American Libertarians on Money and Currency
Olde Time Currency
Long before the Federal Reserve, Minnesotans were spending their own money, in more ways than one.
Take a look at some of the historic money the Minnesota Bankers Association
donated to the Minnesota Historical Society.
Right: Ada National Bank 1914 $10 bill.
In 1989, as a part of its centennial year celebration, the MBA donated a rare currency collection to the state historical center. The collection contained 580 bills issued by federally-chartered Minnesota banks between 1863 and 1935.
The collection, valued at $200,000, represents 338 banks and 227 cities, some of which no longer exist. It's the largest collection of Minnesota currency.
In the old days, banks issued U.S. currency with their own name on the bills.
Right: The private bank of R.J. Mendenhall in Minneapolis issued this 5-cent bill in 1862.
This caused con men to begin passing their own bills. According to "Banking in Minnesota," a history of Minnesota's banking industry, in 1849, a con man began passing handsomely engraved currency with the words "Bank of St. Croix, St. Paul Minnesota" on them in the capital city. Trouble was, there was no such bank. The fraud was soon discovered and broken up.
Right: $5 bill from First National Bank in Minneapolis, (now U.S. Bank); 1879 $1 bill from North Western National Bank of Minneapolis, (now Norwest); and $5 from Marquette National Bank of Minneapolis, (now Marquette Bank).
"The Minnesota Bank Notes Collection is a historic record of the early development of Minnesota's banking system, and the nation's financial system," MBA president and St. Paul banker A. William Sands said in 1989 at the time of the donation.
"This collection, which is by far the largest and most complete collection of Minnesota currency in existence, will be a greatly treasured addition to our holdings," said Nina Archabal, then (and current) director of the Minnesota Historical Society.
Right: An actual $3 bill from the Ramsey County Treasurer; a $5 bill from The Dayton Bank, and a 1903 $20 bill from The National German American Bank of St. Paul.
For More Currency Links:
Currency: A History of U.S. Money Take a look at even more old money, and find out why it's green.
A Close-up Look At The New $50 Bill
The New $100 Bill Take a close-up look at the new C-note, and some of the changes in store for all our U.S. currency.
Did you know: Besides protecting the President, the U.S. Secret Service, in charge of all counterfeit currency enforcement. Know your money! The site includes tips on spotting counterfeit cash, and what to do to protect yourself.
Read an excerpt from "Banking in Minnesota," a history of banking in the state.
The U.S. Federal Reserve sets interest rates and is in charge of the U.S. money supply.
The Federal Reserve Bank of Minneapolis.
Yahoo's list of companies that buy and sell old coins and currency.
Source: Banking in Minnesota, T. Harry Gatton and Turman L. Jeffers, published by the Minnesota Bankers Association, 1989.
U.S. Currency
A History of our Greenbacks
From the Federal Reserve Bank of Kansas City
Introduction
The story of the eight types of currency described in this site is interwoven with history. Changes to currency often came about in times of crisis, times like the Civil War and the Great Depression.
However, some changes to currency occurred in less momentous times. As our nation grew, there was a demand for more and more currency. By the 1920s, the Treasury Department was buying tons of specialized, high grade paper for our currency. It was realized that millions of dollars could be saved by just reducing the size of our currency. This was decided upon and, in 1929, the first of our current, reduced-size notes were put into circulation.
Why is it Green?
One thing that has not changed, however, is the color of our currency. The Bureau of Printing and Engraving has no definite answer to the question, "Why did the government select green for our currency?" However, when the small-sized notes were introduced in 1929, the use of green was continued because pigment of that color was readily available in large quantity, the color was relatively high in its resistance to chemical and physical changes, and green was psychologically identified with the strong and stable credit of the Government.
We hope you will enjoy taking a trip back through history as you read about currency that has been issued within the borders of our country from the Revolutionary War to the present. Prepared by the Kansas City Federal Reserve Bank.
State Bank notes varied from good to worthless
State Bank notes flourished during the Free Banking Era (1837-1863). During these years, there was no federal regulation of banking, an experiment that met with mixed success. In some areas State Bank notes were relatively safe and exchanged close to par or face value. However, in other areas there were too many kinds of paper money in circulation, and depreciated and fraudulent currency was common.
Special publications known as bank note reporters and counterfeit detectors sprang up to help people learn the value of various notes and determine which were good. However, even some of these publications had a poor reputation and many contemporary writers and latter-day historians were critical of them.
One historian describes a merchant trying to determine if a bill was good after checking in one of the publications described above. "He scrutinized the worn and dirty scrap for two or three minutes, regarding it as more probably 'good' if it was worn and dirty than if it was clean, because those features were proof of long and successful circulation. He turned it up to the light and looked through it, because it was the custom of the banks to file the notes on slender pins which made holes through them. If there were many such holes the note had been often in bank and its genuiness was ratified."
State Bank notes, however, did not originate with the Free Banking Era. They had been in circulation since shortly after the end of the Revolutionary War, and were first issued following the opening of the first bank in this country in 1782. But, until 1836, much of the paper currency in circulation consisted of issues of the two U. S. banks established by Congress, the First Bank of the United States (1791-1811) and the Second Bank of the United States (1816-1836).
It was after the closing of the Second Bank in 1836 that the United States entered the Free Banking Era and State Bank notes became the chief form of paper currency. This era came at a time when widespread bank failures caused the public to turn against banking and bankers. Objecting to the monopolistic organization of banks under special charters, the people demanded that banking be operated as free enterprise, subject to special government regulation. By 1860, the banking business was conducted by more than 1,500 state banks.
The Free Banking Era was also the era of wildcat banking and wildcat bank notes. Wildcat banks were opened in mountainous and other inaccessible regions making it difficult or impossible for people to redeem their notes. Some say these banks got their name from the fact that it would have taken a wildcat to locate them.
The National Bank Act of 1863 provided for a uniform national currency and resulted in the elimination of State Bank paper through taxation. A 2 percent tax was levied on State Bank notes in 1862, a tax that was increased to 10 percent in 1866. At this latter rate, there was no more profit in the issue of State Bank notes.
Confederate currency finally totaled $1 billion
Confederate money was printed in every denomination found in the North. This included fractional currency which was needed since there were no Confederate coins in circulation. By the end of the Civil War, over $1 billion worth of paper money printed by the Confederate nation was circulating or stored in warehouses. Since it was easy to counterfeit, considerable amounts were printed in the North and circulated in the South to debase the currency.
Perhaps the most famous of all the counterfeiters was Samuel C. Upham of Philadelphia. Strangely enough, Upham never represented himself as a counterfeiter of Confederate currency; rather, he advertised his lithographed notes as "facsimiles" and "mementos of the rebellion." On the margin of each and every note was printed "Fac-Simile Confederate notes sold, wholesale or retail. by S. C. Upham, 403 Chestnut Street, Phila."
He wrote: "I sold the notes as curiosities--mementos of the rebellion--and advertised them as such in several of the most widely circulated papers in the Union." He went on to say, "During the publication of those facsimile notes I was the 'best abused man' [by the rebels] in the Union. Senator Foote, in a speech before the rebel Congress, at Richmond, in 1862, said I had done more to injure the Confederate cause than General McClellan and his army..."
At the same time, in the South one found reckless printing of paper money not backed by gold or silver in a time when consumer goods were scarce. The result was the greatest inflation ever seen in America with the possible exception of the Revolutionary period.
While inflation was a problem in both the North and the South, it was far worse in the Confederacy. For example, in January 1862 the average value of one gold dollar in Richmond as compared with Confederate Treasury notes was $1.25, by March 1865 it was $60 to $70. In comparison, the average value of one gold dollar in New York compared with U.S. currency was $1.03 in January 1862, and $1.79 in March 1865.
Near the end of the war, Confederate citizens' confidence in their national currency eroded completely. The Southern public began to rely on barter or on U.S. currency obtained through a black market. In fact, the superior value of Northern greenbacks even caused them to be used to some extent in paying Confederate soldiers.
Hoarding of coin led to fractional currency
At the beginning of the Civil War, the North was faced with a colossal increase in government spending, a government that was hesitant to levy new taxes, and bad news from the front. By the end of 1861 both banks and the government stopped issuing coins. The public's confidence in the government was shaken, and they increasingly hoarded half dollars, quarters, and dimes. So extreme was the hoarding that one house in New York City is said to have collapsed from the weight of the coin stored there.
For a time merchants and others issued tickets, due bills, and other forms of private obligations so they could make change. Then, in what one student of these times regards as panic, Congress authorized the use of postage stamps for change. Physically, this observer commented, these glue-coated bits of paper were the worst form of currency ever used by a civilized people. Congress later approved a modified stamp called postal currency, happily without glue on the back. Finally, in October 1863, Congress authorized fractional currency which was eventually issued in 3, 5, 10, 15, 25, and 50 cent denominations.
The second of the four issues of fractional currency proved to be the most controversial. For one, it was the issue in which the 3 cent denomination was introduced, and doubt was expressed as to the need for it. There was also an outcry because the portrait of a division chief of the Bureau of Engraving and Printing appeared on the 5 cent note. The controversy reached the floor of Congress and resulted in the passage of a law that remains in effect today prohibiting the use of a portrait of any living person on a security of the United States. The division chief bore the brunt of the criticism despite the fact that the likeness of Francis E. Spinner, the then very much alive Treasurer of the United States, appeared on the 50 cent note.
In time, people learned to use the small pieces of paper, and silver coins were all but forgotten. This occurred even though the small notes wore out rapidly, became ragged and filthy, and were frequently returned for redemption. Fractional currency continued to be issued until February 1876. The total placed in circulation was more than $368 million.
United States notes were known as greenbacks
United States notes, which came to be called greenbacks, were the first real paper money issued by the U.S. government. They became known as greenbacks as they were the first bills to be engraved with green backs.
Greenbacks were put in circulation in April 1862 at a time when the North was struggling with the problem of financing the Civil War which had begun a year earlier. These notes were made legal tender for all private and public debts except payment of customs duties and interest on U.S. bonds and notes. Thus they also became known as legal tenders.
U.S. notes were originally backed by faith in the government rather than gold or silver. However, the Treasury was directed to begin redeeming U.S. notes in coin in 1879, which everyone understood as meaning they would be redeemed in gold. This continued until 1933 when the nation abandoned the gold standard. And so, once again, these notes were backed by the full faith and credit of the U.S. government.
The highest amount of U.S. notes ever outstanding was nearly $450 million in 1864. After the Civil War, many of these notes were retired until, in 1878, a law was passed freezing the amount outstanding at more than $322 million. This law still stands today although U.S. notes have not been issued since 1969.
Today, U.S. notes are a liability of the U.S. Treasury, while Federal Reserve notes are a liability of the Federal Reserve System. Since the Federal Reserve System has the responsibility for maintaining growth and elasticity in the U.S. money supply, it uses Federal Reserve notes for the active currency part of the money supply. With this in mind, the Department of the Treasury has asked Congress to enact legislation that would allow them to cease issuing U.S. notes on the basis that they are an anachronism.
National Bank notes helped North finance war
In 1863, President Abraham Lincoln, at the insistence of the Secretary of the Treasury, urged Congress to pass the National Bank Act of 1863 as part of the finance program for the Civil War. This act created both national banks and National Bank notes. The new national banks could issue National Bank notes backed by government bonds they purchased, bonds that provided the government with funds needed to finance the war.
Although the National Bank Act had won the approval of Congress primarily because it created a new market for government bonds, its long-run benefits were quite different. It provided a uniform currency and made it possible to eliminate the array of State Bank notes which had so long plagued the economy. As noted earlier in the section on State Bank notes, in the years before the National Bank Act was passed there had been too many kinds of paper money in certain parts of the country, and depreciated and fraudulent currency had been common. Needless to say, this led to many problems.
The national banking system was immeasurably superior to the old state banking system, but even so it was not completely satisfactory. For example, the volume of National Bank notes was inelastic. In times of prosperity, when the business community wanted more money, National Bank circulation tended to decline because banks had more attractive outlets for their funds than the government bonds needed to back their notes. In recession, the situation was reversed and currency expanded even though there was less demand for it.
Even before the Federal Reserve Act was enacted in December 1913, Congress had failed to increase the amount of government bonds national banks could use to back National Bank notes. When the Federal Reserve Act became law it provided that new national banks no longer had to purchase U.S. bonds and deposit them with the Treasurer of the United States in order to commence business. Thus there were not only fewer bonds available, but it was left up to banks to decide whether they wanted to purchase them and issue National Bank notes.
National banks that wanted to retire all or part of their National Bank notes could now sell the bonds that backed them. Federal Reserve banks, in turn, could purchase these bonds and issue Federal Reserve Bank notes against them. In addition, the Federal Reserve Act created a second new type of currency: Federal Reserve notes. All of these events led to a decline in the importance of National Bank notes.
