The Money Power

How finance capitalists enslave the world
-- by: Frank Anstey, 1921, source: Australian Nationalist Archive
MHP hypertext version for non-profit educational use only

3.  British Money Power

Schemes of the financiers during the Great War

The War Begins (1914)

"In every country there is a powerful group of capitalists, firmly entrenched in society, well served by politicians and journalists, whose business it is to exploit the jealousies of nations and practice the alchemy which transmutes hatred into gold.

Diplomacy is the tool of the vast aggregations of capital in oil trusts, steel trusts and money trusts. Where-ever combinations of capital are competing the reactions are exhibited in the relations of their Governments. For the service of the rival monsters the working classes are regimented in conscript armies -- armies and fleets are the material arguments behind financial diplomacy.

Finance is the arbiter of war and peace, the master of despotisms, the unseen power in democracies."

-- Brailsford, in "War of Steel and Gold."

The moment war broke loose in Europe the much-extolled "British System of Finance" fell to pieces. The bottom fell out of the "Money Market." The Stock Exchanges closed. The banks were unable to meet their obligations.

The "Daily Chronicle," of August 5, 1914, said: "Credit based on gold has come to an end." The "Statist" admitted a "Complete breakdown of the banking system."

The British Government came to the rescue. It called together the heads of the great banks and representatives of the Stock Exchange. It asked them to devise a scheme whereby they might be saved at the expense of the people.

This Finance Committee consisted of Lord St. Aldwyne, Lord Revelstoke, Sir John Bradbury, Sir Walter Cunliffe, Austen Chamberlain; each one a chief of a bank tottering to ruin.

This committee instituted a process of salvation based upon the guarantee of the British Nation. The credit of the State, ever powerful where gold is a failure, saved the situation.

The guarantee of the British Government gave a security which privately controlled gold was incapable of giving.

The First Scheme

The first step of the Government was to issue to the private banks millions of £1 and 10/- notes, to enable the private banks to meet obligations to depositors.

The banks were closed four days to give the Government time to print and issue the notes essential to the salvation of the banks. When the banks re-opened they paid their obligations in notes manufactured and guaranteed by the British Nation.

These notes had written across their face, "legal tender for any amount." These notes were not "Bank of England" notes. They were issued from the Treasury. They did not carry any promise of redemption in gold.

Lloyd George, speaking in the Queen's Hall, London, said:

"Have you any of those little £1 notes? They are only scraps of paper. What are they made of? Rags! What are they worth? The whole credit of the British Empire."

With these notes the banks met their obligations. These notes took the place of gold and were subsequently issued by the Government to the banks to the extent of hundreds of millions.

The Government further arranged that private banks might re-discount at the Bank of England all internal bills and securities upon which they (the private banks) had advanced, and that all settlement, whether between the Bank of England and the private banks, or the private banks and their debtors, should be postponed until 12 months after the war.

"The Investors' Review" (August 22, 1914) reported that the country was operating on pure credit money with the mechanism of exchange in excellent condition. In other words, the country was working on a paper currency, guaranteed by all the resources of the British Nation.

It was a proof of the correctness of the statement made by Stoll, in his book, "The People's Credit," that:

"Banking credit is really national credit, because in every crisis it is the Government that is compelled to step in and provide notes and discount facilities to save the banks."

If any Government had attempted in times of peace to enact such a currency for the development of the country, the public would have been told that such a measure was madness, but to save the banks it was sanity.

The Second Scheme

The money kings who controlled the banks and discount houses of England were not satisfied to be merely saved from disaster. The hour of the nation's trouble was their peculative opportunity. With the connivance and acquiescence of the British Government they organised and perpetuated upon the British race the most gigantic swindle of modern times.

The "Clarion," of August 7, gave warning. It said: "The democracy is uninformed, and without guidance, at a time when the greatest and most barefaced piece of thimble-rigging is about to be perpetrated."

The institutions controlled by the Money Kings held hundreds of millions of bills for goods delivered to Continental houses, including Germany. These bills, as far as Germany was concerned, could not be met because of the war, and could not be met in the case of other Continental houses because the war had disastrously affected them.

On August 13, 1914, the British Government guaranteed all bankers, discount brokers and other holders of worthless commercial paper against loss.

It did more. It monetised those bills. It issued to the banks certificates to the extent of those bills. The certificates authorised the directors of the Bank of England to discount the useless bills and issue notes in place thereof.

The Bank of England directors consisted of the Governor, Sir Walter Cunliffe, and 24 "financiers," who were also directors of assisted institutions.

