Money, Banking & Economics

Preface

Elective Affinities

by Johann Wolfgang von Goethe, 1809

“None are more hopelessly enslaved than those who falsely believe they are free.”

Tragedy & Hope

Carroll Quigley, 1966

The Money Power Seeks to Create a World System of Financial Control in Private Hands Able to Dominate Every Nation on Earth

In addition to these pragmatic goals, the powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations. Each central bank, in the hands of men like Montagu Norman of the Bank of England, Benjamin Strong of the New York Federal Reserve Bank, Charles Rist of the Bank of France, and Hjalmar Schacht of the Reichsbank, sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world.”  page(s) 376-377

Prologue

“The Wolf in Sheep’s Clothing”

Gospel of Matthew 7:15

“A Wolf found great difficulty in getting at the sheep owing to the vigilance of the shepherd and his dogs. But one day it found the skin of a sheep that had been flayed and thrown aside, so it put it on over its own pelt and strolled down among the sheep. The Lamb that belonged to the sheep, whose skin the Wolf was wearing, began to follow the Wolf in the Sheep’s clothing; so, leading the Lamb a little apart, he soon made a meal off her, and for some time he succeeded in deceiving the sheep, and enjoying hearty meals.”

The Open Conspiracy: Blue Prints for a World Revolution

H. G. Wells, 1928

 There are no doubt many bankers and many practices in banking which make for personal or group advantage to the general detriment. They forestall, monopolize, constrain, and extort, and so increase their riches. And another large part of that banking world follows routine and established usage; it is carrying on and keeping things going, and it is neither inimical nor conducive to the development of a progressive world organization of finance. But there remains a residuum of original and intelligent people in banking or associated with banking or mentally interested in banking, who do realize that banking plays a very important, interesting part in the world’s affairs, who are curious about their own intricate function and disposed towards a scientific investigation of its origins, conditions, and future possibilities. Such types move naturally towards the Open Conspiracy.

Introduction

Thomas Jefferson to John Taylor,

May 28, 1816

On this view of the import of the term republic, instead of saying, as has been said, “that it may mean anything or nothing,” we may say with truth and meaning, that governments are more or less republican as they have more or less of the element of popular election and control in their composition; and believing, as I do, that the mass of the citizens is the safest depository of their own rights, and especially, that the evils flowing from the duperies of the people, are less injurious than those from the egoism of their agents, I am a friend to that composition of government which has in it the most of this ingredient. And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.

I salute you with constant friendship and respect.
Thomas Jefferson

John Adams to John Taylor

March 12, 1819

I have never had but one opinion concerning banking from the institution of the first in Philadelphia by Mr. Robert Morris & Mr. Governeur Morris—& that opinion has uniformly been that the banks have done more injury to the religion, morality, tranquility, prosperity, and even wealth of the nation, than they ever have done or ever will do good; they are like party spirit the delusion of the many for the interest of a few.

Building an Understanding of Money & Economics…

Robert P. Murphy is a Senior Fellow with the Mises Institute. He is the author of many books. His latest is Contra Krugman: Smashing the Errors of America’s Most Famous Keynesian. His other works include Chaos Theory, Lessons for the Young Economist, and Choice: Cooperation, Enterprise, and Human Action (Independent Institute, 2015) which is a modern distillation of the essentials of Mises’s thought for the layperson.

The Theory and Brief History of Money and Banking

by Robert P. Murphy, January 29, 2020

(Very Basic Education on Money & Banking)

The ultimate purpose of this booklet is to give the reader a solid grasp of how money works in today’s world. Yet before diving into the particulars of central banks, repo markets, and LIBOR—all topics that will be covered in future chapters—we should first provide a general framework giving the basic theory or “economic logic” of money and banking.

In short: Why do we have money in the first place? Where does it come from, and what determines its form (livestock, metal ingots, coins, paper notes, electronic ledger entries, etc.)? What qualities make for a good money? What role do banks play—is it something other than what money itself does for us?

In this chapter, we’ll answer these elementary yet essential questions. To be clear, we are not here offering an actual history lesson, though we do mention some important historical episodes and illustrative examples. Rather we are providing a mental framework for understanding everything else that follows in the booklet.

