WEBVTT

NOTE Cartelization of Banking: The Fed

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and the result was the election of Woodrow Wilson, a Democrat, for the first time since Cleveland

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and the Democratic Party all of a sudden gets in because the Republican Party was split wide open

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with the Morgans deliberately destroying Taft and Rockefeller, Rockefeller person, Taft

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paving the way for Wilson himself, who was also a Morgan person

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and when Taft got in, Taft, as I say, was the heir apparent of Teddy Roosevelt

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and first he'd get in as a successor, he'd keep the same people more or less for a while

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So his anti-Morgan policy didn't show up for a while. He had a Morgan guy secretary of state, Philander Knox, who was really a Mellon person, but Mellon from Pittsburgh, but Mellons and Morgans were of course allied.

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He had a Morgan guy secretary of the Treasury, who was on the board of mutual life insurance company, which has always been Morgan, at least was for a long time, probably still is.

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But, but, as Attorney General, before he filed antitrust suits, he had a guy named George W. Wickersham, who was a Wall Street lawyer.

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And he hasn't been studying much, not too much is known about Wickersham.

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But we do know he was on the board of a New York Wall Street lawyer.

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He was on the board of directors of the Interboro Metropolitan Company, which is a big transit holding company.

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Along with him on the board were August Belmont and Rothschild, agent, and a Guggenheim.

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We get to Solomon Guggenheim.

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So my suspicion is that Wittgenheim was essentially a tool of Guggenheim interests.

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We now come to the point where the Guggenheim family has been highly underwritten about, understudied, a very important family that gets prominent around the late 19th, early 20th century.

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The Guggenheim family was especially discovered copper, and there was a German-Jewish peddler, I think, Meyer Guggenheim, the original one, and went to the West and discovered copper.

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And anyway, they wound up, he and his, I think Daniel Guggenheim was sort of the patriarch of the second generation.

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They really owned all the copper in the United States. Every copper company was originally a Guggenheim company.

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These American Smelting and Refining, Kennecon and Anaconda, the three top copper companies were originally Guggenheim-owned.

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They were extremely wealthy, and yet nobody talked much about them. They hadn't been written much about.

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They didn't have a flair of the Lehman Brothers or Kuhn-Loh of the time.

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is extremely important and under-written, under-scholarly, under-studied, very important in really controlling the Wilson administration in many ways, along with Morgan, so an independent group, and we'll see when we get a little bit later on, essentially the control of Bernard Baruch, the absolute czar of World War I, the economic czar,

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and not only was Leon Baruchas, the head of the War Production Board, totally running the whole economy of World War I,

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he was a beloved figure, ran everything, a top presidential advisor until about the late 1940s,

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in other words, for 30 years, this guy was really running the whole country, more or less,

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regardless of the political party of the president, in other words, he was a democrat,

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And he was a powerful advisor to Hoover and to everybody else, and it was everybody, Eisenhower.

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As a matter of fact, when Eisenhower became president in Fall of 52, the first thing he did was give a dinner in honor of Bernard Baruch.

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And he said, everything I owe, I am that I owe to Mr. Baruch. It turns out that he was a major at West Point in the 40s, 30s.

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He was part of the Baruch study group. At the time he was just a major and nobody knew anything about.

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So, I think he was literally true, in other words, I think Eisenhower was essentially a Baruch creation, along with the Morgans and other Wall Street people.

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So here's Baruch, and not only was he a very strange phenomenon, Baruch, because he suddenly, he was unknown, more or less, until World War I, when I say he becomes the economic czar out of the War Production Board,

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with absolute collectivist control over the economy, running production and prices and everything else, in collaboration with big business groups.

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I haven't gotten to World War I yet, but since I'm on Guggenheim, I'm anticipating a little bit.

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The question that always entered my mind when I was growing up was,

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here's this guy who was running everything, he was the advisor to every president.

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Why did he get that powerful? Who the hell was he anyway?

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And the usual answer of orthodox historians is, well, he made a million dollars on the stock market.

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Well, okay, lots of people make a million dollars on the stock market.

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They don't become total czars of the economy and totally beloved by everybody.

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In other words, it was considered impossible for anybody to criticize Baruch.

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In the press, he was above criticism. He would make idiotic pronouncements on a park bench in the New York Times for every word.

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He would sit on a park bench in Central Park. Those days, of course, you didn't get a muggle all the time in Central Park.

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He'd sit on a park bench and issue pronouncements, and he'd make these idiotic statements.

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He'd write books, his autobiography, for example, was a totally worthless autobiography.

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What he'd say in there is, my advice to every young man trying to make a million dollars in the stock market is,

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He said it was very serious because it would pump us ass.

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He'd say, my advice is buy when the stocks are cheap and sell them when they're high.

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Great advice.

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Any moron knows that.

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The question is, when are they going to be cheap and when are they going to be high?

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He didn't tell us that.

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Anyway, how did he get so beloved?

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How did he get so, how did he hold him to power?

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And why did he stay?

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He virtually ran a new deal in many ways.

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He organized a farm block, a whole farm price support program, essentially Baruch creation.

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He seated people in the government. He was always a mentor of various people and got them into power.

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He really ran the NRA and the AAA through his agents.

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So the question is, why was he so powerful? Why was he about criticism?

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And the answer only came out, first of all, there was no biography of Baruch.

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He wouldn't give his papers to anybody. He wouldn't allow anybody to have them.

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He finally got a Margaret Coyte wrote a biography. It was fairly worthless.

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is finally a good biography after all this time. A few years ago there appeared a biography

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by Jonathan Schwartz called Mr. Speculator. Speculator, the story of Bernard Rook. Excellent

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biography, really has a lot of stuff in there, more than he realizes in a sense. It's pretty

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clear from his biography, the Speculator came out a few years ago. It's pretty clear from

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He was a lousy stock market speculator. He lost money every time he invested on the stock market.

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For one thing, he was a big railroad fan and he would invest in railroads heavily.

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He started investing in railroads after 1900 when railroads entered a big secular decline.

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In other words, he started heavily investing in railroads just about the time railroads were punking out as an investment.

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He was a lousy investor. How did he make a lot of money and how did he become the big shot?

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Big Shot, well, he turned out to be a friend and a disciple, a mentee, protege of the Guggenheims, in other words, his father, Dr. Simon Baru, was a Georgia physician, migrated to New York City around 1900, 1890 whatever it was, and became a Big Shot physician, a Park Avenue physician, so to speak, and one of his clients, one of his patients was Daniel Guggenheim, the mentor of Solomon,

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The patriarch of the family at the time, and since the Guggenheims liked him, the Guggenheims

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were immensely wealthy and they took him under their, seemed like a bright young man, took

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him under their wing and gave him the first job at a stock on Wall Street, etc.

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And he became sort of a running fan of the Guggenheims and they would tell him when to

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invest, we're going to invest in such and such a stock, and he'd invest along with

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them.

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Whenever he did that, he made a lot of money.

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When he invested on his own, he lost money.

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That was the key to his stock market assessment, following the Guggenheims and being their

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Potagy and General Angeron.

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So essentially, Baruch was equal Guggenheim.

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In other words, around Baruch, you can say,

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for reference, as Guggenheim, which accounts for his

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bolting to fame.

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As we'll see in a minute, Woodrow Wilson was essentially

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a Guggenheim Morgan person.

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And Cleveland Dodge,

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most of the major industrial mentor,

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head of the Phelps Dodge Company,

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which was a copper, involved in copper, and the whole Guggenheim,

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The Related Ally with Guggenheim

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There's a very revealing thing in the best biography of Herbert Hoover

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one of the best ones by David Berner

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I just mentioned this in passing, it's like a throwaway line, they said

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Hoover was invited to become Secretary of Commerce by Daniel Guggenheim

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and he turned it down

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I stopped, immediately I stopped, you have to be alive for a situation, what is this?

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Why does Guggenheim have the power to offer somebody Secretary of Commerce a cabinet post?

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Who the hell is Guggenheim? It's obvious that Guggenheim has a great power in this administration.

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It's also obvious that it must have been the Wilson administration because there's no other relevant one.

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Hoover was secretary of commerce during the 1920s and became president after that.

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So it must have been the Wilson administration, and therefore it's pretty clear that Guggenheim has a great power,

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obviously through Baruch and also Cleveland Dodge, who's a full pal of Wilsons.

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Anyway, I'll get to that in a minute, but I'm just demonstrating that Guggenheim has a great power.

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My suspicion is that Wickersham is basically a Guggenheim tool, and it was Wickersham who, at Taft's behest,

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started around the second two years of his administration, around 1980, around 1910,

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Taft starts filing, through Wickersham, anti-trust suits against international harvester and U.S. steel,

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or Morgan Trust, in other words, plus I think Allied, Alice Chalmers, another Morgan company.

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Anyway, in other words, we start finding a lot of antitrust suits, so Taft is going to only be interpreted as saying, here's what happened, remember during the Teddy Roosevelt administration we have a savage attempt by the Morganists to smash Rockefeller.

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William Howard Taft, an Ohio Republican, therefore basically in with the Rockefellers, uses Wickersham, I forget, settles in there in 1910, uses Wickersham, Attorney General, to file a whole bunch of antifrust suits against Morgan's company to try to break them up.

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They fail, the Supreme Court threw them out eventually, but the point is, for several years here, for at least the last two years of the Taft administration, there's a constant tax on the Morgan Trusts.

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Other guys I can mention, the Supreme Court Judge, whom TAF makes appoints as member of the Supreme Court with Charles Evans Hughes, who had been with New York, former Governor of New York, who was a lawyer for the Spanish law company in New Jersey.

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So, later in the new deal period becomes the Chief Justice of the Supreme Court, Rockefeller person.

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So, with TAF coming in, we have a retaliatory thrust, retaliatory strike, and attempt to break up Morgan, sold on Morgan using, in other words, the Sherman Act.

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So it has, from 1990 to 1900, the Sherman Act is a dead letter, not being used, nobody cares about it.

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Then, in 1901 or 2002, whenever it occurred, Teddy Roosevelt brings the Sherman Act out of the closet, uses it as a club to smash Standard Oil on behalf of the Morgans.

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And then when Taff gets in, he starts using the antitrust law as a retaliatory club against the Morgans on behalf of the Rockefellers.

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So as this happened, the Morgans, the very powerful Morgans, we act very, very badly on this thing.

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They're very bitter, very PO at this. Not supposed to do this to the Morgans.

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And so the Morgans create a whole new party, third party, the Progressive Party,

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Created out of thin air in 1912, the object of which was a story tasked, tasked of course

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gets the renomination to the incumbent president.

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So they create a new party called the Progressive Party, the secretary treasurer, the head of

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the executive committee I think it's called, but guess who, George W. Perkins, Morgan partner,

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who's also been called secretary of state for the Morgan Empire.

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The Perkins sets up the Progressive Party, brings Teddy Roosevelt out of the closet instead

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Teddy Roosevelt was off in Africa on safari usually in these two years. Teddy Roosevelt was all upset that Taff was attacking Morgan.

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By the way, he says this openly. He says, terrible thing, he's broken my agreement with Morgan's.

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My agreement never to use antitrust against them. Morgan's a good trust and here Taff's daring to break with me and so forth and so on.

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Teddy Roosevelt comes in a comeback, comes back out of retirement and runs for another term, a third term, in 1912, on a progressive party label.

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Interestingly enough, here's the progressive party. Their platform is very progressive in the sense that they're very corporatist.

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All the planks of the National Civic Federation, the idea of government, total regulation of industry, eliminating laissez-faire.

