An Analysis of Gods of Money – Part 2

An Analysis of Gods of Money – Part 2

Thomas Allen

    17. Engdahl claims that for more than a century N.M. Rothschild & Sons set the world’s daily price of gold [p. 96]. Absurd! Here Engdahl shows his ignorance of the gold standard. First, to change the “price” of gold daily would have required Parliament, Congress, and other governments of countries on the gold standard to change the change the definition of their monetary unit daily. Under the gold standard, the price of gold is not fixed. The monetary unit is defined as a specific weight of gold. For example, between 1837 and 1934, the U.S. dollar was defined as 23.22 grains of pure gold. (To say that the price of gold is fixed under the gold standard is to say that the meter fixes how far light travels in 1/299,792,458 of a second. The distance that light travels during that time fixes the meter, so the weight of gold fixes the monetary unit.)
    If N.M. Rothschild offered to pay more than a pound for 113 grains of gold, which was the value of the pound, people would have sold all their gold to N.M. Rothschild as it would be paying more than 113 grains of gold for 113 grains of gold. If it offered to pay less, no one would have sold it any gold.
    18. According to Engdahl’s description of the New York bankers and the London bankers between the world wars in Chapter 5, the Rothschilds were not as powerful as many believe.
    19. Engdahl claims that President Franklin Roosevelt made the holding or owning gold coins, gold bullion, or gold certificates illegal [p. 123]. That is not quite true. An individual could possess $100 in gold coins. If all the gold coins then in circulation were divided approximately equally among the population, each person would have had between $2 and $3 in gold coins. The U.S. government and the Federal Reserve held 93 percent of the monetary gold. Thus, the U.S. government had no need to collect coins held by the public.
    Like most writers, Engdahl refers to Roosevelt ordering the “confiscation” of the people’s gold [p. 123]. “Confiscation” is merely a euphemism for the more accurate term “stealing.”
    20. Most opponents of the Federal Reserve and the Money Trust believe that the Money Trust or at least a faction of the Money Trust planned and deliberately caused the Great Depression. Engdahl seems to believe that stupidity, greed, arrogance, lust for power, fear, hatred, etc. of the Money Trust and governments caused the Great Depression; it was not a planned event.
    21. Engdahl states that President Hoover took a laissez faire approach to the Great Depression [p. 126]. Earlier he noted that Hoover took an interventionist approach instead of a laissez faire [p. 107]. In America’s Great Depression, Murray Rothbard shows that Hoover’s approach to the Great Depression was highly interventionist. The New Deal was built on the interventionist foundation that Hoover laid.
    22. Engdahl claims that in 1933, Roosevelt began buying newly minted gold above market price. Actually, what he did was to change the definition of the dollar from 23.22 grains of gold to 1/35 of an ounce of gold through several incremental steps. He did not buy gold at an above market price; he devalued the dollar. This action was legalized by the Gold Reserve Act of 1934.
    Engdahl states that Roosevelt resumed the gold standard under the Gold Reserve Act in January 1934 [p. 129]. That is not true. As no one could redeem paper money for gold, which Engdahl acknowledges [p. 129], the gold standard could not exist. The Gold Reserve Act formerly ended the gold standard.
    23. Engdahl calls National Review as an arch-conservative magazine [p. 242]. A better and more accurate description is “neo-conservative.” As he notes, it was and continues to be a promoter of the American Empire. One of its prime objectives was to control the right and direct it away from Washington’s noninterventionist policy and Jefferson’s small highly limited governmental policy. The Old Right, the paleo-conservatives, who advocated small limited government could not be allowed to have a voice.
    Engdahl identifies James Burnham, an operative of the OSS, as a cofounder of National Review [p. 242]. He does not identify the other cofounder, William Buckley. Buckley was a member of the Council on Foreign Relations and Skull and Bones and was a CIA agent.
    Except neo-conservatives, who are as statist as socialists, most conservatives claim that they want limited government. However, most conservatives support a large all-powerful military, i.e., knowingly or unknowingly, they support the military-industrial complex. Thus, they support the warfare state, which is incompatible with limited government.
    24. Engdahl discusses President Kenney’s Executive Order 11110 [p. 250]. Unlike many opponents of the Federal Reserve who discuss this Executive Order, he seems to realize that it dealt with silver certificates. Most write as though it dealt with U.S. notes. Then he claims or at least implies that Kennedy issued $4.2 billion in U.S. notes pursuant to this Executive Order.
    This Executive Order had nothing to do with U.S. notes. U.S. notes and silver certificates are two different types of currencies. Although both were legal tender, U.S. notes were backed by nothing; silver certificates were backed by silver. U.S. notes were an inexpensive form of fiat money. Silver certificates were an expensive form.
