For a Democratic Ruler, It Matters Little Whether Bums or Geniuses, Below or Above-Average People Immigrate into the Country; In fact, Bums and Unproductive People May Well Be Preferred as Residents and Citizens

As far as immigration policies are concerned, the incentives and disincentives are likewise distorted, and the results are equally perverse. For a democratic ruler, it also matters little whether bums or geniuses, below or above-average civilized and productive people immigrate into the country. Nor is he much concerned about the distinction between temporary workers (owners of work permits) and permanent, property owning immigrants (naturalized citizens).  In fact, bums and unproductive people may well be preferred as residents and citizens, because they create more so-called "social problems," and democratic rulers thrive on the existence of such problems. Moreover, bums and inferior people will likely support his egalitarian policies, whereas geniuses and superior people will not. The result of this policy of nondiscrimination is forced integration: the forcing of masses of inferior immigrants onto domestic property owners who, if the decision were left to them, would have sharply discriminated and chosen very different neighbors for themselves. Thus, as the best available example of democracy at work, the United States immigration laws of 1965 eliminated all previous "quality" concerns and the explicit preference for European immigrants, replacing them with a policy of almost complete nondiscrimination (multiculturalism).

--Hans-Hermann Hoppe, Democracy: The God That Failed; The Economics and Politics of Monarchy, Democracy, and Natural Order (New Brunswick, NJ: Transaction Publishers, 2011), 145-146.

True Hitlerism Proclaims Itself as both True Democracy and True Socialism; Liberalism Has the Distinction of Being the Doctrine Most Hated by Hitler

They insist with varying degrees of emphasis on the fact that democracy and liberalism are two entirely different principles dealing with different problems. To practically all of these analysts, who have seen the rise and the preliminary victories of contemporary totalitarianism, it was self-evident that this form of tyranny has its roots in the democratic (plebiscitarian, majoritarian, egalitarian), and not in the liberal-libertarian, principle. Thus, writing about National Socialism, a contemporary author remarked:

True Hitlerism proclaims itself as both true democracy and true socialism, and the terrible truth is that there is a grain of truth to such claims . . . but one fact stands out with perfect clarity in all the fog: Hitler has never claimed to represent true liberalism. Liberalism then has the distinction of being the doctrine most hated by Hitler.

--Erik Ritter von Kuehnelt-Leddihn, Liberty or Equality: The Challenge of Our Time, ed. John P. Hughes (Caldwell, ID: The Caxton Printers, 1952), 21.

Karl Marx on Wall Street Accepts Congratulations from J.P. Morgan, George W. Perkins, John D. Rockefeller, John D. Ryan and Teddy Roosevelt in this 1911 Robert Minor Cartoon

The frontispiece in this book was drawn by cartoonist Robert Minor in 1911 for the St. Louis Post-Dispatch. Minor was a talented artist and writer who doubled as a Bolshevik revolutionary, got himself arrested in Russia in 1915 for alleged subversion, and was later bank-rolled by prominent Wall Street financiers. Minor's cartoon portrays a bearded, beaming Karl Marx standing in Wall Street with Socialism tucked under his arm and accepting the congratulations of financial luminaries J.P. Morgan, Morgan partner George W. Perkins, a smug John D. Rockefeller, John D. Ryan of National City Bank, and Teddy Roosevelt — prominently identified by his famous teeth — in the background. Wall Street is decorated by Red flags. The cheering crowd and the airborne hats suggest that Karl Marx must have been a fairly popular sort of fellow in the New York financial district.

Was Robert Minor dreaming? On the contrary, we shall see that Minor was on firm ground in depicting an enthusiastic alliance of Wall Street and Marxist socialism. The characters in Minor's cartoon — Karl Marx (symbolizing the future revolutionaries Lenin and Trotsky), J. P. Morgan, John D. Rockefeller — and indeed Robert Minor himself, are also prominent characters in this book.

