Arnold Rothstein was the Boss of All Bosses, literally the founder of American organized crime and one of the greatest criminal masterminds to have ever lived. Rothstein was born in 1882, the son of a wealthy Jewish immigrant racketeer and was known to be a natural at probability, mathematics, and was well read on matters of business. Rothstein started taking over Manhattan gambling rackets at a young age by his late twenties expanded his personal rackets to fixing horse races; providing horse race tips allowed Rothstein to network informants and earn friends within the private banking community. Rothstein became connected to members of New York’s Tammany Hall and of New York high society through the popularity of his no tax elite gambling halls. Rothstein conducted business with members of the 60 Families including the Rockefellers, Carnegies, Hearst, Goulds, Morgans and other members of the railroad and banking trusts from California. After becoming a millionaire in 1912, Rothstein moved on to large scale racketeering and started creating the building blocks for the first organized crime organization in the United States using his financial prowess as support.
Rothstein rose to power in what became known as the infamous Black Sox Scandal. Rothstein had successfully rigged the 1919 World Series and was acquitted along with the players in the ensuing investigation. Records related to the court case also disappeared and this was attributed to payoffs made by Rothstein during that time. Rothstein saw opportunity in the disaffection of the general public with the political class and his golden goose came with the passage of the Volstead Act following the Boston Police Strike. His money and connections with bootleggers and former alcohol dealers would serve him well in setting up a vast network of private clubs where alcohol could be enjoyed at prohibition prices. His fixing of the World Series had made him and his associates from Chicago, Cleveland and New York immensely wealthy and they were eager to profit from Rothstein’s further ventures.
Rothstein’s organizing of the underworld into organized municipal syndicates would go largely without criticism and unnoticed as the government focused its resources on crushing labor unions and communism. The Palmer Raids would begin in November of 1919, with Attorney General Mitchell Palmer appointing one, J. Edgar Hoover, head of the Department of Justice’s General Intelligence Unit. Hoover was to compile a list of labor leaders and communist sympathizers to round up for investigation and arrest. Large groups of labor sympathizers were rounded up and charged under the Espionage Act and deported many of the convicted to Europe. The Syndicate was formed under the leadership of Rothstein known in the underworld as ‘Mr. Arnold’ or ‘Mr. Big’, was facilitated by his infamous sub-bosses: Meyer Lansky, Lucky Luciano, Dutch Schultz and Legs Diamond.
Several of Rothstein’s associates from Tammany Hall were looking to go into filmmaking but were barred from film production on the East Coast due to industrial patents held by Thomas Edison and his associates at the Motion Picture Patent Company. Rothstein worked with Cleveland and Chicago Syndicates to set up the movie studios in Los Angeles to produce films and promote west coast rackets as railroad expansion brought in eastern migration. Rothstein introduced the concept of racketeering theatres, triggering company battles for movie rights and display rights at theatres; he achieved this by hustling the construction workers unions and manipulating union tactics to coerce the theater owners. Rothstein’s associate Lepke Buchalter, who would later go on with Rothstein to form Murder Inc., was put in charge of setting up a new movie studio system on the west coast to take over the movie production industry. Rothstein provided loans for the new studios and expanded his control of construction unions to the national level. He financed the Selwyn Brothers, Samuel Goldwyn, Louie B. Mayer, Meyer Lansky, Bugsy Siegel and Moe Dalitz to form now infamous studios such as MGM, Paramount, United Artists and 21st Century Fox.
