(FoundingFather1776 Notes: We live in historic times. The story below is a PERFECT illustration of how real money (i.e. gold & silver) can protect your wealth in turbulent times of great change. Please read it carefully and absorb the lesson. I feel strongly that America is on the precipice of dramatic change, and it is not for the better. If you have money in the stock market or bonds, GET-OUT NOW! Withdraw the money from your 401k (while you still can), pay the tax penalties and buy storable food, commodity items, and precious metals. That is the only way to weather the coming storm and hopefully emerge with some wealth intact. And don’t forget Boys and Girls, precious metals are not just silver and gold. “Brass & Lead” are precious metals too….if you catch my meaning.
The type of changes we as a nation will witness in the next five to ten years will be much greater than the changes that occurred during the Civil War. America is turning into something wholly unrecognizable to the ideals of our Founding Fathers. If a functional economy ever emerges from the other side of this mess, do you want to be like your neighbors? Desperate and bankrupt from following the conventional wisdom? Or do you want to be like Edward Steves, who was smart enough to see where things were headed and who planned accordingly, creating a vast fortune for himself and his heirs. The choice is yours. FoundingFather1776)
Article by Jason Kaspar
During the Civil War, an independent thinker from San Antonio named Edward Steves made a savvy business move that would forever change his fortune and that of his family for generations. He made a bet against a dying currency in favor of the only currency that has never failed.
In Texas, truth and myth are often blurred as stories of what the human spirit accomplishes are stretched into tall tales for open camp fires and star filled nights. Perhaps the story of Mr. Steves borders on exaggeration. Perhaps not. In either case, the moral offers a profound lesson in wealth preservation and accumulation.
Steves immigrated to the United States in 1849 from Barmen, Elberfeld, Germany. He ventured into the Texas hill country as a farmer with mediocre success as he battled unpredictable weather, threat of local Indians, and rocky soil. He scraped every penny, and in early 1861, with an entrepreneurial spirit as big as Texas, he spent his entire savings on a newly invented machine – the first mechanical combine to make it to the South Central Texas region. As fate would have it, this machine arrived on the last ship to make it into Galveston, Texas before the Union blockaded the port in July 1861. After his mechanical contraption arrived in San Antonio, Steves had a monopoly over the local farmers surrounding the area.
The farmers wanted to pay Steves for the use of his mechanical combine in the local currency, Confederate dollars. He refused. He negotiated to take his payment in kind – a percentage of what his combine would process. Steves then bundled up his portion and regularly set off for Mexico, where he would sell it for gold and silver. This occurred for several years until finally the Civil War ended. The Confederacy collapsed along with the monetary system. Confederate dollars and Confederate bonds became worthless, sending many individuals into financial ruin.
The end of the Gavelston blockade marked the death of his monopoly, but by that time he had amassed a fortune in gold and silver. With this fortune, he bought Union dollars and effectively bought back into a working economic system. In 1866 he launched a lumber company that by 1916 had become the largest millwork operation in the Southwest. It exists today as Steves & Sons, offering more than 300,000 variations of doors throughout the United States.
In today’s world, most individuals, including investment professionals, have very little understanding of the history and purpose of precious metals as a monetary asset. Monetary systems have come and gone for thousands of years, but our lives are so cloistered that the probability of living through two entirely different monetary systems seems highly unlikely. As the Steves story illustrates, even in the United States monetary systems collapse and evolve.
The impetuous drive towards globalism and a “world currency” may impact our monetary system more than even the national debt. Initially, the evolution of a system brings chaos. People cling to staples … land, guns, and food production. As a new system emerges, individuals who have precious metals maintain the capacity to buy back into the new system – buying a home, starting new businesses, regaining the quality of life of the previous system. After 5,000 years, this continues to remain the ultimate benefit of precious metals. The irony is that a true global currency has always existed in the form of gold and silver.
Unless an investor trades precious metals effectively, which very few can do over a long period of time, precious metals do not generate wealth in a functioning economic system. Gold is a store of wealth not a generator of wealth. It is much better to own thriving companies that produce a superior return over their cost of capital. Owning businesses that generate a superior return on invested capital is the way to move up the social status in a functioning capitalist system. Unfortunately, American capitalism has been compromised and is now sputtering.
Ten years ago I would have argued that the probability of an American monetary collapse over the following decade was zero. The next ten years present far less certainty. One may disagree whether the probability of a collapse over the next ten years is 2%, 25%, or 60%. But the probability is no longer zero. The criticality of gold and silver as an asset class has reemerged. The Edward Steves story is an illustrative parable of how to build and preserve wealth when economic systems are in flux.
From the very beginning of QE2, it was no secret the Federal Reserve wanted the stock market to rise. The Fed got its wish. Many people see the stock market increase of nearly 20% in a few short months as a sign things are turning around. The turnaround is really a mirage of the printing press. Even so, some pundits think the economy is on the mend. Maritime News reported last week, “It has been successful,” Peter Hooper, chief economist at Deutsche Bank Securities Inc. in New York, said of Bernanke’s policy of pumping money into the financial system, dubbed QE2. “It’s contributed to the rally in the stock market” and has “been important in reducing substantially the downside risk of deflation.” (Click here for the complete story.) Pumping money into the stock market to get stocks to go up is not the same as hiring people and making products so share prices grow. With the stubbornly high unemployment rate of 9.8% (or more than 22% according to Shadowstats.com), this is just one of the dismal facts of this economy. Other gloomy indicators are the million plus foreclosures this year and next. The auto industry just had its fourth month of decline in new orders. The FDIC has shut down 157 banks so far this year, and all the banks look solvent only because of rule changes that amount to government sanctioned accounting fraud. You cannot have the banks, housing and auto sales all tanking at the same time and expect the party to last.
For the life of me, I cannot see how share prices going up are going to get businesses hiring again. This stock market rally is good for one group of people – insiders. They are selling at a rate of more than 80 to 1 over buyers. It is obvious this market is not growing organically but is simply being pumped. Now, people should look out for the dump. Will the market continue to rise? Will there be QE 3, 4, 5, 6, 7 or to infinity? Is printing money the true road to wealth and prosperity? I think you know where I’m going.
A funny and clever way to illustrate what is going on has been put together by a group called Xtranormal. They have produced a series of financial cartoons that explain the economy. Below is one of their latest called “Suckers rally: Pimp Bernanke and the Psychopathic Super-Whores of CNBC.” (Yes, this the actual title.) Enjoy the cartoon below:
My blog, and thousands of others, have documented cases where the government and the banksters that control it have run roughshod over our rights. They debase our currency, they steal our liberties, they dumb-us down and tell us everything is just fine while wholesale looting and fraud is openly carried out by their minions.
I know the litany of injustice we confront can seem overwhelming. I know it is easy to feel like we cannot possibly do anything to defeat the bastards. I know times are hard and many of us have very limited means.
What can we do?
Two words: BUY SILVER! If you have $35-$40 you can buy a one ounce silver coin. If enough of us buy even one silver coin, we can make the banksters at J.P. Morgan go bankrupt…and that will be the first time in modern history that the “little guy” was able to take out one of their opressors directly and decisively!
Maybe when that happens their fellow criminals at the Federal Reserve, at Goldman Sachs, and the rest of the Wall Street cabal will decide they best ease off on the ongoing economic rape of America.