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For example, they call for strong national regulation of corporations.

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Preferably having corporations incorporated by the federal government.

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Anyway, here's what they say.

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We demand a federal commission, such as the Interstate Commerce Commission,

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once again that's being repeated, to attack, quote, unfair competition, unquote,

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and force capitalization, quote, unquote.

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And what does it mean?

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In other words, we need a government bureau to regulate competition,

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regulate all of industry, rather, like the ICC,

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to eliminate unfair competition. What is unfair competition? It's a code word that means competition.

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Unfair competition means competition. It means we have to get rid of competition and have restricted cartelization.

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Unfair means they're cutting prices. That's what it means.

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Forced capitalization, what does that mean? It means too much capitalization. It means to restrict the amount of capital going into industry.

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In other words, to cut production. It's, again, another way of talking about cartelization.

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Again, quoting from the Progressive Party platform. Again, they call it compulsory publicity, an old theme we've been mentioning before that just eliminates secret price-cutting.

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And they said, quote, the Progressive Party platform in 1912, he got more votes than Pat. It became a powerful party for that moment. They scuttled it after the election.

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Quote, thus the businessman will have certain knowledge of the law, the investor will find security for his capital. What does that mean? It means he will restrict the competition.

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That's why they'll find security. Dividends will be rendered more certain. On a such a system of constructive regulation, quoting still, legitimate business freed from confusion, uncertainty and further litigation will develop normally, unquote.

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In other words, what they say in polite language is that we will stabilize the industry, we will cartelize it, there won't be any more competition, there won't be any confusion, uncertainty, we will make the world more secure for businessmen by cartelizing it.

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The progressive party goes on to cite Germany, Bismarck-type Germany, as the ideal example, a model to follow.

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For in Germany, quote, this is not to let these guys from favoring war with Germany, of course, in a couple of two years, but anyway, they cite Germany for their basic policies.

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In Germany, quote, their policy of cooperation between government and business has, in a comparatively few years, made them a leading competitor for the commerce of the world.

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And again, quote, the time has come when the federal government should cooperate with manufacturers and producers in extending our foreign commerce, unquote.

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by the way, you'll find out about, the only way you'll ever find out about what's going on in politics is when, during campaigns, when each party really reveals some of the dirt on the other, on the opposition, both parties usually write, so, at any rate, the, Wilson, of course, also came out for government regulation of reasonable competition and reasonable combinations and all the rest of it, they all now agreed, where Professor Jeremiah Jenckson,

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After the election was over, economist Cornel, one of the prophets of this new economics, said,

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Now the campaign is over, we have to get on with the constructive work of stabilizing the system.

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So, now the progressive party was backed by almost all big businessmen, by a whole bunch of them.

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90% of the Union League club of Chicago, which is the all the top businessmen in Chicago,

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90% backed Teddy Roosevelt in this three-cornered election.

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So it was Teddy Roosevelt and the Progressive Party,

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Taft and the Republican, and Woodrow Wilson, who I'll mention in a minute,

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and the Democrat.

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At any rate, the George W. Perkins, so 90% of the business,

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of the Union League Club of Chicago backing Teddy Roosevelt.

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Two-thirds of the leaders of the Progressive Party,

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two-thirds were big businessmen and big business lawyers,

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and the other third were professionals and educators.

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In other words, everybody in that party was urban, upper middle class or upper class, almost all wasps and almost all republicans or ex-republicans.

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So George W. Perkins really set up the party and Frank, another powerful person, it was Frank Muncie, who was a big newspaper publisher.

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He was heavily invested in Morgan companies and was associated with a Morgan, heavily invested in the U.S. Steel and International Harvester.

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So we have Muncie, who was a Morgan person, and Perkins, who was a Morgan partner, leading the drive for Teddy Roosevelt.

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Let's say two-thirds of the Progressive Party leadership were businessmen.

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And I think I mentioned the fact that the progressive party convention in 1912 was solidly a combination of morgans, pietists, social workers, Jane Addams, only people, technocrats, engineers, historians, economists, all the interventionists, all gathered there.

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and with him singing, him singing, dotting the whole speech. I think I mentioned this, when Teddy Roosevelt gave his keynote address, he deliberately used the Christian-Pliotist imagery.

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He went up in this famous peroration, he went up by saying, we stand in Armageddon and we battle for the Lord, and in between they shout Amen and so forth, and then they sang, Christian hymn, we shall follow, follow, follow, substituting Roosevelt for Jesus.

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So the whole thing was filled with pietist rhetoric and deliberate references to pietist hymns and imagery.

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They had a combination of all these guys.

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Morgans, big businessmen, technocrats, aggressives, social workers and pietists.

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The only big business people who were for task were Old Rich Rockefeller people, of course.

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Senator Old Rich and the Rockefellers.

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and Alan Hugh Root, who for some reason was, listen, Chad, I think he wanted to be president after all, he wanted to get the nomination somehow

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sort of PR for not making him president or whatever, so he personally peed, and Knox stuck with Taff, that's about it

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so in other words, the Progressive Party was organized in order to smash Taff, and I liked Wilson, and this was accomplished

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so then the question is, who was Wilson? Who were his backers? Where did he come from?

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Woodrow Wilson is not one of my favorite people, to say the least, in American history.

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I can't think of anybody I dislike more.

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Combine all the virtues we're talking about, he was a pietist,

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Southern Presbyterian,

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professor, Ph.D., a progressive historian,

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and a political scientist, and imbued with

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not only the idea of saving the soul by saving everybody else, but also saving the world,

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what was in the World War I.

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So, Christianizing the world as well as the country, so to speak.

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His major political, he was president of Princeton for several years and got a lot of trouble at Princeton.

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His major political mentor, until almost the day he was elected, when they had a mysterious split,

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was George Harvey, who was the head of Harper Brothers Publishing Company, and Harper's Weekly magazine.

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By 1906, when he was still president of Princeton, Harvey decided to groom him for president,

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and had a whole thing, a whole campaign, making him governor of New Jersey in 1910, and then getting him nominated in 1912.

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Harvey was a New York City executive, he became president of Harvard, he was also a business executive in general.

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He was closely connected with William C. Whitney and Thomas Fortune Ryan,

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New York, the Morgan-oriented faction magnate, and also Walter Oakman, who was a big Morgan type,

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should be mentioned here, was the president of Guaranteed Trust Company, Morgan's major bank, commercial bank.

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So, he's heavily, heavily hip-deep into Morgan. He's a close friend of Morgan, and in 1900, Morgan owned Harper's Weekly, and Hopper Brothers' publishing company.

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In 1900, it was in bad financial shape, and Morgan asked his old buddy Harvey to become president and take it over and run it, so Harvey and Morgan were very closely allied.

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So we have, in other words, Morgan pushing both Teddy Roosevelt and Wilson, and to say Harvey gets out of favor with Wilson until the end of the 1912, but basically it's still his political mentor until late 1912.

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Another thing that happens was a very peculiar thing about Wilson is that he meets, in 1911, 1912, he's beginning to run for office of president.

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This campaign is gearing up late 1911 and early 1912. He meets Colonel Edward Mandel House, a Texas businessman and politician.

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First of all, as a colonel, and he's always great to me, he's not really as a fake colonel as many Southerners are, he just gave himself the title of colonel.

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The House is a Texas politician, he likes to dabble in Texas politics, and, okay, Texas is an important state, but after all it's not the top state in the Union, and he meets Woodrow Wilson, he wants to be a President Maker, and lots of people like to be President Makers, and he says he's going to help Wilson get elected, okay, and then Wilson asks him, what would you like to do in my administration,

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The House says, I'd like to run your foreign policy, and Wolfson says, okay, and what kind of a thing is that?

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I mean, it seems to me a rational person reading this will stop and say, what in the hell is going on here?

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Meet some colonel from Texas, some fake colonel, and say, yes, yes, you could take over my foreign policy.

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It's very weird. There's no decent biography of the House, even today.

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In other words, very little study.

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His diaries were published by Professor Seymour Yale, but these are just his diaries. He didn't really do anything.

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There's one biography of him in his Texas years and another couple on the Versailles treaty, but there's no real biography of House.

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It's an amazing thing. There's 10,000 American historians, each of which have to get a PhD, so they have to write something, and nobody's done a biography of House.

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It's incredible. Here's a guy who was running the entire foreign policy of the Wilson administration, even though he had no office.

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And he never was a government official. He was just sitting in the White House all the time.

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He was an absolute master of foreign policy. The Secretary of State had no power.

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He was making appointments for Wilson. Almost all of Wilson's cabinet appointments were cleared through the House.

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The House advised him, you pick so-and-so for attorney general, pick so-and-so for postman general.

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And Wilson would listen to him, an abject tool of Colonel House.

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So who the hell was Colonel House to say he was a Texas politician?

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It makes it too weird. There have been all sorts of psychobabble studies of Wilson and House.

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Why is Wilson dominated by house?

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What was the Spangali-like power?

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House out of the Wilson.

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Freud, I think, wrote a study of Wilson and house.

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But none of this stuff, I mean, all of this stuff seems to me meaningless.

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There's no, there's no, there's no real, there's no,

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there's no demonstrable reason why Wilson should have been dominated by house.

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Wilson is a pretty tough character in someone's house.

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And so we have to look for houses with deeper connections here.

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Not only that, but it's now known that House, even though it's supposed to be a loyal tool of Wilson,

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that was his, I'll carry out all of your orders and master it, that sort of thing,

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he's constantly going behind Wilson's back in order to drag us into war on the side of England.

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In other words, he acted almost unofficially as a British agent.

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He would conspire with a British ambassador in the British Secret Service.

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If Wilson was a little bit reluctant to get into the war, as we say, we first will see he finally did,

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House would maneuver with a British, this loyal, behind Wilson's back to force him into it.

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It's a very strange situation, and the state is all some kind of psychobabble. It doesn't fit.

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So who was House? He wasn't just a Texas politician. He was first of all a multi-millionaire.

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His father was the third-largest, third-wealthiest person in Houston, Texas, at the moment.

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He had a lot of cotton land. He was a banker, and he was also a railroad owner.

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He owned the Trinity and Brazos Valley Railroad, an important railroad in Texas,

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in Texas, in which the colonel was the manager, and railroad, of course, means if you hear

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the word railroad, you immediately suspect Morgan by this time. Sure enough, this railroad

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was financed by the old colony trust company of Boston, Boston Financial Entrace, which

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were heavily involved with Morgan, and now have a Morgan connection. Also, House's daughter,

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Mary Gordon Alkencloss, of the famous Alkencloss family, from which Jackie Kennedy-O'Nassos

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Gordon Apacross was a partner, excuse me, a director of the Illinois Central Railroad, which was of course Morgan's.

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We have definite Morgan connections with the Colonel, and it's better if he sounds, of course, he's more amenable to the public,

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because in Texas nobody associated with Morgan as they would have L.A. Uruz, who was a Morgan lawyer.

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So here he comes in, he takes over the government as Wilson gets in.

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Who recommended House to Wilson anyway? How did he get in? He met him through Harvey.

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So we have a Harvey, the Morgan-Harvey House connection.

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In other words, Harvey says, talk to Colonel House, he's listening with his vice on the whole thing.

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Wilson himself, before he became president, was a...

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Before we get to the words themselves, there are other key advisers of Wilson, in addition to Colonel House and George Harvey,

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Cleveland Dodge, I already mentioned, was a post-Dodge copper magnate, in with Guggenheims and Morgans,

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and George Peabody, who was a New York City banker, and I've already mentioned this, Peabody came from an old Boston family.

