Long wants a new economic system. The root is in volition; in the direction of the will.
No man has lost more by Senator Cutting’s death, than his friend from Louisiana. The possibility of a third party for 1936 or 1940 (never wholly alluring) went out of American politics when Cutting plunged to his death.
But Social Credit in America will make the greatest of possible mistakes if it fails to study the Senator from Louisiana and if it fails to aid the Senator from Louisiana.
Share the wealth as Long sees it is still uncut marble, but from that heavy block to
share the purchasing power!
is a possible step. Share the purchasing power, the effective orders against the total production of the nation, as that production works, and as orders can and of a right should be issued against it, is the logical conclusion of what long wants. And Long wants it as no other man now in the Senate.
Long’s resurrection of the Pilgrim’s covenant is the finest appeal to our tradition that has come from any man now in politics. He did not get that out of millionaires’ newspapers.
If you get your ideas of Huey from the British or New York papers (run by mostly the same set of cooks) [stet. not crooks but cooks in this context—EP] you will not get the real Huey.
His style is better than Roosevelt’s. (Look up Schopenhauer on style if you want to see why I say this). His style is better than the Astor–Moley ballyhoo, and le style c’est l’homme.
The neo=Concord school and the neo=transpontine Georgians might start analyzing public writings in our time./ Long’s prose is, in spots, extremely clear and incisive. It is not filled with the Astor=Moley=Roosevelt evasiveness./ No reader is going to believe this until he or she spends a half hour with the actual texts or Long’s ‘Share the Wealth Principles’ or with the radio speech of March 7th.
Both these represent a progress from Father Coughlin’s 16 or whatever points.
There are still statements in these formulations that are more human than purely (videlicet, sterilizedly and unfructably) economic. Thank God for it! The one European who gets action has denied the incarnation of the homo economicus.
Long’s ‘please let me ask you who read this document’, is a request that we social creditors of all people ought to grant him.
We will get nothing from the Tugwell=Moley=Astor=Baruch melange of abuleia and dalliance.
There is no man in our public life more free of mental conceit (love of his own fixations, enamourment with fixed ideas, and wounds to vanity imminent in the modification of the details of those ideas,) than is Long.
Huey with an adequate cabinet would give us a factive administration. The term ‘adequate cabinet’ is very probably a dream floating in the clouds above American possibility. But there already exists a nucleus, or a scattered nebula, of men in the U.S.A. who know enough about economics (non=static but living and developing economic perception) to supply Senator Long with the details and carburetters requisite to putting his will into practice.
If we do notwork with Huey Long we risk a sixteen years’ delay in the establishment of a credit account for the nation.
You do not work with a man if you merely hang round and say ‘Yasssir!’
EZRA POUND
E. The founding of the Bank of England, and the US National Banking Act (46/233)
1.
Hath benefit of interest on all
the moneys which it, the bank, creates out of nothing. (46/233)
Pound’s source was Christopher Hollis, The Two Nations: A Financial Study of English History (George Routledge and Sons, 1935), pp. 30 and 36. Hollis’s ch. 3, a useful summary account of the founding of the Bank of England, accurately reflects what was written in the early tracts mentioned below. Doubt has been cast on Hollis’s accuracy, and on the authenticity and the truth of the quotation, by Meghnad Desai, formerly a professor of economics at the London School of Economics, a leading member of the British Labour Party, and a life peer in the House of Lords. In his The Route of All Evil: The Political Economy of Ezra Pound (Faber & Faber, 2006) he wrote that he had been unable to trace the quote, allowed that it might have been made in a prospectus soliciting support, but dismissed its substance as ‘a common fallacy as to how banks operate’, one feverishly imagined by ‘anti-banking agitators’ and put about by ‘the conspiratorially minded’ (68).
