The Fed, and its partner in theft, the income tax, enabled politicians and their financial backers to ignore their warnings. Should we be surprised that many American war supporters made out like bandits? J. P. Morgan was one of those Americans who cleaned up handsomely from the war he professed to hate. As journalist H. L. Mencken noted a few years later, ‘The Government hospitals are now full of one-legged soldiers who gallantly protected [Morgan’s] investments then, and the public schools are full of boys who will protect his investments tomorrow.’
November 14, 2026
In an earlier article, a banker – government alliance created the Federal Reserve System to protect member banks from Panics brought on by bank counterfeiting.
(Continuing from The Flight of the Barbarous Relic. . . )
It was the Morgans and Rockefellers of Wall Street who turned to government to cage their banking competition, especially the growing challenge from non-national banks in the South and West, and came up with a plan for a central bank. It was the big bankers who took the lead in creating a system that would protect them from the hazards of bank counterfeiting and make them a monopoly issuer of bank notes. After the Act became law, it was Morgan bankers who occupied the seats of power in the new system, particularly at the Fed’s New York branch where Benjamin Strong, president of J. P. Morgan’s Bankers Trust Company, ran the money machine from the Fed’s inception in 1914 to his death in 1928.
The Fed became an indispensable instrument of profit and power. Beginning in 1914, it cut reserve requirements approximately in half, dropping the ratio from 21 percent to 11 percent, roughly doubling the money supply and permitting both financial aid to the Allies and eventual American entry into the European war. Under the impetus of the war, the Fed became the sole fiscal agent of the Treasury, securing the deposit of all Treasury funds at the Federal Reserve. The Morgans, exploiting its ties with England and its position of power at the New York Fed, became the sole purchasing agent in the U.S. for war materials to be shipped to Britain and France. The Morgans also became the sole underwriter for British and French bonds floated in the U.S. to pay for armaments and other goods the Allies wanted.
Government, meanwhile, used the war as an excuse to create what one economic historian has aptly called a ‘garrison economy.’ Among other things government took over railroads and communications industries, seized hundreds of manufacturing plants, fixed prices, intervened in hundreds of labor disputes, raised taxes, and conscripted a million men for military service so they could join the bloodbath over there, in the European trenches. The Supreme Court, the alleged guardian of the Constitution – which itself is our alleged guardian against an aggressive government – ruled most of the war interventions constitutional, including the draft. Merely questioning the constitutionality of the draft could get you thrown in jail. Thus, the federal reserve – a government-protected, government-serving, elaborately-cloaked counterfeiting cartel – played a crucial role in converting a peaceful America into a bellicose, interventionist state.
All the belligerents in the war went off the gold standard and resorted to inflation – counterfeiting – to fund the carnage. Taxes were raised, but only so far. Governments that attempt to fund wars by raising taxes often find themselves facing a revolt on the home front. Wars require massive inflation, and the institution responsible for inflation is the government’s central bank. Without government control of the monetary system through its central bank there would’ve been no war, or certainly not one nearly as long or destructive.