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One of the Peabody family was a partner of Morgan's father, a partner way back in the mid-19th century,

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Junius Morgan Banker was a partner of the same bank as George Peabody as one of his ancestors,

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and another Peabody was the best man at J.P. Morgan's wedding.

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If you were not a high school chum of Morgan and Rockefeller, it would be a good thing to be the best man at his wedding.

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Anyway, we have a very strong, Peabody was definitely a Morgan person, Dodge was sort of Morgan Guggenheim, both, I would say, in that area,

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and House was probably Morgan, Harvey was Morgan, so here's Wilson is surrounded by Morgan people.

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Now, Wilson, before he becomes president, was on the board of directors of two companies, he was a scholar and all that stuff,

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he was also a member of the boards, he was a member of the board of the Carnegie Foundation,

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and also a member of the Board of Mutual Life Insurance Company, which is a Morgan company, Morgan's top life insurance company.

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So, here we see Woodrow Wilson, academic, Ph.D., the only Ph.D. who has ever become president, a total disaster, watch out for Ph.D.s running for office.

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Ph.D., professor and Morgan tool, and also in with the Guggenhans.

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So what was his cabinet when Wilson gets in?

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Let's say Wilson gets in, he squeaks in because Teddy Roosevelt split the Republican vote.

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And by the way, when Wilson was re-elected in 1916, he just beat out Charles Evans Hughes, the Rockefeller person for president, by a real squeaker.

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I mean, Republicans almost won, even though Wilson was still president.

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So what's the Wilson cabinet like?

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Well, he has to make William Jennings Bryan Secretary of State, and he has to do that, because Bryan is so loud.

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Bryan shifted from Cham Clark, who was a progressive Democrat from Missouri, from Missouri.

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The last ballader, throws his support to Wilson. This was obviously a deal that was made. Bryan gets to be Secretary of State.

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So Wilson had to do that. Bryan doesn't have much power as Secretary of State anyway.

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Anyway, House is running the whole thing from one of the unofficial Oval Office, so to speak.

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And he makes the Secretary of Treasury, which is more important for economic affairs.

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Secretary of Treasury, very interesting guy, William Gibbs McAdoo.

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Now McAdoo is from New York City and most historians said, well, he was sort of just a regular progressive or something, baloney.

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In 1922 was the president of the Hudson Manhattan Railroad, which used to run the tubes from New York to New Jersey, the Hudson tubes, it was originally called the Hudson and Manhattan Railroad, it was a very big railroad, a $120 million capitalization, which was very big in that period, one of the 12th largest companies or something like that in the country, it was in the top 100 anyway, top 100, fortune 100. So who was running the Hudson Manhattan Railroad? Well, the Hudson Manhattan Railroad

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McAdoo was president for many years. It almost went bankrupt around 1900.

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And to save it from bankruptcy, he turned to his buddy, J.P. Morgan, himself.

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And Morgan said, okay, my son, I will bail you out.

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In return for which, the entire court, the entire office, all the officers in the court, wherever, were Morgan people, top Morgan people.

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Vice Presidents, which this guy Oakland already mentioned,

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who was the president of Guaranteed Trust Company, which is the Morgan, the major Morgan commercial bank, Guaranteed Trust.

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Right now they have a Morgan Guaranteed, JP Morgan merged with Guaranteed Trust and it's now Morgan Guaranteed Trust.

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The other Vice President, Edward Converse, who was the president of Bankers Trust Company, which Morgan set up in 1900, 1901,

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to do the trust business, you know, the whole trust instruments, a modern instrument.

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The two vice presidents of Hussein and Hens, who were both top Morgan people, not just secondary Morgan people, but top people,

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Oakman and Converse, and other directors included Judge Gary, head of USTO, top Morgan person,

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Frederick Jennings, partner of Stetson, Jennings & Russell, the Top Morgan Law Firm, remember

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Francis Lynn Stetson Jennings was the partner of his, and so on down the line, a whole bunch

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of people, Vice President of Guaranteed Trust, the guy who was the brother-in-law of George

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Baker, head of the first bank in New York, the first national bank in New York, which

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was the Top Morgan Bank, along with Guaranteed Trust. So he had the whole thing, the whole,

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Murray Director was a top Morgan person. So when he becomes Secretary of Treasury,

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McAdoo very quickly cements his position by marrying the daughter of Woodrow Wilson.

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He becomes the son-in-law of Wilson. Later on, and during the war, he becomes the head of the Nationalized Railroad System.

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And he also becomes, by the way, in the 1920s, he almost becomes a Democratic nominee for president in 1924,

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The Ku Klux Klan ticket. This time he moved to Alabama and the Ku Klux Klan was all in favor of him. Why were they all in favor? Because he was a piousist.

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He was in favor of prohibition, they were crushing Catholics and all the rest of the stuff, which we now...

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The Ku Klux Klan, you have to realize, is not just anti-black and anti-Semitic, it was also anti-Catholic, a key thing in 1920.

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It was very powerful in 1920, not only in the South, but also in the North.

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In Oregon, Indiana, New Jersey, places like that, an anti-Catholic ticket, an anti-Catholic plank.

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That's one. So in 1924, that was funny because the run for Democratic Party nomination, skipping ahead here of course, but the 24th for Democratic ticket, we have McAdoo running as a Southern on the Ku Klux Klan ticket,

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progressive Morgan's Ku Klux Klan ticket, running against there's Alfred E. Smith, governor of New York, an Irish Roman Catholic, and the convention took place in New York City.

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All these Southern Baptists and Methodists are coming up thinking that the Jesuits are going to nice them at any moment from behind the Aurochs.

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So they're coming up. H.L. Mencken has a wonderful description of the convention. It was very hot. No air conditioning, I remember.

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It took them 104 ballots. It took them two or three weeks of voting. Imagine the hysteria here. It was very hot. 100 degree heat every day.

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with packed crowds and nobody can breathe in this thing, very hot, and a fantastic struggle between Southern piouses and Irish Catholics in New York.

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Neither of them gets it and the so-called compromise candidate wins in the last minute.

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The 104th ballot, now you're lucky if you go to two ballots for presidential nomination.

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On the 104th ballot, John W. Davis, the compromise candidate, who is going to be Davis?

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Morgan partner, Morgan lawyer, top lawyer from J.P. Morgan Company, candidate, so you're right.

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Leaping ahead, that's okay, it shows you how all these things have a continuity in this whole business.

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Everybody else, the whole cabinet is specially selected by Colonel House.

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McReynolds from Tennessee, the Attorney General, Franklin Lane from California, the Secretary of the Interior, he was a pro-shipper, the interesting thing about him is he was a San Francisco shipper.

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What's happening now, by the way, in the railroad industry is that shippers are beginning to take over the Interstate Commerce Commission.

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The railroads have been running it until about 1900, and as shippers, in other words, the people with low freight rates are beginning to take over.

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Franklin Lane was one of the people, had been a member of the ICC, and in other words, the ICC is now flipping out of railroad control into the control of the shippers, and so the ICC is beginning to look around for other ways of cartelizing the system.

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Postmaster General selected by Colonel House, Secretary of Navy selected by Colonel House, Secretary of Agriculture is also, Secretary of Agriculture is essentially David Houston, who was a Texas person, even though he came from Missouri, he was originally president of the University of Texas, president of Texas A&M, selected by Colonel House, and of course therefore in with House.

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The Secretary of Commerce was supposed to be a Rockefeller person. He was the trustee of William Redfield, the trustee of Equitable Life Insurance Company. He was the sort of Rockefeller, Rockefeller-ee.

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And the Secretary of Labor, which was a new post, had made a separate department, and I was a union official, the first union official, I would have been a cabinet member.

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William Ludwig of Pennsylvania had been Secretary of Treasury of the United Mine Workers, was nominated by Gompers. They asked Gompers to do it. He wouldn't do it. He collected.

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So that's the AFL post that they're laboring, shows a tie-in of the corporatism with laboring unions.

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The ambassador to Great Britain becomes very important in getting us into the war.

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Walter Hines Page was a Virginia newspaper man, old friend of Wilson and virtually a British agent,

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as if he were a British agent to put it that way.

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is a very wealthy and vice president of a double day company, his salary was especially paid for by Cleveland Dodges, a special subsidy, and no doubt in with a Morgan interest, he was also a tool to own a house and he was selected by a house once again,

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And so Hans and Page formed a team to get us into the war, so I'm skipping ahead a little bit essentially. World War I, I consider World War I the most important event of the 20th century, the most important political event, it's the term of everything ever since. Everything, everything that's happened in world affairs and foreign policy in 20th century is the result of World War I, the result of the whole, so we deal a little bit with that either today or next time. And as a matter of fact, in SS-104,

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The two major events of the Wilson administration, before the war that is, both happening in 1913, as soon as he gets in, he starts pushing these things.

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Two major things he does is he puts in an interstate commerce commission for industry, in other words, he finally achieves the agitation, achieves the goals set by the National Civic Corporation, all these guys for 14 years, he achieves a federal trade commission, puts it in in 1913, to do for industry what the ICC had done for Mayor Rose, what the Department of Agriculture had done for agriculture, etc. etc.

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The Federal Trade Commission has also changed the whole banking system by putting in a Federal Reserve system, nationalizing the banking system, creating a national engine for inflation supported by the federal government.

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Those were the two major events before the war in 1913, which Wilson immediately drives through.

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The Federal Trade Commission is driven for by all these people we've been talking about,

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all the Morgan types, all in actual civic federation.

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What they do is they outlaw unfair competition, have a Federal Trade Commission to regulate

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industry and all that.

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One of the main people who helped write the legislation, in other words, was actually

354
00:39:39.300 --> 00:39:58.300
Arthur Eddy, a big shot Chicago corporate lawyer, wrote a book called The New Competition in 1912 and many editions, five or six editions in the last few years.

355
00:39:58.300 --> 00:40:28.300
It's a very interesting book, I read this book, I got a whole lot of copies, and remember, he was one of the writers, the author of the Federal Trade Commission Act, and he said, the slogan, and he also was a specialist in creating trade associations, creating cartelizing devices in industry, which would set quotas, you know, increase prices and cut production, and he writes in this book, he says, the slogan on trade,

356
00:40:28.300 --> 00:40:31.300
At the top of the book, in other words, he starts off by writing a new competition.

357
00:40:31.300 --> 00:40:35.300
The slogan has a slogan. It says, competition is war and war is hell.

358
00:40:35.300 --> 00:40:39.300
That's the scene of his life. In other words, therefore, he can get rid of competition.

359
00:40:39.300 --> 00:40:44.300
And he says, we have to have more trade associations, more cartels.

360
00:40:44.300 --> 00:40:50.300
We have to repeal the Sherman Act, pass a federal licensing law, which would organize cartels directly,

361
00:40:50.300 --> 00:40:55.300
set up a federal trade commission toward that end, and enforce it.

362
00:40:55.300 --> 00:41:01.300
have the government enforce price agreements to keep prices up, production agreements to cut production

363
00:41:01.300 --> 00:41:07.300
This is of course what Mussolini did later, in other words after World War I, Mussolini adopts this policy

364
00:41:07.300 --> 00:41:11.300
fascist economic policy known as the corporate state

365
00:41:11.300 --> 00:41:19.300
which essentially adopts the Morgan Rockefeller type, Rothbard type corporatism

366
00:41:19.300 --> 00:41:36.300
and organize all the Italian industry into associations, creating unions that represent labor, workers, industry associations that represent industry and have the government enforce the whole thing and set up these agreements to regulate production and prices.

