The Unseen Hand - Ralph Epperson

The Federal Reserve

After their successive failures at convincing the American people that they needed a Central Bank by forcing them into a series of wars, the international bankers connected with the conspiracy decided to change their methods. Instead of utilizing wars for this purpose, they would convince the unsuspecting American citizen that they needed a central bank through the use of artificially created depressions, recessions, and panics.

It was easy for the international bankers to create a banking panic.

Because of the nature of the banking business, the bankers knew that only a small percentage of the deposits stored in a bank by the depositors is ever called for on any given day. Because of this, only a small percentage, say twenty percent, is kept at the bank at any one time. The other eighty is loaned out, at interest, to borrowers who in turn reinvest it in Capital Goods or Consumption Goods.

Therefore, it would be easy for the bankers to cause a bank panic, called a "run," by convincing the depositors of any particular bank that the bank was insolvent and didn't have the money to pay the depositors should they withdraw their cash. This was of course a true statement, and if all of the depositors went to the bank at the same time to withdraw their deposits, the individual who had made the statement would prove to be rather prophetic in his analysis of the situation.

The news that a particular bank didn't have the deposits belonging to the depositors would cause other depositors at other banks to withdraw their funds as well to make certain that their deposits were safe. What would start as a "bank run" on a particular bank would end in a full-fledged national panic

And the individual who made the assessment of the bank's insolvency would be recognized as a prophet of the first order.

The banks who would experience a run on their deposits would ask those to whom they loaned the money to return it and there would be a rush to sell properties to pay off the mortgages. When this happened all at once, property values would drop, allowing those with extra cash to buy properties at a reduced price. The pre-planned panic could work two ways: the bankers who knew it was coming could withdraw their cash prior to the beginning of the panic, and then go back into the market to buy Capital Goods at a reduced price.

[Illustration] from The Unseen Hand by Ralph Epperson


This became, then, a powerful tool in the hands of those who wished to change our banking system from one where individual bankers functioned to one where a small group of bankers operated a national bank. The bankers would then blame the current banking system for the troubles in the economy.

But more importantly, the international bankers who caused the problem could offer their desired solution: a central bank.

So the tactic changed from one of creating wars to one of creating bank panics to influence the American people into the creation of a permanent central bank.

One of the prime movers in this movement was J.P. Morgan, whose father was one of the Rothschild agents who made a huge fortune in running President Lincoln's blockade during the Civil War.

(Note: It is interesting to note that the J.P. Morgan, the supporter of America's need for a central bank, is related to Alexander Hamilton, the supporter of America's need for a central bank in the days of America's revolutionary war against the English Government. This connection was revealed in 1982, when Time magazine announced that Pierpont Morgan Hamilton, the great-great grandson of Alexander Hamilton and nephew of J.P. Morgan, had passed away.)

In 1869, J.P. Morgan went to London and reached an agreement to form a company known as Northern Securities that was intended to act as an agent for the N.M. Rothschild Company in the United States.

The first major panic created by the international bankers occurred in 1893 when local bankers around the nation were told to call in their loans. Senator Robert Owen ". . . testified before a Congressional Committee that the bank he owned received from the National Bankers' Association what came to be known as the 'Panic Circular of 1893.' It stated: 'You will at once retire one-third of your circulation and call in one-half of your loans."

Congressman Charles A. Lindbergh, the father of the famous aviator, saw the circular that Senator Owen reported on, and said that it was intended to cause a "stringency" (a tightness) to cause "business men to appeal to Congress for legislation that would favor the bankers."

(Note: The bankers didn't create the panic by advising the American people that the banks were insolvent. They issued a circular to have the bankers cause it themselves. They would hold the former strategy for later panics.)

This tactic, of course, is exactly the same as that explained by Jan Kozak in his book Not a Shot is Fired: create the problem, and then encourage the people affected to ask Congress for laws favorable to those who created the problem.

Congress also took this opportunity to pass an income tax, including it in what was called the Tariff Act of 1894. So the two planks of The Manifesto created to destroy the middle class were being offered to the American people at the same time: the central bank and the income tax.

One courageous Congressman, Robert Adams, went on record as opposing the income tax. He is quoted as saying:

"The imposition of the tax will corrupt the people. It will bring. . . the spy and the informer. It will be a step toward centralization—It is expensive in its collection and cannot be fairly imposed."

But in spite of the actions of the conspirators, the income tax as a law passed by Congress was declared to be unconstitutional by the Supreme Court. So the decision was made to add the income tax to the Constitution as a Constitutional Amendment.

It was now 1900, and the administration of President William McKinley was prosecuting the Northern Securities Company under the anti-trust laws. McKinley changed his vice-presidents for his second term, and less than a year later he was assassinated. His second vice-president, Theodore Roosevelt, became president, and the prosecution of Northern Securities stopped.

Roosevelt was later elected in his own right in 1904.