J.P. Morgan has been “selling” millions of ounces of silver that they don’t have (and that do not exist) in a scam called “naked short selling” – this allows them to make millions of dollars in fraudulent profits and to also supress the price of silver from what it should be. If everybody buys just a few ounces of silver – REAL silver, not silver stocks or certificates – and takes possession of their silver, JP Morgan will be forced to start covering their short positions and the price of silver will skyrocket….and JP Morgan will go bust!
Not only do you get to fight back against the fraud and corruption that is robbing us of a real economy, you also stand to make a fantastic return on whatever amount you invest. How can you turn down an offer like that?
This explains it better than I can:
By the way, if you don’t know how to buy silver bullion you are not alone. Less than 1% of Americans own any gold or silver bullion at all. Here is an article I wrote a while back that explains how to do it (note what the price of gold was when I wrote this):
There are many reputable companies that you can buy from – it is easy to do. Once you do it the first time, you’ll wonder why you didn’t start sooner….it is so easy!
This is not a “financial blog” but rather an “information blog” – therefore I do not dispense financial advice here. Instead, I relay information that I feel is important and beneficial to my readers.
I don’t wish to dramatize my insignificant (and blessedly brief) career as a retail stockbroker, or the other work I have done for some of the biggest Wall Street banks, or the time I spent in the employment of THE biggest bank (and swindle operation) of them all. I merely want to state that I have worked in and around Wall Street for much of my career. I have hung out with brokers, dealers, pitchmen, and head muckety-mucks. I understand exactly what makes these people tick……and that is why I do not own a single stock or bond, nor do I participate in a 401k plan.
It is quite simple. Our financial system is a rigged game, run by criminals. These criminals don’t wear hoodies and carry blackjacks. They wear pin-stripe suits and carry briefcases. And they rob you of much more than a two-bit street thug could ever dream of!
Oh I know full well you *can* make money with stocks, bonds and mutual funds. I know it *is possible* to score big with hedge funds, derivatives trading, commodity speculation and currency arbitrage. I know bonds (especially “guaranteed” ones) do give many people a warm fuzzy feeling deep inside.
But I also know that whatever elusive “winnings” you might squeeze from the Wall Street casinos…in the long run you will lose and they will win. Unless you are an anointed insider, tied into the power-structure – whatever gains you achieve, when factored against inflation and taxes, doesn’t even come close to the risks you took by trusting your money to psychopathic criminals
For me, *real* wealth = paid-for real estate, gold & silver bullion (never paper bullion!) and certain other tangible goods that I can see, touch, and control. If you already have all of those things (and no ridiculous car or credit-card or student-loan debt) and are just swimming in piles of income, then knock yourself out, spin the Wall-Street roulette wheel if that floats your boat. But never fool yourself into thinking you know more than the criminals running the show.
Casinos do not last long if they fleece EVERY customer that walks through the door! Casinos need a few scattered winners so they will tell their friends about all the money they won at the casino. This insures a steady stream of suckers. Casinos love to hang posters of the “big-winners” holding their over-sized cardboard check in the lobbies of their gambling halls. The average schlub can look up and fantasize that maybe one day they too will get to hold a big cardboard check and grin ear-to-ear while shaking hands with “The Donald.”
It is all a rigged game. Run by professional criminals. And I choose not to participate. I will keep and control what I have, to the best of my ability, thank-you very much.
Just so you know I am not some bitter investor that lost a bundle on the market (indeed, when I *did* participate…I actually made money. And I was completely out of the market long before it tanked) here is some information I hope you will check out. It really is amazing.
First up, we have an interview with Max Keiser. Max Keiser invented a trading system that was purchased by Cantor Fitzgerald. He is a broadcaster and financial pundit and has an excellent track record of being right.
I have never heard a former Wall Street “insider” rip to shreds the criminal Wall Street players as passionately and completely as Max Keiser does in this interview:
Next up, I offer you a very informative essay. I hope you will read it.
Everyone needs to do what they feel best with their money and their financial future. Whatever you decide, I implore you to research for yourself anything you put your money into! No one will look out for your best interests but yourself. If you don’t understand something….for goodness sake, don’t throw money at it! Most importantly, never, ever trust Wall Street and their minions. Exploit them if you can, but just like a regular casino…the longer you play their game….the better the odds for the house!
Posted by David Kramer on August 19, 2009 08:34 AM
Richard Ney on the Role of the Specialist
“The story is told that after he had been deported to Italy, Lucky Luciano granted an interview in which he described a visit to the floor of the New York Stock Exchange. When the operations of floor specialists had been explained to him, he said, ‘A terrible thing happened. I realized I’d joined the wrong mob’” (1Ney, 8).
It was with these words that Richard Ney began his first of three books on the nature of the New York Stock Exchange. Ney wrote over 20 years ago, a time when a 750 Dow was high and today’s volumes were beyond imagining. Some of his material is dated, and must be read in the light in which it was written. But the main premise of his books is still true: that the specialist exists not to ensure the free and orderly trade of stock in a particular company, but to fatten upon the innocence and ignorance of the small investor.
The New York Stock Exchange is not an auction market (2Ney, 86), though many investors still hold onto that image. It is a rigged market. Volume is an effect of price. Prices are controlled absolutely by the specialists, the ‘market makers’ in individual stocks. It was this discovery that led Mr. Ney to eventually give us small investors a priceless gift: enlightenment.
“Studying the transactions in each stock, I became immediately conscious that, on too many occasion to be a coincidence, a stock would advance from its morning low and then, often during the afternoon, would show an up-tick of a half-point or more on a large block of anywhere from 1,500 to 5,000 or more shares. This transaction seemed to herald a transformation in what was taking place, for immediately thereafter the stock would begin to drop like Newton’s apple. Before I could find out what caused this, another question presented itself: What caused the same thing to happen at the low point in that stock’s decline? For it was also apparent that a block of stock of the same size often appeared on a down-tick of a half-point or more, after which the stock quickly rallied. Together these two facts seemed to give a stock’s pattern continuity. At the end of several days of investigation, I discovered that these transactions at the top and bottom of a stock’s price pattern were for the specialist’s own account. … Clod that I was, I had at last recognized that, although the study of human nature may not be fashionable among economists, it is never out of season” (2Ney, 9).
The specialist is part of a system. First, he is part of that rare fraternity of men who are all specialists in an exchange. It is a small private club, to whose membership one can only be born. The specialists of the Dow 30 exhibit the spirit of ‘all for one, and one for all’. If one of the 30 is having problems, the other 29 wait for him, before they move onto their next agreed upon campaign (2Ney, 172). The rest of the specialists take their lead from watching the Dow 30.
But the system is more extensive and more powerful than just the specialists. The specialists are the heart of the exchange. The exchange, in turn, has practical control of the major corporations, banks, insurance companies, and brokerage houses in this country. These, in turn, influence news reporting and the regulatory agencies.
ADVANTAGES OF BEING A SPECIALIST
The specialist has many advantages, many tools to use to pry dollars from unsuspecting investors and mutual funds. Chief among these advantages is his book. In his book he can see at a glance all the buy and sell orders from the public and the funds. His book tells him of potentially massive sales above and below his current price. This gives him a great advantage when he is trading on his own investment and omnibus accounts.