The contradictions suggested by Minor's cartoon have been brushed under the rug of history because they do not fit the accepted conceptual spectrum of political left and political right. Bolsheviks are at the left end of the political spectrum and Wall Street financiers are at the right end; therefore, we implicitly reason, the two groups have nothing in common and any alliance between the two is absurd. Factors contrary to this neat conceptual arrangement are usually rejected as bizarre observations or unfortunate errors. Modern history possesses such a built-in duality and certainly if  too many uncomfortable facts have been rejected and brushed under the rug, it is an inaccurate history.

On the other hand, it may be observed that both the extreme right and the extreme left of the conventional political spectrum are absolutely collectivist. The national socialist (for example, the fascist) and the international socialist (for example, the Communist) both recommend totalitarian politico-economic systems based on naked, unfettered political power and individual coercion. Both systems require monopoly control of society. While monopoly control of industries was once the objective of J. P. Morgan and J. D. Rockefeller, by the late nineteenth century the inner sanctums of Wall Street understood that the most efficient way to gain an unchallenged monopoly was to "go political" and make society go to work for the monopolists — under the name of the public good and the public interest. This strategy was detailed in 1906 by Frederick C. Howe in his Confessions of a Monopolist. Howe, by the way, is also a figure in the story of the Bolshevik Revolution.

--Antony C. Sutton, Wall Street and the Bolshevik Revolution (Forest Row, UK: Clairview Books, 2011), 15-16.

Murray Rothbard Makes Much of the Importance of the "Morgan Club" in the Federal Reserve; the Main Counterweight to the Morgan Empire within the Fed Was Paul Warburg of Warburg and Kuhn Loeb

Benjamin Strong stemmed from the Morgan empire, having been the right-hand man of J.P. Morgan during the 1907 financial panic. Morgan later put him at the head of Bankers Trust. Murray Rothbard makes much of the importance of the "Morgan club" as a factor in understanding Federal Reserve policy in its early years. Strong, in taking the position as head of the New York Federal Reserve, had confidently expected that in this role he would be the most powerful official in the new system, although there were some ambiguities about how power would be divided between New York and the board in Washington. At the head of the board was Charles Hamlin, also in the Morgan sphere, as was the Treasury Secretary McAdoo, whose railroad company had been bailed out personally by J.P. Morgan.

Under the initial organization of the Federal Reserve, the Treasury Secretary was an ex-officio member of its board, and McAdoo (now son-in-law of President Wilson) regularly attended its meetings. The main counterweight to the Morgan empire within the Federal Reserve was Paul Warburg, who stemmed from the German banking family of that name and was close to, having married into, the New York banking house of Kuhn Loeb. Warburg has been seen by many historians as "the father of the Fed" in the light of his powerful intellectual and political advocacy of a US central bank, derived from his experience and admiration of banking arrangements in the German Empire and his dismay at the "primitive state" of monetary arrangements which he perceived on arrival in the USA. Strong himself described the Federal Reserve as Warburg's "baby."

--Brendan Brown, A Global Monetary Plague: Asset Price Inflation and Federal Reserve Quantitative Easing (Houndmills, UK: Palgrave Macmillan, 2015), Kobo e-book.

Mario Palmieri's "The Philosophy of Fascism" (1936) Described Ideas Remarkably Similar to those Promoted by the New Dealers

The New Deal was the American version of the collectivist trend that became fashionable around the world, so it perhaps shouldn't be surprising that New Deal utterances by FDR and his advisers sometimes sounded similar to fascist doctrines associated with Italian dictator Benito Mussolini. This, of course, was before Mussolini launched an aggressive foreign policy and allied with Hitler. Mario Palmieri's The Philosophy of Fascism (1936), published in Chicago by the Dante Alighieri Society, described ideas remarkably similar to those promoted by the New Dealers: "Economic initiatives cannot be left to the arbitrary decisions of private, individual interests. Open competition, if not wisely directed and restricted, actually destroys wealth instead of creating it. . . . The proper function of the State in the Fascist system is that of supervising, regulating and arbitrating the relationships of capital and labor, employers and employees, individuals and associations, private interests and national interests. . . . More important than the production of wealth is its right distribution, distribution which must benefit in the best possible way all the classes of the nation, hence, the nation itself. Private wealth belongs not only to the individual, but, in a symbolic sense, to the State as well."

