Creature From Jekyll Island by G. Edward

Over the years since N.M. [Rothschild], the Manchester textile manufacturer, h a d b o u g h t cotton from the Southern states, Rothschilds had developed heavy American commitments. Nathan ...

had made loans to various states of the Union, had been, for a time, the official European banker for the US government and was a pledged supporter of the Bank of the United States.

Gustavus Myers, in his History of the Great American Fortunes, is more pointed. He says:

Under the surface, the Rothschilds long had a powerful influence in dictating American financial laws. The law records show that they were the power in the old Bank of the United States.

The Rothschilds, therefore, were not merely investors nor just an important power. They were the power behind the Bank of the United States! The significance of the Rothschild power in American finance and politics was the subject of extensive comment in a previous section, so there is no need to cover that ground again. It is important here, however, to at least make a mental note of the fact that the Creature from Jekyll Island is descended from a species that is not native to this land.

INFLATION ALL OVER AGAIN

From the beginning, the primary purpose of the Bank was to create money for the federal government. Money for the private 1. Derek Wilson, p. 178.

2. Gustavus Myers, History of the Great American Fortunes (New York: Random House, 1936), p. 556.

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sector was strictly secondary. That was made clear by the fact that the maximum rate of interest it was allowed to charge was six per cent. That made it impractical to make loans to anyone except the federal government and a few large, prime-rate borrowers. And the government wasted no time putting its new central- bank mechanism to work. Having 'invested' $2 million at the start, it converted that into $8.2 million borrowed within the next five years.

Which means that $6.2 million was created specifically for its use.

Anyone familiar with the history of money as outlined in the previous section could easily write the following paragraph.

The creation of millions of new fractional-reserve dollars, which the government pushed into the economy through spending programs, caused an imbalance between the supply of money and the supply of goods and services. Prices appeared to go up as the relative value of the dollar went down. In that same five-year period, wholesale prices rose by 72%, which is another way of saying that 42% of everything people had saved in the form of money was quietly confiscated by the government through the hidden tax called inflation.

The same inflation effect that previously had plagued the colonies now returned to plague the new generation. This time, instead of being caused by printing-press money, it was fractional-reserve money. The cog that linked the two mechanisms together and caused them to function as one was federal debt. It was federal debt that allowed the political and monetary scientists to violate the intent of the founding fathers, and it was this same federal debt that prompted Jefferson to exclaim:

I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the general principle of the Constitution; I mean an additional article, taking from the federal government their power of borrowing.1

Like so many things in the real world, the Bank of the United States was a mixture of evil with some good. It certainly was not all bad. In colonial times, the state governments printed as much paper money as they pleased, and the loss of purchasing power was, in many cases, total. The Bank, on the other hand, was 1. Letter to John Taylor, November 26, 1789. Quoted by Martin A. Larson, The Continuing Tax Rebellion (Old Greenwich, Connecticut: Devin-Adair, 1979), p. xii.

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required to maintain some gold and specie as a base for its pyramid of money. Even though it was an inverted pyramid with reserves being smaller than the quantity of bank notes, it still represented a boundary to just how far the money supply could be expanded.

And that was good.

Furthermore, it is apparent that the bank's directors were imbued with a certain amount of enlightened self interest in that they actually wanted to keep the creation of new money within some kind of control. They could profit from the central-bank mechanism only so long as the economy as a whole was productive enough to support it. They did not want to kill the goose that laid the golden egg. So, like their counterparts in the Federal Reserve System of our modern day, they spoke the language of restraint and, in a few instances, even acted with restraint as well.

WILDCAT BANKS

For example, it was during this period that 'wildcat banks'

began to flourish. They were given that name not because they were untamed—although that would have been another good

reason to do so—but because they were located in areas so remote in the frontier that it was said their only customers were wildcats.

Wildcat banks were not noted for meticulous accounting or business practices. Like all banks at that time, they were required to keep a certain portion of their deposits on hand in the form of gold or silver coin. To engender public confidence in their faithfulness to that obligation, it was common practice to keep the vault door open so a keg or two of gold coins could be viewed during business hours—not altogether different from the modern practice of financial institutions advertising how many billions in assets they hold but never mentioning the size of their liabilities. The wildcatters, however, were not reluctant to sprinkle a few precious-metal coins over the top of nails and let that take care of public relations. In some cases, as state examiners went from bank to bank to check the reserves, the gold would arrive only a few minutes ahead of them, having been rushed from the vault of the bank previously audited.