Today, most Americans do not understand what a central bank is or what function it has. Americans are no longer being taught economics and they no longer learn the history of America’s central banks. These things are being ignored in our classrooms today. As a society we have been dumbed down about the origins of central banks, and past legislation regarding money. Most people don’t know how money works and why it is a medium of exchange.
So now lets take some time and briefly investigate out monetary history and the history of taxation. The truth is the battle over central banks is one of the most important themes in U.S. history. America has had three central banks in its history. Our current central bank is called The Federal Reserve and it is as much a part of our federal government as Federal Express. It is really a private bank and in this case federal is just a title that is put together with bank to make you think it is a part of our government.
Our nation was birthed in the midst of a conflict over taxation and the control of our money through something called the stamp act. A central banking system has played a major part in nearly all of the wars that America has fought. Presidents that resisted the central bankers were persecuted and shot, while other presidents were endorsed by these same banks.
In this day and age, we as Americans are taught a sanitized version of American history. This history omits the role of the central banks and why these banks were failures. Money history is lumped together with economics and it has become a very boring subject. This subject uses numbers, figures, and equations. It is like taking a sleeping pill.
If you want to know what really happened and how the central banking system shaped our history, then just follow the money. Real history is not only found in the events that happened, but a more complete picture reveals the people who bankrolled those events and the agenda they had at the time. When it comes to America’s money history what should we know? Here is a series of events that sponsored the change in the way money was used and the laws that governed it. These events helped to shaped America into the country we see today.
Every American Should Know
The very first central banks were set up in Europe. These central banks were private banks and they were given control of the nation’s money supply wherever they were set up.
England was at war with France and this lasted from 1754 and 1763. As a result of the Seven Years War with France, King George III of England was deeply in debt to the central bankers of England.
In an attempt to raise revenue and pay off debt, King George tried to tax the colonies in America. He did this through the Stamp Act. He felt that since part of his debt has occurred because of defense of the colonies due to the 7 years’ war, then the colonies should share in the debt incurred from that war. Of course, the colonies did not agree.
Benjamin Franklin went before the Parliament in London in 1763. One of the topics discussed was America’s economy.
The Currency Act of 1764 ordered the American Colonists to stop printing their own money. Colonial script was the money the colonists were using at this time. It was to be exchanged at a two-to-one ratio for “notes” from the Bank of England. This was England’s way of taxing America!
When asked why the American colonies had lost respect for Parliament, Benjamin Franklin said.
“To a concurrence of causes: the restraints lately laid on their trade, by which the bringing of foreign gold and silver into the Colonies was prevented; the prohibition of making paper money among themselves, and then demanding a new and heavy tax by stamps; taking away, at the same time, trials by juries, and refusing to receive and hear their humble petitions.”
Around the time of Adam Smith, (1723-1790) there was a massive growth in the banking industry. Within the new system of ownership and investment, money holders were able to reduce the State’s intervention in economic affairs, remove barriers to competition, and, in general, allow anyone willing to work hard enough and who also has access to capital to become a capitalist. It was not until over 100 years after Adam Smith, however, that US companies began to apply his policies in large-scale and shift the financial power from England to America.
The house of Rothschild is established in 1776 in Frankfurt Germany. It is widely believed that this dynasty had a major impact on the first two central banks.
The Continental Congress was desperate for funds and met at Independence Hall. They appointed Robert Morris (an arms dealer), to head the “Bank of North America”, which was to be closely modeled after the Bank of England. (A Central Bank) The charter of the Bank of North America called for private investors to put up $400,000.00 Capital as the initial investment, but when Robert Morris was unable to raise the capital, he used his political influence to have Gold that was loaned to America by France to be deposited in the bank. Then he loaned this money to himself and his friends to “re-invest” in shares of the bank.
The bank held a monopoly over the National Currency from the period of 1781 to 1785. The value of American Currency dropped and the banks charter was not renewed. The first attempt at a central banking system had failed. The effort to kill the Bank of North America was led by William Findley.
William Finley later commented
“The institution, having no principle but that of avarice, will never be varied in its object…to engross all the wealth, power and influence of the state”.
Now you see the mission of every central bank. This is what a central bank does. It is interesting to note that Alexander Hamilton endorsed the Bank of North America.
Gouverneur Morris of Pennsylvania was one of the authors of the U.S. Constitution. He solemnly warned us in 1787 that we must not allow the bankers to enslave us,
“The rich will strive to establish their dominion and enslave the rest. They always did. They always will… They will have the same effect here as elsewhere, if we do not, by the power of government, keep them in their proper spheres.”