Because of his book, the specialist sees shifts in trends long before anyone else. This gives him a great advantage. The specialist will buy heavily at the bottom of a slide (at wholesale) then advance prices and sell, at heavy volume, at the peak of the rally (retail). He will then sell short and take prices down. The turning points of a rally will be marked by heavly volume in the Dow 30 (3Ney, 85-89).
When he desires he can even make large block trades without entering them into his book. In this way the public is never made aware of those trades. Should the specialist want to supply a buy or sell order from his own accounts, rather than from public orders on book, he can and will do so (1Ney, 156). Ney cites specific examples when his customers orders were ignored while the specialist completed orders for his own accounts.
When serving as the market maker, the broker’s broker, the specialist trades from his Trading Account, which is to be used to service the needs of the market. However, he also has Investment Accounts (plural). His Segregated Investment Accounts put him directly into competition with every other investor in his stock. The reason for he has segregated investment accounts is that they enable him to convert regular income into long-term capital gains (1Ney, 113).
In addition, he also trades on Omnibus accounts, taking orders from a friendly bank on behalf of friends, family, and himself (1Ney, 58). Although he is not allowed to be both long and short in his Trading account, he can take the opposite stance in his Investment or Omnibus accounts (3Ney, 130).
A Specialist will often not have any shares in his trading or omnibus accounts. If public demand for shares suddenly increases, the Specialist is more than happy to supply those shares to the public by short selling. This, of course, forces the Specialist to take the price down soon thereafter, so that he may cover his short sales at the lower price. Or, the Specialist may sell from his Investment Accounts, establishing a middle or long term high (1Ney, 61), and then take the price down. Whichever strategy he employs, a large public demand for stock ultimately drives the price of that stock down, not up.
Distribution of large amounts of stock can be done from the specialist’s trading account, usually as short sales. The trading account can then be covered by transferring stock from the long-term investment accounts into the trading account (1Ney, 64).
The existence of the specialist’s Investment and Omnibus Accounts is ultimately detrimental to the public. “In a stock with only a small capitalization or floating supply, the segregation of large blocks into long-term investment accounts for the specialist further decreases the supply of the stock available to the public” (1Ney, 61)
The specialist has absolute control over price. He can match the buys with the sells in any way he sees fit. He can raise the price of the stock 3 points in three trades, and open the next day down 5.
The seeming unpredictability of stock prices is due to the fact that prices exist at the whim of the specialist. A stock is only worth what the specialist is willing to pay for it at the moment. The fluctuations you see are, in fact, the evidence of how the specialist is working out his inventory problems to meet his short-term, intermediate-term, and long-term goals (2Ney, 172). The specialist will sometimes ‘leap frog’ his prices up or down, creating a gap. This is done to keep a group of investors from buying or selling at a particular price. ‘Leap Frogs’ show specialist intent.
Ney offers specific examples where specialists opened stocks considerably lower:
August 8, 1967 Chicago and Northwestern Railroad opened down 39 points.
October 21, 1968 one of the preferred stocks of TRW opened down 28 points.
February 4, 1970 Memorex opened down 29 1/2 points (1Ney, 15)
“With $8,000, you can buy $10,000 worth of stock, but with $8,000 in stock, any Stock Exchange member can buy $160,000 worth of stock for his own segregated investment account” (1Ney, 112).
Because most investors have margin accounts, and the margin account agreement allows their brokers to lend their shares, specialists have an unlimited number of shares to borrow and sell short (1Ney, 68).
Margin agreements also allow the broker to use their customer’s shares as collateral without the customer’s knowledge or permission. This practice is fraught with dangers. In November, 1963, the Ira Haupt brokerage firm (NYSE), which dealt in both stocks and commodities was caught unwittingly in a scheme by one of its commodities customers to leverage nonexistent salad oil. The failure wiped out the partners of the firm and left it owing some $37 million in debts. “To compound Haupt’s and the New York Stock Exchange’s problems, it was impossible to return the stock to customers because the stock (held by the brokerage firm for its customers) had been pledged to banks by Haupt” (1Ney, 122).
Margin accounts usually allow the broker to borrow any cash in the account to use for his own purposes at no interest, even to lend back to the customer for margin purchases, at interest (1Ney, 119).
At the bottom of a cycle of a stock, having panicked customers into selling, the brokers and specialist borrow the customers’ money to make their own long-term purchases; using their advantageous margin to acquire large amounts of stock. At the top of the cycle the process is reversed. Customers are paid back their money by the brokers and the specialist selling their shares to customers at a profit. The insiders even have extra cash to loan customers for margin purchases (1Ney, 136).
Another powerful tool for the specialist is the short sale. Though the specialist is responsible for 85 percent of the short selling done in a stock, the Exchanges are loathe to print any timely data on specialist short sales (2Ney, 94)(3Ney, 234). The specialist uses the short sale to control both downward and upward movements of stock (3Ney, 88).
The private investor or mutual fund can only sell short on an up- tick. The up-tick rules serves only to trap the public into selling short at the bottom, as the specialist drives the price down without a single up-tick for the public’s use (1Ney, 72). But the specialist need not even create an up-tick to sell short. The SEC has been careful not to publicize its rule 10a-1(d), in which sub-paragraphs (1) through (9) exempt the specialist from the up-tick rule (2Ney, 97)(3Ney, 126, 215).
The Securities Exchange Act of 1934 prohibits pegging, the act of artificially holding a stock’s price at a certain level for the advantage of the person or persons doing the pegging. However, SEC rule X-9A6 (1940) allows pegging by specialists in order to ‘maintain an orderly market’ while a large-block distribution of shares is taking place (2Ney, 117).
THE CORPORATION, THE SPECIALIST, AND THE EXCHANGE
The specialists and brokers hold shares “in street name” for investors, and therefore can vote the proxies for those shares. Officers in a corporation must report to the SEC any trading they do in the shares of their own company. Yet the Specialist reports his profits in trading the shares in that same corporation to no one (1Ney, 54-55).
The specialist, one of his partners, a friendly broker, their lawyers, or their bankers, often sit on the company’s board of directors, which makes the specialist privy to information before the average trader. Where an officer of a corporation is held strictly accountable to the SEC for his use of ‘inside information’, the specialist and fellow brokers are accountable to no one (1Ney, 54-55).
“It is an ideal situation. When you control a corporation’s proxies, everyone is sympathetic to your point of view and your choice of directors. This is the other reason why nearly every major corporation listed with the Exchange (NYSE, M.T.) has a broker or a broker’s banker on its board. It gives the exchange a pipeline to that corporation” (1Ney, 90).
Large brokerage houses, large banks, and the New York Stock exchange use dummy corporations as fronts to hold large portions of stocks in corporations. A list from any large corporation of its largest stockholders will be a roll of these very dummy corporations, who show up on list after list of major stock holders in America’s largest corporations (2Ney, 19-23).
The intertwining of interests runs even deeper when the relations of Wall Steet’s top Law firms are examined. For example, in 1974 the New York Stock Exchange’s legal counsel also represented Chase Manhattan Bank. Both entities, through their dummy corporations, were large stockholders in scores of major U.S. corporations (2Ney, 26).
THE EXCHANGE, THE SEC, THE FEDERAL RESERVE, AND THE WHITE HOUSE
“The bankers’ man, Senator Carter Glass, who steered the Federal Reserve Act through Congress in 1913, had maintained that the Federal Reserve banks would be merely ‘lenders of money.’ The only collateral they were to accept was notes that could be paid when, in the course of business, goods and services had been manufactured and distributed. However, almost from the day of its inception, the Federal Reserve System set about making loans on common stocks” (1Ney, 103).
