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

4.  Australian Money Power

Credit control and industry domination

Financial and Industrial Monopolies

[Editor's Note: This chapter has been condensed. The full text is available at the source listed above.]

"Control of banks, trust companies and insurances by a small group of financiers means their ability to lend a large portion of those funds to industries in which they are interested. They appropriate an ever increasing proportion of the products of industry. They dominate the economic situation and become more powerful than the nominal rulers."

-- Louis Brandier

The banks, insurance companies, trustee agencies, and mortgage companies of Australia are controlled by a few men. They control the three per cent, agencies in which the people put their savings and the six per cent, agencies from which the people borrow. They dominate all loans, flotations, and conversions. They command the channels of investment. They direct currency into channels they desire, cut it off from where they wish, depress or inflate values and make fortunes on the fluctuations. They are the inner circle of all rings, trusts, and combines, and the actual owners of scores of enterprises masquerading under the names of original proprietors. They own daily and weekly newspapers to defend their interests, and by their power to give or withhold advertisements they dominate the policies of nine-tenths of the Australian press.

This financial thuggery operates in three distinct but associated sections -- the Sugar, the Metal, the Overseas.

...

These men do not spend their time controlling the savings and insurances of the people from feelings of benevolence or mere personal pleasure. They do it because it gives them control of other people's money, and these monies they can hold from, or divert into, any channel they wish; can finance themselves into any enterprise in which they are interested, and withhold from everything that threatens their established interests. With those deposits markets are rigged, values inflated or deflated, and big scoops secured in products, properties and general securities. Their immense holdings in industrial monopolies are the direct result of their control and manipulation of public savings. By their control of banks and insurances they control not less than £200,000,000 of money, and by their control of these depository agencies of the nation the Sugar, Tobacco, and Gas Monopolists of Sydney share with the Metal Gang of Melbourne and the English group of financiers in the complete domination of the economic life of Australia.

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The "Commercial" was the most notorious of the defaulting banks of 1893. It declared a 12 per cent dividend and then closed its doors upon 30,000 depositors and millions of deposits. It then appropriated one-third of the deposits as "preference" capital and gave receipts on the indefinite future for the two-thirds balance. Other banks followed the "Commercial" example and thousands of depositors were left penniless, compelled to sell their deposit receipts and their compulsory shares for a fraction of their face value.

The directors of these fiduciary institutions had cross loaned to each other enormous sums of other people's money. Many of them owed £100,000, others £200,000, some £300,000, yet while they were pushing other people to the wall, they conspired with each other, met in secret, and wiped off their mutual obligations for a few pence or one farthing in the pound. They kept their assets, gave each other clean receipts, and got through the legislature of the State an Act of Parliament making it an offence for any person or newspaper to give publicity to their scandalous secret "compositions."

They not only wiped off each others' debts to the institutions they controlled, whose depositors' money they had borrowed, upon whose remaining assets they had foreclosed, but from the foreclosed funds they again "borrowed" to purchase the scrip and deposit receipts of the thousands they had ruined. Thus these "financiers," trusted custodians of other men's money, emerged from the struggle more wealthy than ever, gorged with loot gouged from the fingers of the slaughtered depositors. Those men, their families, their progeny, are shining lights in the Austral world of finance to-day, and their road to fortune is part of the smothered history of the country.

J. B. Hobart, a banking manager for twenty-five years with the banks in Australasia, wrote, after his retirement, a book entitled "Banking -- What It Is and What It Does," and in it he said that banking was "a monopoly wielding a sword over the destinies of all," that the banks were used "in the furtherance of monopoly and in carrying babes for other monopolies."

...

Here, again, we see men exercising control over a diversity of occupations -- mines, mills, factories, sheep stations, banking, beer, gas, insurance, rubber tyres -- masters of industry, not by reason of their expert knowledge, but by reason of their control of the financing institutions. Thus a Melbourne capitalist newspaper in a complimentary personal reference to one man could say: "He holds the reins of our greatest industries...He is the power behind the throne of several State administrations." By control of these banks and insurances the Metal Gang control over £200,000,000 of public money, divert it where they will, finance whatever they wish, and absorb more and more to themselves.