367
00:41:36.300 --> 00:41:43.500
and the Roman Catholic Church in the 1920s was quite friendly to this idea, I guess it

368
00:41:43.500 --> 00:41:49.820
would cure it and eliminate class conflict by having it culminate through corporatism

369
00:41:49.820 --> 00:41:50.820
to a corporate state.

370
00:41:50.820 --> 00:41:56.620
The Dolfus regime in Austria in the 1930s was essentially a fascist or corporate state

371
00:41:56.620 --> 00:42:03.540
concept in many countries in Eastern Europe and also of course the Nazi regime took over

372
00:42:03.540 --> 00:42:12.540
He says, for example, competition is selfish unless you are placed by cooperation.

373
00:42:12.540 --> 00:42:14.540
When he meant by cooperation, of course, it's cartels.

374
00:42:14.540 --> 00:42:19.540
Competition is a terrible thing. It destroys, destructs, destabilizes prices.

375
00:42:19.540 --> 00:42:22.540
Prices have a fall with competition.

376
00:42:22.540 --> 00:42:26.540
Stabilizing prices in other terms is a code word for keeping prices up.

377
00:42:26.540 --> 00:42:32.540
It's like Bush, by the way. Bush comes in and has a nerve to call for or tax cheaper oil.

378
00:42:32.540 --> 00:43:01.540
and Bush being as a Texas oil man, of course, his father was a Texas oil man, he comes from Connecticut, a preppy, he's a Texas oil man, so he's worried about the tiger oil, it's finally cheap at long last, the first time since 1972, so competition says that he's inhuman and erratic and so forth and so on, and he said, there's another great question,

379
00:43:02.540 --> 00:43:32.540
from Eddie. Competition free and unfettered is absolutely destructive to all stability of prices. Prices can't be kept up. Before the interstate commerce law, regulating railway rates competition reigned. To a certain extent, the railroads from time to time cooperated to control conditions by pools and associations, in a sense it was sort of summing up the terms so forth. But not until the government stepped in and called a halt to vicious competition, where railroads

380
00:43:32.540 --> 00:43:35.540
The rates regulated in any permanent manner are unclosed.

381
00:43:35.540 --> 00:43:37.540
So he's actually summing up what I've been talking about.

382
00:43:37.540 --> 00:43:39.540
In other words, here we have competition.

383
00:43:39.540 --> 00:43:41.540
Businesses that don't like competition, they turn to the government.

384
00:43:41.540 --> 00:43:44.540
They try to achieve monopoly prices or cartel prices in the free market.

385
00:43:44.540 --> 00:43:46.540
It doesn't work. They turn to the government,

386
00:43:46.540 --> 00:43:48.540
the federal government particularly, to do it for them

387
00:43:48.540 --> 00:43:52.540
in the name of something else, the name of democracy or whatever.

388
00:43:52.540 --> 00:43:56.540
So then he says we have to have legislation to do for general business

389
00:43:56.540 --> 00:43:58.540
with the ICC, just in the railroad.

390
00:43:58.540 --> 00:44:13.540
And he says he likes the, as far as the socialist goes, he likes the philosophical socialist writers, as he calls them, who are not Marxists, who are in favor of the trust as a forerunner of socialists.

391
00:44:13.540 --> 00:44:17.540
He likes that. It's good to have government-regulated trusts that can work with them.

392
00:44:17.540 --> 00:44:23.540
These are so-called right-wing socialists in this period, who are pro-state.

393
00:44:23.540 --> 00:44:29.940
The thing about the left-wing socialists, Marcus Leninists, they tend to oppose the government and all the existing governments.

394
00:44:29.940 --> 00:44:36.940
The right-wing socialists would work happily with the cooperative left-wing opposition,

395
00:44:36.940 --> 00:44:40.940
His Majesty's loyal opposition, they call them, Her Majesty's loyal opposition.

396
00:44:40.940 --> 00:44:46.940
So that's okay to have that, as long as you don't break up this happy, harmonious setup.

397
00:44:46.940 --> 00:44:52.940
The only class in the country that benefits from free competition, I like this as a marvelous statement,

398
00:44:52.940 --> 00:44:57.240
The only class in the country that benefits from free competition are the non-producers who have fixed income.

399
00:44:57.240 --> 00:45:00.840
Who are we talking about? We're talking about us. We're talking about consumers.

400
00:45:00.840 --> 00:45:07.940
We're talking about the people who benefit. People who benefit from love prices. Every one of us, the consumers.

401
00:45:07.940 --> 00:45:11.840
He says of the class small numbers. I question that.

402
00:45:11.840 --> 00:45:17.840
Anyway, after the Federal Trade Commission Act was passed in 1913, he writes several editions of his book.

403
00:45:17.840 --> 00:45:31.840
In 1915 he writes another edition, a fourth edition, and he says he hails the Federal Trade Commission as a good step forward because it outlaws unfair methods of competition.

404
00:45:31.840 --> 00:45:35.840
It's going to end cutthroat competition, it's another code word for competition.

405
00:45:35.840 --> 00:45:39.840
And also he says it's going to lead to resale price maintenance, a fair trade.

406
00:45:39.840 --> 00:45:44.840
It allows the government to set up minimum price regulations for industry, which is something he did for retail.

407
00:45:44.840 --> 00:45:54.840
They finally did it in 1930, the Robertson-Patman Act, which for a long time enforced legal price minima for products.

408
00:45:54.840 --> 00:46:02.840
In other words, if you charge less than $10 for a bottle of vitamins, you're declared illegal, things like that.

409
00:46:02.840 --> 00:46:08.840
The Supreme Court only declared this unconstitutional in about 1970 or late 60s or something.

410
00:46:08.840 --> 00:46:19.840
So for many years, about four decades, this sort of doctrine prevailed to benefit the organized retailers at the expense of the public.

411
00:46:19.840 --> 00:46:30.840
In other words, to cartelize the retail industry and keep prices up. It's called resale price maintenance. Great term. Terms are always pretty shrewd.

412
00:46:30.840 --> 00:46:44.840
So the Federal Trade Commission Act paves the way for that. It's the first step, resale price maintenance, and also to eliminate possible unfair competition.

413
00:46:44.840 --> 00:46:58.840
So almost all business groups, when the Federal Trade Commission was being passed, loved it. They said, this is great stuff, it's going to regulate industry, it's going to stabilize the system and so forth and so on.

414
00:46:58.840 --> 00:47:08.840
Two people, two lawyers, who played a very prominent role in setting up the Federal Trade Commission, Victor Morowitz, who was a Morgan lawyer,

415
00:47:08.840 --> 00:47:16.840
actions in the Pica and Santa Fe lawyer, and Francis Lynn Stuxum, I mentioned many times in this course, a powerful figure, and Morgan's pop attorney,

416
00:47:16.840 --> 00:47:27.840
attorney for J.P. Morgan and Company, J.P. Morgan personally, Cleveland's, Wilbur Cleveland's law partner, who pops up constantly in this whole period,

417
00:47:27.840 --> 00:47:45.840
Francis Lynn Stutz and Morgan's lawyer. They essentially wrote the, these two guys mainly wrote the Federal Trade Commission Act. Also helped by George W. Perkins, Morgan Partner, Morgan himself, Belmont Gompers, James W. Jencks, Cornell University professor, all these guys are in on this.

418
00:47:45.840 --> 00:47:56.600
Finally comes to fruition under Wilson. Also, when the FTC was passed, business groups

419
00:47:56.600 --> 00:48:00.960
hailed it, the Chicago Association of Commerce praised it, the National Chamber of Commerce.

420
00:48:00.960 --> 00:48:06.440
By the way, the U.S. Chamber of Commerce, interesting little fact, was created by President

421
00:48:06.440 --> 00:48:12.560
Taft just before he retired from office. In late 1912, he said, we need an organization

422
00:48:12.560 --> 00:48:19.560
And businessmen will speak for business. So essentially he promoted this and it came into being as a result of government encouragement.

423
00:48:19.560 --> 00:48:26.560
So the Chamber of Commerce, of course, loved this. New York State Chamber of Commerce loved it.

424
00:48:26.560 --> 00:48:33.560
The National Association of Manufacturers, which had traditionally been a laissez-faire after, was split. They were not sure. They were ambiguous on this.

425
00:48:33.560 --> 00:48:38.560
But everybody else, of course the National Civic Federation loved it. Chamber of Commerce loved it.

426
00:48:38.560 --> 00:48:53.560
The question is, we have to always assess the so-called Ralph Nader myth, that all these things were set up by progressive anti-business forces and then the businessmen took it over later.

427
00:48:53.560 --> 00:48:58.560
Who wrote it? We've already seen who wrote it, Marlott, Stetson, Eddy and these people.

428
00:48:58.560 --> 00:49:04.560
Who became members of the Federal Trade Commission? Five-man commission. Who's running it from the very beginning?

429
00:49:04.560 --> 00:49:13.560
Well, the key figure, the chairman, rather, was Joseph E. Davies, who was a young democratic leader,

430
00:49:13.560 --> 00:49:19.560
I think life insurance lawyer at Madison, Wisconsin, who punked out after a very short period of time.

431
00:49:19.560 --> 00:49:26.560
He really wasn't, he was more interested in foreign affairs, and he was interested very soon in getting us into war,

432
00:49:26.560 --> 00:49:29.560
and so he sort of more or less left the commission, he was sort of the figurehead.

433
00:49:29.560 --> 00:49:44.560
Joseph E. Davies had been head of the Bureau of Corporations, which we saw was the Teddy Roosevelt creation, the predecessor to the Federal Trade Commission, for the beginning of it, obviously sympathetic to this whole concept.

434
00:49:44.560 --> 00:49:51.560
Joseph Salerno, Walter Block, Joseph Salerno, Roger Garrison, Hans-Hermann Hoppe, Joseph Salerno, Walter Block, Lew Rockwell, Roger Garrison, Mises Institute, Human Action, Man Economy and State, The Theory of Money and Credit

435
00:50:14.560 --> 00:50:27.560
We have to realize that Thomas W. Lamont, Morgan's partner, a very powerful Morgan partner, later on, actually started this in World War I, II.

436
00:50:27.560 --> 00:50:33.560
It was pushing the idea that Russia was a great democratic country in World War II.

437
00:50:33.560 --> 00:50:38.560
He was not a communist, he was just a Morgan person.

438
00:50:38.560 --> 00:50:48.560
At any rate, the real head of the Federal Trade Commission was the Vice Chairman, as I say, Joe Davies quickly essentially became inactive.

439
00:50:48.560 --> 00:50:58.560
So the Vice Chairman had the key role, he was Edward Hurley, he was head of the Illinois Manufacturers Association, later became head of the Nationalized Railroads in World War I.

440
00:50:58.560 --> 00:51:05.560
He was the vice-chairman and he was the president of Illinois Manufacturing Association

441
00:51:06.560 --> 00:51:10.560
And really running the thing in the first few years

442
00:51:11.560 --> 00:51:17.560
He was the founder of the pneumatic tool industry, he was an important Chicago manufacturer

443
00:51:20.560 --> 00:51:23.560
So he gave a lot of very interesting speeches as he was running the thing

444
00:51:23.560 --> 00:51:27.560
And he was praised overwhelmingly by businessmen, he loved them in return

445
00:51:28.560 --> 00:51:32.560
So, for example, I'll give you a couple of good quotes from Hurley.

446
00:51:32.560 --> 00:51:38.560
He addressed the Association of National Advertisers in December of 1915.

447
00:51:38.560 --> 00:51:41.560
And he said, quote,

448
00:51:41.560 --> 00:51:46.560
Through a period of years, the government has been gradually extending its machinery of helpfulness.