As an emergency measure in the early years of the Great Depression, Congress passed legislation in 1932 making it possible for national banks to use certain U.S. bonds as collateral for National Bank notes. This made possible an increase of $900 million in the volume of currency. However, since there was no demand for more currency, the national banks did not take advantage of the privilege to the full extent and issued only $200 million of the new notes. In 1935, the Treasury redeemed the bonds eligible as security against National Bank notes and this type of currency was gradually retired.
Silver certificates first currency to bear motto
In 1957, $1 silver certificates had the distinction of becoming the first currency to bear the motto "In God We Trust." The motto, coined during the Civil War, now appears on all U.S. currency and coins.
Silver certificates date back to 1878 when they were first issued in denominations of $10 to $1,000. At the same time, the Treasury was authorized to buy $2 to $4 million worth of silver each month and coin it into dollars. However, there was little demand for the silver dollars as the public was not used to such heavy coins. Therefore, in 1886, Congress authorized $1, $2, and $5 silver certificates in the hope that these smaller denominations would make silver money more acceptable.
For many years silver certificates were issued in denominations of $1 to $1,000, and were the major type of currency in circulation. However, a problem arose in the early 1960s when the price of silver began to rise rapidly. As the price rose above $1.29 an ounce, it became evident that a further substantial jump would make it profitable for holders of silver coins to sell them in the open markets. This would have resulted in the disappearance of coins as had happened during the Civil War.
To avert this crisis, Congress eliminated silver certificates in 1963 and empowered the Federal Reserve to issue $1 and $2 Federal Reserve notes for the first time. This was done at a time when the only $1 bills being put in circulation were silver certificates. In 1965, Congress discontinued the silver dollar, reduced the silver in half dollars, and eliminated silver from quarters and dimes. In addition there was a ban on exporting or melting U.S. coins for their silver content. However, the Treasury's supply of silver was reduced by a large-scale redemption of silver certificates along with the need for silver for half dollars. Therefore, in 1967 after the "horse had been stolen," the Treasury locked the barn by gaining authorization to suspend the redemption of silver certificates in silver as of June 24, 1968.
Gold certificates put in circulation in 1882
"Get Gold, humanely if possible, but at all hazards get gold."
Ferdinand V.
"You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold!"
William Jennings Bryan.
Gold has a glamour and mystique all its own. So it seems only natural that gold certificates are colorful, vivid, and among the most attractive of all U.S. currency. The backs of the bills are a brilliant golden orange, symbolic of the coin they represent.
Gold certificates in denominations of not less than $20 were first issued from 1863 to 1879 in exchange for deposits of gold coin and bullion.
The backs of the bills are a brilliant golden orange, symbolic of the coin they represent.
However, gold certificates were not put in general circulation until 1882, and were issued for the next 51 years.
In 1933, the nation faced not only a severe depression but also a banking crisis. The public--which had been demanding currency from their banks--began to demand gold. Runs developed on both Federal Reserve Banks and commercial banks. In order to deal with the crisis, only Federal Reserve Banks were permitted to hold gold. A few exceptions were made such as allowing collectors to keep rare and unusual gold coins and permitting the use of gold in industry or the arts.
The following year, the Federal Reserve Banks were required to turn over all gold coin, gold bullion, and gold certificates to the U.S. Treasury. In return they received a new type of gold certificate, series 1934, in denominations of $100, $1,000, $ 10,000, and $100,000. These were never put in circulation, and the last ones were printed in January 1935.
In 1964, private citizens could once again hold gold certificates issued before Jan. 30, 1934, thus allowing collectors to hold this type of currency. While gold certificates could be exchanged at face value for other U.S. currency, they could no longer be redeemed in gold. Ten years later, in 1974, private U.S. citizens could once again hold gold legally.
Federal Reserve notes now major U.S. currency
When the Federal Reserve System was created by the passage of the Federal Reserve Act in 1913, a new type of currency came into existence: Federal Reserve notes. Today, almost all of the currency in circulation consists of Federal Reserve notes--denomination $1 through $100--issued by the 12 Federal Reserve Banks.
The Federal Reserve Act also created Federal Reserve Bank notes which, it was expected, would eventually replace National Bank notes. Federal Reserve Bank notes differ from Federal Reserve notes in that Federal Reserve notes are an obligation of the Federal Reserve, while Federal Reserve Bank notes were obligations of the individual Federal Reserve Banks which issued them. The Bank notes were issued from 1916 to 1920, and during the banking emergency of 1933, after which they were retired. However, during World War II, a stock of unused Federal Reserve Bank notes was issued for the last time in order to save paper and labor that would have been used to produce other needed currency. Following the war, the notes were gradually retired.
The first issue of Federal Reserve notes (series of 1914) was in the denominations of $5, $10, $20, $50, and $100 notes. The second issue (series of 1918) included $500, $1,000, $5,000, and $ 10,000 denominations.
During World War II, at a time when there was a threat that Hawaii might be invaded, the Treasury Department decided to withdraw all U.S. currency of regular design from circulation in the Territory and replace it with a special issue of notes that would only be used there. The special Hawaiian issue was made up of $1 silver certificates, and $5, $10, and $20 San Francisco Federal Reserve notes. The bills were identical in basic design to the two classes of currency. However, the Treasury seal and serial numbers were overprinted in brown rather than the blue normally used on silver certificates or the green used for Federal Reserve notes. In addition, all denominations were overprinted with the word "Hawaii" in bold type on both the face and the back of these bills. Had the Japanese conquered Hawaii, the distinctively marked currency would have made it possible to take appropriate measures to prevent the enemy from using the money to any advantage.
In addition, American military personnel took these "Hawaiian dollars" with them as they invaded Japanese strongholds in the Central Pacific zone. This step was taken to facilitate identification of the currency being used in the combat zones and to make it easier to isolate this particular currency if military reverses caused a substantial amount to fall into enemy hands.
In 1963, Congress authorized $1 and $2 Federal Reserve notes to replace the silver certificates which were being eliminated. The $2 denomination was included so that Federal Reserve notes would be authorized in all denominations from $1 to $10,000. The denominations of $500, $1,000, $5,000, and $10,000 were discontinued by the Board of Governors of the Federal Reserve System in 1945. This was done due to the lack of demand for them and also to discourage their use in business to avoid income tax. Federal Reserve Banks, however, continued to issue remaining supplies of these large denomination notes until 1969.
For More:
A Close-up Look At The New $50 Bill
The New $100 Bill Take a close-up look at the new C-note, and some of the changes in store for all our U.S. currency.
The U.S. Secret Service, in charge of all counterfeit currency enforcement. Know your money! The site includes tips on spotting counterfiet cash, and what to do to protect yourself.
[Return to Personal Finance Library] [Return to Home Page]
(E-mail: mba@tcilink.com)
Selected Sources
The Federal Reserve Bank of Kansas City
Carothers, Neil. Fractional Money. New York: John Wiley & Sons, Inc.,1930.
Dewey, Davis Rich. Financial History of the United States. 12th ed. New York: Longmans, Green and Company, 1934.
Dillistin, William H. Bank Note Reporters and Counterfeit Detectors. Numismatic Notes and Monographs No. 114. New York: The American Numismatic Society, 1949.
Eaton, Clement. A History of the Southern Confederacy. New York: The MacMillan Company, 1954.
Faust, Patricia L. (ed.) Historical Times Illustrated Encyclopedia of the Civil War. New York: Harper & Row, 1986.
Federal Reserve Board. Annual Reports. 1914, 1932-1934, 1963.
Friedberg, Robert. Paper Money of the United States. 12th ed. revised. Clifton, N.J.: The Coin and Currency Institute, Inc., 1989.
Fundamental Facts About United States Money. Pamphlet. Federal Reserve Bank of Atlanta.
Hessler, Gene. The Comprehensive Catalog of U.S. Paper Money, Chicago: Henry Regnery Company, 1974.
Krause, Chester L., and Lemke, Robert F. Standard Catalog of United States Paper Money. ed. Robert E. Wilhite. 9th ed. Iola, Wisconsin: Krause Publications, 1990.
Krooss, Herman E. (ed.). Documentary History of Banking and Currency in the United States. 4 vols. New York: Chelsea House Publishers in association with McGraw-Hill Book Company, Inc., 1969.
Krooss, Herman E., and Studenski, Paul. Financial History of the United States. 2d ed. New York: McGraw-Hill Book Company, Inc., 1963.
Moore, Carl H., and Russell, Alvin E. Money: Its Origin, Development and Modem Use. Jefferson, North Carolina: McFarland & Company, Inc., 1987.
Munn, Glenn G., Garcia, F.L., and Woelfel, Charles J. (ed.) Encyclopedia of Banking and Finance. 9th ed. revised. Rolling Meadows, Illinois: Bankers Publishing Company, 1991.
Muscalus, John A. Dictionary of Paper Money. Bridgeport, Pennsylvania: John A. Muscalus. 1947.
Myers, Margaret G. A Financial History of the United States. New York: Columbia University Press, 1970.
O'Donnell, Chuck. The Standard Handbook of Modem United States Paper Money. 7th ed. Iola, Wisconsin: Krause Publications, 1982.
Rolnick, Arthur J., and Weber, Warren E. "Explaining the Demand for Free Bank Notes," Federal Reserve Bank of Minneapolis, Quarterly Review, Vol. 12, No. 2 (Spring 1988).
Rolnick, Arthur J., and Weber, Warren E. "New Evidence on the Free Banking Era," The American Economic Review, December 1983.
Thomas, Emory M. The Confederate Nation: 1861-1865. New York: Harper & Row, 1979.
Todd, Richard C. Confederate Finance. Athens: The University of Georgia Press, 1954.
Treasury Department. History of the Bureau of Engraving and Printing: 1862-1962. Washington, D.C.: U.S. Government Printing Office.
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BILLIONS FOR THE BANKERS AND DEBTS FOR THE PEOPLE [Part 1 of 2]
A Study by Pastor Sheldon Emry "For the love of money is the root of all evil..." 1 Timothy 6:10 * * * [There is NO COPYRIGHT on this information. Please re-post it freely and widely. It needs to be in the hands of every American citizen!] ______________________________________________________________________
TABLE OF CONTENTS INTRODUCTION
Love of Money.................................................
i Thomas Jefferson Quote.......................................
ii Three Types of Conquest....................................
.iii BILLIONS FOR THE BANKERS.........................................
1 Money is Man's Only Creation.................................
2 Money Creating Profitable.....................................
3 Adequate Money Supply Needed.................................
3 The Bankers' Depression of the 1930's........................
3 Money For Peace or War?.......................................
5 POWER TO COIN AND REGULATE MONEY.................................
6 HOW PEOPLE LOST CONTROL OF THE FEDERAL RESERVE...................
6 More Disastrous Than Pearl Harbor.............................
7 They Print It -- We Borrow It................................
7 And There is More...........................................
.9 And There is Still More......................................
.9 THE INTEREST AMOUNT IS NEVER CREATED............................
10 Borrow $60,000 and Pay Back $255,931.........................
11 Small Loans..................................................
11 Bankers Always Prosper.......................................
12 The Cost to You.............................................
13 For the Gamblers.............................................
14 YES, IT'S POLITICAL TOO!........................................
15 Mounting Debts and Wars......................................
16 And There is More............................................
17 THE CONSTITUTIONAL WAY..........................................
19 No Bankers' Plunder..........................................
21 Stable Money.................................................
22 Citizen Control..............................................
23 A Debt-Free America.........................................
.24 WHY HAVEN'T WE KNOWN............................................
25 Controlled News.............................................
.25 TELL THE PEOPLE.................................................