Another agent of the British Rothschild banking interests, Colonel Edward Mandell House, wrote an extremely important book in 1912. It was entitled Philip Dru, Administrator, and contained the personal beliefs of the author in the form of a novel. Even though the book was written in 1912, it contained predictions about future events the author hoped would come true.

The plot of the novel concerns a meeting in 1925 between John Thor, described as the "high priest of finance," and Senator Selwyn, a very important Senator.

Selwyn had discovered "that the government was run by a few men, that outside of this little circle, no one was of much importance. It was (Selwyn's) intention to break into it if possible and (his) ambition now leaned so far as to want, not only to be of it, but later, to be IT."

Senator Selwyn was not content with just electing the President of the United States, he also "planned to bring under his control both the Senate and the Supreme Court." "It was a fascinating game to Selwyn. He wanted to govern the Nation with an absolute hand, and yet not be known as the directing power."

The nation came to know of this conspiracy between these two important individuals by a fluke, when Mr. Thor's secretary played back a tape recording made on a dictagraph that had been inadvertently turned on during the meeting. The secretary gave the recording to the Associated Press which spread the story of the conspiracy across the nation. America read the story and knew that "revolution was imminent"

The hero of the story, Philip Dru, who is not directly involved in the plot, organizes an army of 500,000 men and leads them on a march to Washington. He actually clashes with government troops prior to his arrival in Washington, and he scores a decisive victory over the Army. The President, named Rockland in the novel, flees the country, and Selwyn is appointed acting President in his absence. One of his first acts as President is to surrender to Philip Dru.

Dru moves in, keeps Selwyn as the President, but assumes "the power of a dictator" as he allows Selwyn to continue functioning as President, although Dru himself would make all of the decisions. He is now in a position to give the United States a new form of government, Dru describes it as " . . . Socialism as dreamed of by Karl Marx."

He arranges for several key Marxist programs, such as a graduated income tax, and a graduated inheritance tax. He also prohibits the "selling of. . .anything of value," abolishing, at least in part, the right of private property, just as spelled out by Marx in his writings.

Dru starts making the laws of the nation, as " . . . there were no legislative bodies sitting, and the function of law-making was confined to one individual, the administration (Philip Dru) himself."

Dru also re-wrote the "obsolete. . . and grotesque" Constitution of the United States.

Dru also meddled in the internal affairs of other nations, including England, and concerned himself with the nation of Russia as he: " . . . wondered when her deliverance would come. There was, he knew, great work for someone to do in that despotic land."

In other words, Colonel House, the author of Philip Dru, was hoping that there would be a revolution in Russia. He was urging the Russian Revolution upon the Russian people, an event that was still five years away, as the so-called "despotic" Czar of Russia was replaced by "Socialism as dreamed of by Karl Marx."

[Illustration] from The Unseen Hand by Ralph Epperson


After the publication of the novel, it became known that Colonel House admitted that the book formulated "his ethical and political faith." House saw himself "in his hero. Philip Dru is what he himself would like to have been. Every act in his career, every letter, every word of advice that passed from him to (President) Woodrow Wilson was consistent with the ideas enunciated by Philip Dru."

Colonel House had arranged to elect the next president of the United States, Woodrow Wilson, in the election of 1912. Wilson became the student of Colonel House, and as he began to learn the thoughts of his mentor, he became so close that Wilson later said that House's "thoughts and mine are one."

Wilson is confusing, a sort of enigma in the events of that day. He admitted that there was a giant conspiracy, yet he became involved with it. He wrote:

"There is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive that they better not speak above their breath when they speak in condemnation of it."

Mr. Wilson didn't identify the power he had become aware of as being that of the Masons, but he was, in fact, a member.

One of the many people that House gave a copy of his book to was another member of the Masons, Franklin Delano Roosevelt who is reported to have read the book with great interest. One evidence that Roosevelt enjoyed the book was that he called his meetings with the American public over the radio his "fireside chats," possibly because of the fact that in House's book, Dru, the hero, "sat contentedly smoking by a great log fire in the library "

House was an extremely important person during the Wilson years, as he once told biographer Charles Seymour:

"During the last fifteen years I have been close to the center of things, although few people suspect it. No important foreigner has come to America without talking to me. I was close to the movement that nominated Roosevelt."

So not only did House create Woodrow Wilson, he also was involved in making Franklin Roosevelt the President of the United States.

So House became the "secret power" behind both Wilson and Roosevelt, exactly like his fictional character Senator Selwyn had hoped to become.

Another representative of the Rothschild interests, J.P. Morgan, was preparing for the next scheduled event in the creation of America's central bank. Morgan during the early months of 1907 was in Europe for five months, shuttling back and forth between London and Paris, homes of two branches of the Rothschild banking family.

Apparently the reason Morgan was in Europe was because the decision was being made to have Morgan precipitate a bank panic in America. When he returned, he started rumors that the Knickerbocker Bank in New York was insolvent. The bank's depositors became frightened because they thought that Morgan, being the best known banker of the day, might very well be right. Their panic started a run on the bank. Morgan was right, and the panic at the Knickerbocker also caused runs on other banks, and the Panic of 1907 was complete.