Rothstein’s organization of the Mob couldn’t have come at a better time. The labor crisis of 1919 evolved into an economic crisis in January of 1920 as the war demobilization sharply contracted the economy. The United States entered a very severe bout of deflation that lasted for seven months, crushing the middle and lower class labor forces as Wilson reestablished the Gold Standard; this move would tarnish his administration and bring about Republican victory. Returned veterans could not find jobs, labor strikes crippled industries, the reimplementation of the Gold Standard and wage stagnation crippled the economy devastating many municipal economies throughout the country. Organized crimes’ fortunes enhanced when Warren Harding, the Ohio Republican candidate for President won his election under the slogan of “A Return to Normalcy”. Harding was a puppet of the Ohio oil and railroad interests, represented by the “Ohio Gang” a band of politicians and industrialists selected for Harding’s cabinet; but he also fell under the influence of Lou Rothkopf, Arnold Rothstein’s head of the Cleveland syndicate. Harding’s victory was a free pass to economic control for the Mob; alcohol and marijuana speakeasies were quickly established in every major urban area throughout the country. Harding with the Federal Reserve cut taxes, lowered interest rates and increased the money supply, making the availability of dollars more easily available in the market. Rothstein essentially possessed the perfect racket, his organized syndicates around North America would peddle vice to the public while taking in their increased supply of dollars; in turn Rothstein had these dollars converted to gold. The gold increased in value as Harding issued more dollars into the economy and allowed Rothstein to have a medium in which to easily launder the Mobs speakeasy monies. The gold would be stored at mob friendly banks in the City of London and New York. This would inevitably begin the cycle that led to the Gold Crisis of 1931 and the acceleration of the Great Depression.
Another powerful medium for Rothstein and Rothkopf’s monies was the newly established film industry; large sums of cash were often accepted in 1920’s California without question. The Depression of 1920-21 had absolutely crushed the speculative oil boom that had driven the state following the Gold Rush; the Southern conservatives, city administrations and police departments could not resist the large influx of mob cash and the allure of Hollywood glamour that had stimulated the imaginations of millions around the world. The arrival of Rothstein’s agent, Bugsy Siegel, would change Los Angeles’ destiny forever; as his dynamic personality was able to merge the interests of the California conservative elite with that of organized crime. Traditionally, since the late 1800s, the Irish Mob made it a habit of implementing themselves within city political machines to protect their neighborhoods from corruption and abuse at the hands of other ethnic gangs. Under Rothstein’s unified syndicate model the Irish Mob retained significant influence as the gatekeepers for mafia activities being ran by other ethnic gangs like the Italians and the Armenians. The Irish would maintain control of the cities’ apparatus, the city hall, the police department and the public works administrations; the Italians would function as the gangland muscle and the operators; the Armenians would be the transporters and the Jews would be the money men; collectively these groups would birth the American Mob. Irish control of the Los Angeles Police Department and LA County Sheriff made it easy for Rothstein to corrupt the police; the Sheriff practically operated as his personal squadron, covering up the misdeeds of famous Hollywood celebrities who worked for Rothstein’s studios while exposing the deeds of others to the press for profit. The American Mob’s racist sentiments in the twenties enhanced the situation of police abuse towards minorities. The police were expected to ignore and even aid syndicate activities while also being directed to make arrests predominantly in Black and Latino neighborhoods; race based arrests were easy media sensations and could easily maintain the prestige of the police force while covering for their participation in the rackets. Rothstein was practically in control of 25% of United States business by 1925.
‘A Return to Normalcy’
The United States had retained the Gold Standard following the passage of the Federal Reserve Act in 1913; the natural inflation from the 1880’s had been hyperextended by the artificial inflation created during World War I. The Labor Crisis of 1919 slowed the government response to the economy leading to the Depression of 1920-21. Warren Harding won a landslide victory, restoring Republican power under the guidance of the Ohio Gang using the slogan ‘A Return to Normalcy’. Harding responded to the crisis with import-export tariff’s and a job’s program but troubles remained far from over as the new administration began to blatantly hand over the reigns of economic power to the wealthy. Prohibition Laws became a tool of domestic surveillance with the Bureau of Prohibition and the Executive Office itself being notoriously corrupted by mob influence. Union tensions heightened quickly during the Battle of Blair Mountain, the largest civil uprising in US history and the origin of the infamous Mother Jones, when 3000 police had a massive shootout with 10,000 armed coal miners. The blood shed was to remind the unions that the government was willing to help the corporations use force against them.
