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LEGALLY PIGGILY |
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The merchant bankers of Venice came to underwrite the Venetians' (the Phoenicians') voyaging ventures. Such international trade financing swiftly became the big thing in the banking game. The "Merchant of Venice"—Shylock and his "pound of flesh forfeit" of the debtor—was Shakespeare's way of calling attention to the fact that the bankers' "interest" was in reality depleting the life-support equity of both the depositors and the borrowers. It was the financing of such international voyaging, trading, and individual travel as well as of vaster games of governmental takeovers that built the enormous wealth-controlling fortunes of early European private banking families. It was under analogous circumstances of financing inter-American-European trade that, in the late nineteenth century, J. P. Morgan became a man of great power. By having his banking houses in Paris and London, Philadelphia and New York, he was able not only to finance people's foreign travel, all their intershipment of goods, and to give letters of credit, but also to finance and control major "new era" railroading, shipbuilding, mining, manufacturing, and energy-generating enterprises in general. Such powerful banking gave insights regarding the degrees of risks that could be taken. The people doing the risking came to the banker for advice. In such a manner J. P. Morgan developed the most powerful financing position in America, as society went from wooden ships to steel ships and the concomitant iron mining, blast furnace building, and steel rolling mill development, as well as the making of boilers and engines, electric generators, and air conditioning systems. To better understand the coming of world power structure into North American affairs, we will switch back from the nineteenth to the seventeenth and eighteenth centuries, to the opening up of North America and the American socioeconomic scene. The European colonization occurred in several major ways. The Spanish way was accomplished with vast haciendas—grants from the king to powerful supporters. The hacienda development began in Central America and Mexico and expanded northward into California. The British king also gave vast plantation grants to royal favorites on the North American southeastern coast, below the freezing line. The French came to two parts of North America: (1) to the Gulf of Mexico-Mississippi delta, where exiled prisoners were dumped, and (2) to the St. Lawrence area of Canada, whence they moved westward via the Great Lakes, then southward on the Mississippi to join with these lower Mississippi colonists exploring northward and westward on the Mississippi. British sovereign grants were also being given on the northeastern coast, where it was much colder and where existence was much more difficult. Because it was much more difficult to colonize, the royal favorites who received large land grants from the British king in the north did everything they could to encourage colonization of any kind by others, who bought their land from their landlords. The Pilgrims and other people of religious conviction found the freedom of thought-and-act to warrant hazarding their lives in that cold-winter wilderness. On the northeast coast of North America the individuals who did the colonizing were not the landowners, who remained safely in Europe. In the south the royal-favorite landowners themselves occupied and personally operated many of the great plantations. Though motivated by distinctly different northern and southern reasons for doing so, we have the east-coast North American British-blood people breaking away from the Old World through the American Revolution. In our tracing of the now completely invisible world power structures it is important to note that, while the British Empire as a world government lost the American Revolution, the power structure behind it did not lose the war. The most visible of the power-structure identities was the East India Company, an entirely private enterprise whose flag as adopted by Queen Elizabeth in 1600 happened to have thirteen red and white horizontal stripes with a blue rectangle in its upper lefthand corner. The blue rectangle bore in red and white the superimposed crosses of St. Andrew and St. George. When the Boston Tea Party occurred, the colonists dressed as Indians boarded the East India Company's three ships and threw overboard their entire cargoes of high-tax tea. They also took the flag from the masthead of the largest of the "East Indiamen"—the Dartmouth. George Washington took command of the U.S. Continental Army under an elm tree in Cambridge, Massachusetts. The flag used for that occasion was the East India Company's flag, which by pure coincidence had the thirteen red and white stripes. Though it was only coincidence, most of those present thought the thirteen red and white stripes did represent the thirteen American colonies—ergo, was very appropriate—but they complained about the included British flag's superimposed crosses in the blue rectangle in the top corner. George Washington conferred with Betsy Ross, after which came the thirteen white, five-pointed stars in the blue field with the thirteen red and white horizontal stripes. While the British government lost the 1776 war, the East India Company's owners who constituted the invisible power structure behind the British government not only did not lose but moved right into the new U.S.A. economy along with the latter's most powerful landowners. By pure chance I happened to uncover this popularly unknown episode of American history. Commissioned in 1970 by the Indian government to design new airports in Bombay, New Delhi, and Madras, I was visiting the grand palace of the British fortress in Madras, where the English first established themselves in India in 1600. There I saw a picture of Queen Elizabeth I and the flag of the East India Company of 1600 A.D., with its thirteen red and white horizontal stripes and its superimposed crosses in the upper corner. What astonished me was that this flag (which seemed to be the American flag) was apparently being used in 1600 A.D., 175 years before the American Revolution. Displayed on the stairway landing wall together with the portrait of Queen Elizabeth I painted on canvas, the flag was painted on the wall itself, as was the seal of the East India Company. The supreme leaders of