Chapter 37 1. Without the Federal Reserve, there would be no World War I

Kissinger made an impressive comment on the outbreak of the First World War in his famous book "Great Diplomacy". He said: What surprised the outbreak of the First World War was not its outbreak. The reason is simply because of an event that seemed insignificant compared with other previous crises, but because it (the war) took so long to erupt. On June 28, 1914, Archduke Ferdinand, the crown prince of the Habsburg dynasty of the European orthodox royal family, visited Bosnia, which was annexed by Austria in 1908, and was assassinated by a young Serbian assassin.This was originally just a revenge act planned by a purely terrorist organization. At that time, no one would have thought that this incident would detonate an explosion involving more than 30 countries, involving 1.5 billion people, and causing more than 3,000 casualties. The fuse of a world-class war involving tens of thousands of people.

Since the Franco-Prussian War, France and Germany have become feuds. When Britain had to walk out of the gloriously isolated European continental policy, it faced a situation where Germany was strong and law was weak.Germany is already the most powerful country in Europe. If it is not contained, it is bound to become a serious problem for Britain.As a result, Britain drew in Russia, which was also quite afraid of Germany, and established the Triple Entente with France, while Germany formed an alliance with Austria, and the two major opposing groups in Europe were formed. The two camps continue to expand their armies and prepare for war, maintaining large-scale standing armies. As a result, governments of all countries have fallen into a deep debt quagmire.A detailed European Public Debt Revenue Report shows that interest payments and principal repayments on various bonds amount to $5.343 billion per year.The finances of the nations of Europe were in deep trouble, and governments could not help wondering whether war, with all its dire possibilities, might be a more worthwhile alternative to such an expensive and precarious peace.If Europe's military preparations do not end in war, they must end in the bankruptcy of governments.

From 1887 to 1914, this precarious and expensive peace stalled, with highly armed but near-bankrupt European governments still glaring at each other.As the saying goes, when the cannon is fired, the European banking system developed and established by the Rothschild family provides credit to the opposing parties and fully facilitates this military confrontation. War was really about money and food, and by 1914 it was clear that the major powers in Europe could no longer afford a major war.Although they have a huge standing army, a popular military mobilization system, and a modern weapon system, their economy is unable to support huge war expenses.The situation is just as the Russian Privy Council Minister pointed out in his address to the Tsar in February 1914, the cost of the war will undoubtedly exceed Russia's limited financial resources.Our country will inevitably need to borrow from allies and neutral countries, but the cost will be high.If the outcome of the war is unfavorable to our country, the economic consequences of defeat will be incalculable, and the national economy will be completely paralyzed.Even if the war is won, it will be extremely detrimental to our country's finances, and Germany will be unable to compensate our country's military expenses after a crushing defeat.A peace treaty would be subject to British interests and would not give Germany the chance to recover sufficiently to pay our debts, not even long after the war had ended.

Under such circumstances, a large-scale war is unthinkable.If there is a real war, it will only be partial, short-lived and low-intensity, and it may be more like the Franco-Prussian War in 1870, which lasted about ten months.But the result of such a war can only alleviate but not resolve the confrontational situation in Europe.Thus, the time for war can only be delayed in an unstable and expensive peace until the establishment of the Federal Reserve. Although the United States on the other side of the ocean was already the world's largest industrial power at that time, with huge industrial production capacity and abundant resources, it was still a country dependent on foreign debts until 1813, and seldom exported foreign goods. Offer credit.The reason was that, in the absence of a central bank, it was difficult for New York bankers to centralize and mobilize the nation's financial resources.However, the nature of bankers makes them interested in large-scale wars, which can undoubtedly bring huge profits to bankers.When the Federal Reserve Act was passed, international bankers acted immediately. On August 3, 1914, Rothschild's bank in France sent a report to Morgan, suggesting that a credit of 100 million U.S. dollars should be organized immediately for France to the United States. Purchase supplies.Wilson immediately objected upon hearing the news, Secretary of State William.Bryan denounced the loan as an illegal transaction of the worst kind.

