From Gold to Federal Reserve Notes

excerpted from the book

Web of Debt

The Shocking Truth About Our Money System And How We Can Break Free

by Ellen Hodgson Brown

Third Millennium Press, 2007, paperback

Reed Simpson

The chief source of bank robbery is not masked men looting tellers' cash tills but the blatant abuse of the extension of credit by white collar criminals. A common practice is for loan officers to ignore the long-term risk of loans and approve those loan transactions with the highest fees and interest paid immediately - income which can be distributed to the principal executives of the bank. Such distribution is buried within the bank's owner/manager compensation and is distributed to the principal owners as dividends and stock options.

President Franklin Delano Roosevelt, November 23, 1933, in a letter to colonel Edward Mandell House

The real truth of the matter is that a financial element in the large centers has owned the Government ever since the days of Andrew Jackson.

Congressman Louis McFadden, chairman, House Banking and currency Committee, June 10, 1932

Some people think the Federal Reserve Banks are U.S. government institutions. They are not ... they are private credit monopolies which prey upon the people of the U.S. for the benefit of themselves and their foreign and domestic swindlers, and rich and predatory money lenders. The sack of the United States by the Fed is the greatest crime in history. Every effort has been made by the Fed to conceal its powers, but the truth is the Fed has usurped the government. It controls everything here and it controls all our foreign relations. It makes and breaks governments at will.

an editorial in the The Union Times during the Civil War - against President Abraham Lincoln's debt-free Greenbacks

If that mischievous financial policy which had its origin in the North American Republic during the late war [Civil War], should become indurated down to a fixture, then that Government will furnish its own money without cost. It will pay off its debts and be without debt. It will become prosperous beyond precedent in the history of the civilized governments of the world. The brains and wealth of all countries will go to North America. That government must destroyed or it will destroy every monarchy on the globe.

Hans Schicht, "The Death of Banking", February 2005

Through a network of anonymous financial spider webbing only a handful of global King Bankers own and control it all .... Everybody, people, enterprise, State and foreign countries, all have become slaves chained to the Banker's credit ropes.

Dr. Carroll Quigley a professor of history at Georgetown University, and author of the book 'Tragedy and Hope'

[The aim of an elite clique of global financiers (international bankers) bent on controlling the world was] 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.

Sir Josiah Stamp, director of the Bank of England speaking at the University of Texas in 1927

The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in inequity and born in sin .... Bankers own the earth. Take it away from them but leave them the power to create money, and, with a flick of a pen, they will create enough money to buy it back again .... Take this great power away from them and all great fortunes like mine will disappear, for then this would be a better and happier world to live in .... But, if you want to continue to he the slaves of bankers and pay the cost of your own slavery, then let bankers continue to create money and control credit.

Professor Henry C.K. Liu, economist, chair of Department of Economics at UCLA, and countries' investment consultant

Except for coins, which are issued by the government and make up only about one one-thousandth of the money supply, the entire U.S. money supply now consists of debt to private banks, for money they created with accounting entries on their books.


* The "Federal" Reserve is not actually federal. It is a private corporation owned by a consortium of very large multinational banks.

* Except for coins, the government does not create money. Dollar bills (Federal Reserve Notes) are created by the private Federal Reserve, which lends them to the government.

* Tangible currency (coins and dollar bills) together make up less than 3 percent of the U.S. money supply. The other 97 percent exists only as data entries on computer screens, and all of this money was created by banks in the form of loans.

* The money that banks lend is not recycled from pre-existing deposits. It is new money, which did not exist until it was lent.

* Thirty percent of the money created by banks with accounting entries is invested for their own accounts.

* The American banking system, which at one time extended productive loans to agriculture and industry, has today become a giant betting machine. By December 2007, an estimated $681 trillion were riding on complex high-risk bets known as derivatives - 10 times the annual output of the entire world economy. These bets are funded by big U.S. banks and are made largely with borrowed money created on a computer screen. Derivatives can be and have been used to manipulate markets, loot businesses, and destroy competitor economies.

