Gary North Doesn’t Speak for God

July 13, 2012 § Leave a comment

by Dick Eastman

North: Answering Major Douglas’s crackpottery is easy. I did it in 1993 in my book, Salvation Through Inflation. He was convinced that markets needed fiat money produced by the government in order to clear. He argued that when businesses repay loans after production, this destroys money. Then consumers cannot afford to buy the output.

 Eastman: I am no crackpot yet I agree with the Douglas Social Credit proposition that in an economy where all money is created by loans and where all loans are paid back principal plus interest, that there will be chronic deflation.  There will not be enough distributed income coming around for producing firms to cover factor costs plus repayment of principal and interest.  This money leakage to the financial sector in excess of injections will eventually eat up the entire real economy.  

North: It did not occur to him that the banks immediately lend out the paid off loans. That is how they stay in business.
 Eastman: Unfortunately it does not occur to bankers either.   The deflation caused by payments to lenders in excess of loans results in deflation which means a fall in demand  — a depression.  Bankers do not invest in depressions.  Not only that, since the bankers and the bond holders are very often the same group of people, there is incentive for the bankers who are creditors to want the deflation to occur because that makes them wealthier without having earned it.  Their system tends to deflation and the bankers like it that way because it makes all nominal payments owed to them in the future worth more in real terms.

North:  This error is found in most under-consumption theories. There is always a money bleed-off factor. Old money goes there to die, like the elephant burial grounds. The consumers cannot afford to buy.
Eastman:   I don’t see how anyone can deny that the American people are suffering from under-consumption.  I don’t see how one can look at all of the boarded up stores and offices in this country and deny that these businesses were hit by under-consumption that they did not figure out when they took out their business loans.  And with the bailouts and with QE1 one and QE2 I don’t see one penny of that money going to American entrepreneurs to build American productive capacity that will increase the real goods and services output of this country.

After all, Mr. North, with not a penny going for domestic American owned production to make a bigger economic pie — where is the economic justification for this economy doing so much borrowing.  The household sector and the government sector are crushed in debt to international finance yet infrastructure has crumbled without being replaced, our factories are worn out with losses not allowing replacement.  This is not because we were reckless in borrowing from Rothschild.  This is because Rothschild, through his agents since Hamilton, has placed a blood-sucking debt-system on us that ensures economic loss and ensures that creditors will profit from that loss.  Profit how?  When farms and homes and businesses are foreclosed the creditors take possession.  The Rothschild interests own the land and factories of this nation.  That is what multinational corporations are  — the takings from hundreds of thousands of businesses that failed because  our money is loans and all loans must be repaid interest plus principal.

North: Every variation of this theory is nuts, with one exception: when bank depositors withdraw currency and do not spend it, thereby not allowing sellers to deposit the spent currency in their banks. When there is a run on a bank in a fractional reserve system, there is money heaven. The inverted pyramid of fiat money shrinks, just as it expanded before. But this has nothing to do with paying off loans.

 Eastman:   You are saying that runs on banks are caused by depositors withdrawing their money and holding it?  Is that how you think monetary contractions get started?  In October 1929 on each of the three “black days” the stock market crash was precipitated by margin calls made by Wall Street financiers.  Men like Baruch and Percy Rockefeller had already shorted the market.  Churchill was actually on the floor of the exchange to see it happen.  When the loan calls were made people began to sell.  This forced banks to call in loans.  On each of the three days when the ticker got three hours behind, the galleries were cleared and the big financiers jumped in and began buying while people,  not seeing the buy signals on the ticker, continued to sell.  That is typical of how the Rothschild gang (Morgan, Rockefeller, Goldman-Sachs etc.) contract the money supply.  And then with that initial reduction of loan-based money, there is then the money-multiplier effect that you refer to as money withdrawn from banks results in reduced reserves requiring more loan calls and thus less money.  After the 1929 crash money in circulation contracted by one third.    The creditor class wants to get rich by deflation that makes dollars they are owed more valuable. They want to take control of assets  — our homes become their rental properties, our bankrupted businesses are allowed to disappear to give them more monopoly concentration for their corporations.  And so on.

