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The U.S. Constitution: Tool of Centralization and Debt, 1788-Todayby Gary North Recently by Gary North: Insider Trading: A Bum Rap
On a conservative site last week, the editor wrote this:
Having said this, he went on to a conclusion:
When we begin with a myth, we have a tendency to expect miracles. Let me explain. The Constitution was established in order to strengthen the powers of the Federal government. It strengthened them vastly beyond what the British had attempted to impose on the colonies in the early 1770s. Before the American Revolution, the British level of taxation was in the range of 1%. There were sales taxes on imported goods, but most people, then as now, bought domestically produced goods. There were taxes on paper after 1765. This affected mainly lawyers and newspaper publishers. By alienating these two influential groups, the Parliament stirred up a hornets' nest. When professional talkers and writers get squeezed by the government, the public gets an earful. "The end of liberty is nigh!" On the contrary, the end of a debt-free colonial governments was drawing nigh. Revolutions must be financed. They are always financed with debt and fiat money. Creditors buy the IOUs with good money, then weaker money, and then – at the end of the revolt – worthless money. Then they have a supreme political goal: to get the new government to pay off the worthless IOUs at face value in gold or silver. In the 1780s, it was silver. The Constitution was deliberately designed to centralize power vastly beyond what the legitimate constitution – the Articles of Confederation – allowed. The Federal government in 1787 was weak. In 1788, it was vastly stronger. The newly created Federal government immediately did two things. It accepted responsibility to pay off state debts. This was Alexander Hamilton's proposal. He proposed it specifically to centralize the government by granting enormous profits to the investment class that had bought state debts for practically nothing. The Wikipedia article on this consolidation of Federal debt is accurate in its discussion of Hamilton's motives.
Hamilton's statements at the time were quite frank about all this. When Madison and Jefferson opposed the plan, Hamilton bought them off by promising to support the swamp today known as Washington D.C. as the nation's Capitol. This was done at a private dinner with only the three in attendance. Jefferson later wrote about it.
April 4, 2011 Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible. Copyright © 2011 Gary North
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Hamilton's
Report supported ideas of war debt assumption, redemption of Confederate
securities at face value, and funding of new national securities
as a permanent national debt. Hamilton reasoned that creating
a large financial structure, which wealthy citizens would support
and belong to, would enhance the revenue and fiscal system of
the national government and bring prosperity to the Federal government.
He also reckoned that failure to establish the creditworthiness
of the Federal government would weaken the United States, and
called a permanent, reasonably-sized public debt "the powerful
cement of our Union."