Woodrow Wilson and World War I

0:00The guy who was appointed on the Federal Reserve Board, the original Federal Reserve Board, the most appointed, had all sorts of big shots. Paul Warburg was too low, and all sorts of other people. But the guy who really ran the system from 1914 until he died in 1928 was a guy named Benjamin Strong. And everybody admits that when he ran the system, he seized power. As head of the Federal Reserve Board in New York, he was in control of all the bond operations in Wall Street, which was the key to this whole thing. He ran it with an iron hand for about, let's say, till he died. So who was Benjamin Strong? Most historians don't look into it. They say what he did. He was very inflationary. He doubled the money supply during the war, thereby financing the war, basically, the American participation in the war. He kept inflating during the 1920s to support England's crazy bond system, which I hope to get to before it turns over, crazy monetary system. And

0:52thereby was responsible for the Great Depression, because he kept inflating during the 20s and and the reaction came in 2009. So there's a lot to answer for Strong. And the question is, who was he? The question, which somebody like myself would ask, OK, Strong was very powerful. He ran the whole system. Who the hell was he? Where did he come from? What was he before he was the head of the Fed? When he was running the Fed? Well, he was the vice president and then president of Banker's Trust Company. Banker's Trust Company, as we've seen, was a Morgan, JP Morgan Institution, which was created around 1901 or so, in order to buy trust instruments, buy trust instruments, which is a new instrument then, trade and trust instruments. Trusts are very important there. They set up a trust. A trust is a high-powered, protected instrument. In other words, the government can't invade trust very well. They set up a trust that's protected from a lot of government intrusion.

1:42At any rate, the Bankers Trust Company was a Morgan institution. Benjamin Strong was a disciple of Henry P. Davison, he was a best friend of Henry P. Davison's Morgan partner. He lived in Englewood, New Jersey, which in those days was a very wealthy suburb. Lived right next door to Davis and I think. His other close friends were Thomas W. Lamont, Morgan partner, and Dwight Morrow, Morgan partner. His three best friends in the world and mentors, I guess, I think Davis was his mentor anyway, three best friends and mentors in the world, partners with JP Morgan and Company. He joined the country club, a very swanky country club that he would join, etc, etc. When he gets the nod, Colonel House, of course, being a Morgan person, was running, manipulating all of Wolfson's appointments.

2:32He gets the nod, the offer of being head of the Federal Reserve Bank in New York, he doesn't want to take it, he feels unworthy, you know that sort of stuff, I'm not really, I'm only a president of Bankers Trust. He was persuaded to take it by Davison, Lamont and Morrow, No, no, you gotta take it, we need you, blah, blah, blah, and he takes it. In other words, Benjamin Strong lived his entire life in the Morgan and J.P. Morgan ambit, very close as a top Morgan person. His policies after he got out of the office were totally consonant with Morganism. In other words, he followed J.P. Morgan's basic policies, which I will now get to, now brings us to World War I. J.P. Morgan Empire was getting into economic trouble. Remember, Morgan was heavily involved in railroads, and always had been. and Railroads are beginning to collapse. 1900 and on begins the long secular decline of railroad industry. J.P. Morgan, even though they're into industry too, was lagging behind

3:24Kuhn-Loha when it got to underwriting and being investment bankers for industry. Kuhn-Loha was a jump, it's like with all monopolies or plays on monopolies, they can't, they don't spot the new trends coming in very well. And so Morgan didn't spot the industry trend, he lagged behind Kuhn-Loha, Kuhn-Loha was doing better. In 1914, Morgan's very important and the New Haven Railroad, a $400 million railroad went bankrupt, and we began to see then the handwriting on the wall, the Morgan Empire might totally collapse, might be a total destruction for the vast Morgan Empire. When World War I comes, happily for Morgan, we have World War I. J.P. Morgan always had tremendous, very close ties with the Bank of England and the English finance, English international bankers, and as soon as the war was declared in August 1914, Henry P.

4:09J.P. Davis and Morgan partner gets on the boat, gets on the ship, I guess they call it. There's no plane aboard, there's no Concorde, no jet. He gets on the ship, rushes to London, and makes a deal with the Bank of England, the English government. J.P. Morgan and company got the total monopoly of all underwriting of British and French government bonds in the United States. Unbelievable situation. In other words, the British and French are going heavily into debt in order to finance the war effort. The United States is expected J.P. Morgan & Company gets the total monopoly of underwriting and all the big commissions which is involved monopoly of underwriting, British and French government bonds which they then happily began to float in addition to that, it still happened in most of the war equipment, most of the war industry which America now began to ship to Britain and France, especially Britain Steel and all sorts of stuff were essentially Morgan companies, US Steel, Bethlehem, various

5:07arms equipment firms were Morgan companies. So here we have JP Morgan Company very heavily invested now in the victory of the French and British in World War I and both because of the government bond underwriting and because of the war equipment underwriting of the war exports. Very heavily involved. It's essentially pulled the Morgans out of a financial depression, but now the Morgan The Morgan Empire was now totally committed to the importance of British and French victory. If the Germans had won the war, the entire Morgan Empire would have collapsed. The bonds would have been worthless, and all the rest of it, the war equipment industry, et cetera, et cetera. So, the Morgan begins, the mass height, J.P. Morgan, at the very beginning, as soon as the war started, J.P. says, he said it later, I think in a congressional investigation, he said, From the very big start, we did, and we mean his Morgan Empire, we did everything we could to contribute to the cause of the Allies, in other words, everything we could to drag

6:04the United States into war on the side of Britain and France. It becomes a Morgan project, and the entire Morgan statesman, so to speak, gets involved in this thing, using all our influence on Woodrow Wilson to get him into the war, including Colonel House, was lying to Wilson constantly in order to try to get him into the war, Ambassador Page, Ambassador in London, conniving with the British Secret Service and with the British Foreign Office and with House drag Wilson into the war, Wilson's sort of a dum-dum it's not that he's unwilling, but he's sort of a little bit reluctant and the Morgans used all their powerful influence to try to do this as Secretary of Treasury McAdoo said, it was of course again a Morgan person Our prosperity is dependent upon our continued and enlarged foreign trade.

6:58To preserve that, we must do everything we can to assist our customers to buy, to maintain our prosperity, and we must finance it. What the hell does that mean? It means that we, what do you mean we have to finance it? What he's saying is the basis of foreign aid programs still exists in our huge quantities. that for our export industry to be phosphorus, quote-unquote, the American taxpayer, in other words, look at the situation here. Here's export industries. In those days, Morgan controlled. Since they're not getting too much business, we, the American taxpayer, have to be taxed. The money has to be shipped abroad to Britain, France, Angola, whatever happens to be, whatever for Dictatorship or whatever it was, and then these dictators then buy American exports.

7:44They use the dollars to buy American exports. So our prosperity is financed by our foreign aid. What is this? Who's the we and who's the our? It's very much like the Keynesian nonsense about we. The public debt is good, the national debt is good, we only owe it to ourselves. The question is, who's the we and who's the ourselves? The we, the ourselves here is the Morgan interest. In other words, the taxpayers are being financed at each step Let's start with the way. Taxpayers have stopped. The American taxpayer pays through the nose for whose benefit. First of all, the American government takes its handling charge. In other words, bureaucrats get some money out of this. They get their salaries. Some of the foreign aid gets siphoned off the U.S. government. The rest of it gets sent to Britain, France, Zaire, you name it. You underline Pakistan, whoever that happens to be. They get their cut. They build up their bureaucracy, dictatorship, whatever it is.

8:35and they take the rest of the dollars and buy American exports, U.S. Steel, General Electric, whatever happens to be. In other words, the whole foreign aid process is a process by which the American taxpayer is suckered into subsidizing American export companies and plus other bureaucrats, American bureaucrats and foreign bureaucrats. And so Morgan and Morgan Partners are leading the way in war propaganda. They set up an aerial patrol. There was an aerial patrol, aerial coast patrol in 1915. The war starts in 1914. In 1915, Henry P. Davison, Morgan's partner, a guy who made a deal with the Bank of England, probably one of the most important people in the 20th century in America. Almost unknown now, Henry P. Davison, a key figure. So he sets up the aerial coast patrol to get, and Baruch is in this and so forth, to get Americans to look for German planes.

