"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."
Not to take much away from Thomas Jefferson, but he was wrong.
I heard this same line from a Ron Paul volunteer at the LP booth at the Ann Arbor Street Fair 2009. He claimed that only the government should be allowed to create money.
The Ron Paul people were there gathering signatures on a petition to audit the FRB. The lefties here thought that was good idea. Many people signed.
History shows that centralization under the government is worse than private banking. In fact, even allowing governments to compete in the issuance of currencies is better than legalized centralization. I have pointed before this website, Spanish Coins on American Money
. Before 1857, private banks in Michigan and other states promised payment in Dollars and Cents, but showed Spanish (Mexican, etc.) coins in their vignettes, because Federal coinage was less widely known. In fact, before 1857, about 20 different silver and gold coins from different nations were recognized as legal tender here in the United Stats.
In fact, historically, the plethora of money issuing entities created a stable currency matrix. Only legal monopolies allowed debasement. The Roman Empire is the classic case. In the Archaic, Classical and Hellenistic ages, no city could debase its coinage because so many others close at hand struck good silver and gold. Once Rome achieved hegemony, that changed. From the Republic through Pax Romana, there were slips, but it was over all, steadily downhill. Even after recovering from teh military anarchy, the Constantines and their successors continued to reissue good money and then debase it. During the Dark Ages and Middle Ages, hard money currency was restored and such debasements as were common were motivated from the increasing value of silver,
as opposed to fraud by the state. (As silver became more valuable with increased trade and commerce, coins could only get so small. Copper was not used on its own as a medium, so silver was debased to meet the markets. But everyone knew that and acted on it. Bankers invented "money of account" in pounds-shilling-pence as abstract currency. Regardless of what coins were offered in what quantities and tallies, this is what you were owed in silver pounds-shillings-pence.)Again, in our time, we do have competing currencies - and we do have a gold-backed dollar.
The American Gold Eagle competes against the Maple Leaf, the Philharmonic, the Panda, etc. Some are pure gold. The Canadians boast FIVE NINES .99999 PURE
though most are three or four nines fine. The AGE is 33.931 oz, but only 0.9167 fine for a net of One Ounce. The old US $20 are only .9675 OZ, being 33.346 grams but 0.900 fine. Americans are a huge market for American government gold. Other mints sells to other markets, so they have to meet more competitive standards.
The fact is that the American government sells gold coins at the market price. Thus, the dollar is backed in gold.
I understand from an article which appeared in Freedom Daily in Jan 2010 that some debtors had signed contracts to repay their loans of gold coin in gold. But some pleaded with their legislators, after the victory at Yorktown, to change the gold clause so that they could repay in paper instead. This may have been an impetus to the establishment of a federal government over the states. We know it led to the statement in Article 1 Section 10 which held that States should hold only gold and silver coin as tender for payment of debts.
I went looking for that Freedom Daily article but did not find it. As for that genesis, I do caution against simply relying on newspaper accounts or whatever else is handy. Most historians today accept without question the "Panic of 1857" which might never have happened. True enough, it was reported in some NYC newspapers. Here in Michigan, we get newspaper reports of monsters in the woods, such as leopards and Big Foot.
There is a lot ignorance out there.
Edited by Michael E. Marotta, 17 March 2011 - 09:57 AM.