The London "Economist" (Aug. 29th, 1914), said: "The government has guaranteed the banks against loss on bills, which loss may work out at anything from £50,000,000 to £150,000,000, which will, of course, be added to the national debt."

The "Economist," in another article, said: --

"This loss must be enormous because the Bill of Exchange Act declares that when a bill payable after sight is negotiated, the holder must present it within a reasonable time, otherwise the drawer and endorser are discharged from obligations. The banks are the holders. The war renders it impossible for them to present 'in reasonable time'."

Thus, had not the Government come in to load the loss upon the British Nation, the money kings would have had to carry their own baby.

By the 2nd of September, the Government through the Bank of England had discounted German and other bills to the extent of £95,000,000. Later on (Dec, 22nd, 1915) Lloyd George admitted, in reply to a question, that the total State aid to financiers and financial institutions totalled £200,000,000.

The Third Scheme

By what is known as the "Fourth September Banking Scheme" the corporations induced the British Government to endorse a colossal scheme for plundering the public while the attention of that public was rivetted on the German foe. Stripped of all verbiage, gloss, glamor and mystification, it amounted to this:

All bad debts contracted by banks between the 4th August, 1914, and a year after the end of the war, will be made good by the British Government, and added to the National Debt.

This dose was hard to swallow. The "Economist," in its issue of September 12, said:

"There is much to be said for compensating banks, discount and accepting houses for their losses, but in equity one person who has been ruined through no fault of his own has just as much right to be relieved at the taxpayer's expense as another person."

But this public plunder was for banking corporations only.

On Sept. 11th, 1914, the "Clarion" said:

"That notorious highwayman, Dick Turpin, and the 'Heathen Chinee', were not in it with these thieves of to-day. Why, the game of 'Under which thimble the pea?' becomes a standard of high and honorable conduct compared with the chicanery going on under the very eyes of the fleeced ones. The people of England have been robbed, and are about to be further robbed on a larger scale than any recorded in history."

The "Clarion" spoke true. Not the robber scheme of August 13 nor that of September 4 could satisfy the felonious hunger of those who stayed at home to rob while others went abroad to die. Not enough that they had loaded the living with debt and fashioned new chains of servitude for the unborn. The tigers had tasted blood. All the retainers and hangers-on of the Kingdom of Finance must come into the feast.

The Fourth Scheme

On the 3rd October, 1914, the London "Economist" announced that the Stock Exchange operators were "waterlogged with unsaleable securities," and that the Government would stand by them as it had by the banks. They could deposit their scrip at the Bank of England and draw in Government notes 60 per cent, of the face value of such scrip as at the time of the closing of the Stock Exchange.

With these "credits" and Government notes, obtained by a deposit of their unsaleable securities, they were able to resume business and patriotically lend to the Government at interest the currency that the Government had created.

The "Investors' Review" (19/9/20) stated that "Credit is being created against unexisting assets in amounts of unprecedented magnitude at the time when the ordinary uses for it are unusually restricted." "These things are done," said the Investors' Review, "to support the money market." It added:

"These credits are called into being either in the form of notes or in the shape of advances by the Bank of England under Government guarantee."

Thus the British Government advanced credit to men whose credit was dead upon securities that were valueless. Then, because the ordinary channels for the investment of money were "unusually restricted," the Government found a field of profit for the profit-mongers by borrowing "the credit called into existence by the Government" from the very men to whom the Government had given credit upon "unexisting assets."

IN ALL THE WORLD THERE NEVER WAS SUCH A ROBBERY -- THE ROBBERY OF A NATION STRUGGLING FOR ITS LIFE.

The nation needed food, clothing, guns and ammunition to carry on the war.

If a legal tender currency note was good when, issued to bankers for compensation, or to stockjobbers as a circulating representative of unsaleable securities, it was equally good if issued to the industrial community as a circulating representative of the nation's obligation to those who supplied the requisites of war.

The "Fortnightly Review" (March", 1915) said: "The Government rushed to the aid of bankers, bill-brokers, Stock Exchange magnates, great shipowners and mercantile houses, guaranteed marine insurance, and used the financial power of the nation to save the wealthy classes from ruin." But the British Government that issued legal tender notes for the salvation, use and profit of the private banks would not issue legal tender notes for the salvation, use and profit of the nation.

The Government issued interest-bearing bonds and debentures, and the financiers subscribed to the war loans.

But the "financiers" had no credit outside of that guaranteed by the Government. They had no currency outside of that furnished by the Government. How could they subscribe to the loans?

