The Real History of the United States - Part 2

We left off with the causes of the Revolutionary War. I shall continue now with the Unites States as various individuals and Presidents fight against the establishment of a central bank.

After the Revolutionary War, the newly formed Congress voted to establish a currency to pay off their war debt(as was their Constitutional duty). The Congress decided to create a paper currency call the "Continental". They did not borrow it from a bank, they created it, with zero interest attached. Most of the new States, in an act of good faith and as a sign of recognition that the new central government had saved the American people countless millions of dollars in interest payments, passed laws requiring citizens to use the Continental currency as legal tender.

However, by the end of 1776, the Continental was worth approximately 40 cents to the dollar when exchanged for silver coin. The Federal Printing presses, however, printed more than $241.6 million of "Continentals".

American merchants were, at this time accepting the Continentals for 2.5 cents to the dollar. Within 2 years they were worth less than half a penny to the dollar. Let me put that into perspective, so you can grasp the problem here.

In January 1776 a single continental was $1.00 of silver in value.
By December of 1776, the single continental was worth $0.40 of silver in value.
Why? There was a glut of Continentals on the market. The more of a fiat paper currency there is the less it is worth, in comparison to silver, who's value is rather constant.

So if in January of 1776, you could buy 10 apples for 1 Continental, in December that same Continental only bought you 4 apples. This is exactly what is happening to the United States today. The big difference is, there was no interest attached to the Continentals, so printing more only devalued them, it did not add to the national debt.

This is where the saying "Not worth a Continental" came from. This is basic inflation. It is an fundamental economic law. In every case since time immemorial, when a paper currency, un-backed by precious metals, is printed in quickly and in quantity, inflation occurs.

It was at this time that a vital argument was occurring in the halls of American power.

The issue was whether or not the American government should establish a central bank. Alexander Hamilton had this idea: create a profit making institution, to be privately owned with special access to the public's funds. He wanted to give this institution the power to legally create money out of nothing and loan it to the government, at interest. Sound familiar?

Thomas Jefferson, vehemently opposed the creation of this bank. He said "If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered. I believe that banking institutions are more dangerous to our liberties than standing armies. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

Hamilton felt the majority of the people could not handle their own money. He felt that these "matters" should be left to the wealthy. He wrote: "No society could succeed which did not unite the interest and credit of rich individuals with the state. All communities divide themselves into the few and the many. The few are the rich and well born, the other the mass of the people. The people are turbulent and changing, and they seldom judge or determine right."

To this Jefferson responded - when banking establishments are given the power to inflate and deflate a currency at will, they lend themselves to a continuing series of oppressions of the people. He wrote: "Single acts of tyranny may be ascribed to the opinion of the day; but a series of oppressions, begun at a distinguished period, and pursued unalterably through every change of ministry, too plainly prove a deliberate, systematical plan of reducing us to slavery."

Unfortunately for the United States, Alexander Hamilton was appointed Secretary of the Treasury in 1788. In 1791, the United States government granted a 20 year charter to its first national bank, just like Hamilton wanted. The charter was set to expire in 1811, and the American people were to have chance to discuss the Bank and its merits before the charter was renewed.

Jefferson quietly joined the discussion about the First Bank, as it was called. He argued that the Congress did not have the power or authority to delegate the money power to any other agency. He based his arguments on Article 1 section 8 of the constitution which states rather implicitly: "The Congress shall have the power to coin money and to regulate the value thereof..." Jefferson knew what the intentions of the founding fathers were, he was one.. Unfortunately for him and the United States, the First Bank existed until 1811 when President James Monroe let the charter lapse.

Just a side note of history between Hamilton and Jefferson. Although Jefferson and Hamilton managed to work together reasonably well at first, their relations became fraught as Washington's presidency dragged on. By February 1791, the two were locked in an outright struggle, waging a newspaper war by proxy. Jefferson hated conflict, and often thought of resigning, but he hated Hamilton more, and so refused to give him the satisfaction. Sometime in 1793, the conflict just got to be too much for Jefferson. Maybe he decided he would win this fight through other means than debate within Washington's cabinet. On 5 January 1794, the president accepted Jefferson's resignation as secretary of state, and Jefferson set off at once for Monticello.

Hamilton, however got his just deserts. His penchant for defaming other people in the newspaper got him called out in a duel with Thomas Jefferson's Vice President Aron Burr in 1804. Burr fatally shot Hamilton and was the only Vice president in American history to be charged with Murder in both New York and New Jersey, however one charge was dismissed and Burr was acquitted on the other.

My next "Real History" post will detail Andrew Jackson and how he "Beat the Bank".

 

THIS SHOULD BE IN THE HISTORY BOOKS. Again thanks for this research. Kingfish

 

Thank you Kingfish for the compliment!