass eventually had second thoughts, ruing in 1938:
“I had never thought the Federal Bank System would prove such a failure. The country is in a state of irretrievable bankruptcy.”
During the 1920’s Henry Ford and Thomas Edison teamed up to express their views on the monetary system. One particular proposal was that the government should issue currency rather than bonds to finance the huge Muscle Shoals nitrate plant in the Tennessee River Valley. Among quotes attributable to Ford are:
“The function of money is not to make money but to move goods.”
“The youth who can solve the money question will do more for the world than all the professional soldiers of history.”
“It is well that the people of the Nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
Thomas Edison captured the matter with such masterly good sense that he is quoted below at some length:
“If our nation can issue dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good, also. The difference between the bond and the bill is that the bond lets the money broker collect . . . whereas the currency pays nobody but those who contribute . . . in some useful way.”
“If the Government issues a bond, it simply induces the money brokers to draw $30,000,000 out of the other channels of trade . . . if the Government issues currency, it provides itself with enough money to increase the national wealth . . . without disturbing the business of the rest of the country. And in doing this it increases its income without adding a penny to its debt.”
“. . . it is the people who constitute the basis of government credit. Why then cannot the people have the benefit of their own guilt-edged credit by receiving non-interest-bearing currency . . . instead of bankers receiving the benefit of the people’s credit in interest-bearing bonds?”
“If the United States Government will adopt this policy of increasing its national wealth without contributing to the interest collector – for the whole national debt is made up of interest charges – then you will see an era of progress and prosperity in this country such as would never have come otherwise.”
“And it is the control of money that constitutes the money question. It is the control of money that is the root of all evil.”
“There is a complete set of misleading slogans kept on hand for just such outbreaks of common sense among the people. The people are so ignorant of what they think are the intricacies of the money system that they are easily impressed by big words. There would be new shrieks of ‘fiat money,’ and ‘paper money,’ and ‘greenbackism,’ and all the rest of it – the same old cries with which the people have been shouted down from the beginning.”
“Ford’s idea is flawless. They won’t like it.”
Hark the entreaties of the broken
Souls who have borne usury’s curse,
Debt-money’s train of death and woes.
The huddled betimes scarce awoken
Soon to find wit and will aburst,
The hour, impending, no one knows.
The meek get ready to inherit the earth,
The earth prepares to receive the sky,
The youth anon will discover a future,
The wise, in love, smile – and now you know “Why?”
- Richard Kotlarz
PROLOGUE:
This document constitutes one whole thought. Consequently it must be read to its conclusion to comprehend its meaning. It started out as a list of talking points for a meeting of the local peace coalition with our congressman. The conclave never came off, but the topic swelled with the writing, so I persisted to see where it would go. The target audience was not so much the legislator, but rather my peace-coalition compatriots. I had found myself moving away from the message of the movement in the sense that I was increasingly put off by its negative tenor. The answer to the Iraq War, so it seemed to be saying, was to find and punish those who were to blame. Appropriate accountability notwithstanding, I saw no solution in finger-pointing polemics. I needed for my own inner integrity to write out a strong exoteric critique of the situation from a monetary perspective, but then resolve it in a way that encouraged the reader of whatever stripe to contemplate his or her own role in the matter in a way that came to grips with their own responsibility.
That said, this is a vital story of sweeping scope; a veritable allegory of the gods, if you will. It is appropriate, then, that any tendency for arcane tedium has been avoided, and a bracing tenor of language in the manner of an epic tale embraced. To some readers it may seem at places strident or partisan, but it arrives full-circle, I believe, to a more self-reflective view in the fullness of the narrative. A previous version of this treatise has found a resonance across a spectrum of readers that is deeper and wider than I could possibly have anticipated. What is more, the effort has developed into a personal quest into matters economic in the broadest, most constructive, and (hopefully) visionary sense.
The original version of this document was composed in the autumn of 2003, and so some of the references will seem dated. We as a nation are, supposedly, in the process of “pulling out” now, but leaving military bases, civilian contractors and governmental advisors behind. Revisions have been made where appropriate to maintain the conceptual integrity of the piece, in spite of the somewhat disjointed time references. The major change from the original is the significantly expanded overview of world and U.S. history as it is woven around the thread of money. This comprises a bit over half the treatise, but is absolutely necessary to provide a background for the discussion. Indeed, the fact that it is missing from the common knowledge of our culture literally cripples our ability to discover who we are as a people, how we became that way, and any serious path to the future.
I have endeavored to de-emphasize the political aspects of the war.
Charles Dickens opened his classic novel A Tale of Two Cities with perhaps the most famous of all literary curtain risers (after “In the beginning . . .” that is); i.e. “It was the best of times, it was the worst of times . . .” He was referring specifically to the nascent-industrial England of the late 18th century, but the same can be said of the present epoch. Indeed, the contemporary global civilization has stretched this dichotomy to the most extreme polarity possible.
It can be said that a large portion of humankind at present lives in a cornucopia of unfolding progress, possibilities and richness that fairly beggars the imagination. In the historically-brief last century or two it has plumbed the depths, spanned the heavens, opened the floodgates of material abundance, developed vast technological capabilities, shrunk the world into a global village, exploded the boundaries of artistic expression, enacted sweeping social and political reforms, unlocked the atom, mastered incredible techniques for healing, and approached the mysteries of the creation of life itself. Yet, for all of that, it may be fairly asked if we are not approaching the brink of the incomprehensible suicide of civilization, or even the destruction of earth itself, through any number of possible avenues; be it the spontaneous unraveling of the ecosystem; the overwhelming of the last barriers to infectious pandemics; the revitalization of class, ethnic, racial or religious intolerance; the grinding realities of agricultural, industrial and service labor; a decline of culture; snowballing monetary indebtedness; the ever more maddening pace and dehumanization of modern life; the exhaustion of material resources; the collateral consequences of an imperialist New-World-Order hegemony; nuclear holocaust; or the wrath of an angry creator.
What are we to think of this impossibly contradictory state of affairs? The juxtaposed “best” and “worst” of times is in actuality not a contradiction, but rather an expression of the poles of the overarching paradox. What, then, is the paradox? This may be expressed many ways, but in an outward sense it surely is reflected in the reality that humankind, in this time of vastly expanded financial activity, has not mastered money. In what life does money not exist as the most polarized of love/hate, embraced/condemned, or sought/feared elements? It is indeed the essential riddle of our time.
The fact that the subject is money dictates that the discipline of banking be brought most particularly under the green shade of scrutiny. The problem, though, is by no means limited to those involved overtly in the banking or financial professions. In this modern era, we are all economic creatures, and do in fact mould the form of the economic life with our thoughts, feelings and actions. If the economic cake were sliced along a different cross section, any number of other walks or categories of life could be held up for similar treatment.
If there is a “bottom line” to this story it is that, while different “classes” (a divisive word, to be sure) of society may indeed have their respective economic issues, there is ultimately no us-vs.-them factor in their resolution. This premise is held forth adamantly in the fullness of the following narrative. As fellow sojourners in the earth we are all in this together; both as agents for the problem, and as hopes for the cure. If there is any distinction to be said for people of finance it is that theirs is a special calling in an age when the full blossoming of the economic life is coming providentially to the fore.
In the course of performing any economic activity within the present system I suspect that we all experience on some level an existential split, and stand in our respective ways in the need of liberation and healing. In this time of great historical reckoning and economic unfoldment, the chasm occasioned by matters of money, both between people and within them, can no longer be accommodated. The space for a free dialogue between the mavens of money and body of the social order must be opened up for a bracing, but empathetic discourse. What is respectfully offered below is intended to plant the seed for just that. Clearly, the truth cannot be spared, but in our quest there is no place for attitudes of condescension or recrimination.
Thank you for your thoughtful consideration.
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SHOCK & AWE:
Beginning on March 20, 2003, the American public was subjected to an unprecedented period of Shock-&-Awe war-media immersion. It is time to slow down and examine what has transpired, how it fits into a historical perspective, what it bodes for the future, and what it tells us about ourselves. In my view, a genuine comprehension of the overarching picture of what this war and subsequent occupation represent, is essentially missing. In crucial respects, I hear nary a relevant word on the subject. I propose in this treatise to put on hold the familiar political-speak, posit a new historic/economic/social paradigm from which to reason, and then reconstruct the dialog from a completely fresh point of perspective. This discussion will venture into unfamiliar territory, so it will require of the reader some patience and a suspension of judgment. There is no cultural rapport within which this matter can be properly discussed at present. A new worldview from which to reason will be delineated, and the dialog will be reconstituted in a concise manner in short order. We will then come full-circle back to the subject of the Iraq war, but this time with a new understanding. At least that is the idea. Reiteration of points of the familiar debate will be minimized. Let us begin.
OUT OF THE GARDEN:
In ancient times, mankind awoke to a wondrous cosmos that came into being without the benefit “Money”. According to the Judeo/Christian/Islamic creation story mankind was once united with God in a veritable paradise, the Garden of Eden, where he existed in a state of innocence. He was, however, led astray by a clever spirit, and began to have his own ideas about how things ought to be. A state of estrangement from his Creator, and exclusion from the primordial paradise where all his needs were naturally provided, followed.
Now to meet his needs, mankind experienced it as necessary to establish artificial modes of exchange for energy and materials that occurred outside the natural proximities and flows of the primordial paradise. The most rudimentary form of this was barter, the direct exchange of goods. Eventually barter proved to be too cumbersome, so he came up with the idea to use portable and valuable commodities (precious metals in particular) that could stand in for physical wealth, thereby allowing for greater flexibility of trade.
Finally mankind realized that he could trade in a medium created from his unique powers for abstract numerical thinking. We call it “money.” In a material sense it was a stroke of genius. Ideally it could expedite the free exchange of all things in all places. It even became possible to trade goods of any size or description from opposite sides of the world with no requirement for physical transport whatsoever; only the reassignment of abstract credits in virtual space.
It should be noted that this transition from barter, to precious metals, to abstract monetary credits was not a strictly sequential one. Barter is still practiced, and money goes back to ancient times. It does, however, represent an evolution of the exchange idea, and a progression of the preponderance and sophistication of the manner in which it is practiced.
Each one of these modes of exchange had a shadow manifestation that presented a unique potential for trouble and abuse. To bypass barter, one could forcibly take items from a potential exchange partner. History is rife with tales of conquest and plunder in which the more powerful did just that. The adoption of valuable commodity mediums of exchange introduced the possibility of controlling the physical reality of the trade through manipulation of the medium, instead of overt possession of the goods. It has a legitimate place in history as a transition strategy between physical barter and purely abstract credit transfers, but the mesmerizing allure of precious metals tends to bring out the dark side of human nature. Gold, for example, has a long tradition of being stolen, controlled and hoarded with results that were often deleterious in the extreme. Its process of extraction is associated with a litany of inhumanity. It has provoked whole societies of otherwise decent and principled folk to overrun their more aboriginal brethren in genocidal frenzy to appropriate the shiny treasure they were haplessly sitting upon.
The potential for mischief occasioned by money exceeds that of the other modes of exchange. Because it is amenable to manipulation via abstract numbers, the creation and control of money requires virtually no physical possessions or resources. All that is needed is the de-facto privilege or authority to effect its creation out of thin air, and control the matrix of rules under which it is traded. Yet it holds the potential to dominate the physical economy in its entirety, and the whole range of social, environmental, technological, intellectual, political, and other factors implicit in that.
The power of money creation is an indispensable prerequisite of “sovereignty.” Whoever has the money creation power is sovereign, and the rest is for show. This has long been recognized by rulers of every description. This is not primarily about who spends it, who is wealthy, or who makes the campaign contributions. It is about who has the “sovereign” privilege or authority to create it. All other issues are derivative.
I would assert that the story of whoever exercises the money creation power, the mode of its implementation, and the means of its use or abuse is one of the central threads of history, and all other aspects are woven about it. No army has ever been formidable enough to deploy, nor any king sufficiently divine to reign without its consent and sponsorship. That this includes the present American and British governments, and the military force in the Middle East goes without saying, yet I dare say there is virtually not a word in the popular debate which shows an understanding of the root and why of this, even from the anti-war side. The existence of money is treated as an a priori assumption, and our awareness joins in somewhere in the course of its flow. Much like the wind, our lives are immersed in and buffeted by it, but we know not from whence it comes, nor whither it goes. To be sure, there is a lot of talk about money, but it all falls within the notions of popular debate concerning taxing and spending, military funding, campaign financing, corporate greed, and a host of other ancillary issues, which are not properly understandable without taking into account the role of the money creator.
The non-material nature of money is at once its blessing, and its curse. Ideally it has the potential to be eminently benign and beneficial. The downside is that its abuse can be accomplished in the abstract realm of number. This means that it does not have to physically conquer anything. Indeed, it can control any would-be conqueror. To compound the problem, because its essence is not materially visible, this abuse can be hidden within a multitude of obfuscations, manipulations and mystifications. Taken to its logical extreme, a culture can be so brainwashed that any real comprehension of the history or machinations of the monetary system can be virtually expunged from the common awareness, even as it lays upon the populace a yoke which is crushing, yet so woven into the warp and woof of our individual and collective lives that we cannot detect its presence. When that is accomplished, an entire world of civilized people can be marched off into the adventurism of a mounting world conflagration for reasons that it does not fully comprehend. It is true, there will be good people by the millions who will rise up in protest, but they will be so befuddled about what is actually driving events, that in the end they will be minimally effectual at best; co-opted and used at worst. That is precisely what is happening at present.
