The

HISTORY
MONEY
In thi

UNITED STATES
By

WILLIS A. OVERHOLSER, LL B.
 A SHORT REVIEW AND ANALYSIS
of the

HISTORY of MONEY
in the

UNITED STATES
with an

Introduction to the Current

Money Problem

By

Willis A. Overholser, LL.B.

PRICE 25 CENTS

Copyrighted 1936

By Willis A. Overholser

PUBLISHED BY
PROGRESS PUBLISHING CONCERN
Libertyville, Illinois
 Honeywell Studio

WILLIS A. OVERHOLSER
 PREFACE
Probably one of the easiest ways in which one, unfamiliar with
the money question, can gain an understanding of that subject, is
to approach it by reading a brief account of the monetary history
of our Country. That has been the principal idea in view in the
writing of this book.
On the other hand the forces underlying our monetary history
can be understood better after a few fundamentals have been taken
into consideration. The money question, therefore, has been ana
lyzed and explained to a certain extent in the introduction. How
ever, some readers, who have not given the money question any
particular previous thought or study, may not, at first, clearly un
derstand everything that is stated in the Introduction. It is, there
fore, recommended that the reader reread the Introduction after
reading the entire book.
Practically all previous monetary histories have quite appar
ently been written by strong partisans one way or another, whether
avowedly so or not, — whether the writers were honest enough to
admit it or not, and even though many of them have actually denied
since a reading of what they have written will quite apparently
it,

disprove their denials. Generally speaking, there no such thing

is
as non-partisan interpretation of history. The reason for this
a

may be discerned in recent statement by the Lord Chief Justice

a

of England, Baron Hewart, who stated: "The only impartiality

possible to the human mind that which arises from an under
is

standing of neither side of the case." Thus, anyone who gives any
amount of study to any public question will quite likely become

a
partisan one way or another. Many writers have tried to cover
their bias by enunciating their views as economic laws, alleged to
have been proven by the settling (or sometimes the actual un
settling) of certain questions at different stages in history. This,
however, when analyzed, will only go to prove their bigotry. Many
questions have been settled temporarily by might rather than by
right and that particularly true in the field of economics. Also
a is

the failure of measure at one time, under one set of circum

stances, does not prove that will fail at another time under
it

different set of circumstances.

It
has been asserted that figures do not lie. However, there
is

such thing as failing to give all the figures. Similarly, pos

is
it
a

sible for history to be written without all of the facts being given.
The average history book fails to note many of the things pointed
out herein. On the other hand, the writer has no thought of repre
senting that all of the facts are included herein. In the first place,
3
it would be impossible to record all of them in a work of this size.
In the second place, no one knows all of the facts underlying his
tory. The reader must read and analyze history in view of his com
mon sense and every day experience. However, "historical study
is more fruitful if the reader endeavors to interpret the past in
accordance with the experience which was available at the time
the occurrences took place. Past environment is the true test of
past action."*
If the reader, during his reading of various writings, meets
with many contradictions and dilemmas, he must not be discour
aged thereby. Confronting things of that sort is one of the great
things of life in this testing ground existence. Our characters, our
abilities and our intellects are here tested, and, we hope, strength
ened. The presenting of public questions to the 'jury' of the citi
zenry may be likened to the presenting of a lawsuit in court before
a jury. After the evidence is submitted, the lawyer on one side of
the case presents an argument which may sound logical and con
clusive. The lawyer on the other side of the case then presents an
opposing argument which may sound every bit as logical and con
clusive as the first. Each, however, in presenting his argument will
present more of the facts favorable to his side of the case.. This is
what makes the argument of each seem so logical. It thereupon
becomes the duty of the jury to decide the case in the face of these
apparently logical but contradicting arguments. The members of
the jury must test the facts, as well as the other matters set forth
in each argument, in view of their own everyday experiences and
common sense. The great duty of citizenship is to decide between
the conflicting arguments presented on various public questions.
The more intelligently and diligently our citizens apply themselves
in studying, analyzing and deciding these questions, the better are
the chances for good government and improved economic condi
tions.
Most of our monetary histories were written during the days
of inefficiency in production and by men imbued with the idea of
scarcity. Our early treatises on economics were also written during
periods of scarcity. Even most of our present day economists were
reared on the scarcity theories of economics, and few of them are
able to divest themselves of the idea of scarcity, with which they
have been so thoroughly imbued. Most of our historians and econ
omists, therefore, have interpreted history and have formulated
statements of economic principles in view of a scarcity background.
Modern conditions cannot be coped with on any such basis. It has,
'Financial History of the United States (12th edition) by Prof. Davis Rich Dewey, page tu
(Preface).

4
therefore, been considered advisable for someone with the modern
(abundance) point of view to interpret and analyze our monetary
history. It is to be hoped that many others with a similar view
point will do likewise, not only with our monetary history but with
the monetary history of the world, which contains many superb
instances in support of the soundness of a currency system man
aged in accordance with the law of supply and demand.
A book of this size can very) well be written on each separate
period of our history, and it is to be hoped that that will be done
in connection with the series of books of which this is a part. How
ever, interest in the subject probably can best be stimulated, and
a fair understanding of the money question can be had, through
first reading a brief account of the salient events in our financial
history.
WILLIS A. OVERHOLSER.
Libertyville, Illinois
February 20th, 1936

5
6
 INTRODUCTION
PRELIMINARY STATEMENT
The writer does not share the belief, entertained by many
people, that the establishment of an honest monetary system will
cure all of our economic disorders. He recognizes the fact that our
corrupt, unsound and inequitable monetary and credit system has
been responsible for bringing about greater concentration of power
and of wealth than any other one thing. However, the mere in
flation of a flat tire on an automobile will not correct other defects
in the mechanism of the automobile, even though riding along on
the flat tire may have contributed to, or have been responsible for,
causing some of those other defects. Even attempting to inflate the
flat tire will not remedy the injuries done to the tire itself by hav
ing ridden along on it while it was flat. Similarly correcting our
monetary and credit systems will not correct the disorders occa
sioned by a system of taxation which is not based according to
ability to pay, will not correct the abuses accompanying private
monopolies of public utilities, natural resources and industries, will
not correct a failure to bring about a fair and equitable sharing of
the benefits of the means of production and of labor saving devices,
and will not correct a large portion of unjust concentration of
wealth, even though a great deal of it has been produced by a bad
monetary system. It is utter folly to suppose that all of these abuses
can be corrected by the establishment of an honest and adequate
monetary system. Nevertheless, the establishment and mainte
nance of an honest and adequate monetary and credit system is
one of the first (if not the first) and most important things to be
done in correcting our present economic disorders.