Who sits on the Federal Reserve Board? … Chief officers of banks and corporations, all of whose companies are controlled by the Exchange (1Ney, 103-105).
Billions, perhaps trillions of dollars worth of stocks are now held by banks as collateral for loans. This too works to the advantage of the specialists. For, to protect their interests, banks will issue stop orders to sell the stock before it falls below a certain price. The specialist holds those stop orders in his book and therefore knows exactly where a large number of shares can be had, and at what price they can be purchased. One quick sweep down those ranges of prices will deliver to the specialist the inventory he desires for short and mid-term purposes (1Ney, 101).
On June 30, 1934 President Roosevelt appointed Joseph Kennedy to be the first Chairman of the SEC. Only 4 months before, Kennedy, along with Mason Day, Harry Sinclair, Elisha Walker, and others were found to be responsible for operating ‘pools’ that were actively manipulating stock. When these, “poolsters withdrew and the boom collapsed the administration denounced the men who operated them” (1Ney, 215). But what’s a little denouncement between friends?
The stock markets had been headed downhill since December of 1968. On May 26, 1969 a party was held at the Nixon White House. In attendance were John Mitchell, Maurice Stans, Peter Flannigan, thirty five guests from Wall Street, fourteen industrialists, seven bankers, five heads of mutual and pension funds, and two heads of insurance companies. The next day a bull rally began on Wall Street. May 27th saw the Dow Jones 30 average rise by 5 per cent in one day (2Ney, 71).
On April 17, 1971, President Nixon, who along with Attorney General Mitchell had been a Wall Street lawyer (Maurice Stans was a broker), appeared for photographs with friends from the New York Stock Exchange. Nixon recommended the public to invest in the market. By April 28th the market was in a steep decline. Nixon circulated, “to 1,300 editors, editorial writers, broadcast news directors, and Washington bureau chiefs a list of the stocks of ten corporations that had advanced during the past year” (2Ney, 32).
There is a revolving door between the exchange and Washington. SEC Chairmen ‘retire’ to go to work for the Exchanges or major brokerage houses at many times their government salaries (2Ney, 50-63). SEC Chairman Hamer Budge was found by Senator Proxmire’s investigation to be making frequent trips to Minneapolis to confer with officials of IDS. IDS was under investigation at the time by the SEC. After leaving the SEC, Budge took the position of Chairman of the Board with IDS (2Ney, 56).
NEWS AND FINANCIAL REPORTING
It is highly unlikely that we will see news reports critical of U.S. stock exchanges, or of the specialist system. There is a simple reason for this. All news organizations are corporations and do but reflect their management’s views. Corporations that own media have specialists influencing the choice of management. Newspapers, magazines, and television are but extensions of the corporate world.
When Richard Ney’s first book, The Wall Street Jungle, came out it was on the New York Times best seller list for 11 months. Yet the New York Times would not review it. The Wall Street Journal refused to take an ad from a New York bookstore that featured The Wall Street Jungle (2Ney, 30).
All three of the major networks were wary of having Ney appear. NBC banned only two people from appearing on the Tonight show with Johnny Carson: Ralph Nader and Richard Ney. Not only do large banks, brokerage firms, and corporations advertise on television, they also are the largest stock holders (2Ney, 33- 34).
SPECIALIST STRATEGY
The specialist should be thought of as a merchant with some rather unique inventory problems and opportunities. His goal, always, is to buy at wholesale prices and to sell at retail. This applies to his actions in the course of trading day as well as a year of trading.
At the bottom of a slide the specialist will buy heavily for his trading, investment, and omnibus accounts. His goal then becomes to raise the price of his stock with his wholesale inventory intact. In practice, though, he may have to sell shares to meet public demand. This will cause him, then, to lower the price to re-accumulate his inventory before he can proceed to higher levels.
A rally begins while the price of the average stock is still falling. “Major rallies begin and end with the unexpected,” (3Ney, 184).
To stimulate public demand for his stock, near the high the specialist will raise the angle of the rising prices dramatically for the stock. True to one of Ney’s axioms that prices beget volume, the public will rush into the market place at the rally high. The specialist can now sell his accumulated inventory to fill the increased demand. Heavy Dow 30 volume at the high is evidence of heavy short sales by the specialists (3Ney, 113).
When the specialist has sold all his inventory, and has sold short, he will then begin a downward slide of prices so necessary to his plans. Slides are a mirror of rallies. Near the bottom, the specialist will increase the angle of price decline, alarming investors, scaring them into selling their shares to the specialist who needs them to cover his short sales, and to build a new inventory at wholesale. The media will remain bullish, or cautiously optimistic throughout a slide, until the last two weeks, when they will turn suddenly bearish (3Ney, 158).
TIPS FROM RICHARD NEY:
Specialists in the most active stocks will require more time than their fellow specialists to move stocks up or down, or to cover at the top of a rally or the bottom of a slide (2Ney, 84-85).
Specialists may use a rally as a ’stalking horse’ for a later rally. Price is used like a geiger counter to locate volume (3Ney, 149).
During the typical bear market, or slide, the specialists will usually bring prices up on Fridays, to keep investors hopes alive (2Ney, 92).
Leaders of the rally in the Dow 30 will often act as ’screens’ for the price declines of the other 24 or 25 Dow stocks.
Each stock exhibits its own distinct pattern or rhythm of price behavior (2Ney, 189).
THINGS OF WHICH TO BE AWARE
How can you spot the nadir of each high and low? Ney says to look at volume very closely. In particular look at the volume of the individual Dow 30 Industrial stocks (2Ney, 171). Get to know these specialists’ habits. Follow what they do. Patterns of behavior will emerge.
Ney emphasized that a sense of timing was critical for survival in the market (2Ney, 149).
Ney was convinced that detecting Specialist short selling was a key. Specialist short selling at the peak of a rally should be detectable through increased volume.
Richard Ney used charts extensively. Ney was quick to point out that what is really being measured in his charts is not the behavior of the masses in the marketplace, but the techniques of the specialist in an individual stock as he maneuvers to solve short-term, intermediate-term, and long-term inventory problems (1NEY, 259).
Ney points to the gaps in prices that develop when a specialist is trying to ‘catch up’ with the market. These gaps, be they up or down, signal specialist intent (2Ney, 172).
“Investors assume that what happens in the economy or to the corporation in terms of earnings or sales determines the trend of stock prices. … The most misleading element in this type of analysis is that it ignores the basic needs and motivations of the specialist system” (2Ney, 150).
We, as consumers react to certain critical numbers. Specialists know this. Specialists use the 10’s (10, 20, 30, etc.) and 5’s (5, 15, 25, etc.) in their strategies. They will use these numbers to elicit heavier buying or selling from the public. Often too, though, they will avoid critical numbers to avoid buying or selling stock when they do not wish to do so (2Ney, 155-156 & 163).
NEY’S SMALL INVESTOR TRADING RECOMMENDATIONS (1Ney, 297-301)
1. Do not buy the acknowledged leader in a field. Buy the number 2 or 3 company. These companies are more likely to be subject to bull raids by the specialists (1Ney, 298).
