Previously, the traditional source of funding in time of war had been the banks which simply created money under the pretense of loaning it. But that method had been severely hampered by the demise of the Bank of the United States. The state banks were anxious to step into that role; but, by this time, most of them had already defaulted in their promise to pay in specie and were in no position to manufacture further money, at least not money which the public would be willing to accept.
GREENBACKS AND OTHER CRIMES 383
American banks may have been unable to supply adequate
loans, but the Rothschild consortium in Britain was both able and willing. It was during this time that the Rothschilds were consolidating their new industrial holdings in the United States through their agent, August Belmont. Derek Wilson tells us: "They owned or had major shareholdings in Central American ironworks, North American canal construction companies, and a multiplicity of other concerns. They became the major importers of bullion from the newly discovered goldfields."1
Belmont had placed large amounts of Rothschild money into the bonds of state-sponsored banks in the South. Those bonds, of course, had fallen in value to practically zero. As the war shifted in favor of the North, however, he began to buy up as many
additional bonds as he could, paying but a few pennies on each dollar of face value. It was his plan to have the Union force the Southern states at the end of the war to honor all of their pre-war debt obligations—in full. That, of course, would have been a source of gigantic speculative profits to the Rothschilds. Meanwhile, on the northern side of the Mason-Dixon Line, Belmont became the chief agent for the sale of Union bonds in England and France. It was rumored that, when Belmont called on President Lincoln and personally offered Rothschild money at 27 V2 per cent interest, he was rudely thrown out of the office. The story is doubtful, but it represents a larger truth. Profiting from war and placing money on both sides of the conflict were exactly the kind of maneuvers for which the Rothschilds had become famous throughout Europe and were now practicing in America.
In the North, the sale of government bonds was the one
measure for raising funds that seemed to work. Even that, however, with the lure of compounded interest to be paid in gold at a future date, failed to raise more than about half the needed amount. So the Union faced a real dilemma. The only options remaining were (1) terminate the war or (2) print fiat money. For Lincoln and the Republicans who controlled Congress, the choice Was never seriously in doubt.
The precedent had already been set during the War of 1812. At that time, Secretary of the Treasury, Albert Gallatin, had abrogated the Constitutional ban against "bills of credit" by printing Treasury 1 • See Derek Wilson, p. 178.
384
THE CREATURE FROM JEKYLL ISLAND
notes, most of which paid interest at 5.4 per cent. The money was never declared legal tender, and that probably was the basis on which it was defended as constitutional.
THE GREENBACKS
By the time of the War Between the States, however, all
pretense at constitutionality had been dropped. In 1862, Congress authorized the Treasury to print $150 million worth of bills of credit and put them into circulation as money to pay for its expenses.
They were declared as legal tender for all private debts but could not be used for government duties or taxes. The notes were printed with green ink and, thus, became immortalized as "greenbacks."
Voters were assured that this was a one-time emergency measure, a promise that was soon broken. By the end of the war, a total of $432 million in greenbacks had been issued.
The pragmatic mood in Washington was that a constitution is nice to have in times of peace, but an unaffordable luxury in war.
Salmon P. Chase, for example, as Secretary of the Treasury, strongly endorsed the greenbacks which were issued under his direction. They were, in his words, an "indispensable necessity."
Eight years later, as Chief Justice of the Supreme Court, he declared that they were unconstitutional. Had he changed his mind? Not at all. When he endorsed them, the nation was at war. When he declared them unconstitutional, it was at peace. It was merely another example of the universal trait of all governments in time of war. That trait was presented in a previous section as the premise of the Rothschild Formula: "The sanctity of its laws, the prosperity of its citizens, and the solvency of its treasury will be quickly sacrificed by any government in its primal act of self-survival."
