Sunday Book Excerpt from "The Crash (Crisis) of 2016"
Echoing warnings Jefferson made a century and a half earlier, Roosevelt argued that America’s survival depended on constant vigilance against the Economic Royalists...
This book, which was startlingly prescient about what’s happened over the past five years and essentially predicted the 2016 Trump election back in 2013, is no longer in print. But there’s some really great stuff in it, particularly the story of how Jefferson, Lincoln, and both Roosevelt presidents took on the oligarchs of their day and warned posterity of the dangers of oligarchy in America.
The Economic Royalists
After the last Great Crash, FDR understood he was up against more than an economic crisis. He was also up against a counter-revolution that had caused the Great Crash and was unabashedly seeking to reclaim the power of our government and economy they’d held for over a decade and lost to him. They were America’s plutocracy.
In his First Inaugural in 1933, FDR alluded to the “rulers of the exchange of mankind’s goods” who had “failed.”
He told the nation, “Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.”
He added, “True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money.
“Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence.
“They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.”
Roosevelt understood that while genuine kings and theocrats had been pushed to the fringes of the world in the century-and-a-half since the American Revolution, the forces of plutocracy – economic rule by the very wealthy – hadn’t really gone anywhere. And they’d been running amok during the previous decade.
By 1936, Roosevelt had a name for them: The “Economic Royalists.” Eight years later, in the backdrop of World War 2, FDR’s Vice President Henry Wallace referred to these plutocratic forces as “Fascists.”
During our Revolution, they were called “Loyalists” and “Tories.” In the early days of our new nation, they eventually called themselves “Federalists” and were led by America’s second President, John Adams, and our first Treasury Secretary, Alexander Hamilton. Early on, they were rather benign; the real cancer came as the nation became richer.
By the last half of the 19th Century, during the Gilded Age in America, the newspapers called them the “Robber Barons.”
Today, these forces of the very wealthy are often simply referred to as the “1%” (even though they actually represent a much smaller number than that – a tiny fraction of the top 1 percent of Americans, economically).
Regardless of their name, their rise to power has always been a harbinger of impending collapse.
Their greed made the War of Independence inevitable. They pulled the strings of both the North and South during the Civil War. And they provoked the Stock Market crash of 1929 triggering the Great Depression. In fact, our history is one of constant struggle against this cultural infection.
And while iconic figures and people’s movements have arisen throughout history to confront these Royalists, there always comes a crack in the struggle when the Great Forgetting takes hold. And the Economic Royalists jump into this opening to take the reins of power and pillage the nation into collapse.
American history proves this point.
A Crash starts a nation
In 1776, Adam Smith’s Wealth of Nations was published and the U.S. Declaration of Independence was signed. This was no coincidence: Both were reactions to a widespread economic depression that had begun in the previous decade. England reacted to their economic distress with a series of efforts to raise revenue – the Stamp Act, the Townshend Acts, and the Tea Act (among others).
Many people today think that the Tea Act—which led to the Boston Tea Party—was simply an increase in the taxes on tea paid by American colonists. That’s where the whole “taxation without representation” meme came from.
Instead, the purpose of the Tea Act was to give the East India Company full and unlimited access to the American tea trade and to exempt the company from having to pay taxes to Britain on tea exported to the American colonies. It even gave the company a tax refund on millions of pounds of tea that it was unable to sell and holding in inventory.
In other words, the Tea Act was the largest corporate tax-break in the history of the world. And since, at the time, most of the British government and royalty were stockholders in the East India Tea Company, it was also a classic example of crony capitalism.
In response, the colonists dressed like Indians in the middle of the night, boarded ships, and commenced the dumping of hundreds of chests of tea overboard – an act that would eventually light the fuse to war.
The American Revolution began with the largest act of corporate vandalism in the history of the planet in Boston Harbor.
But independence from Britain didn’t defeat the Royalists at home.
Our nation’s second President John Adams was sympathetic to their cause (although a man of modest means himself).