HISTORICAL ORIGINS OF THE MONEY GAME:
There is a recurring historical cycle rooted in a perverse practice of money that can be illustrated by going back to ancient Iraq, otherwise known as Babylon. The priests of Baal controlled not only the religious observances, but also the monetary system. They would readily issue enough credit to the farmers in the spring to plant their crops, but they would also insure that come harvest time, there would not be enough money in circulation in the aggregate to retire all the debt incurred during the planting season. Some farmers would do better than others, of course, but it was a mathematical certainty that a portion of them would have to come back hat-in-hand to the priests and ask for a loan to tide them over. They were happy to oblige. The next season the farmers were working not only to cover their costs, but also to pay the “debt” to the priests. This created a compounding debt spiral in which those who were productive eventually lost everything and became indentured servants to the priests who produced nothing, and their civilization collapsed.
This pattern is not exceptional. As stated in the Acres, U.S.A. newspaper, a major alternative economics forum:
“This business of borrowing money into circulation, then withholding more money creation to make payment and debt service impossible, haunted Persia, cursed Greece and Rome, annihilated the defense of Carthage, and presided over death and wars between Deuteronomy and the eve of the 1948 presidential election.”
This process continues on a vastly greater scale today, and it drives virtually all issues, whether they are nominally economic or not.
Between approximately 1500 and 1000 BC the monetary practice of the Mediterranean societies evolved from a cattle-based to a gold-by-weight standard. This was facilitated by that fact that there were great temple cults that possessed gold hoards large enough to control the value of yellow metal. They, in turn, became effectively the bankers of the era (which explains why banks and bankers’ houses have traditionally imitated the pillared architectural style of ancient temples). With the secular control of money to augment their divinely appointed status as the representatives of the gods, these temples wielded a pervasive influence over all facets of society.
“NOMISMA” IN ANCIENT GREECE:
Money in ancient Greece was called “nomisma”, because it attained its status via the agency of the “law,” for which the Greek work is ”nomos.” This was affirmed by Aristotle when he stated, “. . . and this is why it has the name nomisma – because it exists not by nature, but by law (nomos) . . .” Plato demonstrated an acute awareness of the dangers of precious-metal money, and specified a nomisma currency for his mythical Republic.
In the Greek city-states, the power to coin money was in the hands of a political authority that was linked to the temple cult of a favored god. These cults, in turn, often operated internationally as virtual bankers. A division began to emerge because the civil authority (which was tied to the residents of one particular territory) found that it often had different interests that the temple cults (who were more internationally oriented in their perspective). As a result of this struggle for the control of money, resulting in extreme cases in military conflict, an early separation of religion and the state emerged.
The first documented attempt to establish a nomisma money system is related by Greek historian Plutarch in his classic work of parallel biographies, Parallel Lives. In the 8th century BC, the Spartan ruler Lycurgus instituted a constitution, land reform, and other measures aimed at cleaning up a corrupted society. A pivotal part of this campaign was the introduction of a new monetary system that banned the use of gold and silver for domestic currency, and mandated instead the use of iron discs. Moreover, these discs were rendered too brittle for other purposes by dipping them into vinegar while they were hot. Any “intrinsic value” (commodity value of the metal itself) was thereby destroyed, and they became money by “fiat” (a decree of the sovereign which enters into law). This monetary regime worked well, as Sparta emerged as a Hellenic power for over three centuries. Unwisely, it abandoned its iron money around 415 BC after it became entangled in foreign conquests that captured large quantities of gold and silver, but not before Sparta’s salutary experience with money was imitated by other city-states.
By about 600 BC, Athens had slipped into a deep economic crisis due to the usury (“interest” charge) attached to coinage. The class of free small farmers was vanishing, as land ownership become concentrated in the hands of an oligarchy. In many cases, farmers were bound into slavery to satisfy their debts. According to George M. Calhoun, author of Business Life of Ancient Athens:
“Before the introduction of coined money the peasant farmer borrowed commodities and repaid the loan in kind, and . . .was probably able to meet the obligation without great difficulty; but after the introduction of coined money the situation became decidedly more difficult . . . he must take a loan of money (to) purchase his necessary supplies at a time when money was cheap and commodities dear. When a year of plenty came and he undertook to repay the loan (in money), commodities were cheap and money was dear.”
This harvest-time dilemma of having on hand one year’s supply of crop, but essentially only one day’s market in which to sell it to pay his debt, has always been the plight of the farmer, and explains in large measure why farmers, even to the present day, have had a difficult time achieving enough influence in the marketplace to get a fair price for their product.
In a campaign of reforms that revitalized Athens, the ruler Solon cancelled existing debt contracts, and returned land that had been seized. He banned the putting up of personal slavery as security for debts, and bought back and returned to Athens farmers who had been sold into slavery abroad by their creditors to satisfy their debts. To establish a reliable basis for farm income, Solon decreed a floor price for each agricultural product. Coinage was adopted in which the metal in the coin was of less value than the stamp of the sovereign it was impressed with, making it essentially fiat currency established in the law. With Solon’s reforms as a foundation, Athens rose to its zenith as a civilization.
The historic record indicates that the rise of classical Greek culture was in significant part tied to its adoption of sound money practices that eschewed both usury and precious metals as a basis for the issuance of currency. In the end, these salutary measures became subsumed by outside forces, and the preeminence of the Greek culture faded, but not before a great imitator arose to the west.
ROME:
About the time Lycurgus was introducing his brittle iron currency to Sparta, a village in the Italian peninsula adopted the use of a base-metal alloy, bronze (copper, with minor parts of tin and lead), for coinage used in domestic trade. The decision was made by Numa (716-672 BC), Rome’s second king, who considered himself a descendent of the Spartans. In fact, in Parallel Lives, Plutarch described Lycurgus and Numa as parallels. He inaugurated “Pontifex Maximus,” a religious institution that played a prominent role throughout Roman history, and continues to this day in the Catholic Church. After Numi (and he after the Greek nomisma), they called their money “nummi” or “numisma.”
Rome was not short of precious metals it could turn into coins. The adoption of a base metal was a conscious move to isolate the fledgling society from the corrupting influence of the gold and silver hoards of the merchants and the temple cults to the east. This effectively set Rome on a path whereby it was able to develop independently according its own resources, virtues and values. The fatefulness of this move prompted Henry Noel Humphries, author of Ancient Coins and Metals, to write, “The Roman adoption of a national and exclusive coinage produced a revolution in the monetary system of all civilized nations.”
Rome became a republic in 509 BC. It dispatched a delegation to Athens to study the reforms of Solon in 454 BC; some 145 years after they were enacted. The fruit of their investigation found their way into a Roman law of that year which standardized values for coinage, and linked them to commodities in a way that could be readily understood. Upon the foundation of a stable monetary system defined in the law, a legal order emerged which was of such quality that it is still consulted today. It embodied the greatest separation of religion and state that the world had yet seen. As told by Alexander del Mar, the preeminent monetary historian of the 19th century, it was the era of republican Rome’s numerary system:
“. . . during which all that was admirable of Roman civilization saw its origin, its growth and its maturity. When the system fell (i.e. was changed to being gold-based), Rome lost its liberties. The state was to grow more powerful and dreaded, but that state and its people were no longer one.”
It took until 266 BC for Rome to consolidate the Italian peninsula into one commonwealth, just in time to square off against its arch-enemy Carthage in two great conflicts known as the Punic Wars (264-241 BC and 218-201 BC). Carthage was a Phoenician society on the North African coast that acquired its great wealth through trade in goods and precious metals. The epic conflict was fought, not only between armies, but also monetary systems. The Carthagenian armies (led by Hannibal in the second contest) roamed and ravaged the Roman countryside. Rome fought back by demonetizing its nomisma currency in the areas controlled by the invaders in an attempt to cripple the local economy which the enemy was obliged to depend upon in its foraging for supplies. Carthage countered by importing its own precious-metal coinage.
The tactic had momentous consequences. Rome eventually prevailed in the military contest, but the flooding of much of its territory with the foreign precious-metal currency over a prolonged period of time fundamentally altered the culture, and planted the seed for its ultimate destruction. The pre-war republican ideal of self-sacrificing egalitarianism and service to the society was replaced by the “ethics” of avarice. The society became divided between an emerging plutocracy that had become addicted to its precious metal-hoards, and the hard-pressed masses of working people who did not posses such. The farmers were increasingly unable to hold onto their homesteads as they were conscripted into military service in the Legions, and dispatched to remote realms in pursuit of ever greater quantities of metallic treasure, plus captured slaves who would fill the workforce on expanding plantation estates called “latifundia,” which in turn displaced them from the land, thereby completing the circle of disenfranchisement. With the yeomanry and moral fiber of the society lost, a long decline was initiated which eventually consumed the strength of the republic in the debaucheries of empire.
The consequences of the new gold coinage caused the Roman historian Pliny the Elder (23-79 AD) to rue:
“The next crime committed against the welfare of mankind, was on the part of him who was the first to coin a Denarius of gold. . . . would that gold could have been banished forever from the Earth, accursed by universal report, reviled by the reproaches of all the best men, and looked upon as discovered only for the ruin of mankind.”
The breakdown of the Roman monetary system marked the end of the lawful republic. The society was ripe for dictatorship. At age 36, Julius Caesar (100-44 BC) was elected to the position of Pontifex Maximus. After having himself deified at the Temple of Jupiter Amon in Libya, he returned to Rome, not as a mere dictator, but as a god. The control of money was formally vested in the office of Pontifex Maximus, and the separation of religion and state in Rome was thus ended. The Empire officially converted to a gold standard in 45 BC, and the gold/silver ratio was decreed to be 12-to-1 (i.e. it took 12 oz. of silver to equal the value of 1 oz. of gold), a legal formula that remained in force until the fall of Constantinople in 1204 AD.
As soon as gold had been established as the basis for Roman money, Rome’s money supply began draining away to the orient. This was driven by a number of factors, including the importation of luxury goods, religious tithes sent to Jerusalem, and the usury charges on loans from Middle East lenders.
The most relentless force behind the phenomenon, however, was a “secret” that was protected from public scrutiny. Julius Caesar had fixed the gold/silver ratio for the empire by decree at 12-to-1, but in the orient, for reasons not wholly understood, it had long been pegged at about 6 or 7-to-1. This meant that a trader from one market could buy goods with whatever metal currency was cheaper, and sell them in the other in exchange for coinage that was worth roughly twice as much. This was in addition to his normal profit. For trade that met in the middle, the ample spread could be split. Brokers in the Middle East could pocket huge fortunes by exploiting the differential. The net effect for Western Europe was to see its supply of silver coinage disappear to the East, while gold was hoarded, causing a chronically-worsening shortage of currency. The problem could have been relieved by a return to a base-metal coinage established in the law, but this option would have ended the lucrative scheme. The differential between the east/west ratios was in effect from the time of Alexander the Great to the founding of the Bank of England.
The resulting shortage of coinage was relieved periodically by recapturing lost metal in military forays to the east, but still the draining of currency mounted. Finally, the resultant migration of financial power to the east was a major factor in causing the empire to split, with the Emperor Constantine establishing a new capital at Byzantium in 331 AD. From there he supplanted the diminished Pontifex Maximus by creating a new religious/monetary institution, the “Basileus.” This new center of power fiercely guarded its prerogative to control the minting of new money, even against Rome, for the next almost 900 years.
Much has been written about the supposed “fall of the Roman Empire” to barbarian hordes. Some modern historians, however, suggest the barbarians were actually not very numerous, and the physical assets of the empire remained intact right to the end. Could it be that the barbarians were merely the proverbial straw that broke the camel’s back of an empire that did not fall from without, but rotted from within after a long decline initiated by the abandonment of lawful fiat money by Republican Rome? Given the parallels to present situation of the United States (to be delineated below), this is a relevant topic for our time.
THE DARK AGES:
With the establishment of the religious and monetary authority in Byzantium, the Western Empire became a backwater. The system of vassal states set up under Roman governance degenerated into feudalism. As the money supply fled, commerce diminished, until even the form of taxes collected regressed from being in money, to “in kind” (i.e.-accepting for payment firewood, vegetables, chickens, and the like). Moreover, the monopolistic control of the right to strike coinage was enforced by military power to insure that the Basileus had no rivals. Western Europe descended into the “Dark Ages”, as culture fled with the wealth eastward to the Muslim world.
Charlemagne (742-814 AD) had himself crowned king of the Western Empire by Pope Leo on Christmas Day 800 AD. He attempted to revive the West through force of military conquest, and by re-starting and intensifying the mining of precious-metals with a large workforce of captured slave labor. He eventually stopped his own minting of gold coins, likely as a concession to the religious and monetary supremacy of the Basileus, and his new silver coinage drained away to the East as before. The West was left little better off monetarily for all his brutal efforts.
THE CRUSADES:
The West found itself in the position of being religiously eclipsed and economically prostrate. Its only hope for redemption seemed to lay with military incursion into the East, and so the impulse for the Crusades was born. Naturally, the enterprise was billed as a religious war against the infidel (a Christian “Jihad,” if you will), and there was without doubt much genuine religious fervor associated with the cause. Notwithstanding, it behooves us to not lose sight of the reality that the long process that eventually induced the migration of political, religious and economic power to the East had, arguably, a monetary origin. It all started when republican Rome succumbed to the seductive sway of gold.
The Crusades were a complex historical phenomenon, but they embodied one supremely pivotal moment that redirected the course of world history. The assembled army of the 4th Crusade embarked from Venice in June 1202. By the time the force reached its wintering-over quarters on the Adriatic, suspicions concerning the expedition’s true destination broke out into heated disputes. It was only then that the knights were informed that the planned objective for attack was not the Holy Land (via Alexandria), but rather Constantinople and the dreaded Basileus. Many were reluctant, but promises of great booty were made, and these knights on God’s mission were won over. On April 9, 1205 they attacked and took this largest and most splendid city of the Medieval world, and then loosed upon it an orgy of pillaging of fantastic proportions. In the process the great works of art gathered from ancient temples over the nine centuries of its dominance were melted down into coins or bullion.
