Financialization & The Road To Zero, Part 2: From Capitalism To Financialization

Tyler Durden's Photo
by Tyler Durden
Sunday, Oct 04, 2020 - 10:55 PM

Authored by 'ICE-9' via The Burning Platform blog,

This is Part 2 of a 4-part series.

Read Part 1 here...

...but 4,500 years of mercantilism were not going down without a fight.  Fractional reserve banking had been steadily growing since the 14th century but was exclusively a private business affair unrelated to the state.  These early fractional reserve “banks” began as safe stores for gold and silver but it did not take long for their unscrupulous owners to start speculating with their customers’ deposits, thus the nascent fractional reserve nature of these deposits where redemption coupons in circulation outnumbered physical gold and silver held in “trust”.  After many rounds of speculative losses with other people’s gold and silver, “banks” crashed, losses accumulated, and the Renaissance city states ultimately stepped in to ban this fractional reserve practice and re-enforce the Catholic prohibitions against usury.  As a result, the early 16th century mercantile “banking” industry evolved into a transparent and audited business based upon fees received for the facilitation of foreign coin exchange, notary services, and the provision of letters of account credibility.  With usury removed, the business of transparent and audited mercantile banking spread from Northern Italy throughout Western Europe and control of the banking industry transferred to Catholic and later, Protestant businessmen.  So from 1585 to 1650 the golden age of transparent and audited mercantile banking laid the groundwork for the rise and exploitation of the Dutch and English colonial empires, and the success of mercantile banking also sowed the seeds for its eventual corruption by unscrupulous players in usury friendly Protestant England.

With the resurrection of the European super-state after centuries of dormancy, the various crowns found it increasingly difficult to secure funding to fight their continental wars of ego, secure their growing colonial empires, and fund their increasing opulence at home, so sovereigns began to form nascent “central banks” within their court administrations.  These nascent “central banks” served the crown and the crown alone and existed as polite shake-down operations as wealthy subjects placed themselves in peril if they refused to lend their gold and silver despite high probability the sovereign would default as was his divine right.  So after depleting the royal treasury during the Second Anglo-Dutch War, the English crown initiated a shakedown of the goldsmith bankers when Parliament passed The Great Stop of the Exchequer in 1672 which repudiated all outstanding loans and all but destroyed the English mercantile banking system.  What gold and silver was left to the Exchequer immediately went to use in prosecuting both the Third Anglo-Dutch War and the Franco-Dutch War, which by 1678 left the Exchequer in such dire financial circumstances that it put national security at serious risk.  A funding void followed where loans to the crown in gold and silver were nearly impossible to secure, so a first attempt at pure fiat money promoted as “legal tender” followed without success.  Then in 1685 Charles II died and the Catholic James II ascended the throne putting usury and national finances at risk of eliminating any recourse at replenishing the depleted Exchequer.  So under cover of religion, the Catholic king’s authority was nullified, his Protestant daughter ascended the throne, usury was preserved, and Parliament with its powers to raise funds acquired legal supremacy over the crown.

With a weakened monarchy, new relative strength in Parliament, and a depleted Exchequer, Parliament pulled itself together and got to work and, once lingering legal succession issues surrounding James II were resolved, it passed the Bank of England Act of 1694.  The overt exigencies in this act were related to funding the new war with France and controlling rebellion in Ireland.  But the act also replaced the old rarely used pure fiat money of Charles II with bills redeemable in gold which also paid interest to their holders.  Thus usury was legally preserved by an act of Parliament which a weakened future potentially Catholic monarch could not overturn.  These bills backed with gold gained in popularity and filled the Exchequer’s immediate funding gap and allowed England to continue prosecuting its wars against the Dutch.  For a brief eleven years, from 1696-1707, England had returned to sound mercantile banking practice and acceptance of these interest bearing bills spread, filling the Exchequer with physical gold and silver.

But then enter one Sir William Paterson.  This same Sir William – chief organizer of the ill-fated Darien Scheme where investors lost everything and 1,200 Panamanian colonists perished – in 1694 was the primary promoter behind the joint stock incorporation and charter of the privately owned Bank of England.  A major conflict of interest – not recognized by divine right – arose here whereby King William III was himself a major shareholder in this newly chartered bank.  But this bank was merely one of many banks chartered at the time operating under the ruinous fractional reserve practice, and nearly all these banks eventually failed save one – the Bank of England.  What made this bank charter special was its inside connection to the House of Stuart and its location inside the untouchable City of London Corporation – that one square mile of sovereign within a sovereign ceded in 1067 by William the Conqueror to the inhabitants of London.  And, this special Bank of England had discovered the magic formula that transformed Parliament into a perpetual debtor, turned the bank’s liabilities into assets, and as the money they created had zero cost, afforded the owners of this special Bank of England an infinite rate of return on fiat issuance.  Not since the Pharaohs convinced the Egyptians they were Gods had such an elaborate fraud been perpetrated upon mankind.

