Last week the Federal Reserve blessed us with a new $10 bill replete with shades of orange, yellow and red. We all feel great about the enhanced "security" and quality of our "IOU nothing" bills, now don't we?
The portrait of Alexander Hamilton adorns the $10 bill and he wrote in 1781 that public debt is "a national blessing." If only the Republic's first Treasury Secretary could see us now! The national blessing has swollen past $8.2 trillion and keeps on inflating. Treasury Secretary John Snow(job) pleads for a $781 billion increase in the debt limit. Given outsized American waistlines, SUVs, and $70 billion monthly trade deficits, federal debt of $28,000 per person and $112,000 for a family of four seems apt. A Fed survey reports that the average home mortgage is a mere $95,000. On average, interest on the government's flood of IOUs alone cost a 4-person family nearly $5,000 in annual taxes. No wonder two adults work to make ends meet in so many families. As more of the interest goes to foreign hands, little is heard anymore of the soothing rationale about the public debt, "We owe it to ourselves."
The $20 bill carries the portrait of Andrew Jackson but in sharp contrast to Mr. Hamilton's enthusiasm for debt, Jackson was its sworn enemy in accord with the wisdom that "debt is the slavery of the free." Old Hickory warned in 1824 that if "a national debt is considered a national blessing, then we can get on by borrowing. But as I believe it is a national curse, my vow shall be to pay the national debt." Such common sense from a politician sounds strange today. The government debt was $58 million when Jackson won the presidency in 1828 and surpluses paid it down during his second term, the last time that happened. Taxpayers' annual interest cost plunged from $3 million to nothing.
Even more important than public debt to Jackson (17671845) was his hatred of the Bank of the United States, the nation's second experiment with a European-style central bank. Hamilton (17551804), by contrast, was a proponent of central banking and other accoutrements of a "strong" national government. The Bank of the U.S. had caused a huge inflation of money and credit followed by the inevitable bust known as the Panic of 1819. Jackson was appalled by the suffering and dedicated himself to returning the nation to hard money. Fiercely opposed to credit inflation and its evil twin, fractional reserve banking, he pounded a stake through the heart of the insiders' beast by abolishing the Bank after campaigning on the issue in 1832. Not until 1913 did Wall Street and its banking elite sucker Congress into reestablishing central banking privilege, today's beloved "Fed."
The Fed inherited a dollar as good as gold but its mandate about an “elastic currency” predictably led away from the good done by the “barbarous relic” to the evil done by the inherently worthless Federal Reserve Notes we suffer from today, scrip printed in whatever amounts found convenient. Would Hamilton and Old Hickory be equally proud to have their portraits on their respective FRNs? Hamilton could hardly object but Jackson would turn in his grave.
Authentic money of value once made the United States rich, thanks in part to leaders like Andrew Jackson. Back then people owned silver and gold, debt-free money, while we suffer from rocketing debt and distortions caused by an inflationary currency imposed by the ruling class. We pay for everything, value for value in accord with capitalist theory, while insiders get plenty for nothing from the money machine.
Contrary to statist myth, money is not an invention of the state. Money is the most marketable (most "liquid") commodity and it's a natural result of the democratic market process. Only the private market can deliver quality money. Separation of money and state, not "better monetary policies," is the ultimate political goal.
An interesting secret is that we the people are not obliged to use the Fed's paper money. We can lawfully use any money that is mutually agreeable in daily exchange. Silver and gold are real commodity money, although gold is too pricey for most trades. Silver is affordable, at least for now (it just topped $10 an ounce).
March 8, 2006