The demise of the Basileus formally ended the monetary system that had held sway over Europe since the time of Julius Caesar. The fallout was transformative, as the money power slipped from ecclesiastic to secular control. Local rulers all over Europe resumed the minting of gold coinage, and commercial activity rebounded with the introduction of a more plentiful currency. A network of market towns and cities emerged. This renewed economic activity laid the foundation for cultural transformation as well. Fortunately, the great works of Greek philosophy, which had disappeared from Europe during the Dark Ages, were spared from the flames of Constantinople, and brought to the West.
A significant result of the First Crusade was the advent of the Knights Templar, whose avowed mission was to protect pilgrims traveling to and from the Holy Land. They were an order of fighting monks who took vows of poverty, but somehow this monastic order became by the middle of the twelfth century the most wealthy and powerful institution in Christendom, except for the Papacy. The meteoric rise of this of this organization out of such a humble purpose has inspired ever since a feast of speculation. Some have theorized that the organization was merely a façade for a sinister agenda, but the unquestioned courage and sacrifice in battle of the Knights would make that assertion seem simplistic at best.
What is known is that the Knights set up a system of credit clearing houses whereby a pilgrim could deposit his funds with the Templars back home, and reclaim them at a Templar agency when they arrived in the Holy Land, thereby protecting him and his money from the hazards of robbery en route. The stellar reputation earned by the order, fairly won by valor on the battlefield and trustworthiness in finance, inspired a wave of bequeathals of land and property in its favor. The fortune and skills thus amassed allowed it to emerge rapidly as the banking power in Europe. But, alas, they became too powerful too fast. King Philip of France, in league with the Pope Clement V, issued orders throughout his kingdom to have all Templars arrested at once on Friday the 13th, October of 1307 (likely source of the Friday-the-13th superstition). By this time there were an estimated 20,000 in Europe, but only ten-percent were fighting knights. They were easily overwhelmed, and subsequently tortured in a brutal inquisition.
A significant number escaped by ship, along with a goodly portion of their treasure. Their destination has been the subject of much speculation, but there is an emerging consensus that they found refuge in Scotland. This may explain why this storied land has been the origin of so many monetary innovators and schemers, such as John Law (a fugitive from English law and professional gambler who, from 1717 to 1720, was given control of the French State-owned bank, and brought the country to its economic knees with his “Mississippi Scheme”), William Patterson (founder of the Bank of England), and Adam Smith (author of the Wealth of Nations). The Templars played a significant role in the Magna Carta, and later showed up in the lodges of Freemasonry, which in turn were influential in the French and American Revolutions.
The city-state of Venice had been an indispensable staging area for the Crusades. It was the only European power with a fleet of ships capable of transporting armies. It had earned its economic niche as middleman for trade between Europe and the Far East. As such, it was privy to the differential in the gold/silver ratio between the East and the West, and worked the spread for its trading advantage.
Venice’s privileged position was due in large measure to its strategic location at the juncture of the overland trade route through Turkey, and the sea route through the Moslem-cleared Arsinoe (now Suez) Canal. This advantage was lost when the Portuguese discovered a new route to India around the southern tip of Africa, and the voyages of Columbus opened trade routes to the west, including to the Orient. These and other factors led to Venice’s decline, but not before it had financed the raising of the level of culture in Italy to the point where the Renaissance became possible.
A factor of note during the Crusades was the contrast between the conduct of Christian and Muslim forces. This was especially highlighted with respect to Saladin the Great (1138-1193), a Kurd born in Takrit (which is, coincidentally, Saddam Hussein’s hometown; a fact that no doubt fed his propensity to proclaim himself the modern Saladin). He united the Muslims to battle the Crusaders. His attitude was reportedly expressed in the advice to his son:
“My son I commend thee to the most high God, the fountain of all goodness. Do his will, for that way lieth peace. Refrain from the shedding of blood; trust not to that; for blood that is spilt never slumbers. Seek to win the hearts of thy people and watch over their prosperity, for it is to secure their happiness that thou art appointed by God and by me.”
Saladin’s ardent admirers have often included Christian biographers, who together with Arabs have celebrated his cultured chivalry. The Crusaders took Jerusalem in 1099 and murdered virtually all of its inhabitants, while boasting that the city was knee-deep in blood. Saladin re-took the city in 1187. He spared its residents and allowed them safe passage to leave, it being a holy city captured by the Muslims in a “just war.”
Upon hearing that his worthy opponent Richard the Lion Hearted was in the area, but with no horse on which to fight, Saladin sent to him a splendid steed. When Richard was wounded, Saladin offered him the services of his personal physician. At another time when he encountered the wives of captured knights he promised to free them if he could find them, and then made good on the promise. It is no wonder that Saladin’s reputation spread throughout Europe, and persists in mythical form to this today.
In contrast, when he captured the city of Acre, Sir Richard slaughtered the 2700 Muslim inhabitants without delay when their ransom was late.
Under the rule of a spreading ecclesiastical kingdom set up by the Christian forces, many horrors transpired. According to Dana Carlton Munro in The Kingdom of the Crusades:
“On more than one occasion the inhabitants were slaughtered after they received safe conduct to leave the city, and their bodies were burned or cut open to secure the gold which they were supposed to have swallowed.”
The contrast of cultures was not lost upon the Christian pilgrims. Munro reports,
“In Asia Minor many a pilgrim became a renegade to the Christian faith because of the good treatment received from Moslems . . . The common people said it was not necessary to capture cities for the Crusades because the Turks are better and more trustworthy than they who kept no faith with God or duty to neighbor.”
My purpose here is not to extol Islam, nor condemn Christianity. In the fullness of the story one could surely find instances of valor and debauchery on both sides. Also, it behooves us to take into account the fierce nature of Saladin the Warrior, and the grace Richard may, perhaps, have demonstrated in his better moments. Other historic episodes show Muslims as being deeply involved in the slave trade, and falling under the spell of precious metals in the course of their conquests. Neither the Christian or Muslim civilizations are bereft of shining moments, or descents into the mire. All this said, there remains an important point to be noted. That is that through what is called in the West the “Dark Ages” and “Medieval Period,” there flourished in the East a superior civilization. Moreover, the West is forever indebted to that society for preserving the fruits of early classical civilization, plus initiating great discoveries of its own. Would there even be a “Western Civilization” as we know it today without that critical service rendered by the Muslim world?
This is an important realization for our time because the era of the Crusades still holds a spell over modern worldviews, especially from the Muslim perspective. As they see it, they were the keepers of civilization until they were invaded and brutalized for no just reason. What is more, there has continued over the centuries since that time a follow-on campaign of conquest, exploitation and humiliation. The British imposed their colonial order. Other European powers made their own incursions into the area. Israel is seen as a toehold and forward base for continuing Western domination. The present military foray into Iraq and Afghanistan is only the latest chapter in the ongoing litany. Taken by itself, this may be a somewhat simplistic view of history, but it is not without merit.
Furthermore, the same monetary forces that set up the conditions for there even being Crusades in the first place are still active in the world, and are indeed driving the conflict in the Middle East today. They would have human life serve the avarice of privately-controlled money, rather than permit lawfully-issued money to serve the commonweal of humanity. The ultimate irony is that the principle by which the situation can be remedied exists at the heart of every authentic ethical and spiritual tradition, including those of Christianity, Islam and Judaism; that is the prohibition against usury [the practice of money earning money, or the forcing of life to serve money (i.e. usury, as in use-you-ery)].
In a limited sense the Crusades did accomplish their objective. That is, they did indeed break up concentration of religious and monetary power of the East, but at what terrible price in blood and horror? The betrayal of their avowed spiritual purpose, and the failure of the West to learn the monetary lessons of the early Greek and Roman experience, sent shock waves into the future that resound to this day. One can only imagine how different the world might be at present if the West had only understood its own historical contribution to monetary evolution.
USURY - THE MORAL DEBATE:
The destruction of the Eastern Empire precipitated a 500-year struggle for the control of the body and soul of men, as represented respectively by money and religion. The significant separation of religion and the state that had been achieved by the classic Greek and republican Roman societies was thoroughly undone in the combined 1200 year reign of the Pontifex Maximus and the Basileus. Now it was the task of Western civilization to rediscover its own lost wisdom. Weighing-in in the argument were Church scholars known as the Scholastics, many of whom were later canonized as saints. They devoted a major share of their attention to economic matters, particularly to the questions of “just price” and “usury.” They saw as their mission the formulation of a moral code to guide the rising practice of commerce. Their primary touchstone was not the Bible, but Aristotle. “The Philosopher,” as the Scholastics reverently called him, left no doubt as to his position on usury:
“The most hated sort (of wealth getting), and with the greatest reason, is usury, which makes gain out of money itself, and not the natural object of it . . . Wherefore of all modes of getting wealth, this is the most unnatural.”
The practice of usury had long been condemned in mankind’s moral and religious codes, but strictly speaking the taking of interest under proper conditions had never been prohibited. The distinction between the two concepts had traditionally hinged upon whether the lender was actually taking significant risk, as opposed to reaping a guaranteed gain, irrespective of the rights or wellbeing of the debtor (by that distinction modern bank-lending practices, whereby money is commonly used to “earn” more money, would generally be characterized as usury). For those who would object that to forego a fixed return on money would be unrealistic, it should be noted that Venice had dominated Europe financially for centuries relying mainly on non-usurious financial lending practices learned from the Muslims. These included the “Societas,” whereby the lender shared in the risk, and the “Collenza,” whereby the working partner in a trading venture went to sea while the investing partner stayed home, and any profits earned were shared, but losses were absorbed by the investing partner. The idea of true partnership between finance and actual wealth creation largely became lost in the subsequent centuries as the capitalist impulse wended its way to more northerly and westerly parts of Europe, and eventually to England.
The Catholic Church was instrumental in holding back usury’s floodgates for centuries. Historian Henrie Pirenne wrote in Medieval Cities:
“The scourge of debts, which in Greek and Roman antiquity so sorely afflicted the people, was spared the social order of the Middle Ages, and it may be that the Church contributed to that happy result.”
In the end, the moral imperative could not hold, as corruption within the Church and the rise of a powerful commercial class swept away the usury prohibition. By the early 16th century the idea that a leading institution could charge “interest” had become widely accepted. As it happened, this period also saw the advent of the Protestant Reformation.
In 1517 Martin Luther posted his “95 Theses” on the door of Castle Church in Wittenburg, Germany, the act widely accredited for initiating the Protestant Reformation. The central theme of the document was to protest the sale of “indulgences,” by which the granting of forgiveness for sins had been turned into a commercial transaction. This practice also constituted a continuing transfer of wealth from its poor constituency to the already wealthy Church. Luther’s espoused blanket prohibitions against charging interest at first, then seemed to be reconciled to its reality for a time, but came back again to a simplistic denunciation of the practice. His confused views on the subject also led, it might be argued, to fits of anti-Semitism. Wrote George O’Brien in An Essay on the Economic Effects of the Reformation:
“Luther tore the whole of his beautiful fabric to the ground, and carried back the teaching on usury to the primitive bare prohibition of all gain on loans, with the inevitable result that it could not be lived up to in the facts of modern life, and that it consequently fell into disrepute.”
The influence of Calvinism dealt a final blow to the usury ban. At the moment of Luther’s momentous protest, John Calvin was a student in Paris. In diametric contrast to the Scholastic/Aristotelian view he argued, “When I buy a field, does not money breed money?” This, of course, overlooks the fact that; no, the life element and the human effort gives the increase, and money arises on the tide of wealth so generated. Calvin’s teachings were seductive in many ways to those who argued for the special interests of the privileged strata of society, as they were amenable to justifying any gain that could be garnered by pressing their advantage. He preached a harsh doctrine of the “elect”, appointed by “(God’s) gratuitous mercy totally irrespective of human merit . . . the remainder have been consigned to eternal damnation by a just and irreprehensible, but incomprehensible judgment.”
Repudiating the efficacy of “good works” naturally tended to break down the rampart of morality that had kept naked usury at bay. Scruples regarding the “just price” were superseded by the prerogatives of competition and the sanctity of the contract, the terms of which were often usury expressed in its most blatant form.
Capitalism became in the main cold and heartless in its practice, but clearly this cannot be attributed simply to the fallout from Church corruption and untoward impulses of Protestantism. A powerful commercial class was emerging that challenged religion for the hearts, minds, and some say souls, of men. New discoveries in science led to revolutions in many areas of life. The earth was no longer the center of the universe; nor was it flat. A rising materialism went hand-in-hand with a heightened sense of individualism. Pursuit of whatever-benefited-oneself became more-and-more the new “standard” of conduct. Religious authority was eclipsed by secular enlightenment, sacred duty by personal freedom, and altruistic sacrifice by gratuitous consumption. Within such a turning over of the social order, it was perhaps inevitable a self-centered monetary principle would have widespread appeal. The near-absolute right of money to earn money, at whatever cost to human life, became the presiding “ethic” upon which the new economic order was based. Fortunately, the effects of naked avarice continue to be ameliorated by the efforts of compassionate souls, including religionists of every faith and humanists of every stripe.
CONQUEST OF THE AMERICAS:
It is likely that Columbus’s fateful voyage of discovery was largely motivated by a quest for a route to the west by which Spain could gain an advantage in the gold-and-silver trade with the Far East. “Unfortunately,” the Americas got in the way, but no matter. As it turned out there was precious metal there to be found aplenty. In Peru gold was so common that it was use for water pipes, tanks, and even planking.
The Spanish Crown was not reticent about what it wanted to get out of the expedition:
“Get gold; humanely if you can, but at all hazards get gold.”