After the attempt to establish a central bank in the 1780s had failed, the First Bank of the United States was established in 1791. Alexander Hamilton cut a deal with the south. He said that he would support the move of the nation’s capital to Washington D.C. in exchange for southern support for the establishment of a central bank. Once again, this was a private bank. It was America’s first central bank.
George Washington signed the bill creating the First Bank of the United States on April 25, 1791. It was given a 20-year charter. Alexander Hamilton was our nation’s treasurer at this time. He pushed for the passage of the central bank. James Madison opposed the central bank. He led an attempt to block the bank. He Said,
“History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.”
In the first five years of the First Bank of the United States, the U.S. government borrowed 8.2 million dollars and because new money went into circulation due to this lending, inflation prices rose by 72 percent.
In 1798, Thomas Jefferson said,
“I wish it were possible to obtain a single amendment to our Constitution – taking from the federal government their power of borrowing.”
In 1811, the charter of the First Bank of the United States was not renewed.
One year later, the War of 1812 erupted. The British and the Americans were at war once again. The Americans declared war in 1812 for several reasons, including trade restrictions brought about by Britain’s ongoing war with France.
In 1814, the British captured and burned Washington D.C., but American victories in September 1814 and January 1815 repulsed all three British invasions in New York, Baltimore and New Orleans.
The Treaty of Ghent officially ended the war. On December 24 1814, the members of the British and American negotiating teams signed and affixed their individual seals to the document, which once ratified by their respective governments, ended the war of 1812.
The Battle of New Orleans was fought after it was signed. However, the treaty was not in effect until it was ratified by both sides in February 1815. This was one month after the battle in New Orleans. The treaty ignored the grievances that led to war. American complaints of Indian raids, impressments and blockades had ended when Britain’s war with France ended in 1814, and they were never mentioned in the treaty. The treaty largely restored relations between the two nations to status quo ante bellum, with no loss of territory either way.
In 1816, yet another central bank was created. The Second Bank of the United States was established and it was given a 20-year charter. The Second Bank was chartered by many of the same congressional representatives who in 1811 had refused to renew the charter of the original Bank of the United States. The predominant reason that the Second Bank of the United States was chartered was that in the War of 1812, the U.S. experienced severe inflation and had difficulty in financing military operations.
Andrew Jackson became president in 1828. He was a general and he led the Battle of New Orleans during the war of 1812. Jackson was determined to end the power of the central bankers over the United States
In 1832, Andrew Jackson’s re-election slogan was “JACKSON and NO BANK!” His opponents took his slogan and changed it to Jackass and no bank. Jackson was a democrat and this is the first time a donkey became a mascot for the party. An early renewal bill for the central bank was passed before the vote for Jackson’s second election term. This bill was meant to pressure Jackson politically into signing the bill. Jackson vetoed the bill and made a speech concerning this event.
On July 10th 1832 President Jackson said this about the dangers of a central bank,
“It is not our own citizens only who are to receive the bounty of our government. More than eight millions of the stock of this bank are held by foreigners… is there no danger to our liberty and independence in a bank that in its nature has so little to bind it to our country? … Controlling our currency, receiving our public moneys, and holding thousands of our citizens in dependence… would be more formidable and dangerous than a military power of the enemy.”
In January 1835, Jackson paid off the entire national debt. This is the only time in U.S. history that this has been accomplished. He was the only president to do this.
President Jackson was strongly against the national bank. He vetoed the renewal of its charter and ensured its collapse in 1836.
Richard Lawrence attempted to shoot Andrew Jackson, but Jackson survived. There would be speculation that Lawrence was part of a conspiracy. While nobody denied Lawrence’s involvement, many people, including Jackson, believed that he may have been supported by Jackson’s political enemies. It should be noted that many people believe that Lawrence later admitted the bankers in Europe put him up to this. This has never been proven. However, Lawrence was from England.
The USA enters the period known as the “Free Banking Era”. The only banks in the U.S. were those chartered by the states. The federal government neither chartered banks nor regulated the existing state banks. There were no federal laws regarding money. There was no federal income tax. The Free Banking Era was during the years of 1837 to 1862.
The Supreme Court ruled in Briscoe vs. Bank of Kentucky that state banks and the notes they issued were constitutional. States were the only government powers regulating money. At this point gold and silver was still considered money.