A Convention of Superpowers
In President Jackson’s farewell address in 1837, he looked ahead to the next great challenge of American history, saying:
Have designs already been formed to sever the union? This great and glorious republic would soon be broken into a multitude of petty states, without commerce, without credit, loaded with taxes to pay armies, trampled upon by the nations of Europe.
In the 25 years since Jackson killed the bank, America expanded westwards relentlessly, growing rapidly in this period, and the suggestion is that the principal bankers didn’t feel they had their allegedly desired grip on events
In 1844, across the Atlantic, Britain passed the Bank Charter Act, which was a move by Prime Minister Peel to take back governmental control of the money supply, but crucially the Act covered only the creation of paper bank notes and ignored all other substitutes for money, loans and bank deposits. This gave banks the ability to create money just by accounting, which would have far-reaching effects, and would lead eventually to 97% of all money in Britain today existing as electronic bank deposits, as explained here. (more anon)
Back in the USA, in 1861 Lincoln made his way furtively to his inauguration evading a feared assassination attempt, and within a month was embroiled in the American Civil War and the possible break-up of the Union.
There’s a lot of entangled history going on here along with, of course, the ending of slavery in the United States. Lincoln’s speeches make clear that the Civil War was about saving the Union. We’re concerned here with questions of money and banking, and this gets difficult.
Many researchers and reformers see great significance in the events around Lincoln and the Civil War, A lot of people angry with banking see shoots of freedom in Lincoln’s greenbacks; initially we found the story was muddy.
We found Lincoln an elusive figure in terms of what he really thought about banking and money and what his intentions were. One of the problems with this part of history is that Lincoln, like Jefferson, is so very quotable, put so many things in such memorable ways, that it seems to have become fair game over the years to attribute pithy quotes to them. Ronald Reagan, among many others, has innocently misquoted Lincoln. Lincoln’s body was scarcely cold before coiling mists of mythology began to weave around him.
In particular, Lincoln has many quotes about the money power falsely attributed to him. A few of the juiciest money quotes of Lincoln’s that go around come from a 1935 summary and interpretation of Lincoln’s policies by Canadian progressive politician, Gerald McGeer, (about whom more in a while) and none of these words are Lincoln’s. One piece of McGeer’s summary is:
The government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the government and the buying power of consumers. The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government's greatest creative opportunity. By the adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest, discounts and exchanges. The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government. Money will cease to be the master and become the servant of humanity. Democracy will rise superior to the money power.
Then again, others suggest that it’s genuine and comes from Senate document 23, of 1865. It was quoted in The Grip of Death: a study of modern money, debt slavery and destructive economies" by Michael Rowbotham, 1998. We gave up trying to find Senate document 23 of 1865, time is short. Probably McGeer.
Amongst all the history we were skimming, films we were watching, we became familiar with a popular narrative about the Lincoln presidency. From a skim of the surface, it can be seen that there’s a lot of history that would need deep examination, to the degree that that’s even possible. It all really gave us a feeling that there’s definitely something in this, or there definitely isn’t, or maybe it’s definitely partly true but for some other reason.
When Marc Bolan and T.Rex sang in Rip-Off, that the President’s weird, he’s got a burgundy beard! Marc was surely seeing the US postage stamp with President Lincoln on it, and one of our number had that stamp in his album as well.
President Lincoln had a lot on his hands. European central bankers had loaned Napoleon III the money to seize Mexico, and soon the French had an army stood along the southern border of the United States. To the north, Britain moved 11,000 troops into Canada and stationed them on the USA’s northern border. The way some will have it, it was the the Bank of France’s army to the south and the Bank of England’s army to the north, seeking to prize the Confederate part of America from the Union and gobble up this impertinent American freedom.
At the end of 1861, fleets from France, Britain and Spain appeared at Veracruz in Mexico. These fleets were effectively bailiffs, following the Mexican President’s refusal to make interest payments to foreign countries. These were historical novelties to us, that the French, British and Spanish fleets were in a joint action rather than fighting each other, and their joint action was as debt-collectors against a rogue state that was defying the rules. And the United States could be another state threatening to make a bid for freedom from the bankers’ interest game.