9:27They stand there on the rooftop in New York or somewhere, they get the design of what a German plane looks like, and looking to spot German planes, German planes, it induces war hysteria on the part of the public. They're out there on the roof looking for German planes. So, creating a sort of war climate. Charles Schwab, the head of Bethlehem Steel, producing Armored Plate. Hey, we've got a great Armored Plate thing. He sets up a propaganda to have a big Navy. You need a big Navy. Naval ships, US Navy ships, then of course using Armored Plate. Who are they going to buy the Armored Plate from? Bethlehem Steel, of course. So you have these guys, these munitions manufacturers, and Morgan setting up war propaganda agencies. So Plattsburgh, New York, way upstate New York uses a closer universal military training zone.

10:15These guys set up a camp to have the draft, prepare the way for conscription, which is really probably unconstitutional. So Morgan's led this thing. For example, in the aerial coast patrol, in the Plattsburgh, it's called the businessman's training camp. All these Morgan types are up there training and getting everybody else to come in and military training Who is running it? Willard Strait, Morgan partner, also the publisher of the New Republic Robert Bacon, Morgan partner Teddy Roosevelt, Morgan tool, Henry Cavalade, Morgan person Ella Hewroot, Morgan lawyer, these guys, by 1915 they're pushing for a declaration of war against Germany Maybe in a very short period of time Original pro-war types DuPont, a big arms manufacturer, of course, all in favor of heavy ammunition spending, and all the rest of it.

11:06As Morgan again said, we agree that we should do all that was lawfully in our power to help the allies win the war as soon as possible. This is 1915, 1914. Why does war break out? I want to talk about this because it's really the beginning of all, as I said last time, the beginning of all foreign policy. All foreign policy to this day rests on the whole World War I experience, so to speak. What you really have, the real problem was that Germany and Russia had a sort of a cozy alliance for a long time. Neither would attack the other. They're both the Tsar and the Kaiser, or cousins, part of the same German family. And so the peace of Europe continued for quite a while. The thing that then happens is, the Russian gets taken over by hopped up czarist fanatics, who are essentially generals and pan-Slavic types.

12:02They believe it was a holy Russian mission in life to run into all the Slavic peoples. Anybody who was a Slav was destined by God to be run by the Russian czar. This inspired a perpetual drive by Russia to take over the Balkans, any place which has Slavs in it, the German part of Poland, the Balkans, the Austro-Hungarian Empire was in bad shape, they had a multi-ethnic kind of situation. The Russians began to rely on the Kingdom of Serbia, which was a group of hopped up Serbs and wanted to take over all the Serbs in the Austro-Hungarian Empire, living in Croatia, Bosnia and other places in Eastern Europe.

12:48We had in other words a Russian, first of all Russia was the most imperialist power on the continent for most of the 19th century. I think taking over northern, central Asia and so forth, Hashkent, Ghana as well, a whole bunch of areas in central Asia. You had an imperialist Russian drive now to move into the Balkans, to take over Turkey, to take over Bulgaria, whatever. So this is and runs this whole Balkan area, thereby coming an immediate conflict with Austria-Hungary. In the meantime, the French, in their own right, they want to re-seize Alsace-Lorraine, which had been taken over by the Germans in 1871 on the French-German border. This is a complex situation and basically what happened was that Louis Napoleon, who had been the Emperor of France, went to war against Germany and after being kicked back, The Germans took over Alsace and Lorraine. The case for Alsace is pretty strong. Alsace is basically German, ethnically German. Lorraine's case is probably weaker.

13:54The result of all of this was set up in France, a desire among all parties for what was known as revanche, or revenge in English, but these were the revanchistes. So we have that, especially among the French right wing, for thirty years or forty years agitation to go to war against Germany to re-seize Alsace-Lorraine. France was not very much like it. France was a republican and all the other countries were monarchies at that time. France was considered a commie because they were republicans. But France and Russia finally form a fateful alliance around the 1890s on the basis of this common ground, because Germany was allied with Austria-Hungary it begins to develop this mighty block situation with Russia and France allied, not because they liked each other, but because they had a common enemy, namely Germany, Austria, and Hungary.

14:48And so, a war situation begins to develop between these two blocks. Great Britain, in the meantime, becoming very, very anti-German because Germany is rising up industrially and Britain also had the idea that only Britain could have a large Navy somehow God had decreed that only Britain could have a Navy. Germany even gets to build a Navy and Britain gets hysterical. And that's like Admiral Fisher, the head of the British fleet, wanted to bomb the German fleet in 1907 or 1906 the German fleet was located off Copenhagen in Denmark and he had a serious plan to bomb it, just like that, to destroy it and it finally overruled, it was called Copenhagen in the German fleet at any rate, so Britain becomes an ally of France and Russia and the situation then develops where after a member of the Serbian secret police assassinate the Austrian Archduke in what's now known as Yugoslavia The Austrians, actually what happened was the Austrians were one of the serfs to punish this assassin, the serfs refused to do it

15:58and a war develops between Austria and Serbia, the Russians come in on the part of Serbia and the French come in on the part of signing with the Russians the Germans come in on the part of Austria and the British come in and all of a sudden, bingo, there's a world war in August 1914 It's a war which is useless from any rational point of view and no rational objective In other words, there's no moral justification for it on any ground, there's nobody trying to conquer the world, there's none of this stuff. These are imperial disputes for ignoble ends, territorial gain, whatever, for defeating competition by military fight. And in this fight, there's no question about it, in my mind, that the major culprits are Russia and France and then Britain, Germany and Austria-Hungary, Germany is the least guilty of all of these states.

16:52The one is dragged in because they had a peaceful alliance with Austria-Hungary. At any rate, both sides think the war will be over in six weeks or so. Quick war of a win and by Christmas. The famous phrase was, out of the trenches by Christmas. Of course, it wasn't over until it was dragged on for four and a half years, four and a quarter years, and as it drags on, the war gets tougher and tougher, and more and more chaos. I mean, the war is unbelievably destructive. I mean, by the end of the war, the political systems, the social systems, the economic systems, the loss of life was enormous. I mean, fantastic loss of life and total disruption of everything. And neither side would have a compromised peace, because they all say, we have to win, we have to have a holy honor. Once one soldier of one country gets killed, they say, we have to avenge this guy's death, and it goes, all right, it's an escalating situation.

17:44and it was almost a compromised piece in 1916 and Woodrow Wilson prevented it, one of the most ignoble actions so, no, no, we have to win, we don't have to crush them, so in this situation, as I say, Morgan was heavily wrapped up in French and English victory in addition to that, Kuhn-Loha was pro-German, since Kuhn-Loha Company was German investment bankers of Bankers, they sided emotionally in favor of Germany so that the World War I fight them becomes a situation. Warburg, for example, squeezed out a Federal Reserve worker who is pro-German. We have a situation now where Morgan can use the World War I not just to get a lot of profits but also to crush Kuhn-Loh to make it much less effective, like defeating their German investment banking competitors.

18:37So at any rate, so there's the reason for the war, there's no good reason for any, anybody's far from the war in any sense. The United States had the least reason possible to enter the war at all because they were trading with both sides, no territorial ambition, no nothing. So the, of course Morgan is trying to get Wilson into the war on the side of the British and the French and the big propaganda was the submarine warfare, a terrible thing in Germans using submarines. Well, the situation was this, the British were opposing a blockade. In other words, don't let any goods through. The British were seizing American ships. If there was any American ship that went to Germany, it was being seized. The British kept violating American international law and American shipping rights all the time.

19:23In other words, if we were sending a ship straight to Germany, the British would confiscate it. And the Germans, however, since the British command of the sea had all the surface ships, the Germans had submarines. The thing is, the submarines can't surface. The thing about submarines, if it surfaces, in other words, if you have a surface ship, let's say you have a destroyer or whatever, and you're a battleship, you can command the ship, you know, heave two and whatever, and you can capture the ship, you can say, okay, we'll take a men on board, et cetera, but you can do that. A submarine can't do it. The submarine surfaces and it gives orders that it can be destroyed. A submarine on the surface is totally vulnerable. There's no weapons. So the submarine, and what the British would do then, if the submarine tried to get a British merchant ship, merchant ships were armed by the way, of course, the British, if the submarine surfaced and said go to the merchant ship, it would immediately destroy the submarine, it would immediately shoot it.

20:19So the submarine had to torpedo the ships. They couldn't surface and give a warning because then they'd be smashed So submarine warfare, since the Germans were forced into submarine warfare because they didn't have any surface ships worth much And they were forced into a situation where they had to shoot torpedoes, use the torpedoes first, without surfacing and giving warning So it was easy to whip up propaganda, emotional propaganda against the Germans in the United States by saying Look, the Germans are not fighting fair because they're submarining, they're using torpedoes and not surfacing to give warning The whole point of a submarine is it's impossible for them to do it, but actually the British were interfering much more with American shipping than the Germans were, and if we were out to defend the rights of international law and neutrals, etc., we should have won a war against the British, not against the Germans.