It has always been the policy of the Rothschild interests in control of American banking to first get the people in debt with a short season of easy credit and then to increase the burden of that debt halting the rate of loans and allowing deflation to take its course toward a new depression — almost always hurrying the process with coordinated loan calls and reluctance to make new loans.

Perhaps you are aware of the document known as the Hazard Circular which, in July of 1862, international lenders used to sell war bonds to Northern investors in an effort to debt-fund the Civil War to forestall Lincoln from issuing debt free Greenbacks.  Here is a portion of it:

“Slavery is likely to be abolished by the war power, and all chattel slavery abolished.  This I and my friends are in favor of, for slavery is but the owning of labor and carries with it the care of the laborers, while the European plan, led on by England, is that capital shall control labor by controlling wages.

This can be done by controlling the money.  The great debt that capitalists will see to that is made out of the war must be used as a means to control the volume of money.  To accomplish this, the bonds must be used as a banking basis.  We are now waiting for the secretary of the treasury to make this recommendation to Congress.  It will not do to allow the greenback, as it is called, to circulate as money any length of time, as we cannot control that.  But we can control the bonds and through the bonds the bank issues.”

But Lincoln did get the Greenback approved in 1862, but that did not stop war financier Jay Cook from selling Congress on the present debt-financing system we have today.  Cook told Congress:

“We lay down the proposition that our national debt made permanent and rightly managed will be a national blessing.  The funded debt of the United States is the addition of $3,000,000,000 added to the available actual capital.  To pay this debt would be to extinguish this capital and lose this wealth.”

Clearly Cook was of the Gary North school.  While I would say that Cook is mistaking debt instruments for Real Wealth — as if a million dollars of wealth is created between two men when one hands the other an IOU of a million dollars.  Listen to North attack the concept that there is a distinction between finance credit and Real Credit:

North:  Whenever you see the word Real capitalized, followed by a noun — also capitalized — be on the alert: a crackpot theory is close at hand.

Eastman:  On the contrary. Let me quote at length a great student of economics that Mr. North does not like, Gertrude Coogan:

�Imagine the deception and audacity of Mr. Cooke.  Wealth is a physical thing — resources, houses, farms, etc.  He tried to tell the American people and did make some of them believe that debts of the taxpayers (government bonds) are wealth.  They are not.  Mr. Cook received $25,000 per year for repeating the lie and making it stick. . . .

“The ‘National’ Banking act was enacted on February 25, 1863.  It was then and is now known to be outrageous.  The act was misnamed ‘National’ to deceive the people.  It was national only to the extent of using the nation’s money issuance powers dishonestly.  It gave national banks the power to issue the nation’s currency.  National banks under that act have power to issue currency (paper money) by simply depositing certain issues of government bonds with the United States Treasury and obtaining currency.

Note: Today this is called open market operations or “Quantitative Easing”  only with the Federal Reserve replacing the Treasury.] e Therefore, the privately owned national banks collect interest on bonds deposited with the Treasury but they pay not interest for the currency which is released to them.  They keep only 5% gold certificate reserve with the Treasury to take care of whatever currency might be presented for payment at the Treasury.  Think this fallacious proposition through!  Government bonds are taxpayers’ promises-to-pay, secured by a first lean on all physical property within the nation and a first lean on national income, because Congress has the power to tax.  These fully secured interest-bearing taxpayers’ promises-to-pay are created by the Government and exchanged for privately-owned banks’ promises-to-pay which are unsecured by anything real.  These unsecured promises to pay are called money.   Imagine a banking system which permits taxpayers’ secured promises-to-pay to be exchanged for private individuals’ unsecured promises-to-pay.”