27 AUDIT THE FEDERAL RESERVE.......................................
29 NOTABLE QUOTES ON MONEY........................................
33 THEY HAVE NOT TOLD YOU..........................................
35 GOD KNOWS OUR PLIGHT............................................
37 WHAT YOU CAN DO.................................................
38 ---------------------------------------------------------------------------- p. i
INTRODUCTION
"The love of money is the root of all evil": (1 Timothy 6:10) "If thou lend money to any of my people that is poor by thee, thou shalt not be to him an usurer, neither shalt thou lay upon him usury." Exodus 22:25 "Take no usury of him, or increase ... thou shalt not give him thy money upon usury." Leviticus 25:36-37 "Unto thy brother thou shalt not lend upon usury: That the Lord they God bless thee." Deuteronomy 23:20 In the early Church, any interest on debt was considered usury. Read below to see what interest (usury) on debts, a violation of God's Law, is doing to America. -----------------------------------------------
----------------- THE NEWS ------------------------------------------------------------- A-8 Lynchburg, Va., Sat., March 26, 1977 -------------------------------------------------------------
THE NATIONAL DEBT
In 1901 the national debt of the United States was less than $1 billion. It stayed at less than $1 billion until we got into World War I. Then it jumped to $25 billion. Between 1918 and 1941, on the eve of World War II, the national debt just about doubled -- from $25 to $49 billion. Between 1942 and 1952, the debt went from $72 billion to $265 billion. In 1962 it was $303 billion. Eight years later, in 1970, it was $383 billion. Between 1971 and 1976 it rose from $409 billion to $631 billion. The estimated debt at the end of this year [1977] is $727 billion, and next year it is expected to top $800 billion -- having nearly doubled in the past eight years. If the present trend continues, and there is no evidence whatsoever that it will not continue, we can expect the national debt to nearly double again within the next six to eight years. By then, the INTEREST in the debt alone should be in the $400 billion a year range. [Transcriber's note: As of 1996, the official debt about 5 TRILLION]. Eventually, the government will own nothing, the people will own nothing, the banks will own everything. ________________________________________________________________________ p. ii BILLIONS FOR THE BANKERS DEBTS FOR THE PEOPLE -------------------- [Top of page: A cartoon showing two bankers sitting on top of a private bank tower -- one banker sitting contentedly in a chair smoking a cigar; the other banker throwing a money windfall up in the air and saying to the first banker, "IT IS EASY TO ROB THE PEOPLE AND GET RICH. WE JUST LEND THEM THEIR OWN CREDIT ON PAPER AND CHARGE THEM USURY (INTEREST)." Beneath the bankers is a door called "loans" showing a $50,000 paper credit "loan" going out of the bank to a residential home. From the home are $250,000 in payments (30 year payemts) flying back to land on the "tongue" of the voracious "open mouth" of the bank.] * * * "If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them [around the banks], will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered." -- Thomas Jefferson _____________________________________________________________________________ p. iii THREE TYPES OF CONQUEST History reveals nations can be conquered by the use of one or more of three methods. The most common is conquest by war. In time, though, this method usually fails, because the captives hate the captors and rise up and drive them out if they can. Much force is needed to maintain control, making it expensive for the conquering nation. A second method is by religion, where men are convinced they must give their captors part of their earnings as "obedience to God." Such a captivity is vulnerable to philosophical exposure or by overthrow by armed force, since religion by its nature lacks military force to regain control, once its captives become "disillusioned." The third method can be called economic conquest. It takes place when nations are placed under "tribute" without the use of visible force or coercion, so that the victims do not realize they have been conquered. "Tribute" is collected from them in the form of "legal" debts and taxes, and they believe they are paying it for their own good, for the good of others, or to protect all from some enemy. Their captors become their "benefactors" and "protectors". Although this is the slowest to impose, it is often quite long lasting, as the captives do not see any military force arrayed against them, their religion is left more or less intact, they have freedom to speak and to travel, and they participate in "elections" for their rulers. Without realizing it, they are conquered, and the instruments of their own society are used to transfer their wealth to their captors and make the conquest complete. In 1900 the average American worker paid few taxes and had little debt. Last year payments on debts and taxes took more than half of what he earned. Is it possible a form of conquest has been imposed on our people? Read the following pages and decide for yourself. And may God have mercy on this once debt-free and great nation, in Christ, -- The Author -------------------------------------------------------------------------- -------------------------------------------------------------------------- p. 1 BILLIONS FOR THE BANKERS DEBTS FOR THE PEOPLE -------------------- THE REAL STORY OF THE MONEY-CONTROL OVER AMERICA by Pastor Sheldon Emry [Cartoon showing a mother standing in front of a judge in divorce court, holding the hand of her small boy and girl -- with her husband sitting in the witness chair, holding his head in gloom. The mother says to the judge, "AND JUDGE, WE WERE ALWAYS IN DEBT!."] * * * Americans, living in what is called the richest nation on earth, seem always to be short of money. Wives are working in unprecedented numbers, husbands hope for overtime hours to earn more, or take part-time jobs evenings and weekends, children look for odd jobs for spending money, the family debt climbs higher, and psychologists say one of the biggest causes of family quarrels and breakups is "arguments over money." Much of this trouble can be traced to our present "debt-money" system. ___________________________________________________________________________ p. 2 Too few Americans realize why Christian Statesmen wrote into Article I of the U.S. Constitution: "Congress shall have the Power to Coin Money and Regulate the Value Thereof." They did this, as we will show, in prayerful hope that it would prevent "love of money" from destroying the republic they had founded. We shall see how subversion of Article I has brought on us the "evil" of which God's Word had warned. MONEY IS MAN'S ONLY "CREATION" Economists use the term "create" when speaking of the process by which money comes into existence. Now, "creation" means making something which did not exist before. Lumbermen make boards from trees, workers build houses from lumber, and factories manufacture automobiles from metal, glass and other materials. But in all these they did not "create," They only changed existing materials into a more usable and, therefore, more valuable form. This is not so with money. Here, and here alone, man actually "creates" something out of nothing. ___________________________________________________________________________ p. 3 A piece of paper of little value is printed so that it is worth a piece of lumber. With different figures it can buy the automobile or even the house. It's value has been "created" in the true meaning of the word. "CREATING" MONEY IS VERY PROFITABLE! As is seen by the above, money is very cheap to make, and whoever does the "creating" of money in a nation can make a tremendous profit! Builders work hard to make a profit of 5% above their cost to build a house. Auto makers sell their cars for 1% to 2% above the cost of manufacture and it is considered good business. But money "manufactures" have no limit on their profits, since a few cents will print a $1 bill or a $10,000 bill. That profit is part of our story, but first let consider another unique characteristic of the thing -- money, the love of which is the "root of all evil". ADEQUATE MONEY SUPPLY NEEDED An adequate supply of money is indispensable to civilized society. We could forego many other things but without money industry would grind to a halt, farms would become only self-sustaining units, surplus food would disappear, jobs requiring the work of more than one man or one family would remain undone, shipping and large movement of goods would cease, hungry people would plunder and kill to remain alive, and all government except family or tribe would cease to function. An overstatement, you say? Not at all. Money is the blood of civilized society, the means of all commercial trade except simple barter. It is the measure and the instrument by which one product is sold and another purchased. Remove money or even reduce the supply below that which is necessary to carry on current levels of trade, and the results are catastrophic. For an example, we need only look at America's Depression of the early 1930's. THE BANKER'S DEPRESSION OF THE 1930'S In 1930 America did not lack industrial capacity, fertile farmland, skilled and willing workers or industrious farm families. It had an extensive and efficient transportation system in railroads, road networks, and inland and ocean waterways. ____________________________________________________________________________ p. 4 Communications between regions and localities were the best in the world, utilizing telephone, teletype, radio, and a well-operated government mail system. No war had ravaged the cities or the countryside, no pestilence weakened the population, nor had famine stalked the land. The United States of America in 1930 lacked only one thing: an adequate supply of money to carry on trade and commerce. In the early 1930s, Bankers, the only source of new money and credit, deliberately refused loans to industries, stores and farms. Payments on existing loans were required however, and money rapidly disappeared from circulation. Goods were available to be purchased, jobs waiting to be done, but the lack of money brought the nation to a standstill. By this simple ploy America was put in a "depression" and the greedy Bankers took possession of hundreds of thousands of farms, homes, and business properties. The people were told, "times are hard" and "money is short." Not understanding the system, they were cruelly robbed of their earnings, their savings, and their property. _______________________________________________________________________ p. 5 MONEY FOR PEACE? NO! MONEY FOR WAR? YES! World War II ended the "depression." The same Bankers who in the early 30's had no loans for peacetime houses, food and clothing, suddenly had unlimited billions to lend for Army barracks, K-rations and uniforms! A nation that in 1934 couldn't produce food for sale, suddenly could produce bombs to send free to Germany and Japan! (More on this riddle later). With the sudden increase in money, people were hired, farms sold their produce, factories went to two shifts, mines re-opened, and "The Great Depression" was over! Some politicians were blamed for it and others took credit for ending it. The truth is the lack of money (caused by the Bankers) brought on the depression, and adequate money ended it. The people were never told that simple truth and in this article we will endeavor to show how these same Bankers who control our money and credit have used their control to plunder America and place us in bondage. ____________________________________________________________________________ p. 6 POWER TO COIN AND REGULATE MONEY When we can see the disastrous results of an artificially created shortage of money, we can better understand why our Founding Fathers, who understood both money and God's Laws, insisted on placing the power to "create" money and the power to control it ONLY in the hands of the Federal Congress. They believed that ALL Citizens should share in the profits of its "creation" and therefore the Federal government must be the ONLY creator of money. They further believed that ALL citizens, of whatever State or Territory, or station in life, would benefit by an adequate and stable currency, and therefore, the national government must also be, by law, the ONLY controller of the value of money. Since the Federal Congress was the only legislative body subject to all the citizens at the ballot box, it was, to their minds, the only safe depository of so much profit and so much power. They wrote it out in the simple, but all inclusive: "Congress shall have the Power to Coin Money and Regulate the Value Thereof." HOW THE PEOPLE LOST CONTROL T0 THE FEDERAL RESERVE Instead of the Constitutional method of creating our money and putting it into circulation, we now have and entirely unconstitutional system. This has brought our country to the brink of disaster, as we shall see. Since our money was handled both legally and illegally before 1913, we shall consider only the years following 1913, since from that year on, ALL of our money had been created and issued by an illegal method that will eventually destroy the United States if it is not changed. Prior to 1913, America was a prosperous, powerful, and growing nation, at peace with its neighbors and the envy of the world. But -- in December of 1913, Congress, with many members away for the Christmas holidays, passed what has since been known as the FEDERAL RESERVE ACT. (For the full story of how this infamous legislation was forced through our Congress, read "Conquest or Consent", by W. D. Vennard). Omitting the burdensome details, it simply authorized the establishment of a Federal Reserve Corporation, with a Board of Directors (The Federal Reserve Board) to run it, and the United States was divided into 12 Federal Reserve "Districts." _____________________________________________________________________________ p. 7 This simple, but terrible, law completely removed from Congress the right to "create" money or to have any control over its "creation", and gave that function to The Federal Reserve Corporation. This was done with appropriate fanfare and propaganda that this would "remove money from politics" (they didn't say "and therefore from the people's control") and prevent "Boom and Bust" from hurting our citizens. The people were not told then, and most still do not know today, that the Federal Reserve Corporation is a private corporation controlled by bankers and therefore is operated for the financial gain of the bankers over the people rather than for the good of the people. The word "Federal" was used only to deceive the people. MORE DISASTROUS THAN PEARL HARBOR Since that "day of infamy", more disastrous to us than Pearl Harbor, the small group of "privileged" people who lend us "our" money have accrued to themselves all of the profits of printing our money -- and more! Since 1913 they have "created" tens of billions of dollars in money and credit, which, as their own personal property, they then lend to our government and our people at interest. "The rich get richer and the poor get poorer" had become the secret policy of the Federal government. An example of the process of "creation" and its conversion to peoples "debt" will aid our understanding. THEY PRINT IT -- WE BORROW IT AND PAY THEM INTEREST We shall start with the need for money. The Federal Government, having spent more than it has taken from its citizens in taxes, needs, for the sake of illustration, $1,000,000,000. Since it does not have the money, and Congress has given away its authority to "create" it, the Government must go to the "creators" for the $1 billion. But, the Federal Reserve, a private corporation, doesn't just give its money away! The Bankers are willing to deliver $1,000,000,000 in money or credit to the Federal Government in exchange for the Government's agreement to pay it back -- with interest. So Congress authorizes the Treasury Department to print $1,000,000,000 in U.S. Bonds, which are then delivered to the Federal Reserve Bankers. _____________________________________________________________________________ p. 8 The Federal Reserve then pays the cost of printing the $1 billion (about $1,000) and makes the exchange. The government then uses the money to pay its obligations. What are the results of this fantastic transaction? Well, $1 billion in Government bills are paid all right, but the Government has now indebted the people to the Bankers for $1 billion on which the people must pay interest! Tens of thousands of such transactions have taken place since 1913 so that by the 1980s, the U.S. Government is indebted to the Bankers for over $1,000,000,000,000 (trillion), on which the people pay over $100 billion a year in interest alone with no hope of ever paying off the principal. Supposedly, our children and following generations will pay forever and forever! (Since this book was printed in 1984, the national debt has grown to today's 1989 total of approximately 3 trillion dollars.) [Transcriber's note: As of 1996, it is approximately 5 trillion dolllars]. _____________________________________________________________________________ p. 9 AND THERE'S MORE You say, "This is terrible!" Yes, it is, but we have shown only part of the sordid story. Under this unholy system, those United States Bonds have now become "assets" of