21:07This is, I think, a pretty clear cut. Nobody was advocating, however, going to war on the side of the Germans, World War I. So, what then also happened was the Lusitania, the famous incident occurred in 1912, excuse me, 1916. I'm not saying 1916 was the Lusitania, which is an armed, British-armed merchantman, goes from New York to London, it was armed, in other words, it was perfectly legitimate for a submarine to destroy, to shoot it, to torpedo it, in international law, because it was an armed merchantman, it was not a peaceful merchantman. Americans went aboard it, American passengers went in it, even though they knew it was an armed merchant man, they knew it was a very peculiar situation, the British sucked them into it, they said, yes, yes, it was perfectly safe, and so on, they got a lot of big shots, a lot of American big shots on it, the ship was then sunk by the Germans, torpedoed by German submarine, it had to drive immense hysteria in the United States, we should go to war with Germany, American lives were lost, well the fourth they were lost, you get on an armed English merchant man, which was a war with Germany, obviously, they were at risk.

22:14Now, why these jerks didn't realize, I haven't studied the specific question why they didn't realize I think they were sucked into it by the government, perfectly safe, blah, blah, blah Now, there was some evidence, this has been disputed, it's not been accepted yet There's some evidence of the fact that Winston Churchill was then secretary of the Navy in England, he was the first Lord of the Admiralty deliberately created a situation where misleading the British happened in Lusitania and not telling them that there were German submarines in the area so that it would be sunk. In other words, the British wanted to create an incident which would, where they could use the sinking of a British ship with Americans on it to attack Germany and war propaganda. This has not been fully established. I wouldn't put it past Churchill.

23:01At any rate, it's possible that he deliberately did this, not warning, not sending a warning the warning of the German submarine era, allowing it, so to speak, to be sunk and creating a tremendous war story in the United States. The British, by the way, denied there was an armed merchant, although, of course, there was, but another thing is a little rubbery. So, and it was the submarine warfare question again, which induced, which got the climate of opinion such that Wilson declared war against Germany and entered the war to the tune of A huge amount of American lives lost, plus property, plus total destruction of 19th century civilization The creation of conditions, we'll see next time, allowing the rise, bringing about the rise of Nazism and Communism There would not be any Bolshevism in Russia, there would not be any Nazism in Germany, if not for World War I World War I created the conditions for the whole 20th century stuff War crusade, perpetual war, all the rest of it

24:00Okay, we'll take that up Tuesday. Tuesday I'll start talking about the exam. I think we're going to have essay questions. That's pretty clear, but anyway, we'll get to talk more about it next week. Read, I guess this will be the final reading. Read on the war. It's the final chapter of Einstein, a magnificent final chapter on the war's fulfillment. Last chapter, chapter of great beauty, and also one of the best chapters in Hughes, chapter 23, on the command economy of World War I. This is the so-called revisionist view of World War I on the economic front. Till Weinstein wrote, and Coco has a similar one, but Coco doesn't really talk about the war. He stops more or less with the war.

24:49Before this, it was considered the progressive era, progressive reform was ended by World War I. In other words, he had this great progressive movement and helping the mankind and welfare of the state and all that. And then, all of a sudden, war comes along and kills progressivism. And what Weinstein points out as, on the contrary, progressive war was the culmination of the progressive movement. It was it. That was the key thing, to provide all the things they wanted in spades. and they realized that they were all in favor of it, except for one or two people, except for a couple of mavericks who didn't like the idea. Most of the progressives loved the war, and they thought it was the greatest thing that ever happened to them, and it happened in the United States. We'll get into that in a minute. And Hughes also talks about the war as a command economy. So, it's a very different view of the progressive movement, namely the status movement,

25:42Movement, which is in favor of any kind of state action, especially including war. A similar thing happened with the New Deal period, World War II. It was generally considered that, as Roosevelt said when we entered World War II, the Dr. New Deal is now gone, it's been replaced by Dr. Win the War. We assume that the war put an end to New Dealism. Quite the contrary, the war was a fulfillment of the New Deal. It maximized state power, which and it became sort of a permanent heritage of a massive state after that. What's happened in American history is basically that if you want to have sort of a diagram of government power, which is very difficult, I can't really precisely obviously measure it, if you want to have a government power over society and the economy, it's usually pegged along, first at a low level, pegged along until a war pops up.

26:36In other words, first the war of 1812, big increase in taxes and government control and all the rest of it, government budgets. We spent about 30 years rolling them back, the Jacksonian Democrats, etc. Spent about 30 years getting rid of the effects of the war of 1812. Excise taxes, federal bank, inflationary banking, especially money supply, big increase in the army and navy and so forth and so on. and so on. By the 1840s these aspects were wiped out and we became almost sort of on a low level. So Civil War, you have a massive increase in government power, the income tax comes in, the draft comes in, huge excise taxes on liquor and tobacco, big increases in the budget, high tariffs, government subsidies and all the rest of it.

27:22Then we take another 30 years trying to wash that out. It never really totally went back, but We never got rid of the protective tariffs, there were certain cuts. By the way, by the 1840s, get this, by the 1840s there was no national debt. Jefferson had paid off the national debt before that. Almost no tariffs, very, very low. No tariffs, very low government. No income tax either, there was almost no taxes. So then we have a big increase and also a free banking system, more or less. Then we have a massive government money and so forth, we only partially washed that out by the 1890s. Then comes World War I, you have another tremendous increase in government power, it's only reduced a little bit, and World War II, another huge increase, it's only reduced a little bit.

28:15So in other words, you have like a ratchet effect. The reason for growth of government power in the United States is against the society and the economy, is war, wartime is basically it, except for a few, like the progressive period, where there wasn't a war, but a preparation for war, so to speak, is not the only exception to that, the war, as Randolph Bourne, the great libertarian writer, said around, during World War I, war is the health of the state, in other words, it's war that provides the state the excuse for massive expansion, There's a great new book coming out, which I recommend everybody. It hasn't been published yet, so I can't require you to read it. It will come out this summer by Robert Higgs, called Crisis and Leviathan, which deals with how the economy and society have a tremendous increase in government power because of wartime.

29:05It should be a blockbuster. He's one of the very few social scientists in economic history. I'm going to finish up on the war. As I mentioned last time, the war broke out largely because of Russian imperialism in the 19th century. It was a very small number of people who took that position. Although in the 19th century, all the free market people were anti-war, down to about 1900, 1905. Anyway, before I get into the political economy of World War I, I'm going to finish up on the war. And last time, the war broke out largely because of Russian imperialism in the Balkans, its potential to kind of run all the Slavs in the Balkans, any Slav is considered a Russian, naturally born Russian to the legend.

29:51France was desire to grab Al-Gazalain back, and England was desire to crush German, nascent German competition, industrial might and navy. As a result, World War I breaks out, each side, you know, can win very quickly. Wilson apparently stepped in and prevented a negotiated peace in 1916, which would have at least prevented most of the devastation Wilson, by the way, at this time, itching to get into the war on the side of the allies because of the Morgan, largely because of the Morgan connection also because of Wilson's desire for world global salvation, through pious desire to remake the world to American might typical pious, even versus the pious, dedicated pious type So, we have a fusion of pietism, progressivism, pietism, and this time applying on a world level, not just on an American level, not just stamp out sin on an American level, but also on a world level.

30:44Sin was defined by the Wilkinson as being anything bureaucratic. In other words, what he wanted every country to be democratic in some way, centrist. Neither Marxist nor monarchistic. Both monarchies, or absolute monarchies, and Marxian governments violated his creed on what Wilkins thought the world should become. Basically, Wilkins, by the way, stepped forth all of American foreign policy since then. He's actually been a Wolfsonian. He was almost in the party. Even in the 1920s, even the Republicans in the 1920s were basically Wolfsonians. and Wolfsonian. Certainly, Secretary of State Hughes, a Rockefeller person, was Wolfsonian, and so was everybody else. When Richard Nixon became president, the first thing he did was to put the picture of Wolfson up right over his desk as his inspiration.

31:30So they've all been Wolfsonian ever since then. And Wolfsonian doesn't mean the United States has some kind of God-given mandate. To see through it, everybody in the world is democratic. There are democracies everywhere, and all the world shapes up according to the United States' desires. And so he stepped in and prevented the negotiated peace in World War I, but at that time his idea was every ethnic group should have national self-determination. This of course, this was a 19th century liberal view of national self-determination and opposition to imperialism. So each nation, each nationality should have its own school and languages, own government and so on. The problem is, this was done through coercion, in other words, through America's imposition from above.

