Benjamin Franklin wrote about the value of paper money in the 1740s and defended paper money in Parliament against a Hostile Parliament during is mission to Parliament.
Benjamin Franklin vigorously defended the right of the colonies to issue their own script. He may never told Parliament the following in a letter, but this probably represents what he said during hearings. Maybe away from the halls.
"In the Colonies, we issue our own paper money. It is called Colonial Scrip. We issue it to pay the government's approved expenses and charities" [Possibly Apocryphal but true]
The quote is apocryphal according to Gary North, but it is a summary of things that Benjamin Franklin had actually said in Book form during his youthful days with the Philadelphia Junto. Gary North Alleges he didn't say it to Parliament and claims it can't be verified but what can be verified is that Benjamin Franklin literally, wrote a book on the subject that explained exactly how script money can be used to promote and regulate commerce.
A Collaborative Money System
Benjamin Franklin setup printing presses in Post Offices, setup paper money systems for an number of colonies and printed paper money. So what he did say was that the reasons for rebellion owed:
"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." [bartleby]
Franklin did his greatest work before the revolution. By the time that the constitution was being written, he was old, tired and worn out. I believe both Hamilton and Franklin sought a collaborative system where the Feds should possess the money power and share it with the states. Had they followed Franklin's ideas they would have succeeded. Franklin's ideas were amazingly similar to those of Irving Fisher, and his Postal Banking could easily have been integrated into the Federal system Franklin had built. Paper money, according to the Fisher/Franklin system is a kind of script issued against coin and taxation obligations. Fisher's schema would have required it has to be circulated or lose value and it would get retired when paid for "public debts." Franklin had already noted that such script money, when issued locally, was quite effective.
Nationalizing/Socializing Private Debt
The Authors of the Constitution started with Franklin's schema but dumped it based on their admiration for the power of the British Central Bank. Hamilton openly admired and wanted to imitate this bank. His allies: Robert Morris, Gouvernier Morris and "monied men" of the country also admired the British System. They rejected Franklin's work, Overtly based on the successful counterfeiting of it by the British, and the resulting inflation. But covertly they admired the British System and wanted banking privatized, so they could make money from banking. Robert Morris was a privateer. A Privatized money system allows the laundering of money. He would speculate with investors on land, and lose his shirt when his system collapsed.
The Risks of Privateered Money
Franklin feared making his paper money a national currency due to issues with pushing private debt onto the general public. This fear has been realized with the federal Reserve. The Federal Reserve has regularly nationalized (socialized) the private debt of irresponsible and even criminal bankers, transferring that risk to inflation or risk of economic collapse. The founders and early politicians fought between having a centralized single national bank monopoly or State banks holding State Debts. But both schemas were based on the risk of banking nominally backed by reserves of gold or silver. Both ignored Franklin's ideas. These schemes meant nationalizing private debt and the general economy assuming the risk, sometimes. Or grifting private banks where insiders would abscond as loot, with the reserves and the local bank would shut it's doors unable to pay back depositors. The result of ignoring Franklin (and moderns ignoring Fisher) was a cycle of private debt creation and economic collapse.
Franklin's original scheme was analogous to the scheme Irving Fisher would advance nearly 200 years later, see:
Even so but that early battle was used by privateers to erase that prospect and substitute land based notes with zero interest for private money and money lent into existence. The result was that the money power was privatized and put in the hands of privateers; i.e. bankers.
Then they used these early fights to strip the money power from the Federal Government. The result was so egregious that banksIrving Fisher was a pioneer in modern money theorizing with his Stamp Script Ideas (See: Irving Fisher Post). He seems to have been the first to thoroughly do the math. Hamilton saw "bank paper" (paper money) as a necessary adjunct to coins and said:
"...it may be observed, that the inconvenience of transporting ... is sufficiently great to induce a preference of bank paper..." [Hamilton/Money]
However, if you want to find a classical writer who understood accounting money (debt based paper money) it was Benjamin Franklin. This post is a follow on to: Franklin As a Modern Money Advocate:
Hamilton and his compatriots, especially Governeur and Robert Morris, were enamored about the value of Central Banking British Style. Hamilton admired the Bank of England. Ostensibly because of the way it protected the British Economy and provided investment to the country. He valued Paper money as an expedient. He would monetize the State Debts in order to inflate the economy. This produced both a period of prosperity where the Country could balance its' books and a recession which sent Robert Morris to Debtor Prison and probably contributed to his death.
Even so, Hamilton had liked Franklin's idea at one time. Just Franklin and Hamilton were vetoed by the rest of the founders. But in 1781, Hamilton had said:
"By admitting landed security as a part of the bank stock, while we establish solid funds for the money emitted, we at the same time supply the defect of specie, and we give a strong inducement to moneyed men to advance their money" [Hamilton1781]
If they'd followed Hamilton's 1781 plan successfully (perhaps caught the British counterfeiters), things would have been very different, as one of the reasons for the crash of 1799 and the big war between State versus Federal Banking interests was him not applying Franklin's ideas in the 1790s when they actually implemented a National Bank. Like Irving Fisher the money would have been local, receivable for debts public and private, and harder to counterfeit if locally controlled.
A Stable Economy is a Matter of National Security
Franklin had warned that Parliament, by denying local sovereignty (the principle of subsidiarity) to the Colonists, were defeating their own interest in raising revenues. As Franklin said:
"The Stamp Act says we shall have no commerce, make no exchange of property with each other, neither purchase nor grant, nor recover debts; we shall neither marry nor make our wills, unless we pay such and such sums; and thus it is intended to extort our money from us or ruin us by the consequence of refusing to pay it." [bartleby]
Vacuuming Wealth
We are in an analogous situation between the States and the Federal Government in this day. Because we created the Federal Reserve and separated the public debt of the Several States united from them individually, the States have to borrow money at interest for infrastructure and other purposes. This means that much of the country is starved of wealth and forced to borrow at interest. The objection of the colonies to "taxation without representation" was also an opposition to one way flow of wealth and resources. While Quid Pro Quo relationships are rightly illegal when for Private Separate Advantage, they are necessary to exercise the principles of "commonwealth" and comity. A federation lives on mutual relationships. The fact that the Federal Reserve serves private banking is one reason behind this.
The current system vacuums wealth to central powers.
Federal principles of good government require that money not be vacuumed to a central power. The Tea Acts and Stamp acts were designed to vacuum wealth from the British Colonies. The Tea Act was designed to keep the East India Company solvent by giving it a monopoly on trade with East India (the source of Tea). The Stamp Act was designed to suck up any money the Colonies had, and was coupled with prohibitions on Paper money. If our country had not gotten sovereign power over its money supply we would look like India did after the East India Company was thru with Bengal; destroyed. Our current system isn't fair to anyone. The fact that that sovereign power is privatized to the Federal Reserve means that we are no longer sovereign over our credit money. We need to reassert control over it.
- More on Franklin:
- Franklin As Modern Money Advocate
- http://holtesthoughts.blogspot.com/2015/09/benjamin-franklin-and-paper-money.html
- [bartleby]
- Related Posts:
- https://holtesthoughts.blogspot.com/2017/12/an-ideology-of-piratical-banking.html
- https://holtesthoughts.blogspot.com/2017/07/greshams-law-as-tool-of-regulation.html
This continues a discussion I started a long time ago.
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