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John Lord ia the pen name of a financial writer who'
until recently edited the financial page of a large eastern daily. This is the third of a series of articles by him on deflation. BY JOHN LORD N MY articles thus far on "Deflation" I have dealt mainly with effects. The prices of farm products have been de flated and deflated with a vengeance. The wages of labor are. in process of deflation. I have charged the "govern ing board of the federal reserve banks with delib erate intent to bring about deflation. I have proved this intent by the testimony of John Skelton Wil liams, who for eight years and until March, 1921, was by virtue of his office as comptroller of the treasury a member of the federal reserve board. It is now in order to study the federal reserve act, because without understanding this act and the fiscal power conferred on the federal re serve banks we can not understand the proc esses either of inflation or deflation. The feder al reserve act was adopted by congress in 1913 and approved by President Wilson on Decem ber 23 of the same year. By this act the con trol of the currency, the power and the right to issue money, was transferred from the con gress, where sucTi power was lodged by the Constitution, to the federal reserve banks. The American fathers when writing our Constitu tion put into that document language like this: "Congress shall have power to issue money and regulate the value thereof." In 1913 congress, by enacting the federal reserve law, delegated its own 'power to issue money to the federal re serve banks. The federal reserve act has been amended 13 times, three times this year. Each amendment constitutes an enlargement of the power and scope of the federal reserve system. Although the reserve act was ap proved December 23, 1913, it was not until November, 1914, that the system was in working order. The law re quired all of the national banks in existence at the time of the adoption of the law to become members of the federal reserve system on penalty of being dissolved. The national banks were required to subscribe for stock of the federal reserve banks an amount equal to 6 per cent of the capital and surplus of each individual national bank. Practically all of the national banks immediately became members of the federal reserve system. I as sume that the national banks paid their capital subscriptions in gold and thus immediately created a gold re serve, for without gold the federal re serve banks could issue no paper money. CAN ISSUE MONEY ON GOLD RESERVE The federal reserve system has two principal functions: 1. The issuance of money. 2. The supplying of credit. It was claimed by the sponsors of the reserve system that when the re serve banks were in good running or der they would be able to supply all the credit needed either by the-gov ernment or by the private business concerns of the nation. In order to supply this credit it was neccessary, therefore, that the federal reserve banks be given authority "to issue money not gold or silver money, but paper money. The law provides that for every dollar of gqld or gold certificates owned by the re serve banks, these banks may issue paper money to the amount of two and a half times the gold so held. The re serve banks may issue paper money against notes, mortgages, bonds, trade acceptances and obligations of the. Bank Power Absolute—People Helpless Details of the Astounding Monopoly of Money and Credit the Government Has Given Private Bankers—Third Article on Deflation The power that the financial lords of the United States have through the federal reserve system staggers the imagination. Every farmer owes it to himself, and as a patriot to his country, to study and understand this power, which can, at will, make or break the, farmer, the worker and the business* man. It was used last fall and winter and this spring to bring about defla tion, of which farmers were intention ally made the first and worst victims. It is not hard to understand the details of this monopoly and its danger, as John Lord explains them in this arti cle. His plain, clear style of writing enables any one who can read to mas ter the facts. You will be astonished at the situation which exists. Be sure to read it all! government. The only real restriction on the issue of bank notes is the gold reserve, which must al ways equal 40 per cent of the amount of notes is sued and put into circulation. The government guarantees the paper money and participates in the profits of the reserve banks after allowing these banks to pay all expenses, put aside liberal reserves, and after paying dividends of 6 per cent to the member /banks on the capital originally subscribed. ECONOMICALLY STARVED! —Drawn expressly for" the Leader by W. C. Morris. Morris drew this picture of an emaciated farmer to typify agriculture as it is today—starved economically—largely through the acts and omis sions of the financial barons whose monopoly is exposed in the article by John Lord on this page. FAGE six The government thus becomes a participant in the exploitation of the people. After the heart of the melon has been consumed by the banks, the government gets that part of the melon near the rind, where the seeds are locat ed. It is just such an arrangement as you could expect banks and bankers to devise. The federal reserve act is printed in a booklet containing 84 pages. It is a complicated document, full of words difficult to understand and hard to ex plain to people who are not acquainted with the in tricacies and'technicalities of banking. I foupd it necessary to employ an attorney to interpret the act. I have spent days myself studying the act in order that I might give the readers of the' Leader a clear idea of what it all means. SYSTEM IS A MONOPOLY CREATED BY CONGRESS Boiled down, the federal reserve act means that the congress created a great money monop oly that congress gave to this monopoly abso lute control of the issuance of the people's money and the supplying of credit. Congress gave the reserve banks the power to decide how much or how little money may be permitted to circulate. Congress also gave the reserve banks the power to decide how much or how little credit may be extended to those individ ual citizens needing credit. Congress gave to this monopoly the power to decide who shall have credit and who shall not, and to decide what rate of interest shall be paid for that credit. Congress thus put into the hands of this monopoly the power of sovereign ty—sovereignty greater than that possessed by king or czar on the face of this earth. The power may be used for good or the piower may be abused. The point is, that the power is there—the power to create money and the power to destroy it mmMm&Mmgmmmg^ sthe power to give cred it and the power to refuse credit. But I want my readers to focus their minds again on the fact that the fed eral reserve banks possess the right and the power to issue money. These banks now exercise THE SOLE power to issue money, and the kind of money they issue is paper money. If you have any paper money in your pocket look at it. The chances are you will find that all of your $5 bills and bills of higher value are federal reserve notes. There are some old greenbacks still in circulation. There are some national bank notes. But they are so few in comparison with reserve notes that you seldom see them. All of the metal, gold and silver, is noW in the federal reserve bank vaults or in the government treasury, except small coin and some silver dollars. Our money' in use is paper money. It ought to be paper money, for paper money is the handiest kind of money. But our paper money is NOT govern ment money. It is BANK money. Every dollar of it in use pays a tribute in some form to the money monopoly. Some 40 years ago there was a po litical sect in this country known as the "Greenbackers." These very pecu liar people contended that the govern ment should- make money out of a cheap material instead of an expen sive one. They insisted that paper was the cheapest, most convenient and therefore the best material from which to make money. The Green backers proposed that the government issue money in sufficient quantity to satisfy business requirements and that the value of the money be regulated by the quantity issued. They insisted that it was the quantity of money in circulation that governed the purchas ing power of money, and not the ma- i. it •t? 4)