senses with unease the obvious fact that there are serious problems
with the international economic system. No one seems to understand
what are its root causes, and what, if anything, they can do to
all see rampant devaluation and inflation causing the prices of
energy, food and practically everything we buy and use continuing to
spiral up and out of control. We see the currency in our pockets being
devalued by the day, and buying less and less.
are held captive by this unfathomable force, which every day tightens
its grip on our lives and the future of our children and grand
children. We tend to despair at the hope of getting our leaders to do
something to get economic forces back to some sort of equilibrium
leaving the future a bit more predictable.
end we hope this and the series or articles to follow will answer your
questions, in a simple, direct and easy to understand manner and give
you a definitive understanding of exactly what is and has been causing
the festering situation we call inflation.
What is Money?
First, what exactly is money?
Oxford dictionary defines money as “Coin and promissory documents
representing it”. It is, in essence, anything, which the public
accepts as having a fixed value by everyone in that society.
Yap Islanders used large circular stones with the centers carved out,
rural Tibetans used yak dung, Roman soldiers were paid in salt (hence
the word salary), and even pins were used until they were mass machine
produced, and were naturally referred to as “pin money”.
1100AD King Henry I created the tally stick, a polished stick of
Hazelwood or poplar. The tally stick was notched down one side with as
many notches as was the denomination. The stick was then split down
the centre with one side longer than the other.
longer piece was called the Share, and was retained by the person
paying the money. He therefore became the “Shareholder”. The short end
of the stick called the “foil” was retained by the person receiving
the case of taxes (the tally being the only money accepted by the
crown) the king retained one half, and the payer the other half. This
form of currency lasted until 1826, and was the basis that created the
British Empire. Believe it or not the original shares of the Bank of
England were purchased with a tally sticks.
tally stick, although quite successful as money, was attacked by the
moneychangers, the goldsmiths, and by the Bank of England itself. This
was because the tally system was outside of their control. They
offered the metal coin as an alternative, and both systems coexisted
for over seven hundred years. The word tally is still used commonly
today when accounts are required to balance.
of us think of money in terms of coins and notes. There is, though, a
very specific difference between them. Real money is gold or silver
coins and is so designated. Notes or currency are paper money
substitutes for this real money. Remember this difference, as it is
very important when understanding what money is or should be. Paper
substitutes are currency or cash not money.
pound sterling was exactly what the name implied, one pound in weight
of sterling (92.5% silver), or 240 silver pennies, or 20 silver
shillings. It’s a sad commentary that those 240 silver pennies are now
replaced by a quarter ounce brass coin. A classic example of
devaluation by a base metal of real money.
the centuries, gold and silver have been universally accepted as being
real money by every society on the planet. No one thinks twice about
the value of a silver dollar, a gold sovereign, a Kruger rand or a $20
gold piece. More importantly, they have held their value with very
little change in actual buying power since the time of Pharaoh.
this is true, why do we not use gold or silver as money today?
do we use paper currency instead?
originally, the goldsmiths who were the early bankers, would warehouse
people’s gold or silver for them, and issue paper receipts for the
metal on deposit.
receipts were redeemable into gold at the goldsmith’s shop, when the
holder presented it. Obviously, gold was hard to carry, store, and
maintain security over. A paper receipt was much easier to use when
paying for purchases just as paper money is today.
a while, the goldsmith noticed that only a small percentage of the
gold that they held in their vaults was ever actually redeemed. The
certificates continued to circulate through the economy, as does
became de facto banks although they were not aware of this until their
hoard of gold grew over time. They suddenly realized that they could
issue additional certificates on the gold that they had on deposit,
charging interest on the paper currency they issued, although no real
money existed or was actually on deposit. So was born the world’s
least known confidence game, “fractional reserve banking and lending”.
other words, creating currency out of thin air, and lending it out at
interest with nothing to back the loan except the hope that the
goldsmith had sufficient gold in his vaults to cover any calls for
redemption. We now call this “a run on the bank”. This system
continues to be used by the world’s banks right up to the present day.
goldsmiths and present day bankers loaned out as much as 40 times the
value of the actual gold they held as real money in their vault. You
can readily see that they did not just collect, say 6%, on the actual
gold reserve, but forty times 6% or 240% in actual return on the
original gold being held. One can therefore understand why banking is
such a profitable business.
week we will delve into money going back to ancient Rome, and why
Jesus threw the moneychangers from the temple. We will delve into the
story of how money is what the banks say it is, not what it really is.
I welcome our readers to the wonderful world of how money is
manipulated, and of avarice and greed on a global scale.
is going to be a bumpy ride.
from the Cayman Islands
As We See It: Money makes the world go round (Part
Published on Tuesday, December 23, 2008
The trouble we are having today with our economic
system has its origins in ancient Rome, circa 48 BC. Julius Caesar
took from the money changers the power to coin money. He proceeded to
coin silver for the benefit of all and then established massive
construction projects and public works.
making money plentiful, he won the love, and support of the common
people. But the money changers hated him for usurping their power to
control the money supply. For this affront they plotted his
his murder, the money changers came back into control, and immediately
the supply of coin dried up. Taxes increased, as did corruption, and
eventually the money supply was reduced by 90 percent. This of course
led to the common people losing their land, homes, and businesses
while the money changers benefited and their control became absolute.
AD, Jesus Christ perpetrated the only violence ever attributed to him.
He threw the money changers out of the temple in Jerusalem, and
effectively signed his own death warrant for this act.
was necessary for Jews to pay a temple tax, and the only coin that was
acceptable for this was the silver half shekel -- a coin that did not
bear the image of a Pagan emperor and was therefore acceptable to God.
The only problem is that the moneychangers had cornered the market on
these coins and were selling them at inflated prices. This infuriated
Jesus, so he took the bold action of bodily throwing them from the
temple, as their actions violated the sanctity of God’s house.
obviously did not sit well with the money changers, and they
immediately called for his death and within days he was crucified. The
rest of the story, of course, is history. The moral of this story is
never get on the wrong side of the bankers.
Around 1024, the money changers, who were by then known as goldsmiths,
totally controlled the money supply of medieval England. This is when
paper money or gold receipts were first used and circulated through
the economy as currency representing gold deposited. These were the
1100 the tally stick arrives on the scene, and Henry1 put the
goldsmiths temporarily out business. (See last week’s column)
1225, Thomas Aquinas was born, and became the leading theologian of
the Catholic Church. He argued that charging interest was immoral as
it was double charging (charging for the money and then for the use of
the money). Church law in the Middle Ages forbade charging interest,
as a crime called usury.
1509 Henry VIII ascended the throne of England, and separated England
from the Roman Church, therefore breaking any connection with Church
law, and usury is once again allowed. Under Henry, the goldsmiths
wasted no time in reasserting themselves over the control of England’s
money. Henry was the first to debase his money, by making it one-third
silver and two-thirds copper. Even then they learned how to cheat the
1553, Queen Mary, a staunch Catholic, again tightened usury laws The
goldsmiths were not at all amused by her actions, and they promptly
tightened the money supply and threw the econom into chaos.
1558, Queen Elizabeth took the throne and control of coining money
through the public treasury, once again putting the goldsmiths out of
1609, the moneychangers in the Netherlands created the world’s first
central bank in Amsterdam and so our problems began.
1642, Oliver Cromwell had his Civil War, financed by the goldsmiths,
and in gratitude he allowed them to take over the money supply of
England. They consolidated their power, and for the next few decades
plunged England into a series of costly wars. They also took over a
square mile of central London to create the City of London, or
1688, the English moneychangers had a series of squabbles with the
Stuart kings, Charles and James, and they conspired with their Dutch
counterparts to finance an invasion of England by William of Orange.
