News & Analysis
Ben and Barry's Inflation Problem
Inflation caused by Bernanke's "Quantitative Easing" may doom Obama's re-election. Here's a political equation that ought to furrow the brows of everybody working to get a second term for President Obama: QE1+QT1=DEFEAT. For those not cursed to be economists, QE1 stands for Quantitative Easing, while QT1 means "Quantitative Tightening. According to Ralph Benko, writing in Forbes, Federal Reserve Board Chairman Ben Bernanke may be about to doom the Obama re-election effort with that equation. – SF Examiner/Forbes
Dominant Social Theme: The president may be doomed by factors beyond his control. It is a kind of Greek tragedy.
Free-Market Analysis: There seems to be no doubt that Barack Obama is obsessed with gaining a second term as president of the United States. But this article (excerpted above) makes some very good points about how monetary policy plays into presidential politics. We will examine them further, below.
Ben Bernanke's monetary stimulation has been pervasive and ongoing; it has also been historically massive. Never before has a central bank dumped US$20-$50 trillion into the marketplace within a two year time-span as the Fed under Bernanke seems to have done. And Bernanke, it should be noted, is not the only one following these policies. Other central banks have been printing as well to ameliorate the lingering effects of the 2008 economic crisis.
The argument of the above article, which first appeared in Forbes, is that sooner or later the money that has been printed and shoved into bank coffers will start to circulate. This will happen when people wish to spend more, thus gradually increasing the velocity of money and allowing banks to lend if they wish to. As banks begin to respond to consumer demand – having rebuilt their own balance sheets – the dollars that are lingering in bank vaults will be injected into the larger economy causing price inflation.
The thrust of the article – the analysis and ultimate conclusion – is that price inflation should begin to peak as the US presidential campaign begins in earnest. At that point the Fed and Bernanke will be faced with several unpalatable alternatives. Either price inflation expands (risking hyperinflation) or the Fed begins to raise rates in earnest, eventually choking off the "recovery" (which always happens as the business cycle turns) and the economy lapses back into recession.
The article acknowledges all this and has the good sense, as well, to point out that slowing monetary velocity (as we have often mentioned) is not a scientific endeavor. Here's the salient quote: "In the grim reality of the world dollar system, this is virtually impossible. Vivek Ranadivé, the smartest guy in Silicon Valley you've never heard of, astutely wrote in 2007, 'If you applied the Federal Reserve approach to ensuring a suitable temperature in your home, you would turn the heater on and off every three months, overheating or under-heating your house.'"
This is not idle speculation anymore. For months, even years, people have been warning that one cannot dump trillions of dollars into the American economy, and the world's, without creating significant price inflation. At the beginning of March, Bloomberg reported that commodities reached a two-year high; cocoa reached a 32-year high (though there are political reasons why cocoa has soared having to do with the current political turmoil in the Ivory Coast).
Cotton prices have climbed "above the price reached during the cotton embargo of the American civil war in the 1860s," the Financial Times reported. And of course the price of oil continues to rise, and will go even higher because of the Japanese nuclear disaster. Commodity price hikes have an impact on price inflation in the broader economy. One is speaking, the article notes, of months, however, not years. By the end of 2011, or certainly sometime in 2012, price inflation will become a major challenge to the Federal Reserve and, thus, eventually, to the administration itself.
Bernanke has given several extraordinary interviews of late in which he has maintained almost defiantly that he is "100 percent" confident that the Fed can reduce liquidity at the appropriate time and do so with the efficiency. This flies in the face of both history and logic. Historically, central banks do NOT do a good job of controlling price inflation. Afraid of ruining the recovery, they tend to be timid which gives rise to even higher prices. Then, afraid suddenly of hyperinflation, central bankers over-react and tend to push the economy back into recession with a series of pre-emptive rate hikes.
This pattern can be seen most clearly in the US itself in the late 1970s. The Fed initially was not aggressive enough with price inflation, which spiked into the double digits. When Paul Volcker took over as Fed Chairman he wasted no time in raising interest rates aggressively while apparently throttling back on money creation itself. The result was an aggressive diminishment of price inflation, but also a terrible recession that came close to bankrupting a slew of Western money-center commercial banks.