How the Value of Money Is Changed

Our monetary history reveals beyond dispute that the banking

interests have endeavored continually, from the inception of our
Government, first gradually to gain, and then to retain, control over
the governmental function of issuing money.
The primary reason why the banking interests have done this,
can be found in considering the effects which flow from increasing
or decreasing the amount of money in circulation, which is com
monly referred to as inflation or deflation of money. The great
English economist, John Stuart Mill, very ably pointed out the
effects which follow inflation or deflation, when he stated in his
"Principles of Political Economy" ;*
•Vol. II, pages 29 to 33, pub. 1899 in U. S. by D. Appleton and Company, same taken from the
Fifth London Edition.

7
 That an increase in the quantity of money raises prices, and a dimi
nution lowers them, is the most elementary proposition in the theory of
currency, and without it we should have no key to the others ...
(p. 33).
If the whole money in circulation was doubled, prices would be
doubled. If it was only increased one-fourth, prices would rise one-fourth.
There would be one-fourth more money, all of which would be used to
purchase goods of some description. When there had been time for the
increased supply of money to reach all markets, or (according to the con
ventional metaphor) to permeate all the: channels of circulation, all prices
would have risen one-fourth. But the general rise of price is independent
of this diffusing and equalizing process. Even if some prices were raised
more, and others less, the average rise would be one-fourth. This is a
necessary consequence of the fact that a fourth more money would have
been given for only the same quantity of goods. General prices, therefore,
would in any case be a fourth higher . . . (pp. 29 and 30).
So that the value of money, other things being the same, varies
inversely as its quantity; every increase in quantity lowering the value,
and every diminution raising in a ratio exactly equivalent (p. 30).
it,
This law of money has been accepted as true by Adam Smith,
David Ricardo, and all of the greatest political economists. It

is
just another way of stating the old law of supply and demand as
applied to money. By making money scarce there will be less money
to go around for the purchase of things, and therefore, prices will
have to come down to balance up with the amount of money in cir
culation. Obviously, for the same reason, increasing the amount
of money in circulation will reverse the process and will increase
the prices of commodities in general. This is the basic principle of
monetary science. It simple to understand and an understanding
is

of this law of money is the key to the so-called mysteries of money,

which are not nearly as mysterious as those who profit by the
abuses of the money system and their college professor hirelings
would have everyone believe.
Of course, true that the natural operation of this law of
is
it

money may be suspended temporarily and rendered ineffective to

a certain extent, just as the operation of the law of supply and de
mand in other respects can be temporarily suspended. Thus while
an increase in the supply of wheat (or any other product) should
under the natural operation of the law of supply and demand, when
the demand remains the same, result in a decrease in the price of
wheat, nevertheless, someone were to obtain monopoly of wheat
if

the price thereof would not necessarily decrease with an increase

in the supply. The monopolist would be in a position where he
could prevent any selling and could dictate the price regardless of
the supply. Also, returning to consideration of money, money in
a

the bank means nothing no one can borrow or otherwise ob

if

it

tain the use of it.

Another condition which might prevent an increase in the sup
8
ply of money from bringing about a proportionate increase in
prices might arise at a time when there is a great deal of unem
ployment and a large part of the means of production are idle.
Under such circumstances a large portion of the increased supply
of money might very well flow into productive channels and in
crease production enough so as to balance up to a certain extent
with the increased purchasing power. In other words, the demand
for money, occasioned by increased supply and production of goods,
etc., would thereby be increased at substantially the same time as
the supply of money would be increased, which would tend to pre
vent prices from changing in exactly the same proportion as the
supply of money had been changed. The increased supply in goods,
etc., would be used in bidding against the increased supply in
money, which, in accordance with the law of supply and demand,
would tend to keep priced down. In fact, until the curtailment of
production, occasioned by a lack of sufficient money in circulation,
were remedied, it is doubtful if the increase in supply of money
would have much affect upon prices. The increase in the supply of
money would to that extent increase prosperity without increasing
prices. In other words, while the deficiency causing curtailed pro
duction still exists, an increase in the circulation of money will not
cause a general inflationary condition but merely will be arresting
the deflationary condition, and would be similar to pumping air in
a deflated tire until its normal capacity is reached (as distin
guished from trying to inflate a tire beyond its normal capacity) .
The condition just alluded to, no doubt, exists to a large extent to
day and it, therefore, probably would take a very large increase in
the supply of money before any substantial increase in prices would
be brought about.
Thus you will notice that Mr. Mill in stating that the value of
money varies inversely to its quantity has, therefore, qualified his
statement by saying "other things being the same." Nevertheless,
ordinarily when the circulation of money is increased, it will cause
an increase in prices in general, and a substantial decrease in the
circulation of money will cause a decrease in prices. This general
rule must be kept in mind clearly in considering the money question
and analyzing our monetary history, and notwithstanding the ex
ceptions to the rule, this general rule is still by far the most im
portant thing to consider. The exceptions herein noted are not,
however, submitted as the sole exceptions or qualifications of the
rule. It is not to be expected that those unfamiliar with the subject
will at first understand the full import of the exceptions alluded to
above. A failure to understand same until after reading and hav
ing a clear understanding of the rest of this book is no need for
9
discouragement. The writer has referred to them partly for the
purpose of making it clear that he is fully aware of these excep
tions to the general rule.
The banking interests of our Country have seen to the mould
ing of our monetary legislation so as first to limit the basic supply
of money as much as possible and then so as to hoard and bring
about a virtual monopoly of said supply. By hoarding and monop
olizing our basic money as much as possible they compel the people
to do almost all business on the bankers' costly interest bearing
credit. It has been generally recognized that at least ninety per
cent (90% ) of our business in recent years has been done on credit.
Obviously an expansion (inflation) of credit will cause a general
rise in prices, while a contraction (deflation) of credit will cause
a general lowering in prices. Thus a general expansion or contrac
tion of credit today will affect prices similarly to the way in which
an increase or decrease in the circulation of money did when a
large percentage of business was done with cash instead of bank
credit, and a general expansion or contraction of bank credit today
can bring about a change in prices in general even though the basic
supply of money remains exactly the same, for it isn't the supply
of money that is being used but the supply of bank credit.
The writer realizes that some very respectable authority has
denied that an increase in credit will cause an increase in prices,
the argument being that credit, which is debt, must be paid back
and in the process of paying back, prices will be contracted (or re
duced) and that the effect in the long run is no permanent change
in prices, while on the other hand money can be increased so as to
produce a permanent increase in prices since the increased supply
of money does not have to be withdrawn from circulation. Therein
is pointed out, of course, the inherent weakness of credit. Therein,
furthermore, lies one of the outstanding weaknesses of debt money,
which is loaned into circulation, as compared with wealth money,
which is paid into circulation. However, the fact remains that a
sudden substantial increase in the extension of credit will at least
produce a temporary increase in prices in general and a substantial
deflation of credit will produce a decrease in prices in general.
The true value of money is measured not by whether it is re
deemable in gold or silver or by how much gold or silver it is re
deemable in, when so redeemable, but by prices in general (the gen
eral commodity price level) . It is measured by how much it will
buy in commodities and services in general. In other words by how
much of commodities and services in general that it can be re
deemed in. Since prices in general therefore, are increased with
an increase in the circulation of money or in the supply of credit,