The invasion was successful and, in 1689-94, William III was crowned
King of England.
Following 50 years of costly wars, the English government officials
went hat in hand to the goldsmiths to help them pay for their folly.
The goldsmiths agreed to extensive loans, if the government sanctioned
the set up of a privately owned central bank. This bank was named the
“The Bank of England”. The name deceptively hid the fact it was
privately owned, giving the bank the aura of a governmental entity
As mentioned in last week’s column, these goldsmiths started loaning
money, which they actually didn’t have on deposit but charged interest
for these loans. This became what is known today as “fractional
reserve lending”, and is at the heart of today’s so called credit
banks today leverage their deposits up to 40 times to make loans and
collect interest with money produced out of thin air. This works quite
well as long as people don’t demand their money. When they do, it
creates a lack of cash or liquidity, then a lack of confidence and
finally a “run on the bank”. This inevitably ends in what we are now
experiencing throughout the world in the form of bank failures.
we have a financial crisis of recession or depression, it is described
as “the business cycle”. In actuality, it has been created by the
Federal Reserve (central bank), the Treasury and the bankers
manipulating the money supply and the interest rates, creating
conditions of boom and bust.
next installment will go into the “King of the Goldsmiths” and the
worldwide effort of international bankers to create their greatest
achievement: the control of the world’s money supply through the set
up of privately owned central banks.
hope that you have not been unduly bored with the mass of historical
details that, although greatly truncated, are necessary to fully
understand where we are today and where we are going tomorrow.
from the Cayman Islands
As We See It: Money makes the world go round (Part
Published on Tuesday, December 16, 2008
the year 1743, Amschel Moses Bauer opened a small coin shop/counting
house in his hometown of Frankfurt, Germany. It was nondescript except
for a sign over its entrance depicting a Roman Eagle on a red shield.
business began to be known as the Red Shield firm, or Rothschild in
German. When his son Mayer Amschel Bauer inherited the business, he
decided to change his name to Rothschild. And so began the Rothschild
banking dynasty, and the fortune purported to be the largest in the
world, even to this day.
Amschel very rapidly learned that the profits to be made by loaning to
governments and kings far outstripped lending to private individuals.
Not only were the loans far larger, but they were secured by the taxes
of the country taking the loan.
had 5 sons who he meticulously schooled in the art of money creation.
He then sent them out all over Europe to expand the Rothschild
first son, Amschel Mayer, stayed in Frankfurt to run the main office.
His second, Solomon, was sent to Vienna. The third, Nathan, went to
London. His fourth, Carl, went to Naples and lastly, Jacob, went to
1785, Amschel bought a 5-story home in Frankfurt, which was shared
with the Schiff family. This house was known as “Green Shield.” The
Rothschild and Schiff families would, over many years, play a major
role in both European and American banking.
Rothschild’s started dealing with European royalty when they became
friendly with Prince William of Hess, known to be the wealthiest man
in Europe. At first the family assisted William with speculation in
precious coins. Later, when Napoleon chased William into exile,
William sent £550,000 sterling to Nathan Rothschild in London. He
instructed Nathan to buy British Government Bonds.
Contrary to his instructions, Nathan used the money for his own
purposes. He invested in war industries, which were making enormous
profits with Napoleon running amok all over Europe.
William returned to London in 1815 just prior to the battle of
Waterloo, and demanded his money back from Nathan. The Rothschild’s
returned William’s money with interest, but not the enormous profits
they had made on the use of these funds.
Nathan who was obviously the cleverest of the Rothschild’s, later
bragged that in the 17 years he had been in England he had increased
the £20,000 stake he had received from his father 2500 times. By the
mid 1800s, they dominated European banking and became the wealthiest
family in the world.
Nathan’s biggest coup was actually at the battle of Waterloo, where he
had sent a representative to observe and send back the early results
of the winner of that battle. His representative got the information
to Nathan, that Britain had won, a day before the official results
were received. Nathan dropped hints that the French had won the day
and the markets fell drastically, only to be bought back by the
is interesting is that the French part of the family loaned money to
Napoleon, while Nathan loaned the British the money they needed.
Obviously by hedging their bets, the family still won not only a
fortune, but control of the Bank of England. As you can see War is the
most profitable business bankers can involve themselves in.
investments included Cecil Rhodes, who created the South African
diamond business. In America they financed Harriman and Vanderbilt in
railroads, and the Carnegie family in steel. Little known is that J.P.
Morgan only owned 19% of his own banking firm: the other 81% was owned
by the Rothschild’s.
1850 James Rothschild, the heir of the French wing of the family, was
found to be worth 600 million French Francs; 150 million francs more
than all of the other French bankers put together.
Probably the most notable quotes made by the Rothschild’s are:
me issue and control a nation’s money and I care not who writes its
laws” -- Mayer Rothschild.
my sons did not want wars, there would be none” -- Guile Schnaper,
wife of Mayer Rothschild.
care not what puppet is placed upon the throne of England to rule the
Empire on which the sun never sets. The man who controls Britain’s
money supply controls the British Empire and I control the British
money supply” -- Mayer Rothschild.
“Teach those impudent Americans a lesson. Bring them back to colonial
status” -- Nathan Rothschild.
And a British Prime Minister:
“Rothschild is Lord and Master of the money markets of the world and
of course virtually lord and master of everything else” -- Benjamin
from the Cayman Islands
As We See It: Money makes the world go round (Part
Published on Tuesday, January 6, 2009
exactly is central bank?
could be the Bank of England, the European Union Central Bank, or the
Federal Reserve or for that matter hundreds of other national central
banks. These institutions all have essentially the same function.
supposedly act at the behest of the government to create the country’s
currency, set its interest rates, make a nation’s monetary policy and
set foreign exchange rates. This all sounds good on paper but, in
practice, the best interest of the country is rarely served.
must be understood is that almost all central banks are privately
owned by international banks. This means they are operated for the
profit of the owners, not for the interests of the nation. Countries
set up their central banks in this manner, as they all operate on a
fiat paper money system. Fiat money is not backed by gold or silver,
but made as legal tender by decree. Governments constantly need the
infusion of cash to make up the shortfall between tax collections and
their spending. International bankers, through their connection with
other countries, supply the extra cash to the governments at interest.
the end the 1600s, British politicians had practically bankrupted
Britain after 50 years of almost continuous wars with France and the
Netherlands. They had to go hat in hand to the international
moneylenders to beg for funds to pay for these wars, and pursue their
own political purposes. The price was high. They had to create a
government sanctioned, privately owned central bank that could issue
Britain’s currency. It was to be the world’s second privately held
central bank (The first was the Bank of the Netherlands) and was to
called the Bank of England (BOE) so as to deceive the general public
into believing it was a government entity.
any other private corporation, the investors, who were never
identified, were supposed to put up £1.25 million of initial capital.
Only £750,000 was ever subscribed. Despite that, the Bank was duly
chartered in 1694. The government was allowed to borrow as much money
as they wanted as long as they secured the debt by direct taxation of
the British people, plus the interest demanded by the Bank.
Legalization of the BOE amounted to printing the nation’s currency for
private gain. Almost every country on the planet now has a privately
held central bank, using the BOE as a model. The power of these
central banks is such that they very rapidly take over control of a
nation’s money supply and thus its economy.
Nations do need central banks to organize and control their currency
and economies, but why should they be in the hands of private bankers?
