Wednesday, August 19, 2009

Andrew Jackson & the Second Bank of the US

One of the things that the Austrian school of economists remark on quite frequently is the interesting relationship that fiat central banking has with financing government through inflation. Most especially, many from the school - probably most notably Murray Rothbard - have pointed towards a disturbing, but incredibly strong link between a central bank and War. As paranoid as that might seem, Rothbard's conclusion is hardly the first time anyone's thought of this before...

For example, when 7th President of the United States, Andrew Jackson made a case for the abolition of the Second Bank (Alexander Hamilton's rather obnoxious yet successful attempt at imposing a debt-based monetary system on the infant nation), some of his primary reasons included:

  1. It concentrates the country's finances in only one institution
  2. It enables foreign banking interests to control the US government
  3. The central bank itself weilds too much control over members of Congress
  4. It favored northeastern states over the southern & western states (of which Jackson was a citizen) - more to the point, the central bank favored investment to industrial interests at the expense of agriculture
  5. It served mainly to make the rich richer
I should note also, that Jackson campaigned (and obviously, won) on these issues. He also believed - rightly - that the central bank was the primary cause of inflation. So... In 1832, he managed to veto the Bank's charter renewal.

For whatever reason, this chunk of history has been widely omitted in most people's education. I have said many times before that I was fortunate to have a few phenomenal history teachers - between my AP US history prof in high school and Dr. Patrice Berger in college, I had an excellent starting point for a lot of this stuff. But look at Jackson's list...

Now think about the Federal Reserve as we have it today.

It does only serve to make the rich richer, it does contribute to inflation (and how!), it does concentrate the finances of the nation into one entity which - when it screws up, it screws EVERYBODY up (see: 2008-2009)... And while I would say that it's no longer an issue of "industrial" vs. "agricultural", the central bank clearly favors bigger and bigger corporations and major players. Part of this is making the "rich richer", of course, but fundamentally the Federal Reserve supports massive behemoth investment banks like Goldman Sachs, at the expense of the American public and the value of the dollar. And as if that weren't bad enough, we are now essentially owned outright by China.

Andrew Jackson is & was 5 for 5. He simply could not have been more right... And that was almost 200 years ago.

You'd think we'd have learned some lessons... But history, it seems, is condemned to repeat itself.

Incidentally - Jackson made a pretty serious mistake in the way he dismantled the Bank, instead of reverting to a gold-backed system, many smaller banks flooded the market with their own fiat currencies which were allowable as legal tender - and as a result, a temporary, but painful monetary inflation occurred, which was eventually reigned in by a return to a gold standard. So, I guess, that's another lesson we need to learn - transitioning back to a sane monetary system will be a bit painful in any case, but the severe problems can be avoided by learning from the mistakes of the past.

Let me restate that... Severe problems can be avoided by learning from the mistakes of the past.

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