10
and are decreased with a decrease in the circulation of money or in
the supply of credit, the value of money is regulated by the supply
of money or credit or both. There is, therefore, only one way
whereby the value of money can be effectively regulated and that
is in the regulation of both the supply of money and of credit.
The Constitutional Power for the Regulation of the Value of Money
Section 8 of Article I of the Constitution of the United States
provides that Congress shall have power (among other things) "To
coin money" (and included with this power is the power to issue
legal tender paper money*) and "to regulate the value thereof".
When the Constitution was adopted a large percentage of the busi
ness of the Country was done with cash and a regulation of the
supply of money then would have been fully effective in regulating
the value thereof. The power that went with the regulation of money
in those days was recognized by the Rothschilds (the then most
powerful Bankers) of Europe who said : "Let us control the money
and we care not who make the laws". However, today, by limiting
the use of money and increasing to such a great extent the! use of
credit, the control over the supply of credit has become the whip
of control over the value of money. This has lead many to assert
that the only way that Congress can exercise its Constitutional
duty and power over money is for the Government to take over the
banking system of the Country, lock, stock and barrel. It is pointed
out that Congress is subject to the franchise of the people, that the
people and their welfare, therefore, have some control over the
actions of Congress ; that the banking fraternity on the other hand
is in no way subject to the franchise of the public; and that the
motivating force in the control of the actions of banking institu
tions is their greed.
The Effects of a Fluctuating Money System

If taxes, debts and wages were proportionately reduced or in

creased with a reduction or increase in the amount of money in
circulation or the amount of credit extended, then fluctuations in
money and credit would not be quite so serious, although even then
fluctuations probably would not be desirable. However, those pro
portionate changes do not accompany such fluctuations. This fact
makes it quite desirable for the large financiers and speculators to
bring about big fluctuations. Andrew Shearer in his article on
"Honest Money the Key to Prosperity" in the September 17, 1932
issue of The Prairie Farmer has called attention to the big banker
position in this respect : "To my certain knowledge as expressed by
some Eastern bankers when approached about a stable dollar and
•Knox v. Lee (Legal Tender Cases) 12 Wall. 457, 20 L. Ed. 287; Juilliard T. Greenman. "
110
U. S. 421, 4 S. Ct. 122, 28 L. Ed. 204.

11
stable price level, they said : 'Hell ! we don't want that. We couldn't
make any money. We make our money on the fluctuations of money
and markets.'
"
To appreciate the havoc that is wrought in fluctuating the
value of money, we must realize that in the last analysis the farmer,
the manufacturer and all other producers are required to pay their
debts, taxes and other fixed expenses with their products and ser
vices, although after converting same into cash. If, by reducing
the amount of money in circulation, the prices, which their prod
ucts and services will bring, are similarly reduced, then the farmer,
manufacturer and other producers will have to furnish just that
much larger quantity of their products (or services) with which to
pay their fixed expenses (such as debts, for example, which remain
exactly the same in terms of dollars). To reduce the prices that
producers receive for their products, therefore, is just another
way of increasing! their debts. Can there be any difficulty then, in
understanding why the large bankers wish to fluctuate the money
system. After getting everyone in debt they increase the value of
the debts by pulling the purse strings, decreasing the supply of
money and credit and thereby forcing prices of commodities and
services in general down so that the debtors in paying their debts
and the interest thereon will have to pay with more in commodities
and in services than would have been necessary in paying debts
when the debts in question were incurred. Thus the large bankers
have an interest which is directly antagonistic to the interests of
all producers, namely, to force the value of money up and the value
of all other products and services down. This is not so much the
case with the small bankers, however, since in the bringing about
of great fluctuations and depressions many of the small banks are
broken and the interests of the small bankers are more intimately
associated with the successes and failures of the small producers.
Furthermore, by creating a money and credit stringency the
money trust can make it impossible for many to acquire money or
credit with which to pay their debts, and in that manner the money
mongers — the skunks of the Wall Street fraternity — can take over,
acquire and centralize under their ownership and control, millions
— yea, billions, of dollars worth of the property belonging to the
masses, through foreclosures, forced sales of collateral, etc.

Because of the variations which have taken place in the value

of our dollar and particularly because it has increased in value, it
has frequently been referred to as a "rubber dollar" and as a "rob
ber dollar". It stretches in value like rubber, and by increasing
in value it permits the creditors to rob the debtors.
12
 Our money masters — the Wall Street skunks — have another
means of utilizing their manipulations of money and credit. By
knowing when they are going to deflate, and having the power to
inflate, they are able td wait until prices are inflated to the peak
before selling their own stocks and other securities and property,
and then after deflating are able to buy back what they have sold,
and a lot more, at the lowest of prices. By having control of the
system, and thereby knowing when to buy and sell to the fullest
advantage, the taking of wealth away from the public — the concen
trating of wealth into their own hands —is just like taking candy
away from babes. Is it not apparent that our Federal Reserve and
National Banking Systems provide the greatest instrumentalities
on earth for centralizing the wealth of our Country? Can any bet
ter scheme be conceived for fleecing the public? Has not this gen
eral setup provided the large financiers with a big national shell
game?
The Effects of Inflation and Deflation Upon Labor

Of course, no one with good sense wants uncontrolled inflation.

