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The Basic Principles of Monetary Science

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    Gertrude Coogan, Money creators (1935) Money Creators Preface Chapter 1 Chapter 6 Chapter 9 Chapter 10 Chapter 11 Chapter 12 Chapter 15 Chapter 16 Chapter 17 Money Creators Who Creates Money ? Who Should Create It ? by Gertrude M. Coogan First printing February 1935 Library of Congress Catalog Card Number 67-28926 http://yamaguchy. netfirms. com/coogan_g/coogan_index. html5. 4. 2006 9:07:58 Gertrude Coogan, Money Creators Gertrude Coogan Money Creators PREFACE How long shall we allow our leaders, spiritual and political, to pretend that they see nothing, hear nothing, and know nothing ?

    How long shall we tolerate organs of education and information, public and private, commercial and religious, which are drugged ? How much longer shall we silently consent to have the strong kept in a trap, the wise surrounded by fog, and the sincere millions caused to suffer needlessly ? There can be no Liberty without Economic Freedom — America can have no Economic Freedom without an honest money system — one removed from the controls of the socially irresponsible private Money Creators.

    The problem facing us today is not the formation of a new political party. It is to inform the constituents of every Congressional District so that they may put such pressure upon our Congressmen and Senators as to leave them no alternative but to do the will of the people. The people must demand of them an honest money system. The illicit political machines and numerous rackets will pass into oblivion when an honest money system is set in operation. The controllers of our money system are the controllers of our illicit political machines.

    Victims ! Do you want money made honest for you by the National Government; or kept “sound” for the Money Creators by mis-government ? Do you want U. S. dollars in sufficient number to keep the “wolves of depression” from your door; or do you want dollars in such overwhelming num bers as to deprive them of all value, as the Money Creators have done in other countries ? The reader will ask : “Why have not business leaders known that our money system is dishonest ? They are intelligent, aggressive people who seem equal to anything. The answer is found in the fact that with few exceptions business men are honest, and, as honest men, believe that few men are dishonest. The situation resulting from this concept has set the stage for any confidence game, large or small. The Money Creators have truly operated a confidence game. Our home town and city bankers are, with few exceptions, honest men. Through intrigue and manipulations of gold and government debts they have become mere pawns in the world monetary confidence game.

    They and their predecessors inherited a system which, because it is, they believe always was. If they would look into the origin of the system, and examine its nature, originated sub-rosa and only through centuries of legislative trickery congealed into Law, they would demand that the system be demystified, made non-collapsible, and honest in essence; for they would see that the near-by destiny of the system is ruin for them as well as for others. January 29, 1935 http://yamaguchy. netfirms. com/coogan_g/coogan_00. html (1 of 6)5. 4. 2006 9:08:03 Gertrude Coogan, Money Creators

    FOREWORD To the American People : It gives me special pleasure to have the opportunity to explain the principles and purposes of this book, written by Miss Gertrude M. Coogan of Chicago. The facts that Miss Coogan was awarded a Master’s Degree in Economics and Finance by Northwestern University; was for eight years a Security Analyst for The Northern Trust Company of Chicago; that from the beginning she had a deep desire to understand the fancied enigma of money, have given her a great insight into monetary science. The basic principles of monetary science are simple.

    It is a sound axiom of monetary science that the value of money depends upon the available supply of money in relation to the goods to be exchanged with it. Knowledge of the science has been made difficult by those who have converted these simple principles into an enigma. They have done so with ponderous volumes written on prices and on the processes of production, transportation, distribution and allied topics; weaving into the subject matter deceptive terms so that the public has been grossly misled by the use of words which contain accepted false premises. The intentional use of deceptive terms has made monetary science obscure.

    For example; the so-called monetary experts and financial writers use the word Inflation to stigmatize justified expansion in the volume of money, when Inflation actually means unjustified expansion. They use Deflation, which means justified contraction of a previous unjust expansion; that is, contraction of previous inflation, as synonymous with unjustified contraction, in order to commend that unjust contraction. They use the word Money as meaning gold and currency alone, when the word Money really means, as Webster’s dictionary truly says : “anything having a conventional use as a medium of exchange and a measurement of value. That is, Money means bank checks and bank demand deposits principally. It is through this deceptive use of the word Money that they say there is no relation between the volume of money and our domestic price levels. It is with this false use of the word Money that they deny the quantitative facts of money. They use the term Gold Standard deceptively because the weight of the gold exchangeable for a currency dollar has no standard measure of value, and cannot have. The value of a fixed number of grains of gold exchangeable for a dollar, fluctuates directly with the expansion or contraction of bank credit money.

    It was easy to fix the currency price of gold, but the creators and controllers of bank credit money fixed the goods price of gold. The number of grains of gold exchangeable for a currency dollar is of very minor importance from a domestic standpoint. It is only in the purchase of foreign exchange, the currencies of other countries, that the number of grains of gold exchangeable for a dollar is of vital importance. When other countries change the grains of gold exchangeable for their currency units, it is necessary that the United States do likewise, if we wish to enter export markets.

    In a really scientific money system, gold should not have a fixed price. The number of grains of gold exchangeable for a unit of currency, in reality, should fluctuate as the purchasing power of the dollars themselves change. Fixing the weight of gold exchangeable for a unit of currency has been the means by which the price levels of each country have been altered at the pleasure of foreign Bankers. http://yamaguchy. netfirms. com/coogan_g/coogan_00. html (2 of 6)5. 4. 2006 9:08:03 Gertrude Coogan, Money Creators

    My own interest in this matter arose when I was a boy of 17 in the Panic of 1873. Then, the value of my father’s property was completely destroyed and my mother, from a life of abundance, was suddenly compelled to earn her living by teaching music. I determined to solve that question and have continued to give it consideration throughout my whole life. Opportunity favored me. In 1877, I was graduated in six languages; was awarded the Degree of Master of Arts; was Valedictorian of my class; received the Debater’s Medal; and later had conferred upon me the Degree of LL. D. nd was elected to Phi Beta Kappa. During my entire life I have been a serious student. In 1890, I had the opportunity of establishing the first national bank chartered in Oklahoma; was its President ten years, and have been elected a Director for 45 successive years. I knew the causes of the Panic of 1893 and conducted that bank through that panic. I was a delegate to the National Democratic Convention in 1896 and made a resolute fight to commit the Democratic Party in its platform to a pledge to protect the people of the United States against panics and depressions.

