There is no need to describe what the Great Depression was. Businesses laid off workers and cut wages, consumer demand fell, and tens of thousands of companies went bankrupt. Tens of millions of people were left without work and livelihoods, up to seven million people died of hunger.
On the lands of the North American colonies of Great Britain, even after they gained independence, there was financial freedom for a long time. States, municipalities, private banks, various companies and individuals issued their money. There was no central bank.
Dollars and bullets
Only two times, in 1791 and in 1816, were central banks established with a 20-year license. Both attempts have failed. Banks worked in the personal interests of the bosses, not in the interests of the country, and even tried to blackmail governments.
President Andrew Jackson refused to deal with the central bank. When he paid off the last part of the national debt in 1835, a certain Lawrence shot him with two pistols. Both, however, misfired.
And President Lincoln was still killed. He aroused the hatred of bankers by the fact that in 1863, refusing to take loans from the Rothschild Bank, he introduced interest-free dollars in the country, and a year later signed a law according to which the central bank was not created, and the state finally took over the issue of paper money.
James Garfield was elected president in March 1881. He showed reluctance to create a Central Bank and two weeks later was shot at a train station in Washington.
In the twentieth century, influential banking groups did push through the creation of a Central Bank in America. In order not to tease opponents of the idea, they came up with a neutral name: the Federal Reserve System (FRS). On December 23, 1913 (before Christmas, when people's attention was weakened), the Federal Reserve Act managed to push through the US Congress.
President Woodrow Wilson, who signed the law, later said: "Our credit system is concentrated in private hands … We have been terribly governed, one of the most controlled and suppressed governments in the civilized world."
By this time, the planetary financial center had long since settled in London. The rapid growth of the economies of Germany and North America has turned them into contenders for leading positions. It was profitable for New York to knock Great Britain and a possible competitor in the struggle for leadership - Germany.
In general, the First World War took place, Germany lost, American capitalism was enriched by military supplies, and not only the pound sterling, but also the dollar became the reserve currency for all countries.
On the eve of the collapse
In 1929, the world's financial center moved from London to New York. And in the same year in the United States began the most severe crisis in history. The Great Depression.
Shortly before the start of the events, through the efforts of the Fed, the amount of money in circulation increased significantly. The economic growth was very serious, the people's standard of living was improving. But the bulk of all loans ended up in the securities market!
A madness similar to the "gold rush" began in society. But if, in the battle for gold, hundreds of thousands of people rushed over the distant lands to wash the golden sand, then in the exchange game there was no need to rush anywhere. Out of 120 million Americans, it was estimated that at least 30 million were involved in the game, and 1.5 million had accounts with brokerage firms. The debt of the players who collected credits grew extremely rapidly.
It was a typical speculative pyramid scheme. In such cases, all the "foam" is removed by the organizers of the case, and ordinary participants, if they are lucky, at least do not burn out. But in this case, it turned out differently.
On October 19, 1929, the leading American economist Irving Fisher wrote: "The country is marching on the high plateau of prosperity." That is, according to the calculations of one of the brightest American economists, there was no reason for the collapse.
A few days later, the stock market collapsed, and with it the authority of an outstanding economist collapsed.
Here's what happened: New York bankers, as if on command (or perhaps on command), began to massively withdraw margin loans. There is a subtlety in this type of loans: the broker can demand payment of the debt at any time, and it must be returned within 24 hours. But since brokers make money on the issuance of loans, such requirements were rarely and separately put forward.
The devil's joke is that on October 24, 1929, New York brokers demanded massive repayment of loans. Clients rushed to sell shares, which caused a collapse in the stock market, and the Fed, instead of fixing the situation by increasing the monetary base, squeezed it. Within a few days, most securities and real estate depreciated, more than a third of all banks went bankrupt.
Then the crisis covered all the countries of the Old World.
The crisis did not affect the Soviet Union, since there was no loan capital, finances were arranged completely differently than in the USA or Western Europe.
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Why and who?
To understand who “ate” the well-being of the majority of the population in those years, that is, where did the money go, you need to go 90 years into the future, in the days of the financial crisis that began in 2008. So, 2012, the crisis has been going on for several years. Economic growth is minimal, an army of the poor is growing everywhere. But we read the newspapers: “Over the past year, many millionaires have lost part of their fortune as a result of economic shocks, while billionaires, despite the crisis, have become even richer,” follows from the report of the research company Wealth-X. Over the year, the number of billionaires has grown by 9.4%, and their wealth has increased by 14%."
“… In the US, the number of billionaires has increased by 25, or 5.5%, and their combined wealth has increased by 8% … In the UK, the wealth of the super-rich has grown by almost 4% over the previous year, while its numbers have grown by 0.2%.
"The total capital of the top 10 billionaires in Russia amounted to $ 147 billion in 2012, which is 12% more than the previous figure - Over the year, the number of dollar billionaires increased by 11 people."
Where did the money go? … To the “market” where the super-rich redistribute capital.
Similarly, during the Great Depression, the capital lost by most Americans flowed into the hands of those who knew what was what and how much, and were able to acquire a variety of assets for next to nothing. As a result, if before the events of 1929, US banking capital was dispersed among 16 thousand private and joint-stock banks, then after the crisis it concentrated in a hundred of the largest banks that belonged to only two banking groups. In fact, these banking clans, represented in the FRS, liquidated their competitors during the crisis, and in bulk.
Paper instead of gold
But common sense unequivocally hinted that for their own safety it was necessary to lead the country out of the crisis. The super-rich group is extremely small in number and can be easily destroyed physically. It was necessary to return society to a less destructive regime of functioning in order to avoid an uprising of peoples.
The bankers supported the Franklin Roosevelt administration's tough, not market-based measures to deal with the crisis. The dollar was devalued, and the largest banks received significant loans and subsidies from the treasury (this means this: the money was printed in the factories of the Federal Reserve System under government IOUs and distributed to banks).
In general, we managed to stabilize the dollar.
Under the guise of the Fed's bankers, they organized the confiscation of gold from the country's population by exchanging it for paper money (which they also printed themselves).
In 1935, the US Supreme Court ruled that Roosevelt's reforms limited free competition. Of course, the question of how free competition was when two banking clans ruined thousands of ordinary banks was not even considered.
Only by 1940 did the United States reach the level of the period preceding the crisis in terms of basic economic indicators. But unemployment continued to hold at the level of 14%, and only a new war, or rather, massive financing of military orders, allowed the American economy to start a new upswing …
Magazine: Mysteries of History №40. Author: Dmitry Kalyuzhny