It was reformer and newspaper editor Horace Greeley who, in 1872,  said of the National Bank Act:

“We have stricken the shackles from four million human beings and brought all laborers to a common level, not so much by elevation of the former slaves as by practically reducing the whole working population, white and black, to a condition of serfdom.  While boasting of our noble deeds, we are careful to conceal the ugly fact that by our iniquitous money system we have nationalized a system of oppression which, though more refined, is not less cruel than the old system of chattel slavery.”

This was exactly what  Otto von Bismarck said following the Civil War:

“I fear that foreign bankers with their craftiness and tortuous tricks will entirely control the exuberant riches of America, and use it to systematically corrupt modern civilization.  They will not hesitate to plunge the whole of Christendom into wars and chaos in order that the earth should become their inheritance.”

So not only is under-consumption due to deflation the real cause of depressions, but the chronic problem is by design and to the benefit of international creditors who profit by the deflationary propensities of the system.  What von Mises called the “evenly rotating economy” under the gold system and what others call equilibrium under Say’s law – is a fiction.  Economies tend to decay because principal plus interest is greater than the amount of loans and because creditors profit when deflation follows naturally after any credit expansion.

The von Mises ‘mal-investment” theory of depressions is wrong.  Depressions are caused by deflation and deflation is caused by the financial sector taking away more purchasing power than it contributes.

 North: Douglas offered another theory . . .  the A + B theorem.  . . .  He argued that there is a break in the flow of payments. A factory pays Group A wages and dividends. It pays Group B for raw materials, to cover bank fees, and other “external” expenses. His theorem assumed that payments to Group B do not constitute purchasing power for the output of the factory. The money ceases to provide consumer demand. So, the state must intervene and create money. This is another variation of his broken flow of funds argument. Whenever you see any variation of the broken flow of funds argument, you are in the presence of crackpottery. It does not matter how many equations or graphs the author provides. He is an economic crackpot.

Eastman:  Be careful, brother North, that ye do not judge as marred what the Lord God hath made good.  I am sure you know the verses from Jeremiah 18:   “Then I went down to the potter’s house, and, behold, he wrought a work on the wheels.  And the vessel that he made of clay was marred in the hand of the potter: so he made it again another vessel, as seemed good to the potter to make it.  Then the word of the Jehovah came to me, saying,  O house of Israel, cannot I do with you as this potter?  saith Jehovah.  Behold, as the clay is in the potter’s hand, so are ye in mine hand, O house of Israel.  At what instant I shall speak concerning a nation, and concerning a kingdom, to pluck up, and to pull down, and to destroy it;   If that nation, against whom I have pronounced, turn from their evil, I will repent of the evil that I thought to do unto them.”

The A + B theorem is correct.  Labor produces and earns an income called wages.  The entrepreneur earns his profit (or loss).  The real resource owner gets his rent and factor payments. All those total up to A.  And the financial sector must be repaid the amount of the loan that enabled factors to be paid before the product is sold.  And all of that is “A.”  But then there is also compound interest on the loan.  That is B.  Who gets “B”?  And more to the point, does the person who gets “B” spend “B” on the output produced?

Now Gary North will tell you that the “B” (interest) going to the financial sector will get back into circulation in the form of new business loans.


Interest is compounded, it grows geometrically.  Does investment in America today — if any — profit as fast as interest compounds?  Does investment in America result in more economic pie sufficient that when the added economic pie is sold that the new revenue will grow as interest on debt grows?    And if more loans are made being paid back with more interest, doesn’t that mean that investment will have to grow at the expense of consumption since we know that production of economic pie does not grow at the rate that compound interest grows?

But let’s make it simple.  The financial sector who are creditors are making more wealth for themselves by fostering deflation by not investing than they do by fostering production through investment.  They increase the value of their bonds by increasing the purchasing power of each dollar they will be paid in the future and, on top of that, they get ownership of all of the collateral and equity of the loans they made that have been defaulted on by borrowers caught in the deflation.

