The History of Money Part 5: Greenbacks to the Fed

THE RETURN OF THE GOLD STANDARD (1866 - 1881)

The greenback currency was only issued twice, a total of $449,338,902 debt and gold free paper money was created. The price inflation during the war which reached over 100% was blamed on it. While this was largely true, those who were issuing fractional reserve (so-called gold backed) banker money had most of the power over the money supply even then. Especially after the National banking act ended the issuing of greenbacks.

"While boasting of our noble deeds, we are careful to control the ugly fact that by an iniquitous money system, we have nationalized a system of oppression which, though more refined, is not less cruel than the old system of chattel slavery."- Horace Greely, American journalist and politician (1811-1872)

The bankers wrote:

"Slavery is likely to be abolished by the war power and all chattel slavery abolished. This I and my European friends are in favor of, for slavery is but the owning of labor and carries with it the care of the laborers, while the European plan, led on by England, is that capital shall control labor by controlling wages. The great debt that the capitalists will see to it is made out of the war, must be used as a means to control the volume of money. To accomplish this the bonds must be used as a banking basis. We are now waiting for the Secretary of the Treasury to make this recommendation to Congress. IT WILL NOT DO TO ALLOW THE GREENBACK, as it is called, TO CIRCULATE AS MONEY any length of time, as WE CAN NOT CONTROL THAT. But we can control the bonds and through them the bank issues." - Hazard Circular of 1862

By the end of the Civil war, a Greenback dollar was worth less than 50 cents to the banker "gold" dollar. But as it became obvious that Congress would redeem them in gold, and accepted them as payment of taxes, they became worth more and more. By 1868 it only took $138 in Greenbacks to buy $100 in gold, and by 1874, $111. In 1875, Congress passed a law saying that on January 1, 1879, Greenbacks would be redeemable in gold on a one-to-one basis. This happened with no fanfare whatsoever. Yet still the debtless Greenbacks were removed from circulation.

To give the American public the impression that they would be better off under the exclusive gold standard, the money changers used the control they had been given to create money under the National Bank Act to cause economic instability and panic the people. This was fairly easy to do by calling in existing loans and refusing to issue new ones, a tried and proven method of causing depression and reducing the money supply. They would then spread the word through the media they largely controlled that the lack of a single gold standard was the cause of the hardship which ensued, while all this time using the Contraction Act to lower the amount of money in circulation. Most of this money was debt created money through fractional reserve banking, but the people were led to believe that it was Greenbacks that caused the problems.

The money supply was reduced from $1.8 billion in circulation in 1866 ($50.46 per person), to $1.3 billion in 1867 ($44.00 per person), to $0.6 billion in 1876 ($14.60 per person) and down to $0.4 billion only ten years later. That is merely $6.67 per person. Thus was the depression of the 1870's.

By 1872 the American public was feeling the squeeze, but it wasn’t fast enough. So the Bank of England sent Ernest Seyd, with piles of money, to bribe congressmen into passing an unconstitutional law demonetizing silver. (The word "dollar" was originally defined as 371.25 grains of silver.) Ernest drafted the legislation himself, which became law with the passing of the Coinage Act, effectively stopping the minting of silver as money.

Here's what he said about his trip, obviously pleased with himself:

"I went to America in the winter of 1872-73, authorized to secure, if I could, the passage of a bill demonetizing silver. It was in the interest of those I represented - the governors of the Bank of England - to have it done. By 1873, gold coins were the only form of coin money." - Ernest Seyd

Or as explained by Senator Daniel of Virginia "In 1872 silver being demonetized in Germany, England, and Holland; a capital of 100,000 pounds ($500,000.00) was raised, Ernest Seyd was sent to this country with this fund as agent for foreign bond holders to effect the same object (demonetization of silver)".

At that time the National Banks were issuing paper notes, and the government was coining metals into money, the only government paper money was the greenbacks.

By 1876, with 30% of the work force unemployed, the American people began to long for the days of silver money and the greenbacks. The US Silver Commission was set up to study the deflating currency problem and reported this telling history:

"The disaster of the Dark Ages was caused by decreasing money and falling prices... Without money, civilization could not have had a beginning, and with a diminishing supply, it must languish and unless relieved, finally perish. At the Christian era the metallic money of the Roman Empire amounted to $1,800,million. By the end of the fifteenth century it had shrunk to less than $200,million. History records no other such disastrous transition as that from the Roman Empire to the Dark Ages..."