the American Revolution were of the southern type—George Washington and Thomas Jefferson. Both were great land-owners with direct royal grants for their lands, in contradistinction to the relatively meager individual landholdings of the individual northern Puritan colonists. With the Revolution over we have Alexander Hamilton arguing before the Congress that it was not the intention of the signers of the Declaration of Independence that the nation so formed should have any wealth. Wealth, Hamilton argued—as supported by Adam Smith—is the land, which is something that belonged entirely to private individuals, preponderantly the great landowners with king-granted deeds to hundreds and sometimes thousands of square miles, as contrasted to the ordinary colonists' few hundreds of acres of homestead farms. Hamilton went on to argue that the United States government so formed would, of course, need money from time to time and must borrow that money from the rich landowners' banks and must pay the banks back with interest. Assuming that the people would be benefited by what their representative government did with the money it borrowed, the people gladly would be taxed in order to pay the money back to the landowners with interest. This is where a century-and-a-half-long game of "wealth''-poker began—with the cards dealt only to the great landowners by the world power structure. Obviously, very powerful people had their land given to them by the king and not by God, but the king, with the church's approbation, asserted it was with God's blessing. This deed-processing produced a vast number of court decisions and legal precedent based on centuries and centuries of deed inheritances. Thus, landlord's deeds evolved from deeds originally dispensed from deeds of war. Then the great landlords loaned parcels of their lands to sharecropping farmers, who had to pay the landlord a tithe, or rent, and "interest" out of the wealth produced by nature within the confines of the deeded land. The landlord had his "tithing" barn within which to store the grains collected in the baskets (fiscus is Latin for "basket"; thus the fiscal year is that which winds up within the basketed measuring of the net grains harvested). The real payoff, of course, was in regenerative metabolic increments of the botanical photosynthetic impoundment of Sun radiation and hydrocarbon molecules' structuring and proliferation through other hydrogenic and biological interaccommodations. Obviously none of this natural wealth-regenerating and -multiplying process was accreditable to the landlords. When I was young, there were people whom everybody knew to be very "wealthy." Nobody had the slightest idea of what that "wealth" consisted, other than the visible land and the complex of buildings in which the wealthy lived, plus their horses, carriages and yachts. The only thing that counted was that they were "known to be" enormously wealthy. The wealthy could do approximately anything they wanted to do. Many owned cargo ships. However, the richest were often prone to live in very unostentatious ways. Of course, money was coined and the paper equivalents of metallic coinage were issued by the officers of banks of variously ventured private-capital-banking-type land systems. Enterprises were underwritten by wealthy landowners, to whom shares in the enterprises were issued and, when fortunate, dividends were paid. "Rich" people sometimes had their own private banks—as, for instance, J. P. Morgan and Company. Ordinary people rushed to deposit their earnings in the wealthy people's banks. For all the foregoing reasons nobody knew of what the wealth of the wealthy really consisted, nor how much there was of it. There were no income taxes until after World War I. But the income tax did not disclose capital wealth. It disclosed only the declared income of the wealthy. The banks were capitalized in various substantial amounts considered obviously adequate to cover any and all deposits by other than the bankers involved in proclaiming the capital values. These capital values were agreed upon privately between great landowners based on equities well within the marketable values of small fractions of their vast king-deeded landholdings. "The rich get richer and the poor get children" was a popular song of the early 1920s. Wages were incredibly low, and the rich could get their buildings built for a song and people them with many servants for another song. But, as with uncalled poker hands, nobody ever knew what the "wealthy" really had. I was a boy in a "comfortably off" family, not a "wealthy" family—not wealthy enough to buy and own horses and carriages. To me the wealthy seemed to be just "fantastically so." This brings us to World War I. Why was it called the First World War? All wars until this time had been fought in the era when land was the primary wealth. The land was the wealth because it produced the food essential to life. In the land-wealth era of warring the opposing forces took the farmers from the farms and made soldiers of them. They exhausted the farm-produced food supplies and trampled down the farms. War was local. In 1810, only five years after Malthus's pronouncement of the fundamental inadequacy of life support on planet Earth, the telegraph was invented. It used copper wires to carry its messages. This was the beginning of a new age of advancing technology. The applied findings of science brought about an era in which there was a great increase of metals being interalloyed or interemployed mechanically, chemically, and electrolytically. Metals greatly increased the effectiveness of the land-produced foods. The development of nonrusting, hermetically sealed tin cans made possible preservation and distribution of foods to all inhabited portions of our planet Earth. All the new technology of all the advancing industry, which was inaugurated by the production of steel in the mid-nineteenth century, required the use of all the known primary metallic elements in various intercomplementary alloyings. For instance tin cans involved tin from the Malay straits, iron from West Virginia mines, and manganese from southern Russia. The metals were rarely found under the farmlands or in the lands that belonged to the old lords of the food-productive lands. Metals were found—often, but not always, in mountains—all around the world, in lands of countries remote from one another. Mine ownerships were granted by governments to the first to file