Creature From Jekyll Island by G. Edward полностью

The largest and most pious bank in the Western world had fallenwith the effect of a thunderclap. Soon allied brokers and nationalbanks and 5,000 commercial houses followed it into the abyss ofbankruptcy. All day long, in Wall Street, one suspension after anotherwas announced; railroads failed; leading stocks lost 30 to 40 points, orhalf their value, within the hour; immeasurable waves of fear alteredthe movement of greed; the exchanges were closed; the stampede, the

"greatest" crisis in American history, was on.

AND STILL MORE BOOMS AND BUSTS

Altogether, there were four major contractions of the money supply during this period: the so-called panics of 1873, 1884, 1893, and 1907. Each of them was characterized by inadequate bank reserves and the suspension of specie payment. Congress reacted, 1. Groseclose, Money and Man, p. 202.

2. Quoted by Rothbard, Mystery, p. 231.

3. Matthew Josephson, The Robber Barons: The Great American Capitalists, 1861-1901

(New York: Harcourt Brace Jovanovich, 1934), p. 170.

THE LONDON CONNECTION

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not by requiring an increase in reserves which would have improved the safety margin, but by allowing a decrease. In June of 1874, legislation was passed which permitted the banks to back their notes entirely with government bonds. That, of course, meant more fiat money for Congress, but it also meant that bank notes no longer had any specie backing at all, not even ten per cent. This released over $20 million from bank reserves which then could be used as the basis for pyramiding even more checkbook money into the economy.

It has become accepted mythology that these panics were

caused by seasonal demands for farm loans at harvest time. To supply those funds, the country banks had to draw down their cash reserves which generally were deposited with the larger city banks.

This thinned out the reserves held in the cities, and the whole system became more vulnerable. Actually that part of the legend is true, but apparently no one is expected to ask questions about the rest of the story. Several of them come to mind. Why wasn't there a panic every Autumn instead of just every eleven years or so? Why didn't all banks—country or city—maintain adequate reserves to cover their depositor demands? And why didn't they do this in all seasons of the year? Why would merely saying no to some loan ap-plicants cause hundreds of banks to fail? The myth falls apart under the weight of these questions.

The truth is that, if it hadn't been seasonal demand by agriculture, the money magicians simply would have found another scapegoat. It would have been "immobile" reserves, lack of "elasticity" in the money supply, "imbalance" of international payments, or some other technocratic smoke screen to cover the real problem which Was-—and always has been—fractional-reserve banking itself. The bottom line was that, in spite of an elaborate scheme to pool the minuscule reserves of country banks into larger regional banks where they could be rushed from town to town like a keg of coins on the old frontier, it still didn't work. The loaves and fishes stubbornly refused to multiply.

MORGAN PROSPERS WHEN OTHERS FAIL

The monetary expansions and contractions of this period were large waves that capsized thousands of investment ships at sea. But there was one large vessel that, somehow, bobbed up and down with the surges quite well and could be seen throughout the storm 410 THE CREATURE FROM JEKYLL ISLAND

salvaging the abandoned cargoes of those that were in distress. This vessel brought back to port untold riches that once had been the property of others but now belonged to the master of the salvage ship in accordance with rules of the high sea. The captain's name was J.P. Morgan.

It will be recalled from a previous section that J.P. Morgan and Company was no small player in the world chess match called World War I. Morgan had been chosen by the French and British governments as the official agent to sell their war bonds in the U.S.