the Banks in the Reserve System, which they then use as "reserves" to "create" more "credit" to lend. Current "reserve" requirements allow them to use that $1 billion in bonds to "create" as much as $15 billion in new "credit" to lend to States, municipalities, to individuals and businesses. Added to the original $1 billion, they could have $16 billion of "created credit" out in loans paying them interest with their only cost being $1,000 for printing the original $1 billion! Since the U.S. Congress has not issued Constitutional money since 1863 (over 100 years), in order for the people to have money to carry on trade and commerce they are forced to borrow the "created Credit" of the Monopoly bankers and pay them usury-interest! AND THERE'S STILL MORE In addition to the vast wealth drawn to them through this almost unlimited usury, the Bankers who control the money at the top are able to approve or disapprove large loans to large and successful corporations to the extent that refusal of a loan will bring about a reduction in the price that that Corporation's stock sells for on the market. After depressing the price, the Bankers' agents buy large blocks of the company's stock, after which the sometimes multi-million dollar loan is approved, the stock rises, and is then sold for a profit. In this manner billions of dollars are made with which to buy more stock. This practice is so refined today that the Federal Reserve Board need only announce to the newspapers an increase or decrease in their "discount rate" to send stocks up and down as they wish. Using this method since 1913, the Bankers and their agents have purchased secret or open control of almost every large corporation in America. Using that control, they then force the corporations to borrow huge sums from their banks so that corporate earnings are siphoned off in the form of interest to the banks. This leaves little as actual "profits" which can be paid as dividends and explains why stock prices are so depressed, while the banks reap billions in interest from corporate loans. In effect, the bankers get almost all of the profits, while individual stockholders are left holding the bag. __________________________________________________________________________ p. 10 The millions of working families of America are now indebted to the few thousand Banking families for twice the assessed value of the entire United States. And these Banking families obtained that debt against us for the cost of paper, ink, and bookkeeping! THE INTEREST AMOUNT IS NEVER CREATED The only way new money (which is not true money, but is "credit" representing a debt), goes into circulation in America is when it is borrowed from Bankers. When the State and people borrow large sums, we seem to prosper. However, the bankers "create" only the amount of the principal of each loan, never the extra amount needed to pay the interest. Therefore, the new money never equals the new debt added. The amounts needed to pay the interest on loans is not "created," and therefore does not exist! Under this kind of a system, where new debt always exceeds the new money no matter how much or how little is borrowed, the total debt increasingly outstrips the amount of money available to pay the debt. The people can never, ever get out of debt! An example will show the viciousness of this usury-debt system with its "built in" shortage of money. ____________________________________________________________________________ p. 11 IF $60,000 IS BORROWED - $255,931.20 MUST BE PAID BACK When a citizen goes to a banker to borrow $60,000 to purchase a home or a farm, the Bank clerk has the borrower agree to pay back the loan plus interest. At 14% interest for 30 years, the borrower must agree to pay $710.92 per month for a total of $255,931.20. The clerk then requires the citizen to assign to the banker the right of ownership of the property if the borrower does not make the required payments. The bank clerk then gives the borrower a $60,000 check or a $60,000 deposit slip, crediting the borrower's checking account with $60,000. The borrower then writes checks to the builder, subcontractors, etc., who in turn write checks. $60,000 of new "checkbook" money is thereby added to the "money in circulation." However, and this is the fatal flaw in a usury system, the only new money created and put into circulation is the amount of the loan, $60,000. The money to pay the interest is NOT created, and therefore was NOT added to "money in circulation." Even so, this borrower (and those who follow him in ownership of the property) must earn and TAKE OUT OF CIRCULATION $255,931, almost $200,000 MORE than he put IN CIRCULATION when he borrowed the original $60,000! (By the way, it is this interest which cheats all families out of nicer homes. It is not that they cannot afford them; it is because the Bankers' usury forces them to pay for FOUR homes to get ONE!) Every new loan puts the same process in operation. Each borrower adds a small sum to the total money supply when he borrows, but the payments on the loan (because of interest) then deduct a much LARGER sum from the total money supply. There is therefore no way all debtors can pay off the money-lenders. As they pay the principle and interest, the money in circulation disappears. All they can do is struggle against each other, borrowing more and more from the money-lenders each generation. The money lenders (Bankers), who produce nothing of value, slowly, then more rapidly, gain a death grip on the land, building, and present and future earnings of the whole working population. Proverbs 22:7 has come to pass in America. The borrowers have become the servants to the lenders. No wonder God Almighty forbids interest on loans. (See cover again). __________________________________________________________________________ p. 12 SMALL LOANS DO THE SAME THING If you haven't quite grasped the impact of the above, let us consider a small auto loan for 3 years at 18% interest. Step 1: Citizen borrows $5,000 and pays it into circulation (it goes to the dealer, factory, miner, etc.) and signs a note agreeing to pay the Bankers $6,500. Step 2: Citizen pays $180 per month of his earnings to the Banker. In three years, he will take OUT of circulation $1,500 more than he put IN circulation. Every loan of Banker "created" money (credit) causes the same thing to happen. Since this has happened millions of times since 1913 (and continues today), you can see why America has gone from a prosperous, debt-free nation to a debt-ridden nation where practically every home, farm and business is paying usury-tribute to some Banker. The usury-tribute to the Bankers on personal, local, State and Federal debt totals more than the combined earnings of 25% of the working people. Soon it will be 50% and continue upward. THIS IS WHY BANKERS PROSPER IN GOOD TIMES OR BAD In the millions of transactions made each year like those above, little actual currency changes hands, nor is it necessary that it do so. 95% of all "cash" transactions in the U. S. are executed by check, so the Banker is perfectly safe in "creating" that so-called "loan" by writing the check or deposit slip, not against actual money, but AGAINST YOUR PROMISE TO PAY IT BACK! The cost to him is paper, ink and a few dollars in salaries and office costs for each transaction. It is "check kiting" on an enormous scale. The profits increase rapidly, year after year, as shown below. * * * [Article from a newspaper:] "Valley Bank Posts 49% Gain in Profits" "Gains of 49 percent in net income and 51 percent in operating income were posted last year by Valley National bank. Those gains brought net income to $33,959,000 in the year ended Dec. 31 and operating income to $34,459,000. The year before those totals were $22,836,000 and $22,807,000 respectively." __________________________________________________________________________ p. 13 "Bank's Profit Rise 21%" "Arizona bank announced on Monday it had achieved a 21.2 percent increase in net income in 1978 over 1977. On the basis of operating income, excluding the 1977 sale of the Arizona Bank Building for $1,336,368, the bank said the increase was 43.9 percent. Tostenrud said loans and deposits increased in the last year. Deposits 18.8 percent to $1,353 billion and loans 21.9 percent to $951 million." * * * THE COST TO YOU? EVENTUALLY, EVERYTHING! In 1910 the U. S. Federal debt was only $1 billion, or $12.40 per citizen. State and local debts were practically non-existent. By 1920, after only six years of Federal Reserve shenanigans, the Federal debt had jumped to $24 billion, or $228 per person, and State and local debts were mushrooming. By 1981 the Federal debt passed $1 trillion and was growing exponentially as the Bankers tripled the interest rates. State and local debts are now MORE than the Federal, and with businesses and personal debts totalled over $6 trillion, three times the value of all land and buildings in America. If we signed over to the money-lenders of all of America we would still owe them more two more Americas (plus their usury, or course!). However, they are too cunning to take the title to everything. They instead leave you with some "illusion of ownership" so you and your children will continue to work and pay the Bankers more of your earnings on ever increasing debts. The "establishment" has captured our people with their ungodly system of usury and debt as certainly as if they had marched in with an uniformed army. To understand that it really is a "conquest," go back to the front and read the "Three Types of Conquest" again. _____________________________________________________________________________ p. 14 The borrower must pay back MORE then he borrowed, so bankers ALWAYS get more than they lend! FOR THE GAMBLERS AMONG MY READERS To grasp the truth that periodic withdrawal or money through interest payments will inexorably transfer all wealth in the nation to the receiver of interest, imagine yourself in a poker or dice game where everyone must buy the chips (the medium of exchange) from a "banker" who does not risk chips in the game, but watches the table and every hour reaches in and takes 10% to 15% of all the chips on the table. As the game goes on, the amount of chips in the possession of each player will go up and down with his luck. However, the TOTAL number of chips available to play the game (carry on trade and business) will decrease rapidly. The game will get low on chips, and some will run out. If they want to continue to play, they must buy or borrow them from the "banker". The "banker" will sell (lend) them ONLY if the player signs a "mortgage" agreeing to give the "banker" some real property (car, home, farm, business, etc.) if he cannot make periodic payments to pay back all the chips plus some EXTRA ones (interest). The payments must be made on time, whether he wins (makes a profit) or not. _____________________________________________________________________________ p. 15 It is easy to see that no matter how skillfully they play, eventually the "banker" will end up with all of his original chips back, and except for the very best players, the rest, if they stay in long enough, will lose to the "banker" their homes, their farms, their businesses, perhaps even their cars, watches, rings, and the shirts off their backs! Our real life situation is MUCH WORSE than any poker game. In a poker game none is forced to go into debt, and anyone can quit at any time and keep whatever he still has. But in real life, even if we borrow little ourselves from the "bankers," the local, State and Federal governments borrow billions in our name, squander it, then confiscate our earnings from us and pay it back to the Bankers with interest. We are forced to play the game, and none can leave except by death. We pay as long as we live, and our children pay after we die. If we cannot pay, the same government sends the police to take our property and give it to the Bankers. The bankers risk nothing in the game; they just collect their percentage and "win it all." In Las Vegas and at other gambling centers, all games are "rigged" to pay the owner a percentage, and they rake in millions...The Federal Reserve Bankers' "game" is also rigged, and it pays off in billions! In recent years, Bankers have added real "cards" to their game. "Credit" cards are promoted as a convenience and a great boon to trade. Actually, they are ingenious devices by which Bankers collect 2% to 5% of every retail sale from the seller and 18% interest from buyers. A real "stacked" deck!
____________________________________________________________________
BILLIONS FOR THE BANKERS, DEBTS FOR THE PEOPLE [Part 2]
______________________________________________________________________
p. 16
YES, IT'S POLITICAL, TOO!
Democrat, Republican, and independent voters who have wondered why
politicians always spend more tax money than they take in should now see
the reason. When they begin to study our "debt-money" system, they soon
realize that these politicians are not the agents of the people but are
the agents of the Bankers, for whom they plan ways to place the people
further in debt.
It takes only a little imagination to see that if Congress had been
"creating," spending and issuing into circulation the necessary increase
in the money supply, THERE WOULD BE NO NATIONAL DEBT and the over
$4 Trillion of other debts would be practically non-existent.
Since there would be no ORIGINAL cost of money except printing, and no
continuing costs such as interest, Federal taxes would be almost nil.
Money, once in circulation, would remain there and go on serving its
purpose as a medium of exchange for generation after generation and
century after century, with no payments to the Bankers whatsoever!
MOUNTING DEBTS AND WARS
But instead of peace and debt-free prosperity, we have ever-mounting
debt periodic wars. We as a people are now ruled by a system of
Banker-owned Mammon that has usurped the mantle of government, disguised
itself as our legitimate government, and set about to pauperize and
control our people.
It is now a centralized, all-powerful political apparatus whose main
purposes are promoting war, confiscating the people's money, and
propagandizing to perpetuate itself in power. Our two large political
parties have become its servants, the various departments of government
its spending agencies, and the Internal Revenue Service is its
collection agency.
Unknown to the people, it operates in close cooperation with similar
apparatuses in other nations, which are also disguised as "governments."
Some, we are told, are friends. Some, we are told, are enemies. "Enemies"
are built up through international manipulations and used to frighten the
American people into going billions of dollars more into debt to the
bankers for "military preparedness," "foreign aid to stop communism,"
"minority rights" etc.
Citizens, deliberately confused by brainwashing propaganda, watch
helplessly while our politicians give food, goods, and money to
Banker-controlled alien governments under the guise of "better relations"
and "easing tensions." Our Banker-controlled government takes our finest
and bravest sons and sends them into foreign wars with obsolete equipment
and inadequate training, where tens of thousands are murdered, and hundreds
of thousands are crippled. Other thousands are morally corrupted,
addicted to drugs, and infected with venereal and other diseases, which
they bring back to the United States.
When the "war" is over, we have gained nothing, but we are scores of
billions of dollars more in debt to the bankers, which was the reason for
the "war" in the first place!
__________________________________________________________________________
p. 17-19
AND THERE'S MORE
The profits from these massive debts have been used to erect a
complete and almost hidden economic and political colossus over our
nation. They keep telling us they are trying to do us "good," when in
truth they work to bring harm and injury to our people. These would-be
despots know it is easier to control and rob an ill, poorly-educated
and confused people than it is a healthy and intelligent population,
so they deliberately prevent real cures for diseases, they degrade our
educational systems, and they stir up social and racial unrest. For the
same reason they favor drug use, alcohol, sexual promiscuity, abortion,
pornography, and crime. Everything which debilitates the minds and
bodies of the people is secretly encouraged, as it makes the people
less able to oppose them or even to understand what is being done to
them. Family, morals, love of Country, the Christian religion, all
that is honorable is being swept away, while they try to build their
new, subservient man.
Our new "rulers" are trying to change our whole cultural, social,
religious, and political order, but they will not change the debt-
money economic system by which they ron and rule. Our people have
become tenants and "debt-slaves" to the Bankers and their agents in
the land our fathers conquered. It is conquest through the most
gigantic fraud and swindle in the history of mankind.
And we need to remind you again: The key to their wealth and power
over us is their ability to create "money" out of nothing and lend it
to us at interest. If they had not been allowed to do that, they
would never would have gained secret control of our nation. How true
Solomon's words are:
"The rich rule over the poor, and the borrower is
servant to the lender." Proverbs 22.7
Let us now consider the correct method of providing the medium of
exchange (money) needed by our people.
