and business, nearly doubled the cost of living for every family, inflated listed securities above value countless millions and made possible the wild speculation and trust consolidations since 1896 that have staggered the imagination of the entire world and thrust American finance and industry helplessly into the crater of a seething speculative volcano that perpetually endangers the country with the menace of frequent and desolating panics.

This dangerous condition has come upon us because unlike England we have left the regulation of all currency and finance to Wall Street and the banks. Congress at the instance of the financiers has passed laws that tend to concentrate financial power and profits in the hands of the very interests that profit most from exploitation of the people by abuse of such power. If the country is kept always on the edge of dangerous and devastating panic it is due to the inordinate greed that has induced the big banks and Wall Street to cause a vast and reckless inflation of the volume of bank credit billions of dollars beyond the needs of sound legitimate business and chiefly to artificially inflate the quotation prices far above value of the nearly thirty billion dollars of listed securities, a large portion of which represent no actual assets, but are sustained at fictitious prices with bank credit loaned in enormous volume at nominal rates to inside favored operators.

Notwithstanding this bank record, the Aldrich bill would shackle the hands of the people and their government for fifty years and unreservedly grant to a private corporation owned by these same banks absolute power still further to inflate the currency, bank credit, prices and the cost of living untold billions without any effective restrictions or restraint, thereby robbing the producers by further advance of prices while keeping wages down and by higher interest rates made possible by the monopoly of the supply of money and credit the National Reserve Association is designed to create.

If that private central bank, the National Reserve Association, becomes a fact, the machinery for an endless chain inflation of currency and bank credit will be complete. The banks have discounted about 15 billion dollars of commercial paper or notes based on 12 billions of cash in their reserves. Under the Aldrich plan the banks would rediscount with the central bank, say one-tenth, or 11⁄2 billions, f their 15 billions of commercial paper, getting therefor

This

11⁄2 billions of the association's corporate currency. currency when deposited in the bank reserves will enable the banks to double their credit loans, inflating same from 15 to 30 billion dollars. Then they could take a tenth of the 15 billions of new commercial paper and rediscount same for association currency, increasing "cash reserves" to 41⁄2 billions and credit loans to 45 billions. And so on over and over without any effective restriction or limit. Every billion of commercial paper rediscounted for corporate currency or for a "credit balance" at the National Reserve Association increases the possible loaning power and profits of the banks ten fold. It puts a premium on wild inflation and reckless banking. It may further increase prices and the cost of living beyond all human experience.

If Congress yields and authorizes a private central bank as proposed by the pending bill, the end when the bubble bursts will be universal ruin and national bankruptcy.

CHAPTER VI.

FRENZIED FINANCING.

A Corporation With a Billion of Good Assets to be Formed Without the Investment of a Dollar. Greatest Feat of Financial Legerdemain in All History. The Mystic Power Explained.

If Congress passes the pending Aldrich private central bank bill, the financing will be accomplished substantially as follows:

The three parties interested-the Government, the National Reserve Association and the banks-sit around a table prepared to close the deal.

The Government delivers to the association (Sec. 1) its fifty-year charter-the Aldrich law. The banks hand to the association a $100,000,000 check drawn on themselves to "pay in" 50 per cent of their $200,000,000 subscription (Secs. 1 and 2) to association stock. The association being now ready to "do business," the Government "deposits" with the association (Sec. 23) its "general fund," its entire treasury balance, say $150,000,000. To facilitate matters, $1,030,000,000 (Sec. 51) National Reserve Association "currency" has been printed in advance. This now is handed over to the banks by the association for $744,000,000 U. S. 2 per cent bonds (Sec. 49), $186,000,000 of "gold or other lawful money" to put into the association's reserves (Secs. 41 and 42), and $100,000,000 as a "loan" to enable the banks to meet their $100,000,000 check given to "pay in" 50 per cent of their subscription to $200,000,000 association stock. The association then hands to the banks their $100,000,000 check and takes back $100,000,000 of corporate currency to pay same.

This completes the deal. The association now owns $744,000,000 U. S. bonds, a cash reserve of $336,000,000 of "gold or other United States money" (being the Government $150,000,000 and $186,000,000 obtained from the banks in exchange for corporate currency), and the promis

sory note of the banks for $100,000,000, and $100,000,000 of its corporate currency, total resources $1,280,000,000.

It has as debts, or liabilities, paid in capital stock, $100,000,000; Government deposits $150,000,000; corporate currency $1,030,000,000; total $1,280,000,000.

The association at once exchanges (Sec. 55) the $744,000,000 of U. S. 2 per cent bonds for 3 per cent bonds running fifty years. It pays (Sec. 56) thereon 11⁄2 per cent tax, I per cent representing the difference between 2 per cent and 3 per cent interest and the other 2 per cent being the same as now is paid (U. S. Act of May 30, 1908) on the $744,000,000 of outstanding bank note currency to be cancelled and replaced by corporate currency. Government gets and association pays nothing extra. But the Government loses the I per cent banks now must pay (law of May 30, 1908) for Government deposits and the association gets the benefit. The association also gets the 3 per cent interest on $744,000,000 bonds, less the 12 per cent tax, or 11⁄2 per cent net, a total net profit of $11,160,000 annually. This is enough to pay to the banks yearly 5 per cent dividends (Sec. 19) on the amount paid in on their association stock and to carry $6,160,000 to surplus annually, thus increasing the "book value" (Sec. 12) of association stock, for the benefit of the banks. Although the association has not from any source really received and retained one dollar of actual money, other than the Government's $150,000,000 deposit, except the currency it has run off on its own printing press, yet already it has a permanent annual net income of more than 11 per cent on its entire $100,000,000 of "paid in" capital stock. The banks, of course, get the benefit because (Sec. 3) they own all of the association's stock.

The $336,000,000 is (Sec. 41) a 50 per cent "reserve" covering $672,000,000 of the $1,030,000,000 issued corporate currency; the other $372,000,000 of association currency used to pay for half of the $744,000,000 of bonds (Sec. 42) requires no reserve behind it. By paying a special tax (Sec. 41) the association can issue $336,000,000 more corporate currency on this same $336,000,000 of reserve, thus reducing the reserve basis from 50 per cent to 33% per cent of the volume of corporate currency. And the law permits the association (Secs. 41 and 51) to issue corporate currency without limit as to quantity.

The Aldrich bill authorizes the central bank to issue at