Friday, December 5, 2014

An Analysis of Gods of Money – Part 1

An Analysis of Gods of Money – Part 1
Thomas Allen

    The following is an analysis of Gods of Money: Wall Street and the Death of the American Century by F. William Engdahl (edition.engdahl: Wiesbaden, Germany; 2009). Engdahl has written an interesting book. It is an excellent general history of the self-proclaimed ruling elite working behind the scene to control the U.S. government from Lincoln to 2009.
    He identifies many powerful and important people and organizations and their relationships. He discusses their schemes to concentrate wealth and power under their control. Although he does not seem to be a supporter of free enterprise, Engdahl shows that corruption instead of free enterprise had much more to do with the people like Morgan, Rockefeller, Harriman, and several others (about 60 families) massing their fortunes during the latter part of the nineteenth century and early twentieth century [p. 28].
    Engdahl describes the rise and fall of the House of Morgan. He describes Morgan’s involvement in the Panic of 1893 and the following depression, the establishment of the Federal Reserve System, and World War I. Next he describes the rise of the Rockefellers, which began in earnest after World War I, their replacement of Morgan as the chief money power in the United States during the 1930s, and their rise to the primary money power of the world following World War II. Whereas Morgan was involved mostly in manipulating financial markets in the United States to grow his wealth and power, the Rockefellers were mostly involved in geopolitics to grow their wealth and power. He describes the Bretton Wood agreement, which the Rockefellers were behind, and the rise of the American Century. He finishes with a description of Greenspan’s scheming and its aftermath.
    Much of what he describes is basically the Hamiltonian principle of government-business partnership advocated by Alexander Hamilton, Henry Clay, Daniel Webster, and Abraham Lincoln, and most Presidents after 1860. Under this system, government works with (or for) big business, the money interest (the Money Trust), and multinational corporations to protect them and to advance their causes. The Hamiltonian philosophy calls for the concentration of economic and political power. (During the 1930s, this type of political economy was call fascism.)
    Engdahl has a weird understanding of the free market. Most of what he calls free market is governmental intervention or intervention by the Federal Reserve, a U.S. government created monopoly, in the economy.
    Unfortunately, his book contains some omissions, errors, and incorrect conclusions. Some of them are discussed below. Many of his omissions result from the scope of his book and go beyond its objective. However, other omissions can explain how bankers were able to do what they did. Moreover, Engdahl believes the Lincoln myths, which is the source of many of his errors and incorrect conclusions.
    1. Except a brief quotation from one of Lord Palmerston’s speeches, Engdahl fails to mention the four most powerful men in the world between Lincoln’s election, about when his story begins with a flashback to the Jackson administration and World War I. They were Lord Palmerston (Henry John Temple, 3rd Viscount of Palmerston), sometime after 1848 to 1865, Mazzini, 1865-1872; Albert Pike, 1872-1891; Adriano Lemmi, 1893-1906. These men were the head of the important and powerful secret societies, such as Freemasonry, which Engdahl fails to mention, of the Western world. As such, they were the power behind the powers behind the governments of the Western world.
    2. Engdahl makes the same mistake that most opponents of the Federal Reserve make [p. 9-12]. He emphasizes its private ownership to the point of implying that if the U.S. government own it, most of the country’s financial and economic problems would vanish. If true, Great Britain and other countries whose governments own and control their central banks would be economic paradises compared with the United States. The problem is central banking — not the ownership structure of the central bank.[1]
    3. Engdahl claims that the Constitution gives the U.S. government control of money and credit [p. 14-15]. The founding fathers left the control of the monetary system directly in the hands of the people. The Constitution granted only two monetary powers to the U.S. government. One was to coin money, i.e., to stamp all the gold and silver presented to the mint into coins. These coins were the property of the people who held them and not the U.S. government. The other was to define the monetary unit as so many grains of silver and so many grains of gold. The dollar used in the Constitution was understood to mean the weight of silver in the Spanish milled dollar. The Constitution grants the U.S. government no power to create and issue currency.[2] The only power that it has related to credit is to borrow money. Engdahl seems to trust the U.S. government to issue the country’s money — the same government that the Money Trust, the term that he usually used for the money interest, has controlled since 1860.
    Contrary to what governmental issued fiat money adherents like Engdahl claim, Lincoln was not an admirer of governmentally issued fiat money. However, he was a supporter of centralized banking[3] and the National Banking Act. The National Banking Act gave the U.S. government control of the largest commercial banks. Under the law, if a bank wanted to issue banknotes, it had to buy U.S. government bonds to back its notes. At that time, the National Banking Act was about as far as the public would allow the U.S. government go in establishing a central bank.