THE CONSTITUTIONAL WAY -- EVERY CITIZEN A STOCKHOLDER
If we would have used the Constitutional way of "creating" the money
needed in the nation, the Federal Congress would spend most of its time
and study on the issuance and control of an adequate supply of stable
money for the people.
If an increase of population and production required an increase in
the medium of exchange, Congress would authorize the "coining," (i.e.,
printing) of the determined amount. Some could be used to pay current
legitimate expenses of the Federal Government, with the balance paid
directly to the citizens. Records for payment would be similar to
Social Security records, except a citizen would be recrded at birth,
instead of when he first goes to work.
Each person on the records as of the date of the Congressional
authorization would receive an equal amount just as of he were a
stockholder holding one share. Just think -- a peyment of only $20 to
each citizen would put $4 billion of debt-free and interest-free money
into circulation.
_________________________________________________________________________
p. 20
Such a suggestion always scares the Bankers. Their propagandists
will immediately cry "printing press money," and warn that it would
soon be "worthless" and would cause "inflation."
The truth is their immense ursury charges on their "created" credit
(our debt) is the sole cause of "inflation." All prices on all
industry, trade and labor must be reaised periodically to pay the ever
increasing usury charges. That is the ONLY cause of higher prices,
and the money-changers spend millions in propaganda to keep you from
realizing that.
The money-creators (Bankers) know that if we ever tried a
Constitutional issue of debt-free, interest-free currency, even a
limited issue, the benefits would be apparent immediately. That they
must prevent. Abraham Lincoln was the last President to issue such
debt-free and interest-free currency (in 1863) and he was assassinated
shortly thereafter. [Transcriber's note: JFK also made an issue of some
interest-free U.S. Treasury currency notes in 1963, and he quickly met
the same fate as Lincoln].
___________________________________________________________________________
p. 21
NO BANKS PLUNDER
Under the Constitutional system, no private banks would exist to rob
the people. Government banks under the control of the people's
representatives would issue and control all money and credit. They would
issue not only actual currency, but could lend limited credit at no
interest for the purchase of capital goods, such as homes.
A $60,000 loan would require only $60,000 repayment, not $255,931 as it
is now. Everyone who supplied materials and labor for the home would get
paid just as they do today, but the bankers would NOT get $195,931 in
interest. AND THAT IS WHY THEY RIDICULE AND DESTROY ANYONE SUGGESTING
GOVERNMENT (CITIZENS') MONEY WITHOUT INTEREST AND WITHOUT DEBT.
History tells us of debt-free and interest-free money issued by
governments. The American colonies did it through colonial script in the
1700's and their wealth soon rivaled that of England and brought
restrictions from Parliament, which led to the Revolutionary War.
Abraham Lincoln did it in 1863 to help finance the Civil War. He was
later assassinated by an agent of the Rothschild Bank. No debt-free or
interest-free money has been issued in America since then.
Several Arab nations issue interest free loans to their citizens today.
The Saracen Empire forbade interest on money 1,000 years ago and its
wealth outshone even Saxon Europe. Mandarin China issued its own money,
interest-free and debt-free and historians and collectors of art today
consider those centuries to be China's time of greatest wealth, culture,
and peace.
Germany issued debt-free and interest-free money from 1935 on,
accounting for its startling rise from the depression to a world power
in 5 years. Germany financed its entire government and war operation
from 1935 to 1945 without gold and without debt, and it took the
whole Capitalist and Communist world to destroy the German power over
Europe and bring Europe back under the heel of the bankers. Such
history of money does not even appear in the textbooks of public
(government) schools today. [This is not intended to convey any
approval of the repugnant policies of Nazi Germany or its leadership,
but merely to cite an historical example of a nation which, for a short time,
escaped from the debt system and repudiated it]
Issuing money which does not have to be paid back in interest leaves
the money available to use in the exchange of goods and services and
services, and its only continuing cost is replacement as the paper wears
out. Money is the paper ticket by which transfers are made and should
always be in sufficient quantity to transfer all possible production of
the nation to the ultimate consumers.
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p. 22
It is as ridiculous for a nation to say to its citizens, "You must
consume less because we are short of money," as it would be for an
airline to say, "Our planes are flying, but we cannot take you because
we are short of tickets."
STABLE MONEY
Money, issued in such a way, would derive its value in exchange from
the fact that it had come from the highest legal source in the nation
and would be declared legal to pay all public and private debts.
Issued by a sovereign nation, not in danger of collapse, it would need
no gold or silver or other so-called "precious" metals to back it.
As history shows, the stability and responsibility of government issuing
it is the deciding factor in the acceptance of that government's
currency -- not gold, silver, or iron buried in some hole in the ground.
Proof is America's currency today. Our gold and silver are practically
gone, but our currency is accepted. But if the government was about to
collapse our currency would be worthless.
Also, money issued through the people's legitimate government would not
be under the control of a privately owned corporation whose individual
owners benefit by causing the mojney amount and value to fluctuate and
the people to go into debt.
Under the present debt-usury system, the extra burden of usury forces
workers and businesses to demand more money for the work and goods to
pay their ever-increasing debts and taxes. This increase in prices and
wages is called "inflation." Bankers, politicians and "economists"
blame it on everything but the real cause, which is the usury levied on
money and debt by the Bankers.
This "inflation" benefits the money-lenders, since it wipes out savings
of one generation so they can not finance or help the next generation,
who must then borrow from the money-lenders, and pay a large part of
their life's labor to the usurer.
With an adequate supply of interest-free money, little borrowing would
be required and prices would be established by people and goods, not by
debts and usury.
__________________________________________________________________________
p. 23
CITIZEN CONTROL
If Federal Congress failed to act, or acted wrongly, in the supply of
money, the citizens would use the ballot or recall petitions to replace
those who prevented correct action with others whom the people believe
would pursue a better money policy. Since the creation of money and its
issuance in sufficient quantity would be one of the few functions of
Congress, the voter could decide on a candidate by his stand on money
instead of the hundreds of lesser issues which are presented to us
today.
And since money is, and would remain, a national function, local
differences or local factrions would not be able to sway the people from
the nation's (citizens') interest. All other problems, except the
nation's defense, would be taken care of in the State, County, or City
governments where they are best handled and most easily corrected.
An adequate national defense would be provided by the same citizen-
controlled Congress, and there would be no Bankers behind the scenes,
bribing politicians to give $220 billions of American military
equipment to other nations, disarming us, while alien nations prepare
to attack and invade the United States of America.
___________________________________________________________________________
p. 24
A DEBT-FREE AMERICA
With debt-free and interest-free money, there would be no high and
confiscatory taxation, and our homes would be mortgage-free with no
$10,000-per-year payments to the Bankers, nor would they get $1,000 to
$2,500 per year from every automobile on our roads.
We would need no "easy payment" plans, "revolving" charge accounts,
loans to pay medical or hospital bills, loans to pay taxes, loans to pay
for burials, loans to pay loans, nor any of the thousand and one
usury-bearing loans which now suck the life-blood of American families.
There would be no unemployment, divorces caused by debt, destitute old
people, or mounting crime, and even the so-called "depraved" classes
would be deprived of neither job nor money to buy the necessities of
life.
Criminals could not become politicians, nor would politicians become
criminals in the pay of the Money-lenders. Our officials, at all
government levels, would be working for the people instead of devising
more money to place us further in debt to the Bankers.
____________________________________________________________________________
p. 25
We would get out of the entangling foreign alliances that have engulfed
us in four major ways and scores of minor wars since the Federal Reserve
Act was passed, alliances which are now used to prevent America from
preparing her own defense in the face of mounting danger from alien
powers.
A debt-free America would mean mothers would not have to work.
With mothers at home, juvenile deliquency would decrease rapidly. The
elimination of the usury and debt would be the equivalent of a 50%
raise in the purchasing power of every worker. With this cancellation
of all debts, the return to the people of all the property and wealth
the parasitic Bankers and their quasi-legal agents have stolen by usury
and fraud, and then ending of their theft of $300 Billion (or more)
every year from the people. America would be prosperous and powerful
beyond the wildest dreams of the citizens today. And we would be at
peace! (For a Bible example of cancellation of debts to money lenders
and restoration of property and money to the people, read
Nehemiah 5:1-13.)
WHY YOU HAVEN'T KNOWN
We realize that this small, and necessarily incomplete, article on
money may be charged with oversimplification. Some may say that if it
is that simple the people would have known about it, and it could not
have happened.
But this MONEY LENDER'S conspiracy is as old as Babylon, and even in
America it dates far back before the year 1913.
Actually, 1913 may be considered the year in which their previous plans
came to fruition, and the way opened for complete economic conquest of
our people. The consPIRACY is old enough in America so that to its
agents have been, for many years, in positions of influence such as
newspaper publishers, editors, columnists, church ministers, university
presidents, professors, textbook writers, labor union leaders, movie
makers, radio and TV commentators, politicians, and from school board
members to U.S. presidents, and many others.
CONTROLLED NEWS AND INFORMATION
These agents control the information available to our people. They
manipulate public opinion, elect whom they will locally and nationally,
and never expose the crooked money system. They promote school bonds,
municipal bonds, expensive and detrimental farm programs, "urban renewal,"
foreign aid, and many other schemes which put the people more deeply
into debt to the Bankers.
__________________________________________________________________________
p. 26
Thoughtful citizens wonder why billions are spent on one program and
billions on another which may duplicate it or even nullify it, such as
paying some farmers not to raise crops, while at the same time building
dams or canals to irrigate more farm land. Crazy or stupid?
Neither. The goal is more debt. Thousands of government-sponsored
ways of wasting money go on continually. Most make no sense, but they
are never exposed for what they really are, builders of "billions for
the bankers and debts for the people."
So-called "economic experts" write syndicated columns in hundreds of
newspapers, craftily designed to prevent the people from learning the
simple truth about our money system. Commentators on radio and TV,
preachers, educators, and politicians blame the people as wasteful, lazy
or spend-thrift, and blame the workers and consumers for the increase
in debts and the inflation of prices, when they know the cause is the
debt-money system itself.
Our people are literally drowned in charges and counter-charges designed
to confuse them and keep them from understanding the unconstitutional and
evil money-system that is so efficiently and silently robbing the farmers,
the workers, and the businessmen of the fruits of their labor and of their
freedoms.
___________________________________________________________________________
p. 27
When some few Patriotic people or organizations who know the truth
begin to expose them or try to stop any of their mad schemes, they are
ridiculed and smeared as "right-wing extremists," "super-patriots,"
"ultra-rightists," "bigots," "fascists," etc. Any name
is used which will cause them to shut up or will at least stop other
people from listening to the warning they are giving. Articles and
books such as you are now reading are kept out of schools, libraries,
and book stores.
Some, who are especially vocal in their exposure of the treason
against our people, are harassed by government agencies such as
the EPA, the OSHA, the IRS, and others, causing them financial loss
and bankruptcy. Using the above methods, they have been completely
successful in preventing most Americans from learning the truth.
Therefore, to prevent violence or armed resistance to their plunder of
America, they plan to register all firearms and eventually to disarm
all citizens. They have to eliminate most guns, except those in the
hands of their government, polics and army.
TELL THE PEOPLE
The "almost hidden" conspirators in politics, religion, education,
entertainment, and the news media are working for A Banker-owned
United States, in a Banker-owned world under a Banker-owned World
Government! [NOTE: Read Prof. Carroll Quigley's TRAGEDY AND HOPE
for an Insider's own confession of this! Prof. Quigley, a member of these
elite groups and thoroughly in sympathy with their goal of a World
Government controlled by the financial elite, has been referred to by
President Clinton (who was one of his students) as the man most
responsible for shaping his view of the world!]
Love of Country, compassion for your fellow citizens, and concern for
your children should make you deeply interested in this, America's greatest
problem, for our generation has not suffered under the "yoke" as the
coming generations will. Usury and taxes will continue to take a
larger and larger part of the annual earning of the people and put
them into the pockets of the Bankers and their political Agents.
Increasing "government" regulations will prevent citizen protest and
opposition to their control.
_________________________________________________________________________
p. 28
It is possible that your grandchildren will own neither home nor car,
but will live in "government-owned" apartments and ride to work in
"government-owned" buses (both paying interest to the bankers),
AND BE ALLOWED TO KEEP JUST ENOUGH OF THEIR EARNINGS TO BUY A MINIMUM
OF FOOD AND CLOTHING while in luxury? In Asia and eastern Europe it is
called "communism;" in America it is called "Democracy" and "Capitalism."
America will not shake off her Banker-controlled dictatorship as long
as the people are ignorant of the hidden controllers. International
financiers, who control most of the governments of the nations, and most
sources of information, seem to have us completely within their grasp.