This is history; but history in monetary terms is driven by logic of currency manipulation and its inherent difficulty. Logically, central bankers do not have the tools necessary to drain liquidity properly; and this is why they are always doing too little or too much. Central bankers claim that they can figure out the tendencies of an economy by watching various, broad money supply gauges. In reality, of course, such indices are both unreliable and backward looking.
This is the ultimate weakness of central banking. There are NO tools that really provide insight into what the economy is doing in real time. Inevitably, the central banker is looking into the proverbial rear view mirror, responding to what the economy has already done rather than what is actually taking place at the actual moment-in-time. This is also in fact, why central banking price fixing of the value and supply of money (for that is what it is) doesn't work. They know this.
Trying to slow down the economy is ultimately just as distortive as printing money. The difference is that while printing money usually causes a boom, draining velocity inevitably causes a bust – a recession or even a depression. This is why central bankers are much better, or certainly more enthusiastic, about adding money than subtracting it. The latter process has a good deal more political and economic risk involved.
Bernanke has maintained that, "the most important lesson of all is that price stability should be a key objective of monetary policy." But these are just words. Bernanke, despite his bravado, has no more tools at his command than any other central banker. He appears more powerful or at least more certain because he has presided over the single biggest injection of monetary material into an economy that has ever taken place. But creating a historical disaster is not necessarily proof of competence. The ability to create a massive monetary injury does not necessarily add to one's competence.
At some point, there will come a rupture between the Obama administration and Ben Bernanke's monetary regime. Perhaps what is to come has not yet occurred to Obama. But he is a thin-skinned and ambitious man. He no doubt sees a second term as vindication for what he has gone through and the extraordinary vilification to which he has been subject. In other words, it is an emotional issue for him. Likely, he will treat his monetary dilemma in the same fashion.
If this is a correct analysis, then Obama will surely pressure Bernanke (privately if not publicly) to restrain himself and the Fed when it comes to slowing the economy. If he is successful, the economy will move from price inflation to something approaching price hyper-inflation given the vast sums of currency that can potentially circulate. And the more successful he is, ironically, the worse the ultimate disaster will surely be.
Sooner or later, the Fed like all central banks in the face of price inflation will have to tighten. But if Obama puts enough pressure on Bernanke and is able to affect Fed policy then the US must probably face a kind of monetary whiplash. First price inflation will become a serious problem; then as panic sets in monetary tightening will be applied harder than it would have been otherwise and the economy will be constricted and severely damaged. This is the sad tale of the 1970s and there is no reason to believe it will not be repeated.
Obama is fond of saying that elections have consequences. Monetary policy, which is not hypothetical but which is acted on, has consequences, too. There seems no doubt that the US and the world are headed toward a bout of sustained price inflation. The only question is how bad it will be, how much chaos it will cause and how out-of-control it will become. The second question then is how fiercely central banks will react, and how deep a slump will be created as a result.
The betting here is that the second decade of the 2000s will be like the 1970s on steroids. The amount of money that it has taken to reliquify the dollar reserve system is truly unfathomable. People simply have no idea of the sheer magnitude of central banking irresponsibility in this regard. To salvage an unsalvageable system, central banks knowingly created the "mother of all price inflations." Now Bernanke et al. will have to deal with it. And in Bernanke's case, he will have to do so within the middle of an election cycle.
Bernanke actually wanted a second term, probably because he was frightened about what would be revealed if he stepped away from the helm. Also, having in large part created the problem, he no doubt believes he is in the best position to fix it, or at least ameliorate the worst of the excesses. It is obviously a delicate balancing act; though one could speculate (and we have) that Bernanke et al. are purposefully trying to destabilize the dollar reserve currency to generate conditions more sympathetic to a (non dollar) global currency, perhaps the IMF's SDRs.
We would venture to say that a tipping point may be closer than mainstream media commentators tend to believe. If the system dissolves before other arrangements can be made, then the money masters will effectively lose control and the global game will collapse. In such a case, it is perfectly possible, as we have argued on many occasions, that the world or at least the West might in some fashion default to a market-based gold and silver standard along with free banking.
Conclusion: What is also clear, however, is that if chaos does overwhelm the current system and people truly lose faith, then Bernanke will likely come to regret that he campaigned so hard for a second term. He will surely become a most vilified individual, along with entire central banking priesthood. Obama will not regret a second term, as he probably will not have one.