But inflating a flat automobile tire to its normal size is neither un
controlled nor unsound inflation. Trying to run on a flat automobile
tire is absolutely ruinous. The same is true of trying to run on an
economic or monetary "flat tire" — in other words, on a deflated
monetary system. The United States has been trying to run on a
monetary "flat tire", and is still doing so . Those who advocate ad
hering to such a policy cannot see even to the ends of their noses,
leave alone seeing beyond.
Because of the fact that inflation increases prices in general
and because of the fact that during inflationary periods wages
have not increased as rapidly as prices in general (and the cost of
living of those who have been constantly employed thereby has been
increased somewhat), some people, declaring that their position is
in the interest of labor, oppose any increase in the circulation of
money at all times and under all circumstances. Adhering to such
a policy during a deflationary period is a policy which may appear
to be of benefit to those who are employed! although it is most cer
tainly detrimental to those who are unemployed. It is not as bene
ficial to those who are employed as it may seem, however, for it
jeopardizes practically every man's job who is employed, and it
makes the continuance of unemployment certain for practically
everyone who is unemployed. Every inflationary period during our
history has been a period of increase in employment —of constant
reduction in the number of those who are unemployed, while every
period of deflation has been a period of decrease in employment —
of constant increase in the number of those who are unemployed.
13
 An adequate medium of exchange is the life blood of industry.
It is the grease which keeps the wheels of industry working smooth
ly and efficiently. When the supply is inadequate industry slows
down, factories close and more and more laborers are thrown out
of employment. How can anyone possibly represent the best inter
ests of labor by opposing the inflation of our monetary "flat tire"
to its proper size?
Metallic Standards
The gold standard* never has worked, except for a limited pe
riod, and it never will work. It is contrary to reason and to the
law of nature. It fails to supply money in accordance with the law
of supply and demand. In fact it flops right down onto the law of
supply and demand and sits there. After awhile, however, the law
of supply and demand gets up and casts it off like a large giant get
ting up and shaking off a small midget. As populations increase
and as labor saving devices, production and industry in general in
crease, there is, a related need for an increased supply of the me
dium of exchange. The increase in the production of gold has no
material relationship to these other increases, and in fact lags
behind and is very much less proportionately than these other in
creases. Therefore, it is an unnatural and improper means for use
in regulating the supply of money. As the great Thomas A. Edison
correctly stated: "Gold is a commodity, limited in quantity; and
any commodity, limited in quantity, will never make a satisfactory
medium to be used for money." Thus it is the height of folly to
expect anything as thoroughly and inherently unscientific as the
gold standard to be operated for the interests of the people as a
whole. What has been stated in regard to the gold standard, and
that which is hereinafter stated in regard to it, is true of any other
precious metal money standard.
The gold standard in reality is a gold fraud, and was conceived
as a means of enabling the international banker to fleece and rob.
As a tool for robbery it is a huge success. — In fact, the best that the
mind of man ever has been able to formulate. This standard hav-
•Under the gold standard, aa w« knew it in the United States prior to March 1933, every
paper dollar, every dollar on deposit in a bank and every dollar of debt, was represented as, if
not expressly made, payable or redeemable in a gold dollar containing 25.8; grains of gold, nine-
tenths fine (that is, nine-tenths pure gold). Some of the details relating to the gold standard
as it existed in this Country1 are hereinafter set forth, in the discussion relating to "The Gold
Standard Act of 1900." Until March 1933, one ounce of gold iwas worth under the law $20.67.
Under the present law and revaluation it is worth $35.00 per ounce. At this rate it is estimated
that there are only approximately 22 billions of dollars worth of monetary gold in the entire
world, and approximately 9J8 billions of dollars of same are in the United States at the present
time. It is estimated that the total amount of the interest paying debts in the United States
alone is in excess of 200 billions of dollars. The total amount of gold in this Country at the
present time (and the total amount in the entire world prior to revaluation) probably would not
pay one year's interest bill in full on this indebtedness. If there ever arose any real reason why
all debts should be converted into gold, it could not possibly be done. On the /other hand, af
there is no reason why all debts should ever be converted into gold, then it is submitted that
the debts should not be made so payable. Why have anything hinge (or appear to hinge) on an
unsound lie?

14
ing been discovered, however, the large financiers (realizing how
well they can employ it for their own enrichment) will move heaven
and earth to prevent its complete abandonment and will resort to
every conceivable expedient to bring about its reestablishment
when suspended or abandoned. Civilization, in trying to make any
progress or reforms, is always confronted by the opposition of
those who profit by the defects of the economic structure as it al
ready exists. The average inventor in working out a new invention
generally makes many mistakes, and meets with many difficulties,
which he must discover and correct prior to perfecting his inven
tion. If someone were to slip in from time to time while an in
ventor is working on an invention and throw a monkey wrench
into the machinery, it would take the inventor much longer, to im
prove and produce his invention, —and yet that is precisely what
society has to contend with and must continually guard against in
making progress and improvement.
The gold standard is not only a fraud but also a farce. It has
been lauded and advanced as a medium necessary for carrying on
international exchange, — for settling trade balances between for
eign countries. However, when one or two countries get control of
all the gold it becomes practically useless in that respect, and that
is virtually the situation which exists in the world today. Regard
less of this, however, at least 90 per cent of our business is domes
tic business, and not more than approximately 10 per cent of our
total business ever at any time has been foreign trade, unless pos
sibly during the World War. As Lester 0. Wisler very pointedly
stated in the October 1935 issue of Plain Talk Magazine: "Money
is necessary nationally — not internationally." We can much better
afford to try to carry on our proportionately small amount of for
eign trade by barter and exchange than our large domestic trade,
and in fact, it would be easier since foreign trade is carried on in
large lots and quantities while the reverse is true of the major
portion of our domestic business.
In connection with the foregoing, it is well to note the follow
ing potent and convincing reasoning of Henry Ford, contained in
statements made by him during a recent interview which was re
ported in the February 1st, 1936 issue of The Saturday Evening
Post:
Whatever we do, we shall need to do at home. The place to revive the
standard of living of the United States is within the United States, and the
idea that we can revive our own industries and promote a higher level of
domestic exchange by foreign trade is without foundation. In the first
place, the world could not offer us enough sales to make any material dif
ference in our home production, and in the second place, business founded
upon foreign markets, instead of our own markets, is only temporary.

15
 As a restraint upon inflation the gold standard is a restraint
that does not restrain when put to a real test. In fact, it acts as a
dam for storing up uncontrolled inflation. When placed to a real
test it will break down every time and sooner or later it will always
come to a real test, which generally comes after storing up so many
unsound defects and economic disorders that when it does break
it lets forth a flood of uncontrolled inflation. Instead of just listen
ing to the bankers and their cries about the dangers of uncontrolled
inflation, it is time that we considered how adhering to the bankers'
unnatural metallic standards can bring on uncontrolled inflation.
On the other hand so long as the gold standard does not come to
a complete break it is used to deflate, to bankrupt and pauperize
the masses as well as the government and most of the subdivisions
thereof. Not only should we consider the dangers of uncontrolled
inflation but also the dangers of unbearable deflation. Further
more, not only should we consider the evils of inflation but also the
evils of deflation. As was pointed out in the December 18, 1933
issue of The National Taxpayer :
A well known metropolitan newspaper recently published an editorfal
called "Inflation Is Larceny." If inflation is larceny then there is no word
in the dictionary that will adequately describe the robbery and loot of the
debtors and small people of the Nation which has been produced by
deflation.
Why permit civilization to be wrecked on either the rocks of
uncontrolled inflation or on the rocks of a deflationary gold stand
ard? Civilization must wake up to the fact that if it is to avoid
disaster it must establish and maintain a managed currency system
regulated in accordance with the natural law of supply and demand.
Any nation that adopts a metallic standard can discard it at
will (although the forces of greed endeavored to induce the Su
preme Court of the United States to rule otherwise, as far as this
Country was concerned, in the Gold Clause Cases*. Adopting such
a standard as a means of restraint is similar to a man locking
himself in a jail and holding onto the key ; so as to be able to walk
out at any time. It is well, that this is true for if it were not true
it would place every nation that were to adopt it in a position simi
lar to a person locking himself in an inescapable wooden building
and then throwing away the key. What would happen, in such a
case, if the building were to catch on fire?
It is as ridiculous for a Country to adopt such a monetary stand
ard as it is for an ostrich, while! in a position of danger, merely to
stick his head in the sand. He does not get away from danger but
•Norman ▼. Baltimore ft O. R. Co., 55 S. Ct. 407. 95 ALR 1352 (Aff. 265 NY 37, 92 ALR
1523); Nortz v. United Statea, 55 S. Ct 428, 95 ALR 1346; and Perry r. United Statea, 55 S. Ct
432, 294 U. S. 330, 95 ALR 1333.