Like FDR, Mussolini believed that individualism was old-fashioned, an obstacle to progress. Palmieri quoted Mussolini as saying, "Anti-individualistic, the Fascist conception of life stresses the importance of the State and accepts the individual only insofar as his interests coincide with those of the State." Again, Mussolini: "Liberty is not a right but a duty . . . the individual, left to himself, unless he be a saint or a hero, always refuses to pay taxes, obey laws or go to war."

--Jim Powell, FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression (New York: Three Rivers Press, 2003), Kindle e-book.

Hoover Recognized the Swope Plan as a Fascist Measure and Recorded This in His Memoirs Calling Roosevelt's National Industry Recovery Act "Pure Fascism," and Merely a Remaking of Mussolini's "Corporate State"

In fact, Hoover recognized the Swope Plan as a fascist measure and recorded this in his memoirs, along with the melancholy information that Wall Street gave him a choice of buying the Swope plan--fascist or not--and having their money and influence support the Roosevelt candidacy. This is how Herbert Hoover described the ultimatum from Wall Street under the heading of "Fascism comes to business--with dire consequences":

Among the early Roosevelt fascist measures was the National Industry Recovery Act (NRA) of June 16, 1933. The origins of this scheme are worth repeating. These ideas were first suggested by Gerard Swope (of the General Electric Company) at a meeting of the electrical industry in the winter of 1932. Following this, they were adopted by the United States Chamber of Commerce. During the campaign of 1932, Henry I. Harriman, president of that body, urged that I agree to support these proposals, informing me that Mr. Roosevelt had agreed to do so. I tried to show him that this stuff was pure fascism; that it was merely a remaking of Mussolini's "corporate state" and refused to agree to any of it. He informed me that in view of my attitude, the business world would support Roosevelt with money and influence. That for the most part, proved true. 

--Antony C. Sutton, Wall Street and FDR: The True Story of How Franklin D. Roosevelt Colluded with Corporate America (Forest Row, UK: Clairview Books, 2013), Kobo e-book.

Sidney Webb Wrote that No Consistent Eugenist Can Be a Laisser Faire Individualist Unless He Throws Up the Game in Despair. He Must Interfere, Interfere, Interfere!

Social Darwinism, after all, was associated at least in Britain with a commitment to unrestricted laissez-faire and emphasis on individual choice while eugenics implied, at a minimum, the development of a social, and often a state, concern with reproduction. As Sidney Webb wrote: "No consistent eugenist can be a 'Laisser Faire' individualist unless he throws up the game in despair. He must interfere, interfere, interfere!" The involvement of society or the state in the intimate sphere of family life was not naturally appealing to those whose first principle was that the individual should think of his own interest first and who wished to keep the functions of the state to an absolute minimum. That some social Darwinists were inconsistent--individualists only where it suited their interests--need not be denied. The eugenics movement was largely composed of people who combined a rhetorical commitment to philosophic individualism with advocacy of restrictive immigration laws, compulsory sterilization laws, and an imperialist foreign policy. But it is important to note that advocacy of such policies did involve them in inconsistency; the acceptance of "social consciousness and responsibility in regards to the production of children" and, even more, state action to enforce that responsibility, ran counter to the philosophic temper of social Darwinism.

--Diane Paul, "Eugenics and the Left," Journal of the History of Ideas 45, no. 4 (October-December 1984): 570.