    An attempt was made to remonetize silver. Hon. William Jennings Bryan himself strenuously demanded the establishment of an honest money system—money whose purchasing power should remain the same. Bryan was defeated solely by a studied and expressive campaign of deception and ridicule, the threat of panic and the use of money. In 1898 I went to Europe and studied the methods by which Europe stabilized credit and the value of money.

    After having studied at first hand the Bank of England through its Governors; the Bank of France through its Governor and expert advisers, and the Reichsbank through its Directors, I wrote many articles describing how the purchasing power of money could be stabilized in America. Many articles were written by me at that time to show what principles could be applied to an American system. In 1900 I devised a plan to protect this country against the evils of monetary panics by providing for the issuance of United States legal tender money when national production necessitated an increase in the supply of money.

    In December 1907, I entered the United States Senate and served there for 18 years. Within ninety days after I entered the Senate, on the 25th day of February 1908, I analyzed completely the Panic of 1907; showed its causes, how it could be cured, and how depressions could be prevented in the future. My text was stability in the value of money. I was made Chairman of the Committee on Banking and Currency of the United States Senate on March 5, 1913, and immediately drafted a Bill called the Federal Reserve Bill.

    In drafting this Bill I was greatly assisted by the results of four years work done by the National Monetary Commission. That Commission’s report consisted of 32 volumes, and an auxiliary library of 2500 volumes. It had been established on my request from the floor of the United States Senate. In July 1913, Hon. Carter Glass joined me in presenting to the Senate and to the House the so-called Federal Reserve Bill which had been prepared by me the previous March, but which had been expanded, and contained provisions with which I was not entirely content.

    My Committee was immediately called together to take testimony on this Senate Bill, and after 3,000 pages of printed testimony had been taken, my colleagues in the Senate authorized me to write another Bill. I thereupon had the Senate strike out the Bill that had been prepared in the House and substitute the Bill which I had originally prepared. The Senate adopted the Bill written by me without a change of word. In the Bill introduced in July, in which the Hon. Carter Glass joined me, I had inserted a provision requiring that http://yamaguchy. netfirms. om/coogan_g/coogan_00. html (3 of 6)5. 4. 2006 9:08:03 Gertrude Coogan, Money Creators the powers of the Reserve System be employed in the service of commerce and to promote a stable price level. The meaning of this, of course, was to establish and maintain the stable value of money under mandate. This mandatory provision was stricken out in the House under the leadership of Hon. Carter Glass. I was unable to keep this mandatory provision in the Bill because of the secret hostilities developed against it, the origin of which at that time I did not fully understand.

    Under the administrations of Wilson, Harding, Coolidge and Hoover, this Act was diverted from its proper purpose on the advice of some who controlled the policies of a number of the largest banks. In the campaign of 1920, under the pretext of lowering the cost of living, those in charge of some of the largest banks demanded the contraction of credit and currency. This was done in spite of nine protests I had made on the floor of the Senate between January and June of 1920.

    Policies pursued by those in charge of the Central Federal Reserve Banks resulted in raising the value of money 80%, from an index of 60 in May 1920 to an index of 107 in June 1921. Again, under President Hoover, the contraction of credit took place on such a colossal scale as to force the dollar index (purchasing power) to 166. The consequence was universal bankruptcy, every bank in the United States being forced to suspend operations at the close of Hoover’s services. The purpose of this book is to bring before the American people the knowledge that they must have regarding the nature and manipulations of their money system.

    In my opinion, America faces a crisis which may result in the loss of our Representative Constitutional Government unless every man and woman, rich or poor, young or old; doctor, lawyer, merchant, laborer, educator, clergyman, social worker, society leader; will bestir himself or herself toward the problem of bringing the fundamental truths of monetary science to every fireside. It is time for intelligent Americans to examine their money system and learn how to make simple but fundamental changes.

    Those who own insurance policies and savings accounts must bestir themselves to protect those accumulations. It is an obvious fact that the value of savings accounts and insurance policies will be destroyed unless correct measures are taken to restore property values, employment, and equitable raw material price levels. Instead of allowing our entire social order to be changed, we should examine the fundamental cause of our economic chaos. Making a few intelligent and scientific changes in the operation of our money system will eliminate the dangers of our being afflicted by false principles.

    It is hopeless to think that a few public-spirited citizens in some of the key cities of the United States can accomplish this enormous benefit. They cannot; their handicaps are many. The truths themselves are very simple, but many of the newspapers and publishing companies allow themselves to be used to carry misinformation to the American public, while neglecting to print the truths. Honest money principles are understandable to every one when the money subject is presented in its true light. America will remain in a deplorable condition only so long as the “Let George do it” attitude continues.

    Americans must bestir themselves to eliminate the causes of this business depression and social disorder, and restore prosperity and opportunities to the American people. Loyal Americans realize that the possession of knowledge carries with it the responsibility of dissemination. It required the assistance of every loyal American to help win the World War. In my opinion, the American people have more at stake today than they had at the time of the World War, not that I at all deprecate the glorious services rendered by men in uniform.

    But I believe the future of our nation and the principles for which it has stood, were less in jeopardy then than they are today. It is not necessary that you make the sacrifices you made at the time of the World War, but the cooperation of every one in http://yamaguchy. netfirms. com/coogan_g/coogan_00. html (4 of 6)5. 4. 2006 9:08:03 Gertrude Coogan, Money Creators this important educational program is absolutely necessary. The solution of the problem to protect our homes does not rest with a few leaders in a distant city. It is necessary that every man and woman appoint himself and herself a leader.

    Honest Money Groups must be formed in every block, in every precinct throughout the United States, and in every rural community. The rural community centers and schoolhouses can be most profitably employed this winter in showing the American farmers how simply they can solve all of their own problems. Their grave troubles have been caused not by overproduction, but by money manipulations frequently executed upon foreign advice and to harmonize with foreign “policies. ” The result has been the extraction of dollars of a distorted purchasing power from the American farmer.