* The U.S. federal debt has not been paid off since the days of Andrew Jackson. Only the interest gets paid, while the principal portion continues to grow.

* The federal income tax was instituted specifically to coerce taxpayers to pay the interest due to the banks on the federal debt. If the money supply had been created by the government rather than borrowed from banks that created it, the income tax would have been unnecessary

* Most of the runaway inflation seen in "banana republics" has been caused, not by national governments over-printing money, but by global institutional speculators attacking local currencies and devaluing them on international markets.

* The government can take back the money-issuing power from the banks.

Robert H. Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta, 1934

We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money System. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon.

Graham Towers, Governor of the Bank of Canada from 1935 to 1955

Banks create money. That is what they are for .... The manufacturing process to make money consists of making an entry in a book. That is all.... Each and every time a Bank makes a loan... new Bank credit is created -- brand new money.

Robert B. Anderson, Secretary of the Treasury under Dwight Eisenhower, in an interview in U.S. News and World Report, August 31, 1959

When a bank makes a loan, it simply adds to the borrower's deposit account in the bank by the amount of the loan. The money is not taken front anyone else's deposit; it was not previously paid in to the bank by anyone. It's new money, created by the bank for the use of the borrower.

Michel Chossudovsky, Professor of Economics at the University of Ottawa, during the Asian currency crisis of 1998

Privately held money reserves in the hands of "institutional speculators" far exceed the limited capabilities of the World's central banks. The latter acting individually or collectively are no longer able to fight the tide of speculative activity. Monetary policy is in the hands of private creditors who have the ability to freeze State budgets, paralyze the payments process, thwart the regular disbursement of wages to millions of workers and precipitate the collapse of production and social programmes.

The United States is legally bankrupt, defined in the dictionary as being unable to pay one's debts, being insolvent, or having liabilities in excess of a reasonable market value of assets held.

2005 report by the American Society of Civil Engineers

We need to establish a comprehensive, long-term infrastructure plan. We need to but we can't, because government at every level is broke. If governments everywhere are in debt, who are they in debt to? The answer is that they are in debt to private banks. The "cruel hoax" is that governments are in debt for money created on a computer screen, money they could have created themselves.

Before World War I, two opposing systems of political economy competed for dominance in the United States. One operated out of Wall Street, the New York financial district that came to be the symbol of American finance. Its most important address was 23 Wall Street, known as the "House of Morgan." J. P. Morgan was an agent of powerful British banking interests. The Wizards of Wall Street and the Old World bankers pulling their strings sought to establish a national currency that was based on the "gold standard," one created privately by the financial elite who controlled the gold. The other system dated back to Benjamin Franklin and operated out of Philadelphia, the country's first capital, where the Constitutional Convention was held and Franklin's "Society for Political Inquiries" planned the industrialization and public works that would free the new republic from economic slavery to England. The Philadelphia faction favored a bank on the model established in provincial Pennsylvania, where a state loan office issued and lent money, collected the interest, and returned it to the provincial government to he used in place of taxes. President Abraham Lincoln returned to the colonial system of government-issued money during the Civil War; but he was assassinated, and the bankers reclaimed control of the money machine. The silent coup of the Wall Street faction culminated with the passage of the Federal Reserve Act in 1913.



From Gold to Federal Reserve Notes

In every presidential election between 1872 and 1896, there was a third national party running on a platform of financial reform. Typically organized under the auspices of labor or farmer organizations, these were parties of the people rather than the banks. They included the Populist Party, the Greenback and Greenback Labor Parties, the Labor Reform Party, the Antimonopolist Party, and the Union Labor Party. They advocated expanding the national currency to meet the needs of trade, reform of the banking system, and democratic control of the financial system.

