Wednesday, January 16, 2008

The History of Money Part Four: Andy and Abe


"The bold efforts that the present bank has made to CONTROL THE GOVERNMENT and the distress it has wantonly caused, are but premonitions of the fate which awaits the American people should they be deluded into a perpetuation of this institution or the establishment of another like it...If the people only understood the rank injustice of our money and banking system there would be a revolution before morning." -Andrew Jackson's address to Congress, 1829

When Congress voted to renew the charter of The Second Bank of The United States 2 years early, Jackson responded with the greatest veto in history to prevent the renewal bill from passing. His response gives us an interesting insight.

“I am one of those who do not believe a national debt is a national blessing, but rather a curse to a republic. It is calculated to raise around the administration a moneyed aristocracy dangerous to the liberties of the country... It is not our own citizens only who are to receive the bounty of our government. More than eight millions of the stock of this bank are held by foreigners... is there no danger to our liberty and independence in a bank that in its nature has so little to bind it to our country?... Controlling our currency, receiving our public moneys, and holding thousands of our citizens in dependence... would be more formidable and dangerous than a military power of the enemy. If government would confine itself to equal protection, and, as Heaven does its rains, shower its favor alike on the high and the low, the rich and the poor, it would be an unqualified blessing. In the act before me there seems to be a wide and unnecessary departure from these just principles."-Andrew Jackson 1 1. Andrew Jackson, Veto of the Bank Bill, to the Senate, (1832)

In 1832 Jackson ordered the withdrawal of government money from the Second bank and had it put into state banks. He fired his Treasury Secretary and his first replacement for refusing to do so. The Second Banks head, Nicholas Biddle displayed the power and intention of the bankers when he openly threatened to cause a depression if the bank was not re-chartered, we quote.

"Nothing but widespread suffering will produce any effect on Congress... Our only safety is in pursuing a steady course of firm restriction - and I have no doubt that such a course will ultimately lead to restoration of the currency and the re-charter of the bank." -Nicholas Biddle 1836

By calling in existing loans and refusing to issue new loans the bank did cause a massive depression. It was then Andrew Jackson made these two famous statements: "You are a den of vipers and thieves and I intend to rout you out, and by the eternal God, I will rout you out!” and "The Bank is trying to kill me - but I will kill it!" -Andrew Jackson

When asked what he felt was the greatest achievement of his volumous career, Andrew Jackson replied without hesitation "I killed the bank!" Even desiring to put those words on his headstone when he died.

Andrew Jackson is the only President in history to have paid off the National Debt. He did this soon after killing the bank, and even began a policy of returning tax money back to the states. Although we had no central bank for over 70 years, this was definately not the end of private financial influence over government, when we look at...


Even with the Central Bank killed off, fractional reserve banking continued like a virus through numerous state chartered banks instead, causing the instability this form of economics thrives on. When people lose their homes someone else wins them for a fraction of their value.

“The money power preys upon the nation in times of peace and conspires against it in times of adversity. It is more despotic than monarchy, more insolent than autocracy, more selfish than bureaucracy.” -Abraham Lincoln

On the 12th of April 1861 the Civil war began. Lincoln, needing money to finance his war effort, went with his secretary of the treasury to New York to apply for the necessary loans. The money changers, wishing or assuming the Union to fail, offered loans at 24% to 36%. Lincoln declined the offer. An old friend of Lincoln's, Colonel Dick Taylor of Chicago was put in charge of solving the problem of how to finance the war. His solution is recorded as this:
"Just get Congress to pass a bill authorizing the printing of full legal tender treasury notes... and pay your soldiers with them and go ahead and win your war with them also." -Colonel Dick Taylor

When Lincoln asked if the people of America would accept the notes Taylor said. "The people or anyone else will not have any choice in the matter, if you make them full legal tender. They will have the full sanction of the government and be just as good as any money; as Congress is given that express right by the Constitution."- Colonel Dick Taylor