To coincide with the Union of England and Scotland in 1707, this special Bank of England – one of many chartered banks at the time – was awarded responsibility for managing the issue and redemption of the popular interest bearing bills of what was now the Exchequer of Great Britain.  Given the enticement of near infinite rates of return, it did not take the Bank of England long to begin issuing its own fiat money for use by Parliament and to retire the old interest bearing bills with redemptions.  The magic formula was set – the Bank of England had figured out not how to receive interest from lending its own money, but how to receive interest by creating new money.  And the opaque nature of the magic formula with its unknown gold and silver reserves held in “trust”, together with pomp and trappings, gave the fiat money financial process the appearance of authority and legitimacy.  Parliament got its means to fund a new round of wars of attrition with France, the people got taxed at a slower rate of increase, and the House of Stuart and their banker friends got wealthy beyond belief.  And to the holders of accumulated fiat money, they discovered a way how to transfer the bulk of a society’s real wealth – land, gold, labor, and raw materials – into their own possession for free, using this fiat money of no inherit value to purchase things having real intrinsic value.  Therefore, at its most fundamental level, capitalism became the mechanism by which one trades the family cow for a bag of magic beans.

This special relationship between Parliament and its wars of attrition and the House of Stuart and its banker friends had solved the riddle of Exchequer funding so Great Britain could now focus on its primary 18th century endeavor – war with France.  From 1701 to the final defeat of Napoleon in 1815, Great Britain prosecuted eighteen officially declared wars against France.  The stakes were serious now as France and its livre had wrested control of the world’s reserve currency from the mercantile banking Dutch after their late 17th century wars with both England and France had exhausted the Dutch treasury and the Dutch, with their mercantile banking model, could not print their way back from defeat.  The House of Stuart and its banker friends now saw defeating France and appropriating the world reserve currency to their Bank of England as the overriding collective purpose of Great Britain, and Parliament was ready and eager to assist for the “Glory of Britannia”.  But neither France’s nor Great Britain’s empires contained large quantities of gold or silver, so privateers on both sides played a large role in wartime funding but this stolen loot was especially important to the French corsairs and their mercantile banking system.  Thus the inherent empire self-destruct mechanism latent in all physical money based commercial models – depleting the crown treasury – would play a major strategy in the prosecution of Great Britain’s prolonged wars of attrition with France.  Thus 18th century Europe pitted infinite paper fiat money versus limited physical gold and silver to the death in winner-take-all stakes for control of the world reserve currency.

The first Industrial Revolution from 1760–1820 did not create a large “virtuous cycle” for British fiat money, and given the fractured nature of the British chartered banking system, this early land empire was not yet conducive to establishing a fiat money empire.  For an idea of the imbalance in economic scale versus land size existing within the 18th century British colonies, at the cusp of the 1755 tobacco price crash the tiny Caribbean island of Barbados brought in more customs and excise income to the crown than all American colonies combined.  And, economic depressions in the colonies caused by events in and taxes imposed by the home country were common which prompted early colonialists to build up a high degree of productive diversification and self-sufficiency.  However, after more than 100 years of war against France and the final defeat of Napoleon, the mantle of world reserve currency passed to the House of Hanover and its banker enablers, so Parliament’s favorite charter bank began in earnest to churn out incredible amounts of bank notes that were now no longer needed to fund wars of attrition.  Other charter banks knew well of this special relationship between Parliament and the Bank of England so these banks began accumulating the Bank of England fiat money to use as their “reserves” held in “trust”.  The inflation caused by this round of excessive money printing, combined with little to no increase in wages, reached the point of starvation in the London streets, and Parliament’s disastrous Corn Act of 1815 drove grain prices even higher resulting in food riots and complete economic stagnation.  Thus to this point first the House of Stuart and their banking friends, then the House of Hanover and its banker enablers, through the magic formula of fiat money, had brought the United Kingdom 121 years of near continuous war, recurring national bankruptcies, and now open starvation.  Something had to be done.

So Parliament set about to save its favorite banking charter.  Six years after the London food riots, it required the Bank of England to maintain a minimum reserve held in “trust” and to facilitate conversion of its fiat money into gold.  So the House of Hanover and its banker enablers discovered the new magic trick of borrowing gold to fulfil this new inconvenience, and promptly went back to churning out more fiat money and by 1825 had precipitated a collapse of the United Kingdom banking system that effectively eliminated nearly all competing charter banks.  For their disastrous actions, in 1833 the Bank of England was again rewarded by Parliament with the Bank of England Act granting its fiat money monopoly status as “legal tender” for a “limited period” under “certain conditions”, which over time became unlimited and unconditional as no certain conditions were ever enumerated.  Thus the act wiped out all competing charter banks and forced every person and entity in the British empire to either use or pay exchange fees to use the Bank of England’s fiat money.  And on top of all this, the House of Hanover and its banker enablers, ensconced within the untouchable City of London Corporation, from the safety of this “anachronism gifted by the Normans”, found even more profitable ventures than fraudulent banking and war funding in the forms of the slave and opium trades.  So by 1833 the same people behind slavery and opium were handed gratis sole control over the fiat money that would soon engulf 26% of the world’s land surface.  What could possibly go wrong?