claims. It was the high-seas, intercontinental, international trafficking in these metals that made possible the life-support effectiveness of both farming and fishing. The high-seas trafficking was mastered by the world-around line-of-supply controllers—the venturers and pirates known collectively as the British Empire. This world-around traffic was in turn financed, accounted, and maximally profited in by the international bankers and their letters of credit, bills of exchange, and similar pieces of paper. International banking greatly reduced the necessity for businessmen to travel with their exported goods to collect at the importer's end. Because the world-around-occurring metals were at the heart of this advance in standards of living for increasing numbers of humans all around the world, the struggle for mastery of this trade by the invisible, behind-the-scenes-contending world power structures ultimately brought about the breakout of the visible, international World War I. The war was the consequence of the world-power-structure "outs" becoming realistically ambitious to take away from the British "ins" the control of the world's high-seas lines of supply. The "outs" saw that the British Navy was guarding only the surface of the sea and that there were proven new inventions—the submarine, which could go under the water, and the airplane, which could fly above the water—so the behind-the-scenes world-power-structure "outs" adopted their multidimensional offensive strategy against the two-dimensional world-power-structure "ins." The invisible-power-structure "outs" puppeted the Germans and their allies. The invisible-power-structure "ins" puppeted Great Britain and her allies. With their underwater strategies the "outs" did severely break down the "ins' " line of supply. J. P. Morgan was the visible fiscal agent for the "in" power structure, operating through Great Britain and her allies. The 1914 industrial productivity in America was enormous, with an even more enormous amount of untapped U.S. metallic resources, particularly of iron and copper, as backup. Throughout the nineteenth century all the contending invisible world power structures invested heavily in U.S.A.-enterprise equities. Throughout that nineteenth century, the vast resources of the U.S.A. plus the new array of imported European industrial tooling, the North American economy established productivity. The U.S.A. economy took all the industrial machinery that had been invented in England, Germany, France, and Europe in general and reproduced it in America with obvious experience-suggested improvements. In 1914 World War I started in the Balkans and was "joined" in Belgium and France on the European continent. The British Isles represented the "unsinkable flagship" of the high-seas navy of the masters of the world oceans' lines of supply. The "unsinkable flagship" commanded the harbors of the European customers of the high-seas-line-of-supply control. If the line of supply that kept the war joined on the European continent broke down completely, then the "outs" would be able to take the British Isles themselves, which, as the "flagship" of the "ins," would mean the latter's defeat. In 1914, three years before the U.S.A. entered the war, J. P. Morgan, as the "Allies' " fiscal agent, began to buy in the U.S.A. to offset the line-of-supply losses accomplished by the enemy submarines. Morgan kept buying and buying, but finally, on the basis of sound world-banking finance, which was predicated on the available gold reserve, came the point at which Morgan had bought for the British and their allies an amount of goods from the U.S.A. equaling all the monetary bullion gold in the world available to the "ins' " power structure. Despite this historically unprecedented magnitude of the Allied purchasing it had only fractionally tapped the productivity of the U.S.A. So Morgan, buying on behalf of England and her allies, exercised their borrowing "credit" to an extent that bought a total of goods worth twice the amount of gold and silver in the world available to the "ins." As yet the potential productivity of the U.S.A. was but fractionally articulated. Because the "ability to pay later" credit of the Allied nations could not be stretched any further, the only way to keep the U.S.A. productivity flowing and increasing was to get the U.S.A. itself into the war on the "ins' " side, so that it would buy its own productivity in support of its own war effort as well as that of its allies. By skillful psychology and propaganda the "ins" persuaded America that they were fighting "to save democracy." I recall, as one of the youth of those times, how enthusiastic everyone became about "saving democracy." Immediately the U.S.A. government asked the British and their allies, "What do you need over there?" The "ins" replied, "A million trained and armed men, and the ships to carry them to France, and many, many new ships to replace the ships that have been sunk by submarines. We need them desperately to keep carrying the tanks and airplanes, weapons, and munitions to France." The "ins" also urgently requested that the U.S. Navy be increased in strength to equal the strength of the British Navy and therewith to cope with the German submarines, "while our British Navy keeps the German high-seas fleet bottled up. We want all of this from America." America went to work, took over and newly implemented many of the U.S. industries, such as the telephone, telegraph, and power companies, and produced all that was wanted. For the first time in history, from 1914 to 1918, humanity entered upon a comprehensive program of industrial transformation and went from wire to wireless communications; from tracked to trackless transportation; from two-dimensional transport to four-dimensional; from visible structuring and mechanical techniques to invisible—atomic and molecular—structuring and mechanics. Within one year the million armed and trained U.S.A. soldiers were safely transported to France without the loss of one soldier to the submarines. Arrived in France, they entered the line of battle. With the line of supply once more powerfully re-established by the U.S. Navy and its merchant fleet, it became clear that the "ins" were soon going to win. J. P. Morgan, now representing the "allied" power structures' capitalist system's banks as well as serving as the Allies' purchasing agent, said to the American Congress, "How are you going to pay for it all?" The