32:15And at Versailles, after the war was over, a tremendous devastation of the war. A victor's peace, of course, written by the victors. The map of Europe was redrawn, allegedly in accordance with the Wilsonian principle of national self-determination. However, they had these experts, these historians, who were appointed by Colonel House about a year or two before the end of the war, in the name of the war, called The Inquiry, who much of political scientists and historians finding how to carve up the map of Europe, and this is a beautiful opportunity for intellectuals to take over here, intellectuals were given for the first and last time, perhaps, the power to redraw the map of Europe, almost at will, and you can't imagine how they botched it up, in other words, if they had been blind, if they had been, what do they call it, tinder donkey, tinder donkey gang, if they had taken the map of Europe and arbitrarily blindfolded and so on, and arbitrarily picked out, carving up the map of Europe by purely blindly, they

33:12couldn't have done a worse job than they did. It's unbelievable. They screwed things up to such an extent that it created a perpetual war from then on, for the rest of the 20th century. But it was done, it wasn't really random, it was done with a certain amount of malice at forethought. It was done, of course, in the Colonel House and all the stories, essentially, in the Morgan Ambit. And it was carved up in such a, Europe was carved up in a way, it's the maximum benefit to British and French imperialism. The curious thing is what happened in Europe at that time, in Eastern Europe, which again has set the stage for the rest of the 20th century. I think for the first and last time in world history, at least modern history, a very peculiar situation developed in Eastern Europe, namely, usually when a war is launched, either one side wins and the other side loses, or both sides win, both sides are in a stalemate situation.

34:02There's either one side wins, or both sides are stalemate. Because of the peculiar situation in Eastern Europe and World War I, both sides lost. I can't think of another situation where both sides are crushed. What happened was that, this is Europe, here's Germany, here's Russia, And there were the two big combatants, and also Austria-Hungary, of course. Austria-Hungary was totally demolished, totally wiped up by the Allies, just carved up. Germany first crushed Russia. Russia had a massive army, huge army, and they were simply lost, they were smashed.

34:50They were smashed. And as they were smashed, what happened by the end of the war was that simply in 1917, the soldiers just walked off. They shot their officers and left. They walked home, basically. Mass mutinies on the Russian front. And even though, of course, Russia was probably behind the war, they were all in favor of it until they won. This, by the way, is typical of states in general. As long as the country is winning, everybody loves it. As long as we crush Grenada, everybody knows it's a great thing. If, on the other hand, the coffins start coming back, the body count goes up, support for the war begins to dwindle and as Russia started losing the war, they all left, so you have a massive mutiny in the Russian front, eastern front So, here's Russia losing the war in a massive disaster, every party refuses to leave, refuses to get out they all say, no, we're committing ourselves to a war effort, including the Bolshevik party, which was set from the very beginning

35:43German imperialist war, Russia shouldn't engage in it. Bolsheviks are saying the same damn thing. They're saying, no, no, German imperialism, blah, blah, blah. By this time, by the way, the United States' propaganda machine claimed, I think they really believed it by this time, the Kaiser was out for world domination. They're out to conquer the world. Therefore, any moment is going to invade the United States. It's physically impossible as long as it's absurd to begin with. And therefore, the Kaiser is the center of all evil. You have to crush the Kaiser at all costs. The majority of the Bolshevik party were backing a disastrous policy, including the Bolshevik party. When Lenin returns from exile, arises the famous Finland station in Leningrad in the spring of 1917, I think April 17, he says, what is this nonsense? We should get the hell out of the war. The public wants to get out of the war, and it's the only rational thing.

36:30The majority of the Bolshevik party were against him, much less everybody else. had to, by sheer mental force, he had to persuade the, yell at the Bolshevik party to convince them to change their position. So finally after about two or three months, he was able to do it. The Bolshevik party then became the only party in Russia to say, we've got to leave the war. And the basic reason for the Bolshevik takeover, November 1917, is that their only party said, we've got to leave the war, we've got to quit. Everybody else, the social democrats, the social revolutionaries, the Mensheviks, the pre-Zarists, the cadets, The whole spectrum of Michael Letts that were committed to the end of the war effort, throwing more resources into battling the evil Germans. The only Lenin's that we got to get at, that's the basic reason for Lenin's victory, even though the Bolshevik party was small, but they were the only ones that said, now we got to get out of the war, and it drew a lot of people to the Bolshevik ranks,

37:22and they were finally able to take over. The other slogan on the part of Lenin, they were the only ones in favor of the peasants The peasant party, the peasant had a big party, a social revolutionary party, supposedly out of peasant interest. They got rid of the feudal land and surfed them and all the rest of the stress, the effect of surf, and then the big landlord seizure of peasant land. They were a favorite peasant land, but what happened in the summer of 1917 was growing chaos and the war, losing the war, the peasants started taking over their own land, they were shooting the landlords and taking their land back, and the social revolution said, well, we are favoring this in principle, we can't, this is too anarchic, we gotta wait for a parliament to be established.

38:08But there wasn't a mini parliament for several years, because the peasant parties turned against the peasants themselves. Once again, only Lenin. The Bolsheviks were against everybody except Lenin, and Lenin said, no, no, we should ratify them, the peasants are in great shape, they're the revolutionary group at this point. Violating the principles of Marxism, which is really anti-peasant. Marx himself, of course, thought that the peasants were just rabble and a really progressive class of industrial libertarians, industrial workers, the peasants were reactionaries, which should be exposed of anyway, but Lenin being a keen political entrepreneur, so to speak, letting it override as Marxism, said, no, no, this produces a change, we've got to unite with the peasants. So Lenin was the only person in all of Russia to say the peasants are right, The President was right and we've got to get out of the war, but in those two bases, land and peace, Lenin was able to take over.

39:00It's not that everybody in Russia read us, copied Paul, communists, etc. He was the only one to raise the correct position here. At any rate, when he finally took over, it was a big struggle to get out of the war. Even within the Bolshevik Central Committee, Lenin said we've got to ratify current borders. get out of the war, get out of the border, get out of the war, just to say, okay, we conclude peace with the current border at that time, the Germans had taken over the Ukraine and White Russia and set up, by the way, an autonomous, for the first and only time that Ukraine and White Russia had been independent in many centuries, during this brief period of six months, Germany had occupied it to set up or allow Ukrainian and White Russian nationalism to take over.

39:48So Lenin said, no, we've got to conclude in peace. The entire Bolshevik committee almost went to stir up on this one. No, no, we can't do it. We have to crush German imperialism, roll back only Russian soil. All this stuff is supposed to be bourgeois and nationalistic views. Trotsky and Manoli's got Wuhan. They all said, no, no, we've got to continue the war. and so that Lenin just overrode them and concluded with a famous appeasement piece of Ruslan Tusk in March 1918, which Russia successfully got out of the war, and just quit. So, yeah, that's a situation where Germany had occupied Ukraine and white Russia. So Russia was out of it, in other words, Russia was defeated. When the Allies of the United States, Britain and France conducted a massive offensive and defeated Germany in November 1918, Germany was defeated, and this meant that both Germany and Russia, the two great powers in Eastern Europe, were both defeated, both prostrate.

40:48It was a very unusual situation, the two mighty superpowers were both beaten. This left a power vacuum in Eastern Europe, a power vacuum which the Allies, Britain, France and the United States then took advantage of, The idea was to have these states be the buffer zone to keep down Germany and Russia. Germany was hated because they were the enemy, they were defeated. Russia was hated because the communists got them out of the war. They had two enemy countries, so to speak, Bolshevik Russia and Germany. The idea was to set up these states in Eastern Europe which would perform the function of keeping down permanently Germany and Russia, keeping them as subjugated countries. The idea was crazy in the long run. Obviously these countries didn't have the resources to do it.

41:40They were just totally idiotic. It was a long run proposition. But that was the idea, keep down. So they set up in Eastern Europe, one of the independent states of Latvia, Estonia and Lithuania, They basically set up Poland as a client state in Eastern Europe, making Poland as strong as possible by including within Poland, not just ethnic Poland, which would have been perfectly legitimate, a principle of national self-determination, allow independence, grant independence, ethnic Poland, which is more or less like this, Warsaw Lodz area, Polish heartland. Instead of just giving independence to that, they gave Poland a huge amount of territory, one white Russian and Ukrainian, huge chunks of Lithuania and huge chunks of Germany, which were sliced off from the German part land, namely the East Prussia, huge parts of Prussia in Russia, and huge chunks of Prussia, Silesia, a big colonized area, a Sudetenland, a Sudeten area, so all this was put in place under Poland.