The propaganda started almost immediately that the state-chartered bankers couldn't be trusted anymore with the banking affairs of the nation. The need for a central bank had become apparent by the Panic of 1907, or at least this is how the conspiracy argued.

Historian Frederick Lewis Allen, writing in Life magazine, became aware of the plot. He wrote:

". . .certain chroniclers have arrived at the ingenious conclusion that the Morgan interests took advantage of the unsettled conditions during the autumn of 1907 to precipitate the Panic, guiding it shrewdly as it progressed, so that it would kill off rival banks, and consolidate the pre-eminence of the banks within the Morgan orbit."

Woodrow Wilson, who was president of Princeton University in 1907, spoke to the American people, attempting to remove whatever blame might be placed upon the Morgan shoulders. He said:

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

So Wilson wanted to hand over the affairs of the nation to the very person who had caused all of the concern: J.P. Morgan!

But the main thrust of the explanations about the causes of the 1907 Panic was that the American people needed a strong central bank to prevent the abuses of the "Wall Street" bankers: "What finally convinced Congress of the need for better control over the nation's banking was one stark event: the Panic of 1907. The panic subsided. Agitation grew for an effective national banking system."

So the American people, who had suffered through the American Revolution, the War of 1812, the battles between Andrew Jackson and the Second Bank of the United States, the Civil War, the previous panics of 1873 and 1893, and now the Panic of 1907, were finally conditioned to the point of accepting the solution offered by those who had caused all of these events: the international bankers.

That solution was a central bank.

The individual the bankers used to introduce the legislation that created the central bank was a Senator from Rhode Island, a Mason, and the maternal grandfather of the Rockefeller brothers, David, Nelson, etal., by the name of Nelson Aldrich. He was appointed to a National Monetary Commission and charged "to make a thorough study of financial practices before formulating banking and currency reform legislation."

So for two years, this Commission toured the banking houses of Europe, learning (supposedly) the secrets of the central banking systems of Europe, (there are those who believe that they already knew the secrets of the central banking systems of Europe!)

Upon Senator Aldrich's return, in November, 1910, he boarded a train in Hoboken, New Jersey, for a ride to Jekyll Island, Georgia. His destination was the Jekyll Island Hunt Club, owned by Mr. Morgan. It was here that the legislation that would give America its central bank was written.

Aboard the train, and with Senator Aldrich later in Georgia, were the following individuals:

  • A. Piatt Andrew, Assistant Secretary of the Treasury;
  • Senator Nelson Aldrich, National Monetary Commission;
  • Frank Vanderlip, President of Kuhn-Loeb's National City Bank of New York;
  • Henry Davidson, Senior Parmer of J.P. Morgan;
  • Charles Norton, President of Morgan's First National Bank of New York;
  • Paul Warburg, Parmer in the banking house of Kuhn-Loeb & Company; and
  • Benjamin Strong, President of Morgan's Banker's Trust Company.

The railroad car that these gentlemen travelled in belonged to Senator Aldrich, and while they were aboard, they were sworn to secrecy and asked to refer to each other by first names only.

One of those, Mr. Vanderlip, later went on to reveal his role in the writing of the bill that created the Federal Reserve System. He wrote in the Saturday Evening Post:

". . . in 1910, when I was as secretive, indeed as furtive, as any conspirator. I do not feel it is any exaggeration to speak of our secret expedition to Jekyll Island as the occasion of the actual conception of what eventually became the Federal Reserve System.

"We were told to leave our last names behind us. We were told further that we should avoid dining together on the night of our departure. We were instructed to come one at a time and as unobtrusively as possible to the terminal of the New Jersey littoral of the Hudson, where Senator Aldrich's private car would be in readiness, attached to the rear end of the train for the South.

"Once aboard the private car, we began to observe the taboo that had been fixed on last names.

"Discovery, we knew, simply must not happen, or else all our time and effort would be wasted."

Notice that the conspirators did not want the American people to know what they had in store for them: a central bank. The legislation was to be written not by a group of legislators, but by a group of bankers, mostly connected with the man responsible for the Panic of 1907: J.P. Morgan. The conspiracy also had one additional problem. They had

"to avoid the name Central Bank, and for that reason (they) had come upon the designation of Federal Reserve System. It would be owned by private individuals who would draw profit from ownership of shares and who would control the nation's issue of money; it would have at its command the nation's entire financial resources; and it would be able to mobilize and mortgage the United States by involving (the United States) in major foreign wars."

The method the conspirators used to defraud the American people was to divide the Federal Reserve System into twelve districts so that the American people could not call the bank a "central bank." The fact that the twelve districts had one director, called the Federal Reserve Chairman, apparently was not to be considered relevant.

The one non-banker at Jekyll Island was Senator Nelson Aldrich, but he certainly could have qualified as a wealthy man, capable of starting his own bank. When he entered the Senate in 1881, he was worth $50,000. When he left the Senate in 1911, he was worth $30,000,000.

