dinsdag 27 december 2011

Lincoln drukt het geld en leent het niet van de bankiers: welvaart !

Chapter 8
“With the thoughts you’d be thinkin’,
“You could be another Lincoln,
“If you only had a brain . . . .”
Dorothy to the Scarecrow (1939 film)
Like the Scarecrow who wound up ruling Oz, Abraham
Lincoln went from hayseed to the top of his class by sheer
native wit and determination, epitomizing the American dream. Following
in the footsteps of Andrew Jackson, he rose from the backwoods
to the Presidency without ever going to college. Lincoln’s
mother could barely read. Like Jackson, Lincoln risked life and limb
battling the Money Power; but the two Presidents had quite different
ideas about how it should be done. Jackson had captured the popular
imagination by playing on the distrust of big banks and foreign bankers;
but in throwing out the national bank and its foreign controllers,
he had thrown out Hamilton’s baby with the bath water, leaving the
banks in unregulated chaos. There was now no national currency.
Banks printed their own notes and simply had to be trusted to redeem
them in specie (or gold bullion). When trust faltered, there would be a
run on the bank and the bank would generally wind up closing its
doors. Bank-fed speculation had collapsed much of the factory system;
and federal support for road, canal and railway construction
was halted, halting the pioneer settlement of the West along with it.
Lincoln was only 24 when he joined the fight as an Illinois state
legislator to continue the pioneering internal improvements begun by
Henry Clay and the National Republicans. The National Republicans
were now called “Whigs” after the British Whigs, the party in opposition
to the King. Jackson had taken such unprecedented powers to
Chapter 8 - Scarecrow with a Brain
himself that he had come to be called “King Andrew,” making the
American opposition party Whigs by extension. The “Illinois Improvement
Program” of Lincoln’s home state centered on construction of
the Illinois-Michigan canal and a 3,000-mile railroad system. The result
was an unbroken transportation line from the Hudson River to
the Great Lakes and the Mississippi River. Lincoln also joined the
movement to restore the country’s financial, industrial and political
independence by restoring a national bank and a national currency.1
When the Whig Party disintegrated over the question of slavery,
Lincoln joined the Republican Party, which was created in 1854 to
oppose the expansion of slavery into Kansas. It opposed the political
control exerted by southern slave owners over the national government;
maintained that free-market labor was superior to slavery; promised
free homesteads to farmers; and advanced a progressive vision
emphasizing higher education, banking, railroads, industry and cities.2
Lincoln became the first Republican candidate to be elected President.
Both Jackson and Lincoln were targets of assassination attempts,
but for Lincoln they started before he was even inaugurated. He had
to deal with treason, insurrection, and national bankruptcy within
the first days of taking office. Considering the powerful forces arrayed
against him, his achievements in the next four years were nothing
short of phenomenal. His government built and equipped the largest
army in the world, smashed the British-financed insurrection, abolished
slavery, and freed four million slaves. Along the way, the country
managed to become the greatest industrial giant the world had ever
seen. The steel industry was launched, a continental railroad system
was created, the Department of Agriculture was established, a new
era of farm machinery and cheap tools was promoted, a system of
free higher education was established through the Land Grant College
System, land development was encouraged by passage of a Homestead
Act granting ownership privileges to settlers, major government
support was provided to all branches of science, the Bureau of Mines
was organized, governments in the Western territories were established,
the judicial system was reorganized, labor productivity increased by
50 to 75 percent, and standardization and mass production was
promoted worldwide.
How was all this accomplished, with a Treasury that was
completely broke and a Congress that hadn’t been paid themselves?
As Benjamin Franklin might have said, “That is simple.” Lincoln
tapped into the same cornerstone that had gotten the impoverished
colonists through the American Revolution and a long period of
Web of Debt
internal development before that: he authorized the government to
issue its own paper fiat money. National control was reestablished
over banking, and the economy was jump-started with a 600 percent
increase in government spending and cheap credit directed at
production.3 A century later, Franklin Roosevelt would use the same
techniques to pull the country through the Great Depression; but
Roosevelt’s New Deal would be financed with borrowed money.
Lincoln’s government used a system of payment that was closer to the
medieval tally. Officially called United States Notes, these nineteenth
century tallies were popularly called “Greenbacks” because they were
printed on the back with green ink (a feature the dollar retains today).
They were basically just receipts acknowledging work done or goods
delivered, which could be traded in the community for an equivalent
value of goods or services. The Greenbacks represented man-hours
rather than borrowed gold. Lincoln is quoted as saying, “The wages of
men should be recognized as more important than the wages of money.”
Over 400 million Greenback dollars were printed and used to pay
soldiers and government employees, and to buy supplies for the war.
The Greenback system was not actually Lincoln’s idea, but when
pressure grew in Congress for the plan, he was quick to endorse it.
The South had seceded from the Union soon after his election in 1860.
To fund the War between the States, the Eastern banks had offered a
loan package that was little short of extortion – $150 million advanced
at interest rates of 24 to 36 percent. Lincoln knew the loan would be
impossible to pay off.4 He took the revolutionary approach because
he had no other real choice. The government could either print its
own money or succumb to debt slavery to the bankers.
The Wizard Behind Lincoln’s Curtain
Lincoln’s economic advisor was Henry Carey, the son of Matthew
Carey, the printer and publisher mentioned earlier who was tutored
by Benjamin Franklin and tutored Henry Clay. Clay was the leader of
the Philadelphia-based political faction propounding the “American
system” of economics. In the 1920s, historian Vernon Parrington called
Henry Carey “our first professional economist.” Thomas DiLorenzo,
a modern libertarian writer, has called him “Lincoln’s (and the
Republican Party’s) economic guru.” Carey was known around the
world during the Civil War and its aftermath, and his writings were
translated into many European and Asian languages.
Chapter 8 - Scarecrow with a Brain
According to Parrington, Carey began his career as a classical
laissez-faire economist of the British school; but he came to believe that
American industrial development was being held back by a false
financial policy imposed by foreign financiers. To recognize only gold
bullion as money gave the bankers who controlled the gold a lock on
the money supply and the economy. The price of gold was established
in a world market, and the flow of bullion was always toward the
great financial centers that were already glutted with it. To throw the
world’s money into a common pool that drained into these financial
capitals was to make poorer countries the servants of these hubs. Since
negative trade balances were settled in gold, gold followed the balance
of trade; and until America could build up an adequate domestic
economy, its gold would continue to drain off, leaving too little money
for its internal needs.
Carey came to consider “free trade” and the “gold standard” to
be twin financial weapons forged by England for its own economic
conquest. His solution to the gold drain was for the government to
create an independent national currency that was non-exportable,
one that would remain at home to do the country’s own work. He
advocated a currency founded on “national credit,” something he
defined as “a national system based entirely on the credit of the government
with the people, not liable to interference from abroad.” Like
the wooden tally, this paper money would simply be a unit of account
that tallied work performed and goods delivered. Carey also supported
expanding the monetary base with silver.5
Carey’s theories were an elaboration of the “American system”
propounded by Henry Clay and the National Republican Party. Their
platform was to nurture local growth and development using local
raw materials and local money, freeing the country from dependence
on foreign financing. Where Jackson’s Democratic Party endorsed
“free trade,” the National Republican Party sought another sort of
freedom, the right to be free from exploitation by powerful foreign
financiers and industrialists. Free traders wanted freedom from government.
Protectionists looked to the government to keep them free
from foreign marauders. Clay’s protectionist platform included:
Government regulation of banking and credit to deter speculation
and encourage economic development;
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Government support for the development of science, public
education, and national infrastructure;i
Regulation of privately-held infrastructure to ensure it met the
nation’s needs;
A program of government-sponsored railroads, and scientific and
other aid to small farmers;
Taxation and tariffs to protect and promote productive domestic
activity; and
Rejection of class wars, exploitation and slavery, physical or economic,
in favor of a “Harmony of Interests” between capital and
Lincoln also endorsed these goals. He eliminated slavery, established
a national bank, and implemented and funded national education,
national transportation, and federal development of business and
farming. He also set very high tariffs. He made this common-sense
I don’t know much about the tariff, but I know this much: When
we buy manufactured goods abroad we get the goods and the
foreigner gets the money. When we buy the manufactured goods
at home, we get both the goods and the money.
