America's Money Machine: The Story of the Federal Reserve

294 Pages·2011·2.06 MB·English

by  Elgin Groseclose

AMERICA’S
MONEY
MACHINE
BOOKS BY ELGIN GROSECLOSE
Money: The Human Conflict (1934)
The Persian Journey of the Reverend Ashley Wishard and His Servant Fathi
(1937)
Ararat (1939, 1974, 1977)
The Firedrake (1942)
Introduction to Iran (1947)
The Carmelite (1955)
The Scimitar of Saladin (1956)
Money and Man (1961, 1967, 1976)
Fifty Years of Managed Money (1966)
Post-War Near Eastern Monetary Standards (monograph, 1944)
The Decay of Money (monograph, 1962)
Money, Man and Morals (monograph, 1963)
Silver as Money (monograph, 1965)
The Silken Metal-Silver (monograph, 1975)
The Kiowa (1978)
Olympia (1980)
AMERICA’S
MONEY
MACHINE
The Story of the Federal Reserve
Elgin Groseclose, Ph.D.
Prepared under the sponsorship of the Institute for Monetary Research, Inc.,
Washington, D. C. Ellice McDonald, Jr., Chairman
Arlington House Publishers
Westport, Connecticut
An earlier version of this book was published in 1966 by Books, Inc., under the title Fifty Years of Managed
Money
Copyright © 1966 and 1980 by Elgin Groseclose
All rights reserved. No portion of this book may be reproduced without written permission from the
publisher except by a reviewer who may quote brief passages in connection with a review.
Library of Congress Cataloging in Publication Data
Groseclose, Elgin Earl, 1899–
America’s money machine.
Published in 1966 under title: Fifty years of managed money, by Books, inc.
Bibliography: P.
Includes index.
1. United States. Board of Governors of the Federal Reserve System–History. I. Title.
HG2563.G73 1980 332.1'1'0973 80-17482 ISBN 0-87000-487-5
Manufactured in the United States of America P 10987654321
For
My Beloved Louise
with especial appreciation for her editorial assistance
and illuminating insights
that gave substance to this
work
CONTENTS
Preface
Part I: The Roots of Reform
1. The Quality of the Times
2. The First Shock Wave
3. The Lapping at the Dikes
4. The Rich Man’s Panic
5. A Measure of Expediency
6. The Aldrich-Vreeland Bill
7. An Interlude for Debate
8. The Great Investigation
9. The Setting of the Current
10. The Bill Considered
Part II: The Great Reversal
11. Advent of Storm
12. The First Inundation
13. Collapse of a Theory
14. The Path of Retreat
15. When to Reef Sail
16. The Wounds of War
17. Wading in the Big Pond
18. The Lapping Waves of Crisis
19. The Fulcrum and the Lever
20. The Gushing Fountain
Part III: Debacle of an Idea
21. The Crumbling of the Dikes
22. The New Thermopylae
23. The Keynesian Influence
24. The Not So New New Deal
25. The New Deal and the Federal Reserve
26. New Bridles for Old
27. Where Two Tides Meet
28. The Reversals of War
29. Doubtful Victory
30. The Role of Atlas
31. The Not So Golden Years
32. The End of a Dream
33. The Chute
34. Into the Pit
35. Out of the Pit
Notes
Selected Bibliography
About the Author
Index
Preface

O
N SEPTEMBER 30, 1913, at a moment when American attention was
focused on the revolutionary monetary reform then under debate in
Congress, the New York Times astounded and diverted its public by a bitter
attack on a former president of the United States. The former president was
Theodore Roosevelt who had, the year before, broken away from the Republican
Party to run as the Progressive Party (Bull Moose) candidate for president. He
had been defeated by Woodrow Wilson, but he had been a powerful candidate
who had attracted the greater part of Republican Party votes, and his views on
public questions still commanded a large following among the electorate.
What had aroused the mortal apprehensions of the Times’ editors was an
article in the Century Magazine in which Roosevelt had outlined his proposals
for a reorganization of government and society. The editorial attacked his
blueprint as “super-socialism.” Without going so far as to charge Roosevelt with
being a Marxist—this was before the Russian Revolution, but Marxism was even
then anathema on these shores—it declared that he would in effect bring a
Marxian redistribution of wealth in a “simpler and easier way.”
“He leaves,” the editorial went on to say, “the mines, the factories, the
railroads, the banks—all the instruments of production and exchange—in the
hands of their individual owners, but of the profits of their operations he takes
whatever share the people at any given time may choose to appropriate to the
common use. The people are going to say, We care not who owns and milks the
cow, so long as we get our fill of the milk and cream. Marx left socialism in its
infancy, a doctrine that stumbled and sprawled under the weight of its own
inconsistencies. Mr. Roosevelt’s doctrine is of no such complexity. It has all the
simplicity of theft and much of its impudence. The means employed are
admirably adapted to the end sought, and if the system can be made to work at