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Philadelphia Centennial as well, including the French, who donated
the Statue of Liberty; and millions of people attended from all over the
world. Foreign delegates met with the Philadelphia group to discuss
industrialization and the development of an economic system in their
own countries along the lines envisioned by Franklin and Lincoln.2
Tom Paine had called debt-free government-issued money the
cornerstone of the American Revolution. The cornerstone had been
rejected in America; but it was being studied by innovative leaders
abroad, and some of them wound up rejecting the privately-created
money of foreign financiers in favor of this home-grown variety. As
Wall Street came to dominate American politics and the American
media, these “nationalized” banking systems would be branded un-
American; but they were actually made in America, patterned after
the prototypes of Franklin, Lincoln, Carey and the American
Greenbackers. Russia and China developed national banking systems
on the American model in the nineteenth century, well before the
communist revolutions that overthrew their monarchies. Ironically,
the Marxist political system they later adopted was devised in Great
Britain and retained the class structure of the “British system,” with a
small financial elite ruling over masses of laborers.3 The American
system of Franklin, Hamilton and Lincoln was something quite
different. It celebrated private enterprise and the entrepreneurial spirit,
while providing a collective infrastructure under which competitive
capitalism could flourish. This protective government umbrella
furnished checks and balances that prevented exploitation by
monopolies and marauding foreign interests, allowed science and
technology to bloom, and provided funding for projects that “promoted
the general welfare,” improving the collective human condition by
drawing on the credit of the nation.

The Russian Experience

America™s alliance with Russia dated back to the 1850s, when
Henry Carey helped turn American opinion in Russia™s favor with his
newspaper writings. Carey argued that America should back Russia
against England in the Crimean War. Russia, in turn, sent ships to
back Lincoln against the British-backed Confederacy. The American
system of economics was introduced to St. Petersburg by the U.S.
ambassador. In 1861, Tsar Alexander II abolished serfdom and
launched an economic plan for developing agricultural science,

Chapter 23 - Freeing the Yellow Winkies

communications, railroads, and other infrastructure; and America
provided scientific and technological know-how to help Russia
industrialize. In 1862, Russia established a uniform national currency,
a national tax levy system, and a state-owned central bank.4 By the
beginning of World War I, the Russian State Bank had become one of
the most influential lending institutions in Europe. It had vast gold
reserves, actively granted credit to aid industry and trade, and was
the chief source of funds for Russia™s war effort.5
A group of Russian entrepreneurs fought to copy the American
system advanced by Carey and his faction, but they faced stiff opposi-
tion from the landed nobility, who were backed by international bank-
ing interests. Although the Tsar had liberated the peasants, the nobil-
ity forced such onerous conditions on their freedom that they remained
exploited and oppressed. The peasants had to pay huge “redemption
fees” to their former masters, and they were given insufficient land to
support themselves. World War I imposed further burdens. Most of
the working men were taken to fight the war, and those who remained
had to work grueling hours in serf-like conditions. The people were
forced off the land into overcrowded cities, where famine broke out.
Although the peasants did not actually initiate the Russian Revolu-
tion, when the match was lit, they provided the tinder to set it ablaze.

Overthrowing the Revolution

There were actually two Russian revolutions. The first, called the
February Revolution, was a largely bloodless transfer of power from
the Tsar to a regime of liberals and socialists led by Alexander Kerensky,
who intended to instigate political reform along democratic lines. The
far bloodier October Revolution was essentially a coup, in which
Kerensky was overthrown by Vladimir Lenin with the support of Leon
Trotsky and some 300 supporters who came with him from New York.
Born Lev Bronstein, Trotsky was a Bolshevik revolutionary who had
gone to New York after being expelled from France in 1916. He and
his band of supporters returned to Russia in 1917 with substantial
funding from a mystery Wall Street donor, widely thought to be Jacob
Schiff of Kuhn Loeb. Trotsky™s New York recruits later adopted Rus-
sian names and made up the bulk of the Communist Party leader-
Why was a second Russian revolution necessary? The reasons are
no doubt complex, but in The Creature from Jekyll Island, Ed Griffin