I have not found the quotation in question in Bank of England: Selected Tracts 1694–1804: A Collection of Seven Rare Works…in the Goldsmiths’ Library of Economic Literature, the University of London (Gregg International Publishers Limited, n.d.), but there is indirect confirmation of it in the earliest of these tracts. William III being in need of money to finance his war with France, it was proposed that instead of borrowing at excessive rates from the goldsmiths, the government should borrow £1,200,000 from a new private Corporation to be known as the Bank of England. This Bank would raise the money by public subscription and lend it to the King at 8 per cent plus £4,000 p.a. for expenses (Hollis, 29). In A Brief Account of the Intended Bank of England (1694), attributed to Michael Godfrey or William Paterson, there is this:
This Bank will consist in a Revenue or Income of Eight per Cent. per Annum, for and upon the Money subscribed; and what Profits and Improvements can be made from the Business and Credit of the Bank, will be also divided among the Proprietors. Thus this Company or Corporation will exceed all others of that kind known in the Commercial World. For here will be Eight per Cent. per Annum certain upon the Capital; and as good and great a probability of other Profits as ever any Company had. (Selected Tracts 10)
The further profits, note, will be profits on its credit, not on its deposited subscriptions. In the second tract, A Short Account of the Bank of England (1695), attributed to Michael Godfrey, its deputy governor, we find first,
The Subscriptions to the Bank were made by vertue of a Commission under the great Seal of England, grounded upon the said Act of Parliament…towards the raising of the said 1200000 l.…And notwithstanding all the Endeavours of its Adversaries, to the great Astonishment as well of the Friends, as of the Enemies of the Bank, the whole 1200000 l. was Subscribed in 10 days time (1).
The tract then sets out to defend the Bank against its critics, and among its many justifications, including the 8 per cent return, there is one paragraph which reveals exactly how the Bank had benefit of interest on money which it created out of nothing:
Some find fault with the Bank, because they have not taken in the whole 1200000 l. which was Subscribed; for they have called in but for 720000 l. which is more than they have now occasion for: But however, they have paid into the Exchequer the whole 1200000 l. before the time appointed by the Act of Parliament; and the less Money they have taken in to do it with, so much the more they have served the Publick: For the rest is left to circulate in Trade, to be lent on Land, or otherwise to be disposed of for the Nations Service; and its better for the Bank, as well as the Publick, to have 480000 l. in the Subscribers hands, ready to be called for as they want it, than to have it lie useless by them. (6)
Could Pope or Swift in their satires have been so bold? (Note the hidden bonus: the Bank would receive 8 per cent on the full £1.2m, i.e. £96,000; but £96,000 on £720,000 meant an effective interest rate of 13.33 per cent.)
A 1705 tract, Remarks upon the Bank of England…Concerning the Intended Prolongation of the Bank, attributed to John Broughton, observed that among the Bank’s many privileges were that its interest from the government was ‘Exempt from Taxes, to which other Money, and Stock, and Land were liable’; and that its power to extend its credit without limit, ‘and upon so good a Foundation as the security of an Act of Parliament, is perhaps a more considerable Article of [its] Profit than even so great an Interest’ (13). To put it simply, the private Bank of England was authorized to lend and to charge interest on money it didn’t have—in other words, to print money; its liabilities were underwritten by the government; and its profits were all its own. The Bank of E
ngland continued as a private bank until its shareholders were bought out by the state after the 1939–45 war.