    Engdahl does describe the National Banking Act and how it gave an advantage to the larger, more powerful banks, especially those in New York City [pp. 42ff]. He errs when he writes that national banks were required to maintain reserves in gold. Between 1863 and 1879, most banks used legal-tender U.S. notes as their reserves. Only after 1878 when U.S. notes became redeemable in gold did banks begin increasingly to hold gold as reserves. Moreover, the National Banking Act places many restrictions on banks, such as no branches and no dealing in bills of exchange for exports or imports (this restriction greatly benefitted the London bankers).
    Also, Engdahl believes that the Constitution gives Congress the power to print and issue fiat paper money. It does not. The first draft of the Constitution did contain a clause that gave Congress this power. However, the drafters of the Constitution removed that clause. When they removed that clause, they were convinced that they had denied Congress the power to issue fiat paper money.[4]
    4. Engdahl presents President Lincoln as an opponent of the Money Trust [pp. 13-15]. Lincoln’s rhetoric may make him appear to be an opponent of the Money Trust, but he was not. He was the father of America’s government-business partnership. Lincoln and most of the administrations that followed him promoted the warfare state, corporate welfare, ever expanding centralization of political and economic power — all goals of the big banks and Money Trust. (As President Nixon so aptly admonished his opponents, “Watch what I do and do not listen to what I say,” or word to that effect. He tickled the ears of his supporters by telling them what they wanted to hear. His opponents got the action as he implemented their policies.)
    When the government gains control of creating and issuing all currency and credit, either directly as Lincoln’s monetary admires want or indirectly through a privately owned center bank, which always exists at the pleasure of the government, the government gains complete control of the people. That is why the founding fathers granted the U.S. government no such power.
    Between 1840 and 1865, Lincoln was a front man for the equivalent of Wall Street at that time. He favored rechartering the National Bank;[5] thus, he wanted a central bank.
    5. Engdahl believes that the Rothschilds were behind secession and Lincoln’s assassination [pp. 15-18].  To the extent that the Rothschilds were involved in encouraging Southern States to secede, their objective was not to establish a confederation of Southern States. It was to destroy the States and consolidate an all-powerful government in Washington, which would be much easier for them to control. If they had really wanted to have a confederation of Southern States, Great Britain, France, and most other European countries would have sent troops to fight for the South. The Rothschilds had an enormous amount of influence over these governments.
    6. Contrary to Engdahl’s claim [p. 14], Lincoln understood nothing about the Constitution. If he did, he would have let the Southern States go in peace as they had the constitutional right to do. He could not let the Southern States go because they provided most of the revenue while Lincoln’s Wall Street friends received most of the expenditures.
    7. Engdahl claims that Lincoln’s policies were not continued after his death and that if his Reconstruction policies had continued, the London banks could not have raised the world price of grain [p. 16]. For the most part Lincoln’s policies were continued after the War and are still being implemented today. That Lincoln would have treated the South any better than it was treated during Reconstruction is speculation. Like most Presidents, Lincoln was notorious for saying one thing and doing the opposite. His lust for power would have caused him to try to out do the Radical Republicans so that he, instead of them, would control the Republican party. President Johnson was almost removed from office for standing up to them.
    As for the price of grain, it did trend upward after the War until the Panic of 1873. Then it trended downward for several decades. The South was not noted as a grain growing region. Tobacco and cotton were the major Southern crops. Grains came mostly from the Midwest and Prairie States. The price of cotton and most other agricultural products followed the same trend as grain. However, much influence the London banks had on them is difficult to prove. If they suppressed their production to profit from high prices for a few years after the War, why did they not continue to bribe and extort governments to implement policies to keep prices up during the late 1870s, 1880s, and 1890s?
    If Engdahl is correct about the Rothschilds and other London bankers using Reconstruction to suppress the South’s economy, then the Radical Republicans would have been doing the bidding of the London bankers. The Radical Republicans were the ones who adopted and implemented the Reconstruction laws.
    8. Engdahl seems to oppose the gold standard and believes that it is easily manipulated [pp. 16-17]. Fiat paper money, such as the greenback, is much easier to manipulate than is the true gold standard. Consequently, the Money Trust has fought to replace the gold standard with paper fiat money and its electronic equivalent. Under the true gold standard, the monetary system can operate without banks or government. Although he shows little understanding of the classical gold standard, he does realize that it comes as close as possible to separate money from the state and that it is an automatically correcting system [p. 99].
