The Colonial Money Revolution

Massachusetts State currency, issued 1776. Engraved by Paul Revere

John Ford

The history of banking and the money cartel in Europe and the U.S. over the past 400 years is an account of a number of slightly different versions of ‘fleecing the flock’ through their control of the money supply, interest rates and self-serving politicians. This activity is what leads to the predictable boom and bust cycles that inevitably follow. The only real difference today between Wall St. and their predecessors is their unabashed display of greed and their missionary zeal in converting the disbeliveers to the latest dogma of privitization and derivatives trading. So what we end up with is a government that is captured by the money cartel. And rather than having the too big to jail banks that are now insolvent be placed into receivership as they should through a congressional mandate and  liquidated, it’s government, the municipalities and the people that are going into receivership  as they continue to pay tribute to the money cartel.

But as we may recall it did not always play out this way when the cartel attempted a takeover. One of the earlier attempts at fleecing the flock occurred in the American Colonies with the passage of the Currency Act in 1764 that prohibited the Colonies from issuing paper currency as legal tender money and ordered them to pay all future taxes in gold or silver coins.  An earlier Currency Act (the Paper Bills of Credit, American Colonies Act 1750) limited the amount of currency the American colonies could produce. This forced the colonies on a gold/silver standard that initiated the first phase of the bank wars in America.

The monetary experiments that the colonies began in the late 17th century soon convinced them that they were better off printing paper scrip money to use as a local exchange medium rather then using the Crown’s gold which they would have had to borrow. In what was to become one of the most subversive acts in modern history they did something that really raised the hackles of the European financial mob….…they printed their own money.  As historian Alexander Del Mar wrote in The History of Money in America, “the 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 . . . there 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!”

Even before the Bank of England was established in 1694, the Massachusetts Bay Colony embarked on a radical course of economics, spending bills of credit into circulation that soon built the infrastructure of a local producer based economy. From 1723 through 1775 Pennsylvania issued its own paper currency. They engaged in a highly creative monetary experiment where they discovered that the true authority and autonomy of self government is measured in large part by the ability to control the money supply by issuing both bills of credit and interest bearing notes. They directly challenged the European mercantilist debt based monetary system and proved to the world that the health, wealth, happiness and freedom of a country are dependent upon a sound currency system.

Writing in Monetary Experiments: Early American and Recent Scandinavian, Dr. Richard A. Lester, a noted economist at Princeton University wrote that, “the price level during the 52 years prior to the American Revolution and while Pennsylvania was on a paper standard was more stable than the American price level has been during any succeeding fifty-year period.” And all of this they did I would add, without the authority of a central bank.

During the same period, Pennsylvania established a Land Bank that loaned scrip to farmers using their land for collateral. Twice the value of the land could be loaned, with the actual value of the land representing one half of the loan and the potential value of production representing the remaining value. Interest income from the loans cycled back to the government that had the direct affect of lowering the tax burden and contributing to the overall prosperity of the population. As a way of avoiding inflation, government could retire excess notes out of circulation through taxation.

In commenting on the Pennsylvania currency, Adam Smith wrote in The Wealth of Nations, “the government of Pennsylvania, without amassing any gold or silver, invented a method of lending, not money indeed, but what is equivalent to money to its subjects. It advanced to private people at interest, upon land as collateral, paper bills of credit…made transferable from hand to hand like bank notes, and declared by act of assembly to be legal tender in all payments…the system went a considerable way toward defraying the annual expense…of that…government”.

Benjamin Franklin one of the strongest exponents of paper currency in Pennsylvania, writing in his autobiography stated that, “the utility of this currency became by time and experience so evident as never afterwards to be much disputed.” However within a year of the passage of the Currency Act, Franklin had written that “the conditions were so reversed that the era of prosperity ended, and a depression set in, to such an extent that the streets of the colonies were filled with unemployed.”

One of the more estimable elements of self-government that was bequeathed to us from the Colonial experiment was a workable money system. As a benchmark for a human scale economy it has been ignored, misrepresented and vilified and what we got instead was a debt based European bank model, globalism and an addictive codependency to neoliberal economics. In a speech given in 2003 to the U.S. Treasury Department, Stephen Zarlenga Director of the American Monetary Institute commented very accurately that, “the Constitution trusted the people with the political power; but didn’t firmly place the monetary power in their government. This (along with slavery) is the original sin of American politics. As a result the money power was left up for grabs”.

During the Constitutional Convention that took place from May to September 1787, the issues of self governance and money were primary topics under consideration. Can a country really be self-governing, or will it be ruled by authority? Can a central government be trusted to manage the money supply, or is it better managed by private commercial interests?

What happened at the Constitutional Convention regarding the money issue was largely a sellout to the Federalists who purloined the money power that had previously been retained in Article XII of the Articles of Confederation making bills of credit legal tender.  And let us recall that of the original signers of the Declaration of Independence, sixteen of them signed the Articles of Confederation, whereas of the eight who attended the Convention, only four signed the Constitution. In regard to money matters we treat the Constitution like some kind of inviolable sacred cow, but its really just a Holstein.

If we really want to begin to clean up the mess we have gotten ourselves in, then we could begin with Article I Section 10 of the Constitution and understand what was lost when we had a precious metals standard foisted upon us as in: “No State shall… coin money; emit Bills of Credit; make any thing but gold and silver coin a tender in payment of debt”.

Zarlenga suggests we take a look at what he calls the ‘five magic words’….”to emit bills of credit”. For it was in fact these bills of credit that were spent into circulation in the Colonies, built the infrastructure for internal trade and commerce and assured a stabilized price level period prior to the American Revolution that has never been matched in any succeeding period since. These were the bills of credit, the local Colonial currencies that Hamilton and his gang axed from the Articles of Confederation in order to pave the way for a central bank modeled after the Bank of England and the fractional reserve debt system of money.

What the European money cartel failed to accomplish in 1776 in the Colonial Revolution, they finally succeeded in doing one hundred and forty years later with the Federal Reserve Act which took control over the issuance of money and put it into the hands of a private cartel. In the end, the issuance of debt paper from private banks to governments is, as Zarlenga comments “nothing short of a license to steal”.

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