I’ve got some diagrams showing how this works:

This Rebuttal against Mr. North was created for forums that have limitations on the size of emails due to the fact that many forum participants have dial up modems.  If the reader is interested in viewing the charts included in the original presentation, email Daniel Krynicki or Richard Eastman for these charts at or .

Here are two more that show where B goes and where bailout money goes and where Quantitative Easing liquidity goes:

 Why the bailouts and quantative easing do nothing to end the domestic economy depression:
 The upper loop is International Finance while the lower loop is the domestic economy.  Austrian economists are anti-Nationalists.  They don’t care whether or not the wages of American labor get equalized with the workers of China —  just as Horace Greeley talked about the American worker being taken down to the poverty of the ante bellum chattel slaves.

North: This is another variation of his broken flow of funds argument. Whenever you see any variation of the broken flow of funds argument, you are in the presence of crackpottery. It does not matter how many equations or graphs the author provides. He is an economic crackpot.

The supreme error in Social Credit is the error in all scenarios of price deflation, other than one that relies on the extinguishing of money due to a reversal of fractional reserves. They all fail to follow the money. They speak of saving as if it were a system for hiding paper currency under a mattress. They refuse to answer this crucial question: What does the bank do with the money that a consumer deposits instead of spending? Put another way: What analytical or conceptual difference does it make whether a saver deposits a dollar his bank, which the bank will lend, or whether he spends it, enabling the seller to deposit the dollar in his bank, which his bank will lend.

Eastman: I’m glad you asked that.  You yourself (above) said that deflation occurs when people take their savings out of banks, triggering what you call “reversal of fractional reserves” and what economists call “the money multiplier” — which can multiply either negative numbers or positive ones.  So when a loan is called in and no new loan is made to replace what has been withdrawn there will be a multiplier effect as banks experience a reduction of reserves forcing ultimately a large multiple of the amount withdrawn to disappear from circulation in the contraction.

But your question is, where does the money go?  And my answer is — it is salted away anywhere outside the domestic economy.  It is invested in another country or put in a Swiss bank account or used to pay mercenaries in some war for mercantile advantage.  (see the two diagrams above)

North: Anyone with even a smattering of classical economics can refute the utterly nonsensical theories of C. H. Douglas. Nobody bothered. My book, published in 1993, was the first book-length refutation, as far as I can tell. The only reason why I wrote it was to answer a Social Credit promoter who said that I was intellectually incapable of refuting him or Douglas. It took me maybe three weeks to write that book in my spare time. Maybe it took a month. . . . There is not one argument in Douglas’ writings — and I have read all of his books — that is an accurate description of how the market works, banking works, or entrepreneurs work.

Eastman:  Some people read a book and miss the whole point the author was trying to make .. especially when they start out to prove the author is a crackpot so they can dismiss an annoying critic.   Let me show you what you missed with two diagrams and then let me provide the most thoroughly confirmation of my thesis that deflation is the objective of those behind the usury and hard money system.

First, because loans are less than what borrowers end up paying to the financial sector — the flow to the financial sector that is drained from the circular flow between the  household and business sectors is bigger flow of loans adding to the flow  — resulting in deflation that throws all sectors out of balance.

Now here is what you neglect to mention — Douglas’s solution to the undeniable problem is what you deny anyway.  The chronic shortage of purchasing power due to the drain of usury is compensated by a fiat money – paper or electronic non-hard out-of-thin-air inflation currency that is put in the hands of each household in order that increased household demand will be sufficient to cover costs of production.  This way of introducing money I say will enable us to do away with the fractional reserve banking system while avoiding the deflationary disaster that would result from the killing of the money multiplier.  Social credit can replace the purchasing power that the money multiplier was supposed to provide.   With Social Credit we can have an economy like this:

North:  Keynesians are deflationists, meaning “the free market will produce permanent depression and deflation apart from government spending and central bank inflation.” They believe that, without government spending, huge deficits, and central bank inflation, the economy will go into a deflationary spiral and not recover. They invoke the paradox of thrift and the liquidity trap as reasons. Both rely on the same idea: “money saved in a bank is not simultaneously money lent by the bank to increase production or consumption.” It is a fallacious idea. It is “currency under the mattress” economics. It is “break in the flow of funds” economics. It is crackpottery.

