classical economics
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Making Great Depression

*An Essay*
Planning, Actions and Objectives

By Wayne Jett © December 13, 2018

     The Great Depression produced such extreme hardship that starvation took the lives of millions of people in America and millions more around the world. This essay offers a concise summary of the actions taken by and through two U. S. presidents, Herbert Hoover and Franklin D. Roosevelt, to impose the Great Depression upon Americans and other nations around the world.

     At the outset, you are provided a prelude of the planning and motives for this “pivotal economic event of the 20th Century.” At the end, consider the postlude reference to testimony by a Russian elitist operative in 1938 under interrogation by Stalin’s secret police stating the significance of the 1929 Crash and the roles of FDR and his spouse in “the ‘real’ revolution.”

Prelude: The Elitists’ Assault

     In 1880, the best-selling book1 on economics ever written  detailed how nations worldwide are purposely misled by a powerful pecuniary force which writes laws and molds thoughts in every nation so as to lead societies down the wrong paths – “the power of a vast and dominant pecuniary interest.”2  This is done, Henry George wrote, to make people poorer and more easily dominated than they would otherwise be.

     In 1901, a small book3  written by an obscure British intellectual described the global ruling elitists’ utter disdain for humanity, especially the growing “middle class” of society, and for its related political system, commonly (and erroneously) called democracy. The elitists strongly preferred the older, “more stable,” two-class system comprised only of the ruling class and the lower class of servants, slaves or serfs who obeyed their rulers’ commands without human rights.

     Anticipations reported that, in order to return to the two class system, the entire fabric of Western society must be destroyed as soon as possible, leaving no trace of the middle class of people able to support themselves and families by their productive efforts. In addition, all “people of the abyss” – described as including blacks, browns, yellows, “dirty-skinned whites” and Jews – were to be “poisoned” by means to be developed within the 20th Century, so as to achieve sharply reduced levels of human population.

     Instruments and institutions to be used in this deliberate return to two-class society would include a shadow government surrounding each national government, weakening it until it failed; a graduated income tax on earnings by middle class workers; a death tax to confiscate wealth of the "irresponsible" rich and the most successful middle class; tax-exempt trusts or foundations to shelter wealth of the elite; and, a global network of privately owned central banks to control all currencies used among the nations.

Hoover's Three Big Wrongs

     Herbert Hoover let it be known promptly upon his election as U. S. president in November, 1928, there would be no more budget surpluses or annual cuts in federal income tax rates as had become the custom under President Calvin Coolidge. Hoover had plans to spend federal revenues for public good. Once in office, Hoover called a special session of Congress to consider increasing tariffs on farm products. Once convened, the special session promptly proceeded to adopt tariffs on agricultural and then industrial products so high all imports would be shut out.

     The Great Crash occurred on Wall Street precisely on the days in October, 1929, and at the times when the Senate voted to hike tariffs applicable to industrial products. Yet The New York Times never reported the two topics as being related until the day after the last day of the Crash. Foreign trade was not a large portion of the U. S. economy (less than 10%) at the time. But those who orchestrated the Crash used the Senate votes as signals to trigger heavy short selling of shares – essentially selling shares that didn’t exist – to cause panic among actual shareholders.

     This worked like a charm (as it did in the Tech Crash of 2000-2002 and in 2008), and the fraudulent traders made millions. One of the biggest of these was Joseph P. Kennedy, father of Joe, John, Robert and Edward. Wall Street’s fraudulent trading continued throughout Hoover’s term as president, yet he did nothing to curb it. Big wrong # 1.

     Hoover could have stopped passage of the Smoot-Hawley Tariff Act with a word to his supporters – and certainly could have killed the bill by veto. But Hoover did neither, remained silent, and signed the bill in June, 1930. Within 18 months, U. S. imports and exports were down nearly 70%. Foreign producers suffered even more. By the end of 1931, after closing and liquidation of many factories and businesses, U. S. unemployment was 25%. Big wrong #2.

     How did Hoover prepare to run for re-election in 1932? Did he turn to cutting tax rates, as the popular Coolidge had done? No. Hoover proposed a major increase in income tax rates to cover his budget deficit. The Democratic majority in the House elected in 1930 obliged with rates higher than Hoover proposed: quadrupling the lowest tax rate and nearly trebling the highest rate. Big wrong # 3.

     Hoover belatedly suggested the Senate should investigate the persistent rumors of fraud in the financial markets. The Senate obliged with public testimony of witnesses, which revealed rampant trading fraud and fore-knowledge of the Crash of 1929.  Prospective voters were outraged. No surprise – Hoover lost to Franklin Roosevelt in a landslide after winning by landslide only four years earlier.