The Bank of England itself, that’s what went wrong.  Another major financial crisis initiated by the House of Hanover and its banker enablers’ boom-bust magic formula was “solved” by Parliament’s Bank Act of 1844 that set a fictional amount of imaginary gold as a fabricated “reserve” held in opaque “trust” and thereby “limited” the amount of fake fiat money the Bank of England could issue out of thin air against its imaginary gold reserves, but excluded loans to the public whose losses bothered no one in the House of Lords.  The Bank Act worked so well that by 1847 the Bank of England itself teetered on the brink of insolvency, so to retain their special relationship, Parliament repealed the Bank Act of 1844 and now the Bank of England was legally free again to print as much fiat money as it wanted.  And so economic crises and near collapse followed again from 1857-8, 1867-9, and 1873-96, each time fixed by Parliament with a tweak here, and act there, and a new unenforced regulation or two.  Thus following the 1833 grant of “legal tender” status, during their 67 years of 19th century money monopoly the House of Hanover and its banker enablers gave the United Kingdom 32 years of recession, depression, bankruptcy, and financial collapse.  But despite its delivery record its special relationship with Parliament continued into the 20th century where it once again found its raison d’être – war funding.

One side benefit inadvertently derived from the never ending 19th century financial crises precipitated by Bank of England fiat money mis-managers was Parliament spent so much time dealing with economic problems at home and unrest in the colonies abroad that it had little time to prosecute new European wars of attrition.  With the Crimean War excepted, a sort of Pax Decoctur gripped the United Kingdom’s European aspirations as it focused on its Second Industrial Revolution at home and small scale conflicts abroad to secure far flung provinces against both people that mostly didn’t use money and people that mostly did use opium.  This “Peace through Insolvency” enabled the United Kingdom to continuously reduce its national debt without exception from a level of about 265% of GDP in 1820, down to around 40% of GDP at the start of the 20th century.  As a result, the House of Hanover and its banker enablers were able to finally develop the “virtuous cycle” necessary for the proper function of a true fiat money empire – the colonies ship raw materials to the home country and receive fiat money in payment, the home country took those raw materials and produces value added manufactured goods, then exported those manufactured goods back to the colonies that paid for these value added goods with fiat money received from the sale of raw materials.  All value added activities remained in the home country, and with European populations increasing across the colonies, this “virtuous cycle” generated economic “growth” and “profit” across the United Kingdom’s industrialized areas.  However, these cheap raw materials from abroad also sealed the demise of domestic producers, promoting urbanization at home that stagnated factory wages and led to large scale emigration to the colonies abroad, both phenomena adding to the “virtuous cycle” and increasing “value add” to those with access to capital and ownership of the means of production.

A key component to this British “virtuous cycle” was the House of Hanover and its banker enablers were able to capture the bulk of world raw material sales and thus expand its fiat money empire outside the colonies by the process of commoditization.  Large brokerage houses, often controlled by subsidiaries of the Bank of England, bought and sold such huge quantities of these raw materials on forward contracts that they were able to manipulate their prices.  These hedge purchases and sales not only provided trading income, but also ensured all contracts were settled in Bank of England fiat money regardless of point of sale or purchase.  To squeeze even more profit from this “value chain”, other Bank of England subsidiaries expanded into corporate plantation holdings throughout the colonies, especially in India following the 1862 Cotton Famine.  This practice then spread to mining tenements following the discovery of huge gold deposits throughout Australia and the annexation of the Transvaal.  Thus the vast majority of the “virtuous cycle” was captured and maximum “value” squeezed out the entire “value chain” and into the hands of the House of Hanover and its banker enablers.  And so began a new line of exploitation for capitalism – the manipulation of commodity prices via the coordinated bulk purchase and sale of these commodities in concert with the manipulation of the “value” of fiat currency.  Entire sectors of commodity production around the world were sent into financial ruin by a coordinated attack from both the brokerages and Bank of England monetary policy, these sectors bought nearly en toto for a shilling on the pound, then pumped and dumped using the same coordinated mechanism but in the opposite directions.  Large swaths of entire industries like cotton, land, oil, wheat, coal, iron ore, et cetera regularly passed into and out of the hands of the House of Hanover and its banker enablers generating tremendous profits for them and debilitating losses for others.