Murray Rothbard was an American heterodox economist of the Austrian School, economic historian and political theorist. Rothbard was the founder and leading theoretician of anarcho-capitalism, a staunch advocate of historical revisionism and a central figure in the 20th-century American libertarian movement.

Economics 101: Banking and the Business Cycle

by Murry Rothbard

(Intermediate Education on Banking)

One of the most difficult things to understand about banking is how money is created out of thin air.  Current commercial bank liabilities are immediate. The banks do not have the reserves to redeem all demand notes. Thus, banks are inherently insolvent. But, government has eliminated runs on banks. Banks are not allowed to fail when they are mismanaged.

Central banks are sold to the public as restraining inflation, but central banking was created to allow inflation. The inflationary process generates the boom and bust business cycle.

The Bank of England was a great racket. The public accepted new money that was created out of thin air. The King had given the Bank a monopoly on money creation.  President Jackson tried to get rid of the US central banks. Banks created the Federal Reserve System in 1913. The Fed banks now have a monopoly on all paper money. By legal tender law, one must accept Federal Reserve Notes. The Federal Reserve manipulates the money supply by manipulating the Federal reserves. The Central Bank is a lender of last resort. Every bank will be bailed out.

Economists were mainly concerned about the crashes, not the booms, of business cycles. Mises understood that the banks were inherently inflationary. He understood that the expanded money supply was going to commercial banks to loan to longer-term production projects like construction. This credit expansion was not based upon consumers having saved anything. The boom was a bad distortion. It promoted malinvestment. The crash was inevitable and a good thing. Austrians would stop inflating. Austrians during the crash would keep government hands off. 1920 was a great example of this Austrian Theory of the Business Cycle at work.

The Science of Human Action

by Hans-Hermann Hoppe, July 2011

Hans-Hermann Hoppe is a German-born American economist of the Austrian School and paleolibertarian anarcho-capitalist philosopher.  He is Professor Emeritus of Economics at the University of Nevada, Las Vegas (UNLV), Senior Fellow of the Ludwig von Mises Institute, former Editor of the Journal of Libertarian Studies, a lifetime member of the Royal Horticultural Society and the founder and president of the Property and Freedom Society.

Ludwig von Mises was the acknowledged leader of the Austrian school of economic thought, a prodigious originator in economic theory, and a prolific author. Mises’s writings and lectures encompassed economic theory, history, epistemology, government, and political philosophy. His contributions to economic theory include important clarifications on the quantity theory of money, the theory of the trade cycle, the integration of monetary theory with economic theory in general, and a demonstration that socialism must fail because it cannot solve the problem of economic calculation. Mises was the first scholar to recognize that economics is part of a larger science in human action, a science that he called praxeology.

Human Action

by Ludwig Von Mises, 1940

(Advanced Education on Economics)

Man’s freedom to choose and to act is restricted in a threefold way. There are first the physical laws to whose unfeeling absoluteness man must adjust his conduct if he wants to live. There are second the individual’s innate constitutional characteristics and dispositions and the operation of environmental factors; we know that they influence both the choice of the ends and that of the means, although our cognizance of the mode of their operation is rather vague. There is finally the regularity of phenomena with regard to the interconnectedness of means and ends, viz., the praxeological law as distinct from the physical and the physiological law. The elucidation and the categorial and formal examination of this third class of the laws of the universe is the subject matter of praxeology and its hitherto best-developed branch, economics.

The body of economic knowledge is an essential element in the structure of human civilization; it is the foundation upon which modern industrialism and all the moral, intellectual, technological, and therapeutical achievements of the last centuries have been built. It rests with men whether they will make the proper use of the rich treasure with which this knowledge provides them or whether they will leave it unused. But if they fail to take the best advantage of it and disregard its teachings and warnings, they will not annul economics; they will stamp out society and the human race.

Banking History

Veto message from the President of the United States, returning the bank bill, with his objections

by Andrew Jackson. Washington, July 10, 1832

“WASHINGTON, July 10, 1832.

To the Senate.