Harding’s government also brought about the Lochner Era, a time of an extremely conservative Supreme Court that gave the constitution to the large corporations on a silver platter. The Lochner Court was vehemently anti-union and struck down many attempts at pro-union legislation and attempts to implement child labor, minimum wage and maximum work hour laws. The Court also aggressively struck down taxes against large corporations, many among them being Syndicate interests. Harding’s government was very similar to that of George W. Bush’s, the origins of the term cronyism began with Harding’s government due to criticisms resulting from civic abuses by the Ohio Gang. This cabal of White House officials firmly entrenched interests sympathetic to the American oil cartel. This led to the Teapot Dome Scandel when the Secretary of the Interior, Albert Fall, gave a no bid contract on Naval oil reserves to Sinclair Oil and Pan American Petroleum. In return, Fall received millions of dollars (in todays money) in bribes and pay offs. The congressional Democrats successfully led an inquiry into the abuse and found the assets Fall had used to purchase with the bribe money, the scandal became the Watergate of its time and the court proceedings lasted well beyond Harding’s death in 1923. Fall would become the first cabinet member to be convicted of bribery.
Governance under Harding had collapsed with the Teapot Dome scandal and his death in office and the more respectable Vice President Calvin Coolidge was thrust into the presidency. Coolidge was also a Presidential patsy for the landed elite just as Harding was before him, but unlike Harding, Coolidge was more politically astute and was able to cover for many of the crimes perpetrated by the US Republican oligarchy. Coolidge oppressed the farmer class heavily during his tenure, allocating many of the benefits of government services to the urban service, business and financial sectors. Coolidge made one, J. Edgar Hoover, the head of the Bureau of Investigation which was to administrate the Mann Act, an anti-prostitution racket agency that was primarily used to collect information on philandering officials and prominent men. He appointed a rogue’s gallery of politicians to his cabinet to transform the economy into a state of ‘scientific taxation’, which was a euphemism for lowering taxes for the rich and deregulating industry. Herbert Hoover was made Secretary of Commerce, he transferred authority of child labor back to the states and created a mass deregulation program for the economy. Andrew Mellon was also named Secretary of the Treasury; Mellon was opposed to medical marijuana over strongly held racial and classist beliefs. Coolidge made it his mission to fulfill Harding’s obligation to roll back the taxes that the wealthy had instituted during World War I; the war contracts that the wealthy had benefitted from were gone and the financial elite desired to transform the US into a service/financial based economy based on theories of Hayekian supercapitalism. The US had become immensely wealthy through obtaining European gold in World War I and were able to extend their money supply to expand development like never seen before. New York became the hub for the global elite and Hollywood entered its Golden Age through the wealth expansion; lower rates instituted by the Federal Reserve also stimulated economic excess. Taxes were cut three times under Coolidge in 1924, 1926 and 1928; government services were also cut which increased the financial burden on state and local governments.
The lower class accounted for over half the US population in the 1920s; wages and profits among the lower and middle class stagnated throughout the 20’s in a similar manner to that of the 2000’s while business profits hit new high watermarks thanks to the easy money. Because of the wage stagnation, low rates, deregulation and easy money, lending criteria was tossed out the window after 1925 by investment banking institutions. ‘Buying on Margin’ became a casual social term. Financial products and instruments that were normally available only to the oligarchical elite were made available to the public at large. Because of the asset and liquidity bubble being generated by the Federal Reserve and the Treasury department, banks offered margin deals on American stock to the middle and lower classes as a means of retirement savings. The American people, largely uneducated in finance, were unaware that the government had created an artificial economy based on low rates, hot money, European bonds, and cheap fiat. Meanwhile, the Republican government was asset stripping itself, reducing taxes and lowering receipts, selling valuable government land to private owners instead of profiting on leases, dismantling government income and also allowing the sale of federally held gold. However the economy, after 1927 became largely built on the Federal Reserve’s monetary expansion as European investors began to slowly withdraw assets to fight the onset of the Depression brought upon by World War I.