They did it by lending to the British Government the legal tender currency notes that the Government had previously given to the banks and financiers as compensation for commercially rotten bills and waterlogged securities.

As a result, there went into the vaults of the private banks debentures and bonds armed with the privilege to suck for ever millions per annum from a people struggling oh the battlefields of Europe to maintain the national life. And while they were struggling, the bonds of slavery for the survivors were carefully stored for suckage in the vaults of the vampires.

There might have been some justification for saving the banks and great financiers from ruin, on the ground that their ruin would have involved all in a common disaster.

But there was no justification to furnish insolvent institutions with a currency to enable them to loan that currency to the Government that gave it, and to make a profit from the war. It was pitiless robbery.

But the Kings of Finance must not only be saved, their power of robbery must be extended, their riches augmented, and the toiling multitude ground in the mill of financial servitude.

The "Round Table," of November, 1914, said:

"The British Government has given the private banks most generous aid. It has liquidated their bills and securities by giving them credit on the Bank of England. Upon these credits they can draw, and with these credits contribute to the War Loan."

The "Round Table" went on to say: "One can observe, therefore, the curious process by which the Government lends its credit."

And it might have added: Yes! and the curious process by which it borrowed it back, with a perpetual blister of interest upon the struggling masses.

The "Investors' Review," of October 24, 1914, said: "Out of this great mass of credit, created under Government guarantee, the means comes with which to subscribe to national loans."

The "Round Table," in an article on "How Wars Are Financed," said:

"There must be sufficient time between the instalments of loans to allow the proceeds of the first to be expended by the Government, to pass into the hands of private persons and to filter back to the banks before the next instalment is called. If this condition be fulfilled, the nation can go on fighting for ever, as far as finance is concerned."

Thus currency went out in wages to soldiers and makers of requisites of war, passed along the channels of trade back to the banks for the next instalment. Thus the circle was complete. To the onlookers, there was a never-ending procession of cash. It was financial legerdemain. By it nations were deluded, defrauded and enslaved. Thus thousands of millions were loaned, yet as much remained in the vaults of the great banks as before the first penny was floated. With every new war loan the "rate of interest," the rate of blackmail, upon the struggling nationalities was increased.

The only real limit on loans is the capacity of the people to carry the ever-increasing load of interest, and from these instrumentalities created by the Government the snide financiers piled their fortunes.

One would have imagined that with these advantages the banking corporations would have been well satisfied, but they were not.

The Fifth Scheme

Another plunder scheme was hatched. Through the early months of the war, the great banks and loan agencies were putting the screw on the public, refusing banking facilities to men with undoubted securities, and compelling the general public, in urgent need of currency, to sell their holdings on a falling market, and the corporations were buying those holdings with the credit created and donated to them by the British Government -- vast millions of British Consols (bonds) held by the general public fell into their hands.

The British Government had borrowed hundreds of millions by private arrangement, but it was about to float its "First War Loan" in the orthodox float loan manner.

The Financial Houses having inside knowledge of the "conditions" under which this "First" £350,000,000 loan was to be floated, got their corner on 2.5 per cent Consols.

The "Economist" (October 10, 1914) said: "Funds wherewith to subscribe to the War Loan can be obtained by pledging investments for paper money." This privilege was for the great financial houses only. The Bank of England is a bank for banks, and not for the general public. The average citizen could not take his securities to the Bank of England, draw notes, and with these notes subscribe to a new loan. The financial establishments had that special privilege.

The credit restrictors and market riggers had combined to force the price of Consols below £60. Then they bought. Then the Government floated the loan. Consols at once jumped to £65. At that price they were converted into First War Loan £ 66/13/4 at 3.5 per cent. Multiply the price (£60) at which the Consols were gouged out of the public by three, you get £180 of Consols turned into £200 War Loan, and Consols earning £4/10/- transformed into an earning power of £7 per annum. The profit on this first deal was measured in millions, and the "Nation" said: "It was a barefaced confidence trick, and the Government was a fraudulent trustee of the public interests."

The Sixth Scheme

The Second War Loan (1915) was for £600,000,000 at 4.5 per cent -- the First Loan performance was repeated.

There was the same withholding of bank credits to the public, the same organised depreciation of Consols, the same organised purchase, the same inflation after possession, the same conversion after possession into high-priced securities. The process of public robbery was repeated on even a more gigantic scale than on the first loan.

The general public, who had not already been gouged out of their Consols, could not convert unless they possessed means to subscribe to the loan floats. They could not pledge Consols for credit at the Bank of England. Bank of England facilities were for bankers and brokers only -- not for the general public.