Germany and the United States have no political and economic conflicts. At that time, there were about 8 million German descendants in the United States, accounting for about 10% of the national population. At the beginning of the founding of the United States, German almost became the official language of the United States. German-Americans had With a lot of political influence, coupled with the fact that Irish immigrants in the United States never liked Britain, the U.S. government had fought with Britain several times, so at the beginning of the war, the U.S. government had nothing to do with the war between Britain, France and Germany. wait-and-see attitude.Compared with bankers who are anxious like ants on a hot pot, the US government seems much calmer and more normal.The situation turned out to be that the bankers actively advocated declaring war on Germany, while the government resolutely opposed the war and strictly maintained neutrality.

At this time, the bankers came up with an expedient measure, which was to distinguish between loans for the sale of bonds for the Allies and credits for the purchase of American supplies by the Allies.Under the coercion of the banker, Wilson only agreed to the latter.As the re-election time approached, Wilson gradually leaned towards the banker's position on the issue of entering the war. On December 23, 1913, the Federal Reserve Act was passed, and the conditions for a world-level war were finally ripe.What Dr. Kissinger calls the long-delayed war machine can finally be activated. The Federal Reserve officially began operations on November 16, 1914.On December 16, Davidson, Morgan's right-hand man, came to the UK to meet with the then British Prime Minister Herbert.Asquith discusses the provision of credit by the United States.On January 15, 1915, Morgan Bank reached a credit agreement with the United Kingdom with an amount of 10 million pounds. This was already a considerable deal for the United States at that time. The total amount of loans will reach a staggering three billion US dollars!Morgan Bank charged a 1% handling fee, 30 million dollars fell into the pockets, and Morgan ate a lot during the war.In the spring of the same year, Morgan signed a credit agreement with the French government.

In September 1915, the moment came to test whether Wall Street could become the world's financial center.The $500 million Anglo︱French loan officially kicked off.President Wilson, who had been resolutely opposed to it, couldn't stand the two-sided attack of bankers and cabinet members. His new Secretary of State RobertWithout loans, Lansing warned, the result would be restrained production, industrial decline, idle capital and labor, mass bankruptcies, financial crises, seething and growing discontent. Wilson could hear a cold sweat, and had to give in again.For this unprecedented bond sale, Wall Street bankers also did their best. Sixty-one bond underwriters and 1,570 financial institutions joined the sale business.It was an extremely difficult task, especially to sell these bonds to the American Midwest.The American people generally do not think that the war in Europe has any direct relationship with them, and they are unwilling to invest money in the war in Europe.To reassure such doubts, bankers vigorously assert that the money will stay in the United States.Despite all the methods used, only one Chicago bank in the Midwest was willing to join the Wall Street camp. This behavior immediately angered the local German depositors, and they launched a bank boycott movement.By the end of 1915, there were still one.$8.7 billion in bonds were not sold.

When the war reached a critical moment, in order to get more money, the British government announced that it would tax the interest income of American bonds held by British nationals, and the British immediately sold these bonds at a low price.The Bank of England quickly piled up with U.S. bonds, and the British government immediately asked their U.S. agent Morgan to sell these U.S. bonds in full on Wall Street. The bonds turned into cash, and Britain got another huge sum of money to support the war.However, the creditor status accumulated by Britain to the United States for more than 100 years also disappeared.Since then, the creditor's rights relationship between Britain and the United States has undergone fundamental changes.

The credit of the United States was like cooking oil in a raging fire. The flames of war began to spread rapidly, and the severity of the war also increased sharply.In the Battle of the Marne alone, the Allied Powers consumed 200,000 rounds of shells a day. Human beings have finally seen how tragic the war would be with modernized industrial production and logistics systems, and with modernized financial means. Protracted. War makes material consumption reach the speed of burning, war makes belligerent countries insist on selling iron, and war makes the government at all costs borrow money from banks regardless of conditions. No wonder war is always the favorite of bankers.