The bill ” to modify and continue ” the act entitled “An act to incorporate the subscribers to the Bank of the United States ” was presented to me on the 4th July instant. Having considered it with that solemn regard to the principles of the Constitution which the day was calculated to inspire, and come to the conclusion that it ought not to become a law, I herewith return it to the Senate, in which it originated, with my objections.

A bank of the United States is in many respects convenient for the Government and useful to the people. Entertaining this opinion, and deeply impressed with the belief that some of the powers and privileges possessed by the existing bank are unauthorized by the Constitution, subversive of the rights of the States, and dangerous to the liberties of the people, I felt it my duty at an early period of my Administration to call the attention of Congress to the practicability of organizing an institution combining all its advantages and obviating these objections. I sincerely regret that in the act before me I can perceive none of those modifications of the bank charter which are necessary, in my opinion, to make it compatible with justice, with sound policy, or with the Constitution of our country…”

“In another of its bearings this provision is fraught with danger. Of the twenty-five directors of this bank five are chosen by the Government and twenty by the citizen stockholders. From all voice in these elections the foreign stockholders are excluded by the charter. In proportion, therefore, as the stock is transferred to foreign holders the extent of suffrage in the choice of directors is curtailed. Already is almost a third of the stock in foreign hands and not represented in elections. It is constantly passing out of the country, and this act will accelerate its departure. The entire control of the institution would necessarily fall into the hands of a few citizen stockholders, and the ease with which the object would be accomplished would be a temptation to designing men to secure that control in their own hands by monopolizing the remaining stock. There is danger that a president and directors would then be able to elect themselves from year to year, and without responsibility or control manage the whole concerns of the bank during the existence of its charter. It is easy to conceive that great evils to our country and its institutions millet flow from such a concentration of power in the hands of a few men irresponsible to the people.  Is there no danger to our liberty and independence in a bank that in its nature has so little to bind it to our country?”

Carroll Quigley was a highly respected professor at the School of Foreign Service at Georgetown University. He was an instructor at Princeton and Harvard; a consultant to the U.S. Department of Defense, the House Committee on Astronautics and Space Exploration; and the U.S. Navy.  Bill Clinton named Quigley a great influence on his political philosophy during his acceptance speech to the 1992 Democratic National Convention.

Tragedy & Hope

European Economic Developments

by Carroll Quigley (37 p. excerpt)

In effect, this creation of paper claims greater than the reserves available means that bankers were creating money out of nothing. The same thing could be done in another way, not by note-issuing banks but by deposit banks. Deposit bankers discovered that orders and checks drawn against deposits by depositors and given to third persons were often not cashed by the latter but were deposited to their own accounts. Thus there were no actual movements of funds, and payments were made simply by bookkeeping transactions on the accounts. Accordingly, it was necessary for the banker to keep on hand in actual money (gold, certificates, and notes) no more than the fraction of deposits likely to be drawn upon and cashed; the rest could be used for loans, and if these loans were made by creating a deposit for the borrower, who in turn would draw checks upon it rather than withdraw it in money, such “created deposits” or loans could also be covered adequately by retaining reserves to only a fraction of their value. Such created deposits also were a creation of money out of nothing…

Banking

by James Storum, 1897.

A short history of banking from antiquity to late 19th century U.S. banking

In speaking of banking in Europe, this part of the subject would be incomplete were I to fail to mention that banking firm whose name is a synonym for wealth, the Rothschilds, to whom the nations bow, and who are more powerful than armies and navies. Eleven Barons constitute this firm, with a capital from one to two billion dollars. It is not known how closely the nations of Europe are entwined with the fortune of this powerful monetary firm, but there is one thing certain, they hold the key to all Europe. One nation may declare war upon another, but not the most powerful would have the effrontery to engage in a conflict with the money power of the Rothschilds. The invincible Bismarck, the greatest general of modern Europe, who never yielded his sword to anyone, yielded to the Rothschilds’ power. In 1866 the Prussian Government demanded an indemnity of $25,000,000 from the city of Frankfort. The Rothschilds sent word to Bismarck if any attempt was made to enforce the levy, they would break every bank in Berlin. The great general, who was never known to surrender, bowed in humble submission to the potent force of money.