449
00:51:46.560 --> 00:51:49.560
I like that. Machinery of helpfulness.

450
00:51:49.560 --> 00:51:55.560
Railroads and shippers, he said, have the ICC. It's the same theme with Eddie, and the old guys say more or less the same thing.

451
00:51:55.560 --> 00:52:01.560
President Shipper has had the ICC for many years, the Interstate Commerce Commission, the bankers have the Federal Reserve System, which we'll get to in a minute.

452
00:52:01.560 --> 00:52:07.560
The farmers have the Department of Agriculture. General business needs to have something done for them.

453
00:52:07.560 --> 00:52:17.560
So quote from Hurley, to do for general business that which these other agencies do for the groups to which I refer, none of these guys can write very well, anyway,

454
00:52:17.560 --> 00:52:22.560
to do for the groups to which I refer was the thought behind the creation of the Trade Commission.

455
00:52:22.560 --> 00:52:25.560
Wilson fully supported Hurley on this.

456
00:52:25.560 --> 00:52:28.560
Wilson would send messages to Hurley saying, you're doing a great job, I agree with what he was saying.

457
00:52:28.560 --> 00:52:32.560
Also, one of the things he would do is, Hoover did the same thing.

458
00:52:32.560 --> 00:52:35.560
Hurley would write a speech for Wilson praising Hurley.

459
00:52:35.560 --> 00:52:38.560
In other words, Hurley would write the speech saying,

460
00:52:38.560 --> 00:52:41.560
Ed Hurley is doing a great job, and Wilson would then deliver the speech.

461
00:52:41.560 --> 00:52:44.560
During World War I, Hoover did the same. He would write a speech for Wilson saying,

462
00:52:44.560 --> 00:52:47.560
Hoover is doing a great job.

463
00:52:47.560 --> 00:52:51.560
Anyway, if you want to get endorsed by the President, write the endorsement yourself.

464
00:52:51.560 --> 00:53:04.560
At least if you're Hurley or Hoover. He also addressed the National Industrial Conference Board, which is a group that still exists, of course, which is a group set up by business to bring statistical information to bear on government planning.

465
00:53:04.560 --> 00:53:17.560
And he said, it's kind of cute, he said this in July 16, he says, I don't know anything about the law. And that applies to the Clayton Act and the Federal Trade Commission Act, in other words, he doesn't know anything about the law which he was administering.

466
00:53:17.560 --> 00:53:21.560
In my position on the Federal Trade Commission, I'm there as a businessman.

467
00:53:21.560 --> 00:53:25.560
When I was offered a place, I told the President all I knew was business.

468
00:53:25.560 --> 00:53:28.560
I knew nothing about the new laws nor the old ones.

469
00:53:28.560 --> 00:53:32.560
And I would apply the force that I might have in the interest of business.

470
00:53:32.560 --> 00:53:37.560
I think that the businessman in this country will bear me out when I say that I try to work only in the interest of business.

471
00:53:37.560 --> 00:53:43.560
And nobody would make that kind of a flat statement nowadays when people are more public relations oriented.

472
00:53:43.560 --> 00:53:52.560
But here he's flat out, that's what he's doing. So big businessmen, they loved Hurley, they loved the Federal Trade Commission, they loved to be regulated.

473
00:53:52.560 --> 00:54:00.560
In other words, one of the themes of this course, one of the basic themes is that it's thought by most people, I think, that businessmen are always in favor of laissez-faire, always against government intervention.

474
00:54:00.560 --> 00:54:07.560
Ain't true. It certainly is not true in this whole period from 1900 on, from the late 19th century on.

475
00:54:07.560 --> 00:54:12.560
Quite the opposite. The drive of these business owners is to try to create government as a cartilaging device.

476
00:54:12.560 --> 00:54:19.560
The government would come in there, regulate, restrict, control, limit competition, and raise profits.

477
00:54:19.560 --> 00:54:25.560
So, Wilkinson himself was in favor of this kind of price-fixing thing.

478
00:54:25.560 --> 00:54:28.560
Wilkinson gave a speech also in 1916 where he said,

479
00:54:28.560 --> 00:54:31.560
The Federal Trade Commission has transformed the government of the United States

480
00:54:31.560 --> 00:54:34.560
from being an antagonist of business into being a friend of business.

481
00:54:34.560 --> 00:54:38.560
The only thing is, it had never really been an antagonist, at any rate.

482
00:54:38.560 --> 00:54:43.560
Other people on the Federal Trade Commission, the other three people, Davies and Hurley,

483
00:54:43.560 --> 00:54:51.560
George Rubly, who was a big shot in the Progressive Party in 1912,

484
00:54:51.560 --> 00:54:54.560
and also a lobbyist in the United States Chamber of Commerce,

485
00:54:54.560 --> 00:54:57.560
who was a top official in the U.S. Chamber of Commerce,

486
00:54:57.560 --> 00:55:09.560
A Wall Street lawyer, and a friend for many years of Victor Morowitz, Morgan's lawyer, Dwight Morrow, was a Morgan partner.

487
00:55:09.560 --> 00:55:12.560
By the way, there are several key Morgan partners I should mention now.

488
00:55:12.560 --> 00:55:15.560
As Morgan is getting older, of course, his son also comes in.

489
00:55:15.560 --> 00:55:19.560
They have the key Morgan partner so far, Perkins, of course, we know about.

490
00:55:19.560 --> 00:55:22.560
We're going to go to Perkins and Morgan's partner.

491
00:55:22.560 --> 00:55:26.560
There's Robert Bacon, Morgan's partner, with Secretary of State.

492
00:55:26.560 --> 00:55:56.560
There's Thomas W. Lamont, one of my partners, there's White Morrow, who's the father-in-law of Charles Lindbergh, and Anne Morrow Lindbergh married Charles Lindbergh, who was the daughter of White Morrow, and there's Henry P. Davison, we'll see in a minute, and Willard Strait, who comes out of the State Department, and Thomas W. Lamont,

493
00:55:56.560 --> 00:56:07.560
These are the Morgan partners that are important in politics. I'm not concerned with the straight Morgan partners, a whole bunch of them who are doing other things in politics and merging.

494
00:56:07.560 --> 00:56:21.560
Well, they're straight, comes out of the State Department, becomes a Morgan partner, sets up, this is very interesting, I think it's to symbolize the alliance between government and progressive Morgan people and progressive intellectuals, socialistic or progressive intellectuals.

495
00:56:21.560 --> 00:56:28.560
They decided to set up a new magazine, a weekly magazine, to promote liberal and progressive ideas, progressive meaning status and corporatism.

496
00:56:28.560 --> 00:56:35.560
So they set up a new republic, owned by Willard Strait, also Willard Strait, in addition to being more important,

497
00:56:35.560 --> 00:56:43.560
had the advantage of marrying a very wealthy woman who was a Whitney heiress, Dorothy Whitney, who was the daughter of the top Whitney people,

498
00:56:43.560 --> 00:56:49.560
so Whitney being Morgan and Rockefeller connected, Pratt Whitney connected.

499
00:56:49.560 --> 00:56:52.060
He starts off with a lot of money from his wife, Dorothy.

500
00:56:52.060 --> 00:56:57.060
If you want to be successful in life, marry a rich heiress.

501
00:56:57.060 --> 00:56:58.560
That was a good route.

502
00:56:58.560 --> 00:57:04.560
But anyway, he uses Dorothy's straight money and sets up The New Republic,

503
00:57:04.560 --> 00:57:09.060
which sets up as editors three of the top corporatist, corporate state,

504
00:57:09.060 --> 00:57:13.060
neo-fascist, proto-fascist intellectuals of the country, to edit this.

505
00:57:13.060 --> 00:57:16.560
It's still around, of course, The New Republic.

506
00:57:16.560 --> 00:57:22.560
and they, when we entered World War I, they were the major people pushing for the war effort

507
00:57:22.560 --> 00:57:26.560
the three editors were, the major editor was Herbert W. Crowley

508
00:57:26.560 --> 00:57:30.560
one of my least favorite people

509
00:57:30.560 --> 00:57:36.560
this whole character is a big shot intellectual, he was a Hamiltonian, constantly wrote arctic books

510
00:57:36.560 --> 00:57:40.560
famous book called The New Nationalism, he was a big pal of Teddy Roosevelt

511
00:57:40.560 --> 00:57:48.360
applying Teddy Roosevelt's intellectual ammunition in favor of big state, strong state, executive tyranny,

512
00:57:48.360 --> 00:57:56.360
Hamilton is against Jefferson, against individual liberty, between market, and on and on, in favor of corporatism and the whole bit

513
00:57:56.360 --> 00:58:03.360
in favor of war, in favor of strong state, I think in favor of eugenics too

514
00:58:03.360 --> 00:58:19.360
When his father was a Saint-Simonian, it gets real technical, it goes back to the French socialist, fascist socialist, intellectual Saint-Simon, who believed in the socialist, who believed in dictatorship by the elite, especially bankers.

515
00:58:19.360 --> 00:58:25.360
So the banker socialist was associated beautifully with Morgan, why not?

516
00:58:25.360 --> 00:58:32.360
By the way, one of the top socialist intellectuals in this country, the famous Charles Steinmetz,

517
00:58:32.360 --> 00:58:37.360
famous electrical inventor

518
00:58:37.360 --> 00:58:45.360
Steinmetz is the chief electrical theorist, electrician, we call him electrical engineer for General Electric, Morgan Company

519
00:58:45.360 --> 00:58:49.360
and Charles Steinmetz wrote a couple of books calling for socialism

520
00:58:49.360 --> 00:58:56.360
it turned out what he meant by socialism was a world run by one big corporation

521
00:58:56.360 --> 00:59:00.360
preferably General Electric

522
00:59:00.360 --> 00:59:04.920
and himself supplying the ideas. In other words, you don't like to listen to theoreticians like himself.

523
00:59:04.920 --> 00:59:07.880
Essentially, what he wanted was Steinmetz as a world socialist.

524
00:59:07.880 --> 00:59:10.360
But Steinmetz as a world socialist dictator.

525
00:59:10.360 --> 00:59:14.440
So, there's a very good book on the list, by the way, that you want to read in this.

526
00:59:14.440 --> 00:59:18.840
It's a guy named David Gilbert, for an excellent book which has been sort of neglected,

527
00:59:18.840 --> 00:59:23.000
called Designing the Industrial State.

528
00:59:23.000 --> 00:59:28.840
And he deals with what he calls collectivist intellectualism. Gilbert himself was a New Left historian in the 1960s.

529
00:59:28.840 --> 00:59:34.840
and he deals with proper acidity with what he calls collectivist and electoral, technocrat types

530
00:59:35.800 --> 00:59:38.840
and people like Steinmetz, he has a whole chapter on Steinmetz

531
00:59:42.840 --> 00:59:46.280
going into some sardonic detail in his character, anyway so

532
00:59:48.600 --> 00:59:54.120
anyway so Crowley is a, was that kind of a guy, he was also in 1920s and he was editor of the New

533
00:59:54.120 --> 01:00:00.120
in the Middle Republic, you hail Mussolini's regime as being an excellent, marvelous solution of the essentially pro-fascist.

534
01:00:00.120 --> 01:00:05.120
But you have to realize that liberals and businessmen, all during the 1920s and early 30s, were a favorite of Mussolini.

535
01:00:05.120 --> 01:00:10.120
It was great. Strong. You had everything. You had class harmony instead of class struggle.