    During the Kennedy administration $4.2 billion in U.S. notes were issued. However, they were issued pursuant to an 1878 law that required the U.S. Treasury to maintain a fix supply of $347 billion in U.S. notes.
    The Executive Order did not order the issue of silver certificates. With this Executive Order, Kennedy delegated his power to approve the issue of new silver certificates to the Secretary of the Treasury.
    Engdahl states that Kennedy was the first President since Lincoln to issue interest free money [p. 250]. That is not true. U.S. notes were issued under nearly every President from Lincoln to Nixon. Silver certificates were issued under nearly every President from Hayes to Lyndon Johnson.
    (Engdahl believes that this Executive Order may have led to Kennedy’s assassination [pp. 249-250]. The CIA, FBI, Department of Defense, military-industrial complex, mafia, Mossad, France, Vietnam, Cuba, anti-Castro Cubans,Russia, Lyndon Johnson, and the Texas oilmen among others have been accused of being behind his assassination. If the truth were known, probably several of these were behind it. The poor man did not have a chance.)
    Engdahl suggests that Kennedy’s assassination caused the demise of the silver certificate. It did not. Inflation, deprecation of the U.S. dollar, did. The bullion value of silver in a silver dollar began exceeding the monetary value of a silver dollar. Although no silver certificates were issued after Kennedy’s assassination, or even during his administration, they continued to circulate. They were never called in as were gold certificates.
    25. Engdahl claims that gold has little intrinsic value (p. 264). To the contrary, it has a great deal of intrinsic value — much more than his beloved U.S. note. The U.S. note like the Federal Reserve note has no intrinsic value beyond crude toilet paper and its Btu content.
    He claims that gold’s scarcity made gold serve as a store of value against which countries fixed their currencies [p. 264]. This is only partially true. It is scarce in the sense that it does not exist in large quantities when compared to base metals. However, this scarcity is not what makes it ideal money. A large quantity of gold exists above ground ready to be used as money compared to newly mined gold entering the market. That is, the flow of gold (newly mined gold) is small (about 2 percent) compared to the stock of gold (above ground supply). Thus, newly mined gold has little effect on the value of the existing supply.
    Unlike the U.S. note, people freely chose gold as money. No government had to force it on them. Federal Reserve notes and U.S. notes have to be forced on people to get them to function as money. Moreover, and perhaps more important, gold can actually extinguish debt; U.S. notes and Federal Reserve notes can only discharge debt by passing it to another. Ultimately, the U.S. government ends up owning all debt as U.S. notes and Federal Reserve notes are obligations of the U.S. government.
    26. Engdahl gives the impression that the U.S. government has undergone massive deregulation beginning with the Carter administration. When the EPA came into being in 1970, I worked with two or three volumes of Title 40 of the Code of Federal Regulations. I was working with more than 20 volumes 37 years later. Since 1977 when Carter became President to today, the Code of Federal Regulations has more than doubled. If the United States had undergone massive deregulation since 1977, the Code of Federal Regulations should be much small today than it was in 1977.
    27. Engdahl spends a large part of his book describing how the Rockefellers used governments to increase and protect their wealth and power. Then he claims that they want to turn to a true free market economy to increase and protect their wealth and power [p. 276]. He goes as far as to call such economy neo-feudalism [p. 277]. Feudalism, neo or classical, is hardly free market. It is more like communism. Under feudalism, the monarch owns most of the land. He leases the land to noble families for specific services. Along with the land come the workers, serfs, who are bound to the land and, with few exceptions, cannot legally leave it.
    Based on their actions from the late 1970s, when this abandonment of statism was supposed to have begun to today, the Rockefellers and their associates have not abandon their statism in favor of the free market. Moreover, they have not abandon their control of the U.S. government. If the United States had been on a free market trend since 1977, the U.S. government and its budget would be much smaller today than it was then. To the contrary, both the government and its budget have grown unabated. The U.S. government’s control of the economy has expanded. Apparently, Engdahl has no clue what a free market economy looks like. The Rockefellers do not want a free market economy or free trade, they want a managed economy and managed trade managed for their benefit. That requires the cooperation of government, which is why they expend so many resources to control it.
    Moreover, free trade does not require any international organization like the World Trade Organization to manage it. It requires no management. Managed trade is the bane of free trade. All that free trade requires is for governments to get out of the way and let their people trade. None of the trade deals that Engdahl describes throughout his book are free trade deals. Even when he claims that free trade was behind the deals, they were not free trade deals.