Money reform advocates today tend to argue that the solution to the country's financial woes is to return to the "gold standard," which required that paper money be backed by a certain weight of gold bullion. But to the farmers and laborers who were suffering under its yoke in the 1890s, the gold standard was the problem. They had been there and knew it didn't work. William Jennings Bryan called the bankers' private gold-based money a "cross of gold." There was simply not enough gold available to finance the needs of an expanding economy. The bankers made loans in notes backed by gold and required repayment in notes backed by gold; but the bankers controlled the gold, and its price was subject to manipulation by speculators. Gold's price had increased over the course of the century, while the prices laborers got for their wares had dropped. People short of gold had to borrow from the bankers, who periodically contracted the money supply by calling in loans and raising interest rates. The result was "tight" money - insufficient money to go around. Like in a game of musical chairs, the people who came up short wound up losing their homes to the banks.

The solution of Jacob Coxey and his Industrial Army of destitute unemployed men was to augment the money supply with government-issued United States Notes. Popularly called "Greenbacks," these federal dollars were first issued by President Lincoln when he was faced with usurious interest rates in the 1860s. Lincoln had foiled the bankers by making up the budget shortfall with U.S. Notes that did not accrue interest and did not have to be paid back to the banks. The same sort of debt-free paper money had financed a long period of colonial abundance in the eighteenth century, until King George forbade the colonies from issuing their own currency. The money supply had then shrunk, precipitating a depression that led to the American Revolution.

To remedy the tight-money problem that resulted when the Greenbacks were halted after Lincoln's assassination, Coxey proposed that Congress should increase the money supply with a further $500 million in Greenbacks. This new money would he used to redeem the federal debt and to stimulate the economy by putting the unemployed to work on public projects. The bankers countered that allowing the government to issue money would be dangerously inflationary. What they failed to reveal was that their own paper banknotes were themselves highly inflationary, since the same gold was "lent" many times over, effectively counterfeiting it; and when the bankers lent their paper money to the government, the government wound up heavily in debt for something it could have created itself. But those facts were buried in confusing rhetoric, and the bankers' "gold standard" won the day.

The Greenback Party was later absorbed into the Populist Party, which took up the cause against tight money in the 1890s Like the Greenbackers, the Populists argued that money should be issued by the government rather than by private banks. William Jennings Bryan, the Populists' loquacious leader, gave such a stirring speech at the Democratic convention that he won the Democratic nomination for President

Outgoing President Grover Cleveland was also a Democrat, but he was an agent of J. P. Morgan and the Wall Street banking interests. Cleveland favored money that was issued by the banks, and he backed the bankers' gold standard. Bryan opposed to both. He argued in his winning nomination speech:

We say in our platform that we believe that the right to coin money and issue money is a function of government .... Those who are opposed to this proposition tell us that the issue of paper money is a function of the bank and that the government ought to go out of the banking business. I stand with Jefferson... and tell them, as he did, that the issue of money is a function of the government and that the banks should go out of the governing business .... [W]hen we have restored the money of the Constitution, all other necessary reforms will be possible, and... until that is done there is no reform that can be accomplished.

The Federal Reserve is commonly called the "Fed," confusing it with the U.S. government; but it is actually a private corporation.' It is so private that its stock is not even traded on the stock exchange. The government doesn't own it. You and I can't own it. It is owned by a consortium of private banks, the biggest of which are Citibank and J. P. Morgan Chase Company. These two mega-banks are the financial cornerstones of the empires built by J. P. Morgan and John D. Rockefeller, the "Robber Barons" who orchestrated the Federal Reserve Act in 1913.

Wright Patman, Chairman of the House Banking and Currency Committee, 1960s

When the Federal Reserve writes a check for a government bond it does exactly what any bank does, it creates money, it created money purely and simply by writing a check... The Federal Reserve, in short, is a total money-making machine.

Most money today is created neither by the government nor by the Federal Reserve. Rather, it is created by private commercial banks.

