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Central Banks And American Aristocracy

July 10, 2012 by  

Central Banks And American Aristocracy
Andrew Jackson did not like the idea of an American central bank.

The United States was built on the idea that every man should have at his disposal the means to achieve financial success regardless of who he is or has been or from where he came.

American society, by its very nature, has historically rejected the idea of an elite aristocracy with the means to lead a less-well-off citizenry by its nose simply because one possesses more political, and economic by way of political affiliation, clout than the other.

But in the 236 years that Americans have existed as a distinctly different people, the citizens of the country that French political writer Alexis de Tocqueville first called ‚Äúexceptional‚ÄĚ in his 1835 work ‚ÄúDemocracy in America‚ÄĚ have lost a great deal of exceptionalism by placing their trust in the wrong hands.

Around 1790, long before de Tocqueville made his trip to the States to better understand why America worked, there was a political debate brewing that has continued in some form until this very day. Even casual students of American history recall learning of the formation of the Nation‚Äôs first central bank and the heated debate about its Constitutionality among proponent Alexander Hamilton — America‚Äôs first Secretary of the Treasury — and its opponents then-Secretary of State Thomas Jefferson and Congressman James Madison of Virginia.

Hamilton argued that the establishment of the First Bank of the United States was absolutely necessary to stabilizing and improving the Nation’s credit. He also believed that the formation of the entity would improve the handling of America’s finances overall and handle the war debt that had been racked up by individual States that had printed their own currencies at times during the Revolution. Hamilton, a Federalist, believed that by allowing the Federal government to borrow from a largely private bank to assume the States’ war debts, power could be more easily centralized in the United States.

Jefferson, however, believed that the establishment of the central bank was unConstitutional, as it was a private entity — much like the modern Federal Reserve — and powers of coining and regulating money were specifically delegated to Congress in the founding document. He also believed that the establishment of a centrally controlled banking system endangered his vision of an agrarian republic, a society where producers or ‚Äúcultivators of the earth‚ÄĚ as Jefferson once said, steered the Nation‚Äôs economy.

In April 1791, President George Washington signed the bank bill into law. In 1792, Congress passed the Coinage Act and recognized the dollar as the national currency, despite the fact that the first American experiment with paper money — the continental — led to rampant inflation; this is the reason only coinage is recognized as real currency in the Constitution.

It didn‚Äôt take long for government and central bank meddling to disturb the natural flow of economics. The ‚ÄúPanic of 1792‚ÄĚ occurred when the bank flooded the market with loans and banknotes before revising its policy and reversing course. The sudden halt in market liquidity caused a short-lived panic and froze markets.

The First Bank did have some redeeming qualities, however, despite the con of growing the size of the Federal government. The war debts were largely paid off, and its focus on commercial activities allowed the economy of the United States to grow and diversify. Also, though it did have a lasting economic impact, the men running the institution knew that a great deal of risk taking could lead to the collapse of the young Nation.

The complaints that many Americans had about the first central bank are very similar to what modern Americans critical of the Federal Reserve say about its functions. They charged that there was too much foreign influence in the bank because three-fourths of its stock was foreign-owned. They believed the institution was concealing profits and operating in a shady manner. They were also critical of the bank’s ability to lend money to the government at will. In 1811, the charter to the First Bank of the United States was allowed to expire, but Hamilton’s Federalist legacy lives on to this day.

A year after the initial central bank‚Äôs charter expired, the United States found itself at war with Britain once again. After printing money to fund the War of 1812, questions about inflation started to arise and Congress again began to consider the formation of a second central bank. Again, it is important to note, a central bank was created in an effort to pay off war debts. In 1816, the Second Bank of the United States came into existence, but this time with more money to throw around ($35 million compared to the First Bank‚Äôs $10 million) and poor leadership. In fact, only 18 months after it opened it was on the verge of insolvency. In 1819, a new president, Langdon Cheves, set out to fix the bank which had continually lent capital to speculators whose ability to repay the loans was questionable. His tightening of loans led to the ‚ÄúPanic of 1819,‚ÄĚ which died down quickly since the central bank did not meddle any further. In a letter to U.S. Minister of France Albert Gallatin, Jefferson noted that the wealth wiped out in the Panic was only the wealth that the bank itself had created.

