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The issue here is treated in Galbraith's Money:
Whence it Came, Where it Went on pp. 76-88, and by Peter Bernstein's
The Power of Gold on p. 248. These mitigate somewhat the
conclusions of earlier writers, the best of which in my possession is Norman
Angell's The Story of Money of 1929. I do not own a copy of either Dewey's Financial
History of the U.S. nor of Friedman's Monetary History of the United
States, but some other books I do have all agree on the main points bearing
on the statement Michael has circulated.
Galbraith says that in getting rid of the
Second Bank of the U.S. Jackson was the accidental (or unwitting) ally of the
soft money advocates, because all banking and note issue then became a
prerogative of state chartered banking institutions. Thus a great
confusion of moneys in the U.S. for eighty years. Although Jackson favored hard
money consisting of gold and silver and for eschewing all paper as the
instrument of the devil, in getting rid of the bank he got not hard money but
the softest of all--an explosion of new banks and an avalance of bank notes. The
Second Bank had to close in 1936. Then the Federal gov't decreed that all public
lands must be paid for in hard money or the notes of banks that redeemed their
notes in specie, thus testing their quality. "It was long believed to have put a
modest crimp on both bank lending and bank creation. Then in the following year,
although not necessarily as a consequence, came panic. ...State banking laws and
their enforcement were much tightened."
Bernstein adds understanding via discussion
of bimetallism in the U.S., following on Alexander Hamilton's setting of the
mint price ratio of gold to silver at 15:1 in 1791. Just at that
time, world supplies of gold began to dwindle and the market ratio of the two
metals changed, with the effect that gold virtually disappeared from the
U.S. money supply in favor of silver. Then, in 1834 Congress acted to
change the mint ratio to 16:1--one that prevailed for the next 99 years.
This had the effect of over-pricing silver and stimulating the price of
gold. This was expected to discourage Biddle's bank notes, which were the
favored mediuim of exchange at the time (i.e. the Second Bank of the
U.S.). This put the U.S. effectively on the gold standard. "Silver
continued to function as subsidiary coinage, but gold was the major holding into
which currency and bank deposits could be converted. These shifts were the
inevitable consequence of using a commodity as a standard of value for the money
system."
KW
----- Original Message -----
Sent: Thursday, August 04, 2005 3:04
PM
Subject: [socialcredit] comment
requested
Dear Friends,
The following quote was passed onto me by
Robert Johnson, whose biography of Charles Ferguson should be completed by
December. I recognize that the background is Jackson's war against the
central bank, but can one of you more fluent in history than I please briefly
explain "what is called the hard-money policy of the present
Administration"?
Michael
"This plain truth cannot fail to be
clear as the sunlight to every calm and candid mind, namely, that by reason of
the alliance between the institutions that have created our paper currency, to
derive their profits from lending it, and all our public authorities, both the
Federal and State Governments, the latter conducting all their fiscal
operations through the paper of the banks alone, the country has really
possessed no uniform measure of value, notwithstanding all the precautions of
the Constitution. It has had but a counterfeit presentment of such a standard.
This is a position which the most strenuous friends of banks and paper money
cannot attempt even to controvert. Nor will any question that this defect is
the radical vice of our system of currency being precisely analogous, though
on a wider and more active scale of operation, to the want of fixed standards
of weight and measurement. This defect has been the original and ever active
cause the prima mali labe of all the evils which it is admitted by all
that the country has suffered from its paper currency, whatever differences of
opinion may exist as to its compensating benefits; and to supply this, as far
as it may be incidentally within the competency of the General Government, is
simply the object of what is called the hard-money policy of the present
Administration. The peculiar advocates of paper money rest their defence of it
upon the ground of real convertibility; yet, in practice, that restraint is
entirely evaded, simply for the want of a regular demand for and circulation
of specie." (United States Magazine and Democratic Review,
January 1837)
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