The "money supply" is defined as the entire quantity of bills, coins, loans, credit, and other liquid instruments in a country's economy. "Liquid" instruments are those that are easily convertible into cash. The American money supply is officially divided into M1, M2, and M3. Only M1 is what we usually think of as money - coins, dollar bills, and the money in our checking accounts. M2 is M1 plus savings accounts, money market funds, and other individual or "small" time deposits. (The "money market" is the trade in short-term, low-risk securities, such as certificates of deposit and U.S. Treasury notes.) M3 is M1 and M2 plus institutional and other larger time deposits (including institutional money market funds) and eurodollars (American dollars circulating abroad).

a booklet published by the Chicago Federal Reserve in 1961 and revised in 1992 titled "Modern Money Mechanics: A Workbook on Bank Reserves and Deposit Expansion"

Banks can build up deposits by increasing loans and investments so long as they keep enough currency on hand to redeem whatever amounts the holders of deposits want to convert into currency. This unique attribute of the banking business was discovered many centuries ago.

Trade in seventeenth century Europe was conducted primarily with gold and silver coins. Coins were durable and had value in themselves, but they were hard to transport in bulk and could be stolen if not kept under lock and key. Many people therefore deposited their coins with the goldsmiths who had the strongest safes in town. The goldsmiths issued convenient paper receipts that could be traded in place of the bulkier coins they represented. These receipts were also used when people who needed coins came to the goldsmiths for loans.

The mischief began when the goldsmiths noticed that only about 10 to 20 percent of their receipts came back to be redeemed in gold at any one time. They could safely "lend" the gold in their strongboxes at interest several times over, as long as they kept 10 to 20 percent of the value of their outstanding loans in gold to meet the demand. They thus created "paper money" (receipts for loans of gold) worth several times the gold they actually held. They typically issued notes and made loans in amounts that were four to five times their actual supply of gold. At an interest rate of 20 percent, the same gold lent five times over produced a 100 percent return every year - this on gold the goldsmiths did not actually own and could not legally lend at all! If they were careful not to overextend this "credit," the goldsmiths could thus become quite wealthy without producing anything of value themselves.

... The system was called "fractional reserve" banking because the gold held in reserve was a mere fraction of the banknotes it supported.

All money except coins now comes from banker-created loans, so the only way to get the interest owed on old loans is to take out new loans, continually inflating the money supply; either that, or some borrowers have to default.

Bernard Lietaer helped design the Euro and has written several books on monetary reform

Greed and competition are not a result of immutable human temperament .... Greed and fear of scarcity are in fact being continuously created and amplified as a direct result of the kind of money we are using .... We can produce more than enough food to feed everybody, and there is definitely enough work for everybody in the world, but there is clearly not enough money to pay for it all. The scarcity is in our national currencies. In fact, the job of central banks is to create and maintain that currency scarcity. The direct consequence is that we have to fight with each other in order to survive.

Marriner Eccles, Governor of the Federal Reserve Board, in hearings before the House Committee on Banking and Currency in 1941

If there were no debts in our money system, there wouldn't he any money.

economist John Kenneth Gaibraith wrote in 1975

In numerous years following the [civil] war, the Federal Government ran a heavy surplus. [But] it could not pay off its debt, 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.

The federal debt has been the basis of the U.S. money supply ever since the Civil War, when the National Banking Act authorized private banks to issue their own banknotes backed by government bonds deposited with the U.S. Treasury. When President Clinton announced "the largest budget surplus in history" in 2000, and President Bush predicted a $5.6 trillion surplus by the end of the decade, many people got the impression that the federal debt had been paid off; but this was another illusion. Not only did the $5.6 trillion budget "surplus" never materialize (it was just an optimistic estimate projected over a ten-year period based on an anticipated surplus for the year 2001 that never materialized), but it entirely ignored the principal owing on the federal debt. Like the deluded consumer who makes the minimum monthly interest payment on his credit card bill and calls his credit limit "cash on hand," politicians who speak of "balancing the budget" include in their calculations only the interest on the national debt. By 2000, when President Clinton announced the largest-ever budget surplus, the federal debt had actually topped $5 trillion; and by October 2005, when the largest-ever projected surplus had turned into the largest-ever budget deficit, the federal debt had mushroomed to $8 trillion. M3 was $9.7 trillion the same year, not much more. It is hardly an exaggeration to say that the money supply is the federal debt and cannot exist without it. Commercial loans alone cannot sustain the money supply because they zero out when they get paid back. In order to keep money in the system, some major player has to incur substantial debt that never gets paid back; and this role is played by the federal government.