16
only lays himself open to greater danger. A Nation that adopts the
gold standard and thereby fails to supply its people and commerce
with money in accordance with the law of supply and demand, piles
up debts, concentrates wealth and otherwise stores up disaster.
Again using the ostrich for illustration, if an ostrich while being
pursued by an enemy stops and puts his head in the sand and then,
when the enemy is almost upon him, pulls his head out of the
sand and is immediately pounced upon, the pulling of his head out
of the sand is not the cause of his capture. Rather the stopping and
putting of his head into the sand at a time when he could have
kept his head up and have escaped, is the cause of his capture. It
is equally as preposterous to assert that when a nation plunges into
uncontrolled inflation after suspending the gold standard, upon
meeting with disaster, that the suspension of the gold standard is
the cause of the disaster and of the uncontrolled inflation.

Some Inflationary Disasters Cited in Support of Metallic Standards

The most recent bugaboo that is cited to scare the public into
supporting a metallic money standard is the German Inflation. To
illustrate how absurd this is, consider the following taken from an
article by Daniel L. Cobb, Secretary to President Wilson at the
Peace Conference, which appeared in the April 5, 1934 issue of The
National Taxpayer :
The German Inflation was an International Bankers' Masterpiece. It
was a clever scheme to kill two birds with one stone.
The 1920-21 Deflation gave Thomas A. Edison, Henry Ford and other
Monetary Economists a splendid opportunity to expose the money manip
ulating racket.
Something had to be done to fool the people, a Bogey Man was needed
to scare the timid; the German Inflation served that purpose and the
Bankers have been using it ever sfnce.
To make the inflation scare more complete German marks were
shipped to the United States and sold on the streets of our large cities
at less than cost. Even during the past six months the Wall Street Jour
nal has sent German paper money to thousands of small bankers and busi
ness men in all parts of this country to remind themi of the bogey man.
The other purpose accomplished was to wipe out the German internal
indebtedness, thereby puttfng their house in order so that Germany would
pay reparations to the Allies.
Germany was a defeated nation, they had surrendered everything, even
the control of their monetary system over to the Allies.
Germany was deeply in debt, but their entire indebtedness was to
their own people, who insisted that their government should pay them
instead of paying reparations to the Allies.
By forcing Germany to inflate its money out of existence, that internal
indebtedness was wiped out . . .
When the entire German indebtedness had been wiped out, then the
17
 international bankers advised the Allies to declare the German currency
bankrupt, and thus the German currency became null and void.
Then the Allies appointed representatives of the international bankers
to go to Germany and establish a new monetary system. The new cur
rency adopted had the same names and the same values as the pre-war
German currency.
Although there was no gold in Germany, Germany was forced to
adopt the Gold Standard, and they were forced to make reparation pay
ments on that basis.
See also the booklet entitled "The Iniquitous Dawes Scheme"
by George W. Armstrong.
The German Nation had just finished bearing the brunt of the
Greatest War of all history. It was worn out, bankrupt and in the
midst of economic disaster when it resorted to inflation. To cite the
German inflation as proof that a managed currency system, un
regulated by a metallic standard, cannot be made to work, is an
insult to human intelligence.
In this connection, it is well to note the following statement of
Arthur Brisbane, which appeared in his "Today" column of Feb
ruary 6, 1936:
Washington's statement that talk of "inflation" is not to be taken
seriously delights those who value sound money, even when it is all paper.
But when t!he sound money is all spent, what is to be done? Lincoln
printed new money, which turned out to be sound.
We have one consolation M inflation should come.
When other countries, France under Napoleon, Germany recently,
resorted to inflation, those countries were practically bankrupt. This
country is still the richest in the world; we have simply run out of "loose
change."
The causes underlying the depreciation of the currencies of
some of our early colonies, of the continentals, and of the green
backs, are hereinafter analyzed in the material covering the respec-;
tive periods during which they were issued.
While the writer has pointed out herein some of the peculiar
causes underlying various depreciations of currencies in our his
tory, nevertheless, he recognizes the possibilities of uncontrolled or
harmful inflation. No one can give due consideration to the fun
damental principle of money set forth herein under the heading of
"How the value of money is changed", without recognizing the
dangers of inflation. Only the short-sighted disregard these things. -

In fact, one of the greatest dangers to monetary reform lies in the

over-zealousness of some of the money reformers themselves. Many
of them disregard and try to get away from the realities of life.
One period of uncontrolled or harmful inflation, however, will set
the cause of monetary reform back for another generation or more.
This must constantly be kept in mind by everyone who advocates
18
monetary reform. Some guide for regulating the supply of money
must be adopted which will conform to the laws of supply and de
mand. A monetary system without a guide of that sort will be like
a ship without a rudder. Furthermore, history would appear to
prove quite clearly that the revenue needs of the government should
not, in general, be used as any guide or criterion in regulating the
volume of money, if harmful inflation is to be averted.
Gold Standard Advocates and Honest Money Opposition

