America's Financial Reckoning Day and a Geostrategic Outlook for the Future

THE FOLLOWING REPORT IS NOW AVAILABLE TO DOWNLOAD IN PDF FORMAT IF YOU GO TO OUR HOME PAGE ON THIS SITE. YOU CAN ALSO ORDER HARD COPIES OF THIS 20-PAGE SPECIAL REPORT WHICH IS AVAILABLE AT WWW.CHUCKCOPPES.COM. YOU CAN ALSO FORWARD THIS IDP SPECIAL REPORT TO YOUR FRIENDS BY CLICKING THE SMALL ENVELOPE IN THE UPPER RIGHT HAND CORNER ON THIS PAGE. YOUR SUBJECT LINE IS LIMITED TO A VERY BRIEF SENTENCE AND YOUR LINK WILL APPEAR FROM IDP CONSULTING GROUP WEBSITE.

IDP CONSULTING GROUP SPECIAL REPORT, JUNE 1, 2009

AMERICA’S FINANCIAL RECKONING DAY
AND A GEOSTRATEGIC OUTLOOK
FOR THE FUTURE

BY CHARLES H. COPPES, AUTHOR OF AMERICA’S FINANCIAL RECKONING DAY
“I am willing to know the whole truth; to know the worst, and to provide for it”
- Patrick Henry
Introduction

As we are all aware, our nation and financial institutions have been experiencing tremendous challenges in recent months and this contagion has spread around the globe. According to economist Henry Liu the equity market capitalization of all publicly-traded companies in the world lost half of their value in the final quarter of 2008 for a staggering loss of $30.9 trillion dollars! During this same period the U.S. experienced 6% negative growth and the NY stock exchange finished with a 40% decline wiping out all previous gains. How did all this happen? Pundits and politicians insist it was a lack of regulation or “just old-fashioned greed.” In his new book Meltdown author Thomas E. Woods, Jr. contends, “blaming the crisis on ‘greed’ is like blaming plane crashes on gravity.” He adds, “The current crisis was caused not by the free market but by the government’s intervention in the market.”[1] In this special report we will examine the root causes of our financial crisis and how government bailouts will only make things worse. This will include an overview of the Wall Street meltdown, the call for a global currency, a look at the new administration, civil unrest, and a geostrategic outlook for America as it relates to China, Russia, the Middle East and the future of the European Union and the Eurozone. This report will also serve as a companion to my own book mentioned above (AFRD) and will include frequent references along with various websites for your own research. This information is extremely urgent and you are free to make copies or download copies. I have also concluded with some ideas for contingency planning that you will want to share with your family and friends. Our day of reckoning is drawing near and you need to provide for it.

An Overview of America’s Financial Crisis

Almost 100 years ago Spanish philosopher George Santayana made the famous observation that “those who cannot remember the past are condemned to repeat it.” These same words are carved into the wall of the National Archives Building in Washington, DC. Unfortunately, they have not been inscribed on our hearts and we are apt to repeat the same folly, failures and blunders in successive generations. So to better appreciate our current situation it is necessary to consult the past and draw upon historical events. Our financial problems today are essentially rooted in a money problem, or the very nature of fractional reserve banking. In my book I have traced the origin of money and the development of modern banking, similar to British historian Niall Ferguson’s latest book The Ascent of Money. Today, parallels are being made to the Great Depression, but a more accurate comparison should be noted in the bank panics of 1873, 1884, 1893 and 1907 (AFRD, pp. 3-24). These bank panics were the result of over-leveraged loans and deposits to bank reserves, and in each case Wall Street bankers like J.P. Morgan attempted to consolidate more power into their financial empires.

The Bank Panic of 1907 is better known as the “Banker’s Panic” which lasted only a few weeks but its affects remain to this very day. In October of that year, Augustus Heinze, president of the Mercantile National Bank in New York, and his brother Otto attempted to corner the U.S. copper market. The Heinze brothers had a majority stake in United Copper and their scheme was to purchase the remaining shares to bid up the price and force short sellers of their stock to sell directly to them. Due to insufficient capital their bonanza of cheap stocks failed to materialize. Within a few days shares of United Copper skyrocketed and then collapsed, thus ruining the Heinze brothers. Otto’s brokerage firm, Gross & Kleeberg, went bankrupt and Augustus was promptly fired by his board of directors. Depositors at the Mercantile National Bank were uncertain of their exposure to this stock collapse and they rushed to withdraw their money. Other bankers with close ties to the Heinze brothers were Charles W. Morse, president of the National Bank of North America and New Amsterdam Bank, and Charles T. Barney, president of the Knickerbocker Trust Company. Both were forced to resign and soon their banks also suffered bank runs and the ensuing panic quickly spread to other banks in the New York area.