Eastman: Keynes was an under-consumptionist and under-consumptionists are inflationists, in that they seek inflation to get products sold that deflation is not permitting to be sold.  And yes, without social credit the usury market  — which is a debt slavery market and not a “free market” by the way  — only Social Credit can give you a market economy and general prosperity and freedom  — as I was saying, without Social Credit the usury market that Mr. North is defending will produce deflation and the transfer of pre-existing asset wealth from the worker and entrepreneur to the international financier.  I am an inflationist and I have analyzed social credit and find it the right answer for the American people today.  I find the Austrian economics of Gary North, Ron Paul and Lew Rockwell to be deadly poison, quack medicine, worse than the medieval practice of doctors bleeding a medical patient, because with Austrian economics the banking interests who sent von Mises to the US know very well that gold standards and usury kill the patient  — or make him a slave on land he used to call his own.

North:  Keynesian arguments rely ultimately on the monetary theories of C. H. Douglas and Silvio Gesell. These two crackpots provided the conceptual framework for Keynesian economics. Keynes’ disciples, deservedly embarrassed by this inconvenient fact, have done their best to conceal it for 70 years.  Whenever you hear about the need for a government stimulus spending bill, think “crackpot economics.” Whenever you hear that deficits don’t matter, think “crackpot economics.” …

Eastman:   With social credit government does not run deficits and neither do households.  All of that interest owed so that we can have money is totally unnecessary.  Social Credit simply puts the money in people’s hands and they go out and spend it where it exchanges hands with a given velocity more or less in line with the famous equation of exchange  MV=PQ , but without the money multiplier that obtains with fractional reserve banking.    Social Credit does not say:  “Deficits don’t matter.”  Social Credit does say:  “Deficits are unnecessary.  Deficits should never be allowed to happen.  Deficits — a government and public hopelessly drowning in debt — is unnecessary and in fact the working of a conspiracy of bankers who use the flaws of the system to gather the worlds wealth to themselves leaving the rest of us debt slaves without land or capital or health or any prospect for future happiness.  And the gold standard only makes it worse.   Rothschild monopolizes gold and sets the price.  He creates panics so that people rush to buy gold when they should be investing in real tools and seed and provision  — you will note that the Rothschilds are selling right now at the top to all of the poor ignorant people who listen to the Austrian economists preaching panic.  Why would anyone existing now on borrowed paper money want to switch to a deflationary gold system forcing him to work all the more for the dollars he pays in interest etc.

So here is the conclusion — the proof of all I say in one perfect historical example.  This is taken from C. R. Dickey, Is Economic Ruin Inevitable; A Concise History of Banking With Operational Mechanics of Fractional Reserve Banking (Merrimac, MA:  Destiny Publishers, 1949) reprinted by my friend Daniel S. Krynicki.

Rothschild Power and the Uses of Deflation

The Truth about the Panics of 1873 and 1893

Now that we have seen how the system of international control was firmly established in American finance and industry, let us watch the steps by which it maneuvered the Panic of 1873.

Originally, in England, both gold and silver were equally important parts of the money base.  In the United States, from the adoption of the Constitution in 1789 until 1873, both gold and silver served equally well as a money base.  The combination of the two metals worked well for the people as a whole, but it did not suit the purpose of the gold brokers.  Mayer Amschel (Rothschild) had taught his five sons to induce all countries to adopt gold as a single basis for money.  England capitulated and demonetized silver in 1818.  But the United States was harder to convince, having within its borders some of the largest silver deposits in the world.