    9. Engdahl correctly notes that Eastern banks wanted greenbacks to be redeemed in gold [p. 17]. They were not the only ones who wanted gold redemption. Others included the Calvinist and Reform clergy, many Baptist and Methodist ministers, academic classical economists, Liberal Republicans and Mugwumps, merchants who favored free trade and an end to governmental extortion via protective tariffs, and merchants in the export-import business except the speculators. The mercantilists, industrialists, manufacturers, many businessmen, speculators in the export-import business, promoters, the Careyites, and the greenbackers (intellectuals and politicians with their working class and rural followers) typically opposed redemption. Even some bankers opposed redemption. Engdahl does mention many of these groups. Moreover, in 1869 Congress promised redemption.
    Engdahl seems to be an admirer of Henry Carey [p. 17], a leading opponent of the gold standard and proponent of fiat paper money like the greenback. He was essentially a nineteenth century Keynesian.
    10. In Chapter 2, Engdahl describes how J.P. Morgan and others profited from redeeming U.S. Treasury securities for gold and drawing the U.S. Treasury’s gold reserves used to back U.S. notes dangerously low [pp. 22-27]. What he does not show is that if the U.S. government had not undertaken issuing fiat money in the form of U.S. notes (greenbacks) and Treasury notes of 1890, Morgan’s scheme would not have worked. (To drive up the price of silver, Congress ordered the Secretary of the Treasury to buy silver at the market price with Treasury notes, called Treasury notes of 1890. This silver served as a reserve for the Treasury notes. However, the Secretary of the Treasury had the option of redeeming these notes in silver or gold.) The U.S. Treasury should not have had any paper money to redeem other than gold certificates, which are basically warehouse receipts for gold and fully backed by gold that can be redeemed for gold.
    He suggests that the Depression of 1893-1899 was the result of Morgan and his associates manipulating financial markets. No mention is made of the malinvestment caused by the inflationary Bland-Allison Act and the Sherman Act. No mention is made of the Tariff Act of 1890, commonly called the McKinley Tariff, which raised tariffs by almost 50 percent.
    11. In Chapter 3, Engdahl discusses the Panic of 1907 and Rockefeller’s and especially Morgan’s involvement in orchestrating it [pp.34-38]. What is omitted is that if banks had been practicing sound banking, they would have survived a bank run without the threat of bankruptcy. The major sin of banking is borrowing short and lending long — a formula for disaster once confidence is lost. Another sin is creating banknotes and demand deposits to buy assets other than gold and real bills of exchange.
    12. Engdahl claims that the U.S. government had the constitutional power to regulate credit and be the lender of last resort [p. 38]. It does not although Lincoln and other Hamiltonian wanted the U.S. government to have that role. They wanted to let their comrades in banking profit handsomely from high risk speculation while having the U.S. government bail them out if the speculation went wrong.
    Engdahl mentions the Secretary of the Treasury seeking authority to have a slush fund to manipulate bank lending and to change reserve requirements. He also wanted the power to contract national banknotes [pp. 38-39]. With a minor change in the law or procrastination on his part, the Secretary of the Treasury could have achieved much of his goal by manipulating the supply of U.S. notes. As recent history has shown, having a lender of last resort for banks makes the economy more volatile rather than smoothing it.
    Engdahl comments on the U.S. government hoard of gold in 1895 and notes it was larger than any central bank’s hoard [p. 39]. What is left unsaid is that this gold was held as backing for gold certificates and for partial backing of U.S. notes and to a lesser extent Treasury notes of 1890.
    Moreover, Engdahl seems to believe that when the government manages the gold standard, the money is stronger than when banks manage it [p. 39]. The gold standard is the same regardless who manages it. All the gold presented to the mint, which can be a private mint, is coined, and the coins are the property of the person presenting the gold. Furthermore, no restrictions are placed on the melting of coins and using the metal for nonmonetary purposes. No restrictions are placed on the importing or exporting of gold.
    13. Throughout his book, Engdahl describes the lackeys, cronies, toadies, and agents of Morgan, the Rockefellers, and other bankers capturing key posts in the U.S. government, chiefly the Secretary of the Treasury and often the President, where they faithfully serve the interest of the Money Trust. Does he really believe that these bankers would cease putting their people in these key positions if the Federal Reserve were abolished and the U.S. government issued paper fiat money directly? To the contrary, they would have even more incentive to control these positions. As the U.S. government acquires more of the power that Engdahl wants it to have, the more the bankers seek to control it, and the more corrupt it becomes.
    Engdahl notes that the big international banks seek to gain control of governments and their countries’ money primarily through governmental debt [p. 42]. If true, if the U.S. government had followed the example of President Jackson, the bankers would not have gained the power that they have in the United States. They would have no U.S. debt securities to buy.