John Adams and his Federalists were wary of the common person (who Adams referred to as “the rabble”), and many subscribed to the Calvinist notion that wealth was a sign of certification or blessing from above and proved a certain minimum level of morality.
As second President of the United States, Adams notoriously passed the Alien and Sedition Acts to lock up political dissenters, and moved the country in a more authoritarian and monarchical direction. As Daniel Sisson documents in his incredible book, The American Revolution of 1800, there were genuine fears among Americans that these early Royalists would blow up the American experiment of democracy and not cede power to Jefferson and the more egalitarian Democratic Republicans in the election of 1800.
Jefferson himself later said, “The Revolution of 1800 was as real a revolution in the principles of our government as that of 1776 was in form.”[i]
Jefferson was Adams’s chief political rival, and a champion of a democracy responsive to the people and not the wealthy elite. On October 28, 1813 in a letter to his old rival, Jefferson commented on his distrust of that wealthy elite – in particular in the Senate, which was not democratically elected by the people.
Referring to the “cabal in the Senate of the United States,” Jefferson wrote, “You think it best to put the pseudo-aristoi into a separate chamber of legislation [the Senate], where they may be hindered from doing mischief by their coordinate branches, and where, also, they may be a protection to wealth against the agrarian and plundering enterprises of the majority of the people.”[ii]
Then Jefferson countered in the letter, writing, “I [don’t] believe them necessary to protect the wealthy; because enough of these will find their way into every branch of the legislation, to protect themselves.”
Instead, Jefferson advocated, “I think the best remedy is exactly that provided by all our constitutions, to leave to the citizens the free election and separation of the aristoi from the pseudo-aristoi, of the wheat from the chaff. In general they will elect the really good and wise. In some instances, wealth may corrupt, and birth blind them; but not in sufficient degree to endanger the society.”
And in a final warning about the largely Federalist “cabal in the Senate,” Jefferson wrote, “The artificial aristocracy is a mischievous ingredient in government, and provision should be made to prevent its ascendancy…I think that to give them power in order to prevent them from doing mischief, is arming them for it, and increasing instead of remedying the evil.”
In a 1786 letter, Jefferson gave his most explicit warning about this threat from plutocracy within, and advocated for unwavering vigilance against it.
“Tho’ the day may be at some distance beyond the reach of our lives perhaps, yet it will certainly come,” he wrote, “when, a single fibre left of this institution, will produce an hereditary aristocracy which will change the form of our government from the best to the worst in the world.”
He added, “I shall think little [of] longevity unless this germ of destruction be taken out.”
With the election of Jefferson in 1800, and a civil war averted, the Economic Royalists were held at bay, but they were never defeated. By the 1820’s they’d returned, and this time it was Andrew Jackson who stood up to push them back. Jackson campaigned on a platform of overthrowing the banksters.
In 1832, he vetoed a renewal of the charter of the Second Bank of the United States, defending the first fundamental in his veto message writing, “It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes,” but that he would put an end to that by taking on and humbling the bankers. He was the people’s hero for doing so.
The Next Cycle: the Civil War
But, the Founding generation, who in 1776 had pushed back against the Royalists supporting King George III, and the economic royalists of the East India Company who largely controlled all economic life in America, were all long-dead fourscore (80) years later.
That’s when Abraham Lincoln was a lawyer in private practice, working for the railroads. On August 12, 1857, he was paid $4800 in a check, which he deposited and then converted to cash on August 31. That was fortunate for Lincoln, because just over a month later, in the Great Panic of October, 1857, both the bank and the railroad were “forced to suspend payment.”[iii]
Of the 66 banks in Illinois, The Central Illinois Gazette (Champagne) reported that by the following April, 27 of them had gone into liquidation. It was a depression so vast that the Chicago Democratic Press declared at its start, the week of Sept. 30, 1857, “The financial pressure now prevailing in the country has no parallel in our business history.”