    Collecting dollars of such unfair purchasing power has deprived many American farmers of their homes, and all farmers of their share in the industrial products which this nation is so well equipped to manufacture and distribute. The principal reason for endorsing this book is that I feel it is an intelligent vehicle for the dissemination of the truths which must be understood in every home and crystallized into legislation as quickly as possible. While I was considering practical plans to reach the American people, Miss Coogan brought the manuscript to me. It was read to me and its purpose and intent explained.

    I found that this young American woman had a masterful knowledge of the so-called money enigma. She asked me to recite my means of knowledge and experience in connection with the subject matter, and to write a word of explanation. I am glad to commend it; to give the book my blessings in its principles and purposes to restore and maintain honest money through the powers of the Congress of the United States. This book is worthy of careful study by American citizens who wish to understand the principles that govern the value and the volume of money in the United States and in other countries.

    It contains scientific truths—not quackery. This book can be used as a text book to enlighten the American people as to the simple principles of monetary science which have been befogged by the learned economists. The learned economists, in my opinion, fulfill a description I once heard of a gentleman who “was an encyclopedia of undigested misinformation. ” This writer is informed. The information is sound. It has been digested. It is written in an attractive way with an engaging style, and it conveys to the American people truths of the very first magnitude.

    When these truths are known, and the American people demand their constitutional right of an honest money system, this country will enter upon an era of material and physical prosperity; of opportunity, and spiritual and cultural advancement that will not only charm and delight its own people but will become a model for the rest of the human race. ROBERT L. OWEN, New York City, October 29, 1934. Why This Book Was Written http://yamaguchy. netfirms. com/coogan_g/coogan_00. html (5 of 6)5. 4. 2006 9:08:03 Gertrude Coogan, Money Creators “With adequate knowledge of the physical realities that dominate the economic ffairs of peoples, the road is clear for unlimited progress and the attainment of universal peace and prosperity. The evils that in the past have paralyzed the very heart of nations lie patent and beyond concealment. So they pass beyond the power of further harm. Only that rarest kind of courage—intellectual fearlessness and honesty to face things as they are and not as they appear—is required to abolish poverty and economic degradation from our midst. … ” —Wealth, Virtual Wealth and Debt, by Frederick Soddy. “A great industrial nation is controlled by its system of credit. Our system of credit is concentrated.

    The growth of the nation, therefore, and all our activities are in the hands of a few men … We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world — no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of small groups of dominant men. ” —Woodrow Wilson, 1916. Democrats were ousted; Republicans came and went. Democrats are back—what has been done to destroy this illicit power so clearly defined by a President who was later forced to follow its dictates ? What is it we want of our currency ? … We want a dollar that will, in the language of the President, `not change its purchasing and debt paying power during the succeeding generation’ … “What are the points to be taken into consideration ? First and foremost, that Congress should assume the responsibility laid on it by the Constitution of regulating the value of money. We now know that a given weight of gold is not an unchanging standard of value. That fact is dawning slowly on the most conservative and obstinate minds. ” —Frank A. Vanderlip, 1935.

    Former Pres. National City Bank, of New York. http://yamaguchy. netfirms. com/coogan_g/coogan_00. html (6 of 6)5. 4. 2006 9:08:03 Gertrude Coogan, Money Creators, ch 1, 2, 3, 4, 5 Gertrude Coogan Money Creators Chapter I. Why ? When Lincoln wanted to issue constitutional money, he was violently opposed by the “Bullion Brokers,” as the international bankers were called in those days. Lincoln was, perhaps, the greatest exponent of honesty and of the Constitution that this country has had since Washington. He persisted in demanding honest money, until he was silenced.

    Abraham Lincoln, by the following quotation, proved that he understood the private control of money : “As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until wealth is aggregated in the hands of a few and the Republic is destroyed. I feel at this moment more anxiety for the safety of my country than ever before, even in the midst of the war. ” President Garfield publicly stated that the hand that controls the money supply, rules the nation.

    What hand sent Guiteau ? An honest, constitutional money system is the one thing that international money magicians will not stand for. Woe to the scientific man who at tempts to teach the people common sense in money systems, as envisioned by the founders of the Nation. Benjamin Franklin, in his autobiography, stated that the refusal of George III to allow the colonies to continue to operate an honest colonial money system, which permitted freedom of the ordinary man from the clutches of manipulators, was probably the prime cause of the American Revolution.

    Franklin was perhaps the wisest man this continent has ever produced; he was a great thinker and statesman. You are invited to consider what we have in America. Have you consented to be “tricked” out of your heritage, your children’s and your grandchildren’s ? You are asked to decide whether both you and your descendants wish to live in peace and prosperity, secure under the kind of money system visualized by the Founders of this Nation, and their faithful disciple, Abraham Lincoln; or in slavery, starvation and chaos.

    We now witness : America in a financial cramp — and no relief in sight ! What a spectacle ! The world’s greatest nation (richest in raw materials) laid low and writhing in an agony of monetary starvation. Factories idle, while abundant raw mate rials are at hand but unused, and workmen starving while they linger about the gates hoping for them to be thrown open; farmers hard at work growing their crops in sufficient abundance, but unable to find buyers at decent “prices” — that mysterious index of prosperity.

    Business men able and willing to put their brains and factories to work on what is needed by the people at large, yet restrained from so doing because there is a lack of purchasing power upon which all commercial activity depends. http://yamaguchy. netfirms. com/coogan_g/coogan_01. html (1 of 25)5. 4. 2006 9:08:12 Gertrude Coogan, Money Creators, ch 1, 2, 3, 4, 5 Clouds of “mystery” everywhere, and on every mountain top a prophet of gloom and doom in cap and gown.

    We now hear : Tirades against the Constitution and assertions that it is an antiquated failure by those who have never tried to give even a hint of how matters can really be improved within the framework of that document which is effectually fitted to human nature. “Humanists,” “Liberals,” “Socialists,” “Internationalists” and “Communists” (but not Bolshevists strangely enough) crying for Economic Justice for the oppressed, the weak, the able and disabled, the widows and orphans, and meaning every word of their Jeremiads.