Nobody even expects the [national] debt to be paid off, because it can't be paid off - at least, it can't while money is created as a debt to private banks. The government doesn't have to pay the principal so long as it keeps "servicing" the debt by paying the interest...

The Massachusetts Assembly [in the 1700s] proposed a new kind of paper money, a "bill of credit" representing the government's "bond" or I.O.U. - its promise to pay tomorrow on a debt incurred today. The paper money of Massachusetts was backed only by the "full faith and credit" of the government.'

Other colonies then followed suit with their own issues of paper money. Some were considered government I.O.U.s, redeemable later in "hard" currency (silver or gold). Other issues were "legal tender" in themselves. Legal tender is money that must legally be accepted in the payment of debts. It is "as good as gold" in trade, without bearing debt or an obligation to redeem the notes in some other form of money later.

Benjamin Franklin

The riches of a country are to be valued by the quantity of labor its inhabitants are able to purchase and not by the quantity of gold and silver they possess."

Benjamin Franklin in 1764, to the directors of the Bank of England who asked him what was responsible for the booming economy of the American colonies

In the colonies we issue our own money. It is called Colonial Scrip. We issue it to pay the government's approved expenses and charities. We make sure it is issued in proper proportions to make the goods pass easily from the producers to the consumers .... In this manner, creating for ourselves our own paper money, we control its purchasing power, and we have no interest to pay to no one. You see, a legitimate government can both spend and lend money into circulation, while banks can only lend significant amounts of their promissory bank notes, for they can neither give away nor spend but a tiny fraction of the money the people need. Thus, when your bankers here in England place money in circulation, there is always a debt principal to he returned and usury to be paid. The result is that you have always too little credit in circulation to give the workers full employment.

You do not have too many workers, you have too little money in circulation, and that which circulates, all bears the endless burden of unpayable debt and usury.

Benjamin Franklin, 1765 - after the Bank of England pushed through the British Parliament the Currency Act of 1764, that made it illegal for the American colonies to print their own money

The poverty [in the American colonies] is caused by the bad influence of the English bankers on the Parliament which has caused in the colonies hatred of the English and... the Revolutionary War. [This, he said, was the real reason for the Revolution] The colonies would gladly have borne the little tax on tea and other matters had it not been that England took away from the colonies their money, which created unemployment and dissatisfaction.

The first act of the new Continental Congress [during the Revolutionary War] was to issue its own paper scrip, popularly called the Continental. Most of the Continentals were issued as i.O.U.s or debts of the revolutionary governments to be redeemed in coinage later." Eventually, 200 million dollars in Continental scrip were issued. By the end of the war, the scrip had been devalued so much that it was essentially worthless; but it still evoked the wonder and admiration of foreign observers, because it allowed the colonists to do something that had never been done before. They succeeded in financing a war against a major power, with virtually no "hard" currency of their own, without taxing the people.

President John Adams

There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.

Nathan Rothschild, who controlled the Bank of England after 1820

I 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.

[English King William III was soon at war with Louis XIV of France [late 17th century]. To finance his war, he borrowed 1.2 million pounds in gold from a group of moneylenders, whose names were to be kept secret. The money was raised by a novel device that is still used by governments today: the lenders would issue a permanent loan on which interest would be paid but the principal portion of the loan would not he repaid. The loan also came with other strings attached. They included:

(1) The lenders were to be granted a charter to establish a Bank of England, which would issue banknotes that would circulate as the national paper currency.

