...This third stage of capitalism is of such
overwhelming significance in the history of the twentieth century,
and its ramifications and influences have been so subterranean and
even occult, that we may be excused if we devote considerate
attention to its organization and methods.
Essentially what it did was to take the old disorganized and
localized methods of handling money and credit and organize them
into an integrated system, on an international basis, which worked
with incredible and well-oiled facility for many decades.
The center of that system was in London, with major
offshoots in New York and Paris, and it has left, as its greatest
achievement, an integrated banking system and a heavily
capitalized—if now largely obsolescent—framework of heavy industry,
reflected in railroads, steel mills, coal mines, and electrical
utilities...
...The names of some of these banking families are familiar
to all of us and should he more so. They include Raring, Lazard,
Erlanger, Warburg, Schroder, Seligman, the Speyers, Mirabaud,
Mallet, Fould, and above all Rothschild and Morgan.
Even after these banking families became fully involved in
domestic industry by the emergence of financial capitalism, they
remained different from ordinary bankers in distinctive
ways:
(1) they were cosmopolitan and international;
(2) they were close to governments and were particularly
concerned with questions of government debts, including foreign
government debts, even in areas which seemed, at first glance, poor
risks, like Egypt, Persia, Ottoman Turkey, Imperial China, and
Latin America;
(3) their interests were almost exclusively in bonds and
very rarely in goods, since they admired "liquidity" and regarded
commitments in commodities or even real estate as the first step
toward bankruptcy;
(4) they were, accordingly, fanatical devotees of deflation
(which they called "sound" money from its close associations with
high interest rates and a high value of money) and of the gold
standard, which, in their eyes, symbolized and ensured these
values; and
(5) they were almost equally devoted to secrecy and the
secret use of financial influence in political life. These bankers
came to be called "international bankers" and, more particularly,
were known as "merchant bankers" in England, "private bankers" in
France, and "investment bankers" in the United States. In all
countries they carried on various kinds of banking and exchange
activities, but everywhere they were sharply distinguishable from
other, more obvious, kinds of banks, such as savings banks or
commercial banks...
http://real-world-news.org/bk-quigley/02.html#5
...Each of these methods of raising money had a different
effect upon the two chief financial consequences of the war. These
were inflation and public debt. The effects of the four ways of
raising money upon these two can be seen from the following
table:
It would appear from this table that the best way to pay for
the war would be by taxation, and the worst way would be by bank
credit.
However, taxation sufficient to pay for a major war would
have such a severe deflationary effect upon prices that economic
production would not increase enough or fast enough. Any rapid
increase in production is spurred by a small amount of inflation
which provides the impetus of unusual profits to the economic
system. Increase in public debt, on the other hand, contributes
little of value to the effort toward economic
mobilization...
...This change in the accepted theories after 1934 was a slow
growth, and formed part of the eclipse of financial capitalism;
in the long run it meant that banks would be reduced from
the masters of the economy to become its servant in a situation
where the major economic decisions would not be based on the supply
of money but on the supply and organization of real
resources.
As a matter of fact the whole relationship of money and
resources remained a puzzle to many and was still a subject of
debate in the 1950's, but at least a great victory had been
won by man in his control of his own destiny when the myths of
orthodox financial theory were finally challenged in the
1930's.
The end of financial capitalism may well be dated at the
collapse of the gold standard in Britain in September
1931, but, on the personal side, it might be dated at the
suicide of its most spectacular individual, the "Match King," Ivar
Kreuger, in Paris in April 1932...
http://real-world-news.org/bk-quigley/07.html
http://symposium.gq.nu/cquigley/TH07.htm