    Speakers crying out against Capitalism, without a thought as to what happens to Christian people and institutions under Bolshevism — the secret inevitable of the “reforms” these same speakers are demanding at the expense of the God-given right of every rational human being to own property and enjoy the fruits of his own labors. We never hear the following truths : Capitalism is that system of political economy which recognizes the right of individuals to own, use and control private property. The right to own private property conforms to the basic laws of human nature—the reward to the individual for effort and attainment.

    Equality of opportunity is part of our fundamental code. However, individuals differ; some desire and will assume responsibilities, others decline them. Since natural endowments differ, and individuals differ in their desire to work, the rights of individuals to obtain possessions and distinctions are God-given and inherent in human nature. Capitalism includes the right of a working man to own his cottage; his right to his instruments of production; his automobile, etc. , as well as the employer to own the factory which employs him in turning out products which civilization needs.

    This is the point which the internationalists are not making clear. Capitalism is not a means of exploiting the masses for the benefit of the few. In America, as in other countries, in recent years, particularly since the World War, the masses have been thoroughly exploited, and that exploitation was made possible and executed only because class legislation and dishonest and maliciously controlled private money creation and cancellation powers—fraudulently granted—became the weapons through which the few, most of whom were internationalists, accomplished the exploiting.

    NOW ! That that exploitation has been accomplished — great wealth and power having become concentrated in the hands of a very few—discussions and cartoons are being widely circulated attempting to teach that Capitalism itself is a system of government which keeps a few very rich and all the rest very poor. This is being done to make the people of the United States believe that Capitalism should be abandoned. It is a very sinister element that is trying to tell us that Capitalism is wrong.

    The bolder are stating that we have outgrown Capitalism; the more dishonest are claiming that science and invention have necessitated discarding Capitalism and adopting a Socialistic form of government. Those who are responsible for such misstatements would have the United States abandon Capitalism in order to further entrench the wealth and power of these internationalists. We hear Capitalism has failed ! No, the right and pride of ownership of private property has not failed and will never cease while man is man.

    The error lies not in Capitalism but in our having permitted it to be abused, and allowing a small http://yamaguchy. netfirms. com/coogan_g/coogan_01. html (2 of 25)5. 4. 2006 9:08:12 Gertrude Coogan, Money Creators, ch 1, 2, 3, 4, 5 minority, through malicious operation of the monetary system, to destroy the economic security and peace of all others. Capitalism has now, because of the suffering of the masses, become a target at which the demagogues are aiming the very arrows fashioned by their own masters—those masters are the internationalists, the manipulators of unconstitutional and dishonest money powers.

    The masters of the demagogues are the real enemies of patriotic Americans. Under three unjust super-commandments the World is ruled by the International Money Masters : “Thou shalt not make honest the money system. ” “Thou shalt not follow the money mandates of the Constitution of the United States. ” “Thou shalt not examine the money subject except under our direction. ” And even the prominent spiritual leaders obey their dictates !

    And patriotic organizations formed ostensibly to “defend and uphold” the Constitution are strangely, but it seems intentionally, silent on the most flagrant violation of the Constitution—the delegation to private individuals of the most important national prerogative — “the power to coin money and regulate the value thereof. ” That violation is the principal cause of our overwhelming depression and Socialistic onrush. Without Economic Liberty there can be no lasting political liberty, or religious liberty.

    All forms of liberty depend upon Economic Liberty. But are the International Money Creators the Bolshevists’ supporters and sympathizers ? Are the international money masters and their domestic pawns the holders of money-creating privileges, contrary to the plain words of the Constitution ? Are they the real generators, financiers, controllers, and profiteers of Communism, Socialism, Bolshevism and social disorder of all kinds ? Let the reader decide from the evidence, to which the keys are given herein, and confirmed by many other American volumes.

    Let the reader also decide as to the remedy. Thinking in terms of “how? ” and “why? ” on the part of every American, and the exercise of the political sense demonstrated by his predecessors (the founders and builders of this Nation) are the only means of salvation for America, as well as for the rest of the World. It makes no difference to which Political Party your Congressman belongs. He is your servant. He must do what his constituents demand. Our enemies operate only while we American people remain uninformed.

    Inform yourself and your fellow men. “Truth is Simple”; “Knowledge is Power. ” The question is : Is our knowledge of truth or of falsehood ? If the former, it imposes the duty of dissemination; if the latter, that of exposure and rectification. The possession of a modicum of knowledge also imposes another obligation, viz. : that of aggregation; and still another : to properly use the power thus acquired; for, while knowledge is power it is a power for evil as for good, according to the use made of it by its possessor.

    John Adams wrote to Thomas Jefferson in 1787: “All the perplexities, confusion and distress in America arise, not from defects in their Constitution or Confederation, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit and circulation. ” Our Constitution, repeatedly analyzed by eminent students of political science, has been pronounced the key to the science of government.

    Shall we destroy a government of laws based upon reason and supinely accept the only alternative—a government based upon force, violence, intimidation, and the http://yamaguchy. netfirms. com/coogan_g/coogan_01. html (3 of 25)5. 4. 2006 9:08:12 Gertrude Coogan, Money Creators, ch 1, 2, 3, 4, 5 negation of man’s right to use his God-given reason ? Our Constitution, as written, recognized the basic fundamentals of human nature. “Human law is law only in virtue of its accordance with right reason; and thus it is manifest that it flows from the eternal law.

    And in so far as it deviates from right reason it is called unjust law : in such case it is not law at all, but rather a species of violence. ” —St. Thomas of Aquinas, Summa Theologiae, Qxciii, Art, iii. Our economic and social chaos will be increased as we depart further from the rule of reason upon which this country’s laws were based. Our economic and social chaos can be eliminated only by restoring an honest money system and, through that step, open the way for a return to the scientific principles of government upon which human progress must be based.

    Shall we be driven back to the primitive life of barter for exchange of goods and services, or shall we push aside the human obstacles and set up an honest, simple money system adequate for making all of our exchanges of goods and services readily, and with universal convenience and permanent prosperity ? __________________ Chapter ii The Setting for the “Mystery” THE CONGRESS SHALL HAVE POWER : TO COIN MONEY, REGULATE THE VALUE THEREOF AND OF FOREIGN COIN. Article I, Section 8, Part 5—Constitution of the United States) HOW LONG SHALL WE CONTINUE TO ALLOW OUR PRESENT UNCONSTITUTIONAL MONEY SYSTEM TO KEEP OUR NATION ARTIFICIALLY POOR ? “Congress shall have power to coin money, and regulate the value thereof. ” This well-defined authority contains the hope of preserving from destruction our entire civilization. Fortunately, for Americans and for the entire world, the founders of this country, the authors of the Constitution of the United States, knew well the supreme importance of a scientific and honest money system.