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suggests one that is not found in standard history texts. He observes
that Trotsky and the Bolsheviks received strong support from the high-
est financial and political power centers in the United States, men
who were supposedly “capitalists” and should have strongly opposed
socialism and communism. Griffin maintains that Lenin, Trotsky and
their supporters were not sent to Russia to overthrow the Tsar. Rather,
“Their assignment from Wall Street was to overthrow the revolution.”
In support, he quotes Eugene Lyons, a correspondent for United Press
who was in Russia during the Revolution. Lyons wrote:
Lenin, Trotsky and their cohorts did not overthrow the
monarchy. They overthrew the first democratic society in Russian
history, set up through a truly popular revolution in March, 1917. . . .
They represented the smallest of the Russian radical movements.
. . . But theirs was a movement that scoffed at numbers and frankly
mistrusted multitudes. . . . Lenin always sneered at the obsession of
competing socialist groups with their “mass base.” “Give us an
organization of professional revolutionaries,” he used to say, “and
we will turn Russia upside down.”
. . . Within a few months after they attained power, most of the
tsarist practices the Leninists had condemned were revived, usually
in more ominous forms: political prisoners, convictions without trial
and without the formality of charges, savage persecution of
dissenting views, death penalties for more varieties of crime than
any other modern nation.7
Lenin, Trotsky and their supporters kept Russia in the hands of a
small group of elite called the Communist Party, who were largely
foreign imports. The Party kept Russian commerce open to “free
trade,” and it kept the banking system open to private manipulation.
In 1917, the country™s banking system was nationalized as the People™s
Bank of the Russian Republic; but this system was dissolved in 1920,
as contradicting the Communist idea of a “moneyless economy.”8
Griffin writes:
In 1922, the Soviets formed their first international bank. It
was not owned and run by the state as would be dictated by Communist
theory but was put together by a syndicate of private bankers. These
included not only former Tsarist bankers, but representatives of
German, Swedish, and American banks. Most of the foreign
capital came from England, including the British government
itself. The man appointed as Director of the Foreign Division of

Chapter 23 - Freeing the Yellow Winkies

the new bank was Max May, Vice President of Morgan™s
Guaranty Trust Company in New York.
. . . In the years immediately following the October Revolution,
there was a steady stream of large and lucrative (read non-
competitive) contracts issued by the Soviets to British and
American businesses . . . U.S., British, and German wolves soon
found a bonanza of profit selling to the new Soviet regime.9

The Cold War

If these arrangements were so lucrative for Anglo-American busi-
ness interests, why did the United States target Soviet Russia as the
enemy in the Cold War following World War II? The plans of the
international bankers evidently went awry after Lenin died in 1924.
Trotsky was in line to become the new Soviet leader; but he got sick at
the wrong time, and Stalin grabbed the reins of power. For the
Trotskyites and their Wall Street backers, Stalinist Communism then
became the enemy. Trotsky was expelled from Soviet Russia in 1928
and returned for a time to New York, meeting his death in Mexico in
1940 at the hands of a Soviet agent. Through most of the rest of the
twentieth century, the banking cartel fought to regain its turf in Rus-
sia. The “Neocons” (or “New Conservatives”), the group most associ-
ated with the Cold War, have been traced to the Trotskyites of the
1930s. 10
Srdja Trifkovic is a journalist who calls himself a
“paleoconservative” (the “Old Right” as opposed to the “New Right”).
He writes that the Neocons moved “from the paranoid left to the para-
noid right” after emerging from the anti-Stalinist far left in the late
1930s and early 1940s.11 They had discovered that capitalism suited
their aims better than socialism, but they remained consistent in those
aims, which were to prevail over the Russian regime and dominate
the world economically and militarily. They succeeded on the Rus-
sian front when the Soviet economy finally collapsed in 1989. The
Central Bank of the Russian Federation was added to the league of
central banks operating independently of federal and local govern-
ments in 1991.12
The economic destruction of Russia and its satellites followed. Jude
Wanniski, the Reagan-era insider quoted earlier, said that “shock
therapy” was imposed on the Soviet countries after 1989 as an
intentional continuation of the Cold War by other means. In a February

