Book Review (Part 2 of 3)
Tragedy and Hope: A History of the World in Our Time
Carroll Quigley (1966 MacMillan)
Tragedy and Hope is a free download
After providing a basic introduction to the fractional reserve banking system, Tragedy and Hope goes on to list the banking dynasties that have held near absolute control of the global money supply since 1694. A long time Washington insider (and mentor to Bill Clinton), Quigley identifies the banking cartel formed by Frankfurt banker Meyer Rothschild as the most powerful. At the time of his death, Rothschild’s five sons each controlled a major investment bank in Vienna, London, Naples, Paris and Frankfurt. Quigley lists the investment bank formed by the J.P. Morgan family as second to the Rothschild banks in power and influence, followed by the Baring Brothers, Morgan Grenfell, the Lazard Brothers, Erlanger, Warbur, Shroder, Seligman, the Speyers, Mirabaud, Mallet and Fould.
Prior to 1932, investment banks were mostly privately owned and operated (unlike publicly traded corporations). This allowed their owners to conduct their affairs (i.e. their secret meetings with foreign investment banks) in total secrecy, as well as pass both ownership and control to their heirs. In the second half of the 19th century, some investment bankers used their immense financial holdings to gain direct control of important sectors of the productive economy in addition to their banking interests. The Rothschilds ultimately came to dominate many of the European railroads, as well as acquiring a major interest in European oil companies, while Morgan eventually controlled 26,000 miles of American railroad.
The Council on Foreign Relations
Quigley also talks about the network of secret round tables of international corporate and banking elites started by Cecil Rhodes and expanded perpetuated by his followers with the sizable estate he left them. At their founding, they had the stated purpose of spreading British the virtues of “ruling class” tradition throughout the English speaking world and solidifying the political power and influence of the British Empire. The US Council on Foreign Relations, one of the secret round tables started by Rhodes’ followers, was started in 1919, with the explicit goal of influencing the foreign and domestic policies of a former colony over which Britain no longer had direct control.
How English Banks Controlled the US Government
According to Quigley, the US was consistently a debtor nation prior to World War I. Following the 1776 revolution, US government and businesses continued to borrow funding for industrial and colonial expansion from English and European investment banks. The American banker, JP Morgan, collaborated with European investment banks to dictate US foreign and domestic policy. They did so by threatening to destroy the US economy by 1) refusing to renew treasury bonds (issued in return for bank loans) 2) causing a panic by throwing large numbers of shares on the stock market or 3) destroying the value of railroads and other companies they owned by loading them up with worthless assets. Quigley relates how they engaged in all three tactics at various times throughout the 19th century, resulting in a series of booms, panics, recessions and depressions that wreaked havoc with American economic development.
How the Gold Standard Caused Deflation
Prior to 1932, when the US and most other countries went off the gold standard, investment banks forced all western governments to enact policies that created deflation by limiting the money supply. A constant or shrinking money supply during periods of industrial expansion substantially increases the demand for credit, which allows banks to jack up interest rates. Baby boomers will recall when they did this to Carter – just before he lost to Ronald Reagan. Interest rates shot up to 12%, accompanied by massive unemployment.
During most of the 19th century, international investment banks collaborated to enforce this deflationary policy by forcing all western governments to agree to a gold standard, tying all currency to a fixed amount of gold. Because the gold supply was constant, this forced countries like the US to finance a period of rapid industrial expansion with a shrinking money supply. Even though industry and agriculture were booming, producers had no choice but to lower their prices because people had no money to buy them.
The agricultural sector suffered most during this period. Farmers who took out high interest bank mortgages were forced to sell their crops to bank-controlled food processors at prices that were far below the repayments they owed the banks. As a consequence, banks managed to seize much of their lands. Only North Dakotan farmers figured out how to escape their grasp by lobbying the legislature to form America’s first and only state-owned bank (the Bank of North Dakota) in 1919.
To be continued.
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