American Congress said, "What do you mean, pay for it? This is our own wealth. This is our war to save democracy. We will win the war and then stop the armaments production." Morgan said, "You have forgotten Alexander Hamilton. The U.S. government doesn't have any money. You're going to pay for it all right, but since you don't have any money, you're going to have to borrow it all from the banks. You're going to borrow from me, Mr. Morgan, in order to pay these vast war bills. Then you must raise the money by taxes to pay me back." To finance these enormous payments Mr. Morgan and his army of lawyers invented—for the U.S. government—the Liberty Loans and Victory Loans. Then the U.S. Congress invented the income tax. With the U.S. Congress's formulating of the legislation that set up the scheme of the annual income tax, "we the people" had, for the first time, a little peek into the poker hands of the wealthy. But only into the amount of their taxable income, not into the principal wealth cards of their poker game. During World War I, U.S. industrial production had gone to $178 billion. With only $30 billion of monetary gold in the world, this monetary magnitude greatly exceeded any previously experienced controllability of the behind-the-scenes finance power structure of the European "Allies." World War I over, won by the Allies, all the countries on both sides of the warring countries are deeply in debt to America. Because the debt to the U.S.A. was twice that of all the gold in the "ins' " world, all the countries involved in World War I paid all their gold to the U.S.A. Despite those enormous payments in gold all the countries were as yet deeply in debt to the U.S.A. Thereafter all those countries went off the gold standard. All the monetary gold bullion paid to the U.S.A. was stored in the mountain vaults of Fort Knox, Kentucky. International trade became completely immobilized, and the U.S.A. found itself having unwittingly become the world's new financial master. Swiftly it arranged vast trading account loans to the foreign countries. This financing of foreign countries' purchasing by the U.S.A. credit loans started an import-export boom in the U.S.A., followed by an early 1920s recession and another boom; then, the Great Crash of 1929. The reasons for the Great Crash go back to the swift technological evolution occurring in the U.S.A. between 1900 and the 1914 beginning of World War I and the U.S.A.'s entry into it in 1917. Most important amongst those techno-economic evolution events are those relating to electrical power. Gold is the most efficient conductor of electricity, silver is the next, and copper is a close third. Of these three gold is the scarcest, silver the next, then copper. Though relatively scarce, copper is the most plentiful of the good electrical conductors. Copper is also nonsparking and therefore makes a safe casing for gunpowder-packed bullets and big gun shells. As a consequence of these conditions, in the one year, 1917, more copper was mined, refined, and manufactured into wire, tubing, sheet, and other end products than in the total cumulative production of all the years of all human history before 1917. With the war over all the copper that had been mined and put into generators and conductors did not go back into the mines nor did it rot. World War I was not an agrarian, but an inanimate-energy and power-driven, industrial-production war—with the generating power coming from Niagara and other waterfalls as well as from coal and petroleum. For the first time the U.S.A. was generating power with oil-burning steam turbines. When the war was over, all this power-production equipment was still in prime operating condition. There was enormous potential productivity—a wealth of wealth-producing capability that had never before existed, let alone as a consequence of war. The production capacity that had been established was so great as to have been able to produce, within a two-year span, all those ships, trucks, and armaments. What was the U.S.A. economy going to do with its new industrial gianthood? It was the vastness of this unexpected, government-funded production wealth and its ownership by corporate stockholders that generated many negative thoughts about the moral validity of war profiteering. There were many desirable and useful items that could be mass-produced and successfully marketed. Young people wanted automobiles, but automobiles were capital equipment. In 1920 capital equipment was sold only for cash. There were enough affluent people in post-World-War-I U.S.A. to provide an easy market for a limited production of automobiles. In 1920 there were no bank-supported time payment sales in the retail trade. The banks would accept chattel mortgages and time payments on large mobile capital goods, such as trucking equipment, for large, rich corporations. Banks would not consider risking their money on such perishable, runaway-with-able capital equipment as the privately owned automobile. Because the banks would not finance the buying of automobiles and so many money-earning but capital-less young people wanted them, shyster loaners appeared who were tough followers of their borrowers when they were in arrears. Between the ever-increasing time-payment patronage and the affluent, a market for automobiles was opening that could support mass production. In 1922 there were about 125 independent automobile companies. They were mostly headed by colorful automobile-designing and -racing individuals for whom most of the companies were named. They survived by individually striving each year to produce an entirely new and better automobile, most of which were costly. Many accepted orders for more than they had the mechanical capability to produce. Their hometown financiers would back these auto-designing geniuses so that they could buy better production tooling and build larger factories. Wall Street sold swiftly increasing numbers of shares in auto companies. More and more of them went broke for lack of production, distribution, and maintenance experience on the part of the auto-designer managements. In 1926 the Wall Street brokerage house of Dillon, Read and Co. made a comprehensive cost study of the auto-production field. They found that 130,000 cars a year was, in 1926, the minimum that could be accounted as mass production and sold at production prices. Any less production had to carry a much higher price tag. To warrant the latter, the cars had to be