US culture became greatly defined by what was described in the Great Gatsby in the mid-20s, a have and have not culture. This was called the ‘Weimar Culture’ attributed to attitudes also seen in post-war Germany during the inflationary era of the Weimer Republic. The youth were called ‘The Lost Generation’, disillusioned by war and Wilson’s domestic dictatorship; this generation produced many great authors including Ernest Hemingway, F. Scott Fitzgerald, T.S. Eliot and many others. Cultures like Dadaism emerged that resembled metrosexual cultures of today. Urban populations grew rapidly, crime became a public norm, liberal views of equality for women and gays became prevalent especially among the urban educated, and violation of the Volstead Act or Prohibition was widely in vogue. Family units widely collapsed during the 20s following the early 1920 depression and the fast money environment that ensued afterwards made it economically difficult to sustain having children. The divorce rate increased sharply during the 20’s and the definition of relationships with women widely changed. A sexual revolution of sorts occurred; cosmetics, which had previously only been used by prostitutes and clothing models became extremely popular for the flapper culture. Open relationships and divorce became normal, especially with the economic difficulties men faced versus the cultural promotion of wealth and excess in the Roaring 20’s. This was widely viewed as a rejection of the ‘Victorian’ way of life. Eugenics was considered ‘science’ and extreme nativism became culturally popular. Xenophobia was a widely held belief following World War I with much of the economic malaise being blamed on the Europeans. The KKK, like the Tea Party, rose up as a reaction to this new liberal culture. The KKK would prove to be the most radical Prohibitionists, forming their own Prohibition Anti-Saloon League lynch mob’s to bust alcohol and medical marijuana speakeasies (“tea pads” in Los Angeles)
“The white, native-born Protestant American, as a member of the religious and racial majority, was usually incapable of doubting his native institutions. The blame for the maladies of his world must rest elsewhere. And so he looked to other influences – Roman Catholics who supposedly challenged Protestant hegemony and the separation of church and state. Catholic, Orthodox, and Jewish immigrants crowding onto American shores, Negroes seeking more equitable treatment, American Jews who kept living costs up while wages went down, and numerous other elements of frustration before which he felt helpless. Then the Klan entered his community and offered him a way to fight back. It’s not surprising that the Klan’s strongest supporters were residents of the rural and isolated countryside and city dwellers who had just recently arrived from the farm who were shocked by the lifestyles they witnessed in the big city. The drastic changes of the preceding half century had largely passed them by and lessened their influence in the country they felt they had once dominated. Now resentment of city and city people and nativism came together in the form of the Ku Klux Klan.” – Indiana State Library
Mr. Arnold took to expanding his control over the open US economy through industrial racketeering. Bootlegging proceeds were used to gobble up real corporations like construction companies that would then be used to extort monies from companies they developed for. The actual bootlegging would be left to men from the lower gangland echelons while Rothstein and his higher up associates would provide social and legal cover. Often Rothstein would have his speakeasies and marijuana clubs ceremonially raided by the police under his payroll so that the business would be left alone from future investigations. Rothstein’s gangland penetration of local police departments and Henry J. Anslinger’s Bureau of Narcotics would be critical to his development of the international heroin trade. Rothstein, seeing the opportunities present under Narcotics Prohibition, bailed out several major Chinese opium traffickers in California to assume control of their business in return. To domestically traffic the opium, Rothstein bought a series of art galleries around the country and would often ship fermented heroin through art pieces to keep the authorities unaware. Rothstein would establish the Ports of Los Angeles/Long Beach and San Francisco as two of the largest drug trafficking ports in all of North America.
