Read Part I:

“The Roaring Twenties and the Depression” Part I: “Good Times” and “Rebuilding the Italian and German Economies”

By Richard C. Cook, June 17, 2025

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Prohibition and Organized Crime 

Organized crime has held the US in its grip for decades and does so still today, especially with the emergence within the US of Mexican drug cartels enabled by the US government’s open border policies. The frolics of the 1920s produced enough surplus cash within the US to fuel a drastic rise in organized crime, as described by Stephen Fox in Blood and Power: Organized Crime in Twentieth-Century America, but it was the prohibition of alcohol consumption that enabled organized crime to spread its tentacles across the entirety of the US.

Prohibition lasted from 1920 to 1933. The US had an excise tax on liquor since 1791 which had long been a big money-maker for the federal government. Ever since, there had been an undercurrent of tax evasion by the manufacture and sale of bootlegged liquor. But the evasion became overwhelming with Prohibition. This failed attempt to outlaw all alcoholic beverages resulted in the creation of vast fortunes from criminal enterprise and turned a majority of the US population into scofflaws.

Prohibition was among the worst public policy failures of modern history. The gangsters who controlled the alcohol trade combined it with profiteering in every vice, including gambling, prostitution, extortion, bribery, human trafficking, and later illicit drugs. Alcoholism did see a slight decline, but at a huge cost. Rates of liver cirrhosis, alcoholic psychosis, and infant mortality also dropped. But the net result of all this was a profound decline in private and public morality induced within the entire US population, with effects that persist today.

Organized crime remains a gigantic problem in the US. Illegal drug trafficking has had savage effects on public health that the US government has never effectively dealt with. It’s hardly surprising, when agencies of the US government such as the CIA have also been involved. Indeed, the agency itself has admitted to drug involvement in reports from its own inspector-general that would become established over time through the drug trade in Southeast Asia, Latin America, and Afghanistan.

The FBI under J. Edgar Hoover failed to take organized crime seriously. In fact, the FBI and CIA made an alliance with organized crime where it carried out various unsavory projects for these agencies, including assassinations.

While the Roaring Twenties, vividly characterized in F. Scott Fitzgerald’s The Great Gatsby, seemed to portray the era as one in which everyone was having fun—though Gatsby himself was shot to death in a swimming pool—the need for loose money was ever present to enable the US to keep up with its explosive economic growth and all the new consumer industries, particularly automobiles, fancy new homes, and bank buildings that looked like Greek and Roman temples.

The Bankers’ Catalyst Sparks the Great Depression 

Surprisingly in hindsight, almost no one in America was aware of what was going on in Britain and Europe that might have foreshadowed disaster; the bubble of the Roaring 20s was that all-encompassing. But explosions happen fast. Yet there were signs as early as 1924.

Chase Bank’s chief economist, Benjamin Anderson, then expressed concern about a dangerous speculative bubble caused by

“the present glut in the money markets, with excessively cheap money and its attendant evils and dangers to the credit structure of the country….Both incoming gold and Federal Reserve Bank investments are reflected almost entirely in an increase of member bank balances with immediate and even violent effect upon the money market. The situation is abnormal and dangerous.”[i]

In 1926, Swiss banker Felix Somary also warned of a stock market bubble in America where, if any big investors pulled out, markets would crash.[ii] A large part of the money being lent by US banks to foreign governments was being spent on the purchase of goods manufactured in America, but only the interest on these loans was being repaid, not the principal. So debt, always potentially destabilizing, stayed on the books.

The pro-business Republican administrations of Warren Harding, Calvin Coolidge, and Herbert Hoover had brought prosperity, but by “Black Thursday,” October 24, 1929, the world was spiralling in a different direction. On Black Thursday, the US stock market crashed, following the long indulgence in stock inflation and speculation engineered by US banks and the Federal Reserve. Within a month, stocks valued at $80 billion were worth $50 billion. The Dow Jones Industrial index fell from 381 in September 1929 to 50(!) by May 1932.

The Federal Reserve failed to respond and seemed to be a passive player. The monetary manipulations that were starting to lead to the rearming of both the Soviet Union and Germany were directed by the Bank of England, with the Federal Reserve going along with it.[iii]

Here is how the Depression impacted the US: National income dropped from $83.3 billion in 1929 to $68.9 billion in 1930 with a further descent to $40.0 billion by 1932. Unemployment was estimated at 3.5 million in 1930 but 15 million by 1933. The wholesale price index fell from 95.3 in 1929 to 86.4 in 1930 and 64.8 by 1932.