At the dawn of the 20th century, capitalism had fully matured, sound money mercantile banking no longer existed, and the magic formula had made the United Kingdom the most powerful financial, economic, and political empire ever assembled.  The covert secret formula however was it had fought only one major European war – The Crimean War – since the defeat of Napoleon, and since then the Exchequer had reduced its outstanding budget deficit relative to GDP a full 85%.  And for the first time in the fiat empire’s history, it began delivering large amounts of gold into the City of London Corporation.  The sun never set on Britannia, it ruled the waves, it had commoditized every basic raw material important to the Second Industrial Revolution, and it had subjugated nearly every primary producer on the planet to its service through price manipulated contracts denominated in Bank of England fiat money.  The United Kingdom was in a commanding position but had not yet proven itself as undisputed world military power, and the German Empire was beginning to accumulate victories and influence on the Continent.  So it was inevitable that the egos in Parliament would go back to their old bad habits of 100 years ago and start looking for a major fight to revive the “Glory of Britannia”.  And thus began a 50 year effort to destroy the rising European star of Germany, with its formidable military, efficient and technologically advanced industry, growing colonial empire, and Hegelian guiding principles of “objectivity, truth, and ethical life” which now threatened to not only swallow up and assimilate all the Germanic peoples of Europe, but to swallow up and eliminate their privately owned central banks as well.  The City of London Corporation would tolerate no fiat money rival and Germany could not continue to grow unchecked in influence – nigh, could not continue to exist – and put at risk ownership of the Bank of England’s magic money formula.

This is where the banking story of the United States merges with that of the House of Hanover and its banker enablers.  To its great credit, the United States had three times in its early history repelled the external imposition of a privately owned central bank.  After Andrew Jackson allowed the Federal charter for the den of vipers – aka Second Bank of the United States – to expire in 1837, the existing network of disunited state chartered banks grew across the young country with the addition of every new state, each charter issuing its own semi-fiat money backed by reserve requirements dictated by each state.  Fiat money from the states varied in exchange value and bank failures were common, but the distributed and discretized nature of this Free Banking Era localized the crises and generally did not lead to national economic disasters as did the regular and recurring management failures of the Bank of England.  It was during this laisse-faire period that the United States experienced incredible growth of territory, population, political clout, and economic output, and the Federal Treasury had financially strengthened to the point where the country had the temerity to negotiate for territory, wage its own wars of conquest, and purchase new territories without serious economic repercussion.  With regards to banking it seemed the United States had found the magic money formula by not finding the magic money formula and had instead wandered into a kind of balanced budget quasi-capitalism where state charter banks issued local fiat money that few wanted as it had to compete with the gold and silver specie put in circulation by the Federal Treasury.  But then every balanced budget just begs for a good war of attrition and that’s exactly what came next.

At the cusp of the American Civil War, the Bank of England had coopted the South into its commoditized fiat empire as most of their raw cotton exports went to British textile mills.  Thus the Bank of England’s fiat empire had crept quietly into America when the London financiers gave full support to Confederate war funding by purchasing its heavily subscribed and sterling denominated Cotton Bonds.  To facilitate war funding at home, both the Union and Confederacy resorted to fiat money issue, with the Confederacy printing greybacks and the Union printing greenbacks.  To enforce these new greenbacks as Union fiat money, Congress passed the National Banking Act of 1863 establishing a system and network of national banks using a uniform fiat money with a stipulated uniform fractional reserve requirement mandating these banks purchase and hold US Treasury bills as “reserves”.  Both sides struggled with inflation, but the Confederacy, if not defeated in battle, would likely have succumbed eventually to inflation that by war’s end ran at 9,000% of prewar levels rendering the greybacks effectively worthless.  But the old magic money formula of turning liabilities into assets worked just well enough for the Union and with this National Banking Act their greenbacks replaced the former hocus pocus uncoordinated sideshows from state charter bank fiat issue antics commonly backed with no more than borrowed gold.  Ironically, counterfeiting during the Civil War was a persistent problem, so the National Banking Act not only removed gold convertibility and gold and silver reserve requirements, but also established the United States Secret Service to ensure the Union’s new fake paper money was not fake fake paper money.  And just like the creation of its progenitor the Bank of England, greenbacks were only to be in circulation for a limited time, which in 1878 became legally unlimited time but with the re-imposition of convertibility into gold.  America had officially entered into the world of capitalism, and for the first time had a uniform national banking system under the control of the US Treasury using a single fiat currency convertible into gold with a fractional reserve requirement.  But the greenback was finding itself more and more controlled by Wall Street proxies of the City of London Corporation, Wall Street’s influence was growing immensely within the US Congress, and the bankers of the City of London Corporation had set their sights on gaining control of the levers of America’s new magic formula.

