excerpts from the book
Tragedy and Hope
A History of the World in Our
Time
by Carroll Quigley, 1966
Pg. 48-49:
In effect, this creation of paper claims
greater than the reserves available means that bankers were creating
money out of nothing. The same thing could be done in another
way, not by note-issuing banks but by deposit banks. Deposit bankers
discovered that orders and checks drawn against deposits by depositors
and given to third persons were often not cashed by the latter
but were deposited to their own accounts. Thus there were no actual
movements of funds, and payments were made simply by bookkeeping
transactions on the accounts. Accordingly, it was necessary for
the banker to keep on hand in actual money (gold, certificates,
and notes) no more than the fraction of deposits likely to be
drawn upon and cashed; the rest could be used for loans, and if
these loans were made by creating a deposit for the borrower,
who in turn would draw checks upon it rather than withdraw it
in money, such "created deposits" or loans could also
be covered adequately by retaining reserves to only a fraction
of their value. Such created deposits also were a creation of
money out of nothing, although bankers usually refused to express
their actions, either note issuing or deposit lending, in these
terms. William Paterson, however, on obtaining the charter of
the Bank of England in 1694, to use the moneys he had won in privateering,
said, "The Bank hath benefit of interest on all moneys which
it creates out of nothing." This was repeated by Sir Edward
Holden, founder of the Midland Bank, on December 18, 1907, and
is, of course, generally admitted today.
Pg. 51: The merchant bankers of London
had already at hand in 1810-1850 the Stock Exchange, the Bank
of England, and the London money market when the needs of advancing
industrialism called all of these into the industrial world which
they had hitherto ignored. In time they brought into their financial
network the provincial banking centers, organized as commercial
banks and savings banks, as well as insurance companies, to form
all of these into a single financial system on an international
scale which manipulated the quantity and flow of money so that
they were able to influence, if not control, governments on one
side and industries on the other. The men who did this, looking
backward toward the period of dynastic monarchy in which they
had their own roots, aspired to establish dynasties of international
bankers and were at least as successful at this as were many of
the dynastic political rulers. The greatest of these dynasties,
of course, were the descendants of Meyer Amschel Rothschild (1743-1812)
of Frankfort, whose male descendants, for at least two generations,
generally married first cousins or even nieces. Rothschild's five
sons, established at branches in Vienna, London, Naples, and Paris,
as well as Frankfort, cooperated together in ways which other
international banking dynasties copied but rarely excelled.
Pg. 52: The names of some of these banking
families are familiar to all of us and should be more so. They
include Raring, Lazard, Erlanger, Warburg, Schroder, Seligman,
the Speyers, Mirabaud, Mallet, Fould, and above all Rothschild
and Morgan. Even after these banking families became fully involved
in domestic industry by the emergence of financial capitalism,
they remained different from ordinary bankers in distinctive ways:
(1) they were cosmopolitan and international; (2) they were close
to governments and were particularly concerned with questions
of government debts, including foreign government debts, even
in areas which seemed, at first glance, poor risks, like Egypt,
Persia, Ottoman Turkey, Imperial China, and Latin America; (3)
their interests were almost exclusively in bonds and very rarely
in goods, since they admired "liquidity" and regarded
commitments in commodities or even real estate as the first step
toward bankruptcy; (4) they were, accordingly, fanatical devotees
of deflation (which they called "sound" money from its
close associations with high interest rates and a high value of
money) and of the gold standard, which, in their eyes, symbolized
and ensured these values; and (5) they were almost equally devoted
to secrecy and the secret use of financial influence in political
life.
Pg. 53: The influence of financial capitalism
and of the international bankers who created it was exercised
both on business and on governments, but could have done neither
if it had not been able to persuade both these to accept two "axioms"
of its own ideology. Both of these were based on the assumption
that politicians were too weak and too subject to temporary popular
pressures to be trusted with control of the money system; accordingly,
the sanctity of all values and the soundness of money must be
protected in two ways: by basing the value of money on gold and
by allowing bankers to control the supply of money. To do this
it was necessary to conceal, or even to mislead, both governments
and people about the nature of money and its methods of operation.
Pg. 62: In addition to their power over
government based on government financing and personal influence,
bankers could steer governments in ways they wished them to go
by other pressures. Since most government officials felt ignorant
of finance, they sought advice from bankers whom they considered
to be experts in the field. The history of the last century shows,
as we shall see later, that the advice given to governments by
bankers, like the advice they gave to industrialists, was consistently
good for bankers, but was often disastrous for governments, businessmen,
and the people generally. Such advice could be enforced if necessary
by manipulation of exchanges, gold flows, discount rates, and
even levels of business activity. Thus Morgan dominated Cleveland's
second administration by gold withdrawals, and in 1936-1938 French
foreign exchange manipulators paralyzed the Popular Front governments.