The crash highlighted the enormous economic struggle underway between the North’s and the South’s Economic Royalists.
As the Southern plantation/slave economy was turned on its head with the invention of the cotton gin and calls to end slavery, the Royalists were rising up once again. In the North, too, Economic Royalists were amassing power with booming textile factories and little in the way of protections for workers. Ultimately, in a battle for supremacy over the national economy, the Royalists in the North and South tore the union apart in a bloody Civil War.
Even though the scourge of slavery was defeated in the Civil War, the Royalists, who fought on both sides, didn’t lose the fight. For the next 40 years, they ran roughshod over the American economy, prompting Grover Cleveland, the only Democratic elected President during the era, to proclaim in his 1888 State of the Union Address, “The gulf between employers and the employed is constantly widening, and classes are rapidly forming, one comprising the very rich and powerful, while in another are found the toiling poor.”
He added, “As we view the achievements of aggregated capital, we discover the existence of trusts, combinations, and monopolies, while the citizen is struggling far in the rear or is trampled to death beneath an iron heel.
“Corporations, which should be the carefully restrained creatures of the law and the servants of the people, are fast becoming the people's masters. “
But those who remembered the previous Great Crash and ensuing Civil War were all dead or had, at least, passed out of power by 1920 when a nation exhausted by World War 1 elected Warren Harding President on a platform of “more business in government, less government in business” putting an abrupt end to the Progressive Era that had seen two decades of trust-busting, union organizing, and anti-corruption measures like the Tilman Act of 1907 that banned all corporate contributions to all political candidates.
In his book, Only Yesterday: An Informal History of the 1920’s, published in 1931, American historian Frederick Lewis Allen described the scene in Washington, DC in 1921 when the Economic Royalists flocked back to nation’s capital now that they had an ally in the White House with Warren G. Harding.
“Blowsy gentlemen with cigars stuck in their cheeks and rolls of very useful hundred-dollar bills in their pockets began to infest the Washington hotels,” Allen wrote. “The word ran about that you could do business with the government now—if you only fixed things up with the right man.”[iv]
And Harding was the rightest of the right men. Harding’s Secretary of Treasury, Andrew Mellon, a wealthy industrialist and banker, promptly shepherded legislation through Congress that slashed taxes for the super-wealthy in America from 73% down to 25% over the next few years, and the Harding Administration followed through on its promise of “more business in government”[v] by rolling back labor protections and financial-industry regulations.
After Harding died two and a half years into his term, the Royalist agenda was advanced by the Coolidge Administration, which coined the term “Coolidge Prosperity” referring to the enormous wealth bubble caused by all the “hot” (low-taxed) money produced by Treasury Secretary Mellon’s tax cuts and deregulations.
That hot money inflated a real-estate bubble that started down in Florida (but had spread nationwide) and popped when a hurricane wiped out Miami in 1926, pushing investors to move their money into the growing Stock Market bubble. That bubble popped in 1929, and Republican austerity-based responses triggered the Great Depression just as the third Republican President of the era, Herbert Hoover, was settling into the White House.
He later recounted his Treasury Secretary Andrew Mellon’s advice during the crisis: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” In other words, let everything go bankrupt.
Mellon’s friends knew what that meant. Once everything hit bottom, then those understood the nature and causes of the crash – and why and how the Hoover administration had both prolonged it and let it bottom out –could walk into the devastation and buy up everything for cheap. The Royalists were not going to lose, and some of America’s greatest fortunes were made during the Great Depression using just this technique.
Within 3 years of the Crash of 1929, almost one in four Americans was out of work, tens of thousands of military Veterans calling themselves the “Bonus Army” were “occupying” the National Mall, and loud voices were calling for both Fascism and Communism as a solution to our nation’s problems. It was a time of genuine crisis.
But FDR believed himself equal to the challenge. Being from the Economic Royalist class himself, he well knew that he had to save capitalism from itself, and in the process he could save the nation as well.