Sir Arthur Helps wrote in The Spanish Conquest of America:
“The first Indians he met with had some few gold ornaments about them. Poor wretches, if they had possessed the slightest gift of prophecy they, would have thrown these baubles into the deepest sea.”
He also estimated that the native population under Spanish rule numbered some 32 million souls, but within forty years an estimated 15 million perished, mainly by being worked to death in the mines. The most notorious of these operations was the silver mine at Potosi, Bolivia, where reportedly millions perished, prompting Fray Antonio de la Calancha to record in 1638, “Every peso coin minted in Potosi has cost the life of 10 Indians who have died in the depths of the mines.”
The vast quantities of metal cruelly obtained made Spain wealthy, but poor. Because it relied on plunder for its livelihood and squandered the proceeds on vain extravagances, it lagged behind other European nations in the development of industry and commerce, a lapse which persisted into modern times. Moreover, while Spain fed off the hapless denizens of the Americas, its European rivals grew fat off Spanish galleons. The British Crown even granted charters to “privateers” (essentially “pirates”) for the abject purpose of raiding Spanish shipping.
What is more, for Europe as a whole the surfeit of gold and silver was not a boon without a price. In the words of Del Mar:
“Conquest of the New World arrested the re-growth of the classical conception of money and instead developed the feudal concept into a more monstrous form.”
A BRIEF HISTORY OF ENGLISH MONEY:
England’s location as an outpost on the remote northwest fringe of Europe made it relatively less subject to the caprices of Eastern Empire, and later Papal, control. In addition, being an island nation afforded it a natural unity that was not subject to compromise by shifting frontiers. These factors translated into a degree of isolation from the monetary chaos on the continent.
After the demise of the Western Roman Empire the English economy regressed back to barter, as there was no coinage circulating for two-hundred years. The minting of silver coinage was revived under ecclesiastic control between 800 and 900 AD. In 930 a decree was issued that only one form of coinage would be acceptable for circulation in England; the silver penny. These coins fluctuated considerably in weight and fineness of metal, but were valued by the stamp of the sovereign on the coin, as opposed to the metal’s commodity value, and their trading value remained relatively constant.
Through the Medieval period the monetary power in England remained concentrated in the hands of the King, instead of being divvied up among lesser nobles, and the Crown had a history of using that prerogative in a relatively responsible manner. The result was that England suffered less trauma in its monetary life than the emerging nations on the Continent. Still, it could not remain isolated forever.
A commercial trading class arose which sought to wrest the control of the issuance and retirement of money from the Monarchy so that it might use the franchise for its own private gain based on its ability to control gold and silver stocks. A landmark in this struggle was a legal contest, the Mixt Moneys of Ireland Case. Queen Elizabeth I issued base-metal coinage as legal tender in Ireland in 1600, demonetizing all other coins and requiring that they be returned to the mint. When an Irish debtor attempted to pay off his loan from a London merchant in the new coinage, the merchant sued for payment in gold and silver coin. The Irishman prevailed in court, and the decision had the effect of reinstating in the law a concept of money that had been lost since the end of the Roman republic.
The merchant class loathed the decision, and eventually influenced Parliament into passing the Free Coinage Act of 1666. This effectively put the money-creation-and-control power in the hands of financiers.
In 1667, Charles II countered by issuing a paper near-currency in the form of Royal Exchequer Orders to Pay, for the purpose of paying state expenses. These were a mere step short of being a true fiat money, as they were redeemable for coinage one year after issue by whoever held them. Had these bills been issued without the attachment to coinage, and recognized as lawful money, the English-speaking world would almost certainly have evolved in a far more salutary manner.
As it happened, Charles’ Exchequer Orders suffered from being emitted at too high a denomination for common business, and so were not entirely successful. Moreover, his reign was crippled by an ongoing struggle with the goldsmith bankers. These goldsmiths constituted a rising monetary class that specialized in issuing receipts for people’s gold held in the security of their vaults. Carrying paper was much more convenient than lugging heavy metal, so the receipts themselves came to be circulated as currency in lieu of the gold. The goldsmiths reasoned that since few receipts were actually redeemed for metal in the normal course of business, they need have on hand only a fraction of the gold backing the amount of outstanding paper at any given time. It occurred to them that they could “re-loan” the same gold to additional customers simply by printing more receipts. By this mechanism they effectively began to operate as banks-of-issue, and “fractional reserve” banking was born. Thus, there was at the root of the emergence of modern banking a fundamental fraud, but the scheme functioned smoothly as long as there was not a “run on the bank”; that is, a rush by depositors to redeem their receipts for the gold because they had lost confidence in the institution’s ability to redeem them in the future.
As a sidebar to the goldsmith banker story, it bears mentioning that this group has borne a great onus in the historical reckonings of many would-be monetary reformers. It is easy to find good reason for that assessment, but the whole story is not so simple. It could be argued that they were in effect coming up with a money–creation mechanism that did in fact put a great deal of credit into circulation in an age when that was sorely needed for its own inherent reasons. They operated in a time when the society itself did not have a sufficient sense of the science of money to create an adequate system in the public sphere where it rightly belongs (the same might be said of the situation with respect to money and banking that we find ourselves in today). Were the goldsmith simply a class of scam artists, or were they people who saw a need of the society around them and found a way, however imperfectly, to meet it? The answer is probably both, and all degrees in between. They were, after all, people. It might even be argued (or might not) that had they not initiated such a practice, the evolution of Western society would have been seriously hindered.
In assessing the monetary/economic factor it is important to take into account the entirety of influences that constitute any given situation. The question always is, in a manner of speaking, as broad and complex as life itself. The tendency in economics to isolate a single cause or a mere handful of factors, and then assume that one has a grip on the matter, is the downfall of the “dismal science” (a pejorative phrase often used by economists themselves to characterize the discipline’s dismal record of making accurate assessments). “Alternative” economists are not immune to the same failing. Economic phenomena are always human phenomena, with all the unfathomable perturbations that attend human affairs. They must be understood in the most comprehensive historical and social context possible. The answers are never as simple as identifying the “bad guys.”
Under James II (successor of Charles II), a monarchy already weakened by chronic monetary crisis and war was further crippled by religious strife. James was deposed by William III of Orange (with his wife, Mary Queen of Scotts) in a coup staged from Holland in 1668 that came to be known as the “Glorious Revolution.” This move had heavy backing from the banking class in Holland, and represented in effect the relocation of the nexus of capitalist practice from tiny Holland, to the more promising city of London. The net effects were noted by Sir Archibald Alison in his History of Europe:
“The Prince of Orange brought from the Republic of Holland where it had been already practiced and thoroughly understood the secret of governing popular assemblies and extracting heavy taxes from popular communities . . . his whole effort was directed to gain the majority of the constituencies by corruption and of votes in Parliament by patronage . . . It was then that the national debt began; and government was taught the dangerous secret of providing for the necessities and maintaining the influence of present times by borrowing money and laying its payment on posterity.”
Historian Hippolyte Taine added:
“William 3rd’s reign had been one long series of wars and commercial crises which had so disturbed the country . . . There is a deadness and want of spirit in the nation universally . . . There was nothing to be seen but corruption in high places and brutality among the common people – a group of intriguers leading a populace of brutes.”
THE BANK OF ENGLAND & THE RISE OF COLONIALISM:
The founding of the Bank of England in 1694 represented, effectively, the formal institutionalization of usury. It was chartered as a private corporation authorized to purchase bonds from the monarchy during William III’s desperate reign, in exchange for written-out-of-thin-air currency issued to the Crown. The bonds were then resold to private investors (precisely as in the Federal Reserve’s so-called “Open Market”). In the prospectus for this private company, William Patterson wrote, “The Bank hath benefit of interest on money which it hath created out of nothing.” Nathan Mayer Rothschild (1777 to 1836), who gained control of the Bank of England, boasted famously:
“I care not what puppet is placed upon the throne of England . . . The man that controls Britain’s money supply controls the British Empire, and I control the British money supply.”
The monetary system so established in England extended its hold throughout the world through the phenomenon we call “colonialism.” The object of this venture would be described by its proponents as “capital expansion,” as if it were the spreading of some kind of new wealth, but since its currency was debt-based, the essence of its game was “debt expansion.” This is typical of the corruption or outright reversal of the meaning of language that has been a constant part of the bank-money culture.
The spirit behind the banking system was not to be content with merely impoverishing England, and taking control over dirt-poor serfs. It had a bigger idea. It was no less than world domination. The common bloke in England didn’t need colonies, but he could be forced, conned or enticed into the service of empire. He could be systematically driven into debt (in much the same manner as the farmers of Greece and Rome), and then presented with the option of debtors prison or a one-way passage as a “settler” to Australia. He could be offered relief from a grim, dead-end existence in the industrial slums of England with promises of land and adventure in a new world. He could be entranced with the dreams and prerogatives of empire. In any case, the expansion impulse could be launched on the wings of debt-based money, with the imperative to “earn” the “profit” to roll over that debt and expand its principle base. The first major corporation, the British East India Company, was franchised to promote the proposition, and many more followed.
This process was repeated in similar fashion in other European centers, which in turn embarked on their own expansions, but London remained the core center of the debt-money power base, and does so to a significant extent even today. This explains how a small island nation (which was at chronically at war with even much of its own island), with a modest sized population and minimal resources could expand into a world empire. Much of this has been attributed to the British navy, but it should be noted that a navy is a capital-intensive enterprise. What is more, the ability to land a few sailors on the beaches of vast, strange, and largely inland domains, and then come to dominate them, cannot be attributed to the military advantages of a navy alone. Its real secret is the ability to entice the established native rulers with easy debt money redeemable for flashy goods and the tools of control, and then oblige them to render their fiefdoms safe for capitalist (debt) expansion, and extract the “interest” on that “debt”. The colonial army is then sent in strategically to be an enforcer of the system and a collector for its tribute. This arrangement, in modified form, oppresses the “Third World” no less even to this day.
The dynamic by which central banks extended their control is summed up by British economist Richard Douthwaite:
“Currencies produced by one group for use by another have been instruments of exploitation and control. For example, whenever Britain, France, or one of the other colonial powers took over a territory during the “scramble for Africa” towards the end of the (eighteenth) century, one of the first actions was to introduce a tax on every household that had to be paid in a currency that the conquerors had developed for the purpose. The only way Africans could get the money to pay the tax was to work for their new rulers or supply them with crops. In other words, the tax destroyed local self-reliance, exactly as it was supposed to do . . . Very little has changed. Over 95 percent of the money supply in an industrial country is created by banks lending it into existence. These banks are usually owned outside of our areas, with the result that we have to supply goods and services to outsiders even to earn the account entries we need to trade among ourselves. Our district’s self-reliance has been destroyed just as effectively as it was in Africa, and whatever local economy we’ve been able to keep going is always at the mercy of events elsewhere, as the current world economic crisis is making too clear.”
To be sure, the above summary is a radical contraction of history. It should be stipulated that not everything that transpired under the rubric of colonialism was ostensibly based on money per se (missionary work, for example). It should also be stated that while much of what was done for dishonest motives, not everything was. There were many idealistic efforts (misguided or not) to bring the fruits of Western civilization to the lands and societies influenced, and there were migrations of people’s to colonial lands with their own compelling reasons to seek relief from old world crowding and tyranny. A case could also be made that the cultural exchanges and transformations could have evolved in a more mutually beneficial manner. On the human level, there occurred in the course of events many instances of positive personal endeavor and bonds of affection. The historical questions raised are complex, and I will not attempt resolve them all here. The point I would make is that, however good or bad, all this occurred under the aegis of the debt-money system, and that, in turn, dominated its essential dynamic and character.
IMPERIALISM:
In time the colonial system outgrew its viability. With the rising nationalism and impulse to self-determination of the “third world” it became too difficult and expensive to garrison enough men with guns to impose a foreign order. The colonial powers began to “grant” the colonies their “independence,” but in such a way that it left behind a ruling elite beholden to itself for its wealth, status and means to forcibly remain in power. There was, of course, much lip service about establishing “democratic governments,” but the tacit purpose of such regimes was to enforce “stability” (read “suppression”), set the stage for “business expansion” (read “corporate exploitation”), and keep the world safe for “investment” (read “debt expansion”).
Soon the newly independent nations were drowning in debt, one that their populations had little voice in creating, and one from which they received relatively little benefit (or worse yet, a harvest of destruction and tyranny). In actuality it was often paid back, sometimes several times over, but it could not be rolled over fast enough to overcome the snowballing “interest.” So-called “restructuring” was imposed under the auspices of the International Monetary Fund (IMF) and World Bank. This meant stripping them of any remaining economic sovereignty, disowning the people of their inheritance in the land, resources and infrastructure, and reorganizing the economy as a whole to gear up for producing export crops to cash-flow the ostensible “debt.”
To insure that the social, ideological and economic prostration was total, a new-world-order hegemony was enforced under euphemistic rubrics such as “freedom,” “democracy,” “globalism,” “free trade,” General Agreement on Tariffs and Trade (GATT), North American Free Trade Agreement (NAFTA), World Trade Organization (WTO), and “capitalism.” It became unlawful for even elected officials of the world’s nations (first, second and third world included) to challenge this new order without being overruled by an extra-national tribunal, or overthrown for promoting “communism,” pursuing “unfair trade practices,” or violating “international law and order.”