As we shall see, the powers of these international bankers reached
their peak in the last decade of their supremacy, 1919-1931, when
Montagu Norman and J. P. Morgan dominated not only the financial
world but international relations and other matters as well. On
November I l, 1927, the Wall Street Journal called Mr. Norman
"the currency dictator of Europe." This was admitted
by Mr. Norman himself before the Court of the Bank on March Zl,
1930, and before the Macmillan Committee of the House of Commons
five days later. On one occasion, just before international financial
capitalism ran, at full speed, on the rocks which sank it, Mr.
Norman is reported to have said, "I hold the hegemony of
the world."
Pg. 324: the powers of financial capitalism
had another far-reaching aim, nothing less than to create a world
system of financial control in private hands able to dominate
the political system of each country and the economy of the world
as a whole. This system was to be controlled in a feudalist fashion
by the central banks of the world acting in concert, by secret
agreements arrived at in frequent private meetings and conferences.
The apex of the system was to be the Bank for International Settlements
in Basle, Switzerland, a private bank owned and controlled by
the world's central banks which were themselves private corporations.
Each central bank, in the hands of men like Montagu Norman of
the Bank of England, Benjamin Strong of the New York Federal Reserve
Bank, Charles Rist of the Bank of France, and Hjalmar Schacht
of the Reichsbank, sought to dominate its government by its ability
to control Treasury loans, to manipulate foreign exchanges, to
influence the level of economic activity in the country, and to
influence cooperative politicians by subsequent economic rewards
in the business world.
Pg. 326: Norman (Montagu) had a devoted
colleague in Benjamin Strong, the first governor of the Federal
Reserve Bank of New York. Strong owed his career to the favor
of the Morgan Bank, especially of Henry P. Davison, who made him
secretary of the Bankers Trust Company of New York (in succession
to Thomas W. Lamont) in 1904, used him as Morgan's agent in the
banking rearrangements following the crash of 1907, and made him
vice-president of the Bankers Trust (still in succession to Lamont)
in 1909. He became governor of the Federal Reserve Bank of New
York as the joint nominee of Morgan and of Kuhn, Loeb, and Company
in 1914. Two years later, Strong met Norman for the first time,
and they at once made an agreement to work in cooperation for
the financial practices they both revered.
In the 1920's, they were determined to
use the financial power of Britain and of the United States to
force all the major countries of the world to go on the gold standard
and to operate it through central banks free from all political
control, with all questions of international finance to be settled
by agreements by such central banks without interference from
governments.
Pg. 326-327: It must not be felt that
these heads of the world's chief central banks were themselves
substantive powers in world finance. They were not. Rather, they
were the technicians and agents of the dominant investment bankers
of their own countries, who had raised them up and were perfectly
capable of throwing them down. The substantive financial powers
of the world were in the hands of these investment bankers (also
called "international" or "merchant" bankers)
who remained largely behind the scenes in their own unincorporated
private banks. These formed a system of international cooperation
and national dominance which was more private, more powerful,
and more secret than that of their agents in the central banks.
This dominance of investment bankers was based on their control
over the flows of credit and investment funds in their own countries
and throughout the world. They could dominate the financial and
industrial systems of their own countries by their influence over
the flow of current funds through bank loans, the discount rate,
and the re-discounting of commercial debts; they could dominate
governments by their control over current government loans and
the play of the international exchanges. Almost all of this power
was exercised by the personal influence and prestige of men who
had demonstrated their ability in the past to bring off successful
financial coupe, to keep their word, to remain cool in a crisis,
and to share their winning opportunities with their associates.
In this system the Rothschilds had been preeminent during much
of the nineteenth century, but, at the end of that century, they
were being replaced by J. P. Morgan whose central office was in
New York, although it was always operated as if it were in London
(where it had, indeed, originated as George Peabody and Company
in 1838).
Pg. 936-937: Behind this unfortunate situation
lies another, more profound, relationship, which influences matters
much broader than Far Eastern policy. It involves the organization
of tax-exempt fortunes of international financiers into foundations
to be used for educational, scientific, "and other public
purposes." Sixty or more years ago, public life in the West
was dominated by the influence of "Wall Street." This
term has nothing to do with its use by the Communists to mean
monopolistic industrialism, but, on the contrary, refers to international
financial capitalism deeply involved in the gold standard, foreign-exchange
fluctuations, floating of fixed-interest securities and, to a
lesser extent, flotation of industrial shares for stock-exchange
markets. This group, which in the United States, was completely
dominated by J. P. Morgan and Company from the 1880's to the 1930's
was cosmopolitan, Anglophile, internationalist, Ivy League, eastern
seaboard, high Episcopalian, and European-culture conscious. Their
connection with the Ivy League colleges rested on the fact that
the large endowments of these institutions required constant consultation
with the financiers of Wall Street (or its lesser branches on
State Street, Boston, and elsewhere) and was reflected in the
fact that these endowments, even in 1930, were largely in bonds
rather than in real estate or common stocks. As a consequence
of these influences, as late as the 1930's, J. P. Morgan and his
associates were the most significant figures in policy making
at Harvard, Columbia, and to a lesser extent Yale, while the Whitneys
were significant at Yale, and the Prudential Insurance Company
(through Edward D. Duffield) dominated Princeton.