2. “Nothing puzzles me more than an investor’s willingness to pay more than fifty dollars a share for stocks. Buy low priced stocks. It’s percentages you’re after and you’ll get them in these stocks in a bull market” (1Ney, 298).
3. Invest only in stocks listed on the NYSE.
4. Do not buy secondary offerings from your broker.
5. Buy only stocks whose prices have fallen at least 35 to 50 percent.
6. “The rule, ‘Cut your losses and let your profits ride,’ was invented by a broker” (1Ney, 298).
7. The average investor need not worry about tax brackets, so do not hesitate to sell at a profit. “A short-term gain is better than a long-term loss” (1Ney, 299).
8. Own your stock. Do not use margin.
9. Do not sell short.
10. Do not allow your stock to be borrowed (via a margin account; M.T.)
11. Credit balances should be immediately transferred to your bank.
12. Do not leave your stock with your broker in street name.
13. Invest only in growth oriented, not income, stocks.
14. 4 to 5 stocks in a portfolio is plenty.
15. Make arrangements with your bank to receive your stock.
16. If there has been a major advance from the summer lows, look for the public to begin selling 6 months hence.
17. Big block sales at the end of a run-up (usually marked by heavy volume) marks the imminent decline in price.
18. Look for bull raids in May, up from the April 15th tax low.
19. Never enter stop or limit orders.
20. If you are interested in a stock, learn its specialist’s habits.
21. Stocks that are ideal for bull raids are those that decline as close as possible to an angle of 45 degrees.
Works Cited:
1Ney, Richard. THE WALL STREET JUNGLE, fifth printing. New York: Grove Press, Inc., 1970.
2Ney, Richard. THE WALL STREET GANG, third printing. New York: Praeger Publishers, Inc., 1974.
3Ney, Richard. MAKING IT IN THE MARKET. New York: McGraw-Hill, 1975
[The source for this essay is here. I posted my version of the entire essay because I edited out comments that the author Michael Templain made that I disagreed with, i.e., I felt he didn’t grasp fully what Ney had written. You can read the original essay for yourself in order to make up your own mind. If you decide to read the books, read them in chronological order. They are impossible to find in a library, and are very expensive to buy used.]
This is the first of several articles on Ellen Brown’s superb 2007 book titled “Web of Debt,” now updated in a December 2008 third edition. It tells “the shocking truth about our money system, (how it) trapped us in debt, and how we can break free.” Given today’s global economic crisis, it’s an appropriate time to review it and urge readers to digest the entire work, easily gotten through Amazon or Brown’s webofdebt.com site. Her book is a remarkable achievement – in its scope, depth, and importance.
In the forward, banker/developer Reed Simpson said:
“I have been a banker for most of my career, and I can report that even most bankers (don’t know) what goes on behind (top echelon) closed doors….I am more familiar than most with the issues (Brown covered, and) still found it an eye-opener, a remarkable window into what is really going on….(Although many banks follow high ethical practices), corruption is also rampant, (especially) in the large money center banks, in one of which I worked.”
“Credible evidence (reveals) a world (banking) power elite intent on gaining absolute control over the planet and its natural resources, including its subservient human (ones).” Money is their “lifeblood,” and “fear (their) weapon.” Ill-used, they can “enslave nations and ensure perpetual wars and bondage.” Brown exposes the scheme and offers a solution.
Debt Bondage
What president Andrew Jackson called “a hydra-headed monster….” entraps entire nations in debt. Financial commentator Hans Schicht listed how:
— by making concentrated wealth invisible;
— “exercising control through leverage(d) mergers, takeovers” or other holdings “annexed to loans;” and
— using a minimum of insider front-men to exercise “tight personal management and control.”
Powerful bankers want to rule the world by creating and controlling money, the very lifeblood of world economies without which commerce would cease. Professor Henry Liu calls the monetary system a “cruel hoax” in that (except for government issued coins) “there is virtually no ‘real’ money in the system, only debts” – to bankers “for money they created with accounting entries….all done by a sleight of hand,” only possible because governments empowered them to do it.
The solution is simple but untaken. As the Constitution mandates, money-creation power must “be returned to the government and the people it represents.” Imagine the possibilities:
— the federal debt could be eliminated, at least a more manageable amount before it mushroomed to stratospheric levels;
— federal income taxes could as well; entirely for low and middle income people and at least substantially overall;
— “social programs could be expanded….without sparking runaway inflation;” and
— financial resources would be available to grow the nation economically and produce stable prosperity.
It’s not pie-in-the-sky. It happened successfully under Abraham Lincoln and early colonists.
Brown’s book explains that:
— the Federal Reserve isn’t federal; it’s a private banking cartel owned by its major bank members in 12 Fed districts;
— except for coins, they “create” money called Federal Reserve notes, in violation of the Constitution under Article I, Section 8 that gives Congress alone the right “To coin (create) money (and) regulate the value thereof….;”
— “tangible currency (coins and paper money comprise) less than 3 percent of the US money supply;” the rest is in computer entries for loans;
— money that banks lend is “new money” that didn’t exist before;
— 30% of bank-created money “is invested for their own accounts;”
— banks once made productive loans for industrial development; today they’re “a giant betting machine” using countless trillions for high-risk casino-type operations – through devices like derivatives and securitization scams;
— since Andrew Jackson’s presidency (1829 – 1837), the federal debt hasn’t been paid, only the interest – to private bankers and other owners of US obligations;
— the 16th Amendment authorized Congress to levy an income tax; it was done “to coerce (the public) to pay interest to the banks on the federal debt;”
— the amount has mushroomed to about $500 billion annually and keeps rising;
— creating money doesn’t cause inflation; it’s “caused by banks expanding the money supply with loans;”
— developing nations’ inflation was caused “by global institutional speculators attacking local currencies and devaluing them on international markets;”
— it could happen in America or anywhere else just as easily; and
— escaping this trap is simple if Washington reclaims its money-issuing power; early colonists did it; so did Lincoln.
As long as bankers control our money, we’ll remain in a permanent “web of debt” and experience cycles of boom, bust, inflation, deflation, instability and crisis. Yet none of this has to be nor repeated and inevitable bubbles – created by design, not chance, to advantage empowered “moneychangers,” much like today with its fallout causing global havoc.
Prior to the Fed’s creation, the House of Morgan was dominant in contrast to the early colonists’ model. Operating out of Philadelphia, the nation’s first capital, it favored state-issued and loaned out money, collecting the interest, and “return(ing) it to the provincial government” in lieu of taxes.
Lincoln used the same system to finance the Civil War, after which he was assassinated and bankers reclaimed their money-issuing power. Wall Street’s “silent coup (was) the passage of the (1913) Federal Reserve Act,” the most destructive ever congressional legislation, thereafter extracting a huge toll amounting to permanent debt bondage with national wealth transference from the public to private bankers – with most people none the wiser.
From Gold to Federal Reserve Notes
After the 1862 Legal Tender Act was rescinded (the so-called Greenback law letting the government issue its own money), new legislation replaced it empowering bankers by making all money again interest-bearing. Here’s the problem. “As long as the money supply (is an interest-bearing) debt owed back to private bankers….the nation’s wealth (will) continue to be drained off into private vaults, leaving scarcity in its wake.”
Dollars should belong to everyone. Early colonists invented them as “a new form of paper currency backed by the ‘full faith and credit’ of the people.” Today, a private banking cartel issues them by “turning debt into money and demanding” due interest be paid.
