Creature From Jekyll Island by G. Edward полностью

Rather than allow the banks of the nation to fail, the governments, state and federal, decided in August 1814 to allow the banks to continue in business while refusing to redeem their obligations in specie. In other words, the banks were allowed to refuse to pay their solemn contractual obligations....

This general suspension was not only highly inflationary at the time; it set a precedent for all financial crises from then on. Whether 338

THE CREATURE FROM JEKYLL ISLAND

the U.S. had a central bank or not, the banks were assured that if they inflated together and then got in trouble, government would bail them out.

The state banks had created enough instant money for the

federal government to raise the debt from $45 million to $127

million, a staggering sum for the fledgling nation. Tripling the money supply, with no appreciable increase in goods, means the value of the dollar shrank to about one-third its former purchasing power. By 1814, when the depositors began to awake to the scam and demanded their gold instead of paper, the banks closed their doors and had to hire extra guards to protect officials and employees from the angry crowds. Once again, the monetary and political scientists had succeeded in fleecing the American public of approximately 66% of all the money they held during that period, and that was on top of the 42% fleecing they got a few years earlier by the Bank of the United States.

JUGGLING TRICKS AND BANKING DREAMS

Leaning against the storm of paper money all this time was Thomas Jefferson, by now, past-President of the United States.

Trying to bring the nation to its senses, he never ceased speaking out against the evil of dishonest money and debt:

Although all the nations of Europe have tried and trodden every path of force and folly in a fruitless quest of the same object, yet we still expect to find in juggling tricks and banking dreams, that money can be made out of nothing, and in sufficient quantity to meet the expense of heavy war. ...

The toleration of banks of paper discount costs the United States one-half of their war taxes; or, in other words, doubles the expenses of every war. ...

The crisis, then, of the abuses of banking is arrived. The banks have pronounced their own sentence of death. Between two and three hundred millions of dollars of their promissory notes are in the hands of the people, for solid produce and property sold, and they [the banks] formally declare that they will not pay them.... Paper was received on a belief that it was cash [gold], and such scenes are now to take place as will open the eyes of credulity and of insanity itself to the 1. Rothbard, Mystery, pp. 198-99.

2. Writings, Library Edition, Vol. XIV, p. 227.

3. Writings, Library Edition, Vol. XIII, p. 364.

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dangers of a jDaper medium abandoned to the discretion of avarice and of swindlers. ...

It is a wise rule never to borrow a dollar without laying a tax at the same instant for paying the interest annually and the principal within a given term.2... We shall consider ourselves unauthorized to saddle posterity with our debts, and morally bound to pay them ourselves.3

... The earth belongs to the living, not the dead.... We may consider each generation as a distinct nation^ with a right to ... bind themselves, but not the succeeding generation. ...

The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating.5

And still, Congress did not listen.

SUMMARY

America had its first central bank even before the Constitution was drafted. It was called the Bank of North America and was chartered by the Continental Congress in 1781. Modeled after the Bank of England, it was authorized to issue more paper promissory notes than it held in deposits. In the beginning, these notes were widely circulated and served as a national currency. Although the bank was essentially a private institution, it was designed for the purpose of creating money to lend to the federal government, which it did from the start.

The Bank of North America was riddled with fraud, and it

quickly fell into political disfavor. Its inflated bank notes eventually were rejected by ordinary citizens and ceased to circulate outside of the Bank's home city of Philadelphia. Its charter was allowed to expire and, in 1783, it was converted into a purely commercial bank chartered by the state of Pennsylvania.

The advocates of fiat money did not give up. In 1791, the First Bank of the United States (America's second central bank) was created by Congress. The new bank was a replica of the first, including fraud. Private investors in the Bank were among the nation's most wealthy and influential citizens, including some Congressmen and Senators. But the largest investment and the 1- Letter to Dr. Thomas Cooper, Sept. 10,1814, Writings, Library Edition, Vol. XIV, pp. 187-89.