The Legal Tender Acts and the Legal Tender Cases
The Greenback system undergirded Lincoln’s program of domestic
development by providing a much-needed national paper money
supply. After Jackson had closed the central bank, the only paper
money in circulation were the banknotes issued privately by individual
state banks; and they were basically just private promises to pay later
in hard currency (gold or silver). The Greenbacks, on the other hand,
were currency. They were “legal tender” in themselves, money that
did not have to be repaid later but was “as good as gold” in trade.
Like metal coins, the Greenbacks were permanent money that could
continue to circulate in their own right. The Legal Tender Acts of
i Infrastructure is defined as “the set of interconnected structural elements that
provide the framework for supporting the entire structure.” In a country, it consists
of the basic facilities needed for the country’s functioning, providing a
public framework under which private enterprise can operate safely and efficiently.
Chapter 8 - Scarecrow with a Brain
1862 and 1863 made all the “coins and currency” issued by the U.S.
Government “legal tender for all debts, public and private.” Government-
issued paper notes were made a legal substitute for gold and
silver, even for the payment of pre-existing debts.
In the twentieth century, the Legal Tender Statute (31 U.S.C.
Section 5103) applied this definition of “legal tender” to Federal Reserve
Notes; but it was an evident distortion of the intent of the original
Acts, which made only currency issued by the United States Government
legal tender. Federal Reserve Notes are issued by the Federal Reserve,
a private banking corporation; but that rather obvious discrepancy
was slipped past the American people with the smoke-and-mirrors
illusion that the Federal Reserve was actually federal.
Did the Greenbacks Cause Price Inflation?
Lincoln’s Greenback program has been blamed for the price inflation
occurring during the Civil War, but according to Irwin Unger in
The Greenback Era (1964): “It is now clear that inflation would have
occurred even without the Greenback issue.”7 War is always an inflationary
venture. What forced prices up during the Civil War was
actually a severe shortage of goods. Zarlenga quotes historian J. G.
Randall, who observed in 1937:
The threat of inflation was more effectively curbed during the Civil
War than during the First World War. Indeed as John K. Galbraith
has observed, “it is remarkable that without rationing, price
controls, or central banking, [Treasury Secretary] Chase could
have managed the federal economy so well during the Civil
Greenbacks were not the only source of funding for the Civil War.
Bonds (government I.O.U.s) were also issued, and these too increased
the money supply, since the banks that bought the bonds were also
short of gold and had no other way of paying for the bonds than with
their own newly-issued banknotes. The difference between the government-
issued Greenbacks and the bank-issued banknotes was that
the Greenbacks were debt-free legal tender that did not have to be
paid back. As Thomas Edison reasonably observed in an interview
reported in The New York Times in 1921:
If the Nation can issue a dollar bond it can issue a dollar bill.
The element that makes the bond good makes the bill good also.
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The difference between the bond and the bill is that the bond
lets the money broker collect twice the amount of the bond and
an additional 20%. Whereas the currency, the honest sort
provided by the Constitution pays nobody but those who
contribute in some useful way. It is absurd to say our Country
can issue bonds and cannot issue currency. Both are promises to
pay, but one fattens the usurer and the other helps the People.
The Greenbacks did lose value as against gold during the war, but
this was to be expected, since gold was a more established currency
that people naturally preferred. Again the problem for the Greenback
was that it had to compete with other forms of currency. People remained
suspicious of paper money, and the Greenback was not accepted
for everything. Particularly, it could not be used for the
government’s interest payments on its outstanding bonds. Zarlenga
notes that by December 1865, the Greenback was still worth 68 cents
to one gold dollar, not bad under the circumstances. Meanwhile, the
Confederates’ paper notes had become devalued so much that they
were worthless. The Confederacy had made the mistake of issuing
fiat money that was not legal tender but was only a bond or promise
to pay after the War. As the defeat of the Confederacy became more
and more certain, its currency’s value plummeted.9
In 1972, the United States Treasury Department was asked to
compute the amount of interest that would have been paid if the $400
million in Greenbacks had been borrowed from the banks instead.
According to the Treasury Department’s calculations, in his short tenure
Lincoln saved the government a total of $4 billion in interest, just
by avoiding this $400 million loan.10

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