Surely the central bank needs to be under the control of a parliament
and treasury. The central bank is actually a hidden tax on the people.
The nation sells bonds to the central bank, which issues currency to
government to pay for things Government does not want to tax the
people for. In essence it turns debt into cash. The bonds are
purchased with money that the central bank creates out of thin air.
The more money in circulation makes the money in your pocket worth
less. This is better known as inflation or devaluation, which
originates only from government spending policies.
beauty of the scheme is that not one person in a thousand understands
what is actually going on. Government hides its machinations behind
complex sounding economic gibberish.
the formation of the Bank of England (BOE), the nation was suddenly
drowning in an ocean of newly printed currency. Overnight, prices
doubled, money was being loaned for anything and everything, just as
government has done today to create the sub-prime mortgage bubble. By
1698, government debt rose from the original £1.25 million pounds to
over £16 million. To pay for this, taxes were increased and then
the economy firmly in the hands of the BOE, there began a wild series
of booms and depressions, exactly what a central bank claims to
prevent. Since then, the pound has rarely seen stability and has
dropped in purchasing power ever since.
the mid-1700s, the British Empire was nearing the height of its power
around the world. Britain had fought four costly wars in Europe and
government was in debt to the tune of over £140 million, a staggering
sum for its time.
help pay the interest on this debt, King George attempted to place
onerous taxes on the American colonies but they went unheeded. The
colonies printed their own money called colonial scrip. Scrip was
controlled carefully thus keeping its purchasing power and avoiding
interest or inflation.
Although scrip was paper money without backing, it was issued with the
faith and credit of the colonial governments, and not only worked
admirably, but also drew the various colonies together as a united
group. America had learned the secret of money.
response, the British Parliament hurriedly passed the Currency Act of
1764, which prohibited scrip and ordered future taxes to be paid in
gold or silver coin. Depression set into the American colonies and
revolution was now only a matter of time.
1775, the American colonies had been totally drained of gold and
silver by taxes and printed new paper money called the Continental. At
the start of the Revolution, the supply stood at $12 million. By the
end it had risen to over $500 million. The obvious result was rampant
inflation. A pair of shoes sold for $5,000, making the currency
virtually worthless. A favorite saying was that if something was worth
a Continental, it was worth nothing. George Washington quipped that
“it took a wagon load of money, to buy a wagon load of provisions.”
Towards the end of the revolution, the Continental Congress became so
desperate for money that they allowed Robert Morris to open a
privately owned central bank called the Bank of North America. The
charter required $400 million in gold, which Morris raised through
questionable practices. Like the BOE, the bank was given a monopoly
over US currency and its value plummeted. In 1785, the charter of the
bank was not renewed.
1791, the moneychangers struck again. Congress gave Alexander Hamilton
and Morris a twenty-year franchise for the privately owned First Bank
of the United States, with the idea that it would bring stability and
eliminate inflation. In the first five years the government borrowed
£8.2 million and prices rose by 72%. Thomas Jefferson the new
Secretary of State lamented:
wish it were possible to obtain a single amendment to our Constitution
taking from the federal government their power of borrowing.”
1811, due to political and public pressure, the Senate cancelled the
charter, and killed the bank. Yet, in 1816, Congress chartered the
Second Bank of the United States, a duplicate of the previous bank.
The primary stockholders were never disclosed, although it is know
that a third of the shares were sold to foreigners. In this year,
Rothschild had taken control of the BOE and also had a majority share
in the Second Bank of the United States.
Central banks were here to stay; their network already starting to
stretch around the world. With a finger on the pulse of the money,
they also held the heartbeat of the nations of the world.
week we will see Andrew Jackson the hero of the Battle of New Orleans,
battle the new central bank.
from the Cayman Islands
As We See It: Money makes the world go round (Part
Published on Tuesday, January 13, 2009
Andrew Jackson is primarily remembered as the hero of the Battle of
New Orleans (Jan.8, 1815). The battle was fought in vain as the
British had already signed the Treaty of Ghent bringing the war of
1812 to an end on December 24, 1814. Sadly the news did not arrive
until mid-February and thousands on both sides lost their lives
Despite this, Jackson became a national hero, which helped his
nomination by the Democratic Party, and his election win in 1828. But
I get ahead of my story.
still 1811 and the international bankers are fighting to get a renewal
bill through congress extending the charter of the First Bank of the
United States for 20 more years. James Madison, a staunch enemy of the
Bank, sends his Vice President George Clinton to break the tie in the
Senate putting a final end to the bill.
1812, after 5 years of degenerating relationships between the US and
the British, the US declares war and sends troops into Canada. This
does not stop the international bankers from attempting to
reconstitute a privately held US Central Bank. In 1816, a year after
the war ended, the US Congress passes another bill allowing another
central bank. It is a carbon copy of the previous one, and is called
The Second Bank of the United States.
1828 the American public is unsurprisingly fed up with the bank and
its efforts to swindle the American taxpayer. The Democrats nominate
Andrew Jackson, the Senator from Tennessee, as their candidate on an
anti-bank platform. Jackson is quoted as saying to Martin Van Buren,
“The bank is trying to kill me, but I will kill it!” Jackson is
elected by a landslide. During his first term to root out supporters
of the bank, he fires 2000 of the government’s 11,000 employees. In
1832, the bank asks for a renewal of its charter four years early.
Congress passes the renewal and sends the bill to the President who
promptly vetoes the legislation.
Congress is unable to override his veto.
Jackson then stands for reelection with a campaign slogan, “Jackson
and No Bank”. The bankers poured over $3 million into the campaign of
Henry Clay, his opponent, yet Jackson won reelection by an enormous
though he won, Jackson knew that it was only the beginning of a long
and arduous fight to get rid of the bank and its supporters. He
appoints Roger B Taney as Secretary of the Treasury, and instructs him
to start pulling out Government deposits in the Second Bank.
Nicolas Biddle president of the Bank refuses to cooperate with the
government, and starts to reduce the money supply so as to bring on a
full scale depression. By so doing he tries to force the hand of
congress to override the President and renew the charter. When this
does not work, Biddle blamed Jackson for the depression.
to say the bankers were able sway public opinion against Jackson even
to the point of having him publicly censured in 1835, the first time a
President had ever been so censured. Public opinion though started
swinging back in Jackson’s favor when Biddle openly boasted that he
intended to crash the American economy. On April 4, 1835, by a 134 to
82 vote, the Senate refused to renew the banks charter. This
vindicated Jackson’s stance and won him the nation’s approval.
investigative committee was told to subpoena the bank’s records;
Biddle refused to comply and was later arrested and charged with
fraud. He was tried but acquitted, and died in 1844 still under
serious investigation. The charter of the bank ran out in 1836, and it
died a natural death.
Jackson’s obvious legacy was that he was able to get rid of the
central bank. The Bank though finally resurfaced in the form of the
Federal Reserve in 1913. His other legacy, not as well known, was the
fact that he was the only president to ever pay off the national debt
which he accomplished on January 8th 1838, just before leaving office.
That year, on January 30, an overseas paid assassin Richard Lawrence
tried to kill Jackson, but both of his pistols misfired, and Jackson
retired to his home in Nashville, Tennessee, the “Hermitage”, to live
out his life quietly.
Although it took 75 years to bring the Federal Reserve into existence,
those 75 years were fraught with constant attempts to bring about a
privately owned US central bank.