    Farsighted and intelligent, they took the enormous precaution of placing the power to coin money and regulate its value, with Congress alone. That power is the greatest power inherent in any people who constitute a civilized nation, because with money we make our exchanges of goods and services. The founders of this nation, being learned men, knew well the effects of allowing money creation to be made a privilege and function of private individuals. The phrase “to regulate the value thereof” gives power to control the purchasing power of all money in the nation.

    Wide and sudden gyrations in the purchasing power of money have been the direct cause of more human misfortune and suffering than any other single force in the experience of civilized peoples. To entrust that power to private individuals gives them controls which can actually jeopardize the welfare of every individual in a nation. The subject of money has been presented in all countries as a mystery beyond the wit of all save a few http://yamaguchy. netfirms. com/coogan_g/coogan_01. html (4 of 25)5. 4. 2006 9:08:12 Gertrude Coogan, Money Creators, ch 1, 2, 3, 4, 5 “supermen” to understand. High finance” has been considered magic, controlled by forces unintelligible to the real producers of wealth — those who plan and labor to produce the things which people and nations need to sustain life. Industrialists and agriculturists have been duped and the working classes have been made slaves, not because they are incapable of producing all things necessary for every family to live well; that is, to have houses, food, clothing and opportunities for culture and recreation, but simply because they did not understand the nature and operation of the money system of the United States.

    Had it been honestly explained, they would never have allowed its practices to continue. A money system, if based upon correct and honest principles, is very simple. Those who succeeded in inducing Congress to grant unconstitutional money powers have spent many millions in political racketeering and subsidizing the teaching of false economic and monetary principles. The possessors of these unconstitutional privileges, in reality, govern the United States.

    This was well demonstrated in President Hoover’s administration. He privately admitted that he knew the monetary policies in force should be changed. When asked why, as President of the United States, he did nothing to effect this change, he answered that those in charge of the Federal Reserve policies would not allow him to act, or even make his knowledge known to the public. Truth is Simple Only falsehoods and false principles need be discussed in mysterious terms.

    Any citizen of ordinary mentality can readily understand the money system of this country. In studying it he will observe that there are two important phases: (1) he will see how it works in the distribution of goods, domestically produced and consumed; (2) he will see how our money system connects with the money systems of other countries. Because the United States is a 95%, self-contained country, the all important object should be to operate the system to provide domestic purchasing power.

    Since 1920, that object has been disastrously sacrificed. A correct understanding of the nature and operation of our money system will bring a concerted demand from all real patriots for correction of the present unconstitutional, unscientific and dishonest moneycreating privilege serving a few private individuals. Some individuals have used those unconstitutional powers to destroy the economic and social fabric of our could-be great America for their own selfish advantages.

    Not content with possessing these vast, dishonestly acquired privileges, which have concentrated the nation’s wealth in their hands, they have proceeded to use the power of this wealth to rob loyal Americans also of their personal liberties, and reduce them to slaves in the category of mere animals. Socialism and Communism, as preached and practiced in the world today, and recognized by most Americans as false doctrines, have already to a considerable degree been saddled and bridled upon this people.

    Originated and fostered by foreign beneficiaries of our institutions, these false doctrines have been used to betray America, and, under the guise of “reform” and high-sounding humanitarian appeals to laborers of all classes, are now being used to weld the chains of tyranny and oppression around the limbs, and place shackles on the brains of all save the Elect few; in fact, to induce Americans to assist in forging their own fetters.

    For the past twenty years a handful of selfish vested international interests have controlled our money system, and with it the power to manipulate our entire economic life. If that control is not taken away http://yamaguchy. netfirms. com/coogan_g/coogan_01. html (5 of 25)5. 4. 2006 9:08:12 Gertrude Coogan, Money Creators, ch 1, 2, 3, 4, 5 from them, there is only one answer—the United States Government will be destroyed, millions of lives will be lost, years of starvation, chaos and sorrow will follow—the French and Russian Revolutions will be duplicated in America.

    Those international interests who seek complete world control will have their own possessions in real property and in gold. When other people’s properties pass into the hands of the internationally-controlled Government, under the guise of Socialism and Communism, they will, in reality, pass into their hands; because the Government will be in their hands, as in Russia. A revolution for America is in the World Plan of the Internationalists.

    It can be averted only if every loyal American will rise to the occasion and help, by such means as he is blessed with, be it knowledge, wise counsel, information, and personal services or money for spreading facts, warnings and encouragement,—and, I repeat, help those individuals who now endeavor to preserve, not only America, but all nations from a return of the Dark Ages, which followed the fall of the Roman Republic;—and will surely follow the fall of our own. The same financiers who brought terror, starvation and murder to Russia are at work in America.

    In order to destroy intangible claims on wealth, such as insurance policies and bonds of all kinds, they can execute a complete destruction of currency through a vicious inflation. A vicious inflation results from printing and putting into circulation unlimited amounts of currency, and continuing that process until the currency is outstanding in such enormous volume that it actually has no value. In the early stages of a vicious currency inflation, only the extremely shrewd can detect the process. Excess money dilutes the purchasing power of all the money in circulation.

    As soon as vicious currency inflation is recognized by the masses, they hasten to turn all money into actual physical property. When that stage is reached the entire money structure of the nation is quickly destroyed. It was done after the issue of assignats during the French Revolution; it was repeated after the Russian Revolution. To brave and informed people “Only that is inevitable which has already happened. ” __________________ Chapter iii The Origin of the Practices THE ORIGIN OF THE PRACTICES OF OUR MYSTERIOUS AND UNCONSTITUTIONAL SYSTEM OF MONEY

    Fundamentally, only the Government of a nation should create money. It should be created by the imprint of a National Government, and paid into circulation in the first instance as government expenditures. As people’s ability to produce the necessities and luxuries of life increases, in other words, as the people learn how to use tools and machinery instead of hand labor, they are capable of producing more crops, minerals, houses, clothing, etc. , etc. As more of these things are being produced, more money is necessary in order that distribution can take place among the people constituting a nation.