It was clear that people wanted to work and were able to do so. The natural resources required for production were available, as had been shown by the prosperity of the 1920s. The infrastructure of railroads, highways, motorized vehicles, water and sewage systems, electrical grids, telephones and telegraphs, international shipping, housing for families and workers—all these were up and running.

What was missing was an effective, functioning medium of exchange: money. But the US, along with other Western nations, had long since turned over their monetary systems to the privately-owned banking industry and their gold standard. Even if that industry provided money, it always had a string attached to it. That string was “interest.” With any contraction of the money supply, the additional money needed to cover the interest payments—which would require an expansion, not a contraction of the money supply (and hence inflation)—was just not there. Without it, the economy was kaput.

It’s no mistake that the people in charge of banking are the wealthiest on the planet. Presumably their wealth is the recompense they receive for making modern industrial civilization possible through the extension of credit, yet interest payments were a fatal in that system, and accordingly the civilization that they had enabled had now broken down. The system that the bankers had promoted had failed miserably at keeping their end of the bargain, as it inevitably would.

Even the industrialists were subservient to the financiers, not to mention the people who did the hard, physical work. And by 1929, the international financial system was largely in the hands of the Bank of England. What had happened was that when the US banks raised their interest rates in response to the Bank of England’s call on gold which offered greater returns to investors by shifting funds to the British markets, the smart money bailed out of the US markets. Some used insider information to bail before the crowd did so. Then, “crash.”

Looking deeper, the monetary dynamics now reversed from the 1920s when it was the US that was the leading holder of gold. This had produced so much instability in Europe that the heads of the Banks of England, France, and Germany had demanded that the US raise its own interest rates to reduce inflation and move gold back to Europe.

The decision to do so was reportedly taken at a single meeting over lunch held in New York City. Eustace Mullins wrote:

“The secret meeting between the Governors of the Federal Reserve Board and the heads of the European central banks…was held to discuss the best way of getting the gold held in the United States …back to Europe to get the nations of that continent back on the gold standard….The movement of that gold out of the United States caused the deflation of the stock boom, the end of the business prosperity of the 1920s, and the Great Depression of 1929-1931….The [American] bankers knew what would happen when that $500 million worth of gold was sent to Europe. They [i.e., the bankers] wanted the Depression because it put the business and finance of the United States completely in their hands.[iv]

Germany was also hit hard by the Depression.

Unemployment began to decimate the German economy. On paper, there were over three million jobless individuals by 1930. Despair would lead to many of them committing suicide.[v]

Many more Germans began to support the Nazis, which had been struggling to gain adherents. On January 30, 1933, German President General Paul von Hindenburg named Adolf Hitler Chancellor. This was another result of the Great Depression.

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Richard C. Cook is a retired U.S. federal analyst with extensive experience across various government agencies, including the U.S. Civil Service Commission, FDA, the Carter White House, NASA, and the U.S. Treasury. He is a graduate of the College of William and Mary. As a whistleblower at the time of the Challenger disaster, he exposed the flawed O-ring joints that destroyed the Space Shuttle, documenting his story in the book “Challenger Revealed.” After serving at Treasury, he became a vocal critic of the private finance-controlled monetary system, detailing his concerns in “We Hold These Truths: The Hope of Monetary Reform.” He served as an adviser to the American Monetary Institute and worked with Congressman Dennis Kucinich to advocate for replacing the Federal Reserve with a genuine national currency. See his new book, Our Country, Then and Now, Clarity Press, 2023. Also see his Three Sages Substack and his American Geopolitical Institute articles at https://www.vtforeignpolicy.com/category/agi/.

“Every human enterprise must serve life, must seek to enrich existence on earth, lest man become enslaved where he seeks to establish his dominion!” Bô Yin Râ (Joseph Anton Schneiderfranken, 1876-1943), translation by Posthumus Projects Amsterdam, 2014. Also download the Kober Press edition of The Book on the Living God here. 

Notes

[i] Nomi Prins, All the President’s Bankers, p. 86.

[ii] Guido Giacomo Preparata, Conjuring Hitler: How Britain and America Made the Third Reich, Pluto Press: London, Ann Arbor 2005, p.175. A second edition of this book has been released entitled, Conjuring Hitler: How Britain and America Made the Third Reich and Destroyed Europe. I believe this to be the best book ever written on the true history of events between World Wars I and II. A classic.

[iii] Ibid, p.180.

[iv] Eustace Mullins, The Federal Reserve Conspiracy, Martino Publishing, Mansfield Centre CN, 1954, p.89. Also see Mullins’ The Secrets of the Federal Reserve.

[v] Ibid, p. 192.

Featured image: Unemployed people lined up outside a soup kitchen opened in Chicago by Al Capone, February 1931 (Public Domain)

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