536
01:00:10.120 --> 01:00:16.120
You had, instead of having proletarian types, you have the whole country integrated in big government,

537
01:00:16.120 --> 01:00:23.120
fixing production, fixing prices, cartelizing the system, creating organic, with the organic nation running everything.

538
01:00:23.120 --> 01:00:37.120
And they loved it. So fascism was really liked by most Americans, the entire American establishment, until the war against Ethiopia, until the Italian-Abesinian War in 1935 was it.

539
01:00:37.120 --> 01:00:43.120
Until then they all loved it. And so the fact that a few people were tortured here and there was sort of sloughed over.

540
01:00:43.120 --> 01:00:56.120
He was one of our good, he would now be considered a good dictator, a good free world advocate, a free world dictatorial advocate who was authoritarian rather than totalitarian I guess in the current jargon.

541
01:00:56.120 --> 01:01:11.120
So anyway, so it's only as I say with the Ethiopian war that everybody turned against the Mussolini's. Before that the Crowley also had a large editorial in the republic praising Mussolini as a great guy, made the trains run on time, the famous phrase that was used.

542
01:01:11.120 --> 01:01:24.120
At any rate, the other two guys were Walter Weill and Walter Lippmann then became a famous pundit and columnist and all that.

543
01:01:24.120 --> 01:01:39.120
So we had then, to me this symbolizes the Morgan Progressive Intellectual Alliance, a living embodiment in the New Republic magazine, which was founded in 1912, ready to hail the Wilson administration.

544
01:01:39.120 --> 01:01:44.120
So Lippmann gets to be, Lippmann was the youngest one of that group. He just graduated from college a couple years before.

545
01:01:44.120 --> 01:01:49.120
Big shot on the Intercollegiate Socialist Society and then he gets to be a real big shot and he loves it.

546
01:01:49.120 --> 01:01:55.120
There's a very good book on Lippmann by Ronald Steele, a very long biography which deals with him in some detail.

547
01:01:55.120 --> 01:02:02.120
The Federal Reserve system is again another story. I want to get too technical on the Federal Reserve. It's an extremely important development.

548
01:02:02.120 --> 01:02:07.120
What happened was, as Coco points out, the banks were getting too competitive.

549
01:02:07.120 --> 01:02:19.120
In other words, the banks were getting, from the time of the Civil War, which set up a quasi-centralized banking system with the outlawing of state bank notes,

550
01:02:19.120 --> 01:02:25.120
centralized in Wall Street. Wall Street was getting less and less strong. In other words, Chicago was becoming an important banking center on its own hook.

551
01:02:25.120 --> 01:02:31.120
Kansas City was becoming an important banking system. People were using the state banks more and more against the national banks.

552
01:02:31.120 --> 01:02:35.120
So the Wall Street banks were beginning to lose control over the banking system.

553
01:02:35.120 --> 01:02:42.120
Also, it wasn't inflationary enough. In other words, they weren't able to inflate.

554
01:02:42.120 --> 01:02:45.120
As soon as they inflated, there'd be a recession. There'd be prices would go up.

555
01:02:45.120 --> 01:02:48.120
People would call upon the banks for redemption and gold.

556
01:02:48.120 --> 01:02:51.120
There'd be a recession, and then the banks would collapse.

557
01:02:51.120 --> 01:02:54.120
Until 1907, there was a big banking panic.

558
01:02:54.120 --> 01:02:59.120
And so the Morgans, once again, and plus the other people, in this case, everybody agreed.

559
01:02:59.120 --> 01:03:04.120
The Rockefellers, the Morgans, Kuhn, Lowell, they all agreed you have to have a central bank.

560
01:03:04.120 --> 01:03:13.120
The Central Bank, they had to adopt this progressive system which had been pioneered by England in the late 17th century and adopted by most other countries in the 19th century.

561
01:03:13.120 --> 01:03:22.120
They needed a central bank to do what? To prop up the banks, to be able to have inflation, cheap credit, inflationary bank credit controlled by the government.

562
01:03:22.120 --> 01:03:26.120
So no one bank will collapse, in other words, to sort of support the whole system.

563
01:03:26.120 --> 01:03:37.120
The Central Bank, to be with the English banking theorists, Walter Badgett, said the lender of last resort, in other words, the bailout banks in trouble, okay?

564
01:03:37.120 --> 01:03:49.120
So the Central Bank is the lender of last resort, it centralizes reserves and inflates, it also can purchase government bonds, finance government deficits if necessary.

565
01:03:49.120 --> 01:03:58.120
So the central bank is an inflationary and centralizing device, and the public didn't like it.

566
01:03:58.120 --> 01:04:02.120
The public was generally suspicious of Wall Street for good reason, suspicious of central banks.

567
01:04:02.120 --> 01:04:06.120
They had to sell it to the public, and they sold this likely establishment,

568
01:04:06.120 --> 01:04:12.120
sold the Federal Trade Commission and meatpacking stuff and all the rest of it as ways to check big business,

569
01:04:12.120 --> 01:04:16.120
where it really was a monopolizing device, they sold it as a way to promote competition.

570
01:04:16.120 --> 01:04:29.120
Similarly, they sold the Federal Reserve System as a way to check inflation, to keep a lid on inflation. Banks are too inflationary. We need a central bank to prevent inflation, to regulate the system.

571
01:04:29.120 --> 01:04:34.120
So in other words, the Federal Reserve System operated and still operates as a cartilaging device for banks.

572
01:04:34.120 --> 01:04:41.120
It does for banks what the Federal Trade Commission did for general business, what the ICC did for the railways,

573
01:04:41.120 --> 01:04:47.120
what the Civil Aeronautics Board did for the airlines before they went out of business last year.

574
01:04:47.120 --> 01:04:54.120
All these efforts do, they cartelize the system, they restrict production, raise prices, keep at new entry.

575
01:04:54.120 --> 01:04:58.120
So the Federal Reserve system is a way of cartelizing the banking system.

576
01:04:58.120 --> 01:05:03.120
The banks loved it. Here the banks are being allegedly restricted, right?

577
01:05:03.120 --> 01:05:09.120
According to the propaganda, the banks are being curbed and limited by the Fed.

578
01:05:09.120 --> 01:05:11.120
Do you think they'd hate the Fed? They love the Fed.

579
01:05:11.120 --> 01:05:14.120
Why do they love the Fed? Because the Fed cartelizes them.

580
01:05:14.120 --> 01:05:18.120
The same way as the second bank of the United States in the early 19th century.

581
01:05:18.120 --> 01:05:24.120
They love these banks, which they're supposed to hate, because they pop up the system.

582
01:05:24.120 --> 01:05:28.120
They bail out banks in trouble, they cartelize, they inflate, and all the rest of it.

583
01:05:28.120 --> 01:05:31.120
Of course, sometimes there's marginal disagreements, obviously.

584
01:05:31.120 --> 01:05:35.120
they don't inflate enough for a certain bank, but they love the system

585
01:05:35.120 --> 01:05:39.120
and all these guys supported it, they had to do

586
01:05:39.120 --> 01:05:43.120
the American Bankers Association

587
01:05:43.120 --> 01:05:47.120
starts the parade, the Morgan's love it, the Chamber of Commerce

588
01:05:47.120 --> 01:05:51.120
love it, they have a jockey

589
01:05:51.120 --> 01:05:55.120
for power, they have a jockey for how to write this thing, and they have to worry about

590
01:05:55.120 --> 01:05:59.120
the Republicans and Democrats both liking it, so what happened was originally

591
01:05:59.120 --> 01:06:06.160
The original supporter was Nelson Aldrich, was a Rockefeller in-law, Senator

592
01:06:06.160 --> 01:06:11.440
Nelson Aldrich, and during the Taft administration, the Federal Reserve Bank

593
01:06:11.440 --> 01:06:22.520
proposal was called the Aldrich Plan. So it was a classic meeting, and the

594
01:06:22.520 --> 01:06:28.520
bankers loved it. One of the key figures in this was A. Barton Hepburn,

595
01:06:28.520 --> 01:06:51.520
The secret meeting at Jekylls Island in December 1910, the latter days of the Taft administration,

596
01:06:51.520 --> 01:06:58.520
A secret meeting in Jekyll's Island, which was a private island off the coast of South Carolina,

597
01:06:58.520 --> 01:07:01.520
no, excuse me, off the coast of Georgia, I think.

598
01:07:01.520 --> 01:07:07.520
And it was very hush-hush, because they wanted to have a secret meeting without the press finding out about it.

599
01:07:07.520 --> 01:07:12.520
So they took it, they chartered, Ludwig chartered a train from New York, a train to go down to Jekyll's Island.

600
01:07:12.520 --> 01:07:16.520
And he told them, we told the press we were going on a duck-hunting expedition.

601
01:07:16.520 --> 01:07:21.520
Just a few wealthy friends, duck hunting in Jekyll's Island.

602
01:07:21.520 --> 01:07:23.520
We still don't know to this day who...

603
01:07:23.520 --> 01:07:26.520
You have to use your private island like that, very swanky.

604
01:07:26.520 --> 01:07:29.520
You have to be invited by some guest.

605
01:07:29.520 --> 01:07:32.520
We don't quite know who the guest host was.

606
01:07:32.520 --> 01:07:34.520
Deep suspicion must have been J.P. Morgan.

607
01:07:34.520 --> 01:07:35.520
He's the only guy.

608
01:07:35.520 --> 01:07:37.520
None of these guys were members of the Jekyll Island Cubs.

609
01:07:37.520 --> 01:07:39.520
But J.P. Morgan was.

610
01:07:39.520 --> 01:07:41.520
I think they used his home or something.

611
01:07:41.520 --> 01:07:51.520
So Ulrich sets this thing up in D.P. Morgan's mansion down there, and the members are just a few people.

612
01:07:51.520 --> 01:07:57.520
What they did is they spent a whole week there and they hammered out essentially the Ulrich Plan, the Federal Reserve Commission Act.

613
01:07:57.520 --> 01:08:16.360
Here are the lit. Rockefeller, Henry P. Davison, Morgan Partner, and Paul Warburg of Kuhn-Loeb,

614
01:08:16.360 --> 01:08:22.440
one of the relatives of Jacob Schiff. Warburg, a German, was brought over from Germany and

615
01:08:22.440 --> 01:08:29.440
He was paid, the partner of Kuhl and Loeb, I think, his entire time was spent lobbying for, agitating for the Federal Reserve system.

616
01:08:29.440 --> 01:08:40.440
In other words, he didn't do actual banking work. He was paid, I think, something like $800,000 a year, which now amounts to about $6 million a year, something like that.

617
01:08:40.440 --> 01:08:46.440
He was paid, in real terms, the current dollar, $6 million a year, to do nothing but lobby for the Federal Reserve system.

618
01:08:46.440 --> 01:08:55.200
So, he was a relative of Schiff and Kuhl and Lowe, et cetera, and the famous Wodberg family.

619
01:08:55.200 --> 01:09:03.160
So we have then, these were essentially, these were the four guys at the meeting.

620
01:09:03.160 --> 01:09:04.160
Five guys.

621
01:09:04.160 --> 01:09:05.160
No, a guy named Norton.

622
01:09:05.160 --> 01:09:06.160
Okay.

623
01:09:06.160 --> 01:09:13.320
Charles Norton, who was the head of the First National Bank, which was also a Morgan, okay.