Capital Savings Bank Washington D.C. (the first all African-American owned bank in America)

All the Plenary’s Men

“The King can do no wrong.” —William Blackstone, Commentaries on the Laws of England “When the president does it, that means that it is not illegal.” —Ex-President Richard Nixon, interview with David Frost The question at bar is why the U.S. Department of Justice has failed to prosecute any too-big-to-fail banks or—more importantly—their bankers, even for admitted crimes. It’s a crucial question, because after eight straight years of unremitting prosecutorial failure, it looks very much as if a select group of top banks can, in fact, do no wrong. If that’s the case, then our constitutional republic isn’t merely in trouble. It’s dead. A person or group of people who satisfy Blackstone’s criterion for ultimate sovereign power—the power to commit crimes with impunity—can’t exist in a nation where the law reigns supreme. And yet here we are a decade after the financial crisis began in earnest, and not one TBTF bank executive has gone to jail. Legally, the TBTF banks are indistinguishable from the King, since the power to commit crimes with impunity swallows all other sovereign powers; such a power isn’t even supposed to exist in the U.S., and yet it does. Moreover, since there can’t be two kings in a kingdom, the entire U.S. government, from the president on down, is just one of the King’s men under this formulation of power. The real job of the U.S. government, then, isn’t to represent the will of the people at all, it’s to do the King’s bidding. A nation that isn’t governed by law is governed by instead by a king—it’s one or the other—and the president’s inferiority to such an above-the-law sovereign was confirmed over 40 years ago with Nixon’s ouster. The president, unlike the King, answers to the law (despite Nixon’s opinion). Now, you may say that while the TBTF banks might arguably have the de facto power of the King, that’s a far cry from wielding such power formally (i.e., having de jure criminal immunity). The reply to that objection is set forth in this film, “All the Plenary’s Men,” which is a sequel to “The Veneer of Justice in a Kingdom of Crime.” Another objection, raised by the DOJ itself, is that it HAS prosecuted TBTF bankers, citing cases like that of Raj Rajaratnam. These cases, however, in fact reveal the DOJ acting on behalf of the criminal global banking cartel. On that score, the DOJ’s abysmal track record is by now so extensive and so thorough that it’s possible to spot legal patterns in the DOJ’s protracted miscarriage of justice, and, as you’re about to see, those patterns are very deeply disturbing indeed. What’s been going on cuts right past a garden variety constitutional crisis like Watergate straight to a crisis of sovereignty. The backdrop for all of this is HSBC’s exoneration in December of 2012 for laundering money for drug dealers and terrorists, about which the House Financial Services Committee issued a report in July of 2016. Whether it was due to the political circus in town at the time, or to the Republican authorship of that report (albeit without dissent), it didn’t get nearly the scrutiny it deserved. You see, prosecutors working on the HSBC case were actually going to indict the bank, but they got overruled, and HSBC and its team of criminals skated. The story of how exactly that reversal came about reveals, if not the King himself, then certainly many of the King’s top men.

Method

The Creature from Jekyll Island: A Second Look at the Federal Reserve

G. Edward Griffin, January 1, 2002

(82 page packet below)

It was intended that this book would be half its present size and be completed in about one year. From the beginning, however, it took on a life force of its own, and I became but a servant to its will. It refused to stay within the confines prescribed and, like the genie released from its bottle, grew to enormous size. When the job was done and it was possible to assess the entire manuscript, I was surprised to realize that four books had been written instead of one.

First, there is a crash course on money, the basics of banking and currency. Without that, it would be impossible to understand the fraud that now passes for acceptable practice within the banking system.

Second, there is a book on how the world’s central banks— the Federal Reserve being one of them—are catalysts for war. That is what puts real fire into the subject, because it shows that we are dealing, not with mere money, but with blood, human suffering, and freedom itself.