1854 a new political party, “The Republicans” are being formed in
small white school house in Ripon, Wisconsin. Six years later they
will nominate and elect Abraham Lincoln 16th president of the United
States. After only one month in office, the nation is hurled into a
massive Civil War, brought about by secession of the Southern States
from the Union.
general impression is that the war was brought about by an attempt of
abolitionists to free the slaves. Lincoln was very much against
slavery but even he said, “My paramount objective in this struggle is
to save the Union and it is not either to save or to destroy slavery.”
Reasons for the war are debated but one was that the South was in a
dire economic situation brought on by Northern industrialists raising
protective tariffs preventing the South from buying cheaper European
goods. Europe retaliated by stopping cotton imports from the South
thereby strangling the Southern economy. This is what the
international bankers saw as an opportunity to divide and conquer
further these ends the bankers loaned France 210 million Francs to
invade Mexico and station troops along the US southern border. The
British were not idle, as they stationed 11.000 troops in Canada along
the northern frontier. Both actions were in direct violation of the
Lincoln knew he was in trouble, the nation was fragmenting, and two
hostile European powers were involving themselves in the internal
affairs of the U.S.
needed money, so he and his Secretary of the Treasury, Solomon P.
Chase, went to New York to seek out the money lenders. They were
quoting 24% to 36% interest, so Lincoln said “no thank you” and
returned to Washington where he called on Col. Dick Taylor of Chicago
and appointed him to find a solution. When asked what he would do
Taylor replied, “ Why Lincoln that’s easy, just get Congress to pass a
bill authorizing the printing full legal tender treasury notes. Pay
your soldiers and go ahead and win your war with them.”
Lincoln was not sure that the public would accept them, but Taylor
said “The people or anyone else will not have any choice in the
matter. If you make them full legal tender they will have the full
sanction of the government, and be just as good as any money, as
Congress is given that express right by the Constitution”.
1862 Lincoln printed $450,000,000 worth of this new currency. The
bills were printed green on the reverse side, so as to differentiate
between the currencies then in circulation and they were called
“Greenbacks”. They were printed at no interest to the government and
were used to pay the troops, buy the supplies and won the war for
Lincoln and the Northern armies.
Greenback dollar was so successful that it remained in circulation
until the 1980’s when it was finally retired. Barrack Obama, who
reveres Lincoln, should take a note from Lincoln’s view on currency
and have the treasury print a new Greenback with the full faith and
credit of the US government as legal tender. It worked admirably
before; it would work again.
Abraham Lincoln said “The government should create Issue and circulate
all the currency and credits needed to satisfy the spending power of
the government and the buying power of consumers. By the adoption of
these principals the taxpayer will be saved immense sums of interest.
The privilege of creating and issuing money is not only the supreme
prerogative of the Government but is the governments greatest
week the 75 years leading up to the Federal Reserve.
from the Cayman Islands
As We See It: Money makes the world go round (Part
Published on Tuesday, February 10, 2009
bank is gone, but not forgotten
Lincoln has just finished printing the first lot of greenbacks, and
the international bankers are already hatching a new scheme to control
the currency of the United States. Lincoln would be one of two
presidents to issue debt free United States Treasury Notes, the other
was JFK when, by Executive Order No. 11110, he issued $2 bills with
silver backing. They were short lived and, after JFK’s assassination,
they were quickly withdrawn from circulation. Both presidents should
be honored for showing the courage, in attempting to free the currency
bankers though have no time to dilly-dally. In 1863 Lincoln needs
further congressional approval to print more greenbacks. Instead
Congress, at the behest of the banking interests, forces Lincoln to
accept the “National Banking Act” which they push through Congress.
The Act allowed the entire US money supply to be created out of debt
by forcing the national banks of each state to buy bonds from the US
Treasury and issue them as reserves for banknotes. This was not a
central bank, but it gave the international bankers monopoly over US
top of this, the banks were allowed to operate virtually tax free.
This banking scam was best explained by John Kenneth Galbraith, a well
known liberal economist, when he said, “In numerous years following
the Civil War the government ran a heavy surplus. It could not however
pay off its debts or retire its securities, because to do so meant
there would be no bonds to back the national bank notes. To pay off
the debt was to destroy the money supply.”
is the problem in the USA today. It has a debt based money supply,
with the private bankers at the Federal Reserve holding the debt and
collecting perpetual interest on it. We cannot pay off the debt, for
if we did, we would immediately destroy all currency in circulation.
Lincoln had the right idea when he issued debt-free greenback
currency. We should do so again and as soon as possible.
Solomon P. Chase, Lincoln’s ex-Secretary of the Treasury stated, “My
agency in promoting the passage of the National Banking Act was the
greatest financial mistake of my entire life. It has built up a
monopoly which affects every interest in the country.”
International bankers wanted to establish a gold standard in the
United States, which they could control. This was in direct opposition
to Lincoln’s policy of issuing debt-free greenbacks based solely on
the good faith and credit of the United States. With Lincoln’s
assassination, the bankers were able to proceed with their plan and
within eight years, were able to demonetize silver (which was
plentiful in the Western US) and set up a gold standard.
Remember, Lincoln had printed and circulated large sums of debt-free
greenbacks, which were contrary to what the bankers wanted. To get rid
of the greenback they passed through Congress on April 12, 1866 the
“Contraction Act”. This Act allowed the Secretary of the Treasury to
withdraw from circulation quantities of the greenbacks over a 20 year
period. The result was that the buying power of the average citizen
was reduced by 760 percent. Such a contraction of the currency caused
serious recessions and depressions, despite the United States being in
one of the greatest social, economic, industrial and territorial
expansions the country had ever witnessed. By 1876, one third of the
workforce is unemployed. This was greater than the Great Depression
which never ran over 25 percent.
me give you an idea of how this contraction actually affected the
normal consumer. In 1866, there was $1,800,000,000 in circulation,
which worked out as $50.46 per capita. One year later, in 1867, that
amount had dropped to $1,300,000,000 or $44.00 per capita. Nine years
later, money in circulation had dropped precipitously to less than
$600,000,000 or $14.60. By 1886, the money supply was down to
$400,000,000 or $6.57 for every man woman and child. You can see the
country was being starved for currency.
problem became so severe that Congress set up the United States Silver
Commission to investigate. The Commission published a damning report,
and placed the blame squarely on the banks and contracted money
supply. Congress refused to free up the money supply, and in 1877
riots broke out from Pittsburgh to Chicago. The bankers collectively
decided to hang tough and not give an inch, because they knew they
were now firmly in control. The American Bankers Association and its
members did everything in their power to influence the press and the
Congress to stop the return of the greenback.
Things got so bad that finally Congress passed the Bland-Allison Act
in 1878 allowing the minting of a limited number of silver dollars.
This guaranteed that money returned to the economy. The bankers didn’t
like it but they started issuing loans again and, by 1881, the
post-Civil War depression finally ended.
central issue of the presidential campaign of 1892 is the issue of
more silver money.
Senator William Jennings Bryan of Nebraska, made his famous “Crown of
Thorns and Cross of Gold” speech at the Democratic Convention in
Chicago, where he is nominated as their candidate for president. His
speech electrifies the convention and the country. “We will answer
their demand 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.”
McKinley is backed by the bankers, because he supports the gold
standard. He wins the election, albeit by a very small margin.
1907 and the banking interests now go into top gear to create what
will become the Federal Reserve. Rothschild agent Jacob Schiff gives a
speech before the New York Chamber of Commerce threatening the nation
when he says: “Unless we have a Central Bank with adequate control of
credit resources, this country is going to undergo the most severe and
far reaching money panic in its history.” The 1907 panic occurs, with
a massive fall in the New York Stock Exchange.