    14. Engdahl remarks that the Federal Reserve Act gave private banks total control over note issue, over money [p. 53]. This statement may be true today, but it was not before 1933. Between the adoption of the Federal Reserve Act in 1913 until the end of the gold standard in 1933, banknotes, including Federal Reserve notes, were not legal tender. No one was required to accept them in payment of debt. The only legal tender moneys then were gold, U.S. notes, which was redeemable in gold, and silver certificates.
    Moreover, throughout the history of the United States only banks chartered by the States or the U.S. government could issue banknotes. In that sense, private banks have always had a monopolistic control over note issue. The Federal Reserve Act merely centralized control over note issue. As a result, banks expanded and contracted bank credit money in concert. Thus, inflating and speculating banks no longer had to worry about prudent bankers demanding gold for their notes; after the end of the gold standard in 1933, they could no longer demand gold.
    15. In Chapter 4, where Engdahl describes the events and corruption lending to the United States’ entry into World War I, he fails to mention the importance of the Zionist connection.[6] He also fails to mention that at this time the Federal Reserve Act prohibited the Federal Reserve buying and selling U.S. government securities. During the war, it bought U.S. government securities in violation of the law. As it was doing the U.S. government a service and a favor by buying its securities, those who were charged with enforcing the law refused to do so. Later, Congress legalized the Federal Reserve’s buying and selling U.S. government securities.
    16. When Engdahl discusses the gold standard following World War I, he often gives the impression that it was the gold standard that existed before World War I [pp. 84ff]. (He does note that the classical gold standard separated money from the state and was self-correcting [p. 99].) The impression that he gives is that the only important difference between the two was that the center of financing world trade was moving from London to New York. The two gold standards were entirely different. Before World War I, the United States, Great Britain, France, and most other important countries of the world were on the classical gold standard albeit an adulterated form. Following the war, the United States remained on the classical gold standard, but without the accompanying real bills doctrine. To control trade with Germany, the Allies abandoned the real bills doctrine. Under the real bills doctrine, manufacturers could finance their productions and pay employees and suppliers before their goods were sold without having to borrow. When the real bills doctrine was abandoned, they had to borrow from banks to finance their production. Without the real bills doctrine, gold could not withstand the strain of world trade under the highly bastardized, politically contrived gold-exchange standard instituted after World War I.
    Following World War I, the gold-exchange standard replaced the classical gold standard. Under the classical gold standard, gold was the world reserve currency. Under the gold-exchange standard, the British pound and U.S. dollar functioned as the world reserve currency. Banks and governments found manipulating money under the gold-exchange standard much easier than manipulating it under the classical gold standard. Even under the gold-exchange, gold prevented unrestrained money manipulation. That is why it was abandoned a few years after implementation for a pure fiat monetary system.
    Engdahl does discuss the gold-exchanged standard [pp. 88ff]. However, his failure to explain adequately the difference between the classical gold standard that existed before World War I and the gold-exchange standard that existed after World War I can confuse readers who do not understand the difference.
    Following World War II, the Allies again tried to institute another gold-exchange standard, which was even more bastardized than the one adopted after World War I. It was called the Bretton Woods agreement. The Bretton Woods gold-exchange standard differed in some important aspects from the gold-exchange standard adapted after World War I. Under the latter, the United States remained on the gold-coin standard that existed before the War while Great Britain replaced the gold-coin standard with the gold-bullion standard. Thus, in both countries, the domestic users of the currency could exchange their currency for gold. Also, under the latter, countries defined their monetary unit in gold. Under Bretton Woods, the U.S. dollar was backed by gold, but domestic users of the dollar could not exchange dollars for gold; only foreign central banks and governments could redeem dollars for gold. Countries defined their monetary unit in the U.S. dollar instead of gold [pp. 214, 217-218].
    Under the Bretton Woods gold-exchange standard, the U.S. dollar, which was the only currency redeemable in gold, became the world reserve currency. In reality, the Bretton Woods monetary system was more a dollar standard than a gold standard. It lasted longer than the gold-exchange standard adopted after World War I. It too was abandoned for a pure fiat monetary system.

 1.  Thomas Coley Allen, Reconstruction of America’s Monetary and Banking System: A Return to Constitutional Money (Franklinton, North Carolina: TC Allen Company, 2009), pp. 204-218.

2. Ibid., pp. 72-82.

3.  Thomas J. DiLorenzo, Lincoln Unmasked (New York: Three Rivers Press, 2006), p. 128.

4.  Allen, pp. 72-82.

5.  DiLorenzo, p. 128.

6.  Thomas Coley Allen, Zionism: A Brief History, 1800-1949 (Franklinton, North Carolina: TC Allen Company, 2007), pp. 38-40.

Copyright © 2014 by Thomas Coley Allen. 

More articles on money. 

No comments:

Post a Comment