624
01:09:13.320 --> 01:09:43.320
Well, Morgan had two top banks, Guaranteed Trust Company and First Nation, and we also had, this is the Morgan partner, so we had Morgan Partner, JP Morgan Company Investment Bank, we had Charles Norton of the Morgan's First National Bank in New York, which is now, by the way, became part of National City, and so two Morgan people, two Rockwell people,

625
01:09:43.320 --> 01:09:48.320
There are a lot of people, one Kuhn-Loha person for good distribution of power

626
01:09:48.320 --> 01:09:54.320
plus one Kep professor to actually write up the act. You have to have a technician, an economist named

627
01:09:54.320 --> 01:10:00.320
A. Piot Andrew of Harvard to actually write the thing up.

628
01:10:00.320 --> 01:10:10.320
Sort of an unknown professor, he's not very well known in the economic circle, but he was there to draft the legislation and all that.

629
01:10:10.320 --> 01:10:18.320
So, it's a very small conference, very small, very high level, and they drafted, as I say, this act.

630
01:10:18.320 --> 01:10:21.320
In other words, what you had here was an agreement, okay?

631
01:10:21.320 --> 01:10:25.320
Hammered out, three forces, many of which were hating each other's guts at other levels.

632
01:10:25.320 --> 01:10:28.320
Backepall is Morgan and Kuhn, all of this is important.

633
01:10:28.320 --> 01:10:30.320
This is a banking system, this is money.

634
01:10:30.320 --> 01:10:34.320
This is credit, money, banking, and they all agreed on the basics of it.

635
01:10:34.320 --> 01:10:37.320
They drew up the plan, and Ludwig was supposed to push it through.

636
01:10:37.320 --> 01:10:48.320
And what happened then is that the Democrats, excuse me, the election of 1910, Democrats won the election of the House of Representatives.

637
01:10:48.320 --> 01:10:55.320
So they had to wait. Oldridge's plan was now, Oldridge's name was disliked, of course, by Democrats.

638
01:10:55.320 --> 01:11:01.320
So they had to wait for a year and set up lobbying institutions to make it bipartisan.

639
01:11:01.320 --> 01:11:05.320
They had to bring the Democrats in. Democrats won the House of Representatives in 1910.

640
01:11:05.320 --> 01:11:12.320
They won the presidential election in 1912. They couldn't have a Republican name on it, you had to have a Democratic name on it.

641
01:11:12.320 --> 01:11:23.320
So they waited until Wilson was elected and then when the Democrats took control of Congress, they got Carter Glass, a Democratic congressman from Virginia, to put his name on the legislation.

642
01:11:23.320 --> 01:11:34.320
So they also set up a phony citizens group in Chicago called the Citizens League for Sound Money, something like that.

643
01:11:34.320 --> 01:11:43.320
calling for a Federal Reserve system, because they want to make it as if it's a grassroots movement, not just a few bankers, they want to see the public behind it.

644
01:11:43.320 --> 01:11:48.320
And Chicago sounded safe, you know, because New York meant Wall Street.

645
01:11:48.320 --> 01:11:56.320
So they take it to Chicago and they have a Jane Lawrence lock-down as a distinguished economist who's unfortunately in favor of the Federal Reserve system,

646
01:11:56.320 --> 01:12:03.320
as a major propagandist on behalf of the Morgan of the joint banker group, calling themselves citizens and all that.

647
01:12:03.320 --> 01:12:09.320
and all that, actually he admitted later on that he was a pure tool of the bankers, he was just operating as a banker person.

648
01:12:09.320 --> 01:12:17.320
At any rate, so, and finally, as I say, when Wilson was elected, they pushed through,

649
01:12:17.320 --> 01:12:24.320
and they say it's not a central bank, they couldn't make it, if they had a straight central bank, one bank,

650
01:12:24.320 --> 01:12:30.320
the rest of the public was suspicious that the banks in general wouldn't like it, they said it's decentralized, it's not a central bank,

651
01:12:30.320 --> 01:12:34.320
The Federal Reserve System with 13 chapters, branches, or whatever it is.

652
01:12:34.320 --> 01:12:38.320
They had a very cumbersome, phony, decentralized structure.

653
01:12:38.320 --> 01:12:42.320
It's really quite centralized, but they made it seem as if it was decentralized to appease the congressman.

654
01:12:42.320 --> 01:12:46.320
Okay, we're getting into an exciting watershed in World War I.

655
01:12:46.320 --> 01:12:50.320
Before I get into it, I should mention the Federal Reserve System.

656
01:12:50.320 --> 01:12:54.320
Excuse me, finish that up.

657
01:12:54.320 --> 01:12:58.320
The Federal Reserve Board, which came in

658
01:12:58.320 --> 01:13:07.320
December 1913 and then really starts functioning around the summer of fall 1914. You have to get everything shaped up.

659
01:13:07.320 --> 01:13:15.320
It was a way of cartelizing the banking system so as to permit banks to continue inflating at a controlled rate.

660
01:13:15.320 --> 01:13:19.320
That was controlled by the government to know that the banks won't collapse.

661
01:13:19.320 --> 01:13:26.320
They can be a lender of last resort and the federal reserve can push reserves into the system.

662
01:13:26.320 --> 01:13:31.320
Reserve requirements were lowered, thereby permitting an inflation of money.

663
01:13:31.320 --> 01:13:40.320
The way the banking system works, and I'll only do this very quickly because I can't get into the techniques or technology of the banking system here,

664
01:13:40.320 --> 01:13:48.320
but basically the banking system, the commercial banking system, Chase and the Bank of, Chem Bank and all that, are inflationary engines.

665
01:13:48.320 --> 01:13:53.320
In other words, they're ways to increase the money supply. They're substitutes for counterfeiting.

666
01:13:53.320 --> 01:14:00.320
counterfeiters print money, you know, you take dollar bills, you print money, it's a $10 bill, you spend them

667
01:14:00.320 --> 01:14:06.320
banks create fake warehouse receipts, in other words, you deposit cash in a bank

668
01:14:06.320 --> 01:14:10.320
so, let's say you deposit cash, we're going to quickly

669
01:14:10.320 --> 01:14:16.320
you then have, this is the balance sheet of the bank, right, these are assets

670
01:14:16.320 --> 01:14:19.320
and these are liabilities

671
01:14:19.320 --> 01:14:21.320
plus equity

672
01:14:21.320 --> 01:14:23.320
really means

673
01:14:23.320 --> 01:14:25.320
in macro I go from money and banking

674
01:14:25.320 --> 01:14:27.320
of course I go through this whole

675
01:14:27.320 --> 01:14:29.320
thing step by step, but basically what you have is

676
01:14:29.320 --> 01:14:31.320
you deposit, let's say you deposit $100

677
01:14:31.320 --> 01:14:33.320
in cash in a bank, cash could be

678
01:14:33.320 --> 01:14:35.320
gold, it could be

679
01:14:35.320 --> 01:14:37.320
treasury bills or whatever, it doesn't make any difference

680
01:14:37.320 --> 01:14:39.320
it's cash, okay

681
01:14:39.320 --> 01:14:41.320
you get then, the bank then

682
01:14:41.320 --> 01:14:43.320
has $100

683
01:14:43.320 --> 01:14:45.320
of say cash

684
01:14:45.320 --> 01:14:47.320
the bank gives you a return

685
01:14:47.320 --> 01:15:17.320
So you can return for that a warehouse receipt saying you can claim this at any time, you can claim the $100 at any time you want, on demand, like a warehouse, you know, you deposit a watch in a warehouse and say, or furniture or something, you have your ticket, your warehouse receipt, you pay a fee for restoring it, and you can redeem the damn watch or chair at any time. So you have a $100 balance by $100 of warehouse receipts,

686
01:15:17.320 --> 01:15:21.760
Banking, which have taken two forms over the centuries. One is a note, a physical note,

687
01:15:21.760 --> 01:15:28.760
like a porn ticket or a warehouse receipt saying that the bank of Oshkosh or the bank

688
01:15:28.760 --> 01:15:35.640
of Great Neck promises to give you under redeeming demand or pay you back in demand $100 in cash

689
01:15:35.640 --> 01:15:40.380
on representation of the ticket. That's one way. This is called a bank note. The other

690
01:15:40.380 --> 01:15:44.900
way, a more sophisticated way, which was originally only done for large businessmen. In other

691
01:15:44.900 --> 01:15:48.900
In other words, this is the basic way the average person had a bank note.

692
01:15:48.900 --> 01:15:55.900
The other way, which is usually done for large merchants or big business types or international traders, etc.

693
01:15:55.900 --> 01:15:59.900
is by having open book accounts.

694
01:15:59.900 --> 01:16:05.900
In other words, instead of actually getting a physical note, you just get a record on the bank and they owe you $100.

695
01:16:05.900 --> 01:16:07.900
And you don't get any physical record.

696
01:16:07.900 --> 01:16:24.900
What you get is a transfer order. You have a deposit, or demand deposit, an open book account with a bank of $100 instead of a bank note.

697
01:16:24.900 --> 01:16:29.900
In the old days you could have a combination. You could have $50 in bank notes, $50 in the bank deposit, whatever you want.

698
01:16:29.900 --> 01:16:41.900
The way you transfer a warehouse receipt, you simply sell it to somebody. You buy something with it, you take the $100, you have the demand on the bank, you have $100.

699
01:16:41.900 --> 01:16:48.900
If the bank is considered honest and upstanding and everything, the warehouse receipt functions as if it were cash, as if it were gold or whatever it is.

700
01:16:48.900 --> 01:16:51.900
They trust the bank, the bank has a good reputation.

701
01:16:51.900 --> 01:17:00.900
A merchant or somebody selling you something will take the bank note instead of either you or him having to go to the bank and schlep to the bank and carry the gold out.

702
01:17:00.900 --> 01:17:06.900
They'll simply take the bank note as a... like traveler's checks are done now. They can take a traveler's check instead of the actual cash.

703
01:17:06.900 --> 01:17:09.900
Traveler's check is like a warehouse receipt.

704
01:17:09.900 --> 01:17:13.900
So either the bank notes or the demand deposit, in which case they accept the transfer order.

705
01:17:13.900 --> 01:17:28.900
You say, the transfer order says, Mr. Bank, Bank of J Street, Dear Sir, pay to the order of Joe Jones a hundred bucks.

706
01:17:28.900 --> 01:17:34.900
I sign Murray Rothbard, and then they take my hundred dollar account and transfer the open book,

707
01:17:34.900 --> 01:17:42.900
instead of being done through an actual physical note, transfer their liability, their liability from me to John Jones.

708
01:17:42.900 --> 01:17:48.900
This, of course, is called a check. What a check is, is a transfer order to the bank saying,

709
01:17:48.900 --> 01:17:56.900
Mr. Bank, please sign by me. Please take $100 that you now owe me and transfer it to John Jones.

710
01:17:56.900 --> 01:18:01.900
If the bank is well known, if I'm well known in this case, then John Jones will accept the check

711
01:18:01.900 --> 01:18:08.900
and then deposit it in his bank. At any rate, this becomes, over the years, the man deposit

712
01:18:08.900 --> 01:18:12.940
the man deposit or the warehouse receipt becomes equivalent to cash

713
01:18:12.940 --> 01:18:14.360
uh...