FDR – Traitor To His Electorate

     Franklin D. Roosevelt was elected president to fix or "un-do" Herbert Hoover's three big wrongs. Instead, he did the opposite.

1.    Smoot-Hawley Tariffs

     The Democratic Party traditionally favored low tariffs, and FDR appointed a Secretary of State, Cordell Hull, well known as a supporter of foreign trade and low tariffs. Hull promptly organized a world conference in London to negotiate tariff rate reductions in July, 1933, a mere four months after FDR took office as president.

     But, just as Hull was ready to sign agreements cutting tariff rates, Roosevelt broadcast a radio speech from Washington declaring he would not agree to give up his power to devalue the U. S. currency. Newspapers immediately headlined that FDR had “torpedoed” the London conference and tariff reductions. Americans and other nations clearly understood currency devaluation to be the “other side of the coin” of tariffs for gaining advantage in foreign trade.

2.    Tax Rates

     Far from repealing the monstrous tax increases enacted under Hoover in 1932, FDR raised income tax rates and/or added significant new taxes every year he served as president, except one year – 1939. In that year, House Democrats refused to increase taxes after losing more than 80 seats to Republicans in the off-year elections of 1938.

     Indeed, FDR’s Secretary of the Treasury, Henry Morgenthau, Jr., privately advised FDR in March, 1939, that the country would have a “boom within a month” if the president would permit passage of across-the-board cuts in tax rates. Roosevelt refused and berated Morgenthau for failing to understand that “this is not about recovery; this is a matter of politics.”

3.    Fraud in Financial Markets

     Roosevelt signed the Securities Act of 1933 declaring fraud in the financial markets to be a federal crime. However, the 1933 statute neither defined what would be considered fraud in the financial markets, nor did it define penalties or remedies.

     The following year Roosevelt signed the Securities & Exchange Act of 1934, which established a Securities & Exchange Commission. The SEC would have six politically appointed members with authority to hire permanent staff, to define financial fraud, to determine what investigations should be conducted to detect financial fraud, and to determine penalties applicable to violations.

     The SEC’s first chairman was Joseph P. Kennedy, the notorious stock manipulator mentioned above. Kennedy served about one year, just long enough to hire the SEC’s permanent staff and set rules of operation. This assured that the SEC would function indefinitely as a shield protecting the largest financial manipulators from detection or meaningful penalties for their frauds. Never has this been more blatantly obvious than during and after the “Tech Crash” of 2000-2002 and the financial terrorism of 2008.

4.    Gold Seizure and Dollar Devaluation

     Hoover’s three big wrongs shrank the American economy severely. Factories closed; jobs disappeared; equipment and inventories were liquidated at severe losses. Anyone with savings or capital exchanged it for gold coins at the official rate of $20.67 per ounce to protect themselves against FDR’s rumored plans to devalue the dollar after taking office.

     Shortly after his inauguration in March, 1933, FDR ordered all privately owned gold to be exchanged for dollars at $20.67 per ounce; violators would be subject to fine and imprisonment. The gold was in federal hands by year-end 1933, and on January 31, 1934, FDR devalued the dollar to $35 per ounce.

     Ordinarily, the political excuse for currency devaluation is that it adds liquidity to the economy. But FDR’s devaluation design did precisely the opposite. If FDR had devalued the dollar to $35 per ounce and then ordered gold to be surrendered to the government, those owning gold would have received a nearly 70% gain in number of dollars compared with the price they paid for the gold. More accurately, their purchasing power would have been maintained.

     By FDR’s clever design, the private citizens received only the price they paid for the gold, while all gain on the devaluation went into federal coffers. More accurately, the entire “profit” on the dollar devaluation was transferred from the U. S. Treasury into the newly created, secret Exchange Stabilization Fund.

     The ESF still operates secretly in 2018 with no Congressional oversight of its activities, and is exempt from compliance with any laws of federal or state governments. In essence, the ESF is treated as if it is an independent nation, much like the City of London and the Vatican in their own locales.

     Thus, FDR’s dollar devaluation added no liquidity to the American economy. Indeed, it actually reduced purchasing power of currency held by private Americans by about 41%. This was a crushing blow to many Americans who were already starving and struggling to survive.

5.    Gold Purchases on Foreign Exchange

     Soon after taking office in March, 1933, FDR began using federal revenues to buy gold on foreign exchange, sometimes paying above $40 per ounce for it. By the end of 1935, U. S. gold reserves had risen by 2,640 metric tons above the 1930 level. Some of this increase came from FDR’s gold confiscation from Americans at $20.67/oz.,  some were his purchases from domestic mines, and some were his purchases on foreign exchange from non-Americans (international banks), sometimes at twice the price paid to Americans.

