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| Eustace Mullins - Public Enemy No. 1, circa 1952 |
The Money
Creators
The
editorial page of The New York Times, January 18, 1920, carried an interesting
comment on the Federal Reserve System. The unidentified writer,
perhaps Paul Warburg, stated, "The Federal Reserve is a fount of credit,
not of capital." This is one of the most revealing statements ever made
about the Federal Reserve System. It says that the Federal Reserve
System will never add anything to our capital structure, or to the
formation of capital, because it is organized to produce credit, to create
money for credit money and speculations, instead of providing capital
funds for the improvement of commerce and industry. Simply stated,
capitalization would mean the providing of notes backed by a precious
metal or other commodity. Reserve notes are unbacked paper
loaned at interest. On
July 25, 1921, Senator Owen stated on the editorial page of The New
York Times, The Federal Reserve Board is the most gigantic financial
power in all the world. Instead of using this great power as the Federal
Reserve Act intended that it should, the board....delegated this
power to the banks, threw the weight of its influence toward the support
of the policy of German inflation." The senator whose name was
on the Act saw that it was not performing as promised. After
the Agricultural Depression of 1920-21, the Federal Reserve Board of
Governors settled down to eight years of providing rapid credit expansion
of the New York bankers, a policy which culminated in the Great
Depression of 1929-31 and helped
paralyze the economic structure
of the world. Paul Warburg had resigned in May, 1918, after the
monetary system of the United States had been changed from a bond-secured
currency to a currency based upon commercial paper and
the shares of the Federal Reserve Banks. Warburg returned to his five
hundred thousand dollar a year job with Kuhn, Loeb Company, but
he continued to determine the policy of the Federal Reserve System,
as President of the Federal Advisory Council and as Chairman of
the Executive Committee of the American Acceptance Council. From
1921 to 1929, Paul Warburg organized three of the greatest trusts in
the United States, the International Acceptance Bank, largest acceptance bank
in the world,
Agfa Ansco Film
Corporation, with headquarters
in Belgium, and I.G. Farben Corporation whose American branch
Warburg set up as I.G. Chemical Corporation. The Westinghouse
Corporation is also one of his creations. In
the early 1920s, the Federal Reserve System played the decisive role in
the re-entry of Russia into the international finance structure. Winthrop
and Stimson continued to be the correspondents between Russian
and American bankers, and Henry L. Stimson handled the negotiations
concluding in our recognition of the
Soviet after Roosevelt’s
election in 1932. This was an anti-climax, because we had long
before resumed exchange relations with Russian financiers. The
Federal Reserve System began purchasing
Russian gold in 1920,and
Russian currency was accepted on the Exchanges. According to Colonel
Ely Garrison, in his autobiography, and according to the United
States Naval Secret Service Report on Paul Warburg, the Russian Revolution
had been financed by the Rothschilds and Warburgs, with a
member of the Warburg family carrying the actual funds used by
Lenin and Trotsky in Stockholm in 1918. An
article in the English monthly"Fortnightly", July, 1922, says:
"During
the past year, practically every single capitalistic institution has been
restored. This is true of the State Bank, private banking, the Stock Exchange,
the right to possess money to unlimited amount, the right of inheritance,
the bill of exchange system, and other institutions and practices
involved in the conduct of private
industry and trade. A great
part of the former nationalized industries are now found in semi-independent
trusts." The
organization of powerful trusts in Russia under the guise of Communism
made possible the receipt of large amounts of financial and
technical help from the United States. The Russian aristocracy had
been
wiped out because it was too inefficient to manage a modern industrial
state. The international financiers provided funds for Lenin and
Trotsky to overthrow the Czarist regime and keep Russia in the First World
War. Peter Drucker, spokesman for the oligarchy in America, declared
in an article in the Saturday Evening Post in 1948, that:
"RUSSIA
IS THE IDEAL OF THE MANAGED ECONOMY TOWARDS WHICH WE
ARE MOVING."