While the United States Silver Commission obviously could see the problems being caused by the restricted money supply, this declaration did little to help the problem, and in 1877 riots broke out all over the country. The bankers response was to do nothing except to campaign against the idea that greenbacks should be reissued or silver remonitized. The American Bankers Association secretary James Buel expressed the banker’s attitude well in a letter to fellow members of the association.
He wrote:

"Dear Sir: It is advisable to do all in your power to sustain such prominent daily and weekly newspapers, especially the agricultural and religious press, as will oppose the greenback issue of paper money; and that you also withhold patronage from all applicants who are not willing to oppose the Government issue of money. Let the Government issue the coin and the banks issue the paper money of the country, for then we can better protect each other. To repeal the Act creating bank notes, or to restore to circulation the Government issue of money, will be to provide the people with profits as bankers and lenders. See your Congressman at once and engage him to support our interests, that we may control legislation." -James Buel American Bankers Association (from a circular issued by authority of the Associated Bankers of New York, Philadelphia, and Boston signed by one James Buel, secretary, sent out from 247 Broadway, New York in 1877, to the bankers in all of the States)


James Garfield became the Republican President in 1881 with a firm grasp of where the problem lay:

"Whosoever controls the volume of money in any country is absolute master of all industry and commerce... And when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate." - James Garfield 1881 (Within weeks of releasing this statement President Garfield died of poisoning.)

For ten years after a great populist movement grew within the country and the Democratic Party became the silver party, or the anti gold-only party.
The cry from the streets was to...


FREE SILVER (1891 - 1912)

The dollar was originally defined in silver and although there was a not so smart exact rate of 15:1 value of silver to gold from 1792 to 1873, demonitizing silver was a very bad idea, besides being unconstitutional.

Fleecing of the flock is the term the money changers use for the process of booms and depressions which make it possible for them to repossess property at a fraction of its worth. In 1891 a major fleece was being planned:

"On Sept 1st, 1894, we will not renew our loans under any consideration. On Sept 1st we will demand our money. We will foreclose and become mortgagees in possession. We can take two-thirds of the farms west of the Mississippi, and thousands of them east of the Mississippi as well, at our own price... Then the farmers will become tenants as in England..."- 1891 American Bankers Association (as printed in the Congressional Record of April 29, 1913)

The continued gold only standard made this possible. William Jennings Bryan was the Democratic candidate for President in 1896; campaigning to bring silver back as money (free silver). He said in his famous speech:

"We will answer their demand for a gold standard by saying to them: You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold."- William Jennings Bryan

Of course the money changers supported his opposition on the Republican side as long as he wanted the exclusive gold standard maintained. They all suggested that monetizing silver was simply “inflation” (which obviously was not what the bankers feared, but rather the lack of BANKER CREATED inflation was). The factory bosses were convinced to tell their work force that business would close down if Bryan was elected, and everyone would lose their jobs. Bryan lost a very close election but tried again in 1900 and in 1908 but lost both times. He became Secretary of State under Woodrow Wilson in 1912 but resigned in 1915 under suspicious circumstances connected with the sinking of the Lusitania which drove America into the First World War.

J.P.MORGAN AND THE CRASH OF 1907

If you want to understand the causes of the crash of 1907 (which led to the creation of the Federal Reserve), seeing who benefited is where you should look first. When the stock market slumped causing many of the over extended fractional reserve banks to falter, J.P. Morgan stepped in and offered to save the day. People will do strange things when in a panic, and this might explain why Morgan in effect became the central bank of the United States and was authorized to print $200 million out of thin air merely by loaning it out, which he used to "prop" things up. Some of the troubled banks with less than 1% in reserve had no choice but to borrow from him. It was accept this solution or go under. Even if they realized that their problems had been caused by the same people now offering the solution, there is not a lot they could have done about it. J.P. Morgan was hailed a hero even by the next presidential candidate:

"All this trouble could be averted if we appointed a committee of six or seven men like J.P. Morgan to handle the affairs of our country." -Woodrow Wilson

But not everyone was fooled:

"The market prices of commodities vary from day to day. This occurs when there is no radical difference in the proportion to the supply and the natural demand. This FACT is conclusive proof that our system is controlled by manipulators and fundamentally wrong. Act No. 1 was the manufacture, between 1896 and 1907, through stock gambling, speculation and other devious methods and devices, of tens of billions of watered stocks, bonds, and securities. Act No. 2 was the panic of 1907, by which those not favorable to the Money Trust could be squeezed out of business and the people frightened into demanding changes in the banking and currency laws which the Money Trust would frame. ... see how these bankers have impoverished us by selling to us, - at usury prices, - the credit that is supported by our own toil,... The king bankers put in motion, in 1907, a great scheme. They had gambled and speculated on Wall Street, until so many watered stocks and bonds had been manufactured on speculation, that numberless speculators, big and small, sprang up all over the country, and stocks, bonds, and credits were pyramided, and re-pyramided, and re-re-pyramided. Of course such a condition could not last and a crash was inevitable, because it was not natural for such gambling to continue." -Congressman Charles Lindbergh, Sr.

Notice how these artful and cunning men created the panic of 1907 so that they could provide the solution. Is this not the old Hegelian principle at work?

Apart from making a small number rich at the expense of the many, in this case the instability also served the second purpose of encouraging the public to believe that they would be better off living under a Central Bank and a fractional-reserve "Gold" Standard, The Federal Reserve System.