Thursday, June 4, 2009
But - according to Benjamin Franklin and others in the thick of the action - a little-known factor was actually the main reason for the revolution.
To give some background on the issue, when Benjamin Franklin went to London in 1764, this is what he observed:
When he arrived, he was surprised to find rampant unemployment and poverty among the British working classes… Franklin was then asked how the American colonies managed to collect enough money to support their poor houses. He reportedly replied:
“We have no poor houses in the Colonies; and if we had some, there would be nobody to put in them, since there is, in the Colonies, not a single unemployed person, neither beggars nor tramps.”
In 1764, the Bank of England used its influence on Parliament to get a Currency Act passed that made it illegal for any of the colonies to print their own money. The colonists were forced to pay all future taxes to Britain in silver or gold. Anyone lacking in those precious metals had to borrow them at interest from the banks.
Only a year later, Franklin said, the streets of the colonies were filled with unemployed beggars, just as they were in England. The money supply had suddenly been reduced by half, leaving insufficient funds to pay for the goods and services these workers could have provided. He maintained that it was "the poverty caused by the bad influence of the English bankers on the Parliament which has caused in the colonies hatred of the English and . . . the Revolutionary War." This, he said, was the real reason for the Revolution: "the colonies would gladly have borne the little tax on tea and other matters had it not been that England took away from the colonies their money, which created unemployment and dissatisfaction."
(for more on the Currency Act, see this.)
Alexander Hamilton echoed similar sentiments:
Alexander Hamilton, the nation's first treasury secretary, said that paper money had composed three-fourths of the total money supply before the American Revolution. When the colonists could not issue their own currency, the money supply had suddenly shrunk, leaving widespread unemployment, hunger and poverty in its wake. Unlike the Great Depression of the 1930s, people in the 1770s were keenly aware of who was responsible for their distress.
As historian Alexander Del Mar wrote in 1895:
[T]he creation and circulation of bills of credit by revolutionary assemblies...coming as they did upon the heels of the strenuous efforts made by the Crown to suppress paper money in America [were] acts of defiance so contemptuous and insulting to the Crown that forgiveness was thereafter impossible . . . [T]here was but one course for the crown to pursue and that was to suppress and punish these acts of rebellion...Thus the Bills of Credit of this era, which ignorance and prejudice have attempted to belittle into the mere instruments of a reckless financial policy were really the standards of the Revolution. they were more than this: they were the Revolution itself!And British historian John Twells said the same thing:
The British Parliament took away from America its representative money, forbade any further issue of bills of credit, these bills ceasing to be legal tender, and ordered that all taxes should be paid in coins ... Ruin took place in these once flourishing Colonies . . . discontent became desperation, and reached a point . . . when human nature rises up and asserts itself.In fact, the Americans ignored the British ban on American currency, and:
"Succeeded in financing a war against a major power, with virtually no 'hard' currency of their own, without taxing the people."
Indeed, the first act of the New Continental Congress was to issue its own paper scrip, popularly called the Continental.
Franklin and Thomas Paine later praised the local currency as a "corner stone" of the Revolution. And Franklin consistently wrote that the American ability to create its own credit led to prosperity, as it allowed the creation of ample credit, with low interest rates to borrowers, and no interest to pay to private or foreign bankers .
Is this just ancient history?
The ability for America and the 50 states to create its own credit has largely been lost to private bankers. The lion's share of new credit creation is done by private banks, so - instead of being able to itself create money without owing interest - the government owes unfathomable trillions in interest to private banks.
America may have won the Revolutionary War, but it has since lost one of the main things it fought for: the freedom to create its own credit instead of having to beg for credit from private banks at a usurious cost.
As economic writer and attorney Ellen Brown has tried to teach to Obama, Schwarzenegger, and anyone else who will listen, the way out of the economic crisis is to stop paying interest to private banks for the creation of credit, and to return to the system of government-issued credit used by the Founding Fathers to create prosperity for the people and to gain independence from their oppressors.
And see this.
Postscript: The Smithsonian gives an interesting description of the origin of America's monetary program:
Unlike the Spanish colonists to the south, the English settlers of our original thirteen colonies found no gold or silver among the riches of their new land. Neither did they receive great supplies of gold and silver coins from Britain - money was supposed to move the other way, to the mother country, in exchange for goods. The monetary system in the colonies was "notable because it was based on thin air," says Smithsonian numismatics curator Richard Doty in his book America’s Money, America’s Story. To make up for the lack of currency, the colonists would "replicate and create, try, reject, and redesign every monetary form ever invented anywhere else."Necessity is often the "mother of invention". Whether or not the monetary system was created out of trial and error and scarcity-based necessity, it was a very productive system.
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