But full control of that magic formula would take some time to acquire as the American people proved more intractable than the pliant Dickensian subjects of the City of London Corporation.  The weakened post bellum United States with its new national bank network, huge Federal budget deficit, new fiat money empire throughout the defeated Confederate States, and fast expanding Northern modern industrial base presented the City of London Corporation bankers with proverbial low hanging fruit.  After both sides weathered the depression caused by the Panic of 1873, the City of London Corporation bankers’ first salvo at usurping the American money creation mechanism was the financially engineered Panic of 1893 where a coordinated commodity price crash was timed with a run on the US Treasury gold holdings that nearly drew down the country’s entire gold reserve and sent the United States into prolonged depression.  But there’s no depression a good war can’t fix, so the politically popular 1898 Spanish-American War was prosecuted and with a quick victory the US spirits and economy sprang back to life.  The City of London Corporation bankers’ initial crude efforts was thwarted, so a second better organized salvo was launched in 1907, this time at the undertaking of Wall Street proxies, complete with a ready-made plan to fix everything and paid agents ready in Congress to promote the benevolence and virtue of the Money Trust.  And to show the American people their selfless good intentions, both J. P. Morgan and John D. Rockefeller magnanimously gifted their own money to acquire and “save” insolvent banks after the US Secretary of the Treasury secretly pledged taxpayer bailout money should Morgan’s and Rockefeller’s bank investments fail.  Wall Street began its marketing campaign through Congress for the privatization of both the national currency issue and monetary policy, promising America that once control of these powers passed into secret hands all these recurring depressions caused by these very same secret hands would immediately cease.  But not all members of Congress were yet paid agents of Wall Street, and in 1913 the Pujo Committee released the results of its scathing Money Trust investigations.  The American public was in no mood to submit their sovereignty to the Wall Street Money Trust on behalf of the City of London Corporation bankers, and time was running out for the bankers to get America ensnared into their plans to deal with the new, powerful Continental upstart that threatened the Bank of England’s fiat empire gravy train – Germany.

The second half of the European 20th century following the brutal wars of unification saw the Prussian state and its German coalition fiefdoms start to grind out military victories over first Denmark and next Austria, but it wasn’t until the German Empire coalesced after its decisive and highly efficient defeat of world power France in 1871 that alarms began ringing in the City of London Corporation.  The German people, united under one state and the Hegelian principles of “objectivity, truth, and ethical life”, was one thing, but this Hegelian destiny to unite all Germanic peoples under that state – including Germanic peoples living in states with privately owned central banks – was another thing entirely.  But the German Empire with its sound monetary policy, advanced high tech ground based military capability, and expanding colonial empire presented a formidable adversary, one that guaranteed mutually assured destruction if challenged alone.  Initial efforts to destabilize the German Empire from within using communist agitators all fell flat as the German government enacted liberal labor and social reforms blunting each new call for a general strike.  Against this rising German Empire stood a United Kingdom that had won just one major war in 85 years, was crawling out of the 20 years Long Depression, and whose banks and investment houses were clear culprits in ever recurring financial panic, one after the other, that had disastrously rippled throughout the global economy.  The limits of growth had been reached with the industrial-colonial model of the British Empire, the system was devolving into stasis, and the Exchequer’s budget deficit had been reduced to the point where a new major war of attrition could now be prosecuted.

On the American home front the Jekyll Island conspiracy between the Wall Street proxies for the City of London Corporation bankers and the US Congress had been in play since 1910.  Its success was a crucial step for the Exchequer to gain a reliable overseas source of credit and for the Ministry of Defense to establish a supply chain prior to prosecuting its coming war of attrition against the German Empire.  It is likely these conspirators knew full well their plans would commit the United States to not only massive war funding to Great Britain, but also pit the Americans as enemy against whatever countries Parliament might declare war upon for the “Glory of Britannia”.  So in practice, when Congress passed the Federal Reserve Act in August 1913 despite the Pujo Committee findings, it not only robbed the American people of control over its monetary policy, but to a large extent robbed it of control over much of its foreign policy as well.  Thus this fateful act of betrayal to both American citizens and British subjects joined the eventual downfall of the British fiat empire with an American commitment to Endless Wars in defense of its coming fiat empire.  This was a master stroke for the City of London Corporation bankers that brought the Federal Reserve System into its cross ownership nexus that now facilitated trans-continental coordination of both monetary and foreign policies that assured aggregate coordinated outcomes always resulted in a net gain to the City of London Corporation bankers, regardless of which side of the Atlantic experienced victory or defeat.  And this new Federal Reserve System was isolated from all direct European land based military threats and had the ability to create huge quantities of fiat money adsorbed by a brand new tax base within the expanding American industrial economy which was now inescapably locked into ever growing Federal debt by the XVI Amendment.  Thus not since the fall of Troy had a free and independent people willingly invited such unseen dangers into their midst, and by subterfuge the Federal Reserve Act ended 137 years of fierce American independence with a single unconscionable law and just 30 words contained in a new constitutional amendment.

