Strong was more concerned about British fortunes than
American. In a letter written in May of 1924 to Secretary of theTreasury Andrew Mellon, he discussed the necessity of loweringAmerican interest rates as a step toward money expansion with the Galbraith, pp. 174-75.
426 THE CREATURE FROM JEKYLL ISLAND
objective of raising American prices relative to those in GreatBritain. He acknowledged that the goal was to protect England tromhaving to cut back on wages, profits, and welfare. He said: At the present time it is probably true that British prices for goods internationally dealt in are as a whole, roughly, in the neighborhood of 10 percent above our prices, and one of the preliminaries to the re-establishment of gold payment by Great Britain will be to facilitate a gradual readjustment of these price levels
The burden of this readjustment must fall more largely upon us than upon them. It will be difficult politically and socially for the B r i t i s h G o v e r n m e n t a n d the B a n k of E n g l a n d to face a price liquidation in England ... in face of the fact that trade is poor and they have over a million unemployed people receiving government aid.
BRINGING DOWN THE DOLLAR
The Mandrake Mechanism of the Federal Reserve went intohigh gear on behalf of the Bank of England in 1924, several yearsbefore the historic meeting between Strong, Norman, and Rist.
There were two great surges of monetary expansion. The first camewith the monetization of $492 million in bonds plus almost twice asmuch in banker's acceptances. The second burst of inflation came inthe latter half of 1927, immediately following the secret meetingbetween Strong, Norman, Schacht, and Rist. It involved the fundingof $225 million in government bonds plus $220 million in banker'sacceptances, for a total increase in bank reserves of $445 million. Atthe same time, the rediscount rate to member banks (the interestrate they pay to borrow from the Fed) was lowered from 4 to 3.5 percent, making it easier for those banks to acquire additional
"reserves" out of which they could create even more fiat dollars.
The amount created on top of that by the commercial banks is aboutfive and a-half times the amount created by the Fed, which means atotal money flood in excess of $10 billion in just six years.
1. Chandler, pp. 282-84. ,
2. Approximately $1,328,000,000 in the first burst, including ^h bonds anfl acceptances, plus" $445,000,000 in the second!burst equals amount multiplied by 5.5 equals $9,751,500,000. Add the original $1,773,000,OOU
used as a base, and the total is $11,524,500,000. This estimate is reasonably c l o s e to the figure of $10,661,000,000 published by the Fed itself, which represents the growth in total deposits and currency in circulation during that period. See Depos its and Currency," p. 34.
THE LONDON CONNECTION
427