    Were the money system of a nation in the hands of conscientious men, they would carefully observe the growth of actual production, and as it increases, they would enlarge the supply of money, and put it into circulation in payment for some governmental operation. When issued to pay for necessary government buildings or to pay the legitimate and reasonable costs of carrying out the http://yamaguchy. netfirms. com/coogan_g/coogan_01. html (6 of 25)5. 4. 2006 9:08:12 Gertrude Coogan, Money Creators, ch 1, 2, 3, 4, 5 overnment’s real purpose—to protect the person and property of private individuals—all governmental costs do not have to be met by taxation. But additional money can only be issued as physical production increases. Otherwise, the purchasing power of all money outstanding would be diluted. If money were placed in circulation out of proportion to the physical goods actually produced, it would cause prices to rise, that is, the purchasing power of money would be less. The object of an honestly operated money system is not to do that.

    The object is to keep a flow of money adequate to permit distribution to take place among all producers of the nation. That kind of money system is both scientific and honest. Before the advent of private money-creating power, if any private individual created money and caused the imprint of a government to be put upon it, he was guilty of counterfeiting. What he was doing was really stealing from all of the other people in the nation, because as he counterfeited money and put it into circulation, he was not only obtaining purchasing power for himself, but he was diluting the purchasing power of all holders of money in the nation.

    In other words, he was increasing the flow of money without any regard to the actual physical goods existing within a nation. His increasing the volume of money raised prices for all other people in the nation which, of course, meant that the money belonging to all other people would have less purchasing power. When caught, he was punished very severely by the National Government, for counterfeiting is a very serious offense. It is theft from every person having any purchasing power (money).

    Any increase or decrease in the flow of money should be the function of the people acting through their duly elected representatives, Congress, and it should affect all producers of wealth in exactly the same manner. A Beginning in Monetary Chicanery In earlier periods of human existence, trade was conducted with various media of exchange; cows (pecca, hence the word pecuniary), sheep, gems, salt (mined in Italy and carried over the via salaria, the salt road; hence the word salary), skins, shells, and the wampum or beaded shells of the American Indian, as well as gold and silver.

    Eventually, as population grew and trade increased, money became scarce. Then a group of money lenders conceived the idea of using gold and silver as a basis for the issue of paper money; whereupon they proceeded to obtain legal monopolies of issue in the various countries, which carried with it the power of manipulation and economic control. Of course, well informed people know that money itself is not wealth. Money is simply a medium used as a reckoner or counter of wealth.

    Wealth classifies into two distinct types and functions : (1) Consumer goods, or perishable goods which are consumed or destroyed in actually motivating life; e. g. , food, clothing, etc. ; (2) Capital goods, or producer goods, which do not motivate life itself, but are instruments used in the production of consumer goods; e. g. , a factory, a freight car, a machine, etc. These deteriorate and grow obsolete, but are not consumed by living beings directly.

    Those who conceived the idea of using gold and silver as bases for money issue were able to “sell” that idea to their fellow citizens. There was really nothing the matter with using gold and silver tokens for money, so long as the nation using them was capable of obtaining enough of these metals to increase the flow of money whenever it became necessary due to the people’s increasing ability to produce physical goods. http://yamaguchy. netfirms. com/coogan_g/coogan_01. html (7 of 25)5. 4. 2006 9:08:12

    Gertrude Coogan, Money Creators, ch 1, 2, 3, 4, 5 When people accepted the idea of using gold and silver tokens as the counters used in reckoning the actual physical wealth exchanged, they sought to have those precious metals kept in safe places. A farseeing individual among them realized that if he would build a strong room, people would hire him to store their precious metals. He thereupon went into business and was paid a fee for storing precious metals until the owners needed them to make whatever purchases they desired.

    Those who turned over precious metals to the owner of the strong room obtained receipts for their deposits. The people soon found that it was inconvenient to go to the strong room keeper when they wanted precious metals and, since everybody was assured that precious metal was safe in the strong room, it soon became a common practice to simply turn over the receipts for the precious metals in exchange for goods. It was more convenient to pass a piece of paper which gave evidence that the precious metal existed, than it was to go and get the heavy metal to make the exchange.

    The new owner of the receipt did not take it to the strong room keeper because he felt that when he wanted to pass it on he could simply turn over the piece of paper. These pieces of paper were, in reality, the strong room keeper’s promises-to-pay precious metals upon demand. This was the original public error. The public error lay not in trusting the private banker with their real money, but in carelessly allowing the private banker to issue his slips of paper in substitution and later in multiplicate for real money.

    This placed his private seal on a parity with the seal of the Government on its lawful money. This was the step by which eventually the money seal of the private banker actually took precedence over the money seal of the Government itself. The strong room keeper was in touch with others in the same business throughout his nation. We may be sure that no measures were overlooked by which the laws of nations would be made to legalize practices which were rooted in secretly established precedents rather than on honest and sound principles.

    Whenever any modern Government has attempted to establish a common sense, honest, simple money system, such attempts have always been defeated by law makers who inserted trick clauses in the legislation. It was a fatal mistake to turn over the money metal to private custodians in return for private receipts, and allow them to secretly issue multiplicate receipts, which then became money—the medium of exchange. That was only one-half of the mistake; the other part lay in the stupidity of the nation in legalizing this fraudulent practice, as has our Congress.

    THE STRONG ROOM KEEPER SEES OPPORTUNITIES The keeper of the strong room was a clever and observant man. He soon noticed that the people were exchanging his promises-to-pay the precious metals with one another. He learned this upon noticing that some of those who brought these receipts to his strong room were not the ones to whom he had originally issued them, but he was perfectly willing, if people desired, that business be done in that way. The second observation he made had very far-reaching effects.

    He noticed that only a small percentage of the people presented receipts for their precious metals on any given day. In other words, he noticed that about 90% of his total stock of gold remained in his vaults entirely undisturbed, and that only about 10% of the stored metal was necessary to take care of disbursements and receipts in the course of business. http://yamaguchy. netfirms. com/coogan_g/coogan_01. html (8 of 25)5. 4. 2006 9:08:12 Gertrude Coogan, Money Creators, ch 1, 2, 3, 4, 5 A temptation entered his mind!