Almost immediately Rothstein saw a higher return on the syndicate’s heroin sales over their marijuana sales. With heroin their customers could not help but come back for more and would be willing to pay higher prices once their addictions sat in. Marijuana users tended not to use heroin and were ultimately less profitable than their opium addicted counterparts. The narcotics money was washed through the same process that the alcohol and cigarette monies went through, cash would go unreported and would be laundered into gold. Rothstein maintained private agreement with members of the Anglo-American opium oligarchy, to maintain shipments of opium to America from Turkey, India and the Far East in exchange for gold, which Rothstein could easily reproduce. The shipments, in tandem with the illegal alcohol shipments from Canada and Mexico, revealed the beginnings of a private business consortium that was willing to put its full weight behind Rothstein and the American Mob to continue a banned but extremely profitable business from being restricted by a sovereign government. Rothstein, by the time of his death, possessed influence over every major Alcohol and Tobacco distributor in the world; every city machine and sizeable municipal police force was in his pocket; the film industry, under the guidance of his lackey Louis B. Meyer, had become a very lucrative source of income and he had the silent backing of the Anglo-American Pharmaceutical companies that were quietly selling him opium to be sold on the street. The industries under Rothstein’s stewardship would eventually become the Big 5 of Marijuana Prohibition: Big Alcohal, Big Tobacco, Police/Prison Unions, Big Pharma/Opium and Big Oil who became involved with Rothstein after he brought new investment into Southern California.
Organized crime would rule the United States from 1921 until 1932. The power of money was all prevailing following the Financial Crisis of 1920 and Prohibition had practically handed the newly organized Mob a bottomless bank account. Operations under Rothstein were notoriously smooth and came to be known as the Golden Age of the Gangster as ethnic gangs worked in harmony to keep Rothstein’s new cash flows maintained. In the mid-1920’s, Rothstein’s associate, Lou Rothkopf of the Cleveland Mob, came to influence a Bureau of Prohibition officer named Henry J. Anslinger. Rothkopf put Anslinger in charge of overseeing the northeastern heroin rackets, arresting competition and protecting the Syndicate’s operations. Rothstein, realizing the usefulness of having a corrupt police demagogue under his payroll, floated Anslinger several busts to promote his career as a drug czar. The notoriety and connections gave Anslinger official duties as a US drug control advisor and international narcotics control authority. He was promoted by the US government to travel throughout Europe and evaluate the drug control programs of the Western European nations. As the US’ narcotics representative, Anslinger made contact with Rothstein’s business associates within the Anglo-American Opium Cartel; he found that they were very pleased with the outcome of the drug control treaties. Profits had never been higher, despite opium’s international ban, Rothstein’s drug ring had created a large and highly lucrative domestic heroin market in an America powered by hot and fast cash. The British oligarchy, hampered by the economic costs of World War I, empowered Anslinger to set up heroin processing plants throughout the world using their embassies and diplomatic anti-narcotics missions as cover. They realized that the greater the drug sales in the United States, the sooner they would be able to economically recover their war losses through Rothstein’s laundered gold exports to the City of London. Anslinger would travel to all of the major opium producing regions of the world to establish covert factories that would synthesize the raw opium into heroin, the most notorious being the French Connection established between Turkey, Indochina, Sicily, Corsica and Marseilles.
However as the money grew, so did the greed among the gangs. Through an unfortunate twist of fate, the Boss of all Bosses, Arnold Rothstein, was assassinated in the fall of 1928 in a barbershop that he owned. The lynchpin to the entire American Syndicate had been killed and the power vacuum left behind by Mr. Arnold was immense. The government launched an immediate investigation into Rothstein’s syndicate, uncovering large heroin networks throughout New York State and Chicago. International heroin production centers were also unveiled in France, Holland and Belgium by the Bureau of Narcotics as being the key to Rothstein’s narcotics empire, however the Bureau had already relocated most of the critical operations to Southern France and Italy by the time of the raids. The Syndicate quickly fell into turmoil as Italian Bosses like Al Capone violently put their foot forward to assume control of the alcohol rackets. Future mob kingpins Lucky Luciano, Meyer Lansky and Frank Costello targeted the gambling and narcotics rackets with the intention of quickly reestablishing the primacy of the Syndicate’s operations as they had been under Rothstein.