superlatively excellent. The English-built Rolls-Royce brought the highest price on the American market. There was fierce competition among Packard, Peerless, Cadillac, Pierce-Arrow, Locomobile, Lozier, Leiand, and others for the top American car. All of those premium cars' frames, bodies, engines, and parts were manufactured within their own factories. There were several in-between classes, such as that of the Buick. Most of the 100 or so cars in this intermediate range were assembled from special engines, frames, and other parts made by independent manufacturers. The mortality in auto companies was great. Dillon, Read led Wall Street out of its dilemma by buying several almost bankrupt companies, closely located to one another, such as those of the Dodge family, whose joint production capacity topped the 130,000 units per year mass-production figure. They named their new venture the Chrysler Company. Dillon, Read fired the auto company presidents, who were primarily interested in new-car-designing, and replaced them with production engineers. Wall Street followed suit and put in production engineers as presidents of all the auto companies—except Ford, who owned his company outright and had no obligation to Wall Street and its legion of stock buyers. Old Henry himself was already the conceiver, initiator, and artist-master of mass production. Because the American public was in love with the annual automobile shows, the Wall Street financiers who had thrown out all the colorful auto-designer presidents started a new game by setting up the Madison Avenue advertising industry, which hired artists who knew how to use the new (1920) airbrush to make beautiful drawings of only superficially—not mechanically—new dream cars. They made drawings of the new models, which required only superficial mudguard and radiator changes with no design changes in the hidden parts. Parts were purchased by the big companies from smaller, highly competitive parts manufacturers operating in the vicinity of Detroit. This was the beginning of the downfall of the world-esteemed integrity of Yankee ingenuity, which was frequently, forthrightly, and often naively manifest in American business. Big business in the U.S.A. set out to make money deceitfully—by fake "new models"—and engineering design advance was replaced by "style" design change. In the late twenties first Ford and then General Motors instituted their own time-financing corporations. The bankers of America said, "Let them have it, they'll be sorry—autos, phew! We don't want to go around trying to recover these banged-up autos when the borrower is in default." The bankers said, "It is very immoral to buy automobiles 'on time.' They are just a luxury." What the bankers did like to support in the new mass productivity was tractor-driven farm machinery. Farm machinery was easy to sell. As the farmer sat atop the demonstration plowing or harvesting equipment, with its power to go through the fields doing an amount of work in a day equal to what had previously taken him weeks, he said to himself, "I can make more money and also take it a little easier." So the bankers approved the financing of the production and marketing of the farm machinery. They held a chattel mortgage on the machinery and a mortgage on the farmland itself and all its buildings. The bankers loved that. There was enthusiastic bank acceptance of the selling of such equipment "on time" to the farmers. The bankers did not consider this "immoral." The farmer was "producing food wealth." The automobilist was "just joy riding." Then there came a very bad hog market in 1926. Many farmers were unable to make the payments on their power-driven equipment. The local country banks foreclosed on the delinquent farmers' mortgages and took away their farms and machinery. The bankers had assumed that the farms were going to be readily saleable. It turned out, however, that there were not so many nonfarmers waiting to become farmers, and most of the real farmers had been put out of business by the bank foreclosures so they couldn't buy back their own farms. There were no city people eager to go out and buy one of those farms. "How you gonna keep them down on the farm, after they've seen Paree?" were the words of a popular World War I song. So the dust bowls developed as the upturned, unsown soil began to blow off the farms. It is relevant to note that, in 1900, 90 percent of U.S.A. citizens were living and working on the farms; in 1979 only 7 percent were on the farms, mostly as local supervisors for big, absent-ownership corporations. The owners of the farmlands today are no longer "farmers" or even individual humans—they are the great business conglomerates. What began in 1934 as government subsidies and loans to farmers for farm machinery, later to keep acreage out of production, would by 1978 result in President Carter making enormous payments to appease big corporations for cutting off vital grain and other strategic shipments to Russia. Next, the U.S. government would make enormous subsidies to bail out large corporations such as Lockheed and Chrysler, which as basic military suppliers the U.S. government could not allow to go bankrupt. Eventually the U.S. taxpayers will be asked to make "free-of-risk" bail-outs of "private" enterprises, corporations with initial physical assets worth over a billion dollars classified as risk enterprises. We now return to the 1926-'27-'28-'29 sequence of events developing from selling the farmers' machinery on the bankers' drop-dead terms (mortgage means "on death terms"). In 1927 and 1928 the bigger Western city banks began to foreclose on their local country banks that had financed the farm machinery sales and had been borrowing from the bigger city banks to cover their unprecedentedly expanded loaning. First the little and then the successively bigger banks found that they had foreclosed on farmhouses that had no indoor toilets, many with roofs falling in, barns in poor condition, with the replevined farm machinery rusting out in the open—and no customers. Word of the bad news gradually went around; small bank "runs" began; and in 1929 came the Great Crash in the stock market. All business went from worse to worser. Unemployment multiplied. Prices steadily dropped. Nobody had money with which to buy. Bigger and bigger banks had to foreclose on smaller banks, until finally in early 1933 there came one day in which 5000 banks closed their doors to stop "the run" on their