If any leader of the newly emergent nations refused to go along with the program, he was imprisoned, deposed or assassinated. Better known examples are Patrice Lamumba (the Congo), Jacobo Arbenze (Guatemala), Mohammad Mossadec (Iran), Jean-Bertrand Aristide (Haiti), Salvador Allende (Chile), Jaime Roldós (Ecuador), and Omar Torrijos (Panama). The justification offered was ostensibly that these leaders were “undemocratic,” but the regimes they were replaced by were invariably far more dictatorial. At the same time other governments of the most despotic variety were winked at, “constructively engaged,” or actively supported as long as they went along with the corporate globalist program. If those installed by globalist masters dared to wander off the reservation, they were dealt especially harsh treatment. Prominent examples are Ngo Dinh Diem (Vietnam), Manuel Noriega (Panama), Saddam Hussein, or some say even Adolf Hitler. It didn’t much matter that the countries they were set up to tyrannize were brutally attacked or destroyed in the process of taking them back out. If a popular movement dared to set up anything outside the imperialist model, it was targeted for destruction (including the Sandanistas in Nicaragua, and the Castro government in Cuba). It is commonly thought that the United States lost the war in Vietnam, but the interests that promoted that war, arguably, achieved their objective because Vietnam as a country was effectively destroyed as an alternative model for development in Southeast Asia.
This litany of deceit, plunder and oppression could go on at great length. The examples that can be easily documented from the public record are legion. The historically and politically savvy among us are already aware of many specifics. While it is true that the targeted regimes often had their own egregious flaws (and laudable virtues, if the whole truth be known), that is not what put them in the crosshairs. They challenged the “money power” (the avaricious spirit that vies for the control of money), and that is the only unforgivable sin.
Were the specific rationales for the Iraq War sufficient in the aggregate to justify the military incursion? We have at this remove a preliminary benefit of hindsight on the issues as originally presented, but for the sake of argument let us go back in time to the pre-war starting point. I have to admit to having found at the start a degree of merit in most of the pro-war assertions. Who could not, for example, fail to be moved by the suffering of the Iraqi people and their neighbors during Saddam’s rule? Who could not be concerned by at least the possibility of Saddam having “weapons of mass destruction”? Who could not want him gone? The essence of the problem at hand, however, is not to narrow our field of opinion to fit within the blinders of specific egregious factors because they suit our personal bent of ideology, but rather to expand our vision to encompass the most comprehensive possible understanding of the causes within which the continuing cycles of war and oppression occur. It is only within this context that we can hope to arrest the process. It is on this basis that I stake my position on the anti-war and anti-occupation side. It is incumbent upon others to weigh the matter in their own scales, and arrive at their own conclusions.
While we of anti-war persuasion may on balance remain unconvinced by the arguments of the pro-war camp, we must keep in mind that they are not the enemy. They are fellow citizens who are speaking from their own experience, even as we are expressing ours. A more productive approach is to give advocates for nominally opposing positions their due, and seek the most transcendent understanding on the matter possible. To do that we must ascertain, not only the diversity of opinion, the breadth and complexity of the facts, and the matrix of relationships into which they fit, but also the engine which drives events. On the last count all parties, both pro- and anti-war, have largely failed. Permit me to suggest a concise historical context as follows:
With the emergence of mankind from a Garden-of-Eden harmony, he found it necessary, seemingly, to establish artificial processes of energy and material exchange outside of the perfectly symbiotic natural state of the primordial paradise as a means to survive and manifest his independent will. This had an eminently creative potential, but also a dark one, as the devices so established could be co-opted by spiritual forces inimical to the healthy evolution of human potential. This temptation expressed itself at first by plunder, then by control of commodities used as mediums of exchange (e.g. gold and silver), and finally by the usurpation and manipulation of the abstract concept we call “Money.” The method of monetary abuse is for supremely privileged and secretive interests to seize the sovereign power of money creation, and then “loan” it to the civilization it ostensibly serves on terms such that satisfaction of the resulting “debt” is virtually impossible, and further “debt” creation compounding ad infinitum is inevitable. This is rapidly evolving into an end game in which the domination of the resources and people of the planet is total, right down to the virtual hardwiring of our individual and collective mindsets so that even the occurrence of thought outside of its domain is unlikely. The military incursion into the Middle East is a pivotal stage in that whole process. The agenda is world empire; the pale horse it is riding is debt-money expansion.
Ultimately the debt-money-based globalist order will fail because it is by nature a cancer that will blindly devour the body from which it draws its sustenance. The immutable laws of nature will reassert themselves over the greedy fantasies of endlessly compounding financial usury. Furthermore, there is at the root of human nature a divine spark, a new Phoenix, which will resurrect itself regardless of how submerged our collective memory and self-realization has gotten. The only question is, “How far are we willing to travel down the road to an Armageddon before we wake up?”
If the reply is “Stop; No farther!”, where can we find the inspiration for what to do next? A clue can be found, I suggest, in the oft invoked, but long forgotten American Revolution.
THE REST OF THE AMERICAN REVOLUTION:
As the money power behind the Bank of England sought to spread its corporate order, there were established in North America thirteen quarreling colonies. The intent was to create a source for cheap raw materials. What it had not intended to plant were the seeds of new ideas about mankind having inalienable interests in the rights of the individual, the general welfare of the community and the sovereignty of the people. These ideas germinated in Europe, but could only exfoliate in the relative openness and opportunity of a new world. It also did not reckon with the unique contribution of the aboriginal inhabitants, nor the compounding genius afforded by the uniting of diverse cultural streams into a new nation. The upshot of all of this was that the North American colonies evolved along a trajectory that that was unprecedented in human history.
The colonists reasoned early-on that they could not prosper if they remained dependent on borrowing money from the Bank of England to carry out their commerce. They responded by creating their own money. Some was minted, but most were printed “Bills of Credit.” In fact the paper money issued by these colonies has the distinction of being the first government-authorized paper currency in the Western world, with Massachusetts starting it off in 1690. America was to become the test case for paper-money economics, and was closely watched by the rest of the world. It was an experimental effort, and had its mishaps, but the Colonies gradually became skilled in the use of paper currency. When asked about how he could explain the prosperous condition of the Colonies, Ben Franklin replied:
“That is simple. It is only because in the Colonies we issue our own money. It is called colonial scrip, and we issue it in proper proportion to the demand of trade and industry.”
The Crown set itself in continuous opposition to these unapproved issues and Parliament passed laws in an attempt to curb them. The Currency Act of 1764 banned the extension of legal tender status beyond certain dates, and England assumed the authority to approve or disapprove any laws the Colonies might pass related to new issues. Its foot dragging on such measures effectively deprived the Colonies of their money, and led to the first two now-uncomprehended justifications for breaking with England as set forth in the Declaration of Independence, specifically:
(1) - He has refused his Assent to Laws, the most wholesome and necessary for the public good.
(2) - He has forbidden his Governors to pass laws of immediate and pressing importance unless suspended in their Operation till his assent should be obtained; and when so suspended he has utterly neglected to attend them.
It is interesting to note that the issue of money creation was not mentioned by name in these two items. With respect to the audiences for whom it was intended, both the royal regime in opposition and the body patriotic to be roused, evidently no such explicitness was deemed necessary. The issue of money was already a firmly rooted fixture of the popular political consciousness as the matter about which all else turned. This is telling witness to how far this nation has strayed from its original inspiration, all the sophomoric patriotism of the current political ballyhoo notwithstanding.
We have been subjected to much myth making with regards to the American Revolution. Selected parts have been endlessly quoted and manipulated to promote jingoistic notions, to buttress disingenuous agendas, and ultimately to co-opt our economic and political heritage. Without sufficient historical understanding, even phrases such as “taxation without representation” and the “Boston Tea Party” have come to have a distorted meaning. Closer to the truth was Franklin when he said:
“The Colonies would gladly have borne the little tax on tea and other matters had it not been that England took away from the Colonies (the right to issue) their money, which created unemployment and dissatisfaction.”
Senator Robert Owen, prominent banker and the first chairman of the Senate Committee on Banking and Currency, explained that when the Rothschild-controlled Bank of England heard of the situation in the Colonies:
“They saw that here was a nation that was ready to be exploited; here was a nation that had been setting up an example that they could issue their own money in place of the money coming through the banks. So the Rothschild Bank caused a bill to be introduced in the English Parliament which provided that no colony of England could issue their own money. They had to use English money. Consequently the Colonies were compelled to discard their script and mortgage themselves to the Bank of England in order to get money. For the first time in the history of the United States our money began to be based on debt.”
“Benjamin Franklin stated that in 1 year from that date the streets of the Colonies were filled with unemployed.”
The Crown’s stonewalling of the colonist’s monetary needs also caused an open and widespread violation of the law, even by merchants and statesmen. This resulted in an effective training ground for resisting subjugation, which eventually found expression in Revolution. According to monetary historian Steve Zarlenga, “The skirmishes at Lexington and Concord are considered the start of the Revolt, but the point of no return was probably May 10, 1775 when the Continental Congress assumed the power of sovereignty by issuing its own money.”
Alexander del Mar stated the matter with great force:
“Lexington and Concord were trivial acts of resistance which chiefly concerned those who took part in them and which might have been forgiven; but the creation and circulation of bills of credit by revolutionary assemblies in Massachusetts and Philadelphia, were the acts of a whole people and coming as they did upon the heels of the strenuous efforts made by the Crown to suppress paper money in America, they constituted acts of defiance so contemptuous and insulting to the Crown that forgiveness was thereafter impossible. After these acts there was but one course for the Crown to pursue and that was, if possible, to suppress and punish these acts of rebellion. There was but one course for the Colonies; to stand by their monetary system. Thus the bills of credit of this era, which ignorance and prejudice have attempted to belittle into the mere instruments of a reckless financial policy, were really the standards of the revolution. They were more than this: they were the Revolution itself.”
There is a common “wisdom” that assumes that the eventual failure of the Continental Currency proves that such things should be left to banks. In fact, the oft-repeated phrase “not worth a Continental” arises from this period. The true story, however, indicates quite the contrary. The Continental Congress authorized and printed $241 million, but the British spared no efforts at trying to render it worthless by counterfeiting and distributing this amount many times over (one to two billion). They ran an ad in a British-occupied New York paper that read:
“Persons going into other Colonies may be supplied with any Number of counterfeit Congress-Notes, for the Price of the Paper per Ream. They are so neatly and exactly executed that there is no Risque in getting them off, it being almost impossible to discover, that they are not genuine.”
This “unparalleled piece” prompted George Washington to comment, “. . . no Artifices are left untried by the Enemy to injure us.”
In spite of this, Continental Currency continued to function reasonable well. After three years of war it was still exchanged at $1.75 against $1.00 of coinage. This led and exasperated General Clinton to complain to Lord Germaine, “The experiments suggested by your lordships have been tried, no assistance that could be drawn from the power of gold or the arts of counterfeiting have been left untried, but still the currency . . . has not failed.”
The currency did finally collapse, but not before seeing the new nation through its struggle, prompting Thomas Paine to write, “Every stone in the bridge that has carried us over, seems to have a claim upon our esteem. But this (Continental Currency) was a corner stone, and its usefulness cannot be forgotten.”
Americans are commonly aware that the establishment of the United States brought to the world a new type of democratic order; i.e. personal freedom under the rule of democratically determined law. What is not nearly as widely realized is that it also represented the establishment of a new economic order. It sought to secure not only freedom, but also the means to freedom; i.e. the control of its own money. This is the all-but-forgotten rest of the American Revolution! This was elaborated eloquently in Harmony of Interests, by Henry C. Cary, who was Abraham Lincoln’s economic advisor and the son of Matthew Cary, a close collaborator of Franklin and LaFayette. He stated that there are “Two systems before the world,” and proceeds into a lengthy delineation which concludes:
“One looks to pauperism, ignorance, depopulation and barbarism; the other to increasing wealth, comfort, intelligence, combination of action, and civilization. One looks towards universal war; the other towards peace. One is the English system; the other we may be proud to call the American system, for it is the only one ever devised the tendency of which was that of elevating while equalizing the condition of man throughout the world.”
And what is this “American system” compared to the “English system”? I will choose to call it “Free Enterprise” (the American way) as opposed to “Capitalism” (the Bank of England method). It is imperative that some terms be defined for purposes of this treatise:
“Monetization” is the process by which money is introduced into circulation and regulated. It is the principle that gives the physical economy a monetary dimension so that it can be readily traded. It is the essential power of sovereignty. Without it, “sovereignty” is a hollow concept.
“Usury” is the charge attached to money that is created out of thin air (by the simple mundane act of a banker writing a check) and loaned into circulation via a private banking system. Within present praxis, this applies to virtually the entire money supply. This causes a problem in that the money required to “repay” such “loans” is thereby “borrowed” into existence, but the usury (incorrectly called “interest”) attached to such transactions is not. “Interest” and “usury” are not, as commonly thought, the same essential phenomenon, only taken to different degrees. They are polar-opposite principles. The distinction is crucial.
The usury charge attached to money creation results in a “debt” of the economy as a whole to those private persons who have been awarded the privilege of creating society’s supply of money. True interest, on the other hand, is a charge attached to loans between people of money already in circulation. It does occasion a debt between people, but not of the economy as a whole to any private person or persons. To be sure, the taking of interest can still have its abuses, but one must look at the specific case to ascertain if that is in fact occurring.
“Free Enterprise” is productive economic activity when it is monetized with publicly-issued, usury-free currency that is created and issued in proportion to the needs of trade and industry. Its salient virtues include:
• Money is loaned interest-free or spent into circulation by the monetizing authority; in the American case, the United States Treasury.
• On the Federal level, taxes serve to draw excess money back out of circulation, thereby regulating the money supply. They do not “pay for” anything; the authority to monetize does that.
• Money created and loaned out of the Treasury does not require an “interest” charge to be attached, or if one is levied, the monies collected can be remitted to the Treasury, thereby defraying taxes.
• The economy as a whole remains wealthy by the sum of its actual production. The very existence of a so-called “national debt” becomes a mathematical impossibility.
• The public monetization process lends itself to a transparent, understandable and accountable exercise of national sovereignty through a democratic political process.