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The Overseas Group

The grip of British Capitalism upon Australia consists, not only of mortgages upon Australian Governments, not only on the oversea ownership of Australian resources, but upon the control of nearly one-third of the total depository power of the Australian people per medium of the British banks and British insurances trading within Australia.

These Imperial Land Grant and associated land and mineral companies cover millions of acres, represent scores of millions in value, and from their coal, meat, and wool resources pour out millions of revenue per year for their oversea owners. Linked up with these are the estates of the "free old English gentry" who squatted upon Australian soil during the early part of last century.

The descendants of those families are a peculiar caste. Their spiritual home is England, their outlook, their education, their adopted mannerisms, their social and business relations are all English. Like the Anglo-Indian, Australia is to them another India, an accidental birth-place, a place of occasional temporary residence from whence their money flows.

Thus all the financial and industrial relations of these men are with English banks and English companies. Thus they are constantly changing from Australia to England and vice versa, and those on the English end of company directorates one year are found on the Australian end next year, and later on back again. These men seldom enter into the public life of Australia, but the corporations with which they are connected are the heaviest subsidisers of local reactionary propaganda.

The wool, the meat, the coal resources of Australia controlled by the English group are financed by the English banks, handled by English companies, shipped through and by English companies, insured by English companies, and the directorates of the banks and of these companies are interwoven, interlocked, interchanged. Moreover, as more and more Australian-founded houses fall into the maws of the English group, so the export and import business of Australia approaches more and more to an absolute monopoly headquartered in London. The old trade names are retained to hide the absorption, but whatever remains un-absorbed is subordinate and subsidiary to the paramount power in Australia's oversea trade.

...

By their control of the institutions to which flow the savings of the people they are enabled to "finance" every industrial scheme in which they are interested. They can say who shall have credit and who shall not. They can boom or paralyse. They can inflate or restrict. They are the economic masters of the country. They are the financial backbone of every Ring, Trust, Combine, and price-raising conspiracy. They stand in the same relation to the democracy of Australia as "Standard Oil" and the Steel Trust in America. By their process of amalgamation, fusion and absorption a compact financial oligarchy becomes more and more the dominant fact. Thus there is built up in secrecy and silence a Black Masonic Order of Plutocracy, cemented in all its parts by the lust of power and the cohesive power of plunder.

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Credit Manipulation

Thus the banks created a currency of their own -- an enormous cheque currency, inflated by hundreds of millions -- a vast ocean of cheques, so that the note issues of the Government were mere specks upon the sea of bank-created paper.

Upon this subject the Melbourne "Herald," in the article quoted, said: "Credit inflation is still a mystery to the mass."

It might also have said that behind the veil of this mystery the banking corporations carry on their spoliations, and levy annual toll upon all the productions of the country. That the banks have large hidden reserves, hidden under the heading "liability to depositors" -- to themselves -- is well known. Their disclosed reserves, and reserves allotted to increased capital account, increased from 1914 to 1920 by £13,000,000; their oversea assets in excess of oversea liabilities by £25,000,000. Within Australia the bank holdings of Government bonds increased by £30,000,000, and their holdings of Government notes increased by another £30,000,000. These notes were not themselves interest fruit-bearing, but they were instruments of profit -- they were an army of reserve, they held the fort, the base, the line of communications, while the cheque currency of the banks sallied forth and came back loaded with the loot of piratical expeditions.

To this feast upon the vitals of the nation the public were invited. The vultures of High Finance could tear off more in a few bites than a million flies, but this offer of general participation not only gave to the vultures an air of generosity, but it surrounded them with a multitude of petty partners, who felt they had a personal interest in buzzing in defence of the birds of prey.

Thus the loan loots were made "popular," "democratic," subscribed to by all classes -- old maids, widows, orphans, everybody -- until available savings disappeared into the pool, trans-formed into bonds whose future values depend upon the operations of the riggers of the market for money.