In
Russia, the issuance of sufficient currency to handle the needs of their
economy occurred only after a government had been put in power
which had absolute control of the
people. During the 1920s, Russia
issued large quantities of so-called "inflation money", a managed
currency. The same "Fortnightly" article (of July, 1922) observed
that:
"As economic pressure produced the ‘astronomical dimensions system’ of currency; it can never destroy it. Taken alone, the system is selfcontained, logically perfected, even intelligent. And it can perish only through the collapse or destruction of the political edifice which it decorates." "Fortnightly" also remarked, in 1929, that:
"Since
1921, the daily life of the Soviet citizen is no different from that of the
American citizen, and the Soviet
system of government
is more economical."
Admiral
Kolchak, leader of the White Russian armies, was supported by the
international bankers, who sent British and American troops to Siberia
in order to have a pretext for printing Kolchak rubles. At one time
in 1920, the bankers were manipulating on the London Exchange the
old Czarist rubles, Kerensky rubles and Kolchak rubles, the values of all
three fluctuating according to the movements of the Allied troops aiding
Kolchak. Kolchak also was in possession
of considerable amounts
of gold which had been seized by his armies. After his defeat, a
trainload of this gold disappeared in Siberia. At the Senate Hearings in
1921 on the Federal Reserve System, it was brought out that the system
had been receiving this gold. Congressman Dunbar questioned
Governor W.P.G. Harding of the Federal Reserve Board as follows:
DUNBAR: "In other words, Russia is sending a great deal of gold to the European countries, which in turn send it to us?"
HARDING:
"This is done to pay for the stuff bought in this country and to create
dollar exchange."
DUNBAR:
"At the same time, that gold came from Russia through Europe?"
HARDING:
"Some of it is thought to be Kolchak gold, coming through Siberia,
but it is none of the Federal Reserve Banks’ business. The Secretary
of the Treasury has issued instructions to the assay office not to
take any gold which does not bear the mint mark of a friendly nation." Just
what Governor Harding meant by "a friendly nation" is not clear. In 1921,
we were not at war with any country, but Congress was already beginning
to question the international gold dealings of the Federal Reserve
System. Governor Harding could very well shrug his shoulders and
say that it was none of the Federal Reserve Banks’ business where the
gold came from. Gold knows no nationality or race. The United States
by law had ceased to be interested in where its gold came from in
1906, when Secretary of the Treasury Shaw made arrangements with several
of the larger New York banks (ones in which he had interests) to purchase
gold with advances of cash from the United States Treasury, which
would then purchase the gold from these banks. The Treasury could
claim that it did not know where its gold came from since their office
only registers the bank from which it made the purchase. Since 1906,
the Treasury has not known from which of the international gold merchants
it was buying its gold. The
international gold dealings of the Federal Reserve System, and its active
support in helping the League of Nations to force all the nations of
Europe and South America back on the gold standard for the benefit
of international gold merchants like Eugene Meyer, Jr. and Albert
Strauss, is best demonstrated by a classic incident, the sterling credit
of 1925. J.E.
Darling wrote, in the English periodical, "Spectator", on January 10, 1925
that:
"Obviously, it is of the first importance to the United States to induce England to resume the gold standard as early as possible. An American controlled Gold Standard, which must inevitably result in the United States becoming the world’s supreme financial power, makes England a tributary and satellite, and New York the world’s financial centre." Mr. Darling fails to point out that the American people have as little to do with this as the British people, and that resumption of the gold standard by Britain would benefit only that small group of international gold merchants who own the world’s gold. No wonder that "Banker’s Magazine" gleefully remarked in July, 1925 that:
"The outstanding event of the past half year in the banking world was the restoration of the gold standard." The First World War changed the status of the United States from that of a debtor nation to the position of the world’s greatest creditor nation, a title formerly occupied by England. Since debt is money, according to the Governor Marriner Eccles of the Federal Reserve Board, this also made us the richest nation of the world. The war also caused the removal of the headquarters of the world’s acceptance market from London to New York, and Paul Warburg became the most powerful trade acceptance banker in the world. The mainstay of the international financiers, however, remained the same. The gold standard was still the basis of foreign exchange, and the small group of internationals who owned the gold controlled the monetary system of the Western nations. Professor Gustav Cassel wrote in 1928: "The American dollar, not the gold standard, is the world’s monetary standard. The American Federal Reserve Board has the power to determine the purchasing power of the dollar by making changes in the rate of discount, and thus controls the monetary standard of the world." If this were true, the members of the Federal Reserve Board would be the most powerful financiers in the world. Occasionally their membership includes such influential men as Paul Warburg or Eugene Meyer, Jr., but usually they are a rubber-stamp committee for the Federal Advisory Council and the London bankers.
