Usury and Banking

Shylock: as banker. 1894

Written by Gordon Clark

Gordon Clark
Shylock: as banker
Chapter IV.
Shylock’s Bank of England.
Published: Washington, D.C., Author’s publisher, 1894

[The information contained in this chapter can be found in Colwell’s “Ways and Means of Payment,” Alison’s “History of Europe,” and Doubleday’s “Financial, Monetary and Statistical History of England.” These authorities were followed by John C. Calhoun in his great Senatorial Money-Speech of October 3d, 1837 and are accurately quoted to a considerable extent in Berkey’s Money Question, a book easily procured. Pounds have here been put into dollars, one to five.]

Let us now look at another bank as it stands in the history of two hundred years – the Bank of England. This gigantic weapon of aristocracy and oppression, which has become the most cruel, hypocritical and dangerous monopoly on earth, was established on the first of January, 1695, upon a loan of six millions of dollars to the English government. Interest on the loan was secured to the stockholders by specified taxation and they were paid twenty thousand dollars a year for handling the fund. The institution was chartered as a bank of deposit, loan and discount. It had no direct authority to emit notes as currency, but assumed the right as implicit in its charter and inaugurated the custom of exchanging its own paper, promising specie on demand, for the time-notes of individuals and business establishments. As a mere matter of method, these authenticated certificates of the Bank of England were an improvement on the divisible credit-inscriptions of the Bank of Venice; for printed acknowledgments of value in hand are more convenient for circulation than ledger-accounts and written receipts for funds in bank. But in discounting paper due in the future and substituting for it promises to pay coin on demand, the Bank of England became the real parent of “Modern Speculation,” though she has always tried to palm off the brat on everybody else. She quickly begat, also, four other ugly daughters named Inflation, Contraction, Suspension, and General Bankruptcy. Their photographs have been already placed in the rogue’s-gallery of this album.
There is not one fifth – many authorities declare there is not really one tenth – of the gold and silver in existence for the exchanges of commerce requiring cash. Still, this commerce demands and must have some medium of exchange. So the public pressed the Bank of England for circulation and to furnish it the bank solemnly guaranteed, on the face of its issues, to overcome the limits of nature and surpass the bounties of God. Such is always and necessarily the promise of an inflated bank-bill on a “specie-basis.” It is the money of complete atheism and unavoidable rascality.
Was it the deliberate purpose of the Government of England and of the corporators of her official bank to use this institution for a universal Confidence-Game ? At the outset, no. The plan of issuing bank-notes redeemable in coin and then inflating the paper five or ten times beyond the very physical possibility of keeping the promise – this athletic jump at the moon was not originally a trick of English dishonesty but only a bungle of English stupidity. It was hoped and believed that the bank-notes would be so convenient and necessary in general trade that only a fraction of them would ever be presented for redemption at one time. And such may be the case while the stream of commerce is unruffled – while peace and prosperity ride on it. But the moment these are disturbed – as they must soon be disturbed in the process of setting a financial cone on its apex – that moment ” public confidence is shaken” and there is a “run on specie.” The specie being never sufficient for a run, the end is always “a panic.”
Thus the Bank of England, starting with the amiable fraud of a specie basis for an inflated credit currency, has been the most stupendous repudiator of its obligations and strictly speaking the most destructive failure of the modern world. The bank itself is rich enough, no doubt; but to say that for every pound sterling of its stockholders’ profits it has destroyed ten thousand pounds of other people’s wealth – this statement would fall so far short of the actual, terrible truth that no rigid computation need be attempted. Yet even this result is not in one sense the worst. Once the policy of the bank as we have seen was only a blunder, and could be pardoned; but now this same policy has become a crime – a deliberate scheme to aid England in robbing the human race, the mass of her own subjects included, in the interest of the intelligent, shrewd but selfish and unscrupulous aristocracy of the kingdom.

The government of Great Britain has no respect, no compassion for the poor and ignorant. It has squeezed the life out of Ireland, out of India, out of Egypt – out of every race of human beings that are cursed with its domination. In the name of Christianity and civilization it imbrutes and impoverishes the whole world as far as possible, that English greed may rule the land and the sea; and then it hoodwinks and fleeces the millions of its own subjects at home, that one royal family and some thirty thousand landed, titled cormorants, may shine in gold and satin, and dine on grouse and brandy. For nearly a hundred years, the Bank of England has been a special partner and a ready tool in this diabolism. Virtually, the government winks at the bank, the bank winks at the government, and the two join hands to pillage the globe.

Let us take the most notable instance on record – that of 1797. [Alison’s History of Europe gives all this with copious and minute detail. Doubleday is also full and elaborate.]