• It easily facilitates the increase of circulating money to match the potential of the physical economy to any degree necessary, yet it does not mandate that increase. It can just as easily be contracted as the physical economy becomes more efficient, wealthy and sustainable on a symbiotic basis.
• It is easily and fully capable of actualizing the full material and human potential of the physical economy without inflation, deflation or artificial unemployment.
“Capitalism” (as in “Money-ism”), on the other hand, is the monetization of the physical economy with privately-created, interest-bearing bank notes issued out of the Constitutional power to create money, that has been abdicated by the Federal government to a privileged oligarchy who owns and controls so-called “independent central banks.” Its defects are legion, and include:
• Money is said to be “borrowed” into circulation. The resulting “debt” cannot be fully paid back because only the principle on the “loan” is “borrowed” into existence, but the usury fee, i.e.“interest”, is not.
• The “interest” must be paid out of the principle of subsequent “loans”, so the economy becomes locked into a never-ending cycle of compounding aggregate “debt,” which, within current monetary culture, can never be repaid without extinguishing the money supply.
• “Economic growth” is reflexively touted as a mantra in order to bring new “debt-money” into the economy to roll over the old “debt,” but that also compounds the overall “debt.” It is mathematically impossible to “grow” out of the net public and private “debt” to the economy, as we are, in effect, “growing into it.”
• This compounding “debt” dominates, and eventually sucks the life out of the social/political/economic body it attaches to. The economy attempts to survive for a time by continually expanding into new areas of exploitation in search of an expanding collateral base for the “borrowing” of more money.
• Eventually the land, life and blood of the People becomes mortgaged to private “investors.” The President and entire body of elected representatives are no longer the representatives and executors of a sovereign nation that is fully able to create and issue its own money supply, but are instead relegated to being the receivers in a never-ending bankruptcy reorganization of what is now an enterprise (called the United States), the “debt” contracts and bonds of which reside in the portfolio primarily of an international financial cartel.
Usury-based money becomes the engine that drives inflation, deflation, unemployment, environmental destruction, racism, runaway technology, colonialism, imperialism, war and the host of other ills that plague the world. It is a cancer that corrupts, masquerades as, feeds upon, and eventually destroys the freely engaged enterprise of the people. I realize that this is a sweeping assertion, but I would urge the reader to suspend judgment as the idea is fleshed out below.
I am aware that the way I am defining these terms does not necessarily conform to any orthodox usage, but I would assert that in the realm of economics and finance the language has become so corrupted, loaded and turned on its head that it has become more of a hindrance to sober thinking than a help. Still, it is what we have to work with, and the best will have to be made of the situation by systematically formulating precise definitions, drawing clear images, and exercising rigor of thought as the discussion unfolds. In particular, my definition of “capitalism” is unique, but, I would argue, logical and defensible. The crux of the problem is that, while the Eskimos reportedly have forty-nine words for snow, our language at present has only one, “capitalism,”,\ to describe the myriad perturbations of the economic order that exist around the globe (especially since the demise of “socialism” and “communism”). This paucity of terms is a major impediment to any attempt at clear economic thinking.
Capitalism co-opts and distorts the common sense concepts of free enterprise such as borrowing, debt, loan, interest and many others. Within free enterprise, these practices may still exist between businesses, states, individuals and other microeconomic entities, but are no longer applicable to the Federal macro-economy as a whole. The citizenry is berated constantly in the media that the Federal government must be run according to sound “business” principles, but the Federal government is not by nature a “business.” It is ideally the sovereign macroeconomic entity within which microeconomic enterprises such as businesses operate, notwithstanding that the economy as a whole has effectively become a business in the portfolio of financial “investors” due to the abdication of the money-creation power to an international banking oligarchy. Ultimately capitalism so corrupts the language of a culture that it becomes exceedingly difficult to have a coherent dialog or even thought on economic matters. It becomes effectively invisible as the fundamental unexamined assumptions of our thought processes surrender to its terms.
I realize that this will seem to the reader to be a startling assertion, but in my perception “free enterprise” and “capitalism” are not synonymous terms. Rather, they are diametrically opposed principles, and the founding of this nation and virtually all of its history, even to this very moment, is a litany of the struggle between them. I am widely read, but have never seen or heard free enterprise and capitalism concisely defined and contrasted before, the considerable passionate and erudite criticism of the present monetary system that is extant, notwithstanding.
How can this be? I believe that this collective amnesia bespeaks of the potential of the debt-based money to so dominate a culture that it effectively loses its history, identity and ability to think. “Capitalism” has been planted firmly in our heads as being a term synonymous with a “free-market economy.” A free-market economy is in truth a free enterprise economy; i.e. an economy where those who produce goods and services (along with other consumers) obtain, in the aggregate, monetary credits sufficient to buy the fruits of that production without a residual “debt” of the economy as a whole. Capitalism, in contrast, is a parasite that attaches itself to a free-market economy such that those who produce goods and services (along with other consumers) cannot obtain, in the aggregate, monetary credits sufficient to buy the fruits of that production, except by borrowing increasingly more money from the banks on an ongoing basis. Our text books tell us that the Colonies won the Revolutionary War over 200 years ago, but because we have lost sight of the monetary cause, it is still in progress with the outcome very much in doubt.
Our forbearers were not always so blind. Thomas Jefferson had this to say:
“The Central Bank is an institution of the most deadly hostility existing against the principles and form of our Constitution . . .”
“I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the Government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs.”
“If the American people ever allow the banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied.”
John Adams wrote in a letter to Jefferson:
“All the perplexities, confusion, and distress in America arise, not from defects in the Constitution or confederation, not from want of honor and virtue, so much as from downright ignorance of the nature of coin, credit and circulation.”
THE NEW NATION UNFOLDS:
After a heroic War of Independence announced with a noble Declaration and guided by “founding fathers” of high principles, one might think that the establishment of a free public currency would be a foregone conclusion, but if history teaches anything it is to not underestimate the money power. While the People have on occasion arisen to great heights of purpose and sacrifice, afterwards they understandably tend to turn back to their private lives. The money power, on the other hand, never rests, leading Del Mar to observe ruefully:
“Never was a great historical event (the American Revolution) followed by a more feeble sequel. A nation arises to claim for itself liberty and sovereignty. It gains both of these ends by an immense sacrifice of blood and treasure. Then, when the victory is gained and secured, it hands the national credit (the authority to create money) over to private individuals, to do as they please with it.”
There were strident debates about money at the Constitutional Convention in 1787, but of the champions of sovereign currency, Paine and Jefferson were in France, and Franklin was in failing health. The result is expressed in the Constitution in what is evidently compromised language. Fortunately, it did give Congress the power to “coin money” and “regulate the value thereof.” Unfortunately, it did not delineate the power to issue money in language that was so definitive that it was beyond evasion by those in whose financial interests it was to not see in that way. As a consequence, the conflict between public and bank-issued currencies has plagued the nation throughout its history.
The first Congress lost no time in picking up on the battle. Led by the aristocratic Alexander Hamilton, it authorized in 1791 the first Bank of the United States. According to economics professor Murray Rothbard in The Mystery of Banking, it “was deliberately modeled after the (Rothschild-controlled) Bank of England [parenthesis his],” the very power the Revolution had fought to be free of. The irony was not lost upon Representative James Jackson of Georgia, who noted:
“In the reign of King William, 1706, the policy of the English Parliament laid the foundation of what is called their national debt, (and that by adopting same) it may, for a moment, raise our credit, and increase our circulation by multiplying a new species of currency; but it must hereafter settle upon our posterity a burden which they can neither bear nor relieve themselves from. It will establish a precedent in America that may, and in all probability will, be pursued by that sovereign authority, until it brings upon us that ruin which it has never failed to bring.”
Through an early period wracked by frequent monetary crises, the history of the new nation unfolded. In 1811 the charter for the Bank of the United States came up for a twenty-year renewal, but failed in both houses of Congress by one vote. In 1816, however, a second Bank of the United States was approved. By the time it came up for renewal, President Andrew Jackson was bitterly set against it. In fact one of his campaign slogans was, “Bank and no Jackson, or no bank and Jackson.” Referring to the bankers, he scolded:
“You are a den of vipers. I intend to rout you out, and by the Eternal God I will rout you out. If people only understood the rank injustice of our money and banking system, there would be a revolution before morning!”
He further observed:
“The bold effort the present bank had made to control the government, the distress it had wantonly produced . . . are but premonitions of the fate that awaits the American people should they be deluded into a perpetuation of this institution or the establishment of another like it.” (the Federal Reserve is “another like it")
Congress passed a bill to reauthorize the bank anyway, but in his veto message Jackson declared:
“But if they (the Congress) have . . . power to regulate the currency, it was conferred to be exercised by themselves, and not to be transferred to a corporation. If the bank be established for that purpose . . . Congress have parted with their power for a term of years, during which the Constitution is a dead letter.”
The battle between Jackson and the Bank was of epic proportions, and permanently transformed the political landscape. Before his presidency, politics was almost exclusively a clubby gentleman’s game play out amongst the propertied class. That changed dramatically with Jackson. He found that venue entirely too dominated by the privileged interests, so he appealed directly to the people. He and those associated with his cause initiated the first mass political rallies, the modern political convention, the Democratic Party (as a spin-off from the Jeffersonian Democratic-Republican Party), and in important ways, the modern Presidency, for good or ill.
Though Jackson had turned back the Bank, he had no adequate mechanism to put in its place. His ally and successor, President Martin Van Buren, established the Treasury Department, but the monetary situation remained chaotic. There were hundreds of currencies in circulation, issued by different private banks, which were unevenly or fictitiously backed by precious metals. Banking malfeasance was rampant. Bank failures were common.
In addition, the political party founded by the Jackson/Van Buren movement began to be co-opted by banking interests. Another initiative was called for. On July 6, 1854, the Republican Party was established at a meeting in Jackson, Michigan. The name Republican was chosen because it was the unclaimed half of the Democratic-Republican moniker of Jefferson’s party. Six years later, the party had its first President, Abraham Lincoln.
THE CIVIL WAR:
The exigencies of the Civil War demanded that some way of financing it be found. Though under great pressure to borrow money to finance the war, Abraham Lincoln instead initiated United States Notes, otherwise known as the Greenbacks, which were a Federally-issued usury-free currency. The monetary policies of Lincoln are a generally overlooked, but pivotal part of our history. Indeed, they may have been, even more than his better known proclamations, the crucial factor which allowed the Union to prevail. He had much to say regarding the public-vs.-private issuance of money which we would do well to contemplate today:
“Money is the creature of law and the creation of the original issue of money should be maintained as an exclusive monopoly of National Government.”
“Government possessing the power to create and issue currency . . . need not and should not borrow capital at interest as the means of financing governmental work and public enterprise. The Government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the Government and the buying power of consumers. The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government’s greatest creative opportunity.”
“The taxpayers will be saved immense sums in interest . . . Money will cease to be master and become the servant of humanity. Democracy will rise superior to the money power.”
Congressman Wright Patman commented a century later, “If instead of issuing ‘greenbacks,’ the Lincoln administration had issued the interest-bearing bonds, as urged, naturally, these bonds would still be a part of the Federal debt today.” At compounded interest the amount would be many times greater.
The significance of Lincoln’s monetary policy did not escape notice in certain European quarters, although from an entirely different perspective. There appeared in The London Times during the Civil War the following from Otto Von Bismarck:
“If that mischievous financial policy, which had its origin in the North American Republic (the public issue of usury-free currency) should become indurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and without a debt. It will have all the money necessary to carry on its commerce. It will become prosperous beyond precedent in history of the civilized governments of the world. The brains and wealth of all countries will go to North America. That government must be destroyed or it will destroy every monarchy on the globe.”
In 1876, Bismarck explained further:
“The division of the United States into federations of equal force was decided long before the Civil War by the high financial powers of Europe. These bankers were afraid that the United States, if they remained in one block and as one nation, would attain economic and financial independence which would upset their financial dominance over the world. The voice of the Rothschilds prevailed. They saw tremendous booty if they could substitute two feeble democracies, indebted to the financiers, for the vigorous Republic which was practically self-providing. Therefore, they started their emissaries in order to exploit the question of slavery . . . Lincoln’s personality surprised them. His being a candidate had not troubled them; they thought to easily dupe a woodcutter. But Lincoln read their plots and understood that the South was not the worst foe, but the financiers.”
Lincoln agreed:
“I have two great enemies, the southern army in front of me and the financial institutions in the rear. Of the two, the one in the rear is the greatest enemy.”
In spite of not getting their way on the Greenbacks, the financiers got the National Banking Act of 1863. It was partly in response to a legitimate need for a formal monetary system to avoid the financial chaos the country experienced before the Civil War, but it put the money-making power in the hands of private “National Banks”, and set the stage for the monetary trauma that was to chronically distress the nation after the war. A letter written by the Rothschild Bros. of London to a New York firm of bankers in 1863 read:
“The few who can understand the system (created by the National Banking Act) will either be so interested in its profits, or so dependent on its favors, that there will be no opposition from that class, while on the other hand, the great body of the people mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.”
Salmon P. Chase [Secretary of State (1861-64), and Chief Justice of the Supreme Court (1864-73)] lamented:
“My agency in promoting the passage of the National Bank Act was the greatest financial mistake of my life. It has built up a monopoly which affects every interest in the country. It should be repealed; but before that can be accomplished, the people will be arrayed on one side and the banks on the other, in a contest such as we have never seen before in this country.”
After the Act’s passage, Lincoln echoed similarly ominous sentiments:
“The money power preys upon the nation in times of peace and conspires against it in times of adversity. It is more despotic than monarchy, more insolent than autocracy, more selfish than bureaucracy. I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. Corporations have been enthroned, an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in a few hands and the republic is destroyed.”