In May, 1925, the British Parliament passed the Gold Standard Act, putting Great Britain back on the gold standard. The Federal Reserve System’s major role in this event came out on March 16, 1926, when George Seay, Governor of the Federal Reserve Bank of Richmond, testified before the House Banking and Currency Committee that:
"A
verbal understanding confirmed by correspondence, extended Great
Britain a two hundred million dollar gold loan or credit. All negotiations
were conducted between Benjamin Strong, Governor of the
Federal Reserve Bank of New York and Mr. Montagu Norman, Governor
of the Bank of England. The purpose of this loan was to help England
get back on the gold standard, and the loan was to be met by
investment of Federal Reserve funds in bills of exchange and foreign securities." The
Federal Reserve Bulletin of June, 1925, stated that: "Under
its arrangement with the Bank of England the Federal Reserve Bank
of New York undertakes to sell
gold on credit
to the Bank
of England
from time to time during the next two years, but not to exceed
$200,000,000 outstanding at any one time." A
two hundred million dollar gold credit
had been arranged by a verbal
understanding between the international
bankers, Benjamin Strong
and Montagu Norman. It was apparent by
this time that the Federal
Reserve System had other interests at heart than the financial needs
of American business and industry. Great Britain’s return to the gold
standard was further facilitated by an additional gold loan of a hundred
million dollars from J.P. Morgan Company. Winston Churchill, British
Chancellor of the Exchequer, complained later that the cost to the
British government of this loan was $1,125,000 the first year, this sum representing
the profit to J.P. Morgan Company in that time.
The
matter of changing the discount rate, for instance, has never been satisfactorily
explained. Inquiry at the Federal Reserve Board in Washington
elicited the reply that "the condition of the money markets is
the prime consideration behind changes
in the rate." Since the money
market is in New York, it takes no imagination to deduce that New
York bankers may be interested in changes of the rate and often attempt
to influence it. Norman
Lombard, in the periodical "World’s Work" writes that: "In
their consideration and disposal of proposed changes of policy, the Federal
Reserve Board should follow the procedure and ethics observed
by our court of law. Suggestions that there should be a change
of rate or that the Reserve Banks should buy or sell securities may
come from anyone and with no formality or written argument. The suggestion
may be made to a Governor or Director of the Federal Reserve
System over the telephone or at his club over the luncheon table,
or it may be made in the course of a casual call on a member of
the Federal Reserve Board. The interests of the one proposing the change
need not be revealed, and his name and any suggestions he makes
are usually kept secret. If it concerns the matter of open market operations,
the public has no inkling of the decision until the regular weekly
statement appears, showing changes in the holdings of the Federal
Reserve Banks. Meanwhile, there is no public discussion, there is
no statement of the reasons for the decision, or of the names of those
opposing or favoring it."
The chances of the average citizen meeting a Governor of the Federal Reserve System at his club are also slight. The House Hearings on Stabilization of the Purchasing Power of the Dollar in 1928 proved conclusively that the Federal Reserve Board worked in close cooperation with the heads of European central banks, and that the Depression of 1929-31 was planned at a secret luncheon of the Federal Reserve Board and those heads of European central banks in 1927. The Board has never been made responsible to the public for its decisions or actions. The constitutional checks and balances seem not to operate in finance. The true allegiance of the members of the Federal Reserve Board has always been to the central bankers. The three features of the central bank, its ownership by private stockholders who receive rent and profit for their use of the nation’s credit, absolute control of the nation’s financial resources, and mobilization of the nation’s credit to finance foreigners, all were demonstrated by the Federal Reserve System during the first fifteen years of its operations. Further demonstration of the international purposes of the Federal Reserve Act of 1913 is provided by the "Edge Amendment" of December 24, 1919, which authorizes the organization of corporations expressly for "engaging in international foreign banking and other international or foreign financial operations, including the dealing in gold or bullion, and the holding of stock in foreign corporations." In commenting on this amendment, E.W. Kemmerer, economist from Princeton University, remarked that:
"The federal reserve system is proving to be a great influence in the internationalizing of American trade and American finance." The fact that this internationalizing of American trade and American finance has been a direct cause for involving us in two world wars does not disturb Mr. Kemmerer. There is plenty of evidence to show how Paul Warburg used the Federal Reserve System as the instrument for getting trade acceptance adopted on a wide scale by American
businessmen. The
use of trade acceptances, (which are the
currency of international
trade) by bankers and corporations in the United States prior
to 1915 was practically unknown. The rise of the Federal Reserve ystem
exactly parallels the increase in the use of acceptances in this country,
nor is this a coincidence. The men who wanted the FederalReserve
System were the men who set up acceptance banks and
profited
by the use of acceptances.