funds. People were dismayed and both individually and collectively helpless to do anything to combat the economic collapse. The economy had gone to pieces. People did not parade and protest. They became so low in spirit and listless that they just sat around silently in their homes or in public places. The New York subway stations were filled with people sleeping on the concrete platforms and stairways. No religious organizations were willing to let people sleep in their churches. There came a "pecking-order" point when the central Chicago banks foreclosed on all the other big Western city banks—followed by the big New York City central banks foreclosing on Chicago's central banks. Finally came the denouement, when the big New York banks found themselves about to close because they were already behind-the-scenes insolvent. This occasioned the U.S. Congress voting to accelerate by four months the presidential inauguration of Franklin Delano Roosevelt who, minutes after taking his oath of office, signed the Bank Moratorium, which momentarily suspended the acknowledgment of the death of the wealthy landowners' banking system that had lost all or much of its depositors' money. About a month later Congress voted to the President of the U.S.A. the ability to control all money. Months later again the U.S. Supreme Court upheld that legislation. The U.S.A. citizens themselves and their government had become the wealth resource "of last recourse." The underwriting wealth belongs to all the people and not to the few. That happened also to be the description of socialism. The 150-year-long "infinite wealth" poker hand and its uncalled bluffing was over. The called hands were suddenly down. It turned out that the "wealthys' " wealth was nonexistent. Their marble-walled, steel-barred, visibly vaulted banks had been psychologically attractive to the depositors, who preferred to have their earnings and savings deposited along with the wealth of the powerfully rich. What the banks had been doing was to loan the people's deposits to other people. The banks had no money themselves. What they had done was to capitalize their land at their self-asserted value and had been credited with that value of stock in the bank's ownership. In 1933, for the first time ever, the hands of the U.S. American wealthy were exposed (and by inference, all land-based capitalism everywhere around the world)—most were money empty. Their land and multiservanted mansion values dropped to almost nothing. Nobody had the almost-nothing amount of money to buy those richly housed estates. There was one exception to the last statement—the Vatican-administered Roman Catholic Church's world organization, which for a pittance acquired many extraordinary properties at that time, which it converted into monasteries and convents, colleges and schools. The game of "deedable land wealth" had been a bluff from its very beginning—multimillennia ago, when that little man on a horse, armed with a club, first rode up to the giant shepherd leader of a tribe and said, bluffingly, "It's very dangerous out here in the wilderness for beautiful sheep such as yours," and the shepherd leader's ultimate coercion into accepting "protection" from the claiming and proclaiming "owner" of the land. Landownership did not go back to an act of God. All the kings always had their priests present when the land claimage was made by their explorers. The priests planted their crosses to confirm that the king's ownership was blessed by God. The Roman Catholic Church, starting in its emperorpope days, has been in the deeded-land business for "going on" 2000 years. It is as yet the world's largest real estate owner. Real, a Spanish word, means "royal"—the succession of king-deeded estate lands. With the bluff of wealth over in March 1933, almost all business in America stopped. On the inauguration of Franklin Delano Roosevelt the emergency was so absolute that Congress voted unanimously for whatever corrective measures the New Deal administration prescribed. Roosevelt and his advisors said, "One thing is clear. Despite the emergency America abhors socialism. Americans don't like the assumption that everybody is equal. Americans are so independent, they don't feel at all equal. They don't like socialism, but," said the New Deal leaders, "the fact is that we, the American people, are going to have to guarantee our own bank accounts. People don't like to keep their money under their mattresses and prefer to put it into a bank, so we will have to do what we can to rehabilitate the banks. We the people acting unanimously through our government are going to have to guarantee the safety of each deposit in the banks to a convincingly substantial amount—$5000. We will leave the bank in ownership of the management of the stockholders of those banks that, by virtue of the presidential moratorium, are as yet theoretically alive, and hope that, with our guaranteeing, regulation, and supervising, many of them will reopen and will be able to progressively accredit their depositors with some percentage of their original deposits. "But let us not deceive ourselves. With the government of the people guaranteeing the bank accounts, it becomes, in operating fact, socialism. On the other hand people themselves know so little about banking, credit concepts, and the history of power structures that they will not know that they have adopted socialism, since the government has not taken 'possession' of the banks. Society will think well of 'we the people' as the government, guaranteeing the new deposits in the banks up to $5000." Society likes the idea of a bank as a safekeeping device. People have always believed that when they put their money in the bank, it stayed there. They had no idea it went out on loan within minutes after it came in. They were completely hoodwinked by the appearance of the banks as safe, fireproof, and robberproof depositories of their earnings. Even today, in the last twenty years of the twentieth century, people know little more about banks than they did during the 1929 Crash or at the depth of the Depression in 1932, when all they knew was that they had lost their deposits in most of them. In 1933, '34, '35, and '36 the New Deal and the U.S. Congress diligently investigated the banking system and the practices of its most powerful leaders. They found many malpractices, which we will discuss later. Most prominently they found the banks loaded with worthless mortgages on