DID THEY KNOW

DID THEY KNOW? WAS IT PLANNED?
YOU CAN BET YOUR BOOTS!

By: Tom Rose

Last week I drove with my wife to Paris (to Paris, Tennessee, that is) to deliver a series of six lectures. We have just returned to our farm in northwestern Pennsylvania. It was a really inspiring experience to visit with the pastor and people of a truly Reformed congregation who have been thoroughly trained to weigh everything by the word of God – not only how one comes to a saving knowledge of Jesus Christ (by God’s free grace), but also, once saved, how each person is to order his or her life according to scriptural precepts (II Corinthians 10:3-5). And yes, such ordering leads economically to what is known as a free-market economy in which individuals serve each other’s needs through the process of mutually beneficial voluntary exchange!

In one of my lectures a very astute person raised an interesting question about the recent speculative housing bubble (which in turn resulted in the collapse of some of America’s leading financial firms and to the clearly unconstitutional bailouts by the U.S. Government and the Federal Reserve, originally supposed to be to the tune of $700 billion, but is now well over $800 billion, and still growing!).

The question was, “Do you think the financial leaders of our country knew the speculative bubble would end in a crash? And, if so, do you think it was planned to happen?”

My answer was, “Yes, to both questions. I’m sure my answer is correct, though I can’t absolutely prove it. But I can, through personal experience and logic, explain why I’m so sure the financial crash was intentionally planned and executed.”

            Then I related the following episodes (with some points added for clarity):

In 1924, after World War I, Great Britain attempted to return to a form of the gold standard (called the Gold Exchange Standard), but its political leaders set the price of the British Pound too high relative to its gold content and the currencies of other countries. This resulted in a gold outflow from England to these United States of America because British citizens were selling British bonds (called Consols, a form of bond that has no date of redemption) and were buying American bonds which paid higher rates of interest. This threatened the financial stability of Britain, so the President of the Bank of England (Montagu Norman) phoned his friend, Benjamin Strong, in New York, who was serving at that time as head of the Federal Reserve Bank (FRB). Norman invited Strong to come and talk with him about the problem. (International bankers deviously call such meetings “international monetary cooperation,” but it is more accurate to use the term “monetary collusion!”)

Benjamin Strong’s response to Montagu Norman’s problem was, “I’ll give a ‘coup de whiskey’ to the stock market!” In other words, Strong made it very clear that he would artificially lower interest rates in America, knowing full well that doing so would result in a speculative bubble in the New York Stock Exchange! Remember this as I tell you the rest of the story.

Well, the Federal Reserve Bank, under Benjamin Strong’s leadership, lowered interest rates by pumping fiat money (Federal Reserve Notes) into the economy here in America. The result was a speculative stock market (and real estate) boom known as the “roaring twenties.”   It ended five years later when the leaders of the Federal Reserve became concerned about the speculative bubble they had created and then suddenly raised the “discount rate” from 5% to 6% to dampen speculation, which was a whopping increase of 20%! The “discount rate,” which used to be called the “re-discount rate,” is the interest rate the Federal Reserve charges member banks when they borrow reserves from the FRB. Be aware that such reserves are fiat money that the FRB creates out of nothing, so they amount to an inflationary injection of new money into the economy, which then results in a subsequent rise in general price levels. Note also: While a central bank, which is what the FRB is, can inject newly created money into the economy (this process is accurately called “monetary inflation,” it cannot control where the newly created money is spent! The actual flow of money in the economy depends on the desires and motivations of people themselves, which are subject to change moment by moment.

Now let’s fast-forward to the fall of 1971 when I accepted an offer to head up the economics department of a small private college in Plano, Texas, the University of Plano:

Residents of Texas in that area might be interested in this bit of Texas history, especially those who follow the Austrian School of Economics: Ludwig von Mises was the first visiting professor of economics at Plano University. Pearcy Greaves followed him, and I followed Pearcy. We used von Mises’ text, Human Action. The president and founder of the University of Plano was an attorney by the name of Robert Morris, and the interesting part of this account is that Bob Morris almost totally supported the university through profits from land speculation. At the time my family and I moved there, Plano was a small town of about 6,000 to 8,000 surrounded by farm land.

In the fall of 1972 I climbed the spiral stairs of the tall “Malaysian” Building” to Bob Morris’ office where he could look out over the vast landscape surrounding the town of Plano (now a city). He had purchased the Malaysian Building which had been specially constructed for a world’s fair in the far East and had it dismantled and shipped to Plano, Texas.

I advised Bob that I had been paying special attention to monetary statistics, and that I was very concerned that a boo-bust recession was in the making because of reductions in the money supply, which had been previously increasing. I strongly suggested that he sell any land that he was holding as a speculation because I was sure that land prices would decline sharply as a result. Time went on, and my visits to warn Bob of the end of a speculative boom continued.

Finally, in the fall of 1973 I made my last visit to warn Bob to sell any land holdings he still had. He advised me that he had just recently sold 180 acres of land. Less than two weeks later the stock market crash of 1973 occurred (the steepest since 1929). But, there was a problem! The 180 acres of land had been sold to another land speculator, with 10% down and 90% stilled owed to Bob. The result was that the University of Plano, an excellent small college of some 300 students went bankrupt.

After all these years, I still have a high admiration for Bob Morris as a man of high integrity and as a far-seeing person who devoted himself to benefitting others, especially the younger generation! As I recall, not one faculty member quit when paychecks stopped coming. Every one of us stuck the year out to a successful close, and Bob did his best to finally pay every employee in full after the University of Plano closed.