Lincoln agreed to this solution and Congress printed 450 million dollars worth of the new bills using green ink on the back to distinguish them from other notes. These were called “Greenbacks”

"The government should create, issue, and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers..... The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government's greatest creative opportunity. By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest, discounts and exchanges. The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government. Money will cease to be the master and become the servant of humanity. Democracy will rise superior to the money power." -Abraham Lincoln

The solution worked so well Lincoln was seriously considering adopting this emergency measure as a permanent policy. This would have been great for everyone except the money changers who quickly realized how dangerous this policy would be for them. They wasted no time in expressing their view in the London Times. Oddly enough, while the article seems to have been designed to discourage this creative financial policy, its effect shows clearly its advantages.

"If this mischievous financial policy, which has its origin in North America, shall become endurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without debt. It will have all the money necessary to carry on its commerce. It will become prosperous without precedent in the history of the world. The brains, and wealth of all countries will go to North America. That country must be destroyed or it will destroy every monarchy on the globe." Hazard Circular - London Times 1865

From this extract it’s plain to see that it is the advantage provided by adopting of this policy which poses a threat to those not using it. But in 1863 Lincoln needed more money to win the war, and the President could not get the congressional authority to issue more greenbacks, the money changers proposed through their agents in Congress, the passing of the National Bank Act, that instituted Treasury bonds to replace the greenbacks, Lincoln needing war funds was forced to sign it. Thus restoring the exclusive power to inflate the money supply to a priveleged group of banks, and requiring the government to issue debt bonds against the new money created by the banks. Near the end of the war Lincoln said:

"Yes; we may all congratulate ourselves that this cruel war is nearing its close. It has cost a vast amount of treasure and blood. The best blood of the flower of American youth has been freely offered upon our country's altar that the Nation might live. It has been, indeed a trying hour for the Republic; but I see in the future a crisis approaching that unnerves me and causes me to tremble for the safety of my country.As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until wealth is aggregated in a few hands and the Republic is destroyed. I feel at this moment more anxiety for the safety of my country than ever before, even in the midst of the war." –Abraham Lincoln 1865

Since 1863 the entire US money supply would be created out of debt to bankers buying US government bonds and issuing money in the form of national bank notes. Even though some of the greenbacks continued to be in circulation up until 1994, their numbers were never increased but in fact continuously decreased. In spite of this, having the greenbacks in circulation in America created great wealth.

"In numerous years following the war, the Federal Government ran a heavy surplus. It could not [however] pay off its debt, or retire its securities, because to do so meant there would be no bonds to back the national bank notes. To pay off the debt was to destroy the money supply."- John Kenneth Galbraith

The American economy has been based on government debt since 1864 and it is locked into this system. Talk of paying off the debt without first reforming our banking system is a complete impossibility. That same year Lincoln had a pleasant surprise. Turns out the Tsar of Russia, Alexander II, was well aware of the money changers scam. The Tsar was refusing to allow them to set up a central bank in Russia. If Lincoln could limit the power of the money changers and win the war, the bankers would not be able to split America and hand it back to Britain and France. The Tsar declared that if France or Britain gave help to the South, Russia would consider this an act of war. Britain and France would instead wait in vain to have the wealth of the colonies returned to them, and while they waited Lincoln won the Civil War. With an election coming up the next year, Lincoln himself would wait for renewed public support before reversing the National Bank Act he had been pressured into approving during the war to continue it's funding. Lincoln's opposition to the central banks financial control is well documented. He would certainly have killed off the national banks monopoly had he not been killed himself only 41 days after being re-elected.

"Right after the Civil War there was considerable talk about reviving Lincoln's brief experiment with the Constitutional monetary system. Had not the European money-trust intervened, it would have no doubt become an established institution." - W. Cleon Skousen.

Even after his death, the idea that America might print its own debt free money set off warning bells throughout the entire European banking community. On April 12th 1866, the American congress passed the Contraction Act, requiring the treasury to call in and retire some of Lincoln's greenbacks. With only the money changers standing to gain from this, it's not hard to work out the source of this action.

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