They are afraid of only one thing: an awakened Patriotic Citizenry, armed
with the truth, and with a trust in Almighty God for deliverance. This
pamphlet has given you the truth about their iniquitous system. What you
do with it is in your hands, as in the hands of Divine Providence. "The
fear of man bringeth a snare: but whoso putteth his trust in the Lord
shall be safe." Proverbs 29:25
* * *
[Chart at bottom of page shows "Principal Assets of All
Commercial Banks: 1950 to 1980" -- shows an exponentially
increasing upward spike. Source: Statistical Abstract of
United States. A note below the chart states:
"1982: Since 1950 the Bankers "assets" (obtained by fraud)
have risen from $160 billion to almost $2,000 billion.
They are stealing America with their debt-usury system!]
[Note alongside the chart: "Bankers produce no usable product
or any "wealth," yet their usury robbery amost doubles their
net assets (wealth) every ten years! Is it possible another
generation under their "System" will make them "legal" owners
of the entire United States and 200 million citizens will be
their bond-slaves on the continent our fathers colonized and
developed?"]
____________________________________________________________________________
p. 29
AUDIT THE FEDERAL RESERVE SYSTEM?
The Federal Reserve has never been audited by the government since
it took over our money and credit in 1913. In 1975, a bill, H.R. 4316,
to require an audit, was introduced in Congress.
During the April, 1975, hearings, this author submitted a statement
favoring the audit, as did many others. It is reprinted on the next
two pages, from pages 306-308 of the 739 pages of testimony given
during those hearings before the Subcommittee on Domestic Monetary
Policy of the Committee on Banking, Currency, and Housing, House of
Representatives. Due to pressure from the money-controllers, it was
not passed. No audit has ever been made.
____________________________________________________________________________
p. 33
NOTEABLE MONEY QUOTES
PRESIDENT JAMES A. GARFIELD: "whoever controls the volume of money in
in any country is absolute master of all industry and commerce."
HORACE GREELRY: "While boasting of our noble deeds, we are careful to
conceal the ugly fact that by an iniquitous money system we have
nationalized a system of oppression which, though more refined, is
not less cruel than the old system of chattel slavery."
THOMAS A. EDISON: "People who will not turn a shovel full of dirt on
project (Muscle Shoals Dam) nor contribute a pound of material, will
collect more money from the United States than will the People who
supply all the material and do all the work. This is the terrible
thing about interest...But here is the point: If the Nation can
issue a dollar bond it can issue a dollar bill. The element that
makes the bond good makes the bill good also.
The difference between the bond and the bill is that the bond lets
the money broker collect twice the amount of the bond an an additional
20%. Whereas the currency, the honest sort provided by the
Constitution, pays nobody but those who contribute in some useful way.
It is absurd to say our Country can issue bonds and cannot issue
currency. Both are promises to pay, but one fattens the usurer and
the other helps the People. If the currency issued by the People
were no good, then the bonds would be no good, either. It is a
terrible situation when the Government, to insure the National
Wealth, must go in debt and submit to ruinous interest charges at
the hands of men who cointrol the fictitious value of gold. Interest
is the invention of Satan."
PRESIDENT WOODROW WILSON: "A great industrial Nation is controlled
by its system of credit. Our system of credit is concentrated. The
growth of the Nation and all our activities are in the hands of a few
men. We have come to be one of the worst ruled, one of the most
completely controlled and dominated Governments in the world -- no
longer a Government of free opinion, no longer a Government by
conviction and vote of the majority, but a Government by the opinion
and duress of small groups of dominant men."
(Just before he died, Wilson is reported to have stated to friends
that he had been "deceived" and that "I have betrayed my Country."
He referred to the Federal Reserve Act, passed during his
Presidency) [<--note by the author, Emry.]
SIR JOSIAH STAMP: (President of the Bank of England in the 1920's, the
second richest man in Britain): "Banking was conceived in iniquity
and was born in sin. The Bankers own the earth. Take it away from
them, but leave them the power to create deposits, and with the flick
of the pen they create enough deposits to buy it back again. However,
take it away from them, and all the great fortunes like mine will
disappear, and they ought to disappear, for this would be a happier
and better world to live in. But, if you wish to remain the slaves
of the Bankers and pay the cost of your own slavery, let them
continue to create deposits."
___________________________________________________________________________
p. 34
MAJOR L.L.B. ANGAS: "The modern Banking system manufactures money out
of nothing. The process is perhaps the most astounding piece of
sleight of hand that was ever invented. Banks can in fact inflate,
mint, and unmint the modern ledger-emntry currency."
RALPH M. HAWTREY (Former Secretary of the British Treasury): "Banks
lend by creating credit. They create the means of payment out of
nothing."
ROBERT H. HEMPHILL (Credit Manager of Federal Reserve Bank, Altanta,
Ga.): "This is a staggering thought. We are completely dependent
on the the commercial Banks. Someone has to borrow every dollar we
have in circulation, cash or credit. If the Banks create ample
synthetic money, we are prosperous; if not, we starve. We are
absolutely without a permanent money system. When one gets a
complete grasp of the picture, the tragic absurdity of our
hopeless position is almost incredible, but there it is. It is
the most important subject intelligent persons can investigate and
reflect upon. It is so important that our present civilization may
collapse unless it becomes widely understood and the defects
remedied very soon."
CONGRESSMEN LOUIS T. MCFADDEN: The Federal Reserve (Banks) are one
of the most corrupt institutions the world has ever seen. There is
not a man within the sound of my voice who does not know that this
Nation is run by the International Bankers."
JOHN C. CALHOUN (Speech in the Senate, May 26, 1836): "A power has
risen up in the government greater than the people themselves,
consisting of many and various powerful interests combined in one mass,
and held together by the cohesive power of the vast surplus in the
banks."
LYOF N. TOLSTOY (In What Shall We Do?, 1891): "Money is a new form
of slavery, and sistinguishable from the old simply by the fact that
it is impersonal -- that there is no human relation between master
and slave."
THOMAS JEFFERSON (Letter to Elbridge Gerry, Jan. 26, 1779): "Banking
establishments are more dangerous than standing armies."
WILLIAM CORBETT: (In Advice to Yound Men, 1, 1829): "The power
which money gives is that of brute force; It is the power of
the bludgeon and the bayonet."
SOPHOCLES (Atigone, c. 450 B.C.): "Money lays waste cities; It sets
men to roaming from home. It seduces and corrupts honest men and
turns virtue to baseness; It teaches villany and impiety."
__________________________________________________________________________
p. 35
________________________________________________________________________
The hundreds of "civil rights," "student," "Women's Lib." and
similar "protest" organizations or publications? They protest
"racism," atomic weapons, war, pollution, and scores of other supposed
"wrongs," but NEVER, NEVER, expose or object to the robbery of the
people by the Billionaire Bankers!
By the 1980's virtually no prominent indiviual or national organization
of influence in America, including religious organizations, opposes or
exposes the Bankers' plunder. Because of that silence most Americans
live out their whole lives in this land without ever learning how they are
being robbed[End of Part 2 of 2]
_________________________________________________________
[This item may be freely re-posted and distributed if unaltered and unedited]
On 'Cooling Hot Money':
Transatlantic Trends in Drug-related Money Laundering
and its Facilitation
Nigel South.
Abstract
This article is concerned with the 'cooling' of 'hot money' and the diversion of the huge illicit profits of the drug business into the legal economy. It reviews trends since the early 1980s in techniques and volume of money laundering, considers some of the legislative and law enforcement measures that have been pursued and concludes with some specific and general observations.(1)
Introduction
To paraphrase Bertolt Brecht, 'If you want to steal, then buy a bank'.
This article is concerned with criminal strategies involving not theft but drug trafficking, but Brecht's point remains pertinent - one of the best ways to run a criminal enterprise is to have a legal foundation. In the following sections I shall review trends in drug-related money laundering since the early 1980s, drawing on published and unpublished literature and on field-work interviews conducted in Canada in the late 1980s, and in the UK in the early to mid-1990s.
The issue
One of the most important developments in the recent expansion of 'new' financial crime, has been the burgeoning business of laundering 'hot money' generated by the global, illegal drugs economy and 'washed' through the legitimate banking system. The measure of this importance is not simply the amount of money involved but the actual and possible consequences of its generation and circulation.
At the beginning of the decade, 'The Group of Seven's' Financial Action Task Force reported in April 1990 that forty three billion pounds was then being laundered through the Western banking system (Taylor, 1991: 122) For the Task Force, the scale of such dealings justifies ending the conventions of banking confidentiality (ibid) and strong exhortations to banks that they "should know their customers" and be rigorous in verifying the provenance of cash deposits (Levi, 1991 b: 122) Fears related to such large scale money movement include its disruptive and unpredictable impact upon the management of investment planning and the possibility (and reality) of the destabilisation of smaller banking and investment institutions.
In addition, the placing of such large sums in the banking system is fertile ground for corruption. This can occur in terms of individuals accepting bribes to facilitate transactions in ways which do not draw unwanted attention; or in broader, 'organizational' terms, with the compromise or corruption of banking ethics and proper procedures, justified on the basis that such sizeable deposits are good for the bank! As Levi (1991 b: 112) observes, "in competitive national and international markets, bankers can rationalise their moral blindness on the grounds that critical inquisition of potential customers - legitimate and illegitimate - will simply simply displace them to rival financial institutions."
It is, of course, also possible for entrepreneurs within the banking system and financial markets to develop the provision of banking services with the intention that they be manipulable for corrupt purposes. Regulators generally impede such initiatives, although the experiences of the UK and USA are perhaps different in this respect. Alternatively, financial sector entrepreneurs may subsequently discover the great profitability of such a 'modus operandi'. The case of the Bank of Credit and Commerce International which, whatever the accounts one believes, must fall into one of these categories, is too large a subject to discuss in any detail in this article. However, the revelations and repercussions of the case have brought considerable and needed public and official attention to the potential for 'approved' financial bodies to engage in laundering and fraud, (see Passas, 1994; the self-deluding ability of international banking regulators to either believe the stories they are told or not ask questions at all, is illustrated by Robinson (1994: ch. 15) on 'A Tale of Two Banks', the cases of Banco Ambrosiano and of BCCI).
Before examining the laundering business further, it may be helpful to consider some definitions of the subject.
Definitions.
In a text aimed at US law enforcement personnel studying in criminal justice programmes, Lyman (1989: 135) offers a definition of useful conciseness: "The term 'money laundering' refers to the transformation of illegally obtained currency to that which appears legitimate. In addition, it is the concealment of the illegal source of the income or its applications." A more comprehensive, if somewhat bureaucratic, definition was provided by the US Customs Service in their evidence to the Group of Seven International Task Force (referred to above): "The process whereby proceeds, reasonably believed to have been derived from criminal activity, are transported transferred, transformed, converted, or intermingled with legitimate funds, for the purpose of concealing or disguising the true nature, source, disposition, movement or ownership of those proceeds. The goal of the money laundering process is to make funds derived from, or associated with illicit activity appear legitimate." (Police Review, 1990: 1149).
Levi (1991 b: 111) draws upon Article 1 of the draft European Community Directive of March 1990 which defines money laundering as:
the conversion or transfer of property, knowing that such property is derived from a serious crime, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in committing such an offence or offences to evade the legal consequences of his action, and the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from a serious crime.
A small dictionary of differing definitions could be compiled but perhaps a more useful working interpretation which combines brevity with a degree of analysis was offered by the US Senate Foreign Relations Committee, Sub-committee on Narcotics and Terrorism, which suggested that "money laundering is the conversion of profits of illegal activities into financial assets which appear to have legitimate origins" (1990: 8) and proposed a generic model which identified three stages to money laundering:
placement, which is the physical disposal of the cash;
layering, the process of transferring funds through various accounts to disguise its origins; and
integration, the movement of laundered funds into legitimate organizations (ibid: 12; and Dorn, Murji and South, 1992; see also DEA and RCMP, 1988: 7-10).
The history or etymology of the term 'laundering' probably deserves a study in itself, but popular (and often apocryphal and erroneous) accounts usually associate the techniques of money laundering with the growth of organized crime in the USA. Saltmarsh (1990: 1148), for example, suggests that the term "is reputed to have originated from the 1920s, when the likes of Al Capone and Bugsy Moran quite literally opened up laundry companies in Chicago in order to clean their 'dirty money'". However, whilst Capone's diverse interests may well have included laundries, his reputation as a financially astute business operator is hardly unblemished and it was precisely his shortcomings in disguising the origins of his funds which enabled his eventual prosecution by the US Internal Revenue Service. Nowadays, "such activities as fast-food outlets, casinos and other cash-based establishments serve the same broad purpose ..." (Saltmarsh, ibid).
Estimates and Centers of Laundering.
Despite their variety, definitions may offer more promise of precision than attempts at quantification. Estimates of the scale and volume of laundering can naturally only really represent informed guess work. Examples from the 1970s to the 1990s include the following. The US Senate Foreign Relations Committee, Subcommittee on Narcotics and Terrorism, (1990), offered a figure of $300 billion as generated by international trafficking and in need of laundering in some way. In the UK, a 1989 report of the Parliamentary Home Affairs Committee (1989, vol.2: 124) estimated that around £1,800 million of drug related money flows through the country.