Within four years of the Federal Reserve Act’s passage, the City of London Corporation bankers were victorious, the German Empire crushed absolutely, and the flame of “objectivity, truth, and ethical life” extinguished.  There would be no consolidation of the Germanic peoples under a single state controlled central bank, and no challenge to the Bank of England’s control over its fiat empire.  The costs were staggering – 20 million dead, 21 million injured, 1.2 million Queen’s subjects killed, USD $3.2 trillion.  Despite these losses, the combined ownership nexus of the Bank of England and the Federal Reserve System saw the City of London Corporation bankers in an even more powerful position that before the war, and for the first time since wresting control of the world reserve currency from France in 1815, the Bank of England began to share this status with the United States dollars it also controlled.  And to ensure the permanent dominance of the Federal Reserve System and avoid any resurrection of populist economic policy threats like the Free Silver Movement, or for that matter, to forever eliminate serious economic policy discussion from public debate, in 1920 Congress ratified the XIX Amendment.  Accumulated post-WWI budget deficits on both sides of the Atlantic ballooned – the Exchequer’s climbed from a prewar 20% of GDP to 180%, and the Treasury’s increased from 10% to 40% of GDP, with both countries finding themselves in the usual post-war recessions.  Time to fire up the post-war printing presses – but this time, only on the other side of the Atlantic as the City of London Corporation had grand plans for its new American vassal.

And for all that post-war M2 fiat money now flooding into America – from a total of $18 billion circulating in 1915 to $47 billion in 1929 – the United States got things like flappers, guys going over waterfalls in barrels, jazz clubs, ultra-rich organized crime families, a mass entertainment industry, and through that cultural miasma somehow managed to build thousands of factories, make millions of cars, pave thousands of miles of roads, erect skyscrapers, and electrify cities.  But the average Queen’s subject didn’t even get so much as an extra helping of pudding.  What were the Roaring 20s in America, where industrial and service jobs abounded with the flood of fiat money created out of thin air, were more like the Boring 20s in the United Kingdom, where the printing presses remained idle and recession and mass unemployment were the order of the decade.  But then under orders from the City of London Corporation bankers the Federal Reserve System raised interest rates from 4% to 6%, and suddenly the jazz music stopped, the flappers quit flapping, and the bills for all that art deco came due in October 1929.  We all know the story of what happened next.

One side benefit of the Great Depression in the United States was so many people were unemployed that few paid income taxes, so Congress could not immediately start a new war of attrition to right the ship of finance at Wall Street’s behest.  Learned advisors first had to resort to their old bag of tricks with a tweak here, a Congressional rider there, a new regulation or two, and even introduced the new academic driven massive Keynesian make-work stimulus programs.  Nothing worked no matter how rarefied or how many respected monetary scientists offered lofty solutions, so with the Federal Reserve insolvent and out of gold, President Roosevelt resorted to the old goldsmith shakedown tactic and issued Executive Order 6102 in April 1933, followed by Congress and its Gold Reserve Act of January 1934.  The EO effectively confiscated all gold in the United States, gave it to the privately owned Federal Reserve System at $20.67 per troy ounce, removed the gold standard again, then raised the gold price to $35 a troy ounce and began printing massive amounts of pure fiat money.  That gave the appearance of working, and industrial output slowly rose to greater than 1929 pre-crash gold standard levels entirely on the back of the inflation unleashed by pure fiat issuance until everything collapsed again in 1937.  It began to look more and more like the fog of war was the only solution to pull America out of this depression and unbeknownst to most, the country had been rearming itself since early 1940, nearly two years before the bombing of Pearl Harbor.

The United Kingdom was in serious economic trouble too, having spent the entirety of the 1920s in deep recession and now hopelessly mired in a depression it could not shake.  The old 18th century playbook would have to be dusted off, but at a great cost – financial destruction of the British Empire and sacrifice of the Bank of England for the greater good of the City of London Corporation’s central bank cross ownership nexus.  Starting in the early 1920s, the City of London Corporation bankers had recalled their communists to kick in the teeth and pick whatever flesh was remaining from the bones of the Weimar Republic, and the now worthless Reichsbank was put to work printing up never before seen hyper-inflation.  These actions not only plunged Germany into the economic stone ages, but deprived nexus owned Bank of France of war reparations desperately needed to modernize its industrial base.  Such was the threat posed by even the remains of a German Empire that such actions were deemed acceptable losses so long as “objectivity, truth, and ethical life” were sent to the unequivocal dustbin of history.  Now, on its knees before the world’s creditors and on the brink of devolving into a failed state, Germany was needed once again by these same creditors – and needed fast by Great Britain.  Despite having few natural resources within its borders, Germany’s military machine would be resurrected from the dead and come roaring back with a vengeance on a mission to once again unite all Germanic peoples under the banner of a revisionist version of “objectivity, truth, and ethical life”, and it could only do that through the magic formula of central banking foreign credit.