Nevertheless, through conniving and bribery, foreign bankers finally accomplished their purpose.  In 1872, Ernest Seyd came from London, bringing with him the tidy sum of $500,000.  He came as a representative of “the governors of the Bank of England”, for the purpose of bribing American Congressmen to pass a law demonetizing silver.  [i.e. deflation].    He was instructed to call upon the “Governors” for any amount of money required to get the job done.  His success was stated in The Banker’s Magazine, August 1873, as follows:

“In 1872, silver being demonetized in France, England, and Holland, capital of $500,000 was raised and Ernest Seyd, of London, was sent to this country with this fund, as agent of foreign bondholders and capitalists, to effect the same object here, which was accomplished.”

It is interesting to note how cleverly the sordid transaction was further disguised by this entry in the Congressional Record of April 1872, page 3032:

“Ernest Seyd, of London, a distinguished wirter and bullionist, who is now here, has given great attention to the subject of mint and coinage.  After having examined the first draft of the bill, he made sensible suggestions which the committee adopted and embodied in the bill.”

The vicious law was passed — thanks to Mr. Seyd’s “sensible” suggestions.  Silver was demonetized.  And the result was such an immediate drastic curtailment in the volume of money that the nation was thrown into a panic and a terrible depression that lasted for five years.  Regarding the Panic of 1873, Senator Ferry of Michigan said:

“Millions of people were reduced from good circumstances to penury, or covered with debt, beneath which burden their backs must bend until it is unloaded at the grave, where an innocent posterity must take it up and bear it on.”

President Grant, before his death, admitted that he had been misled in allowing a silver demonetization bill to become law.

By passing the Bland-Allison Act of 1878, Congress partially restored the monetary use of silver.  Again the people became more prosperous, whereupon conspirators began to set the stage for the Panic of 1893.  In the spring of 1891, while Benjamin Harrison was president, Internationalists prepared and circulated among bankers and other agents the following revealing “confidential” circular:

“We authorize our loan agents in the western States that loan our funds on real estate to make them fall due on September 1, 1894, and at no time thereafter.  On September 1, 1894 we will not renew our loans under any consideration.  On September 1st we will demand our money.  We will foreclose and become mortgagees in possession.  We can take two-thirds of the farms west of the Mississippi, and thousands of them east of the great Mississippi as well, at our own price. . . .  We may as well own three-fourths of the farms of the West and the money of the country.  Then the farmers will become tenants as in England.  After September 1st, the interest we receive on coupons will be accumulated.  We will not lend any of our funds after that date, as we can make more money by withholding our interest income.”

It is not necessary to comment on this diabolical plot, except to call attention first to the due date of the loans — September 1st, 1894 — and to the fact that none of these loans were to be renewed; and, second, to the fact that the particular aim of this conspiracy was to ruin the well-to-do American farmers.  Loans made in 1891 were due in 1894.  The planned panic was effected in 1893.  The fictitious “scarcity” of money, resulting from the premeditated withdrawal, of credit by the international bankers, left most of the borrowers unable to pay their loans in September 1894.  Then came the predicted foreclosures and sudden poverty, which many living persons experienced again as they once did in the bitter hardships of their childhood days.

No depression has ever ended without inflation of the currency.  All major depressions of American history have resulted from deliberate policies of deflation in the interests of international bankers.

It is Mr. North who is the Deflationist, the apologist for deflation.

I have a news flash for you.  The Federal Reserve has served as in instrument of theft, not usually through inflation, but through deflation.

Let me seal this point with one last quote from Ms. Dickey’s book:

“World War I began in August of 1914, after the passage of the Federal Reserve Act in December 1913.  Soon the United States was involved in financing war supplies for the allies, and later for our own vast Army and Navy.