Ever since, it’s controlled the nation and public by entrapment in permanent debt bondage, and they do it through the Federal Reserve that’s neither federal nor has reserves. It doesn’t have money. It creates it with electronic entries, any amount at any time for any purpose, the main one being to enrich its owner banks.
This body is a power unto itself, secretive, unaccountable, and independent of congressional oversight or control. It’s a money-creating machine by turning debt into money, but only a small fraction of the total money supply. Individual commercial banks create most of it.
A 1960s Chicago Fed booklet (called Modern Money Mechanics) explained how – through “fractional reserve” alchemy. It states:
(Banks) do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers’ transaction accounts.”
Money is created by “building up” deposits in the form of loans. They, in turn, become deposits, not the reverse. “This unique attribute of banking” goes back centuries, the idea being that paper receipts could be issued and loaned out for the same gold (in those days) many times over, so long as enough gold was held in “reserve” so depositors had access to their money. “This sleight of hand (became known) as ‘fractional reserve’ banking,” using money to create multiples more of it.
As for credit market debt, William Hummel (on the web site Money: What It Is, How It Works) explains that banks create only about 20% of it. The rest is by other non-bank financial institutions, including finance companies, pension and mutual funds, insurance companies, and securities dealers. They “recycle pre-existing funds, either by borrowing at a low interest rate and lending at a higher (one) or by pooling (investor) money and lending it to borrowers.” In other words, just like banks, “they borrow low and lend high, pocketing the ’spread’ as their profit.”
But banks do more than borrow. They also “lend the deposits they acquire….by crediting the borrower’s account with a new deposit.” Banks thus increase total bank deposits that grow the money supply. It amounts to a sleight of hand like “magically pull(ing) money out of an empty hat.”
The US “money supply is the federal debt and cannot exist without it. (To) keep money in the system, some major player has to incur substantial debt that never gets paid back; and this role is played by the federal government.” It’s why the nation’s debt can’t be repaid under a banker-controlled system. Today’s size and debt service compounds the problem, around double the amount Brown cited, growing exponentially to unimaginable levels.
Colonial Paper Money – Another Way Predating the Republic’s Birth
In 1691, three years before the Bank of England’s creation, Massachusetts became “the first local government to issue its own paper money….” in the form of a “bill of credit bond or IOU….to pay tomorrow on a debt incurred today.” This money “was backed by the full ‘faith and credit’ of the government.”
Other colonies then did the same, some as IOUs redeemable in gold or silver or as “legal tender” money to be legally accepted to pay debts. Cotton Mather, a famous New England minister, later redefined money – not as gold or silver, but as a credit: “the credit of the whole country.”
Benjamin Franklin so embraced the “new medium of exchange” that he’s called “the father of paper money,” then called “scrip.” It made the colonies independent of British banks and let them “finance their local governments without” taxation. It was done in two ways, and most colonies used both:
— direct issue “bills of credit” or “treasury notes;” essentially government-backed IOUs to be repaid by future taxes, with no interest owed bankers or foreign lenders; “they were just credits issued and sent into the economy on goods and services;” and
— a system of generating “revenue in the form of interest by taking on the lending functions of banks; a government loan office called a ‘land bank’ (issued) paper money and (loaned) it to residents (usually farmers) at low interest rates….the interest paid….went into the public coffers, funding the government;” it was the preferred way to assure a stable currency rather than by issuing “bills of credit.”
Pennsylvania did it best. It’s 1723-established loan office showed “it was possible for the government to issue new money (in lieu of) taxes without inflating prices.” For over 25 years, it collected none at all. The loan office provided adequate revenue, supplemented by liquor import duties. Throughout the period, prices remained stable.
Prior to this system, Pennsylvania lost “both business and residents (for) lack of available currency.” With it, its population grew and commerce prospered. The “secret was in not issuing too much, and in recycling the money back to the government in the form of principal and interest on government-issued loans.”
Colony-based British merchants and financiers objected strongly to Parliament. Enough so that in 1751, King George II banned new paper money issuance to force colonists to borrow it from UK bankers. In 1764, Franklin petitioned Parliament to lift the ban. In London, Bank of England directors asked him to explain colonial prosperity at a time Britain experienced rampant unemployment and poverty. It’s because Colonial Scrip was issued, he stated, “our own money” with no interest owed to anyone. He added:
“You do not have too many workers, you have too little money in circulation, and that which circulates, all bears the endless burden of unrepayable debt and usury.”
With banks loaning money into the economy, more was “owed back in principle and interest than was lent in the original loans (so) there was never enough in circulation to pay interest and still keep workers fully employed.” Unlike banks, government can both lend and spend money in circulation – enough to pay “interest due on the money it lent, (keep) the money supply in ‘proper proportion’ and (prevent) the ‘impossible contract’ problem (of having) more money owed back on loans than was created (from) the loans themselves.”
Franklin’s efforts notwithstanding, the Bank of England got Parliament to pass a Currency Act making it illegal for the colonies to issue their own money. It turned prosperity into poverty because the money supply was halved with not enough to pay for goods and services. According to Franklin:
“the poverty caused by the bad influence of the English bankers on the Parliament” got colonists to hate the British enough to spark the Revolutionary War. “The colonies would gladly have borne the little tax on tea and other matters (if) England (hadn’t taken their money), which created unemployment and dissatisfaction.” So much that outraged people again issued their own money in spite of the ban. As a result, they successfully financed a war against a major power – with almost no hard currency and no taxation. Thomas Paine called it the Revolution’s “corner stone.”
However, British bankers responded by attacking its “competitor’s currency,” the Continental, driving down its value by flooding the colonies with counterfeit scrip. It was “battered but remained stable.” Where Britain failed, speculators succeeded – “mostly northeastern bankers, stockbrokers and businessmen, who bought up the revolutionary currency at a fraction of its value after convincing people it would be worthless after the war.” It had “to compete with states’ paper notes and British bankers’ gold and silver coins….The problem might have been avoided by making the Continental the sole official currency, but the Continental Congress (didn’t have) the power to enforce” such an order – with no courts, police or authority to collect taxes “to redeem the notes or contract the money supply.”
Having just rebelled against British taxation, colonists weren’t about to let Congress tax them. Speculators took advantage and traded Continentals at discounts enough to make them worthless and give rise to the expression “not worth a Continental.”
How the Government Was Persuaded to Borrow Its Own Money
John Adams once said: “there are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.” The latter method is stealth enough so people don’t know what’s happening and submit to their own bondage. Openly, nothing seems changed, yet a whole new system becomes master “in the form of debts and taxes” that people think are for their own good, not tribute to their captors. That’s today’s America writ large.
After the Revolutionary War, “British bankers and their Wall Street vassals” pulled it off by acquiring a controlling interest in the new United States Bank. It discredited paper scrip through rampant Continental counterfeiting and so disillusioned the Founders that they omitted mentioning paper money in the Constitution. Congress was given power to “coin money (and) regulate the value thereof, (and) to borrow money on the credit of the United States….” It left enough wiggle room for bankers to exploit to their advantage – but only because Congress and the president let them.