Pg. 937: The names of these Wall Street
luminaries still adorn these Ivy League campuses, with Harkness
colleges and a Payne Whitney gymnasium at Yale, a Pyne dormitory
at Princeton, a Dillon Field House and Lamont Library at Harvard.
The chief officials of these universities were beholden to these
financial powers and usually owed their jobs to them. Morgan himself
helped make Nicholas Murray Butler president of Columbia; his
chief Boston agent, Thomas Nelson Perkins of the First National
Bank of that city, gave Conant his boost from the chemical laboratory
to University Hall at Harvard; Duffield of Prudential, caught
unprepared when the incumbent president of Princeton was killed
in an automobile in 1932, made himself president for a year before
he chose Harold Dodds for the post in 1933. At Yale, Thomas Lamont,
managing partner of the Morgan firm, was able to swing Charles
Seymour into the presidency of that university in 1937.
The significant influence of "Wall
Street" (meaning Morgan) both in the Ivy League and in Washington,
in the period of sixty or more years following 1880, explains
the constant interchange between the Ivy League and the Federal
government, an interchange which undoubtedly aroused a good deal
of resentment in less-favored circles, who were more than satiated
with the accents, tweeds, and High Episcopal Anglophilia of these
peoples
Pg. 938: Because of its dominant position
in Wall Street, the Morgan firm came also to dominate other Wal1
Street powers, such as Carnegie, Whitney, Vanderbilt, Brown-Harriman,
or Dillon-Reed. Close alliances were made with Rockefeller, Mellon,
and Duke interests but not nearly so intimate ones with the great
industrial powers like du Pont and Ford. [Because] ... of the
great influence of this "Wall Street" alignment, an
influence great enough to merit the name of the "American
Establishment," this group could ... control the Federal
government and, in consequence, had to adjust to a good many government
actions ... [which they had secretly supported ]. The chief of
these were in taxation law, beginning with the graduated income
tax in 1913, but culminating, above all else, in the inheritance
tax. These tax laws drove the great private fortunes dominated
by Wall Street into tax-exempt foundations, which became a major
link in the Establishment network between Wall Street, the Ivy
League, and the Federal government.
More than fifty years ago the Morgan firm
decided to infiltrate the Left-wing political movements in the
United States. This was relatively easy to do, since these groups
were starved for funds and eager for a voice to reach the people.
Wall Street supplied both. The purpose was not to destroy ...
or take over but was really threefold: (1) to keep informed about
the thinking of Left-wing or liberal groups; (2) to provide them
with a mouthpiece so that they could "blow off steam,"
and (3) to have a final veto on their publicity and possibly on
their actions, if they ever went "radical." There was
nothing really new about this decision, since other financiers
had talked about it and even attempted it earlier.
Pg. 939: The New Republic was founded
by Willard and Dorothy Straight, using her money, in 1914, and
continued to be supported by her financial contributions until
March 23, 1953. The original purpose for establishing the paper
was to provide an outlet for the progressive Left and to guide
it quietly in an Anglophile direction. This latter task was entrusted
to a young man, only four years out of Harvard, but already a
member of the mysterious Round Table group, which has played a
major role in directing England's foreign policy since its formal
establishment in 1909. This new recruit, Walter Lippmann, has
been, from 1914 to the present, the authentic spokesman in American
journalism for the Establishments on both sides of the Atlantic
in international affairs.
Pg. 950: There does exist, and has existed
for a generation, an international Anglophile network which operates,
to some extent, in the way the ... Right believes the Communists
act. In fact, this network, which we may identify as the Round
Table Groups, has no aversion to cooperating with the Communists,
or any other groups, and frequently does so. I know of the operations
of this network because I have studied it for twenty years and
was permitted for two years, in the early 1960's, to examine its
papers and secret records. I have no aversion to it or to most
of its aims and have, for much of my life, been close to it and
to many of its instruments. I have objected, both in the past
and recently, to a few of its policies (notably to its belief
that England was an Atlantic rather than a European Power and
must be allied, or even federated, with the United States and
must remain isolated from Europe), but in general my chief difference
of opinion is that it wishes to remain unknown, and I believe
its role in history is significant enough to be known.
Banks watch
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