Jefferson writes:

At home things are not well. The flood of paper money, as you well know, had produced an exaggeration of nominal prices and at the same time a facility of obtaining money, which not only encouraged speculations on fictitious capital, but seduced those of real capital, even in private life, to contract debts too freely. Had things continued in the same course, these might have been manageable. But the operations of the U.S. bank for the demolition of the state banks, obliged these suddenly to call in more than half of their paper, crushed all fictitious and doubtful capital, and reduced the prices of property and produce suddenly to 1/3 of what they had been.

In essence, Jefferson described to Gallatin precisely how the central bank was harming his cherished agrarian society by slashing the means of producers and landowners to make profits.

Andrew Jackson took office as President of the United States in 1829 and made it no secret that part of his small-government platform would be the end of the central bank. On this very day in 1832, Jackson vetoed the Second Central Bank’s charter renewal. He later signed an executive order announcing that the Federal government would no longer use it and removed all Federal funds from the bank. This Presidential action of decentralizing economic power has never happened since and will likely never again.

In his veto message, Jackson sums up the reason for his actions in closing:

Experience should teach us wisdom. Most of the difficulties our Government now encounters and most of the dangers which impend over our Union have sprung from an abandonment of the legitimate objects of Government by our national legislation, and the adoption of such principles as are embodied in this act. Many of our rich men have not been content with equal protection and equal benefits, but have besought us to make them richer by act of Congress. By attempting to gratify their desires we have in the results of our legislation arrayed section against section, interest against interest, and man against man, in a fearful commotion which threatens to shake the foundations of our Union. It is time to pause in our career to review our principles, and if possible revive that devoted patriotism and spirit of compromise which distinguished the sages of the Revolution and the fathers of our Union. If we can not at once, in justice to interests vested under improvident legislation, make our Government what it ought to be, we can at least take a stand against all new grants of monopolies and exclusive privileges, against any prostitution of our Government to the advancement of the few at the expense of the many, and in favor of compromise and gradual reform in our code of laws and system of political economy.

I have now done my duty to my country. If sustained by my fellow citizens, I shall be grateful and happy; if not, I shall find in the motives which impel me ample grounds for contentment and peace. In the difficulties which surround us and the dangers which threaten our institutions there is cause for neither dismay nor alarm. For relief and deliverance let us firmly rely on that kind Providence which I am sure watches with peculiar care over the destinies of our Republic, and on the intelligence and wisdom of our countrymen. Through His abundant goodness and heir patriotic devotion our liberty and Union will be preserved.

This where de Tocqueville re-enters the story, as he was traveling throughout the United States right about the same time Jacksonian democracy was taking hold in its strongest form, doing research for what would later become ‚ÄúDemocracy in America.‚ÄĚ

Though he described Jackson as a “man of violent character and middling capacities” in one passage, he was witnessing firsthand the President‚Äôs masterful efforts to protect American democracy from the greed of men who would privilege themselves by disadvantaging others.

Unfortunately, despite Jackson‚Äôs efforts to do away with the bank before any more damage could be done to the American public, State banks had already issued reckless loans throughout the country. Without a central bank to bail them out, another of Jackson‚Äôs economic policies — “Specie Circular,” which allowed for the payment for Western lands in gold and silver coinage — threw them into the ‚ÄúPanic of 1837.‚ÄĚ This happened, in part, because the new influx of coinage into banks revealed the lack of true value in paper money. The depression lasted for eight years.

Later in the century, the country would fall into Civil War, a time during which government dabbled in more inflationary finance, racking up huge debts and setting the stage for a central bank once again.

An economic panic in 1907 was the final stepping-stone wealthy elites needed to once again regain control of the financial sector. Just a few years later, in December 1913, the Federal Reserve Act became law and created the central bank from which Americans have yet to free themselves. The creators of the Federal Reserve Bank examined the history behind the collapse of its predecessors and created a monetary goliath that would be difficult to dismantle to give them economic control over the masses.