The Socialist Intelligentsia of the Western World Entered World War I Publicly Committed to Racial Purity, White Domination, and Violence

Havelock Ellis saw it as part of the essential socialist quest for white racial purity. Capitalism believes in mere quantity, both in terms of goods and in terms of people; socialism, by contrast, in quality: ‘the question of breed, the production of fine individuals, the elevation of the ideal of quality in human production over that of mere quantity’ – a noble ideal in itself, and also ‘the only method by which socialism can be enabled to continue on its present path’. That is from Ellis’s Task of Social Hygiene in 1912, which unites Marx’s early vision of inevitable class conflict with eugenic theory and the coming triumph of the white races.

Sidney and Beatrice Webb echoed the point in the New Statesman. If the higher race, as they call the whites, were to lose their world predominance through a falling birth rate, there would be a cataclysm in which they would be replaced by a ‘new social order developed by one or other of the coloured races, the negro, the Kaffir or the Chinese’. That prospect made the Webbs ultra-imperialists:

It would be idle to pretend that anything like effective self-government, even as regards strictly local affairs, can be introduced for many generations to come – in some cases, conceivably never. (2 August 1913)

So the socialist intelligentsia of the western world entered the first world war publicly committed to racial purity and white domination, and no less committed to violence.

Socialism offered a blank cheque to violence, and its licence to kill included genocide. In 1933, in a preface to On the Rocks, for example, Bernard Shaw publicly welcomed the exterminatory principle which, to his profound satisfaction, the Soviet Union had already adopted. Socialists could now take pride in a state that had at last found the courage to act, though some still felt that such action should be kept a secret. In 1932 Beatrice Webb remarked at a tea-party what ‘very bad stage management’ it had been to allow a party of British visitors in the Ukraine to see cattle-trucks full of starving ‘enemies of the state’ at a local station. The account is predictive, nearly ten years before the Nazis began their own mass deportations at the height of the second world war. ‘Ridiculous to let you see them’, said Beatrice Webb, already an eminent admirer of the Soviet system. ‘The English are always so sentimental’, adding with assurance: ‘You cannot make an omelette without breaking eggs.’ The story was recorded years later by her niece, Konradin Hobhouse, in a letter to the Manchester Guardian in February 1958, and it makes plain that some socialists knew of the Soviet exterminations as early as 1932 and accepted, even welcomed them as an essential part of a socialist programme. Such ideas were not limited to dictatorships. A few years later, in 1935, a Social Democratic government in Sweden began an eugenic programme for compulsorily sterilising gypsies, the backward and the unfit, and continued it till after the second world war.

--George Watson, The Lost Literature of Socialism, 2nd ed. (Cambridge, UK: Lutterworth Press, 2010), Kindle e-book.

Marx Said the True Emancipation of the Jews Consisted in "the Emancipation of Society from Jewry" and Goebbels Declared that National Socialism Was "Anti-Semitic" because It Was Socialistic

A latent, sometimes even an open, anti-Jewish sentiment existed in the ranks of Europe's socialist parties--and it was prominent in Red Russia as well. By the time World War II broke out, Stalin had killed many more Jews than Hitler. Needless to say, Jewish haute finance was never really procommunist. If Jewish bankers did business with the Soviet Union, gentile manufacturers and financiers are even more guilty in this respect.

Antonio Machado, the great Spanish poet who died in exile, predicted the inevitable turn to anti-Judaism that Marxism would take. Marx himself started it, of course: "What is the secular basis of Judaism?" he asked. "Practical needs, egoism. What is the secular cult of the Jew? Huckstery. What is his secular God? Money." No wonder Goebbels declared eighty years later that National Socialism was "anti-Semitic" because it was socialistic.

Marxism does not harmonize with the Jewish mind, which is individualistic and commercially oriented; nor has it in any way a "proletarian" character. Marx ended his revolting pamphlet against the Jews, in his Die Frühschriften, with the remark that the true emancipation of the Jews consisted in "the emancipation of society from Jewry" (his emphasis). This is precisely what the National Socialists attempted with the Endlösung [Final Solution].

--Erik von Kuehnelt-Leddihn, Leftism Revisited: From de Sade and Marx to Hitler and Pol Pot (Washington, DC: Regnery Gateway, 1990), 120-121.

