The Real Vampires: An Insider’s View of Banks

Tragedy and Hope: A History of the World in Our Time

Carroll Quigley* (1966 MacMillan)

Tragedy and Hope is a free download from http://sandiego.indymedia.org/media/2006/10/119975.pdf

(This is a third of a series of posts about stripping private banks of their power to create and control our money supply.)

Book Review

Tragedy and Hope is an exacting account of how the Bank of England, the Federal Reserve, the European central banks, and the investment banks that dominate them (e.g. Goldman Sachs and JP Morgan) came to control all western governments.

According to Quigley, banks have controlled western society – by manipulating the money supply – since the creation of the Bank of England and the fractional reserve lending system in 1694. Moreover, owing to the secrecy under which they operate, Quigley asserts that most elected officials are totally unaware of the immense control central and investment banks exert over the so-called democratic process.

He describes in exhaustive detail how all historical inflationary and deflationary crises, panics, wars, recessions and depressions were orchestrated behind the scenes by the banking establishment, for the purpose of increasing their private wealth. In his epic portrayal of three centuries of western civilization, he also describes how the banking aristocracy financed the rise of Communism in Russia, China and Eastern Europe, as well as bringing Hitler, Mussolini, Stalin and Roosevelt to power and guiding their governments from behind the scenes.

How Banks Create Money “Out of Nothing”

The single act, according to Quigley, that guaranteed Britain’s two century preeminence over the rest of the world was the development (in 1694), by British investment banks, of the fractional reserve lending system. This system allowed English investment banks to be the first in the world to lend money (to industry and the British government) that they created out of thin air. He goes on to list the banking dynasties that have held near absolute control of the global money supply since 1694, starting with banking cartel formed by Frankfurt banker Meyer Rothschild. 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.

The Council on Foreign Relations

Quigley also writes about the network of secret round tables of international corporate and banking elites started by Cecil Rhodes and expanded by his followers with his sizable estate. 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 (i.e. money the government borrowed from banks to fund public spending 2) causing a panic by throwing large numbers of shares on the stock market or 3) destroying the value of railroads and other companies the banks owned by loading them up with worthless assets.

As Quigley relates, they engaged in all three tactics at various times throughout the 19^th century, resulting in a series of booms, panics, recessions and depressions that wreaked havoc on American economic development.

How Bankers Engineered, World War I, Bolshevism, Nazism and the Great Depression

The most disturbing section of Tragedy and Hope describes how international bankers engineered (he describes their secret meetings) World War I and what Quigley calls the Banker-Engendered Deflationary Crisis of 1927-40 (aka the Great Depression). Following the 1870 unification under Bismarck, Germany experienced a rapid burst of industrialization, generating sufficient profit that they ceased to rely on investment banks to finance either business or government. They also threatened global bankers by competing with England and other European countries for export markets.

While engineering the first world war to put Germany in her place, the world banking cabal simultaneously hatched a scheme to destabilize Russia (which was making claims on Balkan members of the former Ottoman Empire) by secretly funding the Bolsheviks and other Russian revolutionaries.

Financing Hitler and the Nazis

When the the first world war ended in 1918, public debt in Western Europe and the US had increased by 1000%. In 1929, the austerity measures global banks forced on the US, England, France and other European countries led to widespread bankruptcies and unemployment and the virtual collapse of foreign trade.

Except in Germany. The global banking elite used the wealth generated from debt repayment to finance rapid German re-industrialization and militarization and the Nazi movement started by Hitler. The main German corporations funding Hitler were IG Farben, Siemens, Bayer, Daimler Benz, Porsche/Volksvagen and Krupp. In addition to Henry Ford and William Randolph Hearst, the important US banks and corporations who financed Hitler’s rise to power included Kodak, Coca-Cola, DuPont, Standard Oil, IBM, Random House and Chase Bank.

* Late mentor to former president Bill Clinton, Princeton, Harvard and Georgetown professor Carroll Quigley also served as an adviser to the Pentagon and Foreign Service.

An Australian Looks at the US Economy

How Private Banks (Not Government) Create Money

Australian economist Steve Keen (author of Debunking Economics) has an excellent 2009 article on his Debtwatch site explaining how Fractional Reserving Banking (FSB) supposedly works. The major premise of the article is that true FSB only exists in the minds of academic economists. Keen begins with a quote from Karl Marx (and a prominent photo) that was featured in a January 2009 article Investors Shortchanged  in the Sydney Morning Herald:  

“Talk about centralisation! The credit system, which has its focus in the so-called national banks and the big money-lenders and usurers surrounding them, constitutes enormous centralisation, and gives this class of parasites the fabulous power, not only to periodically despoil industrial capitalists, but also to interfere in actual production in a most dangerous manner— and this gang knows nothing about production and has nothing to do with it.” (Das Kapital, Volume 3, chapter 33).

Although Marx was totally off base in predicting the imminent downfall of capitalism, he sure got it right about banks.

 The Fiction of Fractional Reserve Banking

In the academic model of Fractional Reserve Banking, a retail bank establishes reserves (with depositors’ money and funds borrowed from the Federal Reserve). They then create $90 in new money for every $10 they hold in reserve. Only it never works this way in real life. The Reserve Bank of Australia totally eliminated the reserve requirement in the 1990s.The Federal Reserve has no reserve requirement for business loans and the 10% reserve requirement for personal loans is full of loopholes.

Keen’s article goes on to present M0/M1 and M2 data showing that what academic economists are calling Fractional Reserve Banking is actually a Pure Credit Monetary System. In other words, private banks are totally free to issue as much money, in the form of new loans, as they choose. They also have total control of both the money created by the commercial system and the money created by government.

M0 (sometimes called M1) refers to the Base Money or fiat money created by the Federal Reserve. M2 refers to M0 plus new money created by banks as loans. The ratio of M2/M0 is called the “money multiplier” ratio.

What his graphs show is that credit money (M2) is created first and M0 or fiat money (the reserves to cover it) is created up to a year later. In a true FRB system, M0 or Base Money would increase first, and M2 would follow as banks issue new money based on their reserves. The other major problem is that combined public and private debt greatly exceeds M2. Under a true FRB system, total debt could never exceed the amount of fiat and bank money created.

Why Quantitative Easing Won’t Work

Keen’s paper also includes an interesting prediction that the Federal Reserve’s quantitative easing (increasing M0 by electronically “printing” $85 billion in new fiat money every month) will be vastly insufficient to bring about economic recovery. He gives four reasons for this:

1. Instead of using the money the Fed loans them to lend to borrowers, private banks are allowing inactive reserves to rise.
2. Consumers are too far in debt to take out new loans.
3. Deflation will continue because retailers and wholesalers must deeply discount their products to keep from going bankrupt.
4. “Deleveraging” (paying off debt) is massively suppressing consumer demand.

Keen predicts that quantitative easing will have little effect unless Federal Reserve Chairman Ben Bernanke pumps enough money into the economy to make a dent in the $42 trillion US debt. Deducting compound interest, he reckons $20 trillion would reduce it by about a quarter.

Ironically such a massive increase in government-issued Base Money (M0 ) would effectively replace our bank-controlled credit money system with a publicly controlled fiat money system. In other words it effectively restores the ability of the federal government to issue money, as Lincoln did (see The Role of Foreign Banks in US History).

Makes you wonder if this is Obama’s and Bernanke’s true agenda with all the electronic money they’re printing – to quietly nationalize America’s monetary system through the backdoor.

For more background on how private banks create the vast majority of US dollars (out of thin air), check out the free video The Secret of Oz:

Photo credits:  youkaine via photopin cc and photo credit: wolfgangfoto via photopin cc