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.
But you're right that whether gold/no gold, private money issue or fed there are regular business cycles. Schumpter talked about that.
Try Eugene White's book, "The Regulation and Reform of American Banking."
The "lender of last resort" item reflects what I've read and heard elsewhere from knowledgeable people.
There is no “anti-fed hysteria.”
The fed is unconstitutional, not ‘federal’ in any way, and totally destructive of sanity and freedom, and dedicated to destroying the wealth of the people.
Thanks for showing us exactly what you are!
Those that attack those that speak the truth are of their Father Satan.
As the dollar inflates in value, the value of most assets also rise to match it over time. Sure, there are distortions in prices related to advances in technology and changes in import/export markets, but that would present its own challenges even if there was no such thing as a Federal Reserve, or currency inflation.
Wages have never kept up with inflation.Back in the 50’s and 60’s a man could support a family with his salary/salt money but today it takes 2 working parents to support a family because of inflation.The middle class in America is vanishing because of this.
Has anyone ever seen the US dollar value rise 400-500% like gold and silver?
It’s hard to believe that guy who said that is now on the $20 bill.
I believe he's on there out of spite...
Computer chips are a tiny fraction of what they were in 1980; energy is about triple (over 30 years, or 1% a year, which is pretty stable). My paycheck buys about the same amount of food that it bought 10 years ago, excluding raises (which have all gone into savings).
Perhaps, but the simple fact is the USA would not even exist without his financial contributions. A true patriot.
Not true at all. My fix would work in less than a year. Competitive money-—something, BTW, that Milton Friedman rejected-—would instantly force the banking system back onto sounder footing.
My "fix," however, is much simpler: allow people to issue their own money. They back it with whatever they want. You can bet that the "good" money would immediately surface, just as it did in the 1840s when an Atlanta banker named George Smith backed ALL of his money with gold (not just fractional reserves) and it became the 100% total circulating medium of . . . Chicago, where they banned banks.
It's funny to look at the leftist critiques of the Fed, as they think that it was a "corporate" stopgap to keep from imposing higher income taxes.
I agree. The Rothchilds and the Illuminati were behind the Federal Reserve and the frog is almost boiled.
I’ll not argue on the points you made.
You don’t have to see it because the government is hoping you don’t.Food and gas must never have gone up in your area in the past 20 years.Are you in comedy?
My Coke machine at work has been at $1 per can for a few years, at least. When did it go to a quarter? I feel like it hit that in the sixties, maybe the seventies, when I was humming along on a few K per year. I got a real job and I thought I'd be rich. Funny thing about that.
You know, back in the eighties I recall someone with a chinese background, shall we say, marveling at a conversation she heard from a woman saying her daughter was selling Girl Scout cookies, just like she had done. This was unimaginable stability to her. In China this amount of time represented the lapse of ages.
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