     Thus, FDR increased U. S. gold reserves by 41.5% to 8,998 metric tons within less than three years while average Americans were experiencing deprivation and starvation. This is heartless, cruel, predatory government, in stark contrast with many other nations which sold gold reserves so their citizens could eat.

     From 1936 through 1940, the same practices became even more extreme. During those years, U. S. gold reserves leapt from 8,998 metric tons to 19,543 metric tons. In these five years of abject poverty and starvation for millions of Americans, Roosevelt added more gold to federal reserves—10,545 metric tons—than the U.S. Treasury had acquired previously in all of U. S. history.

     The manner in which this major gold buying program was financed is important. FDR used both federal tax revenues and government bonds to raise the purchase money. Taxing and borrowing sucked capital from the private American economy, denying funding of business and job creation.

6.    No Monetization of Gold Reserves

     Here is the kicker to FDR’s monstrous gold-buying scheme. Under the international gold standard monetary system, as each trading nation experienced positive or negative annual trade balances, gold flowed into or out of its national reserves in exchange for gold-backed currency paid for goods.

     Each nation participating in the gold standard system was obliged to monetize new gold reserves received from other trading countries. This gold standard rule enabled a prospering nation’s people and industry to buy more from traders of other nations, thereby spreading the prosperity.

     By 1936, Europeans were migrating to America in fear of on-coming war in Europe. In July, 1936, someone tipped FDR that conversion of European currencies to dollars had produced an inflow of $7 billion in gold to the U. S. Treasury. This was displeasing to FDR.

     FDR promptly alerted Morgenthau at Treasury that this $7 billion in gold should be evaluated as “hot money,” which might be moved out of the U. S. on a whim. This might "destabilize" the fragile U. S. economy, FDR insisted, so careful study should be made before monetizing any of this gold.

      FDR’s newly appointed chairman of the Federal Reserve, Marriner Eccles of Utah, protested that no sound reason existed to refrain from monetizing the gold inflow. Eccles even wrote a detailed letter to Morgenthau saying so in strong terms.

      But FDR convened a meeting with Eccles and Morgenthau in the White House, and Eccles relented. When writing regulations to “sterilize” the gold (excluding it from monetization), Morgenthau conceded in his personal diary he was very reluctant to write that the flow of gold into the U. S. from Europe was “a bad thing.”

      Nonetheless, FDR’s gold sterilization rules became effective December 23, 1936 – two days before Christmas. Astoundingly, as published, the regulations also sterilized all federal gold purchases from U. S. domestic mines! This refusal to monetize gold continued at least well into 1938, when Morgenthau announced Treasury would begin “gearing down” the practice, but no definitive end to gold sterilization has been identified.

      Thus, FDR’s Treasury and the Federal Reserve prevented expansion of the money supply in the U. S., even when private commerce produced it under normal rules of the gold standard monetary system. In summation, FDR deliberately created extreme monetary deflation, making conditions severely worse for starving Americans, and enabling his elitist sponsors to acquire assets for mere pennies on the dollar.

7.    Regulatory Reduction of Private Bank Lending

      The Federal Reserve Reform Act of 1935 gave Roosevelt new appointments, and thus control, of the Fed Board of Governors in July, 1936. On July 14, its first meeting with expanded membership, the FOMC raised bank reserve requirements 50 percent for no reason other than “showing the banks who’s boss.” This severe increase in reserves required banks to call in loans, even if borrowers were performing, thereby wreaking havoc upon farmers, homeowners and businesses nationwide by forcing liquidation at fire-sale prices.

      After the 1936 landslide re-election of Roosevelt, the FOMC acted again on January 30, 1937, to raise the reserve requirements an additional 33%. The two FOMC actions doubled reserve requirements within seven months and removed $3.1 billion from capital available to support private bank lending. This was 24% of the entire monetary base on June 30, 1936. As with the series of actions by FDR already described, the result produced was severe monetary deflation resulting from shortage of currency.

The True Legacy of FDR4

      Erskine Caldwell entered a Georgia cabin in early 1935 and found three families of sharecroppers living in two rooms. Inside he saw a skinny six-year-old licking the wrappings from a package of meat, as two babies under a year old lay on the floor before an open fire sucking the dry teats of a female dog.