“The money changers have fled from their high seats in the temple of our civilization,” Roosevelt said in his first Inaugural Address. “We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.”
This crisis was also an opportunity for FDR.
FDR Wages War on the Royalists
In his famous “first hundred days,” 15 major and dozens of minor pieces of legislation, all designed to restore the economic fundamentals necessary to put American back on track, made it through both houses of Congress and to his desk for signature.
They created the Federal Emergency Relief Administration, passing borrowed federal money out to the states to give both benefits and jobs to the unemployed. There was the Public Works Administration, which immediately set about building major projects like power generating plants, water and wastewater facilities, schools and hospitals.
People who’d seen their savings wiped out when their banks had gone bankrupt were reassured and brought back to using banks because of the Federal Deposit Insurance Corporation, which guaranteed the little guy would never again lose his money.
Tens of thousands of young men were put to work immediately through the Civilian Conservation Corps, which threw together tent cities for workers across the nation and set about planting trees and reclaiming agriculture- and grazing-damaged land.
The Works Progress Administration undertook bigger projects – dams and roads – than the PWA had begun. He put into place systems to raise workers’ wages and working conditions; made collective bargaining possible; moved children out of the workplace; provided long-term, government-backed mortgages for underwater homeowners caught with short-term exploding mortgages; limited working hours; and dumped the gold standard, which had been a roadblock to such a rapid expansion of government spending.
It worked. From 1933 to 1937, in just four short years, FDR pulled the national unemployment rate from over 24 percent to below 15 percent.[vi]
In 1921, more than a decade before she won her Pulitzer Prize for reporting, journalist Anne O’Hare McCormick convinced her editor at the New York Times to send her to Italy, where she chronicled the rise of the world’s first official Fascist, Benito Mussolini. She knew well what it looked like when executive power was used, and when it was abused.
In FDR, Anne McCormick saw the former, but not the latter, and she largely echoed the American zeitgeist of the day.
On March 19th of 1933, she wrote a full-page article for The New York Times titled: “The Nation Renews Its Faith: Out of the Swift Succession of Events That Has Marked Two Weeks of the New Deal, This Fact Stands Out: That the Confidence of the People in Government Has Been Re-established.”
“Most of all,” she wrote in that article about FDR, “he is an instrument of history.” She noted that FDR’s first two weeks were “more than a transfer of authority from one party to another.” It was, she wrote, “a change of government instead of a change in administration.”
People who’d lost hope that the federal government could ever be their advocate, that the first three words of the Constitution, “We The People,” had been hijacked by banksters and profiteers, that the government could never work for them, had their faith renewed in American institutions.
“One suspects that he expresses the kind of revolution that fires the American mind,” McCormick wrote, “a 100 percent American Revolution, whose manifesto is the Constitution.”
And by his force of personality, and with a genuine supportive majority in both Houses, Congress went along.
As McCormick noted, “One reason for the present meekness of both Houses is that every member is practically buried under avalanches of telegrams and letters from constituents. These messages come to Democrats and Republicans alike. Sometimes profane, always imperative, they are mostly variations of a single order: Support the President: give him anything he wants.”
Toward the end of the new president’s first month, McCormick again brought her typewriter to a full-page New York Times article about FDR. On March 26th, 1933, she wrote, “Mr. Roosevelt thinks and talks a great deal about government. … He believes that at every turning point of history some one rises up who can enunciate and in a sense personify the new direction of the public mind and will. In his view America has reached such a crossroads.”
By 1936, the Great Depression-induced “fear” that FDR had warned the nation of in his First Inaugural had largely subsided in America because of the revolutionary economic policies he enacted in his first few years in the White House.
However, solving the Great Crash’s economic crisis was just the first task. FDR knew the next task was to remain vigilant against the Royalist counter-revolution enabled by the Great Forgetting.