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Posted by Wayne on 03/22/11 06:06 AM
@Ingo,
You believe in government. We know know that government cannot be restrained over the long run, and the Founding Fathers made that point clearly.
It's belief in government that destroyed America.
I cannot control another persons beliefs, nor would I want to.
I just wish to be free of the negative consequences of their bad decisions. I wish all would make correct decisions that lead to their success provided it is achieved through voluntary exchange.
That is what improves this world.
Government represent nothing more than a mechanism to transfer the negative effects of their supporters failures to the other group (the non-supporters of the regime). That is how most governments get support.
They rob Peter to pay Paul.
It's their design, and their nature.
There is only one government at this time that actually protects the individual from the cost of subsidizing the stupidity of others. And even they are less than a perfect example. Switzerland
Costa Rica is a distant 2nd place.
Personally, I would rather trust the past Sergeant of Arms of the Mongol biker club than any politician/bureaucrat/economist.
The past Sergeant of Arms is Jesse Ventura.
I guarantee you that no Gold would disappear on his watch.
Hell, I would sooner trust Genghis Khan rather than Greenspan, Bernake, or Geithner!
Government is oversold, and under performs regarding protecting it's citizens. Now when it comes to plundering it's citizens, it has no equal.
Al Capone would stand in awe at the theft that the politicians have pulled off. And the voters want more government. Talk about Masochists.
You may not want a dictator, but government is just another name for Dictator. Changing the name does not change the fact of it's true nature.
I do not know what is going to happen next, but I do know "Pain is in the Forecast". And I plan to stay out of direct path of the carnage.
Free men have no place in modern society, and we know it.
We don't sacrifice for the approval of the mob.
Ingo, I suggest that you read or reread Atlas Shrugged and the Fountainhead. It's time to disappear. Pick a good Gulag, and pick a hut with a view before they are filed up. Bring some Gold to bribe the moronic thug who is in charge.
I suspect that you are tilting at windmills here. Once lost, freedom does not return until that machine/beast/empire completely fails. The old USSR is a case in point.
The new Russia has low tax rates, and encourages Click to view link's as if the old Soviet machine merely moved to Washington DC. And that is scary!
So you see, I have nothing personally against you. You are just on the wrong team in my view. You can't change the spots on a leopard.
I think you actually believe that bureaucrats at the state level are any different that bureaucrats at the federal level. State control is still government control.
I want nothing to do with any government in control of printing/minting/regulating anything that I need. I have seen where that goes.
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Posted by Ingo Bischoff on 03/21/11 10:07 PM
@ Wayne
"I stand with Benjamin Franklin on this, as this is the American ethic. "They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." -Benjamin Franklin
And you want to give permanent power to the State!"
Wayne,
Stop imputing things to me that I would never intent nor voice. You and anybody else who reads what I write here should know that I am not an anarchist. That does not mean that I am for dictorship. So stop implying it.
Go watch the link I gave you. It expresses how I think about government.
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Posted by Wayne on 03/21/11 06:51 AM
@Ingo
I stand with Benjamin Franklin on this, as this is the American ethic. "They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." -Benjamin Franklin
And you want to give permanent power to the State!
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Posted by Wayne on 03/21/11 06:31 AM
@Ingo
"When someone advocates a power/control system, you can bet that they see a place in that power structure for them. They would never advocate a system they think they would be the slaves/victims in."
When have you heard me advocate power and control over other people? That's all you are doing when you are pro State! Why don't you just leave the criminal class as private citizens where the amount of damage they can cause is localized.
To create a State is to make Gods out of many people with demonstrated criminal tendencies. No, thank you. I am a Free man by nature and breeding. But you obviously yearn to serve, and wear the chains of servitude. Otherwise you would not hold this anti-anarchist (free man) position.
So be it!
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Posted by Ingo Bischoff on 03/20/11 11:40 PM
@ Wayne
"When someone advocates a power/control system, you can bet that they see a place in that power structure for them. They would never advocate a system they think they would be the slaves/victims in."
When have you heard me advocate power and control over other people?
I don't like to post links to make my points, but this maybe helpful to you to get an understanding of how I see the function of government.
