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Chapter Twenty
THE LONDON
CONNECTION
The rise of the House of Morgan; Morgan's ties
with England and the House of Rothschild; the
connection between the Federal Reserve System
and the Bank of England; the Fed's decision to
inflate American dollars to assist the ailing
British economy.
The period between the Civil War and the enactment of the
Federal Reserve System was one of great economic volatility and no
small measure of chaos. The National Banking Acts of 1863-65
established a system of federally chartered banks which were given
significant privilege and power over the monetary system. They
were granted a monopoly in the issuance of bank notes, and the
government agreed to accept those notes for the payment of taxes
and duties. They were allowed to back this money up to ninety per
cent with government bonds instead of gold. And they were guaranteed
that every bank in the system would have to accept the notes
of every other bank at face value, regardless of how shaky their
position. The net effect was that the banking system of the United
States after the Civil War, far from being free and unregulated as
some historians have claimed, was literally a halfway house to central
banking.
The notion of being able to generate prosperity simply by creating
more money has always fascinated politicians and businessmen,
but at no time in our history was it more in vogue than in the second
half of the nineteenth century. The nation had gone mad with the
Midas complex, a compulsion to turn everything into money
through the magic of banking. Personal checks gradually had
become accepted in commerce just as readily as bank notes, and the
banks obliged their customers by entering into their passbooks just
as many little numbers as they cared to "borrow." As Groseclose