Alexander Hamilton bears much blame, the nation’s first Treasury Secretary and Tim Geithner of his day (1789 – 1795). He argued that America needed a monetary system independent of foreign control, and that required a federal central bank – to handle war debts and create a standard form of currency. In 1791, it was created, hailed at the time as a “brilliant solution to the nation’s economic straits, one that disposed of an oppressive national debt, stabilized the economy, funded the government’s budget, and created confidence in the new paper dollars….It got the country up and running, but left the bank largely in private hands” – to be manipulated for private gain, much like today. Worse still, “the government ended up in debt for money it could have generated itself.”
Note the relationship links for Timothy Geithner and the Power Elite
Instead, it had to pay interest on its own money in lieu of creating it interest free. Today, Hamilton is acclaimed as a model Treasury Secretary. For Jefferson, he was a “diabolical schemer, a British stooge pursuing a political agenda for his own ends.” He modeled the Bank of the United States on the Bank of England against which colonists rebelled. It so angered Jefferson that he told Washington he was a traitor. It fostered a bitter feud between them with Jefferson ultimately prevailing.
Hamilton’s Federalist Party disappeared after 1820 while Jefferson and Madison’s Democratic-Republicans became the forerunner of today’s Democrats after the party split into two factions, the Whigs no longer in existence and Jacksonians that by 1844 officially became the Democratic Party. Shamefully they veered far from Jacksonian and Jeffersonian principles.
For his part, Hamilton wasn’t entirely bad. He stabilized the new economy and got the country on its feet. He restored the nation’s credit, established a national currency, and made it economically independent. However, his legacy has a dark side – a “privileged class of financial middlemen (henceforth able) to siphon off a perpetual tribute in the form of interest.” He delivered money power into private hands, “subservient to an elite class of oligarchical financiers,” the same Wall Street types today holding the entire nation hostage – in permanent debt bondage.
From Abundance to Debt
Charging excessive interest is called “usury,” but originally it meant charging anything for the use of money. The Christian Bible banned it, and the Catholic Church enforced anti-usury laws through the end of the Middle Ages.
Old Testament scripture was more lenient, prohibiting it only between “brothers.” Charging it to foreigners was allowed and encouraged, which is why Jews unfairly were called “moneychangers.” They, like others, suffered greatly from money-lending schemes. For centuries, they were “persecuted for the profiteering of a few,” then scapegoated to divert attention from the real offenders.
Fiat money is legal tender by government decree – a simple tally representing units of value to be traded for goods and services. Paper money was invented in 9th century Mandarin China and successfully used to fund its long and prosperous empire. The same was true in medieval England. The tally system worked well for over five centuries before banker-controlled paper money began demanding payment in the form of interest.
History portrays the Middle Ages as backward, impoverishing, and a form of economic enslavement only the Industrial Revolution changed. In fact, the era was entirely different, characterized by 19th century historian Thorold Rogers as a time when “a labourer could provide all the necessities for his family for a year by working 14 weeks,” leaving nearly nine discretionary months to work for himself, study, fish, travel, or do what he pleased, something today’s overworked, over-stressed, underpaid workers can’t imagine.
Some attribute Middle Age prosperity to the absence of usurious lending. Instead of paying tribute in the form of interest, “people relied largely on interest-free tallies.” They avoided depressions and inflation since the supply and demand for goods and services grew in proportion to each other, thus holding prices stable. “The tally system provided an organic form of money that expanded naturally as trade (did) and contracted (the same way) as taxes were paid.”
No bankers set interest rates or manipulated markets to their advantage. The tally system kept Britain stable and thriving until the mid-17th century, “when Oliver Cromwell (1599 – 1658)….needed money to fund a revolt against the Tudor monarchy.”
The Moneylenders Take Over England
In the 19th century, the Rothchild banking family’s Nathan Rothchild said it well:
“I care not what puppet (sits on) the throne of England to rule the Empire on which the sun never sets. The man who controls Britain’s money supply controls the British empire, and I (when he ran the Bank of England) control the British money supply.”
Centuries early, moneylender power was absent. But after the 1666 Coinage Act, money-issuing authority, once the sole right of kings, was transferred into private hands. “Bankers now had the power to cause inflations and depressions at will by issuing or withholding their gold coins.”
King William III (1672 – 1702), a Dutch aristocrat, financed his war against France by borrowing 1.2 million pounds in gold in a secret transaction with moneylenders, the arrangement being a permanent loan on which debt would be serviced and its principle never repaid. It came with other strings as well:
— lenders got a charter to establish the Bank of England (in 1694) with monopoly power to issue banknotes as national paper currency;
— it created them out of nothing, with only a fraction of them as reserves;
— loans to the government were to be backed by government IOUs to serve as reserves for creating additional loans to private borrowers; and
— lenders could consolidate the national debt on their government loan to secure payment through people-extracted taxes.
It was a prescription for huge profits and “substantial political leverage. The Bank’s charter gave the force of law to the ‘fractional reserve’ banking scheme that put control of the country’s money” in private hands. It let the Bank of England create money out of nothing and charge interest for loans to the government and others – the same practice central banks now employ.
For the next century, banknotes and tallies circulated interchangeably even though they weren’t a compatible means of exchange. Banker money expanded when “credit expanded and contracted when loans were canceled or ‘called,’ producing cycles of ‘tight’ money and depression alternating with ‘easy’ money and inflation.” In contrast, tallies were permanent, stable, fixed money, making banknotes look bad so they had to go.
For another reason as well – because of King William’s disputed throne and fear if he were deposed, moneylenders again might be banned. They used their influence to legalize banknotes as the money of the realm called “funded” debt with tallies referred to as “unfunded,” what historians see as the beginning of a “Financial Revolution.” In the end, “tallies met the same fate as witches – death by fire.”
They were money of the people competing with moneylending bankers. After 1834 monetary reform, “tally sticks went up in flames in a huge bonfire started in a House of Lords stove.” Ironically, it got out of control and burned down Westminster Palace and both Houses of Parliament, symbolically ending “an equitable era of trade (by transferring power) from the government to the” central bank.
Henceforth, private bankers kept government in debt, never demanding the return of principle, and profiting by extracting interest, a very lucrative system always paying off “like a slot machine” rigged to benefit its operators. It became the basis for modern central banking, lending its “own notes (printed paper money), which the government swaps for bonds (its promises to pay) and circulates as a national currency.”
Government debt is never repaid. It’s continually rolled over and serviced, today with no gold in reserve to back it. Though gone, tallies left their mark. The word “stock” comes from the tally stick. Much of the original Bank of England stock was bought with these sticks. In addition, stock issuance began during the Middle Ages as a way to finance businesses when no interest-bearing loans were allowed.
In America, “usury banks fought for control for two centuries before” getting it under the 1913 Federal Reserve Act. An issue that once “defined American politics,” today is no longer a topic for debate. It’s about time it was reopened.
Jefferson and Jackson Sound the Alarm
Moneylenders conquered Britain, then aimed to entrap America – by provoking “a series of wars. British financiers funded the opposition to the American War for Independence, the War of 1812, and both sides of the American Civil War.” They caused inflation, heavy government debt, the chartering of the Bank of the United States to fund it, thus giving private interests the power to create money.
Jefferson opposed the first US Bank, Jackson the second, and both for similar reasons:
— distrust of profiteers controlling the nation’s money; and
— concern about the nation’s banking system falling into foreign hands.