Now that the legislation creating the central bank was written, it would need a president who would not veto the bill after it passed the House and the Senate. The President in 1910 and 1911 was William Howard Taft, elected in 1908, and he was on record as saying that he would veto the bill should it come to his desk for him to sign. He was a Republican and was surely to be re-elected to a second term in 1912.

The conspiracy needed to defeat him, so it supported first the campaign of ex-President Teddy Roosevelt, a fellow Republican, to defeat Taft in the Republican primaries. This activity failed as Taft was re-nominated, so the conspiracy planned on defeating him with the Democratic candidate, Woodrow Wilson.

However, the supporters of Wilson soon found that their candidate would not draw enough votes to defeat Taft in the general election. It was discovered that Taft would defeat Wilson by a 55 to 45 margin.

This obviously caused a problem for the supporters of the Federal Reserve Bill, which would be defeated if Taft were to be re-elected. What they had fought wars for and had caused depressions for, was now within their grasp, and it all could be prevented by one man: President William Howard Taft

The supporters needed someone to draw votes away from Taft in the general election, so they urged Teddy Roosevelt to run against both Wilson and Taft It was theorized that Roosevelt, a fellow Republican, would draw votes from the other Republican in the race, Taft, and enable Wilson to win without a majority of the votes cast. (Wilson, of course, had agreed to sign the Federal Reserve Bill should it get to his desk for him as President to sign.)

This strategy was confirmed in a book by Ferdinand Lundberg, entitled America's 60 Families. Lundberg wrote:

"In view of the vast sums subsequently spent by him (Frank Munsey) and Perkins, (two Roosevelt supporters, both of whom were closely allied with the J.P. Morgan interests) to forward the Progressive campaign (of Roosevelt) and insure Taft's defeat, the suspicion seems justified that the two were not over-anxious to have Roosevelt win.

"The notion that Perkins and Munsey may have wanted Wilson to win, or any Democratic candidate other than (William Jennings) Bryan, is partly substantiated by the fact that Perkins put a good deal of cash behind the Wilson campaign.

"In short, most of Roosevelt's campaign fund was supplied by the two Morgan hatchet men who were seeking Taft's scalp."

The tactic of dividing the votes of the apparent winner so that a candidate with a minority of the votes could be elected has been used frequently in the United States, most notably in the nomination of George McGovern in 1972, and also in the election of 1980 which will be discussed in another chapter.

In the case of the McGovern election, it was established prior to the Democratic primaries that he apparently would not be able to gamer more than thirty to thirty-five percent of the primary election votes against Hubert Humphrey, the party's favorite, and their nominee in 1968. Yet it was important for McGovern to get the nomination (for reasons that will be covered later in another context.) To implement this decision, the Democrats offered the Democratic voters a candidate of every political stripe and persuasion in the primaries. These candidates were to divide Humphrey's vote so that McGovern would win the primaries with thirty to thirty-five percent of the vote. This would enable McGovern, with his hard-core following, to win the Democratic nomination with but a small percentage of the vote.

The strategy worked.

McGovern won the nomination against the party favorite, Hubert Humphrey.

So the election of 1912 became history. The three candidates, Taft, Wilson and Roosevelt, waited for the results.

When the votes were counted, Wilson won the election with but forty-five percent of the vote, Roosevelt received more votes than did Taft, and Taft ran third. But the interesting thing is that the total of the votes cast for Taft and Roosevelt, when added together, would have been enough to defeat Wilson, fifty-five percent to forty-five percent. It was extremely likely that in a two-man race, Taft would have defeated Wilson rather handily.

The plot worked. Wilson was elected and then inaugurated in January, 1913. Wilson could now sign the Federal Reserve Bill in December, 1913, after it had passed the House and the Senate. And he did.

What did the American people get from the Federal Reserve System?

The System itself publishes a paperback textbook entitled The Federal Reserve System, Purposes and Functions, that is used in colleges to explain the activities of the System to college students, especially in a class entitled Money and Banking.

This booklet explains the functions of the Federal Reserve:

"An efficient monetary mechanism is indispensible to . . . the nation. The function of the Federal Reserve is to foster a flow of money and credit that will facilitate orderly economic growth, a stable dollar, and long-run balance in our international payments."

(Note: It is a fair question to ask the Federal Reserve System, if the Americans haven't had an "orderly economic growth, a stable dollar, and a long-run balance in our international payments" which has been America's history since the creation of the System, why is it allowed to continue? It would seem that such a system with such a dismal record for about seventy years would be abolished without delay.

Could it be that the system was created to ensure that America didn't have an "orderly economic growth, a stable dollar, and a long-run balance in our international payments?" In other words, the System was created to do exactly the opposite of what it tells the American people! The System is working!)

There were those who opposed the creation of the System at the time and made that opposition public. One such individual was Congressman Charles Lindbergh, Sr.