High finance has had such complete control over our colleges,
newspapers and other propaganda mediums, as well as over our
political parties, during the past thirty years and more, that it has
brought about a literal saturation of our nation with gold standard
propaganda. Until the last few years almost everyone had accepted
the gold standard as God's great gift to mankind. In fact, we had
gotten so we looked upon the gold standard almost like a cheese
mite looks upon cheese. As Dr. Samuel R. Maxwell, the author of
Plenocracy, has pointed out, a cheese mite is a small creature which
is born in cheese, is nursed on cheese, develops and grows on cheese,
never sees anything but cheese, lives in cheese and on cheese,
throughout its narrow restricted little lifetime, and it is only able
to think in terms of cheese. Thus it does not know that anything
exists other than cheese, and, in fact, cheese is its universe. Simi
larly, we had gotten so that when we thought of money we could
only think of gold. It just simply was inconceivable to suppose that
money could be any good if it were not redeemable in gold. "Why —
what would be back of it?" would be the querie, accompanied by a
vacant, puzzled, almost half-witted looking stare.
We have a lot of learned fools in this Country, and many of them
call themselves professors of economics. Of all the cheese mites
they are the worst. Our plutocrats, who financed and controlled our
colleges, particularly our eastern colleges, saw to it that the nature
of the economics, which was taught, was of the gold standard va
riety. Also, that the text books on economics, and the history books,
were filled with praises of the gold standard and condemnations
galore of anything that smacked of greenbackism. If any professor
dared entertain any thoughts of gold standard heresy, he, no doubt,
was forced to realize on which side his bread was buttered. Our
historians were careful to guard against the untaught history re
ferred, to in the pages that follow, which, however, cannot be erased
from the records.
Our modern professors and historians of economics have been
so thoroughly nursed, raised and coddled on gold standard econom
ics and on the banker money system that it is too much to expect
19
that many of them will ever be able to get their pre-determined
views on these matters out of their system. After all, a person's
thinking practically always comes from the approach that he makes
in analyzing a subject, and a professor or expert economist can
make the wrong approach just as well as anyone else. We shall
have to wait a good many years to get a new "crop" of professors
who are unbiased and untainted with this old banker propagan
dized philosophy. Most of the academic economists continue to
draw the same conclusions they were taught to draw. The average
professor, furthermore, in addition to mulling over and dealing
with his ponderings, then merely draws his salary and does not
have the advantages of learning some of the practical features of
economics through scraping together a dollar here and a dollar
there in the school of hard knocks. Many of our expert economists
are employed by large financial institutions, and too many of our
professors and expert economists are just like alienists. It is pos
sible to have a murder trial and employ all the alienists desired who
will testify on either side of the case. As a great Philosopher once
stated : "You can find men who will deny the law of gravity if you
will make it profitable." The opinions of our so-called expert econ
omists, therefore, should be given very little weight.

The People Must Think for Themselves

Thus it is necessary for the people to analyze and study our

monetary and other economic questions for themselves, for these
questions are not too deep or involved for anyone when properly
explained. It is time that they were looking at the money question
from the standpoint of reason. If the international banker and his
college professor puppets tell us that history proves that a managed
currency system, unanchored to a metallic base, will not work, our
answer is that that absolutely is not true, and that history actually
proves that civilization cannot endure without a managed currency
system operated in accordance with the law of supply and demand,
instead of the fraudulent unnatural law of gold. So long as we heed
the banker's "cants" we shall be his slaves. The great men of his
tory have been men who have accomplished things which previously
had been supposed to be impossible. The fact that there have been
failures in the past does not prove that, by heeding the mistakes of
those failures, success cannot be attained. Few inventions ever
would have been produced if each inventor had stopped with his
first failures. Civilization can and shall refrain from committing
suicide. It is the duty of every patriot to use every effort within his
means to resist the forces of greed in their designs leading toward
economic disaster.

20
 CHAPTER I

COLONIAL PERIOD

The early settlers, in leaving England for this Continent, ob

tained of the English Crown charters for the establishment and
governing of colonies. Some of the charters expressly granted to
the colonies power to coin money. All of the colonies had broad
powers, which undoubtedly authorized them to coin money and is
sue currency, and no restrictions were originally placed upon them
in this respect.*
As time passed the various colonies proceeded to issue paper
currency in addition to coining metallic money. While at first this
was done without any restraint being imposed by the English
Crown or Parliament, nevertheless, later, restrictions were estab
lished. The most important part of Colonial monetary history is
the period preceding the Revolutionary War, during which time
the English Government sought to impose more and more restraints
upon the Colonies in connection with their power over money.
These restraints came, to a large extent, through the influence of
the English money barons who wished to exploit the Colonies by
forcing them to do business on English credit and pay tribute in
the form of interest, etc., to the British, just like the international
bankers have exploited our own people in modern times by influ
encing and obtaining virtual control over the Governmental func
tion of regulating our money system.
Some of the Colonies were quite successful in the administra
tion of their money systems and the issuance of currency, while
some of the others were rather unsuccessful. The New England
Colonies and South Carolina appear to have been the most unsuc
cessful in this respectf As we read of the New England invasions
into Canadian territory, of the wars of South Carolina with the
Indians, and of their issuing paper currency to finance these wars,
we can readily see why those colonies did run into trouble and re
sorted to over-issues. Paper money is not wealth, and when used in
an attempt to create wealth which cannot be created or as a substi
tute for wealth which does not exist, trouble will follow. However,
the Colonial period was a period of scarcity, while today we are
living in an age of great production and abundance. The primary
purpose of money is to serve as a medium for effecting exchanges
of wealth. To compare the abuses in the issuance of currency, dur-
•Money Creators by Gertrude M. Coogan (1935), page 174.
tSee History of the United States, by Edward Charming, Vol. n, page 503; History of Amer
ican Currency by William G. Sumner (1876), pp. 19 & 36.

21
ing the colonial period of scarcity, with the issuance of additional
currency, during the present age of abundance (for the purpose of
effecting exchanges of wealth already produced and thereby pro
moting greater production and the overcoming of the present con
dition of stagnation in commerce and industry occasioned by a de
ficiency in the supply of the medium of exchange) , is preposterous.
To cite the failures of some of the colonies in the issuance of cur
rency as any basis of proving that an honest constitutional money
system, unanchored to some precious metal, will not work success
fully in our Country today, is ridiculous. The situation then exist
ing was the very reverse of the situation existing today. Because
of the scarcity existing and because of the fact that the means of
production were few in number and very slow in operation, a very
decided danger existed of issuing more currency than necessary to
balance with production, while during recent history we have failed
to issue sufficient currency to carry our potential production, result
ing in a jamming of our system of production, the shutting down
of production and the creating of business stagnation. Our real
danger today lies in a blow-up occasioned similar to the blowing up
of a gun through a jamming thereof. Disaster from under issue of
currency is as imminent (if not more so) today, as from an over
issue of currency. This makes a managed currency system, unham
pered by an unnatural metallic restraint, absolutely imperative to
day for the safety of our civilization.
Benjamin Franklin, who lived during the latter part of the
colonial period and during the birth of our present Government,
laid down the general proposition that :
There is a certain proportionate quantity of money requisite to carry
on the trade of a country freely and currently; more than which would
be of no advantage in trade, and less, if much less, exceedingly detrimental
to it.*
The first difficulties in coin and currency appear to have re
sulted in connection with the use of different forms of money. The
colonists were in great need of manufactured products produced in
England, and the English demanded coin in the sale of their prod
ucts to the colonists. While a large portion of colonial business was
done by means of barter currency, such as musket bullets, tobacco
leaves, wampum, etc., and also by means of colonial coinage and
colonial currency, nevertheless, the great need for English manu
factured products caused English coins to be hoarded and treas
ured. By 1652, coin was coming in fairly freely by trade with the
West Indies and in that year Massachusetts set up a mint at Boston
*Channing, History of the United States, Vol. II, page 503; The Works of Benjamin Franklin
by Jared Sparks, Vol. II, page 255, in the essay entitled: "A Modest Inquiry Into the Nature and
Necessity of a Paper Currency."