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2005 interview shortly before he died, Wanniski acknowledged that
he was at one time a Neocon himself; but he said that he had had to
break with Neocon policies after the Iron Curtain came down. He
We were all Cold Warriors, united in a very hard line against
Communism in Moscow and in Beijing. [We] fought the Cold
War together and we were proud at being successful in that
Cold War without having a nuclear exchange. But when the
Cold War ended . . . the Russians invited me to Moscow to try
and help them turn their communist system into a market
economy; and I was glad to do that, for free . . . but I had to
break with my old friends because they said we didn™t beat these
guys enough, we have to smash them into the ground, we want to
feed them bad economic advice, “shock therapy,” so that they will
fall apart.13
“Shock therapy” consisted of “austerity measures” imposed in
return for financial assistance from the International Monetary Fund
and its sister agency the World Bank. Also called “structural
readjustment,” these belt-tightening measures included eliminating
food program subsidies, reducing wages, increasing corporate profits,
and privatizing public industry. According to Canadian writer Wayne
Ellwood, structural adjustment is “a code word for economic
globalization and privatization “ a formula which aims both to shrink
the role of the state and soften the market for private investors.”14
Mark Weisbrot, co-director of the Center for Economic and Policy
Research, testified before Congress in 1998 that Russia™s steep decline
after 1989 was a direct result of the harsh policies of the IMF, which
were used as tools for “subordinating the domestic economies of
˜emerging market™ countries to the whims of international financial
markets.” He told Congress:
The IMF has presided over one of the worst economic declines
in modern history. Russian output has declined by more than
40% since 1992 -- a catastrophe worse than our own Great
Depression. Millions of workers are denied wages owed to them,
a total of more than $12 billion. . . . These are the results of
“shock therapy,” a program introduced by the International
Monetary Fund in 1992. . . . First there was an immediate de-
control of prices. . . . [I]nflation soared 520% in the first three
months. Millions of people saw their savings and pensions
reduced to crumbs.15
Chapter 23 - Freeing the Yellow Winkies

The IMF blamed the Russian hyperinflation on deficit spending by
the government, but Weisbrot said it wasn™t true. The real culprit was
the IMF™s insistence on “tight money”:
[F]or the first four years of “shock therapy,” the government
mostly stayed within the Fund™s target range. [But] as the
economic collapse continued, tax collection became increasingly
difficult. . . . In addition, the necessary capital was not made
available for the potentially “efficient” firms to modernize. . . .
Foreign direct investment was supposed to play a key role in
providing capital, but this never materialized, given the instability
of the economy. During the first two years of “shock therapy,”
the outflow of capital exceeded inflow by two to four times. . . .
[T]he whole idea that Russian industry had to be destroyed, so that
they could start from scratch on the basis of foreign investment, was
wrong from the beginning.
Instead of providing capital to promote productivity, Weisbrot said,
the IMF squandered $5 billion on trying to support the plunging ruble
in a futile attempt to maintain the exchange rate at 6 rubles to the
dollar. The result was to deliver $5 billion into the hands of speculators
while setting off panic buying and a new round of inflation. What
was the point of trying to maintain the convertibility of the domestic
currency into dollars? “The IMF argues that it is essential to creating
a climate in which foreign direct investment can be attracted,” Weisbrot
said, “but that is clearly not worth the price in Russia, where the capital
flows that were attracted were overwhelmingly speculative. This is
another example of the IMF™s skewed priorities, which have now
brought Russia to a state of economic and political chaos.”
Russia had succumbed to the same sort of “free trade” policy that
allowed British financial interests to invade America in the nineteenth
century. It had opened itself to dependence on money created by
outsiders, money it could have created itself -- indeed had been creating
itself, before the wolf got in the door in the form of IMF “shock therapy.”
The Soviet economic scheme had failed, but it was not because of
its banking system. Economists blamed the Marxist theory that prices
and employment must be determined by the State rather than left to
market forces. The result was to stifle individual initiative and eliminate
the mechanisms for setting prices and allocating resources provided
by the free market. This was very different from the “American system”
prescribed by Henry Carey and the American nationalists, who
encouraged free markets and individual initiative under a collective

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infrastructure that helped the people to rise together. The seeds of the
American system just had not had a chance to grow properly in Russia.
In other fields abroad, they took better root . . . .


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