As early as 1910, the National Monetary Commission began to issue pamphlets and other propaganda urging bankers and businessmen in this country to adopt trade acceptances in their transactions. For three years the Commission carried on this campaign, and the Aldrich Plan included a broad provision authorizing the introduction and use of bankers’ acceptances into the American system of commercial paper. The Federal Reserve Act of 1913 as passed by Congress did not
specifically
authorize the use of acceptances, but the Federal Reserve Board
in 1915 and 1916 defined "trade acceptance", further defined by
Regulation A Series of 1920, and further defined by Series 1924. One of
the first official acts of the Board of Governors in 1914 was to grant acceptances
a preferentially low rate of discount at Federal Reserve Banks.
Since acceptances were not being used in this country at that
time,
no explanation of business exigency could be advanced for this action.
It was apparent that someone in power on the Board of Governors
wanted the adoptance of acceptances.
The National Bank Act of 1864, which was the determining financial authority of the United States until November, 1914, did not permit banks to lend their credit. Consequently, the power of banks to create money was greatly limited. We did not have a bank of issue, that is, a central bank, which could create money. To get a central bank, the bankers caused money panic after money panic on the business
people
of the United States, by shipping gold out of the country, creating
a money shortage, and then importing it back. After we got our
central bank, the Federal Reserve System, there was no longer any need
for a money panic, because the banks
could create money. However,
the panic as an instrument of power over the business and financial
community was used again on two important occasions, in 1920,
causing the Agricultural Depression, because state banks and trust
companies had refused to join the Federal Reserve System, and in 1929,
causing the Great Depression, which centralized nearly all power in
this country in the hands of a few great trusts. A
trade acceptance is a draft drawn by the seller of goods on the purchaser,
and accepted by the purchaser, with a time of expiration stamped
upon it. The use of trade acceptances in the wholesale market
supplies short-term, assured credit to carry goods in process of production,
storage, transit, and marketing. It facilitates domestic and foreign
commerce. Seemingly, then, the bankers who wished to replace
the open-book account system with the trade acceptance system
were progressive men who wished to help American import-200
export
trade. Much propaganda was issued to that effect, but this was not
really the story. The
open-book system, heretofore used entirely by American business people,
allowed a discount for cash. The acceptance system discourages
the use of cash, by allowing a discount for credit. The open-book
system also allowed much easier terms of payment, with liberal
extensions on the debt. The acceptance does not allow this, since
it is a
short-term credit with the time-date stamped upon it. It is out of the seller’s
hands, and in the hands of a bank, usually an acceptance bank,
which does not allow any extension of time. Thus, the adoption of
acceptances by American businessmen during the 1920’s greatly facilitated
the domination and swallowing up of small business into huge
trusts, which accelerated the crash of 1929. Trade
acceptances had been used to some extent in the United States
before the Civil War. During that war, exigencies of trade had estroyed
the acceptance as a credit medium, and it had not come back
into favor in this country, our people preferring the simplicity and generosity
of the open-book system. Open-book accounts are a single-name
commercial paper, bearing only the name of the debtor.
Acceptances are two-name paper, bearing the name of the debtorand the creditor. Thus they became commodities to be bought and sold by banks. To the creditor, under the open-book system, the debt is a liability. To the acceptance bank holding an acceptance, the debt is an asset. The men who set up acceptance banks in this country, under the leadership of Paul Warburg, secured control of the billions of 201 dollars of credit existing as open accounts on the books of American businessmen.