In the USA, one key technique used to generate estimates of money flow is examination of currency surpluses. Over the long term, under normal circumstances, bank deposits and withdrawals will tend to balance out. However, monitors of such money flows, such as the US Treasury Department, use the reporting of currency surpluses in an area to try to trace the large deposits of illicit money responsible for the surplus. For example, as a UN Information Service (1990: 15) report illustrates,
the currency surplus of banks in Florida, traditionally the main gateway for cocaine smuggled into the USA, increased from $576 million to $1.5 billion in 1976. By the end of the 1980s, the flow of cash turned into a deluge swamping the entire southern border of the United States.
This development of criminal strategies to 'cool hot money', and related counter-targetting efforts by enforcement and fiscal authorities has continued. It reflects the dynamic and fluid nature of the drug market and associated enterprises and the interactive entrepreneuriality of trafficking and enforcement organizations (Dorn and South, 1990; see also Reuter, 1983). In 1989, according to the Drug Enforcement Report (April 10th, 1989: 5), Federal Reserve Bank statistics showed a cash reserve 'high' in Miami banks of $6 billion in 1985 which then fell in the late 1980s to $4.8 billion in 1988. This reflected a mid-1980s shift in the epi-centre of drug money laundering in the USA, westward to Southern California and the Los Angeles area. The cash surplus in the latter region jumped from $165 million in 1985 to $3.8 billion in 1988, according to the Federal Reserve Bank (Drug Enforcement Report, op cit) (9)
The fluidity of the laundering business, indeed the necessity that it be flexible and able to transfer funds around the international banking network with ease, has in turn necessitated the development of a 'mapping' of what the DEA has called 'Major Conduits and Repositories for Illicit Drug Money', (The Economist, March 4th, 1989: 100). In addition to the three 'centers' of Hong Kong, the Bahamas and Panama, cited in a 1989 State Department list (in the annual International Narcotics Control Strategy Report - a list that was out of date even then), the DEA report (less bound by diplomatic considerations) added a further 16 'centers'. In the USA, these are Houston, Los Angeles, Miami and New York; in Canada, Montreal, Vancouver and Toronto; and outside N. America: Andorra, the Cayman Islands, the Channel Islands, Liechtenstein, Luxembourg, Mexico, Singapore, Switzerland, and the United Arab Emirates. Others that may be added in the future, would include Uruguay, "with banking-secrecy laws to put the Swiss to shame", (The Economist, March 4th, 1989:100). For the mid-1990s, this list is probably as applicable as ever, even despite recent legislative moves to 'tighten up' loopholes in several countries (see below).
Regulatory intervention versus globalized financail markets?
The range of interventions, strategies and international agreements developed to break the money laundering chains are wide-ranging and quite sophisticated - however they are not working. Or at least, not very well. To criminologists, if not to regulators, this may be no surprise. Illegal markets may reflect many characteristics of legal ones but do not necessarily conform to the (often stereotypical) models of organization which regulators and law enforcers may adopt (Reuter, 1983; Ruggiero and South, 1995). Money laundering is very big business but it is not necessarily easily controlled by 'very big' 'international agreements', 'enforcement stings' or 'revenue and taxation strategies'. It is an interstitial phenomenon and it takes advantage of, and integrates into, legitimate systems of commerce which are - from the parochial to the multi-national - necessary to the functioning of economic societies. Money laundering cannot therefore be controlled as if it were simply an unwanted slice of the pie that can be cut out and discarded.
Laundering strategies involve financial transactions the size of which are extremely profitable and hence attractive to the legitimate financial enterprises that process them; laundering diverts money from an illegal economy into needed and welcome investment in the legitimate economy; and, generally, it is now so well integrated into the 24-hour a day global network of financial transactions that it's curtailment might - we could speculate - have consequences beyond those that legislators and enforcement officials conventionally suppose. Taylor (1992: 190), for example, points to "the broader economic context" within which money laundering occurs:
the internationalization of finance markets and the competitive struggle for a secure store of value, within which any significant transfer of capital and value must now take place. The rapid movement of money between financial markets, whether carried through airports or transferred between computers via Electronic Data Interchange, is now a condition of survival for any serious financial player. There is a kind of iron logic here which applies to legitimate as well as illegitimate capital.
This is not to suggest that 'nothing can be done' or that 'no measures will have any effect'; it is to suggest that the measures against money laundering that are currently in place are still quite limited (although developing rapidly, Levi, 1991 a) and to succeed in the future may need to be broadened to penalise the financial system that currently profits from the 'cooling of hot money'. Against this proposition however, must be set concerns about the extent to which ªg Government and international regulation of the banking system suggests that financial institutions are in danger of becoming "an arm of the state" (Levi, 1991 a, b).
Measures against Laundering.
In the UK, the 1980s saw the introduction of a range of legislative and investigatory initiatives
Since 1984, when the Police and Criminal Evidence Act was passed, there has been a vast transformation in the range of legislation encroaching on the privacy of banking records. The movement in the direction of encouraging and, in an increasing range of cases, of requiring 'active citizenship' on the part of the banks has as its objectives (1) to prevent criminals from benefiting financially from the offences for which they have been convicted, and (2) to deter them and others from committing crimes for gain in the future. (Levi, 1991 b: 110)
The drafting of provisions in the important UK Drug Trafficking Offences Act (DTOA) ²986) reflected the belief of Government, Parliament and law enforcement bodies that the UK financial system was (and is) facilitating a considerable amount of drug related money laundering: "there must be a vast amount of money circulating within the legitimate banking system that is drug related" (evidence of the National Drugs Intelligence Unit to the Home Affairs Committee, NDIU, 1989: 116). The DTOA is a key piece of legislation in the setting of precedents for the erosion of banking confidentiality in the UK. It is of considerable note in legal terms in two other respects, which also reflect the influence of US innovations. First, in the reversal of the onus of proof, (theoretically) placing this not upon the prosecution but upon the defendant when it comes to satisfying the court as to the source of identified funds. Second, and with particular relevance to the actions of the financial institutions affected, the offence created by s.24 occurs if there is knowledge or suspicion of funds being the profits of drug trafficking - traditionally 'suspicion' has not been sufficient grounds for action within English criminal law. Amendments to the Act continue to modify its interpretation and use, but its principles remain the same.
For present purposes, I shall not examine the UK experience much further. However, I would argue that in three ways the UK case is a good introduction to the 'global stage'. First, because it has been very active in European and Commonwealth bodies concerned with drug trafficking and money laundering, and in promoting and initiating International Mutual Legal Assistance Treaties (which aid extradition of traffickers to the countries where they are wanted and also assist in financial investigations; eg see Levi, 1991 a: 287-295). Second, because the UK has so often been the apparent servant or ambassador for Washington DCs 'internationalization' of its' 'War on Drugs' (10). And third, and relatedly, because the UK government and enforcement agencies have traded upon drug crime and associated 'threats' (arms, terrorism) as symbolic issues: within the international community, highlighting their contributions to cooperative action; and for domestic audiences, being able to show the tough line of taking action against an external threat. Again US influence and the real and symbolic (if waning) 'special relationships' between governments and enforcement agencies have played their parts here (although so too has the over-arching hegemonic 'internationalization' of US law enforcement, see Nadelmann, (1993) for a brilliant review).
In Europe, a number of countries have now adopted legislation allowing for or requiring the reporting of financial transactions which could be related to drug trafficking. For example, in 1990, Spain, which had been the target of some criticism for not appearing to be doing enough to break the cocaine traffic which is channelled through it (and Portugal) from Columbia and elsewhere, introduced legislation obliging bank officials to report suspect transactions to the Bank of Spain. In 1991 the first arrests and charges were made under the legislation and involved the laundering of £8 million of cocaine-related money (The Observer, 7th May, 1991). Other countries are introducing similar measures and there are even changes to legislation concerning the banking systems of traditional 'havens' such as Switzerland, Luxembourg and Liechtenstein (Nadelmann, 1993: 389 and 384-396 passim). The work of the Trevi Group, the Pompidou Group and the 'Group of Seven' International Task Force on money laundering are all representative of European Union (formerly known as the European Community) and wider European cooperation on trafficking and laundering (see Levi, 1991 a; Taylor, 1992: 181-2). Additional momentum was given to the forming of legislation by the support of many countries for the UN Convention on Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988). The UN Convention removed principles of 'banking secrecy' as a reason for refusing to divulge information about trafficking activities and requires signatories to make laundering a criminal and extraditable offense (US SFRC, Subcommittee on Narcotics and Terrorism, 1990: 56-9; The Economist, 1989: 5). However, as Robinson (1994: 36-37) observes, while 80 nations agreed to these principles, 80 is less than half the UN membership and by 1993 only four of the 80 had actually signed!
International cooperation is also enabled by bilateral agreements. Within such 'bilateralism', the US brings to bear continued pressure upon its various 'partners' to step up their contributions to the 'global war on drugs' (despite a degree of hypocrisy in this suggested by CIA use of banks such as BCCI: Levi, 1991 a: 301, fn. 19; Passas, 1994: 75-76; see also Chambliss, 1989: 189-90 on the Nugan Hand bank established in Sydney, Australia in 1976 and used by the CIA; and Robinson (1994: 40) on an even earlier - 1953 - case of CIA laundering in relation to plans to reinstate the Shah of Iran). Such pressure from Washington is premised upon a position long held by the US DEA (since around 1978: US General Accounting Office, 1984: 5) that if traditional law enforcement efforts have so evidently had limited impact upon the organization of drug trafficking, then a new strategy is called for. Pursuit of the assets of entrepreneurial crime may succeed in the destabilisation of trafficking networks where traditional emphasis on prosecution of the 'leaders' of 'organized crime' has manifestly failed (Dombrink and Meeker, 1986; Dorn, Murji and South, 1992).
In the USA, extensive powers of financial investigation are afforded by several pieces of legislation. It might, however, be noted that this very extensiveness is not necessarily conducive to swift or efficient investigation. Consider, for example, the amount of paper (reports, documentation etc) involved in banking compliance with the requirements of an important piece of 1970s legislation:
... the 1970 Bank Secrecy Act which requires a Currency Transaction Report to be filed by financial institutions whenever a currency transaction is $10,000 or more. A second document required under Federal law is the filing of the Currency or Monetary Instrument Report for transactions involving currency or monetary instruments exceeding $5,000 which are taken out of the United States. Finally, a Foreign Bank Account Report is required whenever a person has at least $5,000 in a foreign bank account. In all cases Federal law requires a five-year 'paper-trail' must be maintained for accountability. (Lyman, 1989: 135; see also the discussion of, and reservations about, the US approach to bank confidentiality in Levi, 1991 a: 248-54).
The other key piece of US legislation employed in this sphere has been the RICO (Racketeer Influenced and Corrupt Organizations) statute, 1970, which enables the freezing of assets to prevent their liquidation and upon conviction provides for the seizure of the profits and proceeds of 'organized' or entrepreneurial crime. Civil provisions are also available under the statute for use against those who have not been brought to trial but whose involvement in the matters under investigation can be established on the basis of a lesser standard of proof than that demanded by the criminal law (ie 'proof beyond a reasonable doubt') (Lyman, 1989: 128-9). This provision, whilst a powerful tool to employ in cases where a clear avoidance of justice might otherwise follow, is nonetheless a potential source of the erosion of civil liberties and of the validity of traditional expectations about the workings of the court. Use of RICO has been given some renewed emphasis since 1990 and the passage of the 1990 Depository Institution Money Laundering Amendment Act "which put the burden to report transactions squarely on the shoulders of banks' directors" (Robinson, 1994: 34).
Laundering: How does it work?
At the international level, banking institutions are an obvious conduit for transferring funds abroad if the various checks noted above are not triggered or are otherwise circumvented. But outside the 'traditional' banking system, purchase of instruments conventionally used for overseas exchange purposes, such as travellers cheques or bankers drafts mean that as well as banks, Bureaux of Exchange and Travel Agents can be used by launderers. As Robinson (1994: 38-39) reports, money changers and casas de cambio, casinos and race tracks and so on, offer both new and 'traditional' methods of taking care of the laundry. The purchase or control of such organisations by laundering entrepreneurs has been discovered in many cases. In parts of the USA (New York, California, Florida, Texas) 'store-front' money-transmitting businesses, legitimately in business to 'wire' money to other countries, (eg to relatives), and cheque-cashing operations, have flourished - but most are unlicenced, unregulated and illegal and US banking regulators have estimated that they are involved in the laundering of "billions of dollars" of drug related money (New York Times, 25th September, 1989).
The practice of 'hawallah', 'hundi' or 'chiti' banking within different ethnic communities, enables the avoidance of any conventional paper record of the financial transaction (ICPR, 1989). Such methods do not require the actual movement of money but nonetheless facilitate the payment of funds to another party in another country in local currency, drawn on the reserves of the overseas partner(s) of the Hawallah banker. The system is dependent upon considerable trust and considerable simplicity - the identifying receipt for a transaction being something as innocuous as a playing card or post-card torn in half, half being held by the customer and half being forwarded to the overseas hawallah banker. In his case-study of laundering through the financial enterprises of Hong Kong, Gaylord (1990: 28) describes such an "underground" banking system :
controlled almost exclusively by Chinese, (it) operates through gold shops, trading companies and money changers, many of which are operated around the world by members of individual families. This system grew out of a combination of historical distrust for banks, political turmoil and communist takeovers in many countries where the Chinese resided and were constantly harassed. Out of necessity, the Chinese have developed a business style that, to Westerners, seems extremely secretive. However, bitter experience has taught these people well that the only reliable unit of business is the family.