Morgan owned only 19 percent of his own company, the other 81 percent
was owned by the British Rothschild interests. Allegedly, Morgan and
his friends secretly crash the stock market. He is aware that
thousands of small banks are grossly over extended because of
fractional reserve lending and they have only about 1 percent cash
reserves. Within a few days runs on the banks all over the country
become the norm.
Morgan then steps in to become the “Guardian Angel” of the banking
system, funny when it is said that he and his cohorts have actually
created the money panic. Morgan manages to coordinate, using his own
reserves and pledges from other banks, $25 million to shore-up the
NYSE. As a direct result of this injection, the NYSE was saved and the
immediate panic ended. (Morgan didn’t go unrewarded though and was
offered a railroad company at a fraction of its actual value). He is
now assigned the task of point man in this charge to create what will
become the Federal Reserve.
Morgan was lauded, by of all people, Woodrow Wilson, then president of
Princeton University. Wilson said: “All this trouble could have been
averted if we had appointed a committee of six or seven public
spirited like J.P. Morgan to handle the affairs of our country” Can
you believe this?
President Theodore Roosevelt, as a reaction to the panic, created the
National Monetary Commission, which was charged with making
recommendations to Congress so that money panics would not happen
again. Surprise, surprise, guess who was appointed to the Commission.
You guessed right, J.P. Morgan his friends and cronies. Dracula was
now in charge of the blood bank. The Commission of course recommends
to Congress the establishment of a privately owned Central Bank.
chairman of the committee was Rhode Island Senator Nelson Aldrich.
Aldrich is a key player in this story and we will see him next week as
one of the seven in the “Conspiracy at Jekyll Island.” This is where
this entire story gets really interesting.
from the Cayman Islands
As We See It: Money makes the world go round (Part
Published on Tuesday, February 17, 2009
Conspiracy at Jekyll Island
word Conspiracy frightens almost everyone, including yours truly.
Conspiracy often connotes “political conspiracy” and in the top
echelons of government it is not only hard to comprehend but is
usually ignored out of hand as the machinations of a sick mind or
‘conspiracy theorist’. The conspirators are thereby insulated from
exposure by the totally unbelievable nature of the conspiracy itself.
All they need do is laugh off the charges as ridiculous and, unless
there are provable allegations, they can just go ahead with what they
are doing indefinitely or until the conspiracy is finally exposed for
what it is.
is one of the four barrier islands off the coast of Brunswick,
Georgia, and in February of 1886 the developers of the island sold off
53 of the 100 shares for $600 each. They completed the clubhouse in
January of 1888 and, considering the price paid by this very wealthy
group of financiers, it was probably the best investment they had ever
1910 it had become a winter resort frequented by the American
super-rich. These billionaires of their day came to Jekyll Island in
the depth of winter to enjoy the good life, the warm weather and
camaraderie of their fellows. Yet in November 1910 the island took on
a special significance. It was to become the meeting place of the
seven conspirators who plotted the creation of the Federal Reserve.
Ah, but let me get on with my
Picture a group of seven international financiers, representing over
25 percent of the world’s total wealth, stealing out of New York under
cover of darkness on a private railway car owned by Senator Nelson
Aldrich of Rhode Island. This group was cautioned not to use their
last names, not to dine together, and not even speak to one another
until the railway car had left the Northern New Jersey station. They
would travel hundreds of miles south to the coast of Georgia, to be
transported by launch to a deserted island populated only by a few
group consisted of Nelson W. Aldrich, (senior senator from Rhode
Island along with his personal secretary Arthur Shelton), Dr Abraham
Piatt Andrew, (assistant Secretary of the Treasury), Frank Vanderlip
(President of the National City Bank of New York who were representing
William Rockefeller and Kuhn Loeb & Co.), Paul Warburg (Kuhn Loeb, New
York, representing the Rothschild’s), Benjamin Strong (aide to JP
Morgan), Henry P. Davidson (senior partner with JP Morgan & Co.) and
Charles D. Norton (president of JP Morgan Bankers Trust Company).
would live on
for nine days using duck hunting as a cover, never once using their
last names, and most would use only code names. They became known as
the “First Name Club”. The fear was that the servants would leak the
names of the people at this meeting to the press.
seven were to produce what would be known as the Aldrich Currency
Report, which would become the foundation of the USA’s new currency
system and the Federal Reserve. We cannot over emphasis the importance
of secrecy regarding this meeting, because if any of this information
had leaked to the press, their proposed Federal Reserve System would
have never come into being.
outcry from the public would have had such a negative effect, that
their entire effort would have been stillborn.
public admission that the Jekyll Island meeting ever took place had to
wait until Frank Vanderlip confirmed the fact in a February 9, 1935,
edition of the Saturday Evening Post. He stated, “I was as secretive,
indeed as furtive, as any conspirator. Discovery we knew must not
happen, or else all our time and effort would be wasted. If it were to
be exposed that our particular group had got together and written a
banking bill, that bill would have no chance whatever of passage by
hammering out what would become the framework for the Federal Reserve,
this group quietly and independently returned to New York and
Washington to start the public relations campaign that would become
vital for public acceptance of this legislation? To this end, the
group immediately set up a $5 million dollar educational fund to
create the assistance of professors at top universities to endorse the
bill and to lobby the press for favorable reportage.
new central bank would be very similar to the three previous central
banks in that it would be given a monopoly over US currency, and be
able to create that currency out of “thin air”. Most important, to
give it the aura of legitimacy and to make sure that the public
believed that it was run by the government, it was to be controlled by
a board of governors appointed by the President and approved by the
Senate. This would be an inconvenience, not insurmountable, as the
bankers had the money to control their choices for seats on the board.
Aldrich had demanded his name be attached to the legislation, the
Congress, and public quickly connected it with the bankers. It was
immediately identified as the “Bankers Bill.” The bill lost the trust
of both Congress and the public and had to be withdrawn from
group now did a bit of fast footwork and switched their support from
the Republican to the Democratic Party and Woodrow Wilson, who had
been given intense indoctrination by the Democratic leadership of New
T. McFadden chairman of the House Banking and Currency Committee
explained, “The Aldrich Bill was roundly condemned in the Democratic
platform when Woodrow Wilson was nominated. The men who ruled the
Democratic Party promised the people that if they were elected there
would be no central bank established while they held the reins of
government. Thirteen months later that promise was broken and the
administration signed the Federal Reserve Act.”
Congressman Charles A Lindbergh Sr. from Minnesota, and farther of
Lucky Lindy the Aviator stated, “The act establishes the most gigantic
trust on earth. When the President signs this bill the invisible
government of the monetary power will be legalized. The people may not
know it immediately, but the day of reckoning is only a few years
removed. The worst legislative crime of the ages is being perpetrated
by this banking and currency bill.”
Interestingly enough, a few weeks earlier in October, Congress finally
passed a bill legalizing a direct income tax on the people. This was
pushed through Congress by Senator Aldrich and was more commonly known
as the 16th Amendment to the Constitution. It was as an integral part
of the Federal Reserve legislation, as the bank had to be guaranteed
its interest payments just like the Bank of England had done centuries
before. What better way but to put a direct tax on the people for this
interesting is that the 16th amendment was never ratified by
three-quarters of the states, so it never became the law of the land.
Most tax resistors give the lack of ratification as the reason they
refuse to pay income tax. According to the lawthatneverwas.com,
Government has no legal right to collect an income tax. In 1895, the
Supreme Court had already declared an income tax law (similar to the
16th amendment) as unconstitutional and, in 1909, a similar corporate
tax law was deemed unconstitutional.