The "Fortnightly Review," August, 1915, said: "Advantage has been taken of the opportunity for nimble stock exchange dealing by a class of men who do not think it unpatriotic to utilise a great patriotic occasion for their own sordid ends."

Dealing with this second loan float, the "Economist" (June 26, 1915) pointed out that the patriotic robbers had added another 20 per cent, to the interest rate on Consols, and that "holders of the 3 per cent, loan will now receive interest at the rate of £5/4/9 per cent."

And for this crowd of harpies men were rotting on battlefields.

In this case the previous loan bonds were deposited in the Bank of England, and upon these deposited securities credit was given to the extent of 95 per cent, of par value. It was a paper cheque currency based on bonds, and with this cheque currency the subscriptions were made to the loan.

The "Financial News" reported that: "The Bank of England lent 95 per cent of face value against deposit of bonds."

The "Quarterly Review" said: "The war loan bonds are made on the basis of the most easy borrowing from the Bank of England."

With currency based on previous war bonds the financiers contributed to the 600 million loan.

Oswald Stoll, in his book, "The People's Credit," said:

"Three banks and two insurance companies answered for £100,000,000. They were able to invest such an amount because the Government had backed them by the credit of the whole people. Saved from bankruptcy, they were permitted to place a tax of millions per annum upon the nation that had saved them."

"The Times' History of the War" (page 251, vol. 7), says that the joint stock banks (saved from ruin a few months previously by the paper currency of the nation) subscribed over £200,000,000 to this June loan. And upon this currency, issued by the nation, they draw interest in perpetuity.

The Seventh Scheme

In 1916, after the exhaustion of the proceeds of the "Second War Loan," the war was financed by the banking houses to the extent of one thousand millions for which the Government paid six per cent. The "Nation" said: "A huge proportion of this money is mere inflation, representing no real savings on the part of the bankers and financiers who have manufactured it."

In other words, in exchange for the Treasury Bills and Exchequer Bonds of the Government, they boldly issued valueless cheques; valueless because they represented no real assets -- merely manufactured money. Moreton Frewin, writing in the "Overseas Magazine" (Feb., 1917), described it as: "The most wonderful tale of grand larceny in all the world's history."

The "English Review" of March, 1917, described. Mr. McKenna, the Chancellor of the Exchequer, as: "A mere puppet in the hands of the bankers. He did whatever he was told."

Mr. Frank Hirst, editor of the "Economist," wrote:

"These are the men who, without virtue, labor or hazard, are growing rich as their country is impoverished; they rejoice when obstinacy or ambition adds another year to the slaughter and devastation; and laugh from their desks while they are adding figure to figure and cipher to cipher."

For this and similar statements, Hirst was dismissed from his editorial chair. After that the journal ceased to expose the plunderers, and by various methods other journals were silenced.

The Eighth Scheme

The year 1917 brought to England the "Equality of Sacrifice" Government, under Lloyd George. From this came the Third War Loan, designated "The Great Victory Loan."

Under this all previous financial swindles were outclassed and eclipsed. All previous 2.5, 3.5, 4.5 per cent loans were converted into 5 per cents. The holders were under no obligation to subscribe to the new loan. They simply gave notice of their intention to convert.

For every £100 of second loan they got £105/5/3 in the third loan, so the actual interest was 5 percent.

Conversion (apart from new money) covered the first and second loans, and reached close up to 1000 millions.

"Stead's Review" said: "That means the Government will have to pay stockholders £10,000,000 more a year additional blood money -- upon old loans."

The new money raised was in addition to the above operations, and was almost entirely floated upon the cheque manufactured currency of the private corporations.

Thus to the currency created by the State for the salvation of the banks, loaned back to the nation at perpetual duplicated interest, there was added the inflated cheque currency of the private corporations loaned to the State, representing nothing beyond the State securities acquired by the issue of such fraudulent currency.

Never had the Lords of High Finance gathered such a harvest. Their loot surpassed in its immensity the greatest scheme ever evolved from the cutest group of Yankee grafters. Never in the wildest dreams of avarice did they imagine that they could get a British Government to function so heartily, extensively and exclusively in their interests. With them, as with the German Junkers, the toast was "To the Day," and their day, the day of peculative opportunity, was while the nation bled on battlefields.

"The Money Power garbs itself in militarism, nationalism, sectarianism and all the other hypocritical guises which Capitalism finds useful to its purposes. These serve as pretexts to instil fresh warmth into dying hatreds. These are the bulwarks behind which Capitalism gorges and digests in security."

-- Emile Zola in "Verite."