And they did a good job. It has taken 99 years for the central bank that controls nearly everyone’s life by means of economic meddling to become a mainstream topic of discussion; much of the credit for the newfound interest in the Fed comes from longtime critic Ron Paul. Later this month, Paul’s bill for a full Fed audit is headed to the House floor, and he has written numerous times about what is wrong with the modern central bank. Republican resistance has made a Paul nomination nearly impossible. Had he been given a chance at the Presidency, he may have turned out to be the first President since Jackson to stand up to the economic aristocrats behind the curtain of the central bank. That sort of leadership, it seems, we need now more than ever.

Sam Rolley

Staff writer Sam Rolley began a career in journalism working for a small town newspaper while seeking a B.A. in English. After learning about many of the biases present in most modern newsrooms, Rolley became determined to find a position in journalism that would allow him to combat the unsavory image that the news industry has gained. He is dedicated to seeking the truth and exposing the lies disseminated by the mainstream media at the behest of their corporate masters, special interest groups and information gatekeepers.

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  • Dwight Mann

    End the Fed
    Make the congress do its job of printing money(coin). . .
    Ron Paul in 2012

    • Jay

      End the Fed? That won’t do it. You need to exterminate its owners!

  • Raymond Agnew


    • Raymond Agnew
    • Capitalist at Birth

      Dream on. A vote for the Libertarian ticket is a wasted vote. Why do you continually beat a dead horse. Get involved in the only REALISTIC choices of one party or the other. Ross Perot caused the election of Bill Clinton, because he wanted an Ambassadorship and Bush thought he was a loon. I will never vote Libertarian, because of their open borders policy, which is still in their platform. BTW I voted for Roger Mc Bride in 1984, John Anderson in 1980 and George Wallace in 1982. As you can see, I am no stranger to making idiotic choices. I was much younger and less mature then. Get my Drift.

      • dan

        …and I will never vote for a Republican in name only like Mitt. Get over your self and vote for Ron Paul…and stop your inane nattering that’s just regurgitated propaganda from the mainstream media…or go vote for Mc Lame ,again.

  • Rich

    Andrew Jackson was not the Hero you portray him to be, least you forget the Nullification Crisis. Jackson only dismantled the National “privet” bank he could not control it owners.

    The Tariff of 1828 was largely the work of Martin Van Buren (although Silas Wright Jr. of New York prepared the main provisions) and was partly a political ploy to elect Andrew Jackson president. Van Buren calculated that the South would vote for Jackson regardless of the issues so he ignored their interests in drafting the bill. New England, he thought, was just as likely to support the incumbent John Quincy Adams, so the bill levied heavy taxes on raw materials consumed by New England such as hemp, flax, molasses, iron and sail duck. With an additional tariff on iron to satisfy Pennsylvania interests, Van Buren expected the tariff to help deliver Pennsylvania, New York, Missouri, Ohio, and Kentucky to Jackson. Over opposition from the South and some from New England, the tariff was passed with the full support of many Jackson supporters in Congress and signed by President Adams in early 1828.

    By the war this is where the march to the Civil War began.

    • Rich

      sorry about the misspelling. “PRIVATE”

    • keimh3regpeh2umeg

      You are certainly right about Jackson. He rejected states’ rights and broke treaties with the five civilized tribes. But his instincts were correct on the bank, and despite his flaws, he is someone to look back to for inspiration in dealing with our own banking cartel, the Federal Reserve System.

    • Vigilant

      The march to the Civil War began in 1776. It was the opposition to the extension of slavery in the western territories and new states that embroiled the nation, as evidenced by the Lincoln Douglas debates, “Bleeding Kansas,” and the Dred Scott decision.

