"The Roaring Twenties and the Depression" Part 2. Chapter 11 from "Our Country, Then and Now"
"Prohibition and Organized Crime"; "The Bankers’ Catalyst Sparks the Great Depression"
Serialization of selections from my book Our Country, Then and Now continues with the cooperation of my publisher, Clarity Press. Today we have the second installment of Chapter 11: “The Roaring Twenties and the Depression” with sections on “Prohibition and Organized Crime” and “The Bankers’ Catalyst Sparks the Great Depression.”
World War I, the “Great War,” ended without Britain achieving its aim of annihilating Germany as a rival European power. Germany had been bled dry by the Allies which were bolstered by US entry into the war. Germany was never invaded but seethed with anger.
The onerously punitive Treaty of Versailles lay the groundwork for a second major war twenty years later. Driving the bus, as we shall see, was the Bank of England. Meanwhile, Britain’s acquisition of the Palestinian Mandate set the stage for the future Jewish state.
But the US was pursuing its own interests after bailing out the Allies on the Western Front. The Republicans were again in charge. The US Senate had rejected the Treaty of Versailles and the League of Nations. President Warren Harding, elected in 1920, promised a “Return to Normalcy.”
Fueled by enormous largess in getting their hands on British gold through wartime lending, the US banks pumped the stock market into the stratosphere. Life was great, until the Bank of England pulled the plug. Stay tuned—we’ll see how and why they did it.
After the 1929 crash, the world changed overnight with the onset of the Great Depression. The US dumped the gold standard and embraced Keynesian deficit spending as permanent policy. The New Deal tried but failed to overcome the downturn as bank lending turned abroad.
Using British and American loans, Italy and Germany rearmed under the upstarts Mussolini and Hitler. In Germany, the giddiness of the Weimar Republic was over. In the Pacific, Japan began to spread its wings over East Asia.
In 1914 it was the “Great War.” In 1939 it was the “Good War.” Or was it?
Prohibition and Organized Crime
Organized crime has held the US in its grip for decades and does so still today, especially with the emergence within the US of Mexican drug cartels enabled by the US government’s open border policies. The frolics of the 1920s produced enough surplus cash within the US to fuel a drastic rise in organized crime, as described by Stephen Fox in Blood and Power: Organized Crime in Twentieth-Century America, but it was the prohibition of alcohol consumption that enabled organized crime to spread its tentacles across the entirety of the US.
Prohibition lasted from 1920 to 1933. The US had an excise tax on liquor since 1791 which had long been a big money-maker for the federal government. Ever since, there had been an undercurrent of tax evasion by the manufacture and sale of bootlegged liquor. But the evasion became overwhelming with Prohibition. This failed attempt to outlaw all alcoholic beverages resulted in the creation of vast fortunes from criminal enterprise and turned a majority of the US population into scofflaws.
Prohibition was among the worst public policy failures of modern history. The gangsters who controlled the alcohol trade combined it with profiteering in every vice, including gambling, prostitution, extortion, bribery, human trafficking, and later illicit drugs. Alcoholism did see a slight decline, but at a huge cost. Rates of liver cirrhosis, alcoholic psychosis, and infant mortality also dropped. But the net result of all this was a profound decline in private and public morality induced within the entire US population, with effects that persist today.
Organized crime remains a gigantic problem in the US. Illegal drug trafficking has had savage effects on public health that the US government has never effectively dealt with. It’s hardly surprising, when agencies of the US government such as the CIA have also been involved. Indeed, the agency itself has admitted to drug involvement in reports from its own inspector-general that would become established over time through the drug trade in Southeast Asia, Latin America, and Afghanistan.
The FBI under J. Edgar Hoover failed to take organized crime seriously. In fact, the FBI and CIA made an alliance with organized crime where it carried out various unsavory projects for these agencies, including assassinations.
While the Roaring Twenties, vividly characterized in F. Scott Fitzgerald’s The Great Gatsby, seemed to portray the era as one in which everyone was having fun—though Gatsby himself was shot to death in a swimming pool—the need for loose money was ever present to enable the US to keep up with its explosive economic growth and all the new consumer industries, particularly automobiles, fancy new homes, and bank buildings that looked like Greek and Roman temples.