Within six years of Hitler’s ascension to the German Chancellery, Wall Street and the City of London Corporation bankers had financed the greatest mechanized military ever assembled – the Wehrmacht.  The Dawes plan of 1924 had initiated the linkage between German industry and Wall Street finance for which the American banker Charles G. Dawes shared the 1925 Nobel Peace Prize.  Under the Dawes Plan, prior to the 1929 crash, the Weimar Republic had paid its war reparations not to France or England, but to a consortium of Wall Street investment banks.  This Dawes Plan gave Germany a life-sustaining infusion of US dollar credit that would in theory produce trade that would hypothetically generate customs and excise taxes that were surmised to eventually go towards war reparations to England and France.  But then Hitler repudiated the Versailles Treaty, and the Gold Reserve Act allowed millions more pure fiat US dollars to flow out of Wall Street to their agents in “neutral” Stockholm and into the Nazi controlled Deutsche Reichsbank.  Wall Street and the City of London Corporation loved Hitler and the House of Windsor openly saluted him.  Nazism was to be a great boon to the trans-Atlantic financiers as Hitler would devoured the expendable and unprofitable Slavic peoples and ensured a never ending stream of new revenue with every eastern conquest.  It was a foolproof plan – the Atlantic Ocean was wide, the Kriegsmarine small, the Luftwaffe would run out of gas before it arrived over New York City, and the communist martyrs installed in Russia would put up a fierce and expensive fight until Lebensraum ran out of room.  But what Wall Street had not figured into its equations was that Hitler would sign an Anti-Comintern Pact, a Phony War would transform into a hot war, and another go at uniting all the Germanic peoples of Europe would commence under the new banner of Blut und Boden.  The City of London Corporation bankers would have to fix this Wall Street mess themselves and call up the blue blooded true believers, those who existed for one purpose and one purpose only – the “Glory of Britannia”.

We all know the story of what happened next and how WWII dragged in the entire central bank cross ownership nexus to secure victory for the “Glory of Churchill”.  But for all the tens of thousands of pages published in the learned journal tomes, there is not one observation made how the Federal Reserve System failed to deliver the expectations sold to America that it would end the boom-bust cycles inherent under post bellum 19th century quasi-capitalism.  There was not one erudite call to re-examine the “special relationship” now cemented between Congress and the Federal Reserve System, and not one monetary scientist noticed the Federal Reserve System cross ownership nexus came out of the Great Depression – the depression it created – more powerful than when it entered.  Instead, the world got lofty excuses like The General Theory of Employment, Interest, and Money proclaiming that more of the same failures would make everything indubitably jolly good.  Not one political scientist noticed the Great Depression was used to eliminate banks not in favor with the elite ownership hierarchy within the trans-Atlantic central bank cross ownership nexus.  And, not one scholarly paragraph examined how depressions are, and have always been, financially engineered mechanisms to destroy competitor banks and consolidate increasing power into a handful of fewer banks owned by a shrinking secret ownership pool.

With the conclusion of WWII, the Exchequer was broke as it had issued such an immense quantity of debt to finance the war that it could never be repaid without resorting to harsh austerity measures at home that would threaten social unrest during a period of national weakness.  But with the Bank of England in control of monetary policy, any semblance of economic recovery would be impossible, so after 252 years of their “special relationship”, Parliament made the only logical choice available to it and in 1946 the Bank of England was nationalized and played no further dominant role in world capitalism.  But the central bank cross ownership nexus made out just fine as the Bank of England wiggled out of holding the bag on all those unpayable war debts as the nationalization dumped them onto the backs of the Queen’s subjects in another miraculous “heads they win, tails you lose” event.  Thus 1946 begins the British period of state controlled capitalism that was in effect a transition period into de-industrialization where large segments of its economy were nationalized to ensure they were not revived through modernization and thus would never be placed into competition with industry in the United States or other European countries that were using their post-WWII rebuilding programs to modernize their industries.

After both the Bank of England and Bank of France were lost to nationalizations, Wall Street tool the pre-eminent role within the central bank cross ownership nexus and got straight to work on elevating the US dollar to the status of undisputed world reserve currency, thus ending the 130 year run of the pound sterling. 

And a modern world reserve currency needed a colonial fiat empire, so the United States started with Western Europe via the Anglo-American Loan Agreement of 1946 and later the Marshall Plan of 1948 to kick off its “virtuous cycle”.  The Russian financial system remained unchanged, and it absorbed Eastern Europe into its new expanded fiat empire.  Thus, the true winners at the cessation of hostilities from a purely financial perspective were the United States and the Soviet Union.