Britain was then at war with Buonaparte. The gold and silver of the kingdom had been rapidly withdrawn and the bank had only about five millions of dollars left. The bank went through the form of consulting the government and the government ordered the bank to “suspend specie payments.” The suspension lasted twenty-five years – until Waterloo ended the career of Napoleon. During that time, the necessities of British royalty and British aristocracy forced them to give the whole nation honest money, which means a sufficient circulating-medium to call forth all the ingenuity and industry of production and trade. Paper money, on the principle of the Bank of Venice, was substituted for the insane and mendacious promises of specie on demand. What was the consequence? Why, exactly what is always the consequence when all the people of a country have a fair chance to work. For a quarter of a century, England was as prosperous, in spite of her great wars, as Venice had been for five centuries in like circumstances. In 1797 the public revenue was a hundred and fifteen millions of dollars. In 1815 it had easily been raised to three hundred and sixty millions. The lowest annual collection from loans and taxes was two hundred and thirty-six millions and in 1813 it reached five hundred and forty millions. The suspended bank borrowed for the government seventeen hundred and fifty millions. Three million acres of waste land were improved and cultivated; and the exportation of the single class of articles comprised in cotton manufactures increased from thirty-five millions of dollars in 1801 to a hundred and thirty-five millions in 1822. And for this one quarter of a century there was no commercial crash, no run on the bank, no money-panic. The great land-owners, the great stock-and-bond jobbers, the great bullion-loaners did not want a money crisis: it was not for their interest to have one and be eaten up, pound, shilling and pence, by the French.
But as soon as Waterloo assured the continuation of European kingcraft with its various oligarchies and monopolies, the aristocratic wealth and intelligence of Great Britain combined to rob the poor and ill-informed classes whose labor and commercial activity had saved the realm. To the enormous industries which an adequate system of money had called into being, a sufficiency of circulation had now become as much a necessity, in exchanging merchandise, as a sufficiency of trucks and boats to transfer the merchandise from place to place. If the king and parliament had “called in ” three quarters of all the vehicles of transportation and prohibited the use of them, the value of every great commercial staple would of course have shrunk into insignificance, while the few persons having a monopoly of trucks and boats – say one certain kind with gilded sterns and tail-boards – would have been able to command and buy up at a song the property of other people. But the British masses would have understood this measure and in spite of stolidity and beer would have answered it with a whirlwind of destruction. So a more subtle and cowardly method was adopted to accomplish precisely the same result. A parliamentary act was passed, under the whip of the stock-gambling Ricardo, to resume specie payments – which meant simply to withdraw from use the larger part of the monetary facilities of commercial exchange. [The contraction of the actual currency was about forty per cent. The contraction of discounts — the “elastic’’ banking frauds of the British thimble-rig — was nine dollars of every ten.] Inevitably, the result was the most stupendous crash in business, the most cruel wreck of a people’s property, the most murderous impoverishment of innocent labor that had ever taken place in modern times. Producers, manufacturers, merchants were ruined by thousands and workmen were dropped into idleness by tens of thousands. Crime was necessitated at wholesale by law and order and then punished at retail by the same forces that were the real projectors of it. Revolution was threatened, was begun, and was finally suppressed by military force. Even the revenue of the kingdom was cut down below the possibility of reducing the public debt. But the few who held bullion or were rich enough to stand the strain swiftly increased their possessions and forty-thousand powerful owners of real-estate absorbed a hundred and ten thousand weaker ones.

It was the most diabolical invasion of English welfare since William of Normandy with his brigands in mail had landed at Hastings. As far as the British masses were concerned they could have lost little if anything more had Buonaparte been permitted to take the island. And this was the “work of the English Bank-System, though dominated by the same merciless spirit as that of the more extended money-power which has nearly wrecked both Europe and America in our own day. The “specie basis” was simply a slung-shot and sand-bag with which to sneak behind the honest workers of the realm and do them to death. By use of this peculiar bludgeon, a few of Ricardo’s hebraic gold-bugs in league with the titled descendants of those who conquered the country in 1066, gobbled up the fruits of its progress without the trouble of resort to arms, which : was the more manly method of the Norman pirates, if not of Jacob when he cheated Isaac and Esau. [The directors of the Bank of England themselves protested, in this instance, against contraction. But their established system choked them. Ricardo said it would be a matter of “three per cent” in the “fall of prices.”]

In 1844, the ruin that the Bank of England had so often wrought compelled the passage of an act by the government limiting the currency-notes of the bank to the actuality of redemption in government securities and coin. But the system was at once so utterly bad and so thoroughly fixed that the “bank-act” did little good. The institution kept on with the old dodge in another way. Discounts of commercial paper, entered on its books, took the place of inflated notes by its issue-department. But these discounts, too, called largely for gold: so, when the least drain on the metal-vaults began, discounts were shut off, interest was raised, doubled, quadrupled, and property of all sorts was dumped on the market to pay gold to the bank for the discounted paper. Then the industrial world went to pieces as usual. As American banks have been nothing but a retinue of the Bank of England – promising coin on paper inflations – their credits, too, have been “called in,” as soon as their London mother has begun, from any cause, to drain away their metal. Thus every six years prior to 1861 and several times since, the people of the United States have been a dish of oysters for John Bull. [Our home Shylocks, of course, have had a large spoon in It – the chief spoon; but the English system has wrought the wreck. Berkey has compiled the facts very well. See his “Money Question.”]

In October of 1875, the New York Board of Trade was addressed, at their invitation, by General Butler. Referring to the Bank of England, he said:
“What a marvel of financial strength and credit she has been, to be sure! Well may the bullionists sing paeans to this destructionist of all values for their benefit!”

When General Butler stigmatized the Bank of England as “the destructionist of all values,” he hit the mark exactly. The phrase sums up the whole history of that huge financial blood-sucker.

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Gordon Clark

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