properties that were unsaleable because uninhabitable—mortgages on buildings without roofs, bathrooms, etc. The government said, "The first thing we must do is make those mortgages we've inherited worth something." At this point the American government dictated the banking strategy and started refinancing of the building industry. The so-called building "industry" was already 2000 years behind the arts of building ships of the sea and sky, which ships of the sea and sky are, in fact, environment-controlling structures in exactly the same sense that land buildings are environment-controlling structures. While the design of the seagoing and airgoing environment controls are floatably and flyably weight-considerate and semiautonomous because they generate their own power, desalinate their own water, etc., there is no weight consideration in the designing of the land-anchored environment controls. They don't have to float or fly. They are utterly dependent on sewers, waterlines, electric lines, highway maintenance. They are utterly controlled by the prime landowners, their building codes and readily imposable legal restrictions—all based on the real estates' ownership and control of the highways-sewers-waterlines—the metabolic "guts" of all U.S.A. towns and cities. When the government owns the wealth and controls the issuance of its money, it is socialism. The New Deal was not trying to deceive the people but was engaged in a rescue operation of the first order and was hopeful of not irritating the people psychologically by what it seemed was critically mandatory to accomplish. Paradoxically, the first people they irritated—greatly—were yesterday's rich, in particular those who were as yet living on the dividends and interest of as yet solvent industrial corporations' stocks and bonds. In fear of the New Deal they sought to discredit Roosevelt by a word-of-mouth campaign. From 1933 to 1940 individual members of rich gentlemen's clubs of New York were ostracized from membership in the rudest manner by "the members" if they were not heard to speak frequently of "that son-of-a-bitch in the White House." Franklin Roosevelt and his advisors said, in effect, "We've got to do what we feel is best for the people by whatever name the 'best' may bear. We've got them depositing again in the banks and are rehabilitating all those mortgaged properties which we have inherited by loaning the new owners of the properties funds at negative interest provided they will rehabilitate the property—reroof or put in a bathroom, etc." To those who understood some of its intricacies, everything was now out in the open about the world of banking. The New Deal said it was going to prohibit usurious rates of interest—"the banks must earn enough to keep themselves going, but only can charge 1 1/2 percent for interest." Banks were regulated just like the Post Office. No banker had authority beyond that of a postmaster. The New Deal completely separated from banking what Morgan and many of the private banks had been doing—taking deposit money and putting it into common stocks and even into the bankers' own highly speculative private ventures. Thus came the New Deal's Securities and Exchange Commission and the complete separation of banking and initial risk financing—or, at least, supposedly so. Banks' trust departments could as yet buy and sell corporate venture stocks for clients' accounts however. There were a number of individual bankers who went far beyond unwise banking practices and who, as individuals, took personal advantage of the information they had of individual depositors' affairs and of their privilege as top bank officers to do truly inimical things to enrich their own positions. Few today remember that a half-century ago a number of New York and Chicago's top bankers were sentenced into penitentiaries—the New Yorkers into Sing Sing—the senior partner of J. P. Morgan and Company, the president of the National City Bank, the president of Chase Bank. Every one of them had been found to be doing reprehensible financial tricks. They were selling their own friends short. They were opening their friends' mail and manipulating the stock market. They were manipulating everybody. They were way overstepping the moral limits of the privileges ethically existent for officers in the banking game, so a great housecleaning was done by the New Deal. The banking story is best told by a poem that was, at that time, allegedly composed by Ogden Nash but was never to my knowledge formally published and copyrighted. It was, however, memorized and widely recited from copies often typewritten by those who remembered it: "BUTCHER, BAKER, CANDLESTICK MAKER"
To accomplish their restartings in all areas of the U.S.A. economic system the New Deal also set up the Works Progress Administration (to get people jobs) and the Reconstruction Finance Corporation (to get the big industries going). Amongst the first of the New Deal's emergency acts of 1933 was the establishment of the Works Progress Administration, which provided jobs for approximately anyone who wanted them—artists, mathematicians, etc., as well as all white- and blue-collar workers and, of course, all day laborers and such. Then, pressed by the labor unions and the political urge to avoid the characteristics of socialism and get the heretofore unemployed millions off WPA—the New Deal's Works Progress Administration—the government financed new buildings and granted mortgages for longer and longer periods to encourage people to undertake the production of much-needed homes and other buildings. It must be noted that the rejuvenated building industry was reset in motion as a concession to the building trades and a move to increase employment, not as a much-needed evolutionary advance in the art of human environment controlling. The unions were so strong as to be able to push the New Deal very hard in the direction of resuming only yesterday's multifoldedly inefficient "one-off" building design techniques and materials as the activity in which they could establish maximum employment. Technically ignorant bank officers became the authorities who alone judged the design validity of the structures and architectural acceptability of the building projects, funds for the building of which they authorized as mortgage-secured loans of their bank depositors' money. The New Deal went on to rationalize its strategic acts by arguing to itself, "In order to continue as a nation we must have our