Congressman Lindbergh warned the American people that the Federal Reserve Act

". . .established the most gigantic trust on earth. When the President signs this act, the invisible government by the money power. . . will be legitimized. The new law will create inflation whenever the trusts want inflation. From now on, depressions will be scientifically created."

The Congressman had put his finger on the pulse of the problem: the Federal Reserve System was created to foster economic emergencies.

This instrument of economic destruction was now in place. The staffing of the System's key positions with those who created and supported it followed.

The first governor of the New York Federal Reserve branch was Benjamin Strong of Morgan's Bankers Trust Company, a participant in the Jekyll Island writing of the bill. The first Governor of the Board of Directors was Paul Warburg, a partner in the banking house of Kuhn, Loeb and Company, also a participant at the Jekyll Island Meeting.

What had those who called the system "Federal" created? Was it really a "Federal" Reserve System?

"It is a private organization, since the member banks own all of the stock, on which they receive tax-free dividends; it must pay postage, like any other private corporation; its employees are not on civil service; it may spend whatever it wishes; . . . and its physical property, held under private deeds, is subject to local taxation."

In fact, America's elected officials know that the "Federal" Reserve System isn't federal. In speeches to the American people, recent Presidents Richard Nixon, Gerald Ford, and Jimmy Carter have joined Dr. Arthur Burns, former head of the System, the Associated Press, the House of Representatives in a primer on the System, and others, in stating that the System is "independent," (or words to that effect.)

In other words, these individuals and entities know that the system is not "Federal." It is privately owned and operated.

Other Congressmen, more recent than Congressman Lindbergh, have also warned the American people about the dangers of the non-federal Federal Reserve System. Congressman Wright Patman, the Chairman of the House Banking and Currency Committee, said:

"In the United States today, we have in effect two governments. We have the duly constituted government. Then we have an independent, uncontrolled and un-coordinated government in the Federal Reserve System, operating the money powers which are reserved to Congress by the Constitution."

Ludwig von Mises, a free-market economist, has spoken somewhat humorously on the subject of the governments that create national banking systems like the Federal Reserve:

"Government is the only agency that can take a perfectly useful commodity like paper, smear it with ink, and render it absolutely useless."

The privately owned Federal Reserve System is in control of the money supply and therefore has the ability to create inflation and deflation at will.

The money supply per capita in 1913, when the Reserve System was created was around $148. By 1978, it stood at $3,691.

The value of the 1913 dollar, taken as a base of 1.00, had shrunk to approximately 12 cents by 1978.

(This must be what the Federal Reserve System calls a "stable dollar.")

The quantity of money in January, 1968, stood at $351 billion, and in February, 1980, it was $976 billion, a 278 percent increase. In fact, the quantity of money doubles approximately every ten years. But strangely, this increase in the money supply, or so the American people are told, does not cause inflation. Even though the dictionary definition of inflation states that an increase in the money supply always causes inflation.

The Federal Reserve System admits that the ability to create inflation rests with their agency: "Thus, the ultimate capability for expanding or reducing the economy's supply of money rests with the Federal Reserve."

Not all of the banks in America, however, were interested in the creation of inflation. Some were concerned about their membership in the System and were withdrawing. In fact, William Miller, then the Chairman of the Federal Reserve, in 1978 warned that the flight of the member banks out of the System was "weakening the financial system of the United States."

A total of 430 members banks had left the Federal Reserve in an eight-year span, including 15 major banks in 1977, with deposits of more than $100 billion, and another 39 banks left in 1978. As a result of this attrition, twenty-five percent of all commercial bank deposits and sixty percent of all banks were now outside of the system.

Miller continued: "The ability of the system to influence the nation's money and credit (became) weaker."

The trend away from the Federal Reserve System continued, and in December, 1979, Federal Reserve Chairman Paul Volcker informed the Flouse Banking Committee that " . . . some 300 banks with deposits of $18.4 billion have quit the Fed (the Federal Reserve System) within the past 4.5 years. He said another 575 of the remaining 5,480 member banks, with deposits of more than $70 billion, 'have given us some indication of their intent to withdraw.'"

And in February, 1980, it was reported that: "In the last four months, 69 banks (had) withdrawn from the Federal Reserve System, taking with them seven billion dollars in deposits. Another 670 banks, holding $71 billion in deposits, have expressed a desire to leave the system."

This exodus from the System could not be allowed to continue, so in 1980, Congress passed the Monetary Control Act which gave the Federal Reserve System control of all depository institutions, whether or not the banks were previously members of the System itself.

But in any event, the System after its creation in 1913 was in a position to loan the federal government large sums of money. Their first real opportunity to do this occurred just a few years later during World War I.

The following table illustrates just how much money the System loaned the United States government during the War: (in millions of dollars, rounded).

Year Receipts Outlays Surplus or Deficit
1916 $ 761 731 48
1917 1,101 1,954 -853
1918 3,645 12,677 -9,032
1919 5,139 18,493 -13,363
1920 6,649 6,358 291

The table shows how the size of the government grew from 1916 to 1920, and how enormous quantities of debt were accumulated. This money, in large part, was borrowed from the Federal Reserve System, America's central bank, which " . . . hath benefit of interest on all moneys which it creates out of nothing."