Wilson won the Presidency, and now JP Morgan, Paul
Warburg, Bernard Baruch along with the banking establishment went into
top gear by introducing the plan, which by they had finally named the
Federal Reserve System. It was reintroduced under the new name of the
“Glass-Owens Bill” which was touted to be radically different than the
fact the two pieces of legislation were almost carbon copies of each
other. Frank Vanderlip in his 1935 article in the Saturday Evening
Post said, “Although the Aldrich Federal Reserve Plan was defeated
when it bore the name Aldrich, nevertheless its essential points were
all contained in the plan that was finally adopted as the Federal
1913 the Congress was nearing a final vote on the Glass-Owens bill.
The debate was not going well for the banks with many Senators
intimating the bill was corrupt and deceitful. However the bill passed
the House of Representatives and cleared the banking committee of the
Senate on December 22. 1913.
here comes the trick. It is December 23, 1913, and although the Senate
has not been recessed, all but three senators (including Nelson
Aldrich), leave for home and the Christmas holidays. Because the
Senate is still technically in session and because of a little known
and never used procedural trick, these three senators pass by what is
known as a “Consent Vote” the Federal Reserve Act. By a vote of just
three, the Act is voted into the law of the land and has been there
now for 96 years.
Next week we will examine what has happened since 1913, and why the
present crisis we find ourselves in can be traced directly back to the
Federal Reserve and its actions over the last hundred years.
from the Cayman Islands
As We See It: Money makes the world go round (Part
Published on Tuesday, January 6, 2009
Federal Reserve Legacy
Since its creation in 1913, it is without question the longest running
central bank the
has ever had to endure. After 96 years the nation is still saddled
with its legacy, and the enormous debt it has created. Enough of my
words; let us look at what has happened to the
economy since its creation.
off, let’s get to the matter of who actually owns the Federal Reserve.
The US government has never owned one share of stock in the Fed. It is
100% privately owned by the following international banks: Rothschild
Bank of London, Warburg Bank of Hamburg, Rothschild Bank of Berlin,
Lehman Brothers of New York, Lazard Brothers of Paris, Kuhn Loeb Bank
of New York, Israel Moses Seif Banks of Italy, Goldman Sachs of New
York, Warburg Bank of Amsterdam, and Chase Manhattan Bank of New York,
There are a number of other minor shareholders too numerous to
mention, but the above represent the majority share holders.
let us examine how the Fed creates money out of thin air, as everyone
needs to fully understand how this process works:
The Federal Open Market Committee approves the purchase of
States government bonds.
The Federal Reserve then purchases the bonds.
The Federal Reserve pays for these bonds with electronic credits to
the seller’s bank. These credits are based on nothing.
The bank uses these deposits as reserves. They can then loan out at
interest 10 times the value of these reserves to new borrowers
are simply promises to pay (government IOUs). People buy bonds so as
to guarantee themselves a secure rate of interest. At the end of the
term the government pays the amount of the bond plus interest, and the
bond is destroyed. So far so good. Now let’s look at how this works in
the real world.
Fed buys $1,000,000 of bonds and turns it into $10,000,000 in bank
accounts. The bonds create 10% of this new total and the banks create
the other 90%.
reduce the amount of money in circulation the process is simply
reversed. The Fed sells these bonds to the public, and the money flows
out of the purchaser’s local bank. Loans from bonds must be reduced by
10 times the amount of the sale thus reducing the money in the economy
by 10 million dollars.
benefits the bankers coming in or going out, as the Fed is the sole
monopoly producer of money. It allowed the bankers to create 90% of
our money supply based on the system of fractional reserve banking,
and allowed them to loan out (with interest) this money 90% of which
is based on nothing concrete.
system puts centralized control of the nation’s money supply in the
hands of (and for the profits of) a few individuals. The system is a
win-win deal for the banks and the Federal Reserve, and we (the
people) keep paying perpetual interest on this debt, which is thrust
upon us our government. We are given no say in the matter; we just
receive the bill for the interest.
year after the passage of the Federal Reserve Act, Congressman Charles
Lindbergh Sr. outlined how the Fed created the so-called ‘business
cycle’. “To create high prices, all the Federal Reserve Board will do
will be to lower the rediscount rate producing an expansion of credit
and a rising stock market. When businessmen are adjusted to these
conditions it can check prosperity in mid career by arbitrarily
raising the rate of interest. It can cause the pendulum of a rising
and falling market to swing gently back and forth by slight changes in
the discount rate, or cause violent fluctuations by a greater rate
variation and in either case it posses inside information on financial
conditions and advance knowledge of the changes up or down. They know
in advance when to create panics to their advantage. They know when to
stop panics, as inflation or deflation works equally well for them.”
1916, just before the US entered World War I, President Woodrow
Wilson, who had championed the cause of the Federal Reserve Act,
admitted his own stupidity and the gravity of the damage he had done
to America by unleashing the Federal Reserve on the American people
when he stated, “We have come to be one of the worst ruled, one of the
most completely controlled governments in the civilized world - no
longer a government of free opinion, no longer a government by a vote
of the majority, but a government of the opinion and duress of a small
group of dominant men. Some of the biggest men in the United States in
the field of commerce and manufacture are afraid of something. They
know there is a power somewhere so organized, so subtle, so watchful,
so interlocked, so complete, so pervasive, that they had best not
speak above their breath when they speak in condemnation of it”.
1920, Warren G Harding is elected US president on the Republican
ticket. This period will be known, as the “Roaring Twenties” and
despite World War I having saddled the country with and immense debt
ten times larger than that of the Civil War, the American economy was
growing on a fast track. Gold had poured into the US during the War
and continued during the ‘20s.
reason for this growth was that Harding reduced taxes domestically and
increased tariffs on imports to record levels. This fuelled internal
production and kept the money at home.
1921, Thomas A. Edison, inventor of the incandescent light, commented
in a New York Times article on December 6, that, “If our nation can
issue a dollar bond it can issue a dollar bill. The element that makes
the bond good makes the bill good also. It is absurd to say that our
country can issue 30 million dollars in bonds and not 30 million in
currency. Both are promises to pay, but one promises to fatten the
usurers and the other helps the people”. I believe this says it all.
On August 2, 1923, President Harding dies under mysterious
circumstances aboard a train. The cause was givens as either food
poisoning or a stroke although no autopsy was performed. His vice
president, Calvin Coolidge, succeeds him. Coolidge continues Harding’s
high tariff, and tax cutting policies. These policies are so
successful that the economy continued to grow and the war debt was
reduced by 38%, down to 16 billion dollars. This was when the Fed
started flooding the country with money, increasing the supply by 62%.
from the Cayman Islands
As We See It: Money makes the world go round (Part
Published on Tuesday, March 3, 2009
The depression and its aftermath
Back on October 28 of last year I wrote a column entitled “The D Words
(Depression and Deflation)”. Those of you, who missed it should check
the archives and read it. It makes an excellent primer for this
column. I said in that article that the world’s leadership was not
willing to accept the fact that we were sliding into a depression, and
that by ignoring this would be the worst thing possible. In the
subsequent four months, everything I said then is becoming a most
Whether we accept it or not, the world is sliding uncontrollably into
the same situation it faced in 1930-31. The only difference is the
economic situation today is far worse than it was then and the problem
is we persist in using the same unworkable solutions. They didn’t work
then, and they won’t work now.
