Real inflation (the cost of maintaining a set standard of living) since 1985 = blue line:
Posted on 12/23/2013 3:22:13 PM PST by BfloGuy
It is little wonder that early Democrats garnered such popular support and would demand Andrew Jackson end America’s experiment with central banking. Jackson called it “dangerous to the liberty of the American people because it represented a fantastic centralization of economic and political power under private control.”
It’s hard to believe that guy who said that is now on the $20 bill.
Jackson also warned that the Bank of the United States was “a vast electioneering engine” that could “control the Government and change its character.” These sentiments were echoed by Roger Taney, Jackson’s Treasury Secretary, who talked of the Bank's “corrupting influence” and ability to “influence elections.” (The Whigs would later get revenge on this future chief justice when Abraham Lincoln, in response to a written opinion with which he disagreed, issued his arrest warrant.)
But the courtship between the political classes and their cronies would continue in the decades following Lincoln’s assassination. Those politically well-connected groups that benefited from early central banking continued to benefit from government finance, especially off of “internal improvements,” which is the nineteenth-century term for pork. National banking would appear during the War Between the States, setting in place a banking system in which individual banks would be chartered by the federal government. The government itself would use regulations backed by a new armed U.S. Treasury police force to encourage the banks’ inflation and protect them from the market penalties that inflation would otherwise bring them, such as the loss of specie and the occurrence of bank runs.
The boom and bust cycle, explained by the Austrian School in such detail, became worse and worse in the period leading up to 1913. And with the rise of Progressive Era spending on war and welfare, and with the pressure on banks to inflate to finance this activity, the boom and bust cycles worsened even more. If there was one saving grace about this period it would be that banks were forced to internalize their losses. When banks faced runs on their currencies, private financiers would bail them out. But this arrangement didn’t last, so when the losses grew, those financiers would secretly organize to reintroduce central banking to America, thus engineering an urgent need for a new “lender of last resort.” The result was the Federal Reserve.
This was the implicit socialization of the banking industry in the United States. People called the Federal Reserve Act the Currency Bill, because it was to create a bureaucracy that would assume the currency-creating duties of member banks.
It was like the Patriot Act, in that both were centralizing bills that were written years in advance by people who were waiting for the appropriate political environment in which to introduce them. It was like our current health care bills, in which cartelized firms in private industry wrote chunks of the legislation behind closed doors long before they were introduced in Congress.
It was unnecessary. If banks were simply held to similar standards as other more efficient industries were held to — the rule of law at the very least — then far fewer fraudulent banks would ever come about. There were market institutions that would penalize those banks that over-issued currencies, brought about bank runs, and financial crises. As Mises would later write:
What is needed to prevent further credit expansion is to place the banking business under the general rules of commercial and civil laws compelling each individual and firm to fulfill all obligations in full compliance with the terms of contract.
The bill was passed fairly easily, in part because the Democrats had a larger majority in both Houses than they do today. There were significant differences that were resolved in conference, with one compromise resulting in the requirement that only 40 percent of the gold reserve back the new currency. So instead of a 1-to-1 relationship between gold and currency issued — a ratio that defined sound market banking since the time of Renaissance Italy — the new Federal Reserve notes would be inflated, by law, at a ratio of 1-to-2.5.
The bill that was first drawn up at Jekyll Island was signed by Woodrow Wilson in the Oval Office shortly after the Senate approved it. At one point during the signing ceremony, as he reached for a gold pen to finish signing the bill, he jokingly declared “I’m drawing on the gold reserve.”
Truer words were never spoken.
Central banks always result in feeding those forces that centralize and expand the nation-state. The Fed’s policies in the 1920s, so well documented by Rothbard, would provoke the Great Depression, which, in the end, wrenched political power from cities and state governments to the swampland in Washington. Today people take seriously the claim that there can be a viable federal solution to every problem thanks to the money printed up by the Fed, while each decade has seen a larger proportion of the population become dependent on its inflation.
And yet Andrew Jackson’s beliefs about the perniciousness of the Second Bank of the United States are just as applicable to the Federal Reserve today.
Here’s to hoping we’ll see Jackson’s hawkish nose and unkempt hair on a gold-backed, privately issued currency in the not–too-distant future.
That’s because we lowered the import tariffs in the 1960’s and now the stores are full of Chinese made goods and our industries have been devastated. Unfortunately the Fed doesn’t control the tariffs. That’s the President and congress.
That’s because we lowered the import tariffs in the 1960’s and now the stores are full of Chinese made goods and our industries have been devastated. Unfortunately the Fed doesn’t control the tariffs. That’s the President and congress.
Jackson was a political opportunist of the worst sort and a total demagogue. The BUS posed no threat to him or any common person. In fact, the economy had done very, very well under the BUS---largely because we had COMPETITIVE banking in which any bank could issue money and COMPETE with the "government" bank. Guess what? When you have competition with the private sector, things stay pretty efficient (and the BUS was 80% privately owned). Jackson feared the market.
I go into detail on all this in my first national book, "Banking in the American South from the Age of Jackson to Reconstruction." It's typical of the Mises people to try and make this about Jackson fighting "big government," but nothing could be further from the truth. Government grew, per capita, under Jackson just as it had under every other president.
I will give him a pass on the Panic of 1837---that wasn't his doing and had nothing to do with his "war" on the BUS, as many historians have proven. Rather, Mexican silver, which had helped create inflation in the early 1830s, abruptly ended causing a depression.
But a national bank is a fact of life because every nation needs access to quick money in case of emergency, especially war. And loans are better than taxes.
Er, that “crook” single-handedly financed the American Revolution and ended up in the poorhouse because of it.
...signed into law by Woody KKK Wilson.
Bump for later
He was into a lot of things. IIRC, there are actually pages missing from the Congressional record. More to Morris than normally written. I followed him around for years...a friend of money...a legal pirate...
You’re kidding aren’t you?
Thanks.
What money?Worthless paper backed by Santa Claus and his helpers?
Try an inflation graph from 1913 to 2012 and compare it from 1791 to 1912.People will be horrified!
Interesting assessment. Out of curiosity co you have any links to read?
The funny thing is that you're right, but not in the way you think. lol Just like Obama's true purpose is to bring America down, the Fed's true purpose was for the financial elite to make slaves out of us. Stealing 3% per year from us and causing the boom-bust cycles they've done just that. And now they're going to take us to complete financial ruin to finish the job they started 100 years ago.
Rev 17:12 And the ten horns which thou sawest are ten kings, which have received no kingdom as yet; but receive power as kings one hour with the beast.
Same part that set up the BUS, which Madison said was in fact appropriate. And since he wrote it, he would know.
That’s why the US dollar has lost 96% of it’s purchasing power since 1913 via inflation.The fed does what bankers do and they rob the people blind and the government allows it because they profit also.
Interesting assessment. Out of curiosity co you have any links to read?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.