    Since approximately only 10% of the owners of metal ever wanted it at once, why not issue more receipts than metal actually existed in the vaults? He knew the principle was dishonest, but the temptation was great. After thinking the matter over carefully, and finally succumbing to the temptation, he decided to begin in a small way issuing receipts for more metal than he held in the vaults. In other words, he would increase his promises-to-pay metal beyond the amount of metal that actually existed, and collect interest on this fictitious money.

    This was the original fraud, which exists even today, and is the root of all our economic ills. Let the bankers defend the practice as they will, the fact remains that when they loan their “credit” at interest they are simply creating private money, which they can recall and destroy at will to the distress and impoverishment of the borrower, who periodically finds himself forced through artificial scarcity of “credit” money to pay back real property for the “credit” dollars borrowed. He quietly looked around for some business man who might need more money to conduct his business.

    The business man he sought was a good hard-working honest man. When approached with the idea that the keeper of the strong room would lend him money at interest, he thought that the promise-to-pay which the strong room keeper was offering to lend him, was a receipt for precious metal which actually belonged to the strong room keeper himself. He had no thought that it was simply a fictitious claim created by the stroke of the pen of the strong room keeper and that the gold to which it was a claim did not exist.

    When the strong room keeper issued these promises-to-pay metal which did not exist, he secured from each borrower a mortgage—on his home or business—as security for the return of an equivalent amount of metal receipts. This of course, was dishonest because he was demanding real security for his promises to-pay fictitious gold; more than existed in his vaults. He simply had created that promise by a stroke of the pen. Furthermore, he gave no security to the actual owners of the metal in his vaults when he began to issue more promises-to-pay than metal existed.

    After a while the strong room keeper grew still bolder and less principled. The business man to whom he loaned a receipt for fictitious precious metal agreed to pay interest for the use of that money and agreed to return a receipt for metal on a given date. The strong room keeper then found that his income was increasing. He was not only getting a fee for safe-guarding metal but he was getting interest on receipts for metal which did not exist. However, the business man was totally unaware that he was a party to a dishonest practice.

    Business went along well and the strong room keeper sought other business men to whom he agreed to lend receipts for precious metal. With the increasing of these receipts for precious metal, loaned at interest, prices began to rise and people began to notice an acceleration in the rate of business, due to the increasing supply of money which allowed more men to work and produce by supplying the medium for making their exchanges. Business men found their profits increasing and sought to expand their businesses.

    Other men hearing of the loans which the strong room keeper had made, applied for loans themselves, because they saw in a rising price structure, a chance to earn more profits. > The strong room keeper was actually causing inflation (bankers’ money inflation), that is, he was increasing the amount of money in circulation at a faster rate than physical goods were being increased. This was inflation, of which the people of the community were entirely unaware. THE STRONG ROOM KEEPER REACHES HIS LIMIT http://yamaguchy. netfirms. om/coogan_g/coogan_01. html (9 of 25)5. 4. 2006 9:08:12 Gertrude Coogan, Money Creators, ch 1, 2, 3, 4, 5 While the strong room keeper was increasing his promises-to-pay at a rate faster than the community was able to produce goods, prices were rising sharply. Rising prices are always caused by increasing the money flow faster than the actual physical volume of goods is increased. If the two are increased in the same proportion, production and distribution of increasing amounts of goods can take place without sharp price rises.

    While this sharp price rise was taking place, business activity was at high levels. There not only was no unemployment in the community, there was an actual shortage of labor. The community was happy. The members of every family who wanted to work were employed and had the purchasing power to buy the shoes, clothes, food, furniture, houses, etc. , which were being produced. The teachers in all of the schools had noted that the children were doing very good work. They came to school well fed and clothed and they radiated the happiness that prevailed in their homes.

    The charitable organizations in the community found their services unnecessary. Crime almost disappeared. The people wanted to work; there existed the raw materials and machinery with which to work, and there was a sufficient supply of money which made it possible for them to exchange their products for those of other workers. There was not too much money in the community, but it had been issued too quickly and had caused sharp price rises. Had it been increased only as production was increased, those unhealthy price rises could not have taken place, but there was not too much money.

    There was, however, one very dangerous aspect in the situation. Ninety percent of the money which was in circulation had been created dishonestly by the strong room keeper. It consisted of his promisesto-pay precious metal which he did not have. He had issued them as loans and he alone had complete control over them. The people did not realize that he had issued receipts for non-existent precious metal, and they were unaware that the strong room keeper had power to take away their opportunity to earn a livelihood and, hence, their happiness.

    We observed before that the strong room keeper in issuing these promises-topay, had taken mortgages on homes, farms and factories. He now held mortgages on a substantial part of the people’s physical properties. The strong room keeper realized that he must not expand beyond ten times the amount of metal he had in his vaults, for his experience had taught him that even in a rising price structure, it would be very dangerous to issue promises-to-pay in a greater ratio than ten to one.

    He needed real money (precious metal) equivalent to about 10% of his promises-to-pay in order to keep up his deception, for about 10% of the transactions over his counter were in real money ! Today the practice is accepted as “sound” because it is ancient and has been unwittingly legalized; it is so accepted only because of plausible arguments propagated by those who profit thereby. Once those promises-to-pay fictitious metal had been spent by clients who borrowed from him, the new holders had exactly the same claim on the gold in his vaults as did those first individuals who had actually brought gold to his vaults.

    If something should happen to disturb the “confidence” of the people (every one knows “confidence” is the essence of this kind of banking, even today), he might be confronted very quickly with demands for more gold than he had in his vaults. As soon as the strong room keeper stopped lending additional promises-to-pay, he noticed that prices ceased to rise. He began to wonder if some of the later borrowers might not have difficulty in selling their products, due to the fact that the volume of money was now stationary.

    He decided to curtail somewhat. He also saw an opportunity to take an undue advantage of all the people in the community. Remember, he held mortgages on a number of their businesses and homes. His borrowers had given http://yamaguchy. netfirms. com/coogan_g/coogan_01. html (10 of 25)5. 4. 2006 9:08:12 Gertrude Coogan, Money Creators, ch 1, 2, 3, 4, 5 him these mortgages in good faith, believing that he had loaned them receipts for actual precious metal; never understanding that he was building up a collapsible money structure.