In addition to the ability to create interest-bearing debt, the Federal Reserve System also has the ability to create economic cycles through the expansion and contraction of the quantity of money and credit. Their first major opportunity to create a depression by this method occurred in 1920, when the Federal Reserve created what has become known as the Panic of 1920.

One of those who saw how this was the result of prior economic planning was Congressman Lindbergh, who in 1921 wrote in his book Economic Pinch, the following:

"Under the Federal Reserve Act, panics are scientifically created; the present panic is the first scientifically created one, worked out as we figure a mathematical problem."

The process works in the following manner: the System increases the money supply (from 1914 to 1919, the quantity of money in the United States nearly doubled.) The media then encourages the American people to borrow large quantities of money on credit.

Once the money is out on loan, the bankers contract the money supply by calling in their outstanding loans. The entire process was laid out by Senator Robert L. Owen, Chairman of the Senate Banking and Currency Committee, and a banker himself. He wrote:

"In the early part of 1920, the farmers were exceedingly prosperous.

"They were paying off their mortgages and buying a lot of land, at the insistence of the government—had borrowed money to do it—and then they were bankrupted by a sudden contraction of credit which took place in 1920.

"What took place in 1920 was just the reverse of what should have been taking place.

"Instead of liquidating the excess of credits created by the war through a period of years, the Federal Reserve Board met in a meeting which was not disclosed to the public

"They met on the 16th of May, 1920, and it was a secret meeting.

"Only the big bankers were there, and the work of that day resulted in a contraction of credit (by ordering banks to call in outstanding loans) which had the effect the next year of reducing the national income fifteen billion dollars, throwing millions of people out of employment, and reducing the value of lands and ranches by twenty-billion dollars."

Not only did the bankers transfer large quantities of land from the farmers to the bankers by this contraction, but the process also transferred large numbers of banks from the hands of those bankers who could not meet the demands of the Federal Reserve and had to sell their banking assets for a reduced price to those who had the money to buy bankrupt banks (the Panic of 1920 bankrupted 5,400 banks.)

One of the major non-banking targets of this panic was Henry Ford, the automobile manufacturer.

"Despite inflation, Ford ordered a price cut for his automobiles, but demand was still insufficient and a number of Ford plants had to be shut down.

"Rumor had it that a huge loan was being negotiated. But Ford, who thought New York bankers were nothing short of vultures, was determined not to fall into their hands. . .

"Bankers. . . lined up to offer their 'help' in return for his surrender of independence. The game was clear to Mr. Ford.

"One representative of a Morgan-controlled bank in New York came forward with a plan to "save" Ford . . . .

"Ford saved his company by turning to his dealers, to whom he now shipped his cars collect in spite of the slowness of the market. . . . Demand grew . . . and the plants were re-opened."

Ford, had out-smarted the bankers who had planned the Panic, in part, to destroy him. He did not need to borrow large quantities of money and surrender control of his company to the bankers who would certainly wish to control that which they subsidized.

The Panic of 1920 was a success, and this success led the bankers to plan another: the Crash of 1929.

The first step was, once again, to increase the money supply, and this was done from 1921 to 1929, as is illustrated by the following table:

Years in Billions
June, 1920 $ 34.2
June, 1921 (low) 31.7
June, 1922 33.0
June, 1923 36.1
June, 1924 37.6
June, 1925 42.6
June, 1926 43.1
June, 1927 45.4
June, 1928 (high) 45.7
June, 1929 45.7

The figures reveal that the Federal Reserve expanded the money supply from a low of $31.7 billion in 1921, to a high of $45.7 billion in 1929, an increase of approximately 144 percent.

To move this increase in the money supply into the economy, individual banks could borrow money from the Federal Reserve and re-loan it to the buying public. The money was borrowed at 5 percent interest, and was reloaned at 12 percent.

Contributing to the increase in the money supply, or the money being made available by the Federal Reserve, was the money being made available by the large corporations, which were loaning their surplus funds to buyers on Wall Street. These loans from these non-banking sources were approximately equal to those from the banking system. For instance, call loans to brokers in 1929 made by some leading corporations were as follows:

Lender ownder Peak amounts
American and Foreign Power (J.P. Morgan) $30,321,000
Electric Bond and Share (J.P. Morgan) $157,579,000
Standard Oil of New Jersey (Rockefellers) $97,824,000

In addition, J.P. Morgan and Company had nearly $110,000,000 in the call-loan market.

This expansion in the money supply brought prosperity to the country, and the American people were encouraged by the media to buy into the stock market. They were told that those who did were making large quantities of money.

The stock brokers who were handling the new influx of buyers coming to make a fortune in the stock market were using a new tool to induce them into buying more shares of stock than they had anticipated. This new tool was called "buying on margin," and it enabled the stock buyer to borrow money and to use it to buy stock.