42:55When I was growing up on the European map in the 1930s, Poland, which we considered as kids, well, it's Poland, it's natural Poland, and really only about half of it was Poland, Poland, the rest of it was huge chunks of Germany, White Russia and Ukraine, all of whom hated the Poles, of course, for good reason at this point. So we had then, Poland was supposed to be the power center, keeping down the Russians and Germans in Eastern Europe. Czechoslovakia was also carved out. Here we had Czechoslovakia. The Czechs were our client states. The Czechs, we loved the Czechs. Masaryk was here in the United States, and then different things, Wilson, etc., etc. We had the Czechs and Slovaks, the Czechs and Slovaks had hated each other's guts for centuries, they had hated each other's guts, eventually they were placed in one country, the Czechs dominated the Slovaks, and also the Carpatho-Ukrainians, really just the Ukrainians, there was a whole chunk, the Czechs were given power over this people, about half of the Czechs were occupied by the Czechs, the Slovaks dominated, Carpatho-Ukrainians dominated the Czechs, then Yugoslavia was set up,

44:03I was carved out of Austria-Hungary with the Serbs who were our clients, so to speak, the Serbs were dominating the other half of the country, which were Croats, Slovene, Montenegrin, Macedonians, all of whom hate the Serbs, again for good reason. So you have the Serbs, about half the population, tyrannizing over the rest of the country. You have the Czechs, the Czechs, the Czechs, the Serbs, and the Poles were our favorite states. They were the client states. And they're supposed to keep down Russia and Germany. First of all, they were small anyway. Second of all, they had a huge amount of friction within their own country. It's set up, in other words, it's set up a permanent problem, a permanent friction, a permanent problem of domination and resentment among the people who are being dominated.

44:52So instead of granting national self-determination to every group, they were only granted to three ethnic groups and the rest of them were put under the domination of the people they hated. It's not exactly a long-run set-up. So there's no such thing as Yugoslavs, there's no such thing as Czechoslavs. All this is American and English and French propaganda. There are Czechs, there are Slovaks, there are Croats and Serbs, you know, who hate each other's guts, so forth and so on. For a while, Russia was being crushed. In other words, for a while, the United States, France, and I think Japan all invaded Russia to try to overthrow Bolshevism. This really cemented Bolshevism. The Russians didn't like being invaded for obvious reasons.

45:37and it's really bolstered Bolshevism more than overthrowing it and the Poles invaded Russia and seized a whole bunch of Eastern Ukrainian Russia's zone here so when Russia finally got out of it, when Trotsky built up the Red Army and finally beat back the allied forces obviously there was a lot of hatred between East and West already so we have in other words conditions that were beautifully set up for another war, for the Second World War The German foreign policy then came for the rest of the 20 years, to get back the territory they were carved up out of, in other words, the territory was carved up. The Allies forced the Germans, the Allies imposed a food blockade, the armistice was to play on November 11, 1918.

46:24Until the peace treaty was signed the following year, I think September or August or something, the Allies imposed a food blockade. The British and French blockaded Germany through the mass starvation in Germany and Central Europe after the war, for about nine months after the war was over. So that Germany could sign the famous war guilt clause confessing to total war guilt. They were the only guilty parties in World War I, which of course, I'll be baloney. Probably they were the least guilty of any of the states. They had to sign a sole war guilt clause which sort of rubbed the salt on the wounds. So in other words, Alsace-Lorraine was taken away from Germany. German areas and Sudetenland were taken away, the Polish corridor was taken away, and also the colonies in Africa. And the German foreign policy, regardless of what party, right, left or center, the next 20 years the voters are getting back to the territories.

47:11The re-arming, because you can allow all this armament, as opposed to Germany also, of the Versailles Treaty, and the idea to get the territory back. The English for a long time were saying, yes, they're really right, we have to adjust this, we have to do this all and give them territory, but no one ever did it. So Russia was trying to get their territory back, and it was the goal of Russian foreign policy. Both countries, both Russia and Germany became revisionist countries in the Versailles Treaty. And the idea then was that Russia wanted to get its territory back, and Germany wanted to get its territory back, regardless of what the ideology was, they wanted to get their territory back. And so the famous Hitler Stalin pact of 1939 should not have been a surprise to anybody. It was a big shock to those leftists in the United States. It was very easy to understand, because they got their territory back, eastern Poland, which is really part of Russia.

48:01They got Estonia, Latvia, and Lithuania back, and the Germans got their territory back. Of course, they also added some more, obviously. But the point is, they had reached their objectives, and there was a common ground there, regardless of the ideological differences. So it's set up for the rest of the 20th century, the total wars were set up because of the Versailles Treaty, total flagrant disaster. At any rate, in addition to that, to get back to the economic aspects, all the warring countries, I mean Germany, France, the United States and England, conducted the war in a very different way from which they conducted the war before. Before that, first place war was not really total, it was really more gentlemanly, it sort of fought, the armies fought and you didn't kill civilians, there was a so-called international law that was developed 17th, 18th century, if you have to fight, don't kill civilians, don't interfere with neutral trade and all the rest of it The way the war was fought was very different, total war, civilians were considered fair game, and also, each war was run on a collectivist basis, the entire economy was collectivized by each side

49:10by the United States, by England, by France, by Germany and they all loved it, they came out of the war saying, this is great they have a collective system, we have cartelized the system now, we have we impose, we have control over all of industry, we impose price control, production control, we enforce trade association, we have the whole fascist or corporatist system and now impose them in the name of the war effort, you have to have a war effort, therefore you have to run no other war was fought that way, all other wars were fought by The tax story was to fight the resources away from the private sector and just fight the war. Now the ideology was, no, no, you have to total control of the economy in order to fight the wars. Of course, Bologna, you didn't have to have it. It just has fit in with, of course, the whole ideology of the progressive era, namely the Morgan, in the United States, the Morgan Rockefellers,

49:56whom Loeb drive for state domination, for government cartelization. And they imposed total cartelization in World War I, war collectivism. And they loved it. Why do they love it? He finally had government planning, he had intellectuals running the system, historians, economists, technologists, engineers, they were all running everything, boy do they love it! Several hundred thousand people were killed, Americans were killed in the war, many millions of Europeans, that was an unfortunate by-product, they loved the war system. And so, from then on, after the war was over, they tried to come back to it, all the guys who were running the war, they were all pretty young for some reason, they were in their thirties, sometimes in their twenties, So the rest of their lives, which went into the current period, they try to restore the war system and war collectivism. If you can't have a war, have it to fight depression, have it to fight inflation, have a government planning system, a government business partnership, big government setting, fixing prices, production and so forth, having trade associations, businessmen, and then unions running labor force, sort of corralling a labor force as a partner in this tripartite kind of agreement.

51:05but basically the new deal was very similar, the new deal was to restore the old World War II system and make it permanent okay, before we get to the actual setup, I mentioned that there was a little export prosperity before we entered the war from 1914 to 1917, just to give you a few figures on that for example, from August 1914, when the war started, until March 17 when we entered the war Total war munitions exported from the U.S. to Britain and France were $2.2 billion, which is an enormous amount, close to about $16 billion now. $700 million worth of explosives, $420 million worth of iron and steel, $485 million of copper manufacturing, meaning Guggenheims, etc. etc.

51:5940% of the ammunition was DuPont, and here DuPont calls for a war build up for defense contracts and all that, and makes 40% of the ammunition. Also in addition to that, in 1913 and 14 there was a big recession due to the previous bank credit expansion. Unemployment was fairly high, there was many factories and only a 60% capacity, and so the war orders that came in from 1914 were very welcome to all these people. Andrew Carnegie writes a letter to Wilson in November 1914, saying, this is great stuff, we have a very distressing financial and economic condition, and here these export orders are really helping us out, and of course, Benjamin Strong, the newly developed Federal Reserve system begins to inflate a lot, in order to permit all those things to happen, to permit big foreign loans, loans to Britain and France, expansion of war industries and so forth and so on, This is rendered permissible by the big expansion of inflationary money supply, money and banking,

53:05which of course then doubled the price level by the end of World War I. And profits go up in the war industry, for example, iron and steel exports, for example. The US iron and steel exports were $250 million in 1914, and by 1917, when we entered the war, it was $1.1 billion, so it was a four or five-fold expansion in iron and steel exports. The iron and steel profits went way up as a result. The average profit rate in 1915 we have for iron and steel was 7.5%. By 1917 it was 29 percent. A big expansion of profits, even more than the, almost about the same as the exports.