Click to view link
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Posted by Wayne on 03/20/11 03:32 AM
Even Fox News knows that it's time to send the non-producers a message
Click to view link
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Posted by Wayne on 03/20/11 03:01 AM
@Ingo
This says it more c;early than anything else I have ever read/heard about the state/government
Read My enemy, the State by Albert Jay Nock see link
Click to view link
Ingo, you will no audience for your government among productive, functioning individuals . And the others are of no interest to the producers of the world.
Who is John Galt?
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Posted by Wayne on 03/19/11 09:29 PM
@Ingo
"To claim that because the Original Constitution deliberately failed to ban the Federal government from issuing irremediable currency does not follow. Only totalitarian states lists all permitted actions. You are saying that a failure to deny a power is granting that power to the government. Joseph Stalin would be proud of you!"
Why did I say this. Because you want to either want to rule, or be one who assists in ruling!
What is the basis for that statement?
Ayn Rand explained this clearly.
When someone advocates a power/control system, you can bet that they see a place in that power structure for them. They would never advocate a system they think they would be the slaves/victims in.
Self interest is always the motivating force here.
You renounce anarchism without explaining that anarchism is merely the absence of murderous ruling tyrants, and their coterie of thugs.
There is nothing government does other than what people do.
How can your government protect anyone from the actions of other people?
Can it defend me from physical attacks? No!
Can it prevent thieves from stealing from me? No!
Can it prevent me from my mortality? No?
Can it prevent deception and fraud? No?
Can it give me the experience and skills necessary to a be a free man? No!
All I see at this moment is an entire nation being treated as criminals just for daring to fly on government controlled airlines
while being ripped off by one of the greatest financial scams in all history!
That is what your belief system (government) really means!
Should you claim that this is just an "unintended consequence", or a mere aberration, then you lack the knowledge of the
Founding Fathers.
Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master.
George Washington
The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in government. Thomas Jefferson
There is danger from all men. The only maxim of a free government ought to be to trust no man living with power to endanger the public liberty.
[info][add][mail]
John Adams, Journal, 1772
So we see that the Founding Fathers were anarchists by nature.
Your belief in government is your business, but may you wear the chains of your servitude lightly, because governments will always place us into servitude (for our own good).
"If I knew for a certainty that a man was coming to my house with the conscious design of doing me good, I should run for my life."
Henry David Thoreau
Government is neither a magical totem, nor the Good Witch of the West, but an excuse to steal, murder, and control.
This malevolent force called government is what you are promulgating! Joseph Stalin would have loved to have a person like you for one of his slaves.
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Posted by Ingo Bischoff on 03/19/11 11:20 AM
@ Wayne
"Ingo, why do you so fervently believe in (trust) government?"
I am not an anarchist. There is a legitamite reason to have government. It is necessitated by the lack of instincts for humans to survive peasefully in a terrestrial environment.
The question is not, "whether government", but "how much government". The original U.S. Constitutions suits me just fine. Get rid of the "unconstitutional" constitutional 16th and 17th Amendments, and the competition between the states will bring the amount of government to its lowest level necessary.
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Posted by Ingo Bischoff on 03/19/11 11:11 AM
@ Wayne
"To claim that because the Original Constitution deliberately failed to ban the Federal government from issuing irremediable currency does not follow. Only totalitarian states lists all permitted actions. You are saying that a failure to deny a power is granting that power to the government. Joseph Stalin would be proud of you!"
Sometimes, I am really puzzled by your response. Please analyze the couple of sentences you wrote. Talk about irrational.....
Sorry, I had to point it out to you.....
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Posted by Wayne on 03/18/11 11:48 PM
@Bless
"I think going back to the gold and silver standard is a definite possibility. I think that's why there are so many gold-buying companies out there, they must be thinking the same thing.'
Perhaps they are the historical definition of value?
It might be a delusion to think that they have been replaced due to the misdirect by legal tender. Without the force of law, legal tender would probably be a source of confetti for celebrations!
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Posted by Bless on 03/18/11 07:20 PM
I think going back to the gold and silver standard is a definite possibility. I think that's why there are so many gold-buying companies out there, they must be thinking the same thing.
