As head of the War Industries Board, Baruch spent government funds at the rate of $10,000,000,000 annually.... Baruch packed the War Industries Board and its committees with past and future Wall Street manipulators, industrialists, financiers, and their agents ... who fixed prices on a cost-plus basis and, as subsequent investigations revealed, saw to it that costs were grossly padded so as to yield hidden profits....
The A m e r i c a n soldiers fighting in the trenches, the p e o p l e working at home,the entire nation under arms, were fighting, not only to subdue Germany, but to subdue themselves. That there is nothing metaphysical about this interpretation b e c o m e s clear when we observe that the total wartime expenditure of the United States government from April 6, 1917, to October 31, 1919, when the last contingent of troops returned from Europe, was $35,413,000,000. Net corporation profits for the period January 1,1916, to July, 1921, when w a r t i m e i n d u s t r i a l a c t i v i t y w a s finally l i q u i d a t e d , w e r e $ 3 8 , 0 0 0 , 0 0 0 , 0 0 0 , o r a p p r o x i m a t e l y t h e a m o u n t o f t h e w a r expenditures. More than two-thirds of these corporation profits were taken by precisely those enterprises which the Pujo Committee had found to be under the control of the 'Money Trust.'
The banking cartel was able, through the operation of the Federal Reserve System, to
exactly as was to be done again in World War II and again in the Big Bailout of the 1980s and '90s. It is true that, in 1917, the recently enacted income tax was useful for raising a sizable amount of revenue to conduct the war and also, as Beardsley Ruml pointed out a few years later, to take purchasing power away from the middle class.
But the greatest source of funding came, as it always does in wartime, not from direct taxes, but from the hidden tax called inflation.
Between 1915 and 1920, the money supply doubled from $20.6 billion to $39.8 billion.2 Conversely, during World War I, the purchasing power of the currency fell by almost 50%. That means
Americans unknowingly paid to the government approximately one-half of every dollar that existed. And that was in
2. 'Deposits and Currency—Adjusted Deposits of AH Banks and Currency Outside Banks, 1892-1941,'
260
THE CREATURE FROM JEKYLL ISLAND
between the political and monetary scientists had performed its mission well.
SUMMARY
To finance the early stages of World War I, England and France had borrowed heavily from investors in America and had selected the House of Morgan as sales agent for their bonds. Morgan also acted as their U.S. purchasing agent for war materials, thus profiting from both ends of the cash flow: once when the money was borrowed and again when it was spent. Further profits were derived from production contracts placed with companies within the Morgan orbit. But the war began to go badly for the Allies when Germany's submarines took virtual control of the Atlantic shipping lanes. As England and France moved closer to defeat or a negotiated peace on Germany's terms, it became increasingly difficult to sell their bonds. No bonds meant no purchases, and the Morgan cash flow was threatened. Furthermore, if the previously sold bonds should go into default, as they certainly would in the wake of defeat, the Morgan consortium would suffer gigantic losses.
The only way to save the British Empire, to restore the value of the bonds, and to sustain the Morgan cash flow was for the United States government to provide the money. But, since neutral nations were prohibited from doing that by treaty, America would have to be brought into the war. A secret agreement to that effect was made between British officials and Colonel House, with the concurrence of the President. From that point forward, Wilson began to pressure Congress for a declaration of war. This was done at the very time he was campaigning for reelection on the slogan 'He kept us out of war.' Meanwhile, Morgan purchased control over major segments of the news media and engineered a nation-wide editorial blitz against Germany, calling for war as an act of American patriotism.
Morgan had created an international shipping cartel, including Germany's merchant fleet, which maintained a near monopoly on the high seas. Only the British Cunard Lines remained aloof. The
SINK THE LUSITANIA!
tion, but they did nothing to stop it. When the German embassy tried to publish a warning to American passengers, the State D e p a r t m e n t intervened and prevented newspapers from printing i t Whenthe
thing that could accomplish that was proper even the coldly calculated sacrifice of one of her great ships with E n g l i s h m e n aboard. But the trick was to have