Albert Einstein, the bushy haired scientist, is attributed as saying,
“Insanity is doing the same thing over and over, each time expecting a
different result”. I am beginning to believe our leaders fit this
1930-31 was a very grim time for everyone. The USA had just seen the
stock market crash, and then it continued to drop with seemingly no
bottom in sight. Unemployment in another 3 years would level off at
around 25%. The popular song of the day was “Brother can you spare a
dime”. You couldn’t even buy a beer for a dime because Prohibition was
the law of the land. These were unhappy times and they would continue
for ten years.
only way we came out of this economic morass was Pearl Harbor and
World War II. After that it took five more years of blood, sweat and
tears until finally we arrived at 1946-47 and a consumer-driven
prosperity. The US had gone through over 15 years of hard times of the
worst possible kind.
Enough of my crying the blues; let’s get on with the story…
1924, shortly before his death, Woodrow Wilson said about his relation
to the Federal Reserve: “I have unwittingly ruined my country.”
April of 1929, Paul Warburg sent out a memo to his friends and
business associates that a collapse and depression was being planned
for later that year. It is no coincidence that the biographies of the
Wall Street giants, Rockefellers, Morgan, Joe Kennedy, Bernard Baruch
got out of the market completely and turned their profits into cash
and gold, shipping it off to London.
August 1929, the Fed started tightening the money supply. On 24
October, the New York bankers called their 24-hour brokerage loans.
Brokers and customers were forced to sell their stocks irrespective of
price to meet margin calls. The result was the great crash of 1929,
better known as Black Thursday.
Congressman Louis T. McFadden chairman of the House Banking committee
candidly laid the blame for the crash: “It was not accidental. It was
a carefully contrived occurrence. The international bankers sought to
bring about a condition of despair, so that they might emerge as
rulers of us all.”
Despite the claims of the Federal Reserve that they would protect the
country from depression and inflation, it continued to contract the
money supply. In just a few weeks, 3 billion disappeared and in a year
40 billion was gone. It appeared to be gone, but in fact the money did
not disappear, it was only transferred from one set of hands to
another. Bankrupt corporations and homes don’t disappear, they just
change ownership. A perfect example of this was Joseph F. Kennedy,
father of the president, who was worth 4 million in 1929, and 100
million in 1935. I wonder how that happened at height of the
1996, Milton Friedman, the Nobel Laureate economist put it this way:
“The Federal Reserve definitely caused the Great Depression, by
contracting the amount of currency in circulation by 1/3 from 1929 to
1928 and the Republican Herbert Hoover takes the presidency from
Calvin Coolidge at the worst possible time in history. There is a
parallel between Hoover’s election and Barack Obama’s. Both presidents
are captives of history over which neither one has control.
Hoover is one year in office when the market crashes (the depression
is now known as Hoover’s depression). There is very little he can do,
and the public wants results that are not forthcoming. He is at best
filling the office until the 1932 election, where he will face the
Democrat Franklin Delano Roosevelt, the Governor of New York. It is
preordained that Roosevelt sweeps into power on a wave of popular
approval, the same as the new president is receiving today. Everyone
is looking for a quick fix, a magic bullet and a return to “a chicken
in every pot, a car in every garage”. Sorry to say that was not in the
offing – a sign of what we are facing today.
Roosevelt, in his inaugural address, made the following statement,
“Practices of the unscrupulous money changers stand indicted in the
court of public opinion, rejected by the hearts and minds of men. The
money changers have fled from their high seats in the temple of our
that year, Roosevelt outlawed the holding of gold by any American
citizen. This was effectively a confiscation, but the government did
pay $20.60 an ounce for all that was turned in. Small town America did
not trust Roosevelt after this act. You either turned in your gold or
were fined $10,000, and given a 10-year prison sentence. When asked,
no Congressman, nor the President, nor the Secretary of the Treasury
would accept the blame for having written the order. The only thing
that was said was that, “It was what the experts wanted.” I wonder who
those experts were.
1935, the Fort Knox Gold Depository was completed, and over 700
million ounces of the bright shiny stuff was moved in. This
represented at the time 70 percent of the world’s gold. Roosevelt
started off by telling everyone, “The only thing we have to fear, is
fear itself.” If it had only been that easy. At least Prohibition was
repealed in 1933 and the 10-cent beer returned to everyone’s relief.
At least the pain could be made bearable!
Roosevelt, just as Obama is doing today, created a dozen new agencies
like the WPA, FDIC, FHA, NRA, and on and on and on. Just like the
Stimulus Bill will try to do, it injected money into the economy, to
get people into jobs working primarily for the government by building
dams, roads, parks, post offices and every other form of
infrastructure. There is nothing wrong with this except it is the
private economy that creates wealth, not government that only consumes
is why the Depression lasted over ten years when it should have been
gone and forgotten in no more than three or four at worst. (Remember
the currency at that time was backed by gold and silver, it isn’t
today.) The public works programmes did produce useful and needed
infrastructure, but at what cost?
didn’t create a return of confidence in the economy, and the USA
stumbled along into the late thirties.
brought the economy back, were not Roosevelt’s public works programmes,
but rather preparations for war. They had committed to Lend Lease for
the British and the various war industries were ramping up production
to produce the tools. By the time of Pearl Harbor, the USA had not
completely re-armed itself, but it had created jobs, and a massive
armament industry. Getting up to speed for all out war was now
priority one. Car production stopped and guns, ships, tank and bomber
production moved onto the fast track. We were off and running to win a
war, which was thrust upon us and we were going to win no matter what.
During the first three weeks of 1944, 730 delegates from 44 allied
nations, met at the Mount Washington Hotel, in Bretton Woods, New
Hampshire, to hammer out an international agreement of how the world’s
economy would be operated once the war ended. The main agreement was
that international currencies would be set against each other at fixed
rates and would not vary more than 1 percent. This would be pegged to
the price of gold at $35 an ounce. Since the US dollar was convertible
to gold internationally, the dollar could be considered as “good as
gold”. The dollar was therefore settled on as the world reserve
currency, and henceforth international dealings would be transacted in
dollars. Even today, the price of oil is quoted only in US dollars.
Bretton Woods agreement for all of its high hopes only lasted until
1971. In that year the United States dropped convertibility of the
dollar to gold or silver. Currencies at that point floated, and they
still float today with no relation to reality. With the end of Bretton
Woods, the world’s currencies were now all fiat money with no
convertibility to anything but more paper. The world had embarked on
the road to perdition.
War II had lasted a little over six years and ended with the start of
the atomic age. In the process, the world’s debt had risen to
astronomical heights, with the US going from 43 billion to over 257
billion (an increase of 598 percent). Japan increased 1,348 percent,
France 583 percent and Canada up 417 percent.
saved the USA was the money earned during the war, as there was
nothing to spend it on. With the war over, there was suddenly an orgy
of post war spending for consumer goods not seen in five years. There
was a car in every garage, and a chicken in every pot.
dollar was backed by silver and internationally by gold. It was the
strongest currency in the world. The Marshall Plan was rebuilding a
devastated Europe, and all the major economies were accelerating,
producing the tools of peace. The troops returned and they needed
homes, appliances, cars, and all the good things everyone had to do
without for five years. These were happy days, the best of times, and
expectations ran high. There was work for everyone and the country
embarked on consumerism with a vengeance.
like everything, nothing this good could last forever.
1953, President Eisenhower orders an audit of the Fort Knox Gold
Depository. As mentioned previously, the 700 million ounces of gold
were found intact. This was the last time an audit was ever taken of
the gold at Fort Knox, although Federal Law required a yearly audit.
No one even mentioned another audit until years later during the
1963, JFK starts issuing dollars carrying a red seal called “United
States Note”. A lot of people believe he was printing large quantities
of debt-free currency; essentially a reissue of Lincolns Green Backs.