      Secretary of Agriculture Henry Wallace traveled from Arkansas to the East Coast in 1936 and said he observed abject poverty. Wallace reported that “… one third of the farmers of the United States live under conditions … much worse than the peasantry of Europe ….” This was Roosevelt’s fourth year in office, when he pursued policies of new and higher taxes, high tariffs, and buying gold in foreign exchange for U. S. Treasury vaults.
     Roosevelt concealed and obfuscated some of his actions in public discourse, but plenty of his offensive policies were known. At every turn he found excuses for continuing with them despite persistent objections and arguments from his closest advisers in government. One historian, trying to overcome the obfuscation, describes Roosevelt’s conduct thusly:  “[I]n the end … he did a little of everything and a lot of mischief. … Whatever [the New Deal] was, Roosevelt conclusively demonstrated in 1938 that it was not a recovery program, at any rate not an effective one.”

     American mercantilists had no difficulty seeing through the folderol of Roosevelt’s social program window-dressing and setting it aside. They easily recognized their own agenda in the president’s acts, and the fruits of their graft were bountiful in the extreme. Each could confide unflinchingly to his memoirs what a paradise on Earth existed in the Thirties, when his great fortune was multiplied and he could acquire resources and assets of every kind the world over for mere pennies on the dollar.

Postlude: The Red Symphony5

      In 1938, Joseph Stalin ordered a purge of followers of Leon Trotsky, whom Stalin suspected of plotting a coup against him to take control of the Soviet Union. One among many prisoners taken in the purge was C. G. Rakovsky, Stalin’s former ambassador to France and a suspected operative of Trotsky and the global cabal of ruling elitists. As occurred with many others, Rakovsky was given a show trial, found guilty and sentenced to be executed. Then he was interrogated.

      Dr. J. Landowsky was the physician selected by Stalin’s NKVD to assist in the interrogation by administering appropriate drugs to ease the testimony and to record and transcribe the questions and responses. Landowsky was to make two copies of the transcript – one for Stalin and one for the NKVD commander. Landowsky made three copies, one of which eventually made its way to Spain during World War II by efforts of a Spanish volunteer who found the transcript on Landowsky’s body in Petrograd (Leningrad).

      The transcript was eventually translated into Spanish, titled The Red Symphony, and published as one chapter of a much larger work. Years later, George C. Knupfer translated the transcript into English and published it separately under the same title.

      First and foremost, The Red Symphony demonstrates the remarkable brilliance of Rakovsky. Secondly, it covers many more points of considerable historical value than will be mentioned here. Its immediate relevancy is in relation to the planning and execution of the Crash of 1929 and the Great Depression.

      After Rakovsky’s testimony was completed, transcribed and reviewed, he was advised that, if he hoped to save his life, he would have to provide “proofs” that his testimony was not fabrication; that, indeed, he did have connections with the cabal which wielded such power in the world as he described. Rakovsky asked if the new U. S. Ambassador was in town, stating that in light of his dire situation the cabal might permit him to break normal rules by direct contact with another operative.

      In further questioning inspired by his unusual request, Rakovsky implied that the U. S. government was controlled by the cabal. Rakovsky then explained that October 24, 1929, the first day of the Great Crash, was the beginning of the “real revolution” and more important than the seizure of power by the Bolsheviks in Russia in October, 1917. In February, 1929, Trotsky had left Russia, the financing of Hitler was agreed in July (recall that Baruch was then vacationing in Europe and Scotland), and the Great Crash occurred in October.

      Rakovsky further stated that Hoover’s term of office was used to prepare for seizing power in the U. S. by “financial revolution” and in the USSR (replacing Stalin with Trotsky) through war and defeat. He continued: “[E]xecution of the plan on such a scale requires a special man, who can direct the executive power in the United States, who has been predetermined to be the organizing and deciding force. That man was Franklin and Eleanor Roosevelt.” He then referred to Eleanor as “this two-sexed being” included in the definition of “special man” because Franklin “had to avoid any Delilah.”


 1 Henry George, Progress and Poverty: An Inquiry Into the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth … The Remedy (D. Appleton & Co., New York: 1880), Robert Schalkenbach Foundation, New York: 1955.

  Id., pp. 294-295.

  Anticipations of the Effect of Mechanical and Scientific Progress Upon Human Life and Thought, H. G. Wells, (Harper & Brothers, New York and London: 1901).

4 Excerpted from The Fruits of Graft – Great Depressions Then and Now, by Wayne Jett (Launfal Press, Los Angeles: 2011), pp. 162-163 (footnotes omitted).

5 Parts of this Postlude are excerpted from The Fruits of Graft – Great Depressions Then and Now, previously cited.