      The tariff issue had long been settled, over two and a half decades before the war, and was no longer found in either the Democrat or Republican platforms, nor to any extent in Southern secession documents. As Jackson said on May 1, 1833, after the nullification crisis was defused by the tariff compromise, “the tariff was only the pretext, and disunion and southern confederacy the real object. The next pretext will be the negro, or slavery question.”.

      • keimh3regpeh2umeg

        Correct me if I am wrong, but weren’t tariffs in Lincoln’s platform?

      • Vigilant

        Declaration 12 of the party platform was: “12. That while providing revenue for the support of the general government by duties upon imports, sound policy requires such an adjustment of these imposts as to encourage the development of the industrial interests of the whole country, and we commend that policy of national exchanges which secures to the workingmen liberal wages, to agriculture remunerating prices, to mechanics and manufacturers an adequate reward for their skill, labor and enterprise, and to the nation commercial prosperity and independence.”

        More importantly, both platforms of the Democrats (Douglas and Breckinridge) made absolutely no mention of tariffs. As I said, tariffs were decidedly NOT a factor in the election of 1860.

      • keimh3regpeh2umeg

        Fair enough. But was not a tariff implemented in 1861? And was there not a call for one since 1857, made justifiable, though I don’t quite see the logic, by the Banking Panic that happened in that year? And could not the above plank, given its language, be interpreted as a veiled call for a tariff? What does “an adjustment of these imposts as to encourage the development of the industrial interests” mean if not some form of protectionism?

  • Steve E

    Printing money out of nothing will eventually get you nowhere.

  • EndTheIllusion

    One of the root causes of most of our economic problems is our DEBT BASED monetary system. Money comes into circulation through loans that carry an interest burden. Once the loan is paid back, the money is extinguished. The fatal flaw in this system is while the principle of the loan can be paid back, someone has to take out additional loans to pay back the interest.

    Of course the additional loans also carry an interest burden and this burden keeps growing and growing leaving us where we are today where we are near the end of the ability to carry this burden.

    What we need is a WEALTH BASED monetary system. Here the government SPENDS the money into existence for infrastructure and other necessities of a society. Inflation is not a problem because something is PRODUCED so production matches the money supply. Additionally there is no debt burden associated with WEALTH BASED money.

    Think about this……., if the government needs to build a bridge, we now pay more to the bankers for financing than for the people who supply the materials and do the labor on the bridge. This is insanity, because the bankers produce nothing, yet they get the lion’s share of the costs.

    This is not some pie in the sky idea. We did it in our colonial past and the economy thrived until King George forbade the colonies to print their own debt free money. This triggered a massive depression and helped start the Revolutionary War.

    The fact that our corporate media never mentions the concept of WEALTH BASED money is proof that they are controlled by the ruling elites.

    For more information on how such a system can work, this article is a great starting point

  • NeverLosingHope

    So will our government renew the 100-year charter of the Federal Reserve that expires in December of 2013?

    • Steve E

      Maybe not, if Congress would listen to Ron Paul and audit the Fed to find out what is really going on and show it to the People.

  • loboviejo

    Since 1790, the Central Bank notion has a divisive issue in the United States. The rift was, in the period before 1860, probably as contentious as slavery if not moreso. Andrew Jackson had encouraged David Crockett to run for Congress which he did–as a National Republican and later as a Whig. Crockett soon allied himself with Nicholas Biddle and broke with Jackson. In 1840, William Henry Harrison was elected on the National Bank platform but died in office and was succeeded by John Tyler who opposed anything central. He may have been the last strict constructionist in the White House which alienated the powers that could have gotten him elected in 1844.

    The Van Buren party rejected the national bank as as they and the big money Republicans turned to the “progressive” movement Thomas Woodrow Wilson would sign legislation creating the Fed. His opponent Theodore Roosevelt would also have signed the legislation as he had pushed the issue earlier and his son-in-law Nicholas Longworth had shepherded it through the House. Taft would not, but conservatism was on the wane.

    To Congress I say: Be careful what you campaign for. It might come back to bite you.

