The nonpartisan leader. [volume], September 05, 1921, Image 6

About The nonpartisan leader. [volume] (Fargo, N.D.) 1915-1921

Image provided by: State Historical Society of North Dakota

                
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)