The record keeping procedures of the underground banking system are nearly non-existent. Coded messages, 'chits' and simple telephone calls are used to transfer money from one country to another. The system inherently provides anonymity and security for the customer, converts gold or other items into currency and converts one currency into the currency of the customer's choice. When it is necessary to transfer money to Southeast Asia from Europe or the United States, commercial bank facilities are utilized to augment the underground banking system.
Purchase of property or valuable goods can hide the origin of funds, and paper inflation of the supposed value of, say, a work of art, achieved through false invoicing, can also disguise the offloading of funds. A Scotland Yard detective writing on this area, Graham Saltmarsh, (1990: 1149) noted evidence of "so-called drug barons ... purchasing works of art stolen to order by international art thieves." (A nice suggestion of the criminal economy becoming self-sufficient!). Finally, of course, money can simply be carried, ie smuggled, out of the country and the immediate jurisdiction of investigating authorities.
The permeability and vulnerability of the sophisticated system created to facilitate the ease of movement of legitimate capital is clear. In a fundamental sense, the system is therefore a 'victim' of its own success. Its' rapacious growth, greedy need for the continued (now 24-hour a day) movement of capital, and its modern willingness to 'deal first, ask questions later', all make it an oddly compliant protester against the 'abuse' of its facilities. However, it is also true to say that, in another sense, the system is also the victim of innovative endeavours to subvert or circumvent (sometimes) quite sophisticated monitoring and security procedures. For example, the extensive and elaborate checks against laundering provided for by the US Bank Secrecy Act (above) are undermined by the now well-known technique of 'smurfing'. This involves the employment of numerous (metaphorically) little people (or agents) who act as money couriers and make similarly numerous small-scale transactions of amounts just beneath the $10,000 reporting limit. Vast amounts of moers and make similarly numerous small-scale transactions of amounts just beneath the $10,000 reporting limit. Vast amounts of mo currency exchanges avoid the need to deal with a more heavily regulated banking system yet are necessarily involved in a vast amount of cash exchange. Brokerage houses are given to accepting large cash deposits to negotiate on behalf of legitimate customers such as foreign banks or important customers. If such legitimacy can be established, through small-scale subterfuge or large-scale measures such as orchestrating control of a bank or facilities within it, then the transformation of 'hot' cash into 'cool' securities, exchangeable for clean cash later, is a sound method of laundering. The anonymity of financial tax havens for the legitimately or semi-legitimately wealthy is also take advantage of by the illegitimately wealthy. No big surprise here, except - it sometimes appears - from the 'shocked' administrators of such 'off-shore' banking havens. However, here the depositing of such funds is only the initial phase of laundering - to realise and use such funds, a method must then be found for moving the money on to its ultimate point of destination, or, perhaps more preferable, for 'repatriating' the funds.
One technique employed in this enterprise is the 'loan-back method'. This, in essence, allows the money launderer to 'borrow back' the money that has been placed elsewhere. This works by setting up a corporate identity in an area with lax financial reporting requirements, generally using a local law firm as intermediary to conceal the identity of controlling interests. Next a business that operates in the launderer's own country is purchased with a nominal deposit - the balance of the purchase price is provided by a 'loan' from the offshore corporation or bank set up earlier; ie the launderer is lending to him or herself. Repayment of the loan now continues on a regular basis, as if the legitimate local company was simply paying its debt. Originally 'hot and dirty' money has now returned to the country as 'cool and clean' funds used to purchase a legitimate business. Further funds can then be sent out to the offshore bank for laundering in the form of debt-repayments; as 'legitimate' business expenses, these repayments may also attract tax benefits and exemptions.
The establishment of offshore corporations or banks is central to many methods of laundering through the international markets: for example, simple direct investment in profitable, legitimate ventures; or false invoicing and accounting that depends upon a supplier of goods or services (the offshore corporation) being able to inflate prices charged so that there is a difference between the real value of goods and what is paid for them - this difference being 'skimmed off' and deposited in other offshore accounts. Investment in property markets and laundering through the securities markets are also facilitated by creating an offshore corporate identity.
Observations and Conclusions.
There are many limitations to the success of law enforcement and financial investigation efforts directed against drug-related money laundering. Serious practical problems were identified by the US SFRC Subcommittee on Narcotics and Terrorism (1990: 35-40) as: (i) the lack of coordination between the multiple agencies (national and international) involved and limited intelligence sharing; relatedly, (ii) lack of cooperation between agencies at different 'levels', eg regional or state versus national and federal; and iii) the shortage of 'human resources' involved in the "labor intensive and time consuming work" of investigating suspected violations.
These are important practical points but they also illuminate the limitation of vision that has prevailed in the 'war on drugs' law enforcement mentality. There is little sense here of trying to understand the 'big picture'; of questioning either the origins of the problem being fought or the methods and assumptions adopted in that fight (cf Taylor, 1992: 191-192). For example and crucially, we should note that trafficking and associated laundering have, in large part, been stimulated by the debt crisis of many Latin American (and other) countries. As a report from the UN Information Service (1990: 15) pointed out:
Loans from US banks to developing countries set the stage for this crisis, and defaults on the loans undercut the stability of the US banking system. Now the proceeds from drug trafficking are helping to buoy the liquidity of US banks and figure prominently in payments on Latin American debts. The impact of coca dollars in the western hemisphere now extends from peasant farmers in the Andean mountains to national governments across Latin America and the boardrooms of major banks.
It is also worth observing that not all financial crime is as hotly pursued as the laundering of drug money. This may be for several reasons; perhaps because of the easy rhetoric that can justify virtually anything in relation to drugs law enforcement; or because of associations with 'foreign corruptors' - so much more identifiably criminal than London 'City' crime or Wall Street crooks. The consequence though, as Levi (1991 b: 112) points out, is that "concentrating on drug money is 'to leave virtually untouched many of the so-called white collar criminals who may be just as guilty of violating reporting requirements ...'" (Levi quoting Permanent Subcommittee on Investigations, 1985: 20). This is quite correct and whilst, as I noted above, BCCI is now well known as a case involving drug money laundering, its' other activities and frauds ought to overshadow this issue. Furthermore, the amount involved in such drug money laundering can actually seem small when compared to other instances of financial violation which have come to light. Famously, for example, in 1985 and 1986, the First National Bank of Boston and Crocker National Bank were penalised for $5 billion worth of violations of the US Bank Secrecy Act; the Bank of America was fined $4.7 million for similar offences, (Oxford Analytica, 1988: 10; see also Gaylord, 1990: 26 and 34, fn. 3).
What Levi (1991 b: 119) calls the 'global regulatory complex' is growing but so too are the laundering networks and trafficking enterprises. Eastern Europe is already a new, key market as well as distribution network for traffickers in the mid-1990's (Ruggiero and South, 1995) and with the privatization of banking systems, those same countries, so anxious to attract western currency and often with stringent banking laws (eg Hungary), are also becoming participants in the global laundering complex.
All of this may be a post-modern vision of globalised enterprise and innovation. Fittingly confusing, where the methods of illegitimate players reflect the methods of the legitimate participants, and where, at the end of the day (if there were one in a 24-hour global banking system) it is no longer clear which transactions are criminal and which are not (). In this respect it can be argued that the legitimate financial institutions benefit from the movement of laundered funds just as the launderers do.
Whatever further legislative developments are forthcoming, the question must be asked: "What is all this extra policing of banking transactions likely to achieve?" (Levi, 1991a: 294-5). Levi's (ibid: 295) realistic assessment is that:
neither the supply nor the consumption of narcotics, nor levels of fraud or terrorism, have been abated in any obvious way or to any dramatic extent by money laundering regulations hitherto, and it is a matter of faith rather than of historic evidence that they will be so abated in the future.
It has also been observed that there are larger issues to consider, concerned, for example, with the production of drugs and the significance of this production for Third World economies; and the conditions stimulating demand and consumption in the USA and Europe (Taylor, 1992: 192). The 'problem' of laundering drug profits cannot, ultimately, be resolved unless there are no profits to launder.
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NOTES
1. This article does not deal in detail with the history of, or problems associated with, legislation enabling financial investigations by police and others. This area now seems to be well covered in a voluminous literature in North America and the UK. For some comparative starting points see: Levi, 1991 a, b; Zander, 1989; Dorn and South, 1991; Taylor, 1992; Gaylord, 1990; Nadelmann, 1993.
2. Actually involving representatives of Germany, Australia, Austria, Belgium, Canada, Spain, USA, France, Italy, Japan, Luxembourg, the Netherlands, the UK, the EC, OECD, the IMF and the Bank of International Settlements (Levi, 1991 b: 122).
3. In the UK, the police 'trade journal', Police Review (1990) reported that the Task Force "conservatively estimates that the combined sales of heroin, cocaine, and cannabis in the USA and Europe are US $122 billion (£74 billion a year) of which 50 to 70 per cent - up to US $85 billion - is then made available for laundering and re-investment. This works out at US $232,000 a minute!" These are, however, fairly spectacular figures, and with regard to the extent of money laundering via London (and generally), Levi (1991 a: 221, fn. 3) reasonably voiced some scepticism, calling them "unsubstantiated" and "dubious".
4. In response to this and reports from several European nations and US and Canada, there have been exhortations and guidelines issued to banks and other financial institutions to tighten up their practices. Guidelines basically suggest ways in which to 'spot' and hence try to prevent 'laundering'. According to UK HM Customs, in 1991 other financial institutions such as stockbrokers, insurers and currency dealers (anyone dealing in large amounts of cash) were told to "step up their watch for potential drug money" (London Evening Standard, (Financial Section) 15th January, 1991). This 'Know Your Customer' strategy is discussed in Robinson (1994: 291-296).
5. This is quite apart from the related issue of how drug trafficking profits can underpin and/or undermine whole national economies, as in parts of Latin America. This aspect cannot be explored in this paper but for discussion of issues raised, particularly with reagrd to US foreign policy see: United Nations Information Service, 1990; see also Dorn and South, 1992; Taylor, 1992; Nadelmann, 1986.
6. As Passas (1994: 70) argues, the various differing accounts about the criminal career of BCCI are not "necessarily competing interpretations - in a mind-boggling case like this, it would be unrealistic to seek a single theory to explain everything."
7. I am grateful to Mike Woodiwiss for pointing this out to me (personal communication). Woodiwiss suggests that: "During the 1920's, few gangsters would have felt it necessary to disguise dirty money due to the lack of inclination or interest by local and Federal policing authorities. After Capone's conviction, and greater Federal financial regulation during the New Deal, smarter operators like Meyer Lanski probably saw the need to pioneer new laundering techniques." (See eg. Naylor, 1987; and for a general and illuminating history of 'organised' and 'disorganised' crime in the USA, see Woodiwiss, 1988).
8. Following the famous Pizza Connection case which ran as a Mafia operation in the early 1980s (see Francis, 1988: 249-50) pizza chains have become almost an 'urban myth' as the stereotype of a money-laundering 'front'.
9. See also the discussion of money flow from Hong Kong to San Francisco in the 1980s, in Gaylord (1990: 27); and also via Canada to the USA, in Francis (1988: 239-296).
10. The argument put forward by Bullington and Block (1990: 39) that this war is a 'Trojan horse' that is really underpinned by traditional anti-Communist foreign policy concerns, is pertinent here. See also Levi (1991 b: 110, fn) on "the War on Drugs" as a "useful pretext for US involvement overseas."
11. The professed 'shock' of such bank officials brings to mind Claude Raines as the police chief in the film Casablanca, who is 'shocked' to find gambling taking place at Rick's bar, even as he accepts his winnings from the tables.
Note also that the term "offshore" can be a loaded one, seeming to imply unregulated and corrupt 'foreign' financial havens for the criminal. Yet, for UK authorities, the USA can be seen as 'offshore', and vice-versa.
12. As Gaylord (1990: 30-31) observes, in the current highly competitive market, "banks and brokerage companies often compete, not always unwittingly, for highly questionable business. Under such conditions, even banks with high professional standards are reasonably comfortable in the stance that such large cash deposits are simply 'black' (i.e. is untaxed or from the 'underground economy') rather than 'dirty'."
Dr Nigel South is Senior Lecturer in Sociology and Criminology at the University of Essex, England. He has published widely on drug-related issues and on private policing. His recent books include (with V. Ruggiero) Eurodrugs: drug use, markets and trafficking in Europe (London: UCL Press, 1995).
Nigel South,
Senior Lecturer in Sociology and Criminology,
University of Essex, Colchester, CO4 3SQ
England.
© 1995: IASOC
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