Alexis de Tocqueville Anticipated That the Democratic State Would Evolve in a Totalitarian Way towards the Provider State, Expanding the State and Making People Dependent on the State

The Provider State, Hilaire Belloc's Servile State, is obviously a creation of the leftist mentality. It should not be called the Welfare State for, after all, every state exists for the welfare of its citizens. Alexis de Tocqueville in Democracy in America anticipated with great accuracy the possibility, nay, the probability that the democratic state would evolve in a totalitarian way towards the Provider State. In this state, two leftist wishes find fulfillment--the extension of government, and the dependence of the person upon the state, which controls his destiny from the cradle to the grave. Every aspect of the citizen--his birth and his death, his marriage and his income, his illness and his education, his military training and his transportation, his real estate and his travels--everything is known by the state.

--Erik von Kuehnelt-Leddihn, Leftism Revisited: From de Sade and Marx to Hitler and Pol Pot (Washington, DC: Regnery Gateway, 1990), 28.

Ironically (!) a System of Freely Fluctuating Paper Currencies (the Friedmanite-Monetarist Ideal) Is No Monetary System at All; It Is a System of Dysfunctional Partial Barter

Moreover, secession also promotes monetary integration. The process of centralization has also resulted in monetary disintegration: the destruction of the former international commodity (gold) money standard and its replacement with a dollar-dominated system of freely fluctuating government paper monies, i.e., a global, U.S.-led government counterfeiting cartel. However, a system of freely fluctuating paper currencies--the Friedmanite-monetarist ideal--is strictly speaking no monetary system at all. It is a system of partial barter--dysfunctional of the very purpose of money of facilitating rather than complicating exchange. This becomes obvious once it is recognized that from the point of view of economic theory, there is no special significance attached to the way national borders are drawn. Yet if one then imagines a proliferation of ever smaller national territories, ultimately to the point where each household forms its own country, Friedman's proposal is revealed for what it is--an outright absurdity. For if every household were to issue its own paper currency, the world would be right back at barter. No one would accept anyone else's paper, economic calculation would be impossible, and trade would come to a virtual standstill. It is only due to centuries of political centralization and the fact that only a relatively small number of countries and national currencies remain, and hence that the disintegrative consequences and calculational difficulties are· far less severe, that this could have been overlooked. From this theoretical insight it follows that secession, provided it proceeds far enough, will actually promote monetary integration. In a world of hundreds of thousands of independent political units, each country would have to abandon the current fiat money system which has been responsible for the greatest worldwide inflation in all of human history and once again adopt an international commodity money system such as the gold standard.

--Hans-Hermann Hoppe, Democracy: The God That Failed; The Economics and Politics of Monarchy, Democracy, and Natural Order (New Brunswick, NJ: Transaction Publishers, 2011), 116-117.

What Will a King's Typical Immigration and Emigration Policy Be? (1) Prevent the Emigration (the Leaving) of Productive Subjects; (2) Expel His Nonproductive Subjects, and (3) Keep the Mob of Inferior Producers Out

It is time to enrich the analysis through the introduction of a few "realistic" empirical assumptions. Let us assume that the government is privately owned. The ruler owns the entire country within state borders. He owns part of the territory outright (his property title is unrestricted), and he is partial owner of the rest (as landlord or residual claimant of all of his citizen-tenants real estate holdings, albeit restricted by some preexisting rental contracts). He can sell and bequeath his property, and he can calculate and capture the monetary value of his capital (his country).

Traditional monarchies--and kings--are the closest historical examples of this form of government.

What will a king's typical immigration and emigration policy be? Because he owns the entire country's capital value, he will tend to choose migration policies that preserve or enhance rather than diminish the value of his kingdom, assuming no more than his self-interest.