The Bankers’ Catalyst Sparks the Great Depression
Surprisingly in hindsight, almost no one in America was aware of what was going on in Britain and Europe that might have foreshadowed disaster; the bubble of the Roaring 20s was that all-encompassing. But explosions happen fast. Yet there were signs as early as 1924.
Chase Bank’s chief economist, Benjamin Anderson, then expressed concern about a dangerous speculative bubble caused by “the present glut in the money markets, with excessively cheap money and its attendant evils and dangers to the credit structure of the country….Both incoming gold and Federal Reserve Bank investments are reflected almost entirely in an increase of member bank balances with immediate and even violent effect upon the money market. The situation is abnormal and dangerous.” [i]
In 1926, Swiss banker Felix Somary also warned of a stock market bubble in America where, if any big investors pulled out, markets would crash. [ii] A large part of the money being lent by US banks to foreign governments was being spent on the purchase of goods manufactured in America, but only the interest on these loans was being repaid, not the principal. So debt, always potentially destabilizing, stayed on the books.
The pro-business Republican administrations of Warren Harding, Calvin Coolidge, and Herbert Hoover had brought prosperity, but by “Black Thursday,” October 24, 1929, the world was spiralling in a different direction. On Black Thursday, the US stock market crashed, following the long indulgence in stock inflation and speculation engineered by US banks and the Federal Reserve. Within a month, stocks valued at $80 billion were worth $50 billion. The Dow Jones Industrial index fell from 381 in September 1929 to 50(!) by May 1932.
The Federal Reserve failed to respond and seemed to be a passive player. The monetary manipulations that were starting to lead to the rearming of both the Soviet Union and Germany were directed by the Bank of England, with the Federal Reserve going along with it. [iii]
Here is how the Depression impacted the US: National income dropped from $83.3 billion in 1929 to $68.9 billion in 1930 with a further descent to $40.0 billion by 1932. Unemployment was estimated at 3.5 million in 1930 but 15 million by 1933. The wholesale price index fell from 95.3 in 1929 to 86.4 in 1930 and 64.8 by 1932.
It was clear that people wanted to work and were able to do so. The natural resources required for production were available, as had been shown by the prosperity of the 1920s. The infrastructure of railroads, highways, motorized vehicles, water and sewage systems, electrical grids, telephones and telegraphs, international shipping, housing for families and workers—all these were up and running.
What was missing was an effective, functioning medium of exchange: money. But the US, along with other Western nations, had long since turned over their monetary systems to the privately-owned banking industry and their gold standard. Even if that industry provided money, it always had a string attached to it. That string was “interest.” With any contraction of the money supply, the additional money needed to cover the interest payments—which would require an expansion, not a contraction of the money supply (and hence inflation)—was just not there. Without it, the economy was kaput.
It’s no mistake that the people in charge of banking are the wealthiest on the planet. Presumably their wealth is the recompense they receive for making modern industrial civilization possible through the extension of credit, yet interest payments were a fatal in that system, and accordingly the civilization that they had enabled had now broken down. The system that the bankers had promoted had failed miserably at keeping their end of the bargain, as it inevitably would.
Even the industrialists were subservient to the financiers, not to mention the people who did the hard, physical work. And by 1929, the international financial system was largely in the hands of the Bank of England. What had happened was that when the US banks raised their interest rates in response to the Bank of England’s call on gold which offered greater returns to investors by shifting funds to the British markets, the smart money bailed out of the US markets. Some used insider information to bail before the crowd did so. Then, “crash.”
Looking deeper, the monetary dynamics now reversed from the 1920s when it was the US that was the leading holder of gold. This had produced so much instability in Europe that the heads of the Banks of England, France, and Germany had demanded that the US raise its own interest rates to reduce inflation and move gold back to Europe.