“How did we finance the purchase of those gigantic amounts of perishable goods which were destroyed in the conduct of the World War?  We financed them by allowing the Federal Reserve System (a privately owned and controlled central banking institution) to create its own private promises-to-pay and our national Government borrowed these privately-owned banks’ promises-to-pay ….

“The United States Government printed Government bonds which were signed by the Secretary of the Treasury.  These Government bonds are taxpayers’ promises-to-pay.  They are secured by mortgage on all national income, due to the fact that Congress has the power to levy taxes.  The member banks of the Federal Reserve System took these interest-bearing Government bonds (‘taxpayers’ promises-to-pay) — in other words, the privately owned Federal Reserve Banks created deposits payable to the United States Government.  The Federal Reserve Banks turned over to the United States Treasury a 5% reserve of real money issued to them in exchange for their private promises-to-pay (which they called money and which was spent by the United States Government).  These manufactured deposits became immediately available for checking purposes by the United States Government.  This was credit, or bank deposit inflation, the most dangerous kind possible, because it could be collapsed at will by secret private interests; which was done in 1920 when, suddenly, the “bottom fell out’ of our economic structure.  (Money Creators, pp 137-138)

“Let us now see how this was done.  On May 18, 1920 a secret bankers’ meeting was held in Washington D.C.  According to the published proceedings of this meeting, it was held in the name of the Federal Board, the Federal Advisory Council and the Class “A” Directors of the Federal Reserve Banks.  On the recommendation of “the Orderly Deflation Committee of the American Bankers Association,” a secret resolution was passed declaring for the contraction of money and credit.  Presumably the American Bankers Association recommended the resolution.

“An account of this meeting is contained in Volume 64, Part 5 of the 67th Congress Fourth Session; and in the Congressional Record, page 4858, Proceedings of February 28, 1923.  The names of those attending the meeting and their statements, can be obtained by writing the Superintendent of Documents, Washington D. C., and requesting Document No. 310 of the 67th Congress, Fourth Session.  However, as to the names mentioned in the Document, and the purpose of the secret resolution, it is well to remember the following statements from the Hon. Finly H. Gray’s report of this same meeting:

“The manipulating financiers and bankers, the masterminds of frenzied finance, engineering this gigantic secret movement, were not there, present and in person, but were pulling the wires, directing and prompting their tools, puppets and cats-paws from afar. . . .

“Mr. John Skelton Williams, Comptroller of the Currency, when this contraction of money was proposed, explained his efforts to stop the resolution being drawn.  In relating his efforts to the late John A. Simpson, he said: “I told the other members of the board, Do you know that this will break lots of little country banks?  They cold-bloodedly answered me, they ought to break — there were too many of them.  I then told them, don’t you know it’s going to ruin lots of farmers, and they cold-bloodedly replied to me, they ought to be ruined — they are getting so prosperous they will not work.  (Congressional Record, May 2, 1933.)

“Thus once more hard-working Americans were sold down the river.  Federal Reserve Banks, ‘under order of the Federal Reserve Board, pursuant to the secret resolution of May 18, 1920, without notice or warning, began to raise the rediscount rate from 2% to 5% , to 7%, to 8%, to 9% and until, for some farm banks, the rates were much higher’.  The results of this highhanded manipulation through the Federal Reserve System are ably stated in a few paragraphs from Money Creators:

“Simultaneously with this drastic increase in the rates, the Central Reserve Banks began selling Government bonds.  This selling continued until the price of ‘Liberty’ bonds dropped to 80.  The people who remember their own efforts to get anything like the price they paid for Liberty Bonds which they had to sell to live, will recall the type of purchasers who opened over-the-counter places in which these bonds were bought at bargain levels.  Had these bond buyers been particularly noted for the patriotism during the war?

“Falling bond prices decreased the ‘reserves’ of the community banks.  Decreasing reserves made it imperative that the community banks call in their local loans and force all borrowers to pay.  This brought a terrific liquidation of all agricultural products.  Almost in the twinkling of an eye, agricultural prices tumbled to ruinously low levels. . . .  This was premeditated: the farmer had to be ruined and kept ruined if Americans were to be finally subjected.