As far as emigration is concerned, a king would want to prevent the emigration of productive subjects, in particular of his best and most productive subjects, because losing them would lower the value of the kingdom. Thus, for example, from 1782 until 1824 a law prohibited the emigration of skilled workmen from Britain. On the other hand, a king would want to expel his nonproductive and destructive subjects (criminals, bums, beggars, gypsies, vagabonds, etc.), for their removal from his territory would increase the value of his realm. For this reason Britain expelled tens of thousands of common criminals to North America and Australia.

On the other hand, as far as immigration policy is concerned, a king would want to keep the mob, as well as all people of inferior productive capabilities, out. People of the latter category would only be admitted temporarily as seasonal workers without citizenship,and they would be barred from permanent property ownership. Thus, for example, after 1880 large numbers of Poles were hired as seasonal workers in Germany. A king would only permit the permanent immigration of superior or at least above-average people; i.e., those, whose residence in his kingdom would increase his own property value. Thus, for example, after 1685 (with the revocation of the Edict of Nantes) tens of thousands of Huguenots were permitted to settle in Prussia; and similarly Peter the Great, Frederick the Great, and Maria Theresa later promoted the immigration and settlement of large numbers of Germans in Russia, Prussia, and the eastern provinces of Austria-Hungary.

--Hans-Hermann Hoppe, Democracy: The God That Failed; The Economics and Politics of Monarchy, Democracy, and Natural Order (New Brunswick, NJ: Transaction Publishers, 2011), 142-143.

The Idea of Democracy Is Immoral as well as Uneconomical; Justice as well as Economic Efficiency Require a Pure and Unrestricted Private Property Society

It must be made clear again that the idea of democracy is immoral as well as uneconomical. As for the moral status of majority rule, it must be pointed out that it allows for A and B to band together to rip off C, C and A in tum joining to rip off B, and then B and C conspiring against A, and so on. This is not justice but a moral outrage, and rather than treating democracy and democrats with respect, they should be treated with open contempt and ridiculed as moral frauds.

On the other hand, as for the economic quality of democracy, it must be stressed relentlessly that it is not democracy but private property, production, and voluntary exchange that are the ultimate sources of human civilization and prosperity. In particular, contrary to widespread myths, it needs to be emphasized that the lack of democracy had essentially nothing to do with the bankruptcy of Russian-style socialism. It was not the selection principle for politicians that constituted socialism's problem. It was politics and political decision making as such. Instead of each private producer deciding independently what to do with particular resources, as under a regime of private property and contractualism, with fully or partially socialized factors of production each decision requires someone else's permission. It is irrelevant to the producer how those giving permission are chosen. What matters to him is that permission must be sought at all. As long as this is the case, the incentive of producers to produce is reduced and impoverishment will ensue. Private property is as incompatible with democracy as it is with any other form of political rule. Rather than democracy, justice as well as economic efficiency require a pure and unrestricted private property society an "anarchy of production" in which no one rules anybody, and all producers' relations are voluntary and thus mutually beneficial.

--Hans-Hermann Hoppe, Democracy: The God That Failed; The Economics and Politics of Monarchy, Democracy, and Natural Order (New Brunswick, NJ: Transaction Publishers, 2011), 104-105.

Democracy and Totalitarianism Are Not Mutually Exclusive Terms; the "isms" That Have Menaced Liberty from the 18th Century to Our Days Were Called Democratic

Monarchs, in a way, skated on thin ice. They desperately tried to bequeath their countries to their heirs, for if they failed, they sometimes had their heads chopped off. They could not conveniently retire to a quiet law office like deputies or presidents who fail to get reelected. There are totalitarian and monolithic tendencies inherent in democracy that are not present even in a so-called absolute monarchy, much less so in a mixed government which, without exaggeration, can be called the great Western political tradition.

Inescapably, then, democracy and totalitarianism are not mutually exclusive terms. Professor J. L. Talmon has rightly entitled one of his books (on the French Revolution) The Origins of Totalitarian Democracy. Nor is it an accident that the isms that have menaced liberty from the eighteenth century to our days were called democratic. Their proponents all claimed that the majority, nay, the vast majority of the people supported their particular "wave of the future." . . . De Tocqueville saw only too clearly that while democracy could founder into chaos, the greater danger was in its gradual evolution into oppressive totalitarianism, a type of tyranny the world would never have seen before and for which it would have been partly conditioned by modern administrative methods and technological inventions.