22
to coin silver to be used more instead of barter currency which was
causing considerable disputes and difficulties as a result of differ
ences in values. This was known as the "Pine Tree" coinage and
the metal was debased somewhat in comparison with English coins,
as a result of which it became accepted only at a discount with
English money, or else the English money was clipped down to the
standard of the "pine-tree" coinage. We are informed that the sil
ver money no sooner appeared than it was either smuggled out of
the country or clipped.f Attention is called, in this connection, to
the principle laid down by Sir Thomas Gresham during Queen Eliz
abeth's time (and generally referred to as Gresham's law) , that a
better and a worse currency cannot circulate together, but that the
worse will drive out the better. However, in considering this rule
we should not lose sight of the bearing that the balance of trade be
tween countries will have upon it. Obviously, if one country has
great need for the products of another country, while the latter
country has little, or not nearly as dire a need for the products of
the former, then that type of money which the latter Country can
best use, will drift from the former to the latter.
In 1690 an expedition was fitted out against Canada by the
Massachusetts Colony, the payment for which expedition was to
come from the booty. It came back not only without booty, but in
great misery. The soldiers demanded pay, and to satisfy their de
mands the first paper money was issued.* The issues were limited,
however, to 40,000 pounds; and 10,000 pounds in the treasury were
ordered burned in 1691. Although this expedition apparently re
sulted in economic loss through the loss of the labor of those who
went on the expedition, which loss as already stated, was not made
up by booty, and was not made up to any appreciable extent by
those at home, because of virtual lack of labor saving devices dur
ing that time, nevertheless, no serious results appear to have taken
place and no charge of excessive circulation appears to have been
made.
In 1701 the War of the Spanish Succession broke out in
Europe§ and this was reflected by hostilities between the New Eng
land colonists, on one side, and the French and Indians, on the
other. In 1704, a disastrous attack was made by the Indians and
French Canadians upon Deerfield.J These attacks provoked retal
iations and wars took place at frequent intervals between the New
England colonists and the Canadians. Attacks were made from
tSumner, History of American Currency, page 13.
•Sumner, History of American Currency, page 14; Channing, History of the United States,
Vol. II, page 500; The American Nation— A History (Edited by Albert Bushnell Hart), Vol1. 6,
page 296.
{Channing,History of the United States, Vol. II, page 537.
tChanning, History of the United States, Vol. H, pages 539 and 540.

23
one side or the other in 1707, 1709* and 1711,** and these attacks
were followed by extended fighting:. In 1745, the New England col
onies joined in an expedition against Louisbourg. After a forty-
nine day siege, with the aid of ships from England, they were able
to force Louisbourg to surrender. These conflicts were finally end
ed in 1748 by the Peace of Aix-la-Chapelle, whereunder Louisbourg
was restored to the French, and New England, by act of the Brit
ish Parliament, was reimbursed for a part of the expense of the
war.f
South Carolina was at the other end of the row of English
colonies along the Atlantic seaboard, and as New England was ex
posed to peril from the French and Indians of Canada in the north,
so also the southern Carolina was constantly threatened by the
Spaniards and their Indian allies in Florida.^
Thus we have a picture of the situation that existed in the
colonies during the period of time when they made use of paper
currency. Being relatively new and poor settlements, their eco
nomic vitality was anything but strong, and the harassings which
they received, together with the energy which they expended in re
taliations, could only have served to weaken them to a very large
extent economically, and especially during such an age of scarcity.§
Having reviewed briefly the setting under which currency was
first issued on this continent, we shall first call attention to the
most unsatisfactory issues of currency during this period.
The first issue of currency in Massachusetts in 1690 has al
ready been alluded to. In 1709 at the time of another Canadian ex
pedition 30,000 pounds in bills of credit were issued, and 10,000
pounds of the old bills were re-issued.ff and in 1711, 10,000 pounds
more were issued to pay military expenses. These bills were pay
able in coin and in 1709 the time for redemption was set at 4 years.
In 1710 it was set at 5 years and in 1711 at 6 years. As the time
for redemption was pushed forward the bills depreciated in com
parison with silver. In 1715 Massachusetts issued 100,000 pounds
of bills and in 1721 a similar amount were issued. As time passed
new issues were emitted for the taking up of some of the old. Dif
ferent issues being in circulation with different times for redemp
tion, some of the issues depreciated in value in exchange in com
parison with others. To add to the confusion the different colonies
coined and issued their own money and the exchange values of the
different forms of money varied considerably. As trade was car-
*Sumner, History of American Currency, page 17.
••Channing, History of the United States, Vol. II, pages 542 to 544.
tChanning, History of the United States, Vol. II, pages 546 to 549.
iChanning, History of the United States, VoL II, pages 501 and 502.
SThe American Nation— A History (Edited by Hart), Vol. 6, pages 295 to 297.
ttSumner, History of American Currency, page 16.

24
ried on among the various colonies the money of one colony would
circulate into other colonies. As more paper money became issued,
opposition grew in England to the issuance of currency in the col
onies, and pressure became used to curtail the issuance thereof,
particularly the issuance thereof by the New England colonies.
After the capture of Louisbourg in 1745, Massachusetts proceeded
toward the redemption in coin of its paper currency and Parliament
voted 175,000 pounds sterling for this purpose.
Rhode Island was quite reckless in the issuances of paper
money and with less excuse for being so than Massachusetts, since
Massachusetts bore more of the brunts of the French and Indian
onslaughts. Rhode Island is said to have issued paper money as a
political speculation, and that it issued over half a million pounds
to private individuals in proportion to their political influence. As
a result great depreciation f ollowed.f Many of these bills circulated
in Massachusetts and helped add to the confusion in the latter col
ony. In fact, the Governor of Massachusetts stated in 1744 that of
400,000 pounds of Rhode Island bills in circulation, 380,000 pounds
were in Massachusetts.^
South Carolina, which bore the brunt of Spanish and Indian
onslaughts in the south, first issued bills of credit in 1702 with
which to pay the expenses of an expedition against the Spaniards.
These only amounted to 6,000 pounds. Other small issues were
made in 1706 and 1707. The first large issue was in 1712 amount
ing to 52,000 pounds. The Yamassee War led to additional issues
which eventually resulted in depreciation and in 1722 the bills were
rated by law at four for one in silver.*
As we note how most of the colonies, which ran into difficulties
in the issuance of currency, had been greatly weakened by wars,
we perceive a very marked similarity between their condition and
the condition of Germany at the time of the German inflation fol
lowing the World War.
As already alluded to, the primary purpose of money is to serve
as a medium of exchange and as a representative of wealth. It
should not be used as a means of representing wealth that does not,
and cannot be made to, exist. To attempt to so use it will result in
harmful inflation. Some of the colonies got into difficulties in try
ing this. Their currencies would not be accepted by other countries
and as they did not have the capacity to produce all the additional
wealth internally which was needed in carrying on their wars with
the Indians, the French and the Spaniards, their over issues of
tChanning, History of the United States, Vol. n, pages 502 and 503.
JSumner, History of American Currency, page 32.
•Chaaning, History of the United States, Vol. II, page 502.