    28. Engdahl calls Milton Friedman’s teachings as “radical free market dogma” [p. 276]. I am not sure what Engdahl means by a “radical free market dogma,” but Friedman was an ardent opponent of free market banking and money. He supported centralized banking, the Federal Reserve System, and the banking cartel that it entailed. Also, he was a proponent of the government controlling the monetary system and opposed the gold standard.
    Engdahl gives the impression that the Federal Reserve abandoned Keynesianism for Friedmanism. It may have abandoned Keynesianism, but it never adopted Friedman’s doctrine. Friedman advocated the Federal Reserve creating the same quantity of money month after month, year after year, without regards to employment, interest rates, or anything else.
    29. Engdahl claims that when interest rates rose from 6 to 8 percent under Volcker, wealthy bondholders reaped staggering profits on their bonds [pp. 278-279]. When interest rates rise, the value of existing bonds falls. If the interest rate doubles, the value of existing bonds falls about half. People holding bonds when the Federal Reserve raised interest rates lost wealth. People who had advance knowledge that the Federal Reserve was going to raise interest rates could profit handsomely by shorting bonds. When they knew in advance that the Federal Reserve was going to start reducing rates, they could cover their shorts and begin to buy bonds. Thus, they can receive enormous profits.
    If the Rockefellers and their banker, industrial, and government comrades were really promoting the free market, they would have dismantled the Federal Reserve. They would not have used it to manipulate interest rates or to control banking.
    The crisis that Engdahl describes that governments of several foreign countries endured following Volcker’s raising interest rates [p. 286] would not have occurred if those governments had followed the example of President Jackson. If they had no debts, a change in interest rates would not have affected them.
    Engdahl does not discuss the massive destruction of capital that came with falling interest rates. A company that borrowed $10 million with bonds at 10 percent interest was at a competitive disadvantage with a company that later borrowed $10 million with bonds at 5 percent. It had to pay twice the interest. If it bought its bonds to avoid the higher interest, it would have to pay $20 million for them. (The value of bonds rises as interest rates drop. If the interest rate falls by half, the value of bonds approximately double.) Under the gold standard, interest rates vary little and are usually low. The interest rate gyrations that have occurred in recent decades would not have happened under the gold standard.
    30. Engdahl blames the inflation of the 1970s and early 1980s on a 140 percent increase in the price of oil and not on government deficits. Inflation is a monetary phenomenon. If the money supply were stagnant, a large increase in the price of oil could cause a good deal of havoc, but it would not cause a rise in general prices. As the increased oil prices caused oil-related products, assets, and services to rise, prices of other things would have to fall.
    31.Engdahl states that President Reagan filled his administration with laissez faire economists [p. 286]. If he did, they had little influence. The size of the U.S. government and its power over the economy grew during his administration.
    Moreover, he claims that “Reagan’s free market had all but destroyed an entire national economy: the USA’s” [p. 293]. He blames this destruction on the Federal Reserve raising interest rates to very high levels and spends pages describing its destructive effect. The Federal Reserve is not a creature of the free market; it is a governmentally created entity. A governmental monopoly, such as the Federal Reserve, with the power to manipulate interest rates and to control the banking cartel is not free market.
    In Chapter 16, Engdahl describes Greenspan’s management (mismanagement?) of the Federal Reserve. He claims that Greenspan was a proponent of the free market. He describes Greenspan’s creating booms and busts in various markets via manipulating interest rates while he protected banks and other financial institutions that he deemed too big to fail. In spite of his rhetoric, Greenspan was no proponent of the free market. If he were, he would not have used his office to manipulate interest rates or to bail out banks and other financial companies to keep them from bankruptcy. Moreover, he would have pushed for the abolishment of the Federal Reserve System and would have promoted a decentralized competitive banking system without any central bank. He would have advocated returning to the classical gold standard. Then interest rates would have been steady at a low level.
    In summary, in spite of its shortcomings, Engdahl’s book is worth reading. In spite of his lack of understanding the free market and the gold standard, his book does contain a good deal of useful information.

Copyright © 2014 by Thomas Coley Allen.

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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.

Endnotes
 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. 

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