--Erik von Kuehnelt-Leddihn, Leftism Revisited: From de Sade and Marx to Hitler and Pol Pot (Washington, DC: Regnery Gateway, 1990), 22.

The Demand for Equality and Identity Arises in order to Avoid that Fear, that Feeling of Inferiority. Nobody Is Better, Nobody Is Superior, Nobody Feels Challenged, Everybody is "Safe"

There is a dull, animalistic leaning towards social conformity (identity) as well as a programmatic, fanatical drive in that direction. Nietzsche was aware of it, as was Jacob Burckhardt. Its driving motor is fear, formed by an inferiority complex and engendering hatred, with envy as its blood brother. This fear stems from feeling inferior to another person (or to a situation); hatred is possible only through feeling helpless before a more powerful person. A feeble and cowardly slave can fear and hate his master; the master, in contrast, will not hate but rather feel contempt for his slave. Haters throughout history have committed horrible acts of cruelty (the inferior's revenge), whereas contempt--always coupled with a feeling of superiority--has rarely produced cruelty.

The demand for equality and identity arises precisely in order to avoid that fear, that feeling of inferiority. Nobody is better, nobody is superior, nobody feels challenged, everybody is "safe." Furthermore, if identity, if sameness has been achieved, then the other person's actions and reactions can be forecast. With no (disagreeable) surprises, a warm herd feeling of brotherhood emerges. These sentiments--this rejection of quality (which ineluctably differs from person to person)--explain much concerning the spirit of the mass movements of the last two hundred years.

--Erik von Kuehnelt-Leddihn, Leftism Revisited: From de Sade and Marx to Hitler and Pol Pot (Washington, DC: Regnery Gateway, 1990), 5.

The Origin of the Federal Reserve Has Been Deliberately Shrouded in Myth: (1) Legends Around the Panic of 1907 and (2) The Myth of the "Impartial" Central Bank Altruistically Looking out for the Public Interest

The origin of the Federal Reserve has been deliberately shrouded in myth spread by pro-Fed apologists. The official legend holds that the idea of a Central Bank in America originated after the Panic of 1907, when the banks, stung by the financial panic, concluded that drastic reform, highlighted by the establishment of a lender of last resort, was desperately necessary.

All this is rubbish. The Panic of 1907 provided a convenient handle to stir up the public and spread pro-Central Bank propaganda. In actuality, the banker agitation for a Central Bank began as soon as the 1896 McKinley victory over Bryan was secured.

The second crucial part of the official legend claims that a Central Bank is necessary to curb the commercial banks' unfortunate tendency to over-expand, such booms giving rise to subsequent busts. An "impartial" Central Bank, on the other hand, driven as it is by the public interest, could and would restrain the banks from their natural narrow and selfish tendency to make profits at the expense of the public weal. The stark fact that it was bankers themselves who were making this argument was supposed to attest to their nobility and altruism.

In fact, as we have seen, the banks desperately desired a Central Bank, not to place fetters on their own natural tendency to inflate, but, on the contrary, to enable them to inflate and expand together without incurring the penalties of market competition. As a lender of last resort, the Central Bank could permit and encourage them to inflate when they would ordinarily have to contract their loans in order to save themselves. In short, the real reason for the adoption of the Federal Reserve, and its promotion by the large banks, was the exact opposite of their loudly trumpeted motivations. Rather than create an institution to curb their own profits on behalf of the public interest, the banks sought a Central Bank to enhance their profits by permitting them to inflate far beyond the bounds set by free-market competition.

The bankers, however, faced a big public relations problem. What they wanted was the federal government creating and enforcing a banking cartel by means of a Central Bank. Yet they faced a political climate that was hostile to monopoly and centralization, and favored free competition. They also faced a public opinion hostile to Wall Street and to what they perceptively but inchoately saw as the "money power." The bankers also confronted a nation with a long tradition of opposing Central Banking. How then, could they put a Central Bank across?