  • dan

    Old Hickory was a man of the people …. and for the people. I just wish the Manifest Destiny / expansionist crew had not treated the ‘natives’ as they did (Trail of Tears)
    but politics makes for strange bedfellows. We would have been under British control
    sooner (how many don’t know that the Fed and the Bank of England are the same critter
    and that they evolved from the East India Company) nor seen our rise to prominence
    in the world.

  • diamond1957

    If it not for his foreign policy views, which were really never fully disclosed or allowed to be known, he would have had my vote. I feel he lacked a strong enough personality to instill the kind of confidence needed to accomplish his goals, or to be a world leader. Though Ron Paul did put forth ideas which should be discussed and acted on. The media is the one with too much power, because of the level of information saturation we are too open, too vulnerable to suggestion.

  • Dan Mancuso

    Interesting but brief article. The best book I’ve read on the subject is “The Creature from Jekyll Island”. Can’t recall the author’s name. And to all those anti-Paul ists, I’m no Libertarian, but in your BS two party system he makes a lot of sense. Try reading his book, ” The Revolution: a Manifesto”. Even brain dead liberals and socialists could understand it if they tried. I figure your best bet would be with the Tea Partyers – if they could just get together and form a cohesive group…

  • Ted Rice

    Jackson managed to plunge the US into a LONG depression, which didn’t let up until a central bank was re-established. He also, like present day republicans, was so anti-regulation that corruption ran wild in government and business.

  • Bailey

    This article points out the fact very clearly that what we are now experiencing, finacially, is nothing new. If only our so-called “leaders” (i.e., congressmen, senators, executive office, etc.) would learn from history, we would Not have the Federal Reserve Banksters, but we would be in a stable finacial condition. In addition, without the FR we probably would not have had to experience the devestation of NAFTA and GATT. Without the FR and its government minions (POTUS, congress,senate, Supreme Court) we would have continued to be a prosperous nation and a leader in the free world instead of the joke we have become.

    • Deerinwater

      For sure Bailey, ~ it’s been an on going War fought on many fronts with many battles waged for several hundred years.

  • Fernando

    One error in the essay, the Continental was NOT the US first experiment with paper currency. Colonial Script was succesfully used prior to the Revolutionary War. The Brits outlawed it once they found out about it, and this was the main reason that led to the Revolution. The Continental suffered high inflation thanks to the Brits forging them and thereby increasing the currency.

    • Deerinwater

      This omission of fact is deliberate as it opens the door to the benefits that can be offered by fiat money. ~ Neither this site nor Ron Paul wish to go there as they support a gold standard.

      History has proven on several occasions fiat money worked quit well and everyone benefits and the economy thrived. I will offer you a link if you are truly interested in such matters.

      Why this site, Ron Paul or anyone would prefer a gold standard leaves room for speculation. Harder to manipulate value perhaps but not by no means impossible. Look what the Rockefeller’s did with silver a few years ago.

      Sitting on a dragons hoard of gold would give anyone incentive to want a gold standard I suppose. Those are just some off hand ideas.

      It funny how a simple omission of fact works. And you are right, ~ the Crown did counterfeit Colonial script there by making it worthless.

      And of course we can’t carry must gold around anymore then we can carry a cop, so we carry money and guns , the next best thing.

      Best documentary 2010

      It 2+ hours long ~ absorb it at your leisure , It was an awaking for myself.

  • http://Liberterian Charles Bonomelli

    Someone needs to take the step to control or abolish the Fed. and its policies.

  • Perdido

    To all that think abolishing the Fed is THe ANSWER.
    Think hard about it. When the Fed is gone we will have the most craven group of people on the face of the earth in charge of printing money. No discipline, no regard, no consequence — Inflation will be at Zimbabwean levels within months of giving the elected class control of the presses.
    We can all agree the Fed needs to go, but we absolutely must have a clear, iron-clad plan in place to control the “controllers”.
    God bless each of you.

    • EndTheIllusion

      And how would that would be different from today?

      • Deerinwater

        Well? ~ things are not anywhere close to perfect but things could be much worse.

        We could trade one monster for two monsters.

  • Ron Paul



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