The Civil War was not concluded quickly and, as the story is related, Lincoln desperately needed money to maintain the war effort. It’s widely reported that, in 1861, he sought loans from major banks in New York and was quoted a 36% interest rate. The European central bankers, the same sources financing the French and, ultimately, the British, armies, quoted him 24-36% interest rates. Whatever happened, America would have staggered under a huge debt for ages. Enemies on all sides? Or actually different heads of the same enemy?
But others point out that Senator Chandler is quoted as saying in the Greenbacks Debate in the Senate in 1862.
I simply wish to say to the chairman of the Committee on Finance [Mr. Fessenden] that any merchant in the United States with good securities can to-day borrow $1,000,000 at six per cent. I can, with good securities; and so can my friend from Maine.
Anyway, the story then has Lincoln, desperate for money to finance the war, and in a quandary at what to do, gaining a flash of inspiration from his friend, Colonel Dick. Dick suggests to the President that the government should issue currency directly, backed only by the honour of the American government. It does seem absurd that Lincoln needed Colonel Dick to suggest this, since such practice had been a seminal part of America’s short history, and it seems to be the case that the issuing of interest-free notes by the Treasury at this time was a routine practice. Indeed, it’s pointed out that just six months previously Lincoln had signed two acts which authorised the Treasury to do just this, print money.
Anyway, original genius or not, so it was, between 1862 and 1865, Lincoln’s government printed $450 million in Greenbacks, interest-free, debt-free money and the Greenback legend was born. Some of these greenbacks remained in circulation in America until only a few years ago. The troops were paid, the war effort was sustained at zero interest for the federal government. According to accounts, the greenbacks sparked lively economic enterprise in the North.
Much less famous than the Greenbacks, naturally, are the Greybacks (not Graybacks) which were issued by the Confederate States, believed by some to have been backed by cotton and tobacco, but actually backed just by a promise to pay once the war had been won. It seems like the recourse of doing this wasn’t only Colonel Dick’s idea. The Greybacks sometimes featured scenes from slavery and are a rare collector’s item now.
The Russian fleet in New York Harbor
The Union had at least one friend, it seems: Russia.
What to a non-historian now seems a remarkable curiosity is that, in 1863, Russia sent two squadrons to America in support of the northern Unionists against the southern Confederates, docking their Atlantic squadron in New York and their Pacific squadron in San Francisco. They stayed for a year, navigating up and down the coasts, assisting in the blockade of the South. The USA later expressed gratitude for Russia’s support in this grand gathering of superpowers around America, come to attend at the birth of a new age for the USA.
A reading of this act is that Czar Alexander II, Alexander the Liberator, who had refused to let international money dealers set up a central bank in Russia, saw America as an ally in this global game of financial power and entrapment; America’s survival and evasion of the grasp of the money power made Russia more secure. Perhaps these nations might have formed a great alliance at this time, among the many twists and turns of history, a bulwark against central bankism. Is this what all of history’s struggles have been? It’s hard to completely discount.
Through 63 and 64 the war dragged on, and Congressional approval was needed to print more Greenbacks. The claim is that bankers used their power and influence to force through the National Banking Acts of 1863 and 64, passed in the Senate in 1863 on a slim 23-21 vote. The aim of the Act was to create a single national currency, and established national banks that could issue notes which were backed by the United States Treasury, and started to establish a national banking system.
The claim is that all this was forced on Lincoln and that he had to swallow it for now. There’s plenty of suggestion, though, that Lincoln had for a long time been promoting the idea of a privately-owned central bank, the hydra that Andrew Jackson slayed.
The new national banks between them had the exclusive monopoly power to print bank notes, and from this point on, the money supply for the USA would be created from debt by bankers using US government bonds as reserves to print money. A number of interest-free greenbacks continued to circulate (despite later acts to call them in), but most of the US currency would now carry a hidden tax collected by the bank, in that people’s money is created out of a national debt which is theirs to pay.
Economist JK Galbraith said:
In numerous years following the War, the Federal Government ran a heavy surplus. It could not, however, pay off its debts, retire its securities, because to do so meant there would be no bonds to back the national banknotes. To pay off the debt was to destroy the money supply.
And this is the design we all live under today, the national debt is perpetual, it can’t ever be paid. The very currency is our own indebtedness. This is what we’ve come to contemplate.