When Lord Desai declares Pound altogether wrong to think ‘that banks [in general] create profits out of nothing’, because ‘Banks have to…have collateral assets against any credit they create by lending’ (68), he is being disingenuous, since banks do lend on their credit. Witness Will Hutton in the Observer of 4 November 2007: ‘prudence demands that [banks] have up to 8 dollars or pounds of their own capital to support every 100 dollars or pounds that they lend.’ That order of ‘prudence’ ensured that ‘Between 2004 and 2007 bank lending rose 200 per cent while bank capital went up only 20 per cent’ (Will Hutton, Observer (13 April 2008)). In 2007 Citigroup’s ratio of assets to capital proved to be 1:48, though they reported ‘only’ 1:22 (Jeff Madrick, ‘The Wall Street Leviathan’, NYR (28 April 2011) 72). ‘In the past 10-to-one leverage would have been about par for a bank. More recently…many large financial institutions, including now-defunct investment banks such as Bear Stearns and Lehman Brothers, reached for 30-to-one leverage, sometimes even more’ (Robert M. Solon, Nobel Prize in Economics 1987, NYR 56.8 (14 May 2009) 4). Imprudent Bear Stearns, America’s fifth largest investment bank, had collapsed early in 2008 with $11.8bn of capital ‘leveraged’ up to $395bn of debt, thus bringing on the great global credit crisis. In short, ‘Banks [do] create money by lending’ (J. K. Galbraith, Guardian (21 September 2012) 34. In fact, ‘The essence of the contemporary monetary system is creation of money, out of nothing, by private banks’ (Martin Wolf, Financial Times (9 November 2010)). Rather than being wrong, Pound, in 1935, hadn’t seen anything yet. ‘The bank makes it ex nihil’—not the whole £1,200,000 or whatever, but 40 per cent of it in the beginning, and a greater proportion now—and Pound might well repeat, ‘Denied by five thousand professors’ (46/233).
2.
Semi-private inducement
Said Mr RothSchild, hell knows which Roth-schild
1861, ’64 or there sometime, ‘Very few people
‘will understand this. Those who do will be occupied
‘getting profits. The general public will probably not
‘see it’s against their interest.’ (46/233)
The authenticity of this quotation has also been called into question, and this time for good reason. Pound’s immediate source, as Leon Surette argued in his Pound in Purgatory: From Economic Radicalism to Anti-Semitism (Urbana: University of Illinois Press, 1999), pp. 268–9, may have been appendix 5, ‘Quotations from Prominent Men’, in Father Coughlin’s Money! Questions and Answers (1936); though it should be noted that Pound himself, in A Visiting Card (1942), gave his source as Willis A. Overholser, A Short Review and Analysis of the History of Money in the United States (Libertyville, Ill.: Progress Publishing Concern, 1936), p. 46. He said there that the quoted words—a close paraphrase, not an exact quotation—were from ‘a letter of Rothschild Bros. [of London], quoting John Sherman [chairman of the Senate Committee on Finance], and addressed to the Wall Street firm of Ikleheimer, Morton, and Van der Gould, dated 25 June 1863’ (S Pr 280, 281—see also 309). This is the letter as printed by Overholser:
A Mr. John Sherman has written to us from a town in Ohio, U. S. A., as to the profits that may be made in the National Banking business under a recent act of your Congress, a copy of which accompanied his letter. Apparently this act has been drawn upon the plan formulated here last summer by the British Bankers’ Association and by that Association recommended to our American friends as one that if enacted into law, would prove highly profitable to the banking fraternity throughout the world.
Mr. Sherman declares that there has never before been such an opportunity for capitalists to accumulate money, as that presented by this act and that the old plan, of State Banks is so unpopular, that the new scheme will, by mere contrast, be most favourably regarded, notwithstanding the fact that it gives the National Banks an almost absolute control of the National finances. “The few who can understand the system”, he says, “will either be so interested in its profits, or so dependent on its favors, that there will be no opposition from that class, while on the other hand, the great body of the people, mentally incapable of comprehending the tremendous advantages that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.”
Please advise us fully as to this matter, and also, state whether or not you will be of assistance to us, if we conclude to establish a National Bank in the City of New York. If you are acquainted with Mr. Sherman (he appears to have introduced the National Banking act) we will be glad to know something of him. If we avail ourselves of the information he furnished, we will of course make due compensation.
Awaiting your reply, we are, etc.
