Creature From Jekyll Island by G. Edward полностью

The pressure for issuance of greenbacks originated in Congress, but Lincoln was an enthusiastic supporter. His view was that: Government, possessing power to create and issue currency and credit as money and enjoying the right to withdraw currency and credit from circulation by taxation and otherwise, need not and should not borrow capital at interest.... The privilege of creating and issuing money is not only the supreme prerogative of the government but it is the government's greatest creative opportunity.

1. This is taken from an abstract of Lincoln's monetary policy that was prepared by the Legislative Reference Service of the Library of Congress. Quoted by Owen, p. 91.

GREENBACKS AND OTHER CRIMES 385

It would appear that Lincoln objected to having the government pay interest to the banks for money they create out of nothing when the government can create money out of nothing just as easily and not pay interest on it. If one ignores the fact that both of these schemes are forbidden by the Constitution and is willing to tolerate the plunder-by-inflation that is the consequence of both, then there is an appealing logic to the argument. The politicians continue to have their fiat money, but at least the banks are denied a free ride.

LINCOLN'S MIXED VIEW OF BANKING

It is apparent that Lincoln had undergone a change of heart regarding banks. Early in his political career, he had been a friend of the banking industry and an advocate of easy credit. As a member of the Whig political party in the 1830s—before becoming a Republican in his campaign for the Presidency—he had been a supporter of Biddle's Second Bank of the United States.1 During his famous debates with Senator Stephen Douglas, one of the points of contention between the two was that Lincoln defended the Bank and advocated its reestablishment. Furthermore, after becoming President, he took the initiative in requesting Congress to reestablish central banking.2

Lincoln appears to have been inconsistent, and one gets a gnawing feeling that, in his effort to finance an unpopular war, he sometimes found it necessary, like Salmon Chase and other politicians of the time, to anesthetize his personal convictions and do whatever was required to meet the exigencies of governmental survival.

One thing, however, is clear. Regardless of Lincoln's personal views on money, the greenbacks were not pleasing to the bankers who were thereby denied their customary override on government debt. They were anxious to have this federal fiat money replaced by bank fiat money. For that to be possible, it would be necessary to create a whole new monetary system with government bonds used as backing for the issuance of bank notes; in other words, a return to central banking. And that was precisely what Secretary Chase was preparing to establish.

1- See Lincoln's speech on the Sub-Treasury, Fehrenbacher, pp. 56-57.

2. See Lincoln's annual message to Congress, December 1, 1862, Fehrenbacher, p. 398.

386 THE CREATURE FROM JEKYLL ISLAND

In 1862, the basic position of the bankers was outlined in a memo, called The Hazard Circular, prepared by an American agent of British financiers and circulated among the country's wealthy businessmen. It said:

The great debt that capitalists will see to it is made out of the war must be used as a means to control the volume of money. To accomplish this the bonds must be used as a banking basis. We are now waiting for the Secretary of the Treasury to make this recommendation to Congress. It will not do to allow the greenback, as it is called, to circulate as money any length of time, as we cannot control that. But we can control the bonds and through them the bank issues.1

THE NATIONAL BANKING ACT

On February 25, 1863, Congress passed the National Banking Act (with major amendments the following year) which established a new system of nationally-chartered banks. The structure was similar to the Bank of the United States with the exception that, instead of one central bank with power to influence the activities of the others, there were now to be many national banks with control over all of them coming from Washington. Most banking legislation is sold to the public under the attractive label of reform. The National Banking Act was one of the rare exceptions. It was promoted fairly honestly as a wartime emergency scheme to raise money for military expenses by creating a market for government bonds and then transforming those bonds into circulating money.

Here is how it worked: