The Story of Real Money (Entry 365th)
By 1917 the New York Federal Reserve Bank held ten percent of the world’s entire store of monetary gold (gold held in the form of coin or bullion for the purpose of honoring the promise to pay specie-on-demand) and thereby reassure the “naïve” and '“puerile” among us that real money remained the global market standard for exchange.
This accumulation of gold was the direct result of World War I and the advantageous position of the United States of America in the war — namely, that the war was waged on the property of others. Although there was a significant loss in American life during the war — more than double the number of Americans who lost their life as a direct result of America’s engagement in the Vietnam War —, the number was small when compared with the loss of life of the war’s major combatants including Germany (2,731,000), Turkey (2,325,000), Russia (2,311,000), France (1,927,000), Austria-Hungary (1,860,000), Great Britain and Ireland (1,350,000), and Italy (1,160,000). The United States lost fewer of its own citizens in World War I than even the far smaller countries of Serbia (575,000), Romania (550,000), or Bulgaria (388,000).
Germany’s loss in human life was twice that of Great Britain including the British colonies and Ireland, and the world’s loss of human life was 9.26 times greater than the losses of the entire British Empire! As a percentage of the casualties felt by Germany, France, and Great Britain and Ireland we lost 4.3%, 6.1%, and 8.7%, respectively.
Although the United States of America played an important strategic role that forced the November 18th Armistice and eventually the Treaty of Versailles agreed on June 28, 1919 our primary role in the conflagration was that of the chief supplier of war-related materials funded by the various private banks of the newly formed Federal Reserve System. Foremost among these private banks were the member banks of the Federal Reserve Bank of New York.
When the Federal Reserve System was initially conceived, its twelve nationally chartered regional banks were granted a charter for twenty years — just had been granted the 1st (1791-1811) and 2nd (1816-1836) Banks of the United States.
In 1927 Louis McFadden, a professional banker and highly respected member of the 69th Congress (1925-27) of the United States, drafted a set of amendments to the Federal Reserve Act of 1913 that would place the Federal Reserve System under the congressional radar and hide it from rigorous, future public scrutiny.
William McAdoo (1863-1941), the US Treasury Secretary under the Woodrow Wilson, and twice failed presidential candidate for the Democrat Party had been implicated in the Tea Pot Dome Scandal (1921-23), in which Albert Bacon Fall, jailed Secretary of the Interior under President Warren Harding (1865-1923), leased US Navy petroleum reserves to private companies in Wyoming and California in return for an unpaid $100,000 loan and $200,000 (1924 dollars) worth of Liberty Bonds issued during World War I.
It was an ideal time for America’s banking industry to clean up its own act and consolidate its spoils.
Louis McFadden’s bill, that would become historically known as the McFadden Act, was the 69th Congress’s second act of business. The law finished by making the Federal Reserve System America’s central bank in perpetuity.
Sec. 18. That the second subdivision of the fourth paragraph of section 4 of the Federal Reserve Act be amended to read as follows: “Second. To have succession after the approval of this Act until dissolved by Act of Congress or until forfeiture of franchise for violation of law.”
H. R. 2 - An Act To further amend the national banking laws and the Federal Reserve Act, and for other purposes. <https://fraser.stlouisfed.org/title/mcfadden-act-976>
The law was approved by Calvin Coolidge (1872-1933), our nation’s 30th President (1923-1929) on February 25, 1927. Brigadier General Charles Dawes and former chair of the 1st Committee to reform the German reparation policies of the Reparation Commission was serving as Vice President of the United States (1925-1929) at the time.
In liberty, or not at all,
Roddy A. Stegemann, First Hill, Seattle 98104
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