Nexus - 0602 - New Times Magazine-pages

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Plutocracy, once established, will corrupt the legislature so that laws will be made in its favour, and the administration of justice will favour the rich. The men behind the Bank of North America—Alexander Hamilton, Robert Morris, and the Bank's President, Thomas Willing—did not give up. Only six years later, Hamilton, then Secretary of the Treasury, and his mentor, Morris, rammed a new privately owned central bank, the First Bank of the United States, through the new Congress. Thomas Willing again served as the bank's president. The players were the same, only the name of the bank was changed. Plutocracy, once established, will corrupt the legislature so that Most of the framers intended the Constitution's silence to keep laws will be made in its favour, and the administration of justice the new federal government from having the power to authorise will favour the rich. paper money creation. Indeed, the Journal of the Convention for The men behind the Bank of North America—Alexander 16 August reads as follows: Hamilton, Robert Morris, and the Bank's President, Thomas It was moved and seconded to strike out the words 'and emit Willing—did not give up. Only six years later, Hamilton, then bills of credit' and the motion...passed in the affirmative. Secretary of the Treasury, and his mentor, Morris, rammed a new But Hamilton and his banker friends saw this silence as an privately owned central bank, the First Bank of the United States, opportunity for keeping the government out of paper money cre- through the new Congress. Thomas Willing again served as the ation which they hoped to monopolise privately. So both bankers bank's president. The players were the same, only the name of the and anti-banking delegates, for opposing motives, supported leav- bank was changed. ing any federal government authority for paper money creation out of the Constitution, by a four-to-one margin. This ambiguity 10. THE CONSTITUTIONAL CONVENTION left the door open for the Money Changers—just as they had In 1787, colonial leaders assembled in Philadelphia to replace _ planned. the ailing Articles of Confederation. As we saw earlier, both Of course, paper money was not itself the main problem. Thomas Jefferson and James Madison were unalterably opposed Fractional reserve lending was the greater problem, since it multi- to a privately owned central bank. They had seen the problems plied any inflation caused by excessive paper currency issuance caused by the Bank of England. They wanted nothing of it. As by several times. But this was not understood by many, whereas Jefferson later put it: the evils of excessive paper currency issuance were. If the American people ever allow private banks to control In their belief that prohibiting paper currency was a good end, the issue of their currency, first by inflation, then by defla - the framers were well advised. Prohibiting all paper currency tion, the banks and the corpora - would have severely limited the frac- tions which grow up around tional reserve banking then practised, them will deprive the people of since the use of checks was minimal all property until their children and arguably would have been pro- wake up homeless on the conti - Fractional reserve lending was hibited as well. But bank loans, cre- nent their fathers conquered. . . ated as book entries, were not During the debate over the future the greater problem, since it addressed and so were not prohibited. monetary system, another one of the multiplied any inflation caused As it happened, the federal and founding fathers, Gouvenor Morris, 5 state governments were widely headed the committee that wrote the by excessive paper currency regarded as prohibited from paper final draft of the Constitution. issuance by several times. money creation, whereas private Morris knew the motivations of the banks were not—it being argued that bankers well. this power, by not being specifically Along with his old boss, Robert prohibited, was reserved for the peo- Morris, Gouvenor Morris and ple (including legal persons, such as Alexander Hamilton were the ones who incorporated banks). had presented the original plan for the Bank of North America to The contrary argument was that bank corporations were instru- the continental Congress in the last year of the Revolution. ments or agencies of the states which incorporated them and so In a letter he wrote to James Madison on 2 July 1787, Gouvenor __ were prohibited from "emitting bills of credit", as were the states Morris revealed what was really going on: themselves. This argument was ignored by the bankers, who pro- The rich will strive to establish their dominion and enslave ceeded to issue paper banknotes based on fractional reserves, and the rest. They always did. They always will... They will have it lost all force once the US Supreme Court ruled that even the the same effect here as elsewhere if we do not, by the power federal government could charter a bank which could issue paper of government, keep them in their proper spheres. money. In the end, only the states were prohibited from issuing Despite the defection of Gouvenor Morris from the ranks of the paper money, and neither private banks nor even municipalities bank, Hamilton, Robert Morris, Thomas Willing and their were prohibited from issuing paper money (as happened in around European backers were not about to give up. They convinced the —_ 400 cities during the Great Depression). bulk of the delegates to the Constitution Convention not to give Another error not often understood concerns the authority given Congress the power to issue paper money. Most of the delegates the federal government "to coin money" and "to regulate the value were still reeling from the wild inflation of the paper currency thereof". Regulating the value of money (that is to say, its pur- during the Revolution. They had forgotten how well colonial chasing power or value relative to other things) has nothing to do scrip had worked before the war. But the Bank of England had with quality or content (e.g., so many grains of gold or copper, not. The Money Changers could not stand to have America print- etc.), but has to do with its quantity—the supply of money. It is ing her own money again. quantity that determines its value, and never has Congress legis- Many believed that the Tenth Amendment, which reserved lated any total quantity of money in the United States. powers to the states which were not delegated to the federal gov- Legislating a total money supply (including currency, checks ernment by the Constitution, made the issuance of paper money and all bank deposits) would, in fact, regulate the value (purchas- by the federal government unconstitutional, since the power to ing power) of each dollar. Legislating the rate of growth of the issue paper money was not specifically delegated to the federal money supply would then determine its future value. Congress government in the Constitution. The Constitution is silent on this has never done either, though it clearly has the constitutional point. However, the Constitution specifically forbade the individ- authority to do so. It has left this function to the Federal Reserve ual States to "emit bills of credit" (paper money). and the 10,000+ banks which create our money supply. Fractional reserve lending was the greater problem, since it multiplied any inflation caused by excessive paper currency issuance by several times. 14 = NEXUS FEBRUARY — MARCH 1999