With Mr. Arnold’s death, the decorum that had previously taken place within the Mob was gone. Between 1929 and 1934 the American Mafia was virtually a mobsters free for all. Gangs quickly struck out on their own, developing their own scams and rackets; violently competing with each other for control of shipping lanes and turf. The anarchy was accelerated by the Stock Market Crash of 1929. Rothstein’s Gold Ring had reached its nadir, too many dollars (liquidity) had been removed from the economy by the public’s love for the illegal alcohol and narcotics industries. The government, already having cut taxes several times on the populace, found itself in a financial crisis as too much money had been created relative to the national gold supply. The German economy entered hyperinflation in 1929; the European economy had become dependent on War Reparations and the issuance of new bonds to be bought by American investors. The imbalance of the global economy created a crisis in European bonds by 1929 as European countries failed to economically recover from World War I; the default of bonds created a stock market contagion that quickly spread to the United States. As the stock market began to collapse, large margin calls began to wipe out large blocks of liquidity in the market; the US economy had become severely overextended by the speculative bubble. The agricultural and manufacturing sectors had declined due to deregulation, union busting and debt; these sectors composed of the majority of the US economy and were not strong enough to insulate America from the economic shocks to the financial and services sectors. Loans dried up and banks began to become insolvent as their capital investments were reduced to zero.
Hoover was considered to be a ‘useful idiot’ by Andrew Mellon and the Ohio Gang who had persuaded Coolidge to exit stage right in popularity in favor of Hoover, who was a staunch careerist. Mellon had become the spokesman for the American oligarchy in the 1920s and owned one of the largest international banking firms in New York. He had a great reputation for using fiscal policies to ease credit and reduce the public debt. He was keenly aware of the situation that had materialized within the United States, a large pool of fiat liquidity had amassed without the proper Gold supply to back it; imminent defaults on European bonds would have led to large losses and a categorical reduction in the US gold supply to make good on those losses. Mellon and the Federal Reserve had expanded the dollar supply so rapidly during the Roaring 20’s that the United States could only pay 40% of its gold liability. To protect the bullion interests of the oligarchy, Mellon raised the interest rate and sharply contracted the money supply to deflate the dollar back to gold parity. This decision was fine for oligarchical interests who held large bullion and dollar supplies but was utterly devastating for the American farmer and manufacturer who watched as the prices of their products bottomed out, killing thousands of farm businesses and factories throughout the country. Many of the service sector businesses had become mob owned after 1925 and these businesses practically evaporated with the US money supply.
Hoover returned to the playbook used by Harding and Coolidge; putting forward ideas to cut taxes to stimulate growth while investing in large infrastructure projects to stimulate employment. However, unbeknownst to Hoover, a large portion of the assumed tax base had been fraudulent due to the flourishing of organized crime under the previous administrations. The large majority of the population were farmers, mal-investment led to an overproduction in agricultural goods which compounded with the deflation created by Mellon and the Federal Reserve, crushed the commodities market and all of the American farmer’s profits with it. Manufacturing goods followed suit as factories lost their customer bases and raw material vendors. There was literally no tax base left to be had. Hoover scrambled to provide government aide to the public sectors, creating public works programs to build new federal buildings, passing large agricultural subsidies, and prevailing wage acts to boost growth. Hoover, however would not break with Mellon’s view of keeping a balanced budget, refusing to push the government into debt to stave off the Depression. Instead he ran with suggested ideas like deporting 500,000 migrant workers and helping pass the disastrous Smoot-Hawley Tariff which exploded like a bomb on international trade.