Jefferson got Congress to refuse to renew the first US Bank charter in 1811 and learned on liquidation that two-thirds of its owners were foreigners, mostly English and Dutch and none more influential than the Rothschilds. Later, Madison signed a 20-year charter. However, when Congress renewed it, Jackson vetoed it.
The Powerful Rothschild Family
The House of Rothschild was British in name only. In the mid-18th century, it was founded in Frankfort, Germany by Mayer Amschel Bauer, who changed his name to Rothschild, fathered 10 children, and sent his five sons to open branch banks in major European capitals. Nathan was the most astute and went to London. “Over the course of the nineteenth century, NM Rothschild would become the biggest bank in the world, and the five brothers would come to control most of the foreign-loan business of Europe.”
Belatedly, Jefferson caught on to the scheme – that “private debt masquerading as paper money….owed to bankers” placed the nation in bondage. In his words, “deliver(ing) itself bound hand and foot to bold and bankrupt adventurers and bankers….” Jefferson’s idea for a national bank was a wholly government-owned one issuing its own credit without having to borrow it from private interests.
Jackson believed the same thing in calling the Bank of the United States “a hydra-headed monster.” When the bank charter was renewed, he promptly vetoed it, yet understood that the battle was just beginning. “The hydra of corruption is only scotched, not dead,” he said.
He was right. The Bank’s second president, Nicolas Biddle, retaliated “by sharply contracting the money supply. Old loans were called in and new ones refused. A financial panic ensued, followed by a deep economic depression.” However, Biddle’s victory was short-lived. In April 1834, the House rejected re-chartering the Bank, then January 1835 became Jackson’s “finest hour.”
He did something never done before or since. He paid off the first installment of the national debt, then reduced it to zero and accumulated a surplus. In 1836, the Bank’s charter expired. Biddle was arrested and charged with fraud. He was tried and acquitted but spent the rest of his life in litigation over what he’d done. “Jackson had beaten the Bank.” Imagine today if Obama defeated the Fed and its Wall Street puppeteers instead of embracing them with limitless riches.
Lincoln Foils the Bankers and Pays with His Life
Like Jackson, Lincoln faced assassination attempts, before even being inaugurated. “He had to deal with treason, insurrection, and national bankruptcy” during his first days in office. Considering the powerful forces against him, his achievements were all the more remarkable:
— he built the world’s largest army;
— “smashed the British-financed insurrection,”
— took the first steps to abolish slavery; it became official on December 6, 1865 when the 13th Amendment was ratified, eight months after Lincoln was assassinated;
— during and after his tenure, the country became “the greatest industrial giant” in the world;
— “the steel industry was launched; a continental railroad system was created; the Department of Agriculture was established; a new era of farm machinery and cheap tools was promoted;”
— the Land Grant College system established free higher education;
— the Homestead Act gave settlers ownership rights and encouraged new land development;
— government supported all branches of science;
— “standardization and mass production was promoted worldwide;”
— labor productivity increased by 50 – 75%; and
— still more was accomplished “with a Treasury that was completely broke and a Congress that hadn’t been paid” as a result.
It was because the government issued its own money. “National control was reestablished over banking, and the economy was jump-started with a 600 percent increase in government spending and cheap credit directed at production.” Roosevelt did the same thing with borrowed money. Lincoln did it with United States Notes called Greenbacks. They financed the war, paid the troops, spurred the nation’s growth, and did what hasn’t been done since – let the government print its own money, free from banker-controlled debt slavery, the very system strangling us today the way Lincoln feared would happen.
His advisor was Henry Carey, a man historian Vernon Parrington called “our first professional economist.” Lincoln endorsed his prescription:
— “government regulation of banking and credit to deter speculation and encourage economic development;”
— its support for science, public education and national infrastructure development;
— “regulation of privately-held infrastructure to ensure it met the nation’s needs;”
— government-sponsored railroads and “scientific and other aid to small farmers;”
— “taxation and tariffs to protect and promote productive domestic activity;” and
— “rejection of class wars, exploitation and slavery, physical or economic, in favor of a ‘Harmony of Interests’ between capital and labor.”
Leaders like Jefferson, Jackson and Lincoln are sorely missed, but for Lincoln it was costly.
He Loses the Battle with “the Masters of European Finance”
German Chancellor Otto von Bismark (1815 – 1898) called them that in explaining how they engineered the “rupture between the North and the South” to use it to their advantage, then later wrote in 1876:
“The Government and the nation escaped the plots of the foreign bankers. They understood at once that the United States would escape their grip. The death of Lincoln was resolved upon.” The last Civil War battle ended on May 13, 1865. Lincoln was assassinated on April 15.
European bankers tried but failed to trap him “with usurious war loans,” at 24 – 36% interest had he agreed. Using government-issued Greenbacks shut them out entirely, so they determined to fight back – eliminate the thorn, then get banker-friendly legislation passed, achieved through the National Bank Act reversing the Greenback Law. It was “only a compromise with bankers, (but) buried in the fine print,” they got what they wanted.
Although the Controller of the Currency got to issue new national banknotes, it was just a formality. In fact, the new law “authorized the bankers to issue and lend their own paper money.” They “deposited” bonds with the Treasury, but owned them so “immediately got their money back in the form of their own banknotes.” It was an exclusive franchise to control the nation’s money forcing government back into debt bondage where it never had to be in the first place. A whole series of private banks were then chartered, all empowered to create money in lieu of debt free Greenbacks.
One other president confronted bankers and paid dearly as well – James Garfield. In 1881, he charged:
“Whoever controls the volume of money in any country is absolute master of all industry and commerce….And when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.”
Garfield took office on March 4, 1881. On July 2, he was shot. He survived the next two and half months, then died on September 19. It was a time of depression, mass unemployment, poverty, and starvation with no safety net protections. “The country was facing poverty amidst plenty,” because bankers controlled money and kept too little of it in circulation – an avoidable problem if government printed its own.
Gold v. Inflation – Debunking Common Fallacies
The classical “quantity theory of money” holds that “too much money chasing too few goods” causes inflation, excess demand over supply forcing up prices. The counter argument is that if paper money is tied to gold, an inflation-free stable money supply will result. Another fallacy is that adding money (demand) raises prices only if supply remains fixed.
In fact, if new money creates new goods and services, prices stay stable. For thousands of years, the Chinese kept prices of its products low in spite of their money supply being “flooded with the world’s gold and silver, and now with the world’s dollars….to pay for China’s cheap products.”
What’s important is not what money consists of but who creates it. “Whether the medium of exchange (is) gold or paper or numbers in a ledger,” when created by and owed to private lenders with interest, “more money would always be owed back than was created…spiraling the economy into perpetual debt….whether the money takes the form of gold or paper or accounting entries.”
Today’s popularism is associated with the political left. However, 19th century Populists saw “a darker, more malevolent force….private money power and the corporations it had spawned, which was threatening to take over the government unless the people intervened.”
Lincoln also feared it saying:
“I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. Corporations have been enthroned, an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in the hands of a few and the Republic is destroyed.”
Today’s America is the reality he feared. A tiny elite own the vast majority of the nation’s wealth in the form of stocks, bonds, real estate, natural resources, business assets and other investments. In contrast, 90% of Americans have little or no net worth. Of all developed nations, concentrated wealth and inequality extremes are greatest here with powerful bankers sitting atop the pyramid, now more than ever with their new riches extracted from public tax dollars and Fed-created money.
Foundingfather1776 