Overholser also printed the response of Ikleheimer, Morton, and Van der Gould, as of 5 July 1863. In this Sherman is given the character of a hero of the age, as possessing ‘in a marked degree, the distinguishing characteristics of the successful modern financier’, and likely to ‘prove to be the best friend the monied interests of the world have ever had in America’. Enclosed with the letter was a printed circular, prepared because ‘Inquiries by European capitalists, concerning this matter, have been so numerous’, setting out ‘the method of organizing national banks under the recent act of congress, and…the profits that may reasonably be expected from such an investment’. The main points of the circular were these (Overholser 47–8):
1. Any number of persons, not less than five, may organize a National Banking Corporation.
2. Except in cities having 6,000 inhabitants or less, a national bank can not have less than $1,000,000 capital.
3. They are private corporations organized for private gain…
4. They are not subject to the control of the state laws, except as Congress may from time to time provide.
7. To start a national bank on the scale of $1,000,000 will require the purchase of that amount (par value) of U.S. Government bonds.
8. U.S. Government bonds can now be purchased at 50 per cent discount, so that a bank of $1,000,000 capital can be started at this time with only $500,000.
9. These bonds must be deposited with the U.S. treasurer at Washington, as security for the national bank currency, that on the making of the deposit will be furnished by the government to the bank.
10. The U.S. Government will pay 6 per cent interest on the bonds, in gold, the interest being paid semi-annually. It will be seen that at the present price of bonds, the interest paid by the government, will of itself amount to 12 per cent in gold, on all the money invested.
11. The U.S. Government, under the provisions of the national banking act, on having the bonds aforesaid deposited with its treasurer, will on the strength of such security, furnish national currency to the bank depositing the bonds, to the amount of 90 per cent of the face of the bonds, at an annual interest of only ONE per cent per annum. Thus the deposit of $1,000,000 will secure the issue of $900,000 in currency.
13. The demand for money is so great that this currency can be readily loaned to the people across the counter of the bank at a discount at the rate of 10 per cent at 30 to 60 days’ time, making about 12 per cent interest on the currency.
14. The interest on the bonds, plus the interest on the currency which the bonds secure, plus the incidentals of the business ought to make the gross earnings of the bank amount to 28 to 33⅓ per cent. The amount of dividends that may be declared will depend largely on the salaries the officers of the bank vote themselves, and the character and rental charges of the premises occupied by the bank as a place of business. In case it is thought best that the showing of profits should not appear too large, the now common plan of having the directors buy the bank building and then raising the rent and the salaries of the president and cashier may be adopted.
15. National banks are privileged to either increase or contract their circulation at will and, of c
ourse, can grant or withhold loans as they may see fit. As the banks have a national organization, and can easily act together in withholding loans or extending time, it follows that they can by united action in refusing to make loans, cause a stringency in the money market and in a single week or even in a single day cause a decline in all the products of the country. The tremendous possibilities of speculation involved in this control of the money in a country like the United States, will be at once understood by all bankers.
16. National banks pay no taxes on their bonds, nor on their capital, nor on their deposits. This exemption from taxation is based on the theory that the capital of these banks is invested in U.S. securities, and is a remarkable permission of the law.
Thus far the circular—which is not, as some have assumed, the notorious ‘Hazard Circular’ of 1862—is quite accurate ‘as to the method of organizing national banks under the recent act of congress, and as to the profits that may reasonably be expected from such an investment’. But then there is a clause 17 which mentions ‘the suit of Mr Branch against the United States, reported in the 12th volume of the U.S. Court of Claims Reports, at p. 287’, but that was a case originating in events dating from June 1865, and finally decided only in December 1876, long after July 1863, the supposed date of the letter enclosing the circular. The circular therefore cannot be what it purports to be.
Neither Overholser nor Coughlin gives any source for the circular and the related correspondence, and no authenticating source is known. Further, there appears to be no record to attest the existence of the Wall Street firm of Ikleheimer, Morton, and Van der Gould. One can only conclude, in the absence of any positive evidence to the contrary, that the exchange of letters and the circular were fictions, forged by a person or persons unknown at a date unknown. The fictions are true to the main facts, but they are not what they pretend to be. The remark attributed to one of the Rothschilds, therefore, while it may have its general truth, must be deemed to have been altogether falsely attributed.
Ezra Pound: Poet Page 48