And so, as he was accepting his party’s nomination for a second-term as President of the United States, Roosevelt said, “Today, my friends, we have won against the most dangerous of our foes. We have conquered fear.”
But, he cautioned, “I cannot, with candor, tell you that all is well with the world,” he added. “Clouds of suspicion, tides of ill-will and intolerance gather darkly in many places.”
In fact, he’d confronted an attempted coup by the Economic Royalists just two years into his first term.
A front man for a group of American banksters and industrialists, Gerald MacGuire, approached the popular General Smedley Butler about leading an army of 500,000 men, assembling in Elkridge, MD, to march into DC and onto the White House lawn to oust FDR.
Butler said that some of the wealthiest bankers and industrialist in the nation were putting up $3 million - over $3 billion in today’s dollars. DuPont and Remington were supplying the arms and ammunition for the assault scheduled to begin the following year in 1935.
But General Butler blew the whistle, and the “Business Plot,” as it came to be known as, was thwarted.
In sworn testimony before the House Un-American Activities Committee, Butler said about MacGuire, "He did not give me the name of it, but he said it would all be made public; a society to maintain the Constitution, and so forth. They had a lot of talk this time about maintaining the Constitution. I said, ‘I do not see that the Constitution is in any danger,’ and I asked him again, ‘Why are you doing this thing?’"
Co-conspirators were named in the hearings including the Rockefellers, the Mellons, the Morgans, the Duponts, the Remingtons. Butler told the Committee that MacGuire had told him, "You know, the President is weak. He will come right along with us. He was born in this class. He was raised in this class, and he will come back. He will run true to form. In the end he will come around."
And it was true that Roosevelt did come from a wealthy family of considerable economic and political influence in New York. He also practiced corporate law for a Wall Street firm. But despite his outward appearances of wealth and allegiance to the financial elite, Franklin Roosevelt was, at his core, a progressive.
He came of age during the Progressive Era in the early 1900’s when his distant cousin (they didn’t know each other personally) Teddy Roosevelt beat back the Robber Baron Economic Royalists, so he had strong knowledge of progressivism. As he summed up while running for Governor of New York for the second time in 1930, "Progressive government by its very terms…must be a living and growing thing, that the battle for it is never ending and that if we let up for one single moment or one single year, not merely do we stand still but we fall back in the march of civilization.”
So, when the Economic Royalists declared war on FDR, he declared war right back on them. “Here in America we are waging a great and successful war. It is a war for the survival of democracy. We are fighting to save a…precious form of government for ourselves and for the world, he said in that same 1936 speech”[vii]
Summarizing America’s multigenerational war against the Economic Royalists, Roosevelt went on, “It was to win freedom from the tyranny of political autocracy that the American Revolution was fought. That victory gave the business of governing into the hands of the average man, who won the right with his neighbors to make and order his own destiny through his own government.”
However, Roosevelt added, since our War of Independence, “[M]an's inventive genius released new forces in our land which reordered the lives of our people. The age of machinery, of railroads; of steam and electricity; the telegraph and the radio; mass production, mass distribution - all of these combined to bring forward a new civilization and with it a new problem for those who sought to remain free.
“For out of this modern civilization economic royalists carved new dynasties. New kingdoms were built upon concentration of control over material things.”
Roosevelt added, “Through new uses of corporations, banks and securities, new machinery of industry and agriculture, of labor and capital - all undreamed of by the Fathers - the whole structure of modern life was impressed into this royal service.”
And then the Crash happened.
“The collapse of 1929 showed up the despotism for what it was,” Roosevelt said. “The election of 1932 was the people's mandate to end it. Under that mandate it is being ended.”
Echoing warnings Jefferson made a century and a half earlier, Roosevelt argued that America’s survival depended on constant vigilance against the Economic Royalists.
“These economic royalists complain that we seek to overthrow the institutions of America,” he said. “What they really complain of is that we seek to take away their power.
“Our allegiance to American institutions requires the overthrow of this kind of power.”