There was also another revealing letter (dubbed the “Hazard Circular”) being circulated among American Bankers by European banking interests during the Civil War concerning the new dispensation with respect to slavery. It read:
“Slavery is likely to be abolished by the war power and chattel slavery destroyed. This, I and my European friends are in favor of, for slavery is but the owning of labour and carries with it the care of the laborers, while the European plan , led by England, is that capital shall control labour by controlling wages.”
And so, it would seem, an attitude was afloat in banking circles that favored a transition to the more refined wage-servitude, in which the laborer was obliged to fend for his own care and sustenance without his employer having to be concerned that he had the means to do so. It was a new sort of “slavery,” without the “benefits,” if you will. This form of exploitation became common, and has persisted and grown in myriad guises until many of the middle class, who thought they were safely past indentured servitude, are now slipping back into it via the dual agencies of falling wages and rising debt. Compounding the problem for those still struggling to extricate themselves from the residual legacy of historical slavery, the blue sky into which their upward economic and social mobility could aspire to soar is fast clouding over.
POST CIVIL WAR:
The post-Civil-War period was a plateau in our history. It was, in many respects, the time of our first emergence as a nation. The changes wrought, patterns formed and dynamics initiated persist in manifold forms to this day. Among other things, Americans for the first time thought of themselves in the main as one country, as opposed to a confederation of semi- autonomous states. Before the conflict, people commonly identified themselves by the state they originated from; after, they reflexively called themselves “Americans.” Before the war people would say, “the United States are;” afterwards “the United States is.” The shared crucible of the internecine struggle engendered a veritable bonding, the bitter divisions of the episode notwithstanding. This sense of kinship was incomplete, to be sure, and there were wounds to be healed. In addition, the new national identity fell short of fully including those “minorities” who were not-male, not-white, not-of-significant-means, and otherwise not-of-the-norm (which altogether constituted a great majority). Even so, a character was established from which we have evolved as a nation and a people.
The nation emerged as the purported “land of the free”, but virtual slavery masqueraded in a new guise. This lamentable irony was captured by Horace Greeley:
“While boasting of our noble deeds, we are careful to conceal the ugly fact that by our iniquitous money system we have nationalized a system of oppression, which, though more refined, is not less cruel than the old system of chattel slavery.”
The banks had endured a setback with Jackson’s veto of the second Bank of the United States and the founding of the Democratic Party. While they did succeed in temporarily breaking up the Union, the overall effort backfired, as the shared struggle forged a new national identity. What is more, the wartime Republican president had overcome that division, in large part by the introduction of a paper fiat currency which was rooted in the commonweal of the nation. The fact that this Federally-issued money functioned well and saw the country through the most extreme of exigencies “threatened” (from the perspective of banking interests) to establish a new socio/economic/political model for the future. The jig would be up, not only in North America, but also worldwide, and the advocates for private-money knew it. Something had to be done. The first order of business in regaining the upper hand was to neutralize the two major parties as effective advocates of a sovereign public currency.
ASSASINATION & CO-OPTION OF THE REBUBLICANS:
The door was opened to the possibility of recapturing the political process by the assassination of Lincoln. This nefarious deed was in fact only one part of a larger plot to murder Vice President Johnson and Secretary of State Seward also, which had the greater goal of destabilizing the federal government. Eight conspirators were eventually tried, with four receiving death sentences, and theories still abound as to who put up the money, gave the orders, and provided the necessary cover and support. It is easy to assume that it was the result of radical southerners avenging, or perhaps still trying to win, the war, though according to some historians the south increasingly saw Lincoln as their best hope in any post-war dispensation. That would, of course, not preclude that a handful of fanatics might think otherwise. Whatever the truth of the matter (and I don’t here pretend to know the whole truth), the snuffing of Lincoln removed a major impediment to the bank-money agenda. Though his successor, Andrew Johnson, was committed to monetary views similar to Lincoln’s, that august moral force that would set the tone for post-war reconciliation, reconstruction and reclamation of national sovereignty was no longer a part of the scene. The coup de grace came when Johnson was undermined by an impeachment attempt that he survived by only one vote. He was replaced as Republican nominee in the next cycle by the more amenable to those who favored a specie-backed currency, Ulysses S. Grant.
ALEXANDER DEL MAR ON BETRAYAL & CO-OPTION OF THE DEMOCRATS:
The next logical step in the destruction of the Greenback was to neutralize the Democratic Party. It had emerged as the natural ally of the People in their battle with the money power. The treacherous campaign to subvert this connection was described in detail by Alexander del Mar in his book A History of Monetary Crimes, as “The Crime of 1868.” As a prominent Democrat and the organizer and director of the Bureau of Statistics (1866-1869), he was a player in the unfolding drama. His first-person account is worth relating in some detail.
The chief protagonist in the intrigue was August Belmont, who was the main Rothschild agent in America at the time. He managed to get himself ensconced in the job of Chairman of the National Committee for the Democratic Party as a reward for bailing out its beggared finances. A key conspirator was Manton Marble. He was the part owner and editor in chief of the New York World newspaper, which had assumed the role of unofficial voice for the Democratic Party, and champion of the Greenbacks.
At issue was the status of the Greenbacks. Banking interests wanted to portray their role as a wartime emergency measure only, and retire them as soon as possible. The plot was thickened by schemes to accomplish this on such terms as would create a windfall profit for the bankers. These primarily involved the redemption of Greenbacks for gold or coinage. The Greenbacks had functioned well, and had therefore become extremely popular with the populace, who wanted to retain them as an institution. In the short run, this threatened the financiers’ windfall. In a larger sense, the essential “threat” the Greenbacks posed was the salutary example they presented. If the issuance of money as a public good based on the sovereignty and enterprise of the People were “indurated down to a fixture,” it would jeopardize the existence of the entire bank-money scheme. The American Revolution would, in an economic sense, be consummated. The will and welfare of the people would at long last, in Lincoln’s words, “. . . rise superior to the money power.”
In concerted campaign orchestrated by Baron James Rothschild from Paris, leaders of the party were blackmailed with ruin if they opposed the bankers’ will. In spite of this, on July 4, 1868 the Democratic National Convention passed a resolution which denied the redemption of the Greenbacks by anything other than “. . . lawful money of the United States” (i.e. more Greenbacks). Furthermore, the convention showed a determination to nominate a candidate for President who supported that very resolution; one George H. Pendleton. Amidst a bitter floor fight, and though he was leading the pack, Pendleton’s name was inexplicably withdrawn on the 22nd ballot, and that of Horatio Seymour substituted in his place. Seymour was an advocate of coin redemption, and thus in line with the bankers’ agenda. They managed to secure Seymour’s nomination, but the rank and file on the floor remained resolute in their support for the Greenback. This created the likelihood that few Democratic members of Congress would vote for redemption by coinage even if Seymour were elected.
The bankers appeared to be checkmated, but they had already made arrangements for an ace-in-the-hole. It was in the form of Manton Marble’s New York World newspaper, an organ which August Belmont controlled, and had foisted upon the party as its mouthpiece-of-record. The strategic value of this asset had been further enhanced by the fact that the party leaders had been cajoled into changing the venue of the national convention from another location to New York in order to bring it more directly under the sway of this paper.
On October 15, mere days before the election, it was widely expected that the Democrats would win handily. With no warning whatsoever, the paper dramatically reversed its editorial position and recommended that the name of Seymour be withdrawn, ostensibly because the party could not win with this nominee at the head of the ticket. The campaign was thrown into chaos. A committee of high party officials convened in Washington DC, and sent messages and an emissary to New York urgently seeking verification, clarification and a rationale for the bizarre action. Their entreaties were met with contemptuous evasions, and the party was not able to recover in time for the polling date. Even so, Seymour garnered 2.6 million votes, compared to 2.9 for the Republican Grant. Upon assuming office, Grant’s first act was to sign the so-called Credit Strengthening Act, which President Johnson had vetoed. It provided for the redemption of government bonds in gold (not Greenbacks).
RELIGIOUS CRUSADE AGAINST THE GREENBACKS:
The subversion of the two major political parties was only the opening salvo in a culture-wide war to undermine the monetary prerogative of the People. The assault by the financiers proceeded on many fronts, most of which focused on the destruction of the only lawful, benign and truly efficacious currency the post-revolutionary nation had yet known; the Greenback.
In the days before Madison Avenue, the heavy lifting of the public relations campaign was assumed by elements of the religious establishment working through churches and universities, especially those of the Calvinist sects. This was, no doubt, in keeping with the dictum of John Calvin himself, who had written, “The people must be kept in poverty in order that they may remain obedient.” Colleges in America at that time were, with few exceptions, religious institutions. At most colleges, ‘political economy’ was taught by clergymen as an aspect of ‘moral philosophy.’
While the defense of slavery throughout the South before the war was to be expected, it was also widespread in the North, and institutions of higher learning played a prominent role. This was instrumental in creating the political climate in which the banker-instigated breakup of the Union was possible. After the war this mindset morphed into a bizarre “Christian” fetishism about the sanctity of gold and silver. Secular lucre (i.e. the Greenbacks) was railed against as a form of demonology, while the supposedly solid virtue of the banking establishment was apotheosized as the guardian of financial probity. Such dubious spiritual exhortations softened the memory, wit and character of the public sufficiently for the money-power agenda to move ahead. Ministers, professors and financiers joined in a concerted effort to once again deny the nation its sovereign right to its own money.
BANKERS’ CAMPAIGN TO DESTROY THE GREENBACKS:
While the National Banking Act of 1863 did restore the power to issue new money to the banks, it did not put it under authority of one central bank. Consequently, as the nation expanded by leaps and bounds, much banking activity grew up outside the control of big money interests. To consolidate their hegemony, a campaign to retire the Greenbacks, de-monetized silver and corner the gold market was initiated. As a result the money supply was sharply curtailed, and a period of contracted credit and deflation ensued. This caused great economic distress in the rural areas, in newly burgeoning industries, along the rapidly expanding frontier, and for anyone who was obliged to pay back a debt with increasingly scarce dollars. The late 19th century was wracked by periodic banker-engineered “panics,” for which these same parties presented themselves as the solution.
There are a number of landmarks in this litany that bear mentioning. The effort to trash the Greenbacks and demonetize silver was designed to bind the American dollar exclusively to gold, which was largely in the possession of European bankers, and would have to be borrowed from them to even have a money supply. Besides the obvious profit-taking involved, the overarching purpose was to effectively return the control of the fledgling nation back to the monetary interests that had always conspired to keep it in debt. It should be noted that the conspiracy to demonetize silver was not strictly an American affair, but a worldwide initiative that decimated even Japan. In the words of the U.S. Treasury Secretary, John G. Carlisle:
“The conspiracy . . . formed here and in Europe to destroy . . . from three-sevenths to one half of the metallic money of the world, is the most gigantic crime of this or any other age.”
One feature of this campaign was the deftly crafted coup that banned the coinage of silver dollars, in a bizarre incident that Del Mar described as “The Crime of 1873.” It was accomplished with such stealth, via two bills with dovetailing language, that virtually no public official was aware of it for almost two years, not even President Grant who signed it into law. The specific intention or effects of the legislation did not become generally known to the nation until it was revealed in a letter to the editor in the Boston Globe in March 1876, after which it exploded into a national scandal. Outrage over the incident vented in public debate that lasted well into the 1890’s.
One effect of “the crime” was to exacerbate a financial collapse that had begun in the fall of 1873, ostensibly triggered by speculation in railroad stocks. In response, a bill was passed by Congress in April 1874 which would have increased the supply of Greenbacks and national bank notes in circulation. President Grant vetoed the bill, an unpopular move that contributed to the Republican loss of the control of Congress in the elections of 1874. The resulting lame-duck session enacted the “Resumption Act” to redeem Greenbacks in gold. There was so much public resentment about the Act that it was nearly repealed by Congress in its 1876 session, failing to pass by one vote in the Senate. The Act was a bust anyway, as people almost universally declined to turn in their Greenbacks when the day arrived.
In 1878 a bill was passed to re-monetize silver, over President Hayes’ veto. It was a relatively benign measure since the silver to be monetized would come from American mines. A later measure would cause $378 million in new silver dollars to be coined, which was nearly the number of Greenbacks in circulation. The problematic aspect of the re-monetization initiative came in 1890 with the passage of the Sherman Act, which required the government to purchase on a monthly basis far more silver than American mines could produce. The only way it could be satisfied was to buy from Europe’s recently de-monetized hoards. This developed into a shell-game in which silver was bought with Treasury notes, which the Europeans redeemed for gold, which then had to be borrowed back at interest to maintain the redeemability of the notes. The American public was thereby fleeced for millions of dollars. This act was repealed in 1893.One feature of this campaign was the deftly crafted coup that banned the coinage of silver dollars, in a bizarre incident that Del Mar described as “The Crime of 1873.” It was accomplished with such stealth, via two bills with dovetailing language, that virtually no public official was aware of it for almost two years, not even President Grant who signed it into law. The specific intention or effects of the legislation did not become generally known to the nation until it was revealed in a letter to the editor in the Boston Globe in March 1876, after which it exploded into a national scandal. Outrage over the incident vented in public debate that lasted well into the 1890’s.
EMERGENCE OF THE POPULIST MOVEMENT:
Having been thwarted in their attempts to work through the major parties, many supporters of lawful United States currency formed splinter parties, the rallying cries of which became “Greenbackism” and “Free Silver.” These, in turn, formed the political core of the “Populist” movement. It is difficult for the present-day citizen to realize just how important monetary issues were to the electorate. The scourge of late 19thcentury deflation caused Benjamin Anderson, an early 20th century theorist, to observe:
“Nor is the tremendous agitation over bimetallism, involving a literature so great that no man could dream of reading it all, involving great political movements, presidential campaigns, great congressional debates, repeated legislation, international conferences, etc. for 20 years, to be explained on any other ground than that the world felt practical, important, and unpleasant effects on industry and trade from the inadequacy of the money supply.”