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Posted by Wayne on 03/18/11 04:36 PM
@Ingo,
"The founders on purpose failed to specifically prohibit the federal government from issuing irredeemable currency. They wanted to leave the federal government with the opportunity to tax the people for war costs through inflation. By temporary charter of a central bank issuing an irredeemable currency in limited quantities as set by the Congress, the federal government should have the opportunity to meet war debts. The founders were comfortable with that idea, because they knew that the states would never let central banking get out of hand. They failed to consider that the states (or their people) could be stupid enough to ratify a 16th and 17th Amendment, thereby giving up the voices of state governments in the running of the federal government."
This is irrational!
To claim that because the Original Constitution deliberately failed to ban the Federal government from issuing irremediable currency does not follow. Only totalitarian states lists all permitted actions. You are saying that a failure to deny a power is granting that power to the government. Joseph Stalin would be proud of you!
You also say that the founders failed to consider that the people (or their States) would be stupid enough to ratify the 16th and 17th Amendments.
This places one in the position of needing some magical proprieties to be be able to determine when not banning something was deliberate, and when it was just a failure.
That perfectly describes the other arm of Leviathan, the Courts.
Do you believe that the US Supreme Court is made up of Uberminds?
That is the claim of the government, after they have stacked the Court with their flunkies, in the style of FDR.
Ingo, why do you so fervently believe in (trust) government?
History tells us that it's always proved to be a gang of thugs. Perhaps not in the inception stages, but later the thugs always show up.
It's almost a law of nature.
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Posted by Memehunter on 03/18/11 03:14 PM
Thanks Ingo Bischoff and DB for taking the time to write down your views on this topic. I found this exchange very instructive.
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Posted by Ingo Bischoff on 03/18/11 01:55 PM
@ DB
We do have different views as regards a temporary use of central banking in lieu of direct taxation. We differ somewhat on the personality and motivations of Alexander Hamilton, as well as on a variety of other subjects......
To disagree is a very healthy thing. People who will read this thread will form their own opinion from our dialog.
I believe that it is partly the passionate exchange of different views in this forum which accounts for the increasing readership of The Daily Bell.
For providing this forum, I am extremely grateful to Toni, the DB Staff and FAFMT.
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Posted by Ingo Bischoff on 03/18/11 12:56 PM
@ DB
"Hamilton's elitist views and real purpose for wanting Central Banking came to light, when he wrote: "All communities divide themselves into the few and the many. The first are rich and well-born, the other the mass of the people. The people are turbulent and changing; they seldom judge or determine right."
I have no disagreement with you that Hamiltion held an elitist view. I do not believe in this sort of elitism to justify an attempt to run the "world". However, in establishing the U.S. Treasury and urging the first central bank, Hamilton did the U.S. a favor.
Was he a god? Not in my book. Was he smart? There is no doubt on my part that he was. Would I liked to have seen him be President. Not on my life.
However, I do give credit where credit is due, and in the establishment of the U.S. Treasury and the U.S. Custom Service, Hamilton does deserve credit.
Also, as an aside, Hamilton never, ever owned a slave. When he was given one as a present, he set him free. Maybe the jewish education caused him to feel that way. Just a thought.
Reply from The Daily Bell
Ingo ... the chartering of a central bank, the creation of a US Custom Service, the establishment of the Treasury - you see these somehow as positives, even as admirable achievements. We have a fundamental disagreement here. We do not believe that monetary facilities of the state work well, or even work at all. They are mostly, ultimately destructive.
We would rather see money DIVORCED from the state. We would rather the government was starved than had an operative Treasury. We would rather private interests worked out imports and exports than a customs service. The colonies managed quite well for several hundred years without the European superstructure that Hamilton foisted on it. An agrarian, Thomas Jefferson much disliked Hamilton's point of view; and when Hamilton's life is examined he benefited much from the European systems that he attempted to graft onto the US.
There is every reason to believe he might have been an agent of the European banks (or the Rothschilds themselves) just based on the pattern of his life, his enrichments, the people he did business with and his belief system. It is all very convenient. And there is plenty of evidence, circumstantial at least, to promote this view.
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Posted by Ingo Bischoff on 03/18/11 11:41 AM
@ Wayne
"As I read these comments, there is something so obvious here that it is scary. After every war, we (the US) always seemed to have this need for a Central Bank, or at least the cry for one to pay off the debts!"