Governor
Marriner Eccles of the Federal Reserve Board stated before the
House Banking and Currency Committee that: "Debt is the basis for the
creation of money."
Large
holders of trade acceptances got the use of billions of dollars worth
of credit-money, besides the rate of interest charged upon the acceptance
itself. It is obvious why Paul Warburg should have devoted so
much time, money, and energy to getting acceptances adopted by
this country’s banking machinery.
On September 4, 1914, the National City Bank accepted the first timedraft drawn on a national bank under provisions of the Federal Reserve Act of 1913. This was the beginning of the end of the open-book account system as an important factor in wholesale trade. Beverly Harris, vice-president of the National City Bank of New York, issued a pamphlet in 1915 stating that: "Merchants using the open account system are usurping the functions of bankers." In The New York Times on June 14, 1920, Paul Warburg, Chairman of the American Acceptance Council, said:
"Unless the Federal Reserve Board puts itself heart and soul behind the untrammeled development of acceptances as a prime investment forbanks of the Federal Reserve Banks the future safe and sound development of the system will be jeopardized."202
This
was a statement of the purpose of Warburg and his bunch who wanted
"monetary reform" in this country. They were out to get control of
all credit in the United States, and they got it, by means of the Federal
Reserve System, the acceptance system, and the lack of concern
by the citizens. The
First World War was a boon to the
introduction of trade acceptances,
and the volume jumped to four hundred million dollars in
1917, growing through the 1920s to more than a billion dollars a year, which
culminated in a high peak just before the Great Depression of
1929-31.
The Federal Reserve Bank of New York’s
charts show that its use
of acceptances reached a peak in November, 1929, the month of the
stock market crash, and declined sharply thereafter. The acceptance
people by then had gotten what they wanted, which was
control of American business and industry. "Fortune Magazine" in February
of 1950 pointed out that: "Volume
of acceptances declined from $1,732 million in 1929 to $209 million
in 1940, because of the concentration of acceptance banking in
a few hands, and the Treasury’s low-interest policy, which made direct
loans cheaper than acceptance. There has been a slight upturn since
the war, but it is often cheaper for large companies to finance imports
from their own coffers." In
other words, the "large companies" more accurately, the great trusts,
now have control of credit and have not needed acceptances. Besides
the barrage of propaganda issued by the Federal Reserve System
itself, the National Association of Credit Men, the American Bankers’
Association, and other fraternal organizations of the New York bankers
devoted much time and money to distributing acceptance
propaganda.
Even their flood of lectures and pamphlets proved insufficient,
and in 1919 Paul Warburg organized the American Acceptance
Council, which was devoted entirely to acceptance propaganda.
The first convention held by this association at Detroit, Michigan, on June 9, 1919, coincided with the annual convention of the National Association of Credit Men, held there on that date, so that "interested observers might with facility participate in the lectures and meetings of both groups," according to a pamphlet issued by the American Acceptance Council. Paul Warburg was elected President of this organization, and later became chairman of the Executive Committee of the American Acceptance Council, a position which he held until his death in 1932. The Council published lists of corporations using trade acceptances, all of them businesses in which Kuhn, Loeb Co. or its affiliates held control. Lectures given before the Council or by members of the Council were attractively bound and distributed free by the National City Bank of New York to the country’s businessmen. Louis T. McFadden, Chairman of the House Banking and Currency
Committee,
charged in 1922 that the American Acceptance Council was exercising
undue influence on the Federal Reserve Board and called for
a Congressional investigation, but Congress was not interested. At
the second annual convention of the American Acceptance Council, held
in New York
on December 2,
1920, President Paul Warburg
stated:
"It is a great satisfaction to report that during the year under review it was possible for the American Acceptance Council to further develop and strengthen its relations with the Federal Reserve Board." During the 1920s Paul Warburg, who had resigned from the Federal Reserve Board after holding a position as Governor for a year in wartime, continued to exercise direct personal influence on the Federal Reserve Board by meeting with the Board as President of the Federal Advisory Council and as President of the American Acceptance Council. He was, from its organization in 1920 until his death in 1932, Chairman of the Board of the International Acceptance Bank of New York, the largest acceptance bank in the world. His brother, Felix M. Warburg, also a partner in Kuhn, Loeb Co., was director of the International Acceptance Bank and Paul’s son, James Paul Warburg, was Vice-President. Paul Warburg was also a director on other important acceptance banks in this country, such as Westinghouse Acceptance Bank, which were organized in the United States immediately after the World War, when the headquarters of the
international
acceptance market was moved from London
to New York,
and Paul Warburg became the most powerful acceptance banker
in the world. Paul
Warburg became an even more legendary figure by his memorialization
as "Daddy Warbucks" in the comic strip, "Little Orphan Annie".