The upshot of the co-option of the major parties, and subsequent attempts to address it by third parties, was that the political will for genuine monetary reform was hopelessly splintered and confused. The sentiment for the monetization of silver on the part of many populists was an understandable response to the draconian contraction of a money supply limited by gold, but it also partook of some of the same defects in definition and function that plagued the yellow metal. The movement was obsessed with the monetization problem, but did not understand money well enough. As a fractured pro-Greenback majority grew, the Republicans supported the bankers, the Democrats were co-opted, and not surprisingly, bank notes again gained ascendancy as currency. There were, however, prominent dissenting voices even within the major parties. Republican President James Garfield declared:
“Whoever controls the volume of money in any country is absolute master of all industry and commerce . . . And when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.”
Three-time presidential candidate for the Democratic Party, Williams Jennings Bryan, declared in his famous Cross-of-Gold speech:
“The gold standard has slain its tens of thousands. If they ask us why we do not embody in our platform all the things that we believe in, we reply that when we have restored the money of the Constitution, all other necessary reforms will be possible, but until this is done there is no other reform that can be accomplished.”
And concluded:
“Having behind us the commercial interests and the laboring interests and all the toiling masses, we shall answer their demands for a gold standard by saying to them, you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.”
FARMERS & LABOR GET ORGANIZED:
The Grange movement was successful in bringing about measures to regulate monopolistic railroad and grain warehouse practices. In addition, the birth of the cooperative extension service, rural free mail delivery, and the farm credit system (a network of borrower-owned cooperative lending institutions and related service organizations) were largely due to Grange lobbying. It joined forces with the Knights of Labor, which were founded in 1869, and grew into one of the most influential labor organizations of the 19th century. Together they became the champions of “progressive era” causes, which included the demand for an end to child and convict labor, equal pay for women, a “progressive income tax,” and the cooperative employer-employee ownership of mines and factories.
Perhaps the most important initiative to emerge out of the Grange was the Farmer’s Alliance, a movement designed to help farmers bring their product to market at a fair price by forming agricultural cooperatives that would eliminate the middleman. Their most notable proposal was the Subtreasury Plan. This called for the establishment of federal warehouses for storage of nonperishable crops so that they could be released to the market in a gradual way that didn’t undercut prices. Farmers would pay nominal charges for handling, storage, and insurance. In addition, they would be allowed to borrow up to 80 percent of the local market price on the products deposited, while the annual interest rate on these loans would be held to 2 percent or less. The program would be funded with newly-printed money, until the volume of circulating currency reached fifty dollars per capita, a volume associated with the prosperous war years.
The Subtreasury Plan failed to be enacted in the late 19th century “populist” era, but it did serve as a model for the WWII farm-parity legislation (describe below) that was instrumental in pulling the economy out of the Depression, financing WWII, and setting up the United States as the preeminent “superpower.” It also represented an advancement in monetary thinking, in that the issuance of new money would be coordinated scientifically with the actual production of the land and labor, with due consideration being given to assure the producer a price for his product that would cover his production costs, yield a profit sufficient to pay his livings expenses, and provide the seed money for another round of production.v
MANIFEST DESTINY:
The newly rejoined Union expanded westward under the banner of “Manifest Destiny.” It was a period known for inhumane disregard for the aboriginal inhabitants that were deemed to be in the way. I would assert that this was not an inherent result of the American Revolution, but rather an aberrant dynamic that violated it in form and spirit. While it was true that the nation was destined to unfold westward in ways that would cause transcendent changes, it was also founded on inspired principles in large part inherited from its aboriginal inhabitants and the more inspired contributions of its diverse immigrant cultures.
A more fitting model for its inception might be the Quaker vision of a “Holy Experiment,” as established by William Penn, the founder of Philadelphia and the Pennsylvania Colony. The King had granted Penn the land, but he still treated the native inhabitants as the legal owners, and purchased it from them at fair market value. Penn established no forts or garrisons, and resorted to no violence in staking his claim. The Quakers regarded the red men as brethren who worshiped the same Great Spirit. The result was the “Long Peace” that endured for 70 years, and was undisturbed by hostility or armed conflict. The Quaker Colony initiated many of the practices that were to become hallmarks of the ethos that makes us proud to distinguish ourselves as Americans. This included a pro-active open-door immigration policy, an extraordinary welcoming of religious diversity, a self-image as a “melting pot” of disparate peoples, free tracts of land to immigrants (thus pioneering the policy of “homesteading”), free public education, an elected government, and the first written constitution with provisions for an amendment process. The Quaker experiment greatly influenced later personages who were seminally influential in the founding and shaping of the new nation, including Ben Franklin and Ralph Waldo Emerson.
Other streams of culture and creativity which originally or eventually augmented this founding impetus included the contributions of Africans, Hispanics, Scotts and Irish, mainland Europeans, Asians, Jews, Muslims and others. In addition there arose in virtually all areas of creativity and endeavor a spirit and genius that seemed to arise essentially from the American soil itself. All this combined in an alchemy that produced a rich and robust culture, one which virtually all parts of the world find enticing. Potentially, America is truly a “city on the hill.” This opens up the possibility of a whole new, or should we say lost, vision for this country that is outside the purview of this treatise. It is a story of immense beauty and power, but it is yet to be fully told.
The perverse chapters in the unfolding of the America’s “Manifest Destiny” were not so much a result of any genetic evil nature on the part of immigrant settlers as they fled the tyranny of the “Old World” to find life in the “New,” but was more a product of the lust for precious metals (gold especially), and the injection of European bank-money which financed the Robber Barons as they pushed their relentless rails, concomitant enterprises, venal politics, and racist doctrines across the land. Corrupt money dominated the dynamic and character of the westward growth, much as for the colonial expansion in the rest of the world.
THE FEDERAL RESERVE ACT:
The half-dozenth or so banker-caused financial “panic” since the Civil War occurred in 1907, and provoked a public outcry for monetary reform. In response, Congress established the National Monetary Commission in 1908, naming to it a number of representatives of the international banking establishment. They toured Europe for two years at taxpayer’s expense, and then held a super-secret meeting at Jekyll Island, Georgia at a hunting club owned by J.P. Morgan (the main representative of the Rothschild bank in America). Years later when the meeting was public knowledge, the New York Times noted that “One-sixth of the total wealth of the world was represented by the members of the Jekyll Island Club.” Among the five people present were Senator Nelson Aldrich (maternal grandfather of Nelson Rockefeller), and Paul Warburg, a German banker. It was there that the essence of what later became the Federal Reserve Act was formulated. It was authored mainly by Warburg, but was represented to Congress as the Aldrich Bill. It was defeated in 1911, in part due to the promise of a veto by President Taft. The bankers then induced Theodore Roosevelt to enter the next Presidential contest under the so-called Progressive “Bull Moose” Party, thus splitting the Republican vote and insuring Taft’s defeat.
This set the stage for the passage of the Federal Reserve Act. It appears that the defeated Aldrich bill was repackaged with minimal modifications and reintroduced as the Glass Bill, after Chairman of the House Banking and Currency Committee, Carter Glass. The issue was joined in a momentous contest. Glass commented that “nothing in (President) Jackson’s battle against the U.S. Bank Charter” surpassed the intensity of the battle over the Federal Reserve Bill. The Bankers were publicly against it, but that was a PR ploy orchestrated by the money-power interests behind the scenes, and designed to dupe the public into thinking that it was inimical to the interests of the hated Wall Street bankers.
The opposition to the bankers’ agenda by champions of a stable public currency was passionate and principled, but divided. They held differing views on whether the bill as proposed would give the bankers the balance of power they so much dreaded. Representative Charles Lindbergh, Sr. of Minnesota and Senator Elihu Root of New York both opposed the bill, but Senate Banking Committee Chairman Robert Owen, then Secretary of State William Jennings Bryan, and President Woodrow Wilson each supported it.
Central to the story is the role of the President. By most accounts he was a decent and well-meaning man, but in the condescending words of J. Laurence Laughlin (the University of Chicago professor who was chief propagandist for the Aldrich bill), “It goes without saying that . . . Mr. Wilson was not an expert on money and banking.” He was besieged on all sides, but he had his principles and held his ground. In one famous incident, Chairman Glass pressed Wilson to appoint at least minority banker representation on the Federal Reserve Board. As Senator Owen tells it, “After a discussion of two hours, approximately, the President coincided with my contention that the Government should control every member of the Board on the ground that it was the function of the government to supervise this system, and no individual, however respectable should be on this Board representing private interests.” Undaunted, Glass led a delegation of bankers to the White House to protest the President’s decision. Wilson asked them, “Will one of you gentlemen tell me in what civilized country of the Earth there are important government boards of control on which private interests are represented?” After what Glass described as a “painful silence,” Wilson continued, “Which of you gentlemen thinks that railroads should select members of the Interstate Commerce Commission?” Glass later admitted, “There could have been no convincing reply to either question.”
On June 23, 1913, the President made clear his intent to a joint session of Congress:
“And the control of the system of banking and of issue which our new laws are to set up must be public, not private, must be vested in the Government itself, so that the banks may be the instruments, not the masters, of business and of individual enterprise and initiative.”
There was a large contingent in Congress who supported Wilson’s sentiments, but were opposed to the bill because they feared it gave the bankers enough leverage to take over the system. Congressman Lindbergh, leader of the opposition in the House, declared in a speech from the floor:
“This act establishes the most gigantic trust on earth, such as the Sherman Antitrust Act would dissolve if Congress did not by this act expressly create what by that act it prohibited. When the President signs this act the invisible government by the money power, proven to exist by the Money Trust investigation, will be legalized.”
“The greatest crime of Congress is its currency system. The schemiest legislative crime of all the ages is perpetuated by this new banking and currency bill”.
In the Senate, Elihu Root gave a widely acclaimed three-hour speech, that even Glass admitted was the most memorable part of the debate, in which he reasserted the Constitutional duty of the Congress to control the currency, and objected that Section 16 of the Act delegates an unlimited power to issue currency to the Federal Reserve Board of Governors.
Notwithstanding strong and eloquent opposition, the Federal Reserve Act passed and was signed by Wilson into law on December 23, 1913 (a Christmas-impending time chosen, evidently, to insure that many members in opposition were not present). A new era in American history had begun. By this act the Congress had officially abrogated its Constitutional legislative responsibility to create money to a private corporation. This is confirmed years later, in 1957, in an illustrative exchange between Bruce Spence, chairman of the House Banking and Currency Committee, and William McChesney Martin, chairman of the Federal Reserve Board of Governors:
Chairman: When we delegate power to an agency, without any standards or limitations or definitions or restrictions, it is a legislative power that we delegate.
Mr. Martin: That is what I conceive . . .
Chairman: We have delegated that to the Federal Reserve
Mr. Martin: That is correct, sir.
Chairman: Without restrictions or standards.
Mr. Martin: Oh, yes, indeed.
I would argue that “Federal” and “Reserve” are deceptive terms that mask the true nature of the institution. They would be more accurately translated “Private” and “Corporation.”
It wasn’t long before those who had supported the Federal Reserve Act began to have doubts. In 1916, Wilson lamented:
“I have unwittingly ruined my country . . . A great Industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the Nation, therefore, and all our activities are in the hands of a few men . . . We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world – no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of small groups of dominant men.”
William Jennings Bryan wrote:
“That is the one thing in my public career that I regret – my work to secure the enactment of the Federal Reserve Law.”
Senator Owen said:
“The people did not know the Federal Reserve Banks were organized for profit-making. They were intended to stabilize the credit and currency supply of the country. That end has not been accomplished. Indeed, there has been the most remarkable variation in the purchasing power of money since the System went into effect.”
Even Carter Glass eventually had second thoughts, ruing in 1938:
“I had never thought the Federal Bank System would prove such a failure. The country is in a state of irretrievable bankruptcy.”
During the 1920’s Henry Ford and Thomas Edison teamed up to express their views on the monetary system. One particular proposal was that the government should issue currency rather than bonds to finance the huge Muscle Shoals nitrate plant in the Tennessee River Valley. Among quotes attributable to Ford are:
“The function of money is not to make money but to move goods.”
“The youth who can solve the money question will do more for the world than all the professional soldiers of history.”
“It is well that the people of the Nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
Thomas Edison captured the matter with such masterly good sense that he is quoted below at some length:
“If our nation can issue dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good, also. The difference between the bond and the bill is that the bond lets the money broker collect . . . whereas the currency pays nobody but those who contribute . . . in some useful way.”
“If the Government issues a bond, it simply induces the money brokers to draw $30,000,000 out of the other channels of trade . . . if the Government issues currency, it provides itself with enough money to increase the national wealth . . . without disturbing the business of the rest of the country. And in doing this it increases its income without adding a penny to its debt.”
“. . . it is the people who constitute the basis of government credit. Why then cannot the people have the benefit of their own guilt-edged credit by receiving non-interest-bearing currency . . . instead of bankers receiving the benefit of the people’s credit in interest-bearing bonds?”
“If the United States Government will adopt this policy of increasing its national wealth without contributing to the interest collector – for the whole national debt is made up of interest charges – then you will see an era of progress and prosperity in this country such as would never have come otherwise.”
“And it is the control of money that constitutes the money question. It is the control of money that is the root of all evil.”
“There is a complete set of misleading slogans kept on hand for just such outbreaks of common sense among the people. The people are so ignorant of what they think are the intricacies of the money system that they are easily impressed by big words. There would be new shrieks of ‘fiat money,’ and ‘paper money,’ and ‘greenbackism,’ and all the rest of it – the same old cries with which the people have been shouted down from the beginning.”
“Ford’s idea is flawless. They won’t like it.”