In 1951 during the fog of the Korean War and with the Secretary of the Treasury in the hospital, the Assistant Secretary of the US Treasury – not Congress – handed the power to set interest rates independently of government economic policy entirely to the Federal Reserve System.  Like the original Federal Reserve Act, this additional power grab was sold to the American people on the premise the privately owned Federal Reserve System would “tame inflation” and “foster economic stability without responding to short-term political pressure”.  This single act by an adjutant set the stage for the Federal Reserve System to wield incredible power over government policy and essentially hold Congress to ransom, where although the US Treasury was responsible for raising government money, the privately owned Federal Reserve System was now responsible for setting that money’s price paid to it for creating it out of thin air.  So the Federal Reserve System now had the power to create or destroy national wealth by reducing or raising interest rates and there was no legal stipulation for whom their policies should benefit.  Thus unbeknownst to the American people, this unnecessary power relinquishment was, in effect, the crucial piece that would set the stage for enabling the financialization of the America economy.

Post-WWII capitalism under the American fiat leadership functioned much like it did prior to the war except where the fiat empire was concerned.  Instead of conquest and physical occupation of resource rich lands and filling these lands up with colonists, the United States resorted to a proxy conquest model where it initiated coup d’états, assassinations, foreign espionage, fraudulent elections, and foreign propaganda campaigns to install pliable dictators and friendly juntas.  These leaders were amicable to pursuing “growth” policies, allowed American military bases on their soil, and had no qualms about crushing dissent at home or piling billions of US dollar denominated debt onto the heads of their citizenry.  In exchange for their compliance, these dictators and juntas were kept in power with generous foreign aid packages, and they in turn doled out lucrative resource development concessions, purchased US made military hardware, and awarded contracts to US corporations for industrial, civil, and defense projects.  In a new twist on colonization, many of these American proxy conquests created large numbers of emigres into the United States and provided a mechanism to ensure the consumer base at home continued to grow and devour excess production capacity as American living standards rose and native born birth rates declined.  A new “virtuous cycle” evolved whereby industry in the conquered fiat empire eventually began to generate export income sold into the US dollar denominated commodity markets, and those US dollars returned to the United States to purchase US value added exports and services.  And to secure this new “virtuous cycle”, in 1947 the Central Intelligence Agency was born out of the National Security Act, and it quickly evolved into its main directive of waging clandestine foreign hybrid wars to consolidate and grow the American fiat empire, install and keep friendly governments investing in US exports – especially military equipment – and defeat the competing Soviet fiat money empire.  Thus with its responsibility of maintaining its new global fiat empire, the United States entered into its historical phase of Endless War.

The United Kingdom on the other hand could no longer afford control over its fiat empire as it had no viable value added export capability at war’s end and thus its “virtuous cycle” stopped functioning.  It instead resorted to de-colonialization, but only in terms of physical land holdings.  The City of London Corporation bankers either kept effective control over these former colonies’ new central banking systems or was its primary beneficiary, and in either case it retained the majority of financial profits derived from these newly created banking systems.  This “de-colonized” banking model was similar to the false “independence” of the Federal Reserve System, but here the City of London Corporation bankers retained control through majority stock ownership of the member banks that comprised the new banking systems.  In the English speaking constitutional monarchies where the serious financial profits were generated, an additional failsafe was guaranteed by the Queen’s appointment of Governor Generals who could – and once did in Australia – sack recalcitrant duly elected governments that did not put the City of London Corporation’s interests above those of their own people.

One post-WWII change with huge repercussions to American capitalism was the US dollar denomination takeover of global commodities trade from the pound sterling.  As world population and industrialization increased and Western Europe crept back into consumer manufacturing, the volume of forward contracts traded in dollars grew in step.  However, all that American ingenuity put into its fiat empire’s “virtuous cycle” began to work too well in the Middle East and North African oil sectors.  By 1965 the combined dollar revenues received from new oil exports, taken together with all Western European dollar revenue streams, were greater than what the US domestic export capacity could absorb through its “virtuous cycle”.  Instead of buying US value added exports, these surplus overseas dollars went searching for investments and with limited low risk opportunities available, they eventually found the US Treasury Gold Window.  The 1934 Gold Reserve Act had ended domestic dollar convertibility into physical gold but not international convertibility, which was retained as per the Bretton Woods agreement, and during the second half of the 1960s these foreign dollars began to drain the US Treasury of its gold reserves.  Despite the gold rush, the US Treasury held its official exchange price constant at $35 an ounce – the same price set after the depression era Gold Reserve Act.  When the House of Rothschild finally raised the gold price in 1968, it signaled US gold reserves were in decline and prompted frenzied buying from Western Europe up until the day that American capitalism ended.