The decision to do so was reportedly taken at a single meeting over lunch held in New York City. Eustace Mullins wrote:
“The secret meeting between the Governors of the Federal Reserve Board and the heads of the European central banks…was held to discuss the best way of getting the gold held in the United States …back to Europe to get the nations of that continent back on the gold standard….The movement of that gold out of the United States caused the deflation of the stock boom, the end of the business prosperity of the 1920s, and the Great Depression of 1929-1931….The [American] bankers knew what would happen when that $500 million worth of gold was sent to Europe. They [i.e., the bankers] wanted the Depression because it put the business and finance of the United States completely in their hands. [iv]
Germany was also hit hard by the Depression.
Unemployment began to decimate the German economy. On paper, there were over three million jobless individuals by 1930. Despair would lead to many of them committing suicide.[v]
Many more Germans began to support the Nazis, which had been struggling to gain adherents. On January 30, 1933, German President General Paul von Hindenburg named Adolf Hitler Chancellor. This was another result of the Great Depression.
[i] Nomi Prins, All the President’s Bankers, p. 86.
[ii] Guido Giacomo Preparata, Conjuring Hitler: How Britain and America Made the Third Reich, Pluto Press: London, Ann Arbor 2005, p.175. A second edition of this book has been released entitled, Conjuring Hitler: How Britain and America Made the Third Reich and Destroyed Europe. I believe this to be the best book ever written on the true history of events between World Wars I and II. A classic.
[iii] Ibid, p.180.
[iv] Eustace Mullins, The Federal Reserve Conspiracy, Martino Publishing, Mansfield Centre CN, 1954, p.89. Also see Mullins’ The Secrets of the Federal Reserve.
[v] Ibid, p. 192.
I have a different theory about all this. WWI never ended, and WWI and WWII were the same war. The Treaty of Versailles was designed to crush Germany into submission by blaming Germany for the war and imposing ruinous obligations on the Germans to “compensate Britain and France for the expenses of WWI. But the real purpose was to force the German ruling elites to relinquish control of their country to the bloody shield banksters.
Germany suffered from too many people and not enough land to feed them, so that it depended on exporting superior products to obtain foreign exchange needed to purchase food for its population. So, the Germans negotiated a modification of the Treaty of Versailles called the “Dawes Plan” which allowed them to borrow gigantic loans from the United States denominated in gold-backed American dollars. Dawes was one of the partners of JP Morgan’s American branch of the Peabody/Morgan bank in London. In other words, the money was British. This necessitated passage of a bill in Congress to make it legal. The original terms stipulated that the Germans could pay off the loans with their manufactured goods. However, the funds provided by the Dawes Plan proved insufficient, so the Germans needed to borrow more money to complete the restoration of their industries, and so they sought additional loans. This required another modification of the Treaty of Versailles that was negotiated by Thomas P. Lamont, the senior partner of the JP Morgan bank. It was called the “Young Plan.” This modified the original terms that allowed Germany to pay off the loan using manufactured goods, and now required that both loans must be paid off in gold-backed American currency. The expansion of the American money supply that caused the “Roaring Twenties” was intended to fool the Germans into thinking that they could easily sell their goods to Americans to pay off their loans, but it was a deliberate trap. No sooner than the ink dried on the loan papers, there was a meeting between Montagu Norman, head of the Bank of England (the central bank of England), and Benjamin Strong, head of the New York Branch of the “Federal” Reserve (The central bank of the United States, which was also British controlled). Both Strong and Norman were homosexuals. They conspired to coordinate their bank policies to cause an international deflationary depression that wrecked the ability of the Germans to sell their goods to Americans to obtain the American currency they needed to pay off their loans. This caused a horrific depression and drastic unemployment in Germany, and the German government reacted by paying off the Young Plan loans with hyperinflated and nearly worthless German currency. During this economic turmoil the Bloody Shield Banksters financed the communist plan to seize political control of Germany using heavily armed Jewish thugs recruited from Russia. During this turmoil Hitler formed a gang of “brown shirts” that consisted of unemployed WWI German soldiers, and it played a key role in defeating the Russian gunmen, and enabled Hitler to become Chancellor of Germany. It later crashed the American stock market in 1929. This enabled Joseph P. Kennedy to dramatically expand his fortune by speculating in the stock market. The crash caused severe American unemployment, which set the stage for desperate workers to join the American armed forces during WWII. There are lots of other juicy details but I’ll end the torture here.