53:59So we had, in other words, enormous increase in profits as a result of the war production and war exports. In addition to the Morgan underwriting, monopoly underwriting of British and French bonds, The French bonds, they were also, Morgan loaned $823 million, a stupendous figure in those days, a single loan in late 16, early 17 to Great Britain. So when the war came about, there was a massive collectivization of the industry, usually illegally. In most cases, Wilson simply appointed somebody to be the czar of some industry and it was illegal. Then they got the Congress a few months later to ratify it by passing a law saying this is okay. There was a certain jockeying for power, and eventually by March 1918, Bernhard Baruch, as I mentioned, became the sole head of the War on the Industries Board, collectivizing all of industry.

54:52And they would set up commodity sections. In other words, each commodity had commodity sections. There were about, I think, 90 of them, I would say. There were over 60, over 60 commodity sections, or different commodities, iron, steel, copper, whatever, had sections. These were called commodity sections, which were headed by a certain number of people, three or four or five or whatever, government appointees running each section. Let's say iron and steel. And the iron and steel people would negotiate with trade associations. If they didn't have a trade association, they'd encourage them, they'd sort of force them to have one. Well, you guys better form a representative so they can negotiate. So the iron and steel industry was encouraged then to have, to elect representatives so to speak and they would negotiate over prices and production with the iron and steel committees government committees, section chiefs and this would happen in copper and everything, machine tools, all these industries, a whole bunch of different industries each of which would have government appointees, section chiefs and committees

55:57negotiating prices and production with these committees, trade association The question is, who are these guys from the government? They were big shots from the same industry. In other words, they appoint these guys, let's say the head of U.S. Steel would be appointed head of the Steel Commit section. He would then negotiate with the vice president of U.S. Steel or two or three other types. In other words, the very cozy cartel arrangement, when the government officials are simply the same, the old heads of various firms, and then they get a dollar a year. They say, boy, we're really sacrificing the law after only getting a dollar a year from the government. But they have the power, also they keep getting salaries from an escrow or whatever from the industry, from the firm anyway. So, they are negotiating with the people from their own buddies, from the big shots in steel and construction, copper and lumber and whatever.

56:47In this way, the whole government, the whole industry is planned by these government association, collaboration of government and industry, designed for us to restrict production and keep prices up. It means to expand more production, but to restrict it in the sense of keeping, making sure the prices go way up and profits are guaranteed, and so on. So, they all love that, except for individual firms that try to break the cartel. If an individual firm tries to bust the agreement on lower prices or expand production, in other words, they have minimum quotas and maximum minimum prices and maximum production in most cases if some firm were trying to out-compete, they'd be smashed, they'd be cracked down on by the government the mavericks who refused to run with the herd, as they call it these were called, by the way, these these representatives were called war service committees the industry groups were called war service committees The government were called commodity sections. There were about 300 war service committees

57:52negotiated with about 60 or so commodity sections. And the Chamber of Commerce, which was set up by the government, in essence, remember, Cass had the idea toward the end of his regime to set up an industrial group which would then sort of negotiate with government. And they just about came into being by the time Wilson came in. So the Chamber of Commerce sort of oversees this whole thing, in other words, sort of a point of the war service committee, or got the copper industry to get together and elect the war service committee people, or appoint them the chamber of commerce is sort of acting as a government business liaison for this whole situation in U.S. chamber of commerce a very cozy situation, for example Robin Clarkson, who was, I think, the secretary of the war industry board wrote a book about the experience after the war is over, they all loved this experience, it was just great, and Clarkson participated in it It's a very interesting book. I mean, of course, I love the whole system. He sees nothing wrong with it. He's lauding the whole thing.

58:48It's called, I think, Industrial Production in America, something like that, and the war. There's a great quote from Clarkson, a revealing quote. He's talking about the war collectivism. Businessmen wholly consecrated the government's service. There's a lot of baloney, they're consecrated their own profits, in addition to the government's service. Businessmen wholly consecrated the government's service, but full of understanding of the problems of industry now face, that's the guys on the Commodity Section he's a businessman, consecrated to government service, wholly consecrated to government service but full of understanding of the problems of industry now face businessman, wholly representative of industry, that's these guys on the war service committees they're buddies but sympathetic with the purpose of government, of course they're sympathetic, they're very cozy partnership here, cartelizing partnership and he goes on, the commodity sections were businessmen operating government business for the common good if you scratch the common good you get the much better view of it the war committees of industry knew, understood, and believed in the commodity chiefs, they were of the same

59:53piece they were the same people, they were buddies, they were close friends and whatever coming from the same firms and then cozy getting together with the power of government to run the system again he says the commodity sections were industry, mobilized and drill mobilized and drill responsive, keen and fully staffed, they were militant they were militant and in serrated ranks notice the military analogy here, they were militant, they were all organized he says at one other point, if any maverick undercut the system trying to compete in other words he was roped and branded and forced to run with a herd and was treated as if they were cattle the maverick leaves the herd, he's forced by the benevolent shepherd or whatever it is, you know, the cowboy to come in and force him to join with the rest of the group

1:00:45the commodities section, he says, were industry, yeah, they were a system of concentration of commerce, industry, and all the powers of government it was without compare among all the other nations, well the other nations were pretty pretty well acted that way too at any rate Who was in the war industry's board? Well, Baruch, as I say, was the chairman. A Guggenheim tool, as we now know, after many years of the mystery. The vice-chairman was Alexander Legge, another very interesting person, who pops up later. Very important figure of Baruch. All these guys, by the way, had a lot of solidarity coming out of the war. They all liked each other. They all got along very well. And after the war, the next twenty years of trying to recapture, we established these institutions in peacetime. Alexander Legge, Vice Chairman of the War Industries Board had been Chairman of the Board of President of the International Harvester one of the top Morgan trusts in other words, or emphasis, Morgan

1:01:45he was Vice Chairman of the War Industries Board Robert Brookings was in charge of price fixing the wealthy St. Louis lumber magnate and founder of the Brookings Institution around that time Another guy, who became a Baruch tool for the next 20 years and also founder of a form block, was George Peake. He was vice president of the Beer & Company, later the Moline Plough Company. Moline was the second largest farm equipment manufacturer. International harvester was the Molineing farm equipment manufacturer. So, Peek and General Johnson, who was also in the Vier and Company, became the founders of the farm block after the war was over, about 1920, 1919. Peek and Johnson came out with a book called Equality for Agriculture, which they called for the use of government to raise, especially the farm price support firms, to buy crops, cotton, wheat, etc., The Raise of Farm Prices Now these guys were not dirt farmers, they were farm equipment manufacturers, and they realized, of course, we want to

1:02:55subsidize farm equipment manufacturing, and the best thing to do is for the government to subsidize the farmers, and in turn, we'll then buy farm equipment. So, and Baruch, by the way, was also the grand old man, so to speak, of the farm policy, farm price support program. He was a big land speculator, he bought a lot of rural farmland, and of course, if you have farm price support, so the government which tremendously raises the price of farmland. So there's a personal economic interest involved here as well as an ideological drive towards statism. Then there's the Railroad Administration in charge of the railroads. As we'll see next time, the railroads are nationalized by the federal government at the behest of the railroads. They love nationalization. You'd think the railroads wouldn't like to be nationalized. They loved it.

1:03:42In the beginning of World War I, the thing I mentioned last time or the time before that, the railroads had lost control of the ICC. They had set up the ICC and they were running it for many years. By 1900, 1905 or so, the shippers began to control it, the organized shippers. Of course, they wanted to keep railroad rates low. All of a sudden, the railroads found the railroad rates were low. They didn't like the ICC anymore. And so in order to get out from under the ICC, the railroads promoted the idea that the government should nationalize them. The government nationalized the railroads, put them over, I think it was head up by the Railroad Administration, ran the trains and all that, incurred all the operating costs, and the railroads got a guaranteed profit. In other words, railroads got their, whatever, six percent, eight percent profit or something, for doing nothing. All the costs were incurred by the government, deficits, and then the taxpayer picked up the difference and paid off the railroads.

1:04:30They loved it. Great way to be nationalized. You get guaranteed profits and no costs. and also Herbert Hoover was in charge of the food administration as the czar of the entire food industry Hoover had been a British connected miner, geologist and general copper and oil miner and so forth I guess copper largely and other mines I was an England and I took charge of Belgian War Relief for which I became known as a food maven and then he was appointed by Wilson, he was a big Wilsonian became a food czar, demanding absolute power of all food he didn't even have a commission over him, he just ran all the food farms, wholesale retail, everything else and what he did is he imposed a whole licensing requirement. In order to exist in the food industry, you have to have a license, a federal license which was issued by the food administration.