The buyer was encouraged to buy stock with only ten percent down, borrowing the remaining ninety percent from the stock broker, who had arranged for the buyer to borrow from either a bank or a large corporation. The following example will illustrate how this method worked:

"A share of stock sells for $100, but because of the ability of the purchaser to buy on margin, with only ten percent down, ten shares could be bought, with the same $100 instead of only one:

One shareTen shares
Buyer's cash: $ 100 $ 100
Borrowed cash: $ 0 $ 900
Total: -$100 $1,000

"Therefore for the same investment, $100, a purchaser could borrow $900, using the stock as collateral for the loan, and therefore buy ten shares for the same investment of $100.

"Now, for this example, presume that one share of stock went up ten percent in the stock market, or to $1 10. This would increase the profits made by the stock buyer:

Value of one share: $110 Ten shares: $1,100
Buyers investment: $100 $ 100
Profit: $ 10 $ 100
Profit on investment 10% 100%

The investor could now sell the shares of stock, and make a one-hundred percent profit with only a ten-percent increase in the stock's value (the buyer could double his investment) after paying off the loan to the lender.

There was one catch, however, as the money was loaned to the buyer on what was called a "24 hour broker call loan." This meant that the broker could exercise his option and require that the borrower sell his stock and return the loan amount 24 hours after the lender had asked for it. The buyer had 24 hours to repay the loan and had to either sell the stock or come up with the loan amount to pay off the lender of the money.

This meant that, whenever the brokers wanted to, they could require all of the stock buyers to sell at the same time by calling all of the loans at the same time. This activity would precipitate a panic on the stock market, when all of the stock owners went to sell their stock. And when all the sellers offer stock at the same time, the price drops rapidly. The whole process was detailed by one author who wrote:

"When everything was ready, the New York financiers started calling 24-hour broker call-loans. This meant that the stock brokers and the customers had to dump their stock on the market in order to pay the loans.

"This naturally collapsed the stock market and brought a banking collapse all over the country, because the banks not owned by the oligarchy were heavily involved in broker call-loans at this time, and bank runs soon exhausted their coin and currency, and they had to close.

"The Federal Reserve System would not come to their aid, although they were instructed under the law to maintain an elastic currency."

The Federal Reserve "would not come to their aid," even though they were required by law to do so, and many banks (and individuals) went bankrupt. Notice that those banks owned by the oligarchy had already gotten out of the broker call-loan business, without any damage, and those who didn't went bankrupt

Is it possible that the Federal Reserve planned it exactly as it happened? Is it possible that those banks that knew the game plan had gotten out while the prices were high and then came back into the market when they were low? Is it possible that some banks knew when the crash was coming and all that they had to do to buy bankrupt banks was to wait until after the crash, and then buy up the troubled banks at only a percentage of the true value?

After the Stock Market Crash of 1929, even a casual observer had to notice that the ownership of the banking system had changed. In fact, today "100 out of 14,100 banks (less than 1%) control 50% of the nation's banking assets. Fourteen big banks have 25% of the deposits." 34

In any event, the stock market crashed. The stock market index shows the effects of this manipulation:

1919 $138.12
1921 66.24
1922 469.49
1932 57.62

One of the spectators of the stock market crash was Winston Churchill who was brought to the stock market exchange on October 24, 1929, by Bernard Baruch. Some rare historians are convinced that Churchill was brought to witness the crash firsthand because it was desired that he see the power of the banking system at work.

Even though many stockholders had to sell their stock, it is not commonly questioned as to who bought all of the stock that was being sold. The history books generally discuss all of the selling that went on during the crash, but fail to discuss all of the buying.

John Kenneth Galbraith in his book The Great Crash 1929, wrote this about the buyers:

"Nothing could have been more ingeniously designed to maximize the suffering, and also to insure that as few as possible escaped the common misfortune.

"The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another.

"In the end, all the money he had was extracted from him and lost.

"The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains."


One of those "fortunate speculators" who got out early was Bernard Baruch, the individual who brought Winston Churchill to witness the crash. He has said: "I had begun to liquidate my stock holdings and to put my money into bonds and into a cash reserve. I also bought gold."

Another who got out early was Joseph P. Kennedy, the father of President John Kennedy, who in the winter of 1928-29 got out of the market "The profits he took from the sale of his . . . holdings were not reinvested, but kept in cash."

Others who sold their stock before the crash included international bankers and financiers Henry Morgenthau and Douglas Dillon.

The selling on credit during the crash had another effect already mentioned. About sixteen-thousand banks, or fifty-two percent of the total, went out of business.

Some of the stockholders went to their banks to withdraw whatever cash they had in the bank to pay whatever they could of their stock call in cash. This caused a nearly nation-wide bank run. To end this panic, President Franklin D. Roosevelt, two days after his inauguration in March of 1933, shut down all the banks for a "holiday."

There weren't many who saw what was happening to the American people by these machinations of the bankers, but one who did was Congressman Louis McFadden, who was quoted as saying:

"When the Federal Reserve Act was passed, the people of these United States did not perceive that a world banking system was being set up here.