(2) The Bank would create banknotes out of nothing, with only a fraction of them backed by coin. Banknotes created and lent to the government would be backed mainly by government I.O.U.s, which would serve as the "reserves" for creating additional loans to private parties.

(3) Interest of 8 percent would be paid by the government on its loans, marking the birth of the national debt.

(4) The lenders would be allowed to secure payment on the national debt by direct taxation of the people. Taxes were immediately imposed on a whole range of goods to pay the interest owed to the Bank.

The Bank of England has been called "the Mother of Central Banks." It was chartered in 1694 to William Paterson, a Scotsman who had previously lived in Amsterdam" A circular distributed to attract subscribers to the Bank's initial stock offering said, "The Bank bath benefit of interest on all moneys which it, the Bank, creates out of nothing." The negotiation of additional loans caused England's national debt to go from 1.2 million pounds in 1694 to 16 million pounds in 1698. By 1815, the debt was up to 885 million pounds, largely due to the compounding of interest. The lenders not only reaped huge profits, but the indebtedness gave them substantial political leverage.

The Bank's charter gave the force of law to the "fractional reserve" banking scheme that put control of the country's money in a privately owned company. The Bank of England had the legal right to create paper money out of nothing and lend it to the government at interest. It did this by trading its own paper notes for paper bonds representing the government's promise to pay principal and interest back to the Bank - same device used by the U.S. Federal Reserve and other central banks today.

In 1705, [John] Law published a series of pamphlets on trade, money and banking, in which he claimed to have found the true "Philosopher's Stone," referring to a mythical device used by medieval alchemists to turn base material into gold. Paper could be converted into gold, Law said, through the alchemy of paper money. He proposed the creation of a national paper money supply consisting of banknotes redeemable in "specie" (hard currency in the form of gold or silver coins), which would be officially recognized as money. Paper money could be expanded indefinitely and was much cheaper to make than coins. To get public confidence, Law suggested that a certain fraction of gold should be kept on hand for the few people who actually wanted to redeem their notes. The goldsmiths had already established through trial and error that specie could support about ten times its value in paper notes. Thus a bank holding $10 in gold could safely print and lend about $100 in paper money.

Until the twentieth century, banks followed the model of the goldsmiths and literally printed their own supply of notes against their own gold reserves. These were then multiplied many times over on the "fractional reserve" system. The bank's own name was printed on the notes, which were lent to the public and the government. Today, federal governments have taken over the printing; but in most countries the notes are still drawn on private central banks. In the United States, they are printed by the U.S. Bureau of Engraving and Printing at the request of the Federal Reserve, which "buys" them for the cost of printing them and calls them "Federal Reserve Notes. Today, however, there is no goId on "reserve" for which the notes can be redeemed.

In the United States, the usury banks fought for control for two centuries before the Federal Reserve Act established the banks' private monopoly in 1913. Today, the U.S. banking system is not a topic of much debate; but in the nineteenth century, the fight for and against the Bank of the United States defined American politics.

With a Treasury that was completely broke ... [President Abraham Lincoln during the Civil War] authorized the government to issue its own paper fiat money... popularly called "Greenbacks" because they were printed on the back with green ink (a feature the dollar retains today). They were basically just receipts acknowledging work done or goods delivered, which could be traded in the community for an equivalent value of goods or services. The Greenbacks represented man-hours rather than borrowed gold... Over 400 million Greenback dollars were printed and used to pay soldiers and government employees, and to buy supplies for the war.

... Like metal coins, the Greenbacks were permanent money that could continue to circulate in their own right. The Legal Tender Acts of 1862 and 1863 made all the "coins and currency" issued by the U.S. Government "legal tender for all debts, public and private." Government-issued paper notes were made a legal substitute for gold and silver, even for the payment of pre-existing debts.