It is speculated this is the reason he was killed. On June 4, 1963,
Kennedy issued executive order 11110 authorizing the US government the
power to issue currency without going through the Federal Reserve.
This order gave the Treasury the power to issue silver certificates
against any silver bullion, silver or standard dollars in the
treasury. For every ounce of silver in the US Treasury vaults, the
government could introduce new debt free money into circulation.
his assassination, this entire programme came to an abrupt halt and
the currency already circulating was withdrawn and destroyed. So ends
the last valiant experiment with debt-free money.
week we bring the story to a close at the critical point the US has
arrived at. We do hope these ten columns have not bored you unduly,
and most importantly we hope that you have a far better understanding
of what is money and why it makes the world go round.
from the Cayman Islands
As We See It: Money makes the world go round (Part
Published on Tuesday, March 10, 2009
finally, we get to the end our journey and this hopefully will be the
last of this series of 10 columns. I admit the subject matter was dry
and not particularly easy to understand but I have tried to make these
columns as interesting and as informative as I possibly could.
is important is that you now (hopefully) have a far better
understanding of the currency that you carry in your pocket, how it’s
created, what is happening to it and where we are all heading as far
as money is concerned.
now, on with the story…
War had ended, prosperity had returned and everything was coming up
roses. Again it was too good to last.
Stalin had just developed his own atomic weapon, and felt like flexing
his muscles in Korea. The USA felt that it had to defend the world in
the name of democracy. It was 1951 when they mobilized forces under
the UN flag for a so-called ‘police action’. The war ended with a
divided Korea and a total stalemate. (After 58 years we still have our
troops in South Korea defending it from its neighbor to the North).
The police action ran up an immense debt, which the USA could ill
afford then nor now.
French had failed to win the war in Vietnam, so the US took their
place, and proceeded to lose the war and run up more debt. The war
finished with a quagmire from which the USA barely managed to
extricate itself. While running up the bills in Vietnam, Lyndon
Johnson was running up another enormous debt fighting the war on
poverty at home. When all was said and done, Ole Lyndon figured he had
better not run for another term.
1972 and Dick Nixon enters the White House with a crushing debt over
his head created by his predecessors and his own ineptness. He
suddenly realizes that he can no longer issue currency backed by
silver and he is forced to abrogate the Breton Woods agreement. This
action throws the country (and the world) into chaos. There is no
longer an ‘as good as gold’ US dollar reserve currency. It is now a
fiat paper-based currency, convertible into nothing but more paper.
They had taken the final and fatal step toward destruction of the US
dollar. What followed was devaluation and inflation on a grand scale
right up to the present.
1973, the oil producing countries figure out the scam with the fiat
dollar and that selling their oil at $3 barrel will not buy them what
it used to. They put an embargo on oil and raised their prices to
equal the devaluation of the dollar. As the dollar goes down oil and
other commodities go up. Inflation (which is actually the value of the
currency going down) becomes the norm with a 3% to 6% rate a year
Ronald Regan becomes the new president in 1981 and is immediately
pressed by fellow conservatives to consider the reintroduction of the
gold standard for US currency. He appoints a group called the ‘Gold
Commission’ to investigate and report back to Congress the feasibility
of this proposal. In 1982 the commission reports back with the
shocking statement: “The US Treasury owns no gold at all”. The Federal
Reserve, as collateral against the debt, now owned all the gold in
Fort Knox. The gold had been sold to the Federal Reserve for $35 an
ounce in 1974, and 9 years later it had appreciated 25 times to over
$800 an ounce Oh what a friend we have in the Fed.
are, surprisingly, 5 countries in the world that never got caught up
in the privately owned Central Bank system: Iran, North Korea, Sudan,
Cuba and Libya. All of them have the unique distinction of controlling
their own destinies and their own currencies with no outside
manipulation. This does not mean than any of them have a sought after
internationally convertible currency, but it does at least allow them
to plan their economies the way they want, and not pay international
bankers for the privilege of doing so.
Examples of smaller third world nations that fell under the control of
the IMF and the World Bank, and who lived to regret it, were
Argentina, Bolivia, Tanzania, and even Brazil. These and other nations
accepted loans to get themselves out of short term financial
difficulties, only to be eventually thrown into dire economic
problems, hyperinflation, massive unemployment, street riots, and
bankruptcy. It was like the whole country using a credit card
irresponsibly. In time the banks were taking over their water, gas and
electricity utilities, dictating employment levels, prices charged by
the utilities and even the budgets of the countries.
2001, Argentina was driven into bankruptcy. The peso was devalued
wiping out the savings of the average Argentine, who now was so
desperate that he started burning down Buenos Aires.
Tanzania’s GDP dropped from $309 to $210 per capita, standards of
literacy fell and poverty increased to envelop 51% of the population.
Tanzania with the willing help of the World Bank and the IMF pushed
the country into abject poverty and bankruptcy.
moral to the story is never trust the bankers to be beneficent when
they loan money. They will do anything to get that money back with
interest. When it comes to money, greed takes over and common sense,
ethics and morality are left somewhere in a galaxy far, far away. My
father told me a long time ago, “There are no friends in business.”
now need to look at us, our friends, neighbors and fellow citizens,
and how we survive in the depression that is right now enveloping all
of us. Make no mistake the last time the USA stock market had over 50%
of its value wiped out was 1929, the last time the USA had 10%
unemployment was 1930. The last time Americans feared losing their
jobs, cars and homes was 1931. The dates have changed, but the
situation has not.
are embarking on the same path as the Great Depression; the only
difference is that conditions are now far worse than they were in the
30’s. The debt as a percentage of Gross National Product was 273% in
1929. Today, before all of these big spending programs kick in, it was
running at 376%. In 1929, there was gold and silver behind the US
Dollar. Today there is nothing to back the currency but PAPER.
Considering everything, the situation does not look particularly
bright for a prosperous long-term future but don’t give up the ship
yet. I don’t like giving advice, because people rarely take it anyway
but here are my thoughts and I hope that you take them to heart:
and foremost … THERE IS NO FREE LUNCH. Someone has to pay for it, and
that someone is you. Government give you nothing that they have not
already taxed you for. If you understand this basic fact of life, you
are already half way to self-sufficiency.
next thing of greatest importance is debt. Remember: DEBT IS POISON.
Always look at your debts as the Albatross hanging around your neck
just waiting for you to lose the income you expect will always be
there. You need to get rid of any debt that you may have. This means
mortgages, car or other loans, and, most importantly, credit card
debt. Get rid of all credit cards. There is no sense in paying
ultra-high interest to a bank every month especially if it is to buy
things you don’t really need. The only type of plastic you should
carry is a debit card. These deduct charges from your checking account
as you make them and thank God you can’t run up debt with them.
nothing you absolutely do not need, eat at home and plan no more
foreign vacations. In a word tighten the belt, save what you can,
spend nothing you don’t need, and live frugally.
your cash and realize that in the future, CASH IS KING. When everyone
else is selling what they own for $.10 on a dollar, you will have the
cash to buy tremendous values. The grim times ahead can be times of
enormous opportunity if you have CASH. Don’t be foolish, “Save for the
Rainy Day”, and stay dry, let the fools get wet.
you just follow these three very simple pieces of common sense advice,
you will survive and prosper through the worst of times.
wish you all the best, but not of luck, as luck has nothing to do with
it. It takes thought and planning to get your finances in order. I
hope you look back at these years as a period in which you actually
prospered. Meanwhile you will hear from me, from time to time, with
updates as this long term story unfolds. Until then …