"A super-state controlled by international bankers and international industrialists acting together to enslave the world for their own pleasure.

"Every effort has been made by the Fed to conceal its powers but the truth is—the Fed has usurped the Government

"It controls everything here and it controls all our foreign relations. It makes and breaks governments at will."

After the stock market crash had run its course, Congressman McFadden charged that: "The money and credit resources of the United States were now in the complete control of the banker's alliance between J.P. Morgan's First National Bank group, and Kuhn, Loeb's National City Bank."

On May 23, 1933, McFadden brought impeachment charges against the Federal Reserve Board, the agency he thought had caused the Stock Market Crash of 1929, with these charges, amongst others:

"I charge them . . . with having. . . taken over $80,000,000,000 (eighty billion dollars) from the United States Government in the year 1928—

"I charge them . . . with having arbitrarily and unlawfully raised and lowered the rates on money, . . . increased and diminished the volume of currency in circulation for the benefit of private interests. . . "

And then McFadden expanded his understanding of those who benefitted in the crash to include the international bankers:

"I charge them . . . with. . . having conspired to transfer to foreigners and international money lenders title to and control of the financial resources of the United States "

He then ended with this statement that the cause of the depression was not accidental:

"It was a carefully contrived occurrence . . . . The international bankers sought to bring about a condition of despair here so that they might emerge as the rulers of us all."

McFadden had a price to pay for his attempts to explain the causes of the depression and the stock market crash:

"On two occasions assassins attempted to kill McFadden with gunfire; later he died, a few hours after attending a banquet, and there is little doubt that he was poisoned."

[Illustration] from The Unseen Hand by Ralph Epperson


Now that the stock market had crashed, the Federal Reserve took steps to reduce the nation's quantity of money:

Date in billions
June, 1929 (high) $45.7
December, 1929 45.6
December, 1930 43.6
December, 1931 37.7
December, 1932 34.0
June, 1933 (low) 30.0

The quantity of money went from a high of nearly $46 billion to a low of $30 billion in just four years. This action of the Federal Reserve rippled throughout the entire business world to the point where "production at the country's factories, mines, and utilities fell by more than one-half. The total output of goods and services dropped by one-third."

In spite of all of the evidence to the contrary, there are still those who don't know who, or what, caused the Stock Market Crash of 1929. One of these is economist John Kenneth Galbraith, who, in his book The Great Crash, 1929, wrote that: "The causes of the Great Depression are still far from certain."

In fact, Galbraith knows that people did not cause the crash and the resulting depression:

"No one was responsible for the great Wall Street Crash. No one engineered the speculation that preceded it

"Hundreds of thousands of individuals . . . were not led to the slaughter. They were impelled. . . by the lunacy which has always seized people who are seized in turn with the notion that they can become very rich.

"There were many Wall Streeters who helped to foster this insanity. . . .There was none who caused it."

The media now entered the fray, by proclaiming that the free-enterprise system had failed, and that government was needed to solve the economic problems caused by the lack of wisdom inherent in the system. The solution was " . . . new government measures and controls. The powers of the Federal Reserve Board—have been strengthened."

More recently, it has been illustrated just how much power the Federal Reserve has. Take, for instance, the two articles in the Portland Oregonian of Saturday, February 24, 1972. The two articles are on top of one another on the same page.

The top article is captioned: "Reserve Board Raises Lending Rate for Banks" and the bottom article is entitled: "Wall Street Values Plunge."

Anyone could protect a fortune in the stock market by knowing in advance when the Board was going to take an action that would force the market down. Conversely, a fortune could be made if the advance information foretold a rise in the market.

In fact, the Federal Reserve System doesn't even have to do anything as even a rumored action will cause the stock market to operate in a downward direction. For instance, a rumor spread on December 16, 1978, that the Federal Reserve System was anticipating a certain action, and the market went down I

Later another Congressman attempted to investigate the Federal Reserve. Congressman Wright Patman introduced a bill which would have authorized a full and independent audit of the System by the General Accounting Office. Patman claimed that the audit was essential to give the public's elected representatives complete and accurate information on the internal operations of the System, since they had not been audited since their inception in 1913.

Patman was frankly astonished by the opposition to his bill. He wrote:

"Although I had anticipated that officials of the Federal Reserve System would vigorously oppose my bill, I am frankly amazed by the massive lobbying campaign now underway, to prevent enactment of this measure. This itself is further proof, if any is needed, that a thorough and independent audit . . . is an absolute necessity in the public interest."

Congressman Patman did score a "small victory," however. The Congress passed his bill but attached an amendment that will limit the audit to administrative expenditures only, presumably the expense accounts of the executives of the System, the numbers of pencils purchased per employee, etc, hardly what Patman had in mind.

Later Congressman Patman, Chairman of the House Banking Committee, was removed from his Chairmanship after the elections of 1974, because, as one Congressman voting to remove him told one of his constituents, Patman was "too old."

Or maybe "too smart!"