“Rural banks could accept farmers’ deposits, but could not loan farmers’ money to farmers; such loans were ‘unsound’ by decree of the Federal Reserve dictators.  Thus, the sluices were prepared for draining the rural money to industrial centers, and thus, via speculation, into the hands of the Internationalists.  On this sudden fall of the price levels, the confiding and unsuspecting farmers and other citizens of the agricultural districts saw their property, crops, produce sinking in a vortex of falling values, forcing down and destroying their buying power, their interest, debt and mortgage paying power ..  This destructive policy was pursued intentionally.  It was not an experiment.  Hon Finly Gray said they knew exactly what the result would be….

“It is interesting to note that at the time of the agricultural collapse in the United States, some in charge of the destructive policies sent their paid agents into the agricultural states to misinform and mislead farmers.  [Modern day Ron Pauls, Gerald Celentes, Glenn Becks, Gary Norths?]  The purpose was to promote dissension and radicalism.  Those who instigated these movements were paid agents of the very ones who were responsible for placing the terrible economic pressure on farmers.  Their object was to make the American Farmer lose faith in his own institutions and innocently become a party to the destruction of his own country.”  (pp. 62-64)

Now that farmers could be kept paralyzed with agricultural prices below the cost of production, plans were laid for another upward swing in the business cycle, which were to end this time in the crash of 1929.  The dizzy spiral — aimed especially at businessmen, investors, and industrialists –started in 1923, when the United States began making irresponsible foreign loans to the countries of Europe and South America.  “Many of these loans,” says an informed analyst, “were for fantastic purposes and borrowers had no intention of ever paying them.”

Then in 1927, Montagu Norman of the Rothschild-controlled Bank of England came to New York for the purpose of persuading the Federal Reserve Board to reduce the rediscount rate.  This reduction was opposed by the eleven Federal Reserve Banks outside New York City; nevertheless, they were ordered to lower their rediscount rates, and begin buying additional Government bonds [Quantitative Easing].  The purpose for this move was to build up huge reserves in the city banks with which to float the frenzied credit inflation and stock market speculation of 1928-29.”  [See my comment above on how this primed trap was set off.  — DE]

Well, you see the point.  Deflation happens for reasons other than people all withdrawing their savings and not spending them.  Gary North has missed the boat.  He does not see that Douglas was right that the domestic economy does leak purchasing power to the financial sector which then sends it abroad.  He does not see that the system tends to deflation rather than to clearing markets as the false-law of Say claims.   He does not see that deflation causes depressions, and that conspiracy rather than impersonal market forces and a “trade cycle”  bring the nation to ruin again and again.

I hope Mr. North will respond to this challenge to his views.  Crackpots don’t merit a debate, but are Social Crediters really crackpots?  I think Mr. North has failed to make the case that they are.

What is Social Credit? 

other postings touching on North’s Book

Recently, Gary North wrote a 38 Page essay called “Gertrude Coogan’s Bluff”.  
I read it and I read Gertrude Coogan’s “Money Creators”.  Ms Coogan was 
keenly aware of the boom and bust cycles caused by manipulations of 
high-finance from the international banking cartels.  Her dissertation was 
thorough.  In 344 pages she covered the mechanics of Fractional Reserve 
Banking and precisely how they use this power to control the economy.  
She also presented historical data in a final chapter.  If one would read Mr. 
North’s final page, he would understand that nothing Ms Coogan wrote in 
her bool has any value at all.  North’s essay is nothing but a hatchet job.  
This is the school of thought that Ron Paul subscribes to, all criticism with 
no answers.  Ms Coogan provides one possible solution.  Others suggest 
several more.  Anyone who wants to learn more should start paying attention 
to Richard Eastman’s posts. 

Daniel S. Krynicki

St. Clair Shores, Michigan  


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