The strip celebrated a homeless waif and her dog who are adopted
by "the richest man in the world", Daddy Warbucks, a takeoff on
"Warburg", who has almost magical powers and can accomplish anything
by the power of his limitless wealth. Those in the know snickered
when "Annie", the musical comedy version of this story, had a
highly successful run of several years on Broadway, because the vast majority
of the audience had no idea that this was merely another Warburg
operation.
It was the transference of the acceptance market from England to this country which gave rise to Thomas Lamont’s ecstatic speech before the Academy of Political Science in 1917 that: "The dollar, not the pound, is now the basis for international exchange." Americans were proud to hear that, but they did not realize at what a price. Visible proof of the undue influence of the American Acceptance Council on the Federal Reserve Board, about which Congressman McFadden complained, is the chart showing the rate-pattern of the Federal Reserve Bank of New York during the 1920s. The Bank’s official discount rate follows exactly for nine years the ninety-day bankers’ acceptance rate, and the Federal Reserve Bank of New York sets the discount rate for the rest of the Reserve Banks. Throughout the 1920s the Board of Governors retained two of its first members, C.S. Hamlin and Adolph C. Miller. These men found themselves careers as arbiters of the nation’s monetary policy. Hamlin was on the Board from 1914 until 1936, when he was appointed Special Counsel to the Board, while Miller served from 1914 until 1931. These two men were allowed to stay on the Board so many years because they were both eminently respectable men who gave the Board a certain prestige in the eyes of the public. During these years one important banker after another came on the Board, served for awhile, and went on to better things. Neither Miller nor Hamlin ever objected to anything that the New York bankers wanted. They changed the discount rate and they performed open market operation with Government securities whenever Wall Street wanted them to. Behind them was the figure of Paul Warburg, who exercised a continuous and dominant influence as President of the Federal Advisory Council, on which he had such men of common interests with himself as Winthrop Aldrich and J.P. Morgan. Warburg was never too occupied with his duties of organizing the big international trusts to supervise the nation’s financial structures. His influence from 1902, when he arrived in this country as immigrant from Germany, until 1932, the year of his death, was dependent on his European alliance with the banking cartel. Warburg’s son, James Paul Warburg, continued to exercise such influence, being appointed Franklin D. Roosevelt’s Director of the Budget when that great man assumed office in 1933, and setting up the Office of War Information, our official propaganda agency during the Second World War. In The Fight for Financial Supremacy, Paul Einzig, editorial writer for the London Economist, wrote that:
"Almost immediately after World War I a close cooperation was established between the Bank of England and the Federal Reserve authorities, and more especially with the Federal Reserve Bank of New York.* This cooperation was largely due to the cordial relations existing between Mr. Montagu Norman of the Bank of England and Mr. Benjamin Strong, Governor of the Federal Reserve Bank of New York until 1928. On several occasions the discount rate policy of the Federal Reserve Bank of New York was guided by a desire to help the Bank of England.
*
William Boyce Thompson (Wall Street operator) commented to
Clarence
Barron, Nov. 27, 1920, "Why should the Federal Reserve Bank
have
private wires all over the country and talk daily by cable with the
Bank
of England?" p. 327 "They Told Barron".There
has been close cooperation in the fixing of discount rates between
London and New York."
__________________________
86 Paul Einzig, The Fight
For Financial Supremacy, Macmillan, 1931
From SECRETS OF THE FEDERAL RESERVE
The London Connection
By Eustace Mullins
http://thetruthnews.info/secretfed.pdf
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