In 1929, following the St. Valentine’s Day Massacre, Hoover became aware of the large hand of international narcotics that had taken control over the economy of the United States. Vast quantities of heroin and alcohol were being produced outside of the country and the dollar income from those sales was being used to buy US and foreign gold. It became apparent that the Bureau of Prohibition had become completely corrupted, thus Hoover commissioned Mellon to use the authority of the Treasury to divide the Bureau into two organizations: The Bureau of Prohibition which was to be formed from new recruits and led by Eliot Ness; and the Bureau of Narcotics, which drew recruits from the old bureau and was led by Henry J. Anslinger. Hoover hoped to mitigate the Bureau’s corruption by focusing them on tackling heroin rackets ran by minorities not realizing that it was the Bureau who managed them. Heroin imports and sales had declined temporarily following the assassination of Arnold Rothstein; the US government mistook this for a decline in popularity of the drug when in fact the Bureau of Narcotics was already in the process of making the international heroin trade more efficient by establishing the French Connection.
The final nail in the economic coffin would come in 1931. Eliot Ness’s Untouchables had ferociously dismantled Al Capone’s alcohol empire, breaking the Canadian-Seagram’s Connection and pushing the Italian Mobs back into competition for the narcotics rackets. Ness was a national hero in a decade of practical lawlessness and it became clear that public opinion had staunchly turned against the Mob following Capone’s brutal massacres. Traditionally gangland activities had always stayed incognito and behind-the-scenes, but Capone, an Italian, had loudly brought the bloody violence, public corruption and racket competition before the scrutiny of the public. The landed gentry had also earned the ire of the public at large as they were blamed, and rightfully so, for bringing about the economic devastation that had ripped the world apart. Calls for bigger government and the seizure of the wealth’s ill-gotten assets created a panic among the American elite who saw an existential threat to their status in society with the rejection of lessee-faire capitalism as an economic ideology.
Trade unionists and economic liberals like Franklin Delano Roosevelt became popular as political candidates, calling for increased taxes and the seizure of monetized commodities. Andrew Mellon, facing impending impeachment, called for a meeting between the Anglo-American elite which included Averill Harriman, leader of the Consortium and one of the richest bankers in New York. Harriman and Lord Montague Norman of the British Central Bank made a shocking proposal: Norman would raise the interest rate on the pound from 1% to 5%, 1.5 points above the US prime rate with an additional 0.5% on all gold deposits and that all gold would be guaranteed by the English Crown. The Dollar had proven to be a formidable adversary to the international dominance of the British Pound following the First World War. Norman viewed his plan as a painful necessity in maintaining the Pound as the global reserve currency which in turn would maintain the power of the British Empire. Norman’s rate hike would become historically infamous as the coup d’grace to the global economy; literally overnight, vast sums of gold deposits exited the private accounts and accounts of Central Banks around the world. The gold was quickly centralized in the City of London which guaranteed depositor safety from the Crown and higher rates of interest. An international currency crisis immediately followed as non-pound denominated currencies collapsed from the sudden decline in gold reserves. The US economy entered the worst period of deflation in its history, the sudden loss of gold reserves put the economy into complete freefall; banks closed, loans and deposits vanished with the loss of dollar reserves. New money could not be created and old money was being hoarded as prices declined by the hour. The Republican moneyed elite had reached the depths of their own greed and depravity, they had successfully defrauded their own country, the entire country, through the use of organized crime.
The Great Depression was an unspeakable horror. By the end of 1931, industrial production collapsed by 46%, prices fell by a third, foreign trade declined by two-thirds and unemployment soared by over 600%. Urban cities filled with citizens from the South and Mid-West, desperately searching for work. Hoovervilles became common with the large population of homeless erecting tent cities to support themselves. The most notorious Hoovervilles’ were in New York’s central park, the Port of Seattle and The Bonus Army, an assemblage of 17,000 World War I veterans and their families in Washington DC led by the famous General Smedley Butler. The federal government had not honored several of the certificates issued to veterans from World War I and Hoover met the protestors with violent reprisals from the local police and the Army which eventually drove the Hooverville from Washington DC.
Continue to Part 3…..