--Murray N. Rothbard, The Case Against the Fed (Auburn, AL: Ludwig von Mises Institute, 2007), 82-84.

The Republican Party, Which Inherited the Whig Admiration for Paper Money and Governmental Control and Sponsorship of Inflationary Banking, Was Able to implant the Soft-Money Tradition Permanently in the American System

The Civil War exerted an even more fateful impact on the American monetary and banking system than had the War of 1812. It set the United States, for the first time except for 1814–1817, on an irredeemable fiat currency that lasted for two decades and led to reckless inflation of prices. This “greenback” currency set a momentous precedent for the post-1933 United States, and even more particularly for the post-1971 experiment in fiat money.

Perhaps an even more important consequence of the Civil War was the permanent change wrought in the American banking system. The federal government in effect outlawed the issue of state bank notes, and created a new, quasi-centralized, fractional reserve national banking system which paved the way for the return of outright central banking in the Federal Reserve System. The Civil War, in short, ended the separation of the federal government from banking, and brought the two institutions together in an increasingly close and permanent symbiosis. In that way, the Republican Party, which inherited the Whig admiration for paper money and governmental control and sponsorship of inflationary banking, was able to implant the soft-money tradition permanently in the American system.

--Murray N. Rothbard, A History of Money and Banking in the United States: The Colonial Era to World War II, ed. Joseph T. Salerno (Auburn, AL: Ludwig von Mises Institute, 2002), 122-123.

Greenbacks and Other Crimes: Russia Aligns with the North in the Civil War because England and France Were Conspiring to Break Up the Russian Empire

We saw how the American continent had become a giant chess board in a game of global politics. The European powers had been anxious to see the United States become embroiled in a civil war and eventually break into two smaller and weaker nations. That would pave the way for their further colonization of Latin America without fear of the Americans being able to enforce the Monroe Doctrine. And so it was that, within a few months after the outbreak of war between North and South, France landed troops in Mexico and, by 1864, had installed Maximilian as her puppet monarch. Negotiations were begun immediately to bring Mexico into the war on the side of the Confederacy. England moved her troops to the Canadian border in a show of strength. America was facing what appeared to be a checkmate from the powers in Europe.

It was a masterful move that possibly could have won the game had not an unexpected event tipped the scale against it. Tsar Alexander II—who, incidentally, had never allowed a central bank to be established in Russia—notified Lincoln that he stood ready to militarily align with the North. Although the Tsar had recently freed the serfs in his own country, his primary motivation for coming to the aid of the Union undoubtedly had little to do with emancipating the slaves in the South. England and France had been maneuvering to break up the Russian empire by splitting off Finland, Estonia, Latvia, Poland, Crimea, and Georgia. Napoleon III, of France, proposed to Great Britain and Austria that the three nations immediately declare war on Russia to hasten this dismemberment.

Knowing that war was being considered by his enemies, Tsar Alexander decided to play a chess game of his own. In September of 1863, he dispatched his Baltic fleet of war ships to Alexandria, Virginia, and his Asiatic fleet to San Francisco. . . .

The presence of the Russian Navy helped the Union enforce a devastating naval blockade against the Southern states which denied them access to critical supplies from Europe. It was not that these ships single-handedly kept the French and English vessels at bay. Actually there is no record of them even firing upon each other, but that is the point. The fact that neither France nor England at that time wanted to risk becoming involved in an open war with the United States and Russia led them to be extremely cautious with overt military aid to the South. Throughout the entire conflict, they found it expedient to remain officially neutral. Without the inhibiting effect of the presence of the Russian fleet, the course of the war could have been significantly different.

--G. Edward Griffin, The Creature from Jekyll Island: A Second Look at the Federal Reserve, 3rd ed. (Westlake Village, CA: American Media, 1998), 377-378.