The founders on purpose failed to specifically prohibit the federal government from issuing irredeemable currency. They wanted to leave the federal government with the opportunity to tax the people for war costs through inflation. By temporary charter of a central bank issuing an irredeemable currency in limited quantities as set by the Congress, the federal government should have the opportunity to meet war debts. The founders were comfortable with that idea, because they knew that the states would never let central banking get out of hand. They failed to consider that the states (or their people) could be stupid enough to ratify a 16th and 17th Amendment, thereby giving up the voices of state governments in the running of the federal government.
If you want to be scared, be scared about the kind of people who will ratify a 16th and 17th Amendment. The country today is full of those kind of people.
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Posted by Ingo Bischoff on 03/18/11 11:19 AM
@ DB
Was Alexander Hamilton an Anglophone? Yes, without a question he loved British culture and institutions. His advocacy for the creation of the first central bank lay in the fact that he saw an ability to establish credit for the U.S. worldwide by paying the debts incurred in the War of Independence. That he looked at the British crown's central banking system, is no surprise. Hamilton intended for the U.S. to fight the British by ruining their credit standing instead of defeating them militarily. Rather than being in bed with the Rothschilds, he in essence fought the central banker to the British crown.
This misperception about Hamilton being an agent of the House of Rothschild is so much bunk. If people are given a good conspiratorial theory, they lap it up.
"JP Morgan " his father too " were supposedly agents of the Rothschilds. Morgan supposedly controlled up to 30 or 40 percent of the working capital of the entire US at some point in his Machiavellian career."
JP's father has sent Pierpont to Europe to study banking in England, Germany and Austria. That he should have had contact with people from the Rothschild banks does not surprise me. The different redeemable currencies in the U.S. and the tremendous growth in banking after the end of the Civil War created difficulties in the nation as a whole for which there was no governmental institution to deal with it. J.P. Morgan was the one who tried to herd the cats that were the collection of state chartered banks. His reputation as fierce and ruthless made a lot of bankers fall in line with J.P.'s decisions. Did he have control over banks and businesses, yes. Was J.P. Moran rich? Absolutely not. When he died and his estate was settled, people simply could not believe how little he owned compared to the very power he exercised in the banking circles and the business community.
There is much more of your view of history that differ with mine, but readers of this thread are capable to discern the differences without me having to point them up again.
Reply from The Daily Bell
"This misperception about Hamilton being an agent of the House of Rothschild is so much bunk."
Really? Here from the Jewish Press, America's largest independent Jewish Weekly: "The Jews of Nevis and Alexander Hamilton."
By the late seventeenth century this Jewish community was an established enclave complete with the communal necessities of a cemetery, a synagogue and a Jewish school.
"It is unclear if the school was in the synagogue or in a separate building. Curiously enough, we know of the existence of a Jewish school through some of the biographies of Alexander Hamilton, born in Nevis. Hamilton's mother, Rachel Faucett, after her separation from her Danish-Jewish husband John Michal Lavien, cohabited with a Scotsman, James Hamilton, in Nevis and gave birth to Alexander. 'The Anglican Church could not offer full acceptance of the situation... (and) denied Alexander membership or education in the church school. He was enrolled in a private school on Nevis taught by a Jewish head mistress and ... soon was fluent in Hebrew and French.'"[v]
... "Perhaps from this exposure at an impressionable age, Hamilton harbored a lifelong reverence for Jews. .... In the heat of a renowned legal case, Hamilton challenged the opposing counsel: 'Why distrust the evidence of the Jews? Discredit them and you destroy the Christian religion....' "
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From Wikipedia: "The first institution with responsibilities of a central bank in the U.S. was the First Bank of the United States, chartered in 1791 by Alexander Hamilton. Its charter was not renewed in 1811."
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Hamilton on European banks in a letter to Robert Morris:
"If the leading principles are once approved, we shall find good models in the different European banks, which we can accommodate to our circumstances. Great care, in particular, should be employed to guard against counterfeits ; and, I think, methods may be devised that will be effectual."
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A more speculative history of Alexander Hamilton via the Click to view link.
Click to view link
The First Bank of the United States (1791-1811)
Alexander Hamilton, an Illuminist and agent of European bankers, had immigrated to the colonies in 1772 from the British colony of Nevis on the Leeward Islands in the British West Indies. He married the daughter of Gen. Philip Schuyler, one of the most influential families of New York. In 1789 he was appointed Secretary of the Treasury [by Washington]. Hamilton and Robert Morris successfully convinced the new Congress not to take this power literally, enabling the Bank of North America to be established in 1781 which was similar to the Bank of England. At the time, America had a foreign debt of $12,000 (in money borrowed from Spain, France, Holland, and private interests in Germany) and a domestic debt of $42,000.