714
01:18:14.360 --> 01:18:16.840
the chances for

715
01:18:16.840 --> 01:18:21.580
counterfeiting, I call counterfeiting unlimited, it's a free banking situation of this sort

716
01:18:21.580 --> 01:18:25.560
the temptation for counterfeiting comes about when the bank says look

717
01:18:25.560 --> 01:18:27.180
these suckers

718
01:18:27.180 --> 01:18:31.240
they trust me, they don't come and demand the cash anymore because they think

719
01:18:31.240 --> 01:18:32.980
I have the money here

720
01:18:32.980 --> 01:18:36.040
and I owe it to them, but on the other hand very few of them really show up anymore

721
01:18:36.040 --> 01:18:37.420
let me start

722
01:18:37.420 --> 01:18:42.520
either stealing the gold itself and lending it out or else printing fake warehouse receipts

723
01:18:42.520 --> 01:18:46.780
and lending those out and they'll be accepted as if they're the same thing as regular warehouse

724
01:18:46.780 --> 01:18:51.360
receipts, which is what the banks started to do after centuries of getting a reputation

725
01:18:51.360 --> 01:18:55.860
for honesty and probity and all that, they started printing fake warehouses, let's say

726
01:18:55.860 --> 01:19:04.860
$200 of warehouse receipts, either in bank deposit or bank note, and they lend it out,

727
01:19:04.860 --> 01:19:07.860
put the $200, lend it out to something of charge interest.

728
01:19:07.860 --> 01:19:15.860
So now they have $300 in liabilities and demand deposits or bank notes, right?

729
01:19:15.860 --> 01:19:19.860
And they have $200 of IOUs to, I don't know, Michelangelo, whatever it is.

730
01:19:19.860 --> 01:19:21.860
So, in which they get interest.

731
01:19:21.860 --> 01:19:23.860
This is the way banks expand.

732
01:19:23.860 --> 01:19:26.860
They expand in two ways, either by actually going to people depositing their money there,

733
01:19:26.860 --> 01:19:30.860
or by lending money, lending money to the banks and they lend it out,

734
01:19:30.860 --> 01:19:42.860
The Bank can get away with this so long as people don't call for their money in any large amount.

735
01:19:42.860 --> 01:19:45.860
So this is called fractional reserve banking.

736
01:19:45.860 --> 01:19:50.860
In contrast to 100% reserve banking, banks actually keep the money.

737
01:19:50.860 --> 01:19:56.860
There's a whole argument between economists and moral theorists and legal theorists about whether this is fraud or not.

738
01:19:56.860 --> 01:20:03.860
I think it is, at any rate. The point is that with fractional reserve banking, you now inflate, you create more dollars.

739
01:20:03.860 --> 01:20:07.860
The way you manufacture dollars and run them out, this is an inflationary instrument.

740
01:20:07.860 --> 01:20:12.860
In other words, it increases the money supply, not by digging gold out of the ground, but by just printing tickets,

741
01:20:12.860 --> 01:20:17.860
or by creating money out of thin air in the bank, on the books of the bank.

742
01:20:17.860 --> 01:20:25.860
So, in a free market, this is limited play for this, because if I create it, let's say I have a Rothbard bank,

743
01:20:25.860 --> 01:20:55.860
Well, I only have a few clients, most of the other thousands of banks, people, if I ran out of check, if I lend out IOUs, if I create a bank deposit for people, they'll start using the money to buy things, and as soon as they do that, the other bank, their bank, calls upon me for redemption, and I haven't got the money, and I go bankrupt, so, there's no way that individual banks can really make it, can really have a play for this, and a free service.

744
01:20:55.860 --> 01:21:25.860
The only way they can really accomplish this systematically and not be afraid of going under at any moment is by having a cartel and the only way a cartel can succeed like any other industry is by the government enforcing it, by the government organizing the cartel and enforcing it, limiting competition and pouring money in and bailing out any bank in trouble as the whole banking system inflates together, happily inflates together, creates more money, drives up prices, transfers wealth and income from other people to themselves

745
01:21:25.860 --> 01:21:32.860
In other words, from people who are from the average consumer, from the guys who are in on the credit system, who borrow the money and all that sort of stuff, who are in with the government.

746
01:21:32.860 --> 01:21:43.860
This is basically, the way the governments have done this in the last couple hundred years is through the central bank, central bank system, which is a partnership of government and private banking.

747
01:21:43.860 --> 01:21:52.860
In other words, originally the Bank of England, the first central bank, organized in the 1690s, was simply a private corporation, which the government needed money, the king always needed money.

748
01:21:52.860 --> 01:22:00.860
Government is always dying for money. Their credit was exhausted because the king was confiscating. The king had borrowed money from the goldsmiths who had a major amount of capital.

749
01:22:00.860 --> 01:22:10.860
And they confiscated the gold to finance his war against the impuritans. And also he stopped payment on various bonds that they issued.

750
01:22:10.860 --> 01:22:21.860
So if the king has no credit, who's going to borrow into him? So as a result, and he couldn't tax anymore because he would have had his head chopped off if he had increased taxes in those days.

751
01:22:21.860 --> 01:22:26.860
The promoters of the Bank of England came up with a scheme,

752
01:22:26.860 --> 01:22:32.860
look, Sire, you give us a monopoly in oil banking, you give us in London and so forth and so on,

753
01:22:32.860 --> 01:22:37.860
give us privileges, and we will then buy your financial deficits,

754
01:22:37.860 --> 01:22:40.860
we'll give you Bank of England notes, warehouse receipts, you can spend them.

755
01:22:40.860 --> 01:22:44.860
And that's what happened, there was a racket by which the government organized,

756
01:22:44.860 --> 01:22:48.860
privileged the Bank of England and thereby benefited from the fact

757
01:22:48.860 --> 01:23:18.860
The Bank of England created money, instead of the King of England printing the money, which looked bad, looked inflationary, they have a private corporation, a distinguished corporation, which then creates money out of thin air, through this warehouse receipt system, fake warehouse receipt, and uses it to buy government bonds, which then the King spends, the government spends, everybody's happy, so the poor public finds the value of the pound is going down, they don't know why. In most countries in the world, except the United States, government deficits are financed by a central bank.

758
01:23:18.860 --> 01:23:23.220
Bank, in England, Israel and almost all the other countries, it's very easy to have a

759
01:23:23.220 --> 01:23:24.220
deficit.

760
01:23:24.220 --> 01:23:29.900
The central bank just buys the bonds and increases the money supply in a very inflationary manner

761
01:23:29.900 --> 01:23:30.900
to do it.

762
01:23:30.900 --> 01:23:33.740
The Federal Reserve system has done not quite as bad, but it's equivalent.

763
01:23:33.740 --> 01:23:40.340
The United States, as I say, had a semi-centralized banking system after the Civil War, but not

764
01:23:40.340 --> 01:23:42.620
really fully central.

765
01:23:42.620 --> 01:23:47.020
And Wall Street was suffering and the banks were collapsing.

766
01:23:47.020 --> 01:23:55.020
So the bankers got together at Jekyll Island and other places, this is all wings of the bankers, Rockefeller, Morgan, Kuhn, Lowell, they all agree you have to have cheap credit,

767
01:23:55.020 --> 01:24:04.020
you have the government bailing out of the banking system and organizing a cartel, and of course then the question is who runs it, we'll see.

768
01:24:04.020 --> 01:24:14.020
Central Bank, I guess together, lowers the fractional reserve requirement so that the banks can create more money, creates a monopoly, does it through monopolizing bank notes.

769
01:24:14.020 --> 01:24:29.020
In other words, before 1913, the large national banks, the large Wall Street banks, printed notes, in other words, you could go to Chase Bank, or City Bank, and wonder if you can get Chase Bank notes, which looks like Federal Reserve notes now,

770
01:24:29.020 --> 01:24:57.020
Chase Bank will pay to the account of, pay to the something, pay to the order of the bearer $100 in gold, the $100 in treasury bill, usually gold, so there were individual banks, the large banks, before the Civil War every bank had bank notes.

771
01:24:57.020 --> 01:25:01.020
After the Civil War, as you remember, the state banks were prevented from doing it.

772
01:25:01.020 --> 01:25:03.520
Only large Wall Street banks could print banknotes.

773
01:25:03.520 --> 01:25:06.020
Now only the Federal Reserve can print banknotes,

774
01:25:06.020 --> 01:25:10.520
for the result that all of our paper money, if you look at your paper money, says Federal Reserve note.

775
01:25:10.520 --> 01:25:14.020
And the banks then were limited in creating demand deposits.

776
01:25:14.020 --> 01:25:18.020
So if anybody wants a banknote for regular transaction,

777
01:25:18.020 --> 01:25:21.020
you're not going to pay a check to buy a newspaper or get a sandwich.

778
01:25:21.020 --> 01:25:24.020
If you want a banknote or paper money,

779
01:25:24.020 --> 01:25:26.300
your bank has to go to the Federal Reserve

780
01:25:26.300 --> 01:25:38.940
to produce and sell the bank, so to speak, the money. So in other words, the way the central bank has control over the banking system is by having a monopoly, a legal monopoly, a coercive monopoly on the issue of notes, of paper money.

781
01:25:38.940 --> 01:25:47.300
So the banks want it, it's not that the banks don't like the monopoly, they love it, because this gives the central bank control, so the central bank can inflate together. All the banks can now inflate together,

782
01:25:47.300 --> 01:25:51.060
with the central bank doing most of the inflating. The way the central bank inflates

783
01:25:51.060 --> 01:25:57.780
is by creating reserves, creating more cash, so to speak, or reserves on the central bank

784
01:25:57.780 --> 01:26:04.780
upon which the banks can pyramid in a multiple fraction, in other words, this is a federal

785
01:26:04.780 --> 01:26:09.540
reserve system, they have gold on which they pyramid and then the banks can pyramid on

786
01:26:09.540 --> 01:26:14.580
top of that. The pyramid is right now 10 to 1, which is what it was in 1913, so it's,

787
01:26:14.580 --> 01:26:18.620
in other words, for every dollar of reserves that the Fed creates, the banks can inflate

788
01:26:18.620 --> 01:26:24.460
10 to 1 on top of it, creating fake warehouse receipts, demand deposits, which they multiply

789
01:26:24.460 --> 01:26:29.460
on top of reserves, which then becomes part of the money supply.

790
01:26:29.460 --> 01:26:33.380
I'm not going to go into the mechanics of it, you can check any Money and Banking textbook

791
01:26:33.380 --> 01:26:37.980
to see how this works, but anyway, basically what happens is another Federal Reserve buys

792
01:26:37.980 --> 01:26:46.380
an asset and gets deposited in a bank, then the banks determine 10 to 1 fake warehouse

793
01:26:46.380 --> 01:26:53.380
and they can't go under because every bank does it together because the central bank is maneuvering the whole thing and the central bank bails them out.

794
01:26:53.380 --> 01:26:59.380
So it's very important for the banks to create this. If the banks want to inflate, we have to suffer the consequences.

795
01:26:59.380 --> 01:27:06.380
It was a bipartisan thing that passed very heavily after a lot of jockeying positions.

796
01:27:06.380 --> 01:27:12.380
As I said at the end of last hour, in order to sucker in the public, which had a healthy distrust of Wall Street,

797
01:27:12.380 --> 01:27:18.380
They claim it's not really a central bank, it's really decentralized, because there are 12 chapters, whatever it is.

798
01:27:18.380 --> 01:27:20.380
It really was centralized.

799
01:27:20.380 --> 01:27:25.380
There was, however, a fight for power at the beginning, and in those days, the way the law was set up,

800
01:27:25.380 --> 01:27:30.380
the head of the Federal Reserve Bank of New York dominated the system.

801
01:27:30.380 --> 01:27:37.380
During the 1930s, the law was changed, and now the Federal Reserve Board in Washington runs the whole thing.

802
01:27:37.380 --> 01:27:41.380
The Federal Reserve Board of New York, the president of the Federal Reserve Board of New York, was then the key figure,

803
01:27:41.380 --> 01:27:47.380
was of course nominated and appointed by the Federal Reserve System, which is a partnership of government and the banks.