1:05:29If they didn't like what you were doing, if you didn't abide by the price and production agreements, you were deprived of your license. You were put out of business, in other words. A very powerful weapon by Hoover. Hoover was much more of a dictator over food than the other guys were over industry. He had a huge federal licensing network. Also, Hoover invented the system of fake voluntarism. In other words, what he did was, he had all these price restrictions, price controls put on by Hoover. Food prices had to be a certain amount, so forth and so on. It had a certain minimum. He got the public to volunteer to be the unpaid enforcer. He was a paid enforcer. He mobilized the public to be like friends of the Food Administration.

1:06:14I think he had some kind of stamp, a kind of logo of the food. He had them abide by each restaurant, each food and grocery store had this logo of the Food Administration. And he mobilized everybody to report, spy on their neighbors, spy on every restaurant, every grocery store, make sure they didn't cut prices or whatever. If they did cut prices, report them to the Food Administration. It's really like a vast espionage network of unpaid patriots who were spying on, who were opposed to administration regulations. That's what Hoover called volunteerism. The peculiar kind of volunteerism was like having voluntary Gestapo, spying on your neighbors. And the regulations that he put in were cartilaginic regulations. In other words, for example, he had a big bread campaign. Before that, if your wholesalers or bakers sold bread to the retailers And the retailers didn't sell all the bread, they returned them to the free of charge, like newspapers, newsstands now return unsold papers to the newspaper, news dealers, newspaper people, so they could return the breading and pay for it.

1:07:16So Hoover insisted, put the government regulation, no, no, from now on, the retail is responsible for unsold bread, in other words, trying to get them to sell its stale bread to the public, in the name of the war effort. first what it does is it means it's restricting the supply, decreasing the quality typical of cartilages is to cut the quality and raise the price so these were some of the measures again Clarkson talking about this whole system says, another great quote from Clarkson business willed its own domination, forged its bonds, and policed its own subjects there were bitter and stormy protests here and there The occasional obstructor fled from the mandate of the board, only to find himself ostracized by his fellows in industry.

1:08:02In other words, anybody who broke, decided to sell fresh bread instead of stale butter, cut the price or whatever, was then ostracized by the other people in the industry, violating the cartel agreement, and also, of course, in the case of Hoover, mobilizing the deluded public to spy on and try to put these guys out of business. Another thing that the Food Administration did, and also was done in industry, in the name of the war effort, it's to eliminate a variety of products. This was done all through industry, by the way. Compulsory is called elimination of waste. Therefore, you're against waste. Waste is bad for the war effort. So, in the name of eliminating waste, they had compulsory standardization of all sorts of stuff, gear shifts, bread, I mean, whatever, what do you think of? In other words, if there were fifty different varieties of certain products, they'd fortunately have only ten, things like that.

1:08:53By doing that means you're eliminating small businesses, you're hurting, you're changing the shape of industries and have to reduce the number of opportunities available to the consumer, you're having a smaller number of products and then a larger size of each product. In other words, you're benefiting large businesses, expensive smaller businesses which meet different parts of the market. And this was carried on, this was continued during the 1920s by Hoover when he was Secretary of Commerce continuing this compulsory standardization of industry. Reduce the number of styles, the number of fashions, the number of different grades of things, and thereby cut competition, cut the supply curve to the left, push the supply to the left, push out of business a whole bunch of competing firms, especially small business.

1:09:39This was done mostly by the conservation division of the Warren District Board, the name of conservation. As Clarkson says about the Conservation Division, he says there's a drastic reduction in the number of styles and sizes of products. You can only have eight kinds of gear shifts or years instead of 20 or whatever. He said, quote, the World War was a wonderful school. The Conservation Division alone showed that merely to strip from trade and industry the lumber of futile custom and the incrustation of useless variety could then bring about what was a great thing. In other words, to eliminate what the consumers wanted, which is a lot of variety. For example, there were Conservation Division outlawed 250 kinds of plows and 750 kinds of drills. Well, there were lots of different drills with different, meeting different tastes.

1:10:27Now I can only have a few kinds of plows, a few kinds of drills. And the Clarkson goes on, this then would be the goal of the next quarter of the 20th century, to standardize American industry, to make a wartime necessity a matter of peacetime advantage. He wants to perpetuate this stuff during peace. And then Clarkson talks about how the people of the war industry, the war is one that wants to perpetuate this whole thing forever. He says, from their meditations arose dreams of an ordered economic world. They conceive of America as commodity sectioned, permanently commodity sectioned, for the control of world trade. They beheld the whole trade of the world, carefully computed and registered in Washington.

1:11:13In a word, a national mind and will confronting international trade and keeping its own house in business-like order. As Harry Wheeler, who was head of the Chamber of Commerce, talked about the future based on this war industry board thing, he said, the war services committee system, quote, promises to form the basis for a truly national organization of industry. The integration of business, the expressed aim of the national chamber, is in sight. War is a stern teacher that is driving home the lesson of cooperative effort. War breaks out, there's tremendous... European countries are blockading each other, so they're not buying each other's food as they used to, and so they're buying American food when America was neutral in the war until 1918, 1917.

1:12:03So you have a tremendous increase in price, this is quantity, a tremendous increase in demand for American agricultural products. And so, as a result, you have a huge increase in supply, big increase in price. So the price goes up, and then when the war starts, there's a big American demand for food, et cetera, et cetera, and foreign aid, and all the rest of it. You have a tremendous increase in agriculture, both in production and in price. So you have a huge increase in demand, huge increase in price, and it stimulates a big increase in American cotton and wheat and all that. Now, when the war is over, the blockade is gone finally and Europeans are growing their own food and trading it. They don't need American agriculture that much. The demand curve for agriculture falls back again and prices fall.

1:12:48And after every big war, you always have a fall in farm prices. First, the prices go up during the war. Same thing happened after the Napoleonic Wars in 1815. Big drop in demand for agriculture, a big fall in prices. Well, at full agricultural prices, the farmers start griping, of course. Farmers want to be kept in a style in which they become accustomed during wartime. But the farmers themselves were not that organized yet. The farmers didn't have that powerful farm block that they have today. The first guys calling for government subsidies to agriculture, farm price support, in other words, the taxpayer buying farm products that can rise in price, So Johnson and Peake and Baruch are their godfathers, so to speak. Baruch, I guess, was the Jewish godfather of this whole movement, so to speak.

1:13:34So Johnson and Peake write this thing. He, in other words, farm equipment manufacturers saw from the very beginning the advantages of farm price support. In other words, they're that. In other words, if you give the farmers more money, they will buy more farm equipment. And so the farm equipment manufacturers are the first ones to fall for farm price supports. So we have a combination of farm speculators and farm equipment manufacturers, being the first ones to engage in this farm block process. So, they started this agitation for farm price support, and all the way in the 1920s, this picks up support among the farmers, and they get into it.

1:14:27And Herbert Hoover was also a Baruch, I mean also part of the Wilsonian war effort. In other words, he was nominally a Republican, but nobody even knew it. He was the food czar in World War I, as I already mentioned. and also a big pro-farmer person, he told the farmers that if he ever got to be president, he would immediately institute this new system of farm price supports, which he did, the first thing he did as president, he gets in in March 1929, immediately pushes through this farm price program, which of course is still with us, it's still a big disaster, it's gotten worse, but basically he started it, Hoover basically was a major person responsible, so again, bipartisan, Hoover, when Hoover Hoover entered politics. Hoover had been in Belgium, a big mining geologist is what he was, basically, and an entrepreneur and promoter of copper mines and other mines throughout the world.

1:15:22He lived in London for many years and during World War I he was head of Belgian War Relief, which was using food as a political weapon to feed only Belgians and not Germans, that sort of stuff. The pretense of being a Christian, pro-food person who doesn't care who's being relieved. At any rate, when America entered the war, Hoover was made food czar, he was brought back by Wilson. Wilson loved Hoover, Hoover loved Wilson, and Hoover was a Wilsonian to the hilt. And his political career begins, he's already a multi-millionaire, he wants to devote himself to politics. He's only about 40, something like that, and he becomes the food czar. He insisted, by the way, Baruch at least had the head of the war industry's board.