In 1790, Hamilton who favored Central Banking urged the Congress to charter a privately owned company to have the sole responsibility of issuing currency in order to handle the country's financial situation. His plan called for Congress to create a Central Banking system with a main office in Philadelphia and smaller branches located in important cities throughout the country. It would be used to deposit government funds and tax collections and to issue bank notes to increase the money supply needed to finance the country's growth. This Bank of the United States would have a capital stock plan of $10 million, with 4/5's (80%) to be owned by private investors and 1/5 (20%) by the U.S. Government. It would be administered by a President and a 25 member Board of Directors, with 20 to be elected by the stockholders and 5 appointed by the government.
Central banking was initiated by international banker William Paterson in 1691 when he obtained the Charter for the Bank of England which put the control of England's money in a privately owned company which had the right to issue notes payable on demand against the security of bank loans to the crown. One of their first transactions was to loan 1.2 million pounds at 8% interest to William of Orange to help the King pay the cost of his war with Louis XIV of France. Paterson said: "The bank hath benefit of interest on all monies which it creates out of nothing." Reginald McKenna, British Chancellor of the Exchequer (or Treasury), said 230 years later:
"The banks can and do create money ... And they who control the credit of the nation direct the policy of governments and hold in the hollow of their hands the destiny of the people."
Hamilton's elitist views and real purpose for wanting Central Banking came to light, when he wrote: "All communities divide themselves into the few and the many. The first are rich and well-born, the other the mass of the people. The people are turbulent and changing; they seldom judge or determine right."
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Mises Institute:
Court historians have long praised the glories of Alexander Hamilton as the greatest of the founding fathers. This view is back in vogue as U.S. economic policy becomes ever more statist ...
Hamilton was the master of the political lie. He used his rhetorical powers and elite connections to invent the myth of the Constitution's 'implied powers. He established the imperial presidency. He devised a national banking system that imposes boom-and-bust cycles on the American economy. He saddled Americans with a massive national debt and oppressive taxation. He pushed economic policies that lined the pockets of the wealthy and created a government system built on graft, spoils, and patronage. He transformed state governments from Jeffersonian bulwarks of liberty to beggars for federal crumbs ...
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"Was JP Morgan rich, absolutely not."
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John Pierpont (J.P.) Morgan was born in Hartford, Connecticut on April 17, 1837. His father, Junius Spencer Morgan, was a prosperous financier, with holdings in America and Europe, who taught his son from an early age how to manage the family assets that he (J.P.) would someday inherit. J.P. was a willing student ...
As J.P. Morgan's fortune grew, he continued to make investments and acquisitions. He funded Thomas Edison throughout the 1870's and 1880's, and laid the financial foundation for Edison Electric Company. When many small companies and railroads ran into tough times after the Civil War, Morgan saw opportunities and acquired those with potential. By the mid 1880's, he had significant railroad holdings, and owned some 5,000 miles of rail by 1900. He consolidated and restructured many of his rail companies, bringing his own regulations and standards to an industry that the government had failed to regulate. Morgan's rail holdings included the New York Central, New Haven and Hartford, Lehigh Valley, Pennsylvania, Reading, Erie, Southern, Chesapeake and Ohio, and the Northern Pacific systems. The rails and trains, of course, required huge quantities of steel. Knowing this, Morgan founded and acquired huge steel-making operations, in effect owning the steel operations that supplied his rail companies with their steel. In 1901 he established the U.S. Steel Company by merging Carnegie Steel Works and several other steel companies into the dominant steel producer in the country.
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Posted by Chris F on 03/18/11 11:08 AM
One of the problems of establishing a One World Currency (other than the dollar) is that the central bankers will need near absolute control over commodities because people who are concerned about preserving their wealth will flee into those pesky commodities, gold, silver and real goods.
This is why we're not going to see a One World Currency, even now we're seeing them struggle to suppress the price of gold and silver. Soon, they won't be able to manipulate the price of gold and silver at all. The One World Currency idea is a pipe dream for fools only.
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