25
currency were nothing more nor less than attempts to issue money
to represent wealth which could not be, and was not, produced.
Some of the most unfavorable features of colonial monetary
history now have been pointed out, as handed down to us largely
by zealous advocates of the gold standard banker controlled money
philosophy (particularly Professor William G. Sumner, whose His
tory of American Currency has been cited herein) , and more space
has been given to this phase of our history than should be given in
a book of this size except for the purpose of having the adverse
features pointed out. When considered in view of general condi
tions during the colonial period and compared with present condi
tions, we submit that even the worst phases of colonial history do
not support the contentions of the gold standard bankerites.
We shall now present the more favorable features of colonial
monetary history. In so doing we shall not merely rely on the in
terpretations given by men of later times, without first hand per
sonal information, but we shall quote from some of the men of
those times, including one who has been recognized by many as the
greatest statesman of our entire history — Benjamin Franklin. In
view of the esteem with which Franklin has been held for years
and is held today, even by the most conservative and reactionary,
it is interesting to note what some of the conservatives said about
him in his own day. In 1736 he began his long service as Clerk of
the Pennsylvania Assembly, and soon became a recognized leader
of the popular party. In 1748 one of the proprietors characterized
his "doctrine that obedience to governors is no more due than pro
tection to the people" as "not fit to be in the heads of the unthink
ing multitude," adding, "He is a dangerous man, and I should be
glad if he inhabited another country, as I
believe him of a very
uneasy spirit. However, as he is a sort of tribune of the people, he
must be treated with regard."* Thus, it has been truthfully stated
that : "A conservative is a person who does nothing except to pay
tribute to the memory of dead radicals."!
Maryland, Virginia and the middle colonies, except New York,
were comparatively prudent in the issuance of currency.J Pennsyl
vania was particularly successful in the handling of its currency
system,§ although some of our reactionary writers of history very
grudgingly admit it.
Pennsylvania in issuing its paper currency loaned the money
to its citizens.A loan would be made to a farmer, for example,
•The American Nation— A History (Edited by Hart), Vol. 6, pages 226 and 227
tThe National Taxpayer, December 18th, 1933 issue.
tThe American Nation— A History (Edited by Hart), Vol. 6, page 297.
SChanning, History of the United States, Vol. E, page 504; The American Nation— A History
(Edited by Hart), Vol. 6, page 297; Sumner, History of American Currency, page 19.

26
equal to one half of the value of his farm, and with this money he
employed labor to clear the land and put up buildings. The Penn-
sylvanians of that period were, in fact, good builders, and some of
the buildings are still standing as monuments to the usefulness of
a regulated paper money. David Hume, an English Historian, de
scribed the situation which then existed in Pennsylvania, in a letter
to Abbe Morellet, as follows :
In Pennsylvania the land itself is coined. A planter immediately after
purchasing land, can go to a public office and receive notes to the amount
of half his land, which notes he employs in all payments. No more than
a certain sum fs issued to one planter, and he must pay back each year
into the public Treasury one-tenth of the notes. When they are all paid
back he can repeat the operation. This caused a prosperity that Burke
said was unparalleled.
The Pennsylvania Assembly authorized the emission of 15,000
pounds in paper bills in 1723, to be loaned on security of land or
silver. This experiment met with such favor that later in the same
year the Assembly authorized the issue of 30,000 pounds more.
From this beginning, Pennsylvania slowly followed the lead of the
other colonies. In 1729 another issue of 30,000 pounds was author
ized, to be redeemed in sixteen years, and in 1731 bills not redeem
able in coin were issued and many bills that came back to the loan
office were again emitted instead of being destroyed.* Pennsylvania
guarded her currency carefully by strict laws against, and severe
penalties for, counterfeiting^
Adam Smith, in his "Wealth of Nations", which appeared in
1776, had this to say about Pennsylvania's paper money (page
262) :
Pennsylvania was always more moderate in its emissions of paper
money than any other of our colonies. Its paper currency accordingly is
said never to have sunk below the value of the gold and silver which was
current in the colony before the first emission of its paper money.
In speaking of the independent money of the middle colonies,
Benjamin Franklin wrote:
The fact in the middle colonies is really this. On the emission of the
first paper money, a difference soon arose between that and silver; the
latter having a property the former had not, a property always in demand in
the colonies. to-wit, its being fit for a remittance. This property having
soon found its value by the merchants bidding on one another for
it,

and
dollar thereby coming to be rated at eight shillings in paper money of
a

New York, and in paper of Pennsylvania, has continued uni

d.

it

s.
7

formly at those rates in both provinces now near forty years, without any
variation upon new emissions; though in Pennsylvania the paper currency
has at times increased from 15,000 pounds the first sum, to 600,000 pounds,
or near it. Nor has any alteration been occasioned, by the paper money,
in the price of the necessaries of life, when compared with silver.J
•Channing, History of the United States, Vol. II, page 504.
3. ;

tChanning, History of the United States, Vol. II, page 504, note
tSparks, The Works of Benjamin Franklin, Vol. II, pages 350 and 351.

27
 In commenting on the economic conditions which flowed from
this sort of a monetary system in Pennsylvania, Franklin had this
to say :
Abundance reigned in Pennsylvania and there was peace in all her
borders. A more happy and prosperous population could not perhaps be
found on the globe. In every home there was comfort. The people gen
erally were highly moral and knowledge was extensfvely diffused.

In The American Nation — A History — by Prof. Evarts Boutell

Greene (Edited by Albert Bushnell Hart) §, the following is stated
in regard to the prosperity which existed in the colonies during
this period :
Notwithstanding unfortunate experiments of various kinds, the colonies
were on the whole prosperous. Prosperity was probably more generally
diffused in New England and Pennsylvania than elsewhere; but in every
colony there were many persons who could, according to the standards
of the time, command the material comforts and luxuries of life. In the
south the most substantial wealth was probably to be found m Charleston ;
but a considerable number of the Virginian planters, though often land-
poor and in debt, were able to secure for themselves luxuries of food,
clothing, and furniture. Such a man, for instance, was William Byrd. In
New England there were prosperous merchants, such as Peter Faneuil,
or Thomas Amory, who, after a broad experience in various parts of the
world, settled in Boston in 1719 and wrote of his new home, "People live
handsomely here and without fear of anything." Philadelphia and New
York also gave to intelligent observers like the Swedish Kalm and the
English Burnaby the impression of comfort and prosperity. Burnaby, who
visited Philadelphia m 1760, spoke of it with admiration, observing its
substantial public buildings and its handsome streets. A few years earlier