1:16:09Hoover insisted, I want no boards, I've got to be the sole power. And Wilkson of course gave it to him, like Wilkson made Colonel House his foreign policy czar, for the speak. Colonel House a Morgan associate. Hoover said, I have to be the food czar. So Hoover heads up the food administrator, he's the food administrator. Sam mentioned this, the licensing power, to license everything connected with food. The Federal Government licensed every restaurant, every food, wholesale or manufacture, everything. Any processor was licensed, and if the restaurant or the bread manufacturer didn't obey the food administration regulations, the cartel regulations that you have to, price has to be a certain amount, production has to be a certain amount, The license was taken away, they couldn't, they were put out of business.

1:16:58Licensing is a very powerful weapon. It's like the FCC can decide if a radio station or a TV station is biased or something, they can remove the license. So Hoover also pioneered in the use of phony voluntarism. In other words, to use the masses, use the public, unpaid supporters of the unpaid enforcers of government regulations. So, he'd say, well, every restaurant had to obey certain price regulations, maximum prices, minimum prices, whatever, and they had to put up a sign saying, we obey the regulations, a kind of symbol, which Franklin Roosevelt later used for the National Recovery Administration, called the Blue Eagle, the NRA had a Blue Eagle sign, put the Blue Eagle up on the window, to show you were true America. So, anyway, then they used the masses, In other words, Hoover encouraged volunteer organizations or citizens to go out there and police the food stores and the restaurants to make sure that prices were no higher or no lower than the regulation.

1:18:05And then to report back to the local government food administrators. In other words, they used the public as a group of unpaid spies, so to speak. This was done also on the civil liberties front. The public was encouraged to turn in quote, German agents or German spies, unquote. This is the beginning of the whole spy hysteria, which of course is still with us. World War I, I mean, it starts everything. World War I begins the whole espionage hysteria, it starts then, and everybody, not only is this the beginning of the FBI, and it really starts slightly after the war, but basically begins then, but the whole idea that we're encountering menace from foreign agents begins in this period, and people are encouraged to turn everybody in. Everybody, anybody speaking German was in those days.

1:18:50Fair game. As a matter of fact, the use of the German language was, the use of the German language, the teaching of German was outlawed in Seattle. High points, low points, World War I. The German was considered enemy language, therefore nobody was allowed to teach it. It was a great big step forward in human knowledge. Bunch of monsters. Anyway, this is the, and so the German copy taught in the public school system because it was a so-called enemy language. And Sauerkraut was renamed Liberty Cabbage, I think, or Victory Cabbage, which was Sauerkraut's red German name. Beethoven was barred from being on the radio because he was a German composer, right? And so, I mean, it's just an unbelievably monstrous, the whole set, the whole World War I, it begins with all the evils of the 20th century, the whole man business, economically, foreign policy and civil liberties and all the rest of it.

1:19:44and those historians, it also begins the idea of intellectuals working for the war effort, working for the government to run the system, economists to run the economy historians are propagandized by the Germans as an evil since the 16th century or whatever and social workers and all the rest of it, the whole group political scientists, all of them become part of the government machine, in this case the war machine particularly those intellectuals who have gotten PhDs in Germany historians, economists, political scientists are leading the parade and saying all German culture has been evil for hundreds of years just writing crazed pamphlets that it all started with Luther and everybody's been evil ever since and all Germans have been rotten and so on of course they sang a very different tune five years before that but this is the... each one was trying to prove their 100% Americanism or 200% Americanism or whatever any professors who didn't go along with this were driven out of the university system

1:20:48and Richard T. Ely, one of my least favorite people in American history, symbolizes much of this he was the top progressive economist, founder of the major founder of the American Economic Association to lead the economic profession away from laissez-faire and toward the statism The founder of the Wisconsin Idea and institutionalist and whatever, got a PhD in Berlin, was one of the leading war propagandists and cracking down on the idea of academic freedom for professors and the rest of it. He also considered any pro-peace agitation or any anti-war agitation as German espionage, agents of the Kaiser.

1:21:34By the way, when Lenin popped up, and as a matter of fact, there are still nutty historians right now who think that Lenin was essentially a German agent. In other words, all of Bolshevism was a plot by the Kaiser to break the Russian war effort. Still, there was a biography of Lenin a few years ago that said the same thing. It was all essentially a plot, a Kaiser plot. So, all these guys were, as I say, they all started with Wilsonian, Wilson provided the sort of the intellectual, Wilson himself as the only PhD who's ever been president, I hope it will not be any other one, he's representative of what happens when a PhD becomes president, a professor, PhD, distinguished historian and political scientist, and In many sense, of course, the idea that it's America's role in the world to remake the entire world in an American image that everybody's democratic and everybody listens to the other thing, centrist, not too left-wing, not too right-wing, everything's got to be fixed

1:22:45and re-drawing the map of Europe in that image So Hoover, nobody knew which party Hoover belonged to In 1920, when Hoover, when Wilson's family's second term was up, he was already pretty ill A lot of people, a lot of Democrats were booming Hoover for the Democratic nomination for president They didn't know what his party was, they assumed he must be a great guy, must be a Democrat He later said he was a Republican, but the point is, it would have surprised nobody which party he belonged to The same thing happened to Eisenhower after World War II, he was being boomed for both party nominations And so, it really didn't make that much difference. This is a little 20th century bipartisan man, so to speak, who can swing either way because they're really technocrats, since both parties are, quote, progressive, unquote, and both parties are committed to the same kind of Wilsonian foreign policy and progressive domestic policy, it doesn't really make much difference what party you're dealing with. Oh, another person, another politician who gets his start under Wilson as Assistant Secretary of the Navy. Remember, Assistant Secretary in those days was a pretty powerful post, he was like number two man.

1:23:54Franklin D. Roosevelt, then runs for vice president I think in 1920 and is defeated and then becomes president. He also has Wilsonians, and I think Franklin Roosevelt and Hoover, even though most historians consider them as mortal enemies, they were pretty friendly. They were close friends. They were both Wilsonians and both knew each other. And after the war was over, in a little known event, Hoover and Franklin Roosevelt collaborated in a group, formed a group called the American Construction Council and the object of which was to cartelize the construction industry. In other words, the construction industry has always been highly competitive. There's always been a lot of real contractors and developers. The idea was to bring them all together in one council so they can restrict production, raise prices, and all the rest of it.

1:24:43The usual cartelist thing. It didn't work in construction. Since they did not have government backing, it didn't work. Voluntary cartels never worked, especially didn't work in this case. It died out after about two or three years, but these two died, one was president and one was vice president, I forget which is which. So Roosevelt and Hoover are both Wilsonians, both progressives, both what would later be known as New Dealers. As a matter of fact, the entire New Deal policy started with Hoover, the entire New Deal program of keeping up wage rates by government coercion, expanding, cheapening credit, expanding the money supply, expanding public works to fight against the recession. It all begins with Hoover. Roosevelt did a foreign price support program. It all begins with Hoover. Roosevelt just did more of it.

1:25:31Quantitatively did more of it. Qualitatively, in other words, looking at each program, Hoover really started the whole thing. There's no program that Roosevelt started. Hoover didn't start before that. Deficit spending, it all really begins with Hoover. Another thing which I almost forgot to mention here, another key thing which happened in 1913, in addition to the Federal Reserve Act, which paved the way for financing the war, was of course the income tax, our beloved income tax. It begins in 1913 with the Wilkins administration, but it was made constitutional under the Taft administration in 1908, so that basically both parties began to be responsible for this income tax. Before that, of course, there was no income tax. We didn't have to fill out any 1040 forms in April 15th or anything like that. There were tariffs.

1:26:19When the Democrats came in, the tariffs were pretty low. And that was about it. In other words, government was very small, because they didn't have an income tax to siphon things off. When the income tax first came in, the critics of the income tax claimed that if you start with an income tax, you might eventually get a tax rate as high as ten percent. 1%, 2%, maximum 5%, the highest millionaire level. The rest, of course, is history. So, again, with any government power, especially revenue source, you start small and you keep expanding. This is what always happens with government. You start small, you get your foot in the door, you get people desensitized to it and you widen it and you grab more loot.

1:27:07You don't start with a 90% income tax right away, obviously. It would be a revolution. You start with five and work your way up. So anyway, of course, now it's part of the American heritage. Actually, the income tax wasn't used that much until World War II. What happened in World War II was, to finance World War II, see, the old days you had to cough up your entire lump sum on March the 15th. You have to save up, you have to pay $5,000 in income tax. You have to save the whole thing up and pay it in one sum. And obviously nobody could, you know, very few people would do that. So the tax rates had to be kept fairly low.