And when this source was dried, the workers, the widows, the old maids, the petty traders, were told that they could make yet more money from their bleeding country. They could take their bonds, their homes, their land, and mortgage them to the banks, and the banks would advance their paper money at four per cent., which they could reloan to the Government at five, and they could continue to pay four until the paper money was returned. But no money passed -- not even paper money. There were merely figures in a book, designated "deposits," and those figures in a book, borrowed by the Government, drawn upon by cheques, represented not cash in the banks, but the mortgaged properties of the general public, mortgaged to the banks for figures in a book at four per cent.

Of the £40,000,000 loan of 1918, the Melbourne "Argus" of March 18th said that the banks, by this process "made fluid" private property, and the term "private property" included private holdings of previous issues of Government bonds. So that the banks created book credits and cheque currency representing nothing but the prior debts of the Government. With these book credits and cheques the banks bought fresh supplies of interest-bearing bonds, both on their own behalf and on behalf of "approved customers."

The "Banking Record" of September, 1919, said: "The £90,000,000 increased deposits within Australia was created by bank advances of paper money on meat and wheat and other primary products, and by bank advances of paper money to enable customers to take up war bonds."

For "paper money" say "figures in a book, a pile of cheques, and a few notes for small change purposes," and you get to the vitals of the subject.

On the 7th September, 1920, the Melbourne "Argus," in an article on the "ignorance of legislators," said: "The banks create deposits every time they make an advance or discount a bill." In other words, "deposits" have, for the most part, no relation to the popular conception of "deposits" -- two-thirds of so-called "deposits" are "loans," overdrafts, discounts, advances of bank-created paper against "approved" securities. And for these securities the borrowers are "put in credit," charged interest and designated "depositors." The term is delusive. Under it are hidden all the "secret reserves" of the corporation, masquerading as "liabilities" and as bona fide obligations to the public. And under it are hidden the corruptive powers and practices of the gentlemen controlling the Fiduciary Institutions.

And to these private manufacturers of paper credits, the owners of meat and wheat, of farms, and homes, and workshops, the owners of actual property and actual forms of capital are compelled to pay interest for a circulating representative of their own capital. . Only those escape it who are themselves within the ring. By their monopoly privilege the banking corporations make their dividends, pile up their reserves, control all industries, and levy perpetual toll upon the energies of the people. The "Australasian Manufacturer," published In Sydney, which claims to have "the largest paid-up circulation of any periodical in Australasia," said in its issue of February 2nd, 1918, that it "advocated the establishment of a form of banking more in harmony with the needs of modern industry," and it quoted with approval the following statement from an editorial in the London "Daily News":

"The question for us all to ask is whether this private monopoly of the national credit can be permitted to continue? Can we start the future with a "corner" in money? Or must we not see that money, like political power, must be democratised? If money is only a symbol representing the whole credit of the community, why should that symbol not be at the command of the whole community, whose credit it represents?"

The banking directors have not only power to create and inflate credits. They have the much more deadly power to withhold credits from men whose security is beyond question. Thus they can destroy values which their inflated currencies have created, and their outside partners can be financed to purchase the systematically depreciated stocks. Thus the press of October 7th, 1920, could report: --

"Bankers are frankly opposed to the creation of fresh credits...pressure, exercised by banks for reduction of overdrafts makes unloading of stocks imperative. As might be expected, it is the smaller houses that are likely to be the first to feel the pinch most acutely."

And to these alternating inflations and squeezings, the people of all countries under the rule of plutocratic banks are periodic victims.

These notes were to the banks as "gold in reserve." And upon these 16 additional millions -- Government paper -- the, bank erected, as per "Banking Record," a superstructure of 90 millions additional credits loaned out at interest to Government and people. The Government note issues thus became more profitable to the banks than interest-bearing bonds.

"Money lending contains the root idea of capitalism. In money lending there is no thought of production. In money lending economic activity has no meaning. All undertakings in the field of industry are dependent upon the consent of the banker. The Stock Exchange activities of the banks are becoming more and more the controlling force in every department of economic life."

-- Werner Sombart in "The Jews and Modern Capitalism", 1911