In the twentieth century, the Legal Tender Statute (31 U.S.C. Section 5103) applied this definition of "legal tender" to Federal Reserve Notes; but it was an evident distortion of the intent of the original Acts, which made only currency issued by the United States Government legal tender. Federal Reserve Notes are issued by the Federal Reserve, a private banking corporation...

New York Times, 1921

If the Nation can issue a dollar bond it can issue a dollar bill. The element that makes the bond good makes the bill good also. The difference between the bond and the bill is that the bond lets the money broker collect twice the amount of the bond and an additional 20%. Whereas the currency, the honest sort provided by the Constitution pays nobody but those who contribute in some useful way. It is absurd to say our Country can issue bonds and cannot issue currency. Both are promises to pay, but one fattens the usurer and the other helps the People.

In 1972, the United States Treasury Department was asked to compute the amount of interest that would have been paid if the $400 million in Greenbacks had been borrowed from the banks [instead of being printed by the U.S. government during the Civil War]. According to the Treasury Department's calculations, in his short tenure Lincoln saved the government a total of $4 billion in interest, just by avoiding this $400 million loan.

The London Times editorial, 1865, about the threat to foreign bankers of the new Greenback system established by Abraham Lincoln during the Civil War

If that mischievous financial policy, which had its origin in the North American Republic, should become indurated down to a fixture, then that Government [the U.S. government] will furnish its own money without cost. It will pay off debts and be without a debt. It will have all the money necessary to carry on its commerce. It will become prosperous beyond precedent in the history of the civilized governments of the world. The brains and the wealth of all countries will go to North America. That government must be destroyed, or it will destroy every monarchy on the globe.'

German Chancellor Otto von Bismarck wrote in 1876

The [U.S.] Government and the nation escaped the plots of the foreign financiers. They [the foreign financiers] understood at once, that the United States would escape their grip. The death of Lincoln was resolved upon. [Lincoln was assassinated in 1865.]

President James Garfield, 1881

Whosoever controls the volume of money in any country is absolute master of all industry and commerce... And when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to he told how periods of inflation and depression originate. [President Garfield was murdered not long after releasing this statement.]

The classical "quantity theory of money" - the foundation of classical monetary theory, it held that inflation is caused by "too much money chasing too few goods." When "demand" (the money available to buy goods) increases faster than "supply" (goods and services), prices are forced up. If the government were allowed to simply issue all the Greenback dollars it needed, the money supply would increase faster than goods and services, and price inflation would result. If paper money were tied to gold, a commodity in limited and fixed supply, the money supply would remain stable and price inflation would be avoided.

A corollary to that theory was the classical maxim that the government should balance its budget at all costs. If it ran short of money, it was supposed to borrow from the bankers rather than print the money it needed, in order to keep from inflating the money supply. The argument was a "straw man" argument - one easily knocked down because it contained a logical fallacy - but the fallacy was not immediately obvious, because the bankers were concealing their hand. The fallacy lay in the assumption that the money the government borrowed from the banks already existed and was merely being recycled. If the bankers themselves were creating the money they lent, the argument collapsed in a heap of straw. The money supply would obviously increase just as much from bank-created money as from government-created money. In either case, it was money pulled out of an empty hat. Money created by the government had the advantage that it would not plunge the taxpayers into debt; and it provided a permanent money supply, one not dependent on higher and higher levels of borrowing to stay afloat.

The quantity theory of money contained another logical fallacy, which was pointed out later by British economist john Maynard Keynes. Adding money ("demand") to the economy would drive up prices only if the "supply" side of the equation remained fixed. If new Greenbacks were used to create new goods and services, supply would increase along with demand, and prices would remain stable... Adding more money to the economy would inflate prices only when the producers ran out of the labor and materials needed to make more goods. Before that, supply and demand would increase together, leaving prices as they were before.

In 1886, corporations were given the rights and privileges of "individuals" although they lacked the morality and the conscience of live human beings. Their sole motive was profit, the sort of single-minded devotion to self-interest that in a live human being would be considered pathological.

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