national defense. Since it is established that there is nowhere nearly enough life support to go around in this world, if we don't have a formidable national defense, we're going to be successfully attacked by hungry enemies. Our national defense can't carry on without steel and the generation of electricity, the production of chemicals, and other imperative industrial items." The FDR team soon concluded that the industries producing those absolute "defense" necessities were to be called our "prime contractors." The prime contractors must be kept going at any cost. "So we'll give war-production orders to the prime contractors to produce such-and-such goods. The contractors with signed government contracts can then go to the banks and borrow the money to pay their overhead and to buy the materials and power and to pay the wages to produce the goods. Then we the government will pay the producers for those finished goods and services, and they can pay off their loans from the bank. The money paid by the prime contractors as wages will give people buying power, which will allow them to start other economic production systems going." This became a monetary irrigation system (still in use today in 1980 U.S.A. affairs), which works at a rate providing about ten recirculations in a year following upon each major war order initiated by and paid for by the government. In the depths of the Depression in 1932, when you could buy a meal for five cents and the finest of shirts for one dollar, the Reconstruction Finance Corporation went much further. It gave U.S. Steel $85 million worth of new rolling equipment (in 1980 U.S. currency that would be close to a billion dollars), etc., etc. The U.S.A.'s Reconstruction Finance Corporation had a secondary government machinery-owning outfit that loaned all these prime contracting companies new equipment with which to fill their government orders. What the New Deal did in fact was to socialize the prime contractor corporations instead of the people. This hid the fact of socialism from the world in general. Socializing the prime contractor corporations indirectly benefited the people themselves. In this way the New Deal seemingly didn't give money to the corporations—just orders. The U.S.A.-established and -financed RFC loaned the prime contractors all the money they needed to buy all the equipment. But in the end the government rarely collected on the loans and finally just forgave the machinery borrowers altogether, selling them the equipment for very low "nominal" sums. The New Deal had also pledged itself at outset to take care of the "forgotten man." The government voted minimum-wage limits of a substantial magnitude. The economy was going again. People were getting more and more jobs—how many depended upon how many prime contracts the government gave out. World War II was clearly looming ahead. The New Deal said, "We have to be prepared" . . . and their "preparedness" ordering increased. Jobs increased rapidly. Empty buildings filled. There were a number of great corporations whose businesses had practically stopped by 1933, but those businesses had now been set in healthy motion once more under the New Deal's socializing of the prime contractors. Franklin Roosevelt said to the heads of the great corporations that had not gone "bust," "Every one of you has a large surplus that you held on to, in fear, through the Depression. We want you to spend your surpluses in research and development of new equipment. Since the early clipper ship days, it has always been a function of a 'fundamental risk enterprise' that the enterprise use some of its profits to buy itself new and better equipment—a new and better ship—with the enterprise that is doing the prime risk-taking by investing in the new equipment, thereby requalifying for the privileges and rewards granted by governments for wise risking, daring execution, and good management." FDR said, "We want you enterprisers to 'modernize.' " But U.S.A. big corporate management said, in unison, "We won't do that. It is much too risky a time to use any of our surplus." They knew the oncoming World War II was forcing the government to see that their plants were modernized, so by holding out they forced the government to take over both the risk and cost of modernizing. Heretofore in the history of private enterprise research and development—of more efficient new plants and equipment—had been funded from the enterprise's "surplus" earnings—i.e., from earnings prudently withheld from distribution to stockholders to ensure the continuing strength of the enterprise. Then FDR's U.S.A. Treasury, with all FDR's lawyers' advice, ruled that the large private-enterprise corporations could make their new plant expansion and equipment improvements and charge the costs to operating expenses, which expenses were then to be deducted from new earnings before calculating income taxes. This amounted, in fact, to an indirect subsidy to cover all new-equipment acquisition. The U.S.A. Treasury next ruled that all research and development—"R and D"—was thereafter also to be considered by the U.S.A. Treasury Department as "an operating expense" and also to be deducted from income before calculating income taxes. The U.S.A. thereby eliminated almost all the "risks" of private enterprise. Next Henry Luce, representing news publishers in America—the newspapers and magazines—went to Roosevelt and said, "Your democracy needs its news. You have to have some way for the people to know what's going on." "Yes," said FDR. Luce went on, "We publishers can't afford to publish the news. The prices people are willing to pay for the news won't pay for the publications. The newspapers and magazines are only paid for by advertising, and the New Deal has no allowance for advertising in its operating procedures." The New Deal then ruled that advertising was henceforth to be classified as research and development, therefore deductible from gross income as an operating expense before calculating taxes. Thus advertising became a hidden subsidy of very great size—about $7 billion a year at that time—hidden in tax-calculation procedures. The subsidy was so great as to cover the founding of what has come to be known as "Madison Avenue." While the government was doing all this, the Congress passed strict and comprehensive rent controls, bank-loan-interest controls, and price controls of every kind. It was pure socialism. It had to be done that way. There was no question. |