    They had no idea that they had borrowed and were paying interest on receipts for fictitious metal, and that the strong room keeper by merely calling in these receipts for non-existent metal could cause a serious collapse in prices and values. The strong room keeper decided to act. He there, upon summoned the owner of one of the local factories before his loan period expired. He called him to his office and after a few very courteous inquiries, he told him that he felt the “business situation” warranted that some of his loans should be recalled.

    He very carefully explained to the factory owner that he, as the strong room keeper, was really the guardian of all business in the community and that he was bound to see that the business men keep their operations within reasonable limits. The factory owner was very much surprised. He knew that he had given ample security for the loan, for he had given a mortgage on his factory, worth many times the amount of the loan. He also knew that his business was in good condition for he was showing very satisfactory profits, and he had no accumulation of inventories.

    He began to tell this to the strong room keeper. The strong room keeper grew very serious. After all, he told the factory owner, the strong room keeper’s first obligation was to the entire community. He could observe what was going on in all businesses much better than any individual business man; that, after all, business men were human beings and were readily carried away by enthusiasm, ambition, and even greed. Therefore, the responsibility fell naturally and directly upon his houlders to keep the business men in line. He further told the factory owner that the most essential thing in any business is to keep one’s standing with the strong room owner and that in the name of “sound” lending, it would be necessary for him to curtail at this time. Of course, he felt very sorry, but he just had to guard the “best interests” of the community. After all, he must be guided by the “laws of economics” alone.

    He could not be carried away by his desire to see full employment maintained for all of the people, or the community’s desire to produce and distribute enough food, clothing and shelter for every family to have a reasonable share, as was possible because of the availability of raw materials and their ability and desire to work. A BUSINESS DEPRESSION The factory owner had no alternative. He left the strong room keeper’s office glum and discouraged. Why was it necessary to call his loan; to cancel out what he was using for money ?

    He knew that there were no inventories piling up in any of the businesses in the community. He knew that labor was giving an honest day’s work for an honest day’s pay. He could not understand why the harbinger of disaster had to descend upon his business. He felt resentful that the strong room keeper had said business men were greedy. He had worked very hard to build up his business and was not in any manner dissatisfied with any of the people who were working for him. If he were forced to realize cash to pay that loan, he would have to curtail his operations.

    That meant he would have to offer some of his goods for sale at much lower prices, and that he would have to discharge some of his employees. The thought of having to tell them saddened him. Why, when the community was getting along so well, did it have to be disturbed by a “business depression”? The community had demonstrated its ability to produce food, clothing and shelter for all of the people—why did the money man now have to start disturbing that situation ? http://yamaguchy. netfirms. com/coogan_g/coogan_01. html (11 of 25)5. 4. 2006 9:08:12

    Gertrude Coogan, Money Creators, ch 1, 2, 3, 4, 5 He thought the matter over very carefully that night but could see no way out, excepting to cancel his orders for more raw material, and sell some of his goods at lower prices for quick raising of cash. The next day he notified his customers that they would have to pay him immediately. Each of them, of course, had to face the same situation that the factory owner faced. Each one in turn had to write to his customers and request the payment of accounts. Once set in motion the force was cumulative.

    Due to the sudden forced offering of goods, prices began to drop severely in all businesses. Alas ! Soon working men began to get slips in their Saturday night envelopes telling them that work had to stop. Meanwhile, prices continued to drop. The strong room keeper called in other borrowers. Some he ruthlessly told to pay their loans. Others he told he would have to raise the interest rates on their loans. Money was now “scarce” and in order to continue accommodating them, it would be necessary to increase the rate from 4% to 8%.

    They saw that prices had already fallen and knew they would have to sacrifice their inventories in order to obtain cash, so they agreed to pay the 8%. Collecting 8% meant that the strong room keeper could still, after squeezing his loans by 50%, enjoy the same income he was receiving when all of his promises-to-pay were outstanding. He kept up the process of calling loans, forcing business men to sell their inventories and discharge their employees, until prices had dropped to the point where some of the business men were not able to sell their inventories and realize sufficient money to meet their loans.

    These business men he called in and in a very sympathetic tone of voice explained to them that they were simply victims of “economic laws” and that “economic laws” could not be violated. The strong room keeper had “to safeguard the money of the community. ” Though he disliked to act, it would be necessary for him to foreclose. He thereupon took over their businesses. Of course, he shed a few tears and told the business men he really felt very sorry that such a situation arose, but that his first duty was to safeguard the money of the community and that the “laws” of economics simply could not be violated by mankind.

    This meant foreclosures. The business men had borrowed the banker’s loans of imaginary or “confidence” money, secretly manufactured, actually sheer counterfeit; and now because the volume had been contracted must repay the “loans” with real wealth. The business men thus had to turn over to the strong room keeper the results of many years of hard work. They had built their factories and stores over a period of years; they now had to turn them over to the keeper of the strong room and begin all over again, or try to find employment working for some one else.

    This process went on until the strong room owner had called in one-half of his promises-to-pay, and cancelled one-half of the money in the community. By simply “destroying” one-half of the fictitious money he had created he enriched himself by foreclosing on real wealth pledged against the loan of his fictitious money. Business men had pledged their real wealth (factories and properties) to obtain a loan of money which had nothing behind it except the money man’s purely imaginary “credit”—on which they had paid interest. THE COMMUNITY CALLS AN ECONOMIC CONFERENCE

    The community had changed from a happy prosperous one to a scene of discouragement, disillusionment and poverty. Many working men had been discharged; many business men had lost their businesses and their homes; many farmers had lost their farms. The school children were no longer well fed and clothed. The demands for charity were overwhelming. Dissatisfaction and crime in the community became a serious problem. The principal Christian clergyman in the town was a kindly, sympathetic gentleman. He wisely http://yamaguchy. netfirms. com/coogan_g/coogan_01. html (12 of 25)5. 4. 2006 9:08:12

    Gertrude Coogan, Money Creators, ch 1, 2, 3, 4, 5 suggested that a committee be appointed to discuss the plight of their community, and see if there

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