Third, there is a history of central banking in America. That is essential to a realization that the concept behind the Federal Reserve was tried three times before in America. We need to know that and especially

Finally, there is an analysis of the Federal Reserve itself and its dismal record since 1913. This is probably the least important part of all, but it is the reason we are here. It is the least important, not because the subject lacks significance, but because it has been written before by writers far more qualified and more skilled than I. As mentioned previously, however, those volumes generally have remained unread except by technical historians, and the Creature has continued to dine upon its hapless victims.

Future Method

Coalition for Inclusive Capitalism

Christine Lagarde

Coalition for Inclusive Capitalism, 2014

Largarde is the President of the European Central Bank since 1st November 2019. Between July 2011 and September 2019, she served as Chair and Managing Director of the International Monetary Fund (IMF).   Lagarde was the first woman to become finance minister of a G8 economy and is the first woman to head each the ECB and IMF.

Bill Clinton’s Closing Keynote

Coalition for Inclusive Capitalism, 2015

William Clinton grew up in Arkansas and attended Georgetown University. At Georgetown University, he was hugely influenced by his professor Carroll Quigley (Tragedy & Hope).  After graduating from Georgetown he became a Rhodes Scholar (Oxford).  Post university he was an American politician and attorney who served as the 42nd president of the United States from 1993 to 2001. Prior to his presidency, he served as governor of Arkansas and as attorney general of Arkansas.

Lynn de Rothschild

Coalition for Inclusive Capitalism, 2015

Lynn Forester de Rothschild is an American-British businesswoman who is the chief executive officer of E.L. Rothschild, a holding company she owns with her third husband, Sir Evelyn Robert de Rothschild.  The company manages investments in The Economist Group, owner of The Economist magazine, Congressional Quarterly and the Economist Intelligence Unit, E.L. Rothschild LP, a leading independent wealth management firm in the United States, as well as real estate, agricultural and food interests.

Charles, Prince of Wales

Coalition for Inclusive Capitalism, 2014

Charles, Prince of Wales is the heir apparent to the British throne as the eldest son of Queen Elizabeth II.

Epilogue

Narrative of the Life of Frederick Douglass, an American Slave

by Frederick Douglass, 1845

“The more I read, the more I was led to abhor and detest my enslavers. I could regard them in no other light than a band of successful robbers, who had left their homes, and gone to Africa, and stolen us from our homes, and in a strange land reduced us to slavery. I loathed them as being the meanest as well as the most wicked of men. As I read and contemplated the subject, behold! that very discontentment which Master Hugh had predicted would follow my learning to read had already come, to torment and sting my soul to unutterable anguish. As I writhed under it, I would at times feel that learning to read had been a curse rather than a blessing. It had given me a view of my wretched condition, without the remedy. it opened my eyes to the horrible pit, but to no ladder upon which to get out. in moments of agony, I envied my fellow-slaves for their stupidity. I have often wished myself a beast. I preferred the condition of the meanest reptile to my own. Any thing, no matter what, to get rid of thinking! It was this everlasting thinking of my condition that tormented me. There was no getting rid of it. It was pressed upon me by every object within sight or hearing, animate or inanimate. The silver trump of freedom had roused my soul to eternal wakefulness. Freedom now appeared, to disappear no more forever. It was heard in every sound and seen in every thing. It was ever present to torment me with a sense of my wretched condition. I saw nothing without seeing it, I heard nothing without hearing it, and felt nothing without feeling it. It looked from every star, it smiled in every calm, breathed in every wind, and moved in every storm.”

End Note

Abraham Lincoln

Address before the Wisconsin State Agricultural Society Milwaukee, Wisconsin September 30, 1859

“The thought recurs that education—cultivated thought—can best be combined with agricultural labor, or any labor, on the principle of thorough work; that careless, half-performed, slovenly work makes no place for such combination; and thorough work, again, renders sufficient the smallest quantity of ground to each man; and this, again, conforms to what must occur in a world less inclined to wars and more devoted to the arts of peace than heretofore. Population must increase rapidly, more rapidly than in former times, and erelong the most valuable of all arts will be the art of deriving a comfortable subsistence from the smallest area of soil. No community whose every member possesses this art, can ever be the victim of oppression in any of its forms. Such community will be alike independent of crowned kings, money kings, and land kings.”