The hard lesson to be learned is that economic downturns always come after monetary bubbles, and the inevitable financial crashes are likely to catch people unawares who are caught owing money.

The bubble crash of 1973 provides a much-needed lesson for Americans today in 2008! During financial crashes massive transfers of wealth occur – from the hands of ordinary people, the middle class, who are too busy working and raising a family to pay much attention to high-finance manipulations – to high-placed elite individuals and financial institutions who are generally responsible for creating speculative bubbles.

The Bible has many warnings that people should not put their trust in rulers (Psalms 146:3 & 5). It also warns against being encumbered with debt because those who owe money become enslaved to lenders (Proverbs 22:7).

            Now, turn the clock back to 1957:

In 1957 I accepted a position as manager of the Chamber of Commerce in Parsons, Kansas (population about 15,000). The town was suffering from a local building bubble that had crashed. Some 120 new homes had been built in a new subdivision during the Korean War (1950-53) to house workers at a nearby military facility. Practically every house in the subdivision was financed, at top prices, by Federal Government agencies. When the war ended in 1953, war-related jobs vanished. Residents found new jobs elsewhere and simply abandoned their homes and moved out of the area. When my family and I moved to Parsons, more than 120 homes in the subdivision sat empty and abandoned!

Does this sound familiar to what is happening today in 2008? Government financing of homes at artificially low interest rates encourages people to pay high prices for homes and to make insufficient down-payments! Such subsidization actually puts ordinary workers at risk; but, on the other hand, it enriches land developers, certain land owners, real estate sales people, lending institutions, and local businesses. But ordinary working people often end up losing what small equity they might have accumulated during boom times.

Now, fast forward to 1985:

In the fall of 1985 there was a meeting of the so-called G-5 industrial nations in Tokyo, Japan. An announcement was made that the industrial nations of the world would engage in “monetary cooperation” (read “collusion”) to lower interest rates in these United States to facilitate trade (meaning an inflow of goods from overseas). Does this sound familiar? I entered my classes in economics, money and banking and investments after reading the announcement in the Wall Street Journal and said this to my students:

“The Federal Reserve has just re-enacted the exact scenario it created in 1924 when it artificially lowered interest rates in these United States of America. (Note my use of the plural “these United States of America.” I always do so to remind Americans that it was not the people directly who created the Constitution of 1787, but rather the States which did so as politically sovereign entities – contrary to what textbooks of today wrongly claim.)

            I went on to say:

“I don’t know how long it will take for the speculative bubble that the FRB is creating to burst. In 1924 it took five years before the stock market crashed. I can’t predict how long it will take this time for the speculative bubble to burst that the FRB is creating, but I think it will be in a much shorter time because information moves much more quickly in this age of computerized technology.”

            Now turn to the fall of 1987:

In late September 0f 1987 the FRB again raised the “discount rate” from 5% to 6%, and I entered my classes of economics, money and banking, and investments with this announcement:

“The FRB has once again repeated the fateful increase in the “discount rate” by a massive 20%. The end of the speculative bubble that started in 1985 is here, and a crash of the stock market is imminent!”


About ten days later the Dow Jones Industrial Average plummeted by 528 points, the biggest one-day drop in history up to that time.

Now, what is my point in relating these episodes? Is it to show how expert I am in financial affairs? No, not at all!

My point is simply this: If I just a self-taught economist who was busily at work raising a family, operating a publishing business www.biblicaleconomics.com and also operating a cattle farm could observe the “signs of the times” and thereby be able to predict the occurrence of financial bubbles and their collapse by tracing economic causes and effects, and doing so on a part-time basis, don’t you think that the high-placed elites, who spend 100% of their time creating speculative bubbles and then bursting them know exactly what they are doing? You better believe it!

There is absolutely no doubt at all in my mind that the financial bubble and crash that occurred in 2007-2008 worked exactly according to plan. And the result has been the same as always – a massive transfer of wealth, from weaker hands of the American public, to the coffers of the stronger financial elites who control the Federal Reserve Bank and America’s large financial institutions (which have just been bailed out of the consequences of their greedy folly, at taxpayers’ expense!).

Our country for many decades has been in control of a behind-the-scenes cabal that is treasonously intent, first ,in melding these United States of America into a political and economic union with Canada and Mexico, and then, second, in melding our country into a plan that has existed for many centuries: a fascistic, “New World Order” in which most Americans are to serve as economic slaves to a select Babylonian Talmudic elite. This is not “conspiracy theory” talk. It is, in fact, a long-term plan that is already in motion! If you are not yet knowledgeable about what is going on, it is high time for you to wake up and “smell the roses” (pun intended!).

Example: President George W. Bush met with the Prime Minister of Canada and the President of Mexico at his ranch in Texas in 2005. They officially deny their secret plan to destroy our American Republic, and they also deny construction of the super-highway to connect Canada and Mexico through our country (which has already begun, but is being strongly opposed by patriots in Texas, Oklahoma, and other states). This is nothing less than treason in high places! The same holds true for the multi-trillion dollar, unconstitutional bailouts mentioned above which are currently being instituted by the FRB and the Federal Treasury Department.

As I so often tell people: The “name of the game” is to create chaos, both domestically and internationally in order to create fear and panic among the American public so that they will unthinkingly surrender their constitutionally protected freedoms in the elusive hope of gaining peace and safety. But, remember the biblical warning not to put trust in civil rulers, but to trust in the Lord, who is the Ruler of nations (Isaiah 10:1; Ezekiel 45:9).