Important to note is that this panic was preceded by the great earthquake that devastated San Francisco in April 1906. This natural disaster had caused market volatility and sharp declines in the Dow Jones in addition to a flood of money that had left New York banks to aid in reconstruction. In this environment many banks and trust companies were vulnerable including the established Trust Company of America that was nearing total collapse. Coming to the rescue was J.P. Morgan & Company who persuaded other bankers including John D. Rockefeller to provide needed capital for the Trust Company of America. J.P. Morgan also persuaded the U.S. Secretary of the Treasury George Cortelyou to issue $150 million in low-interest bonds which the banks could use as collateral to create new money on the books. Finally, in an effort to avert a stock market crash Morgan arranged for several banks to provide the enormous sum of $23 million dollars to allow the New York Stock Exchange to continue operating. During this same period the bankers also worked hard to convince clergymen to assure their congregations that there was no reason for further panic (the equivalent of today’s mass media). Within a short period the financial crisis subsided but the mood remained tense on Wall Street.
 

Similar to previous bank panics, the Banker’s Panic of 1907 exposed the institutional weakness of fractional reserve banking even as it does today. When banks take in deposits for safekeeping they treat them as both a bank asset (to be loaned out with interest) and a liability (which is owed to the depositor). This form of double book entry creates a “dual claim” that dates back to the goldsmiths in Europe and is the pattern for our banking system today. With a typical reserve ratio of only 10% all banks are subject to a bank run if depositors start demanding their money. This little secret can be unsettling and it can cause embarrassment to bankers who are looked up to as pillars of high society. Instead of seeking genuine banking reform to promote sound fiduciary policies back in 1907 the bankers in New York sought to create a central bank similar to the Bank of England that was chartered in 1694. As Professor Murray Rothbard points out, “Very quickly after the panic [of 1907], banker and business opinion consolidated on behalf of a central bank, an institution that could regulate the economy and serve as a lender of last resort to bail banks out of trouble.”[2] This idea of a central bank that could serve as “the lender of last resort” is precisely what the bankers wanted.

In 1908, Congress took up the cause for banking reform under the leadership of Senator Nelson W. Aldrich (R-RI), head of the Senate Finance Committee and father-in-law of John D. Rockefeller, Jr. (who married his daughter Abby). In June of 1908, Congress passed the Aldrich-Vreeland Act, which authorized national banks to issue emergency “script” currency in the event of a bank run. Another provision of this Act that received very little attention was the creation of the National Monetary Commission (NMC) that was given two years to study and make proposals for comprehensive banking reform. Senator Aldrich was a close business associate of J.P. Morgan and he was determined that the NMC would represent the interests of the Morgan, Rockefeller, Kuhn, Loeb banking cartel on Wall Street that was collectively known as the “money trust.” These were the same forces that President Andrew Jackson had fought in his two terms and Abraham Lincoln later referred to as money powers that “…prey upon the nation in times of peace and conspires against it in times of adversity.” J.P. Morgan had come from his father’s banking firm J.S. Morgan & Company in London in 1864 and he was well acquainted with central bank operations in England. He had been instrumental during the bank panic of 1893 and was also an enthusiastic and powerful supporter for a central bank in America.

In late 1910 select members from the NMC staff conducted an ultra-secret meeting in order to work on the commission’s report and draft the Aldrich Bill that would later become the Federal Reserve Act. This meeting was held at the Jekyll Island Club on Jekyll Island, Georgia, which was an exclusive club for the wealthy co-owned by J.P. Morgan. Historians all agree that Paul M. Warburg (Kuhn, Loeb, Schiff) was the leading expert on the NMC staff. Warburg’s brother Max Warburg was the financial advisor to the German Kaiser and director of Germany’s own central bank known as the Reichsbank. “Because of this knowledge, Paul Warburg became the dominant and guiding mind throughout all the discussions,” writes G. Edward Griffin in his monumental book The Creature from Jekyll Island.[3] The primary goals of the Wall Street money trust were to assure their control of the new central bank, create an “elastic” currency through debt monetization and shift bank losses to the taxpayers. From 1911 to 1913 Congress conducted the infamous “Money Trust hearings” and the conspirators finally prevailed when the Federal Reserve Act was signed into law December 22, 1913. The new Governor of the Federal Reserve Bank of New York (our defacto central bank today) was Benjamin Strong from J.P. Morgan’s Bankers Trust Company and Paul Warburg was named as Vice-Governor (see above photos).

This bit of history is necessary to assign the proper blame for America’s financial reckoning day where it belongs (AFRD, pp. 25-52). There is no provision in the U.S. Constitution for a private banking cartel to act as the fiscal agent for the U.S. government. The Fed is made to sound “federal” but only Congress has authority “to coin money, regulate the value thereof…and fix the standard of weights and measures” (Art. 1, Sec. 8), and this authority lies with the U.S. Treasury. What we have is a form of modern “seigniorage” that was practiced by English lords [4]. By the late 18th Century the Bank of England had so bankrupted the British Empire that it led to excessive taxation of the colonies and this led to our American Revolution. By allowing the Fed to control our money supply and fund the expansion of the American Empire we are now assuring our own bankruptcy in the 21st Century! Thomas Jefferson foresaw this inherent danger and left us with these prophetic words:

If the American people ever allow the banks to control the issuance of their currency, first by inflation, and then by deflation, the banks and corporations that grow up around them will deprive the people of all property, until their children wake up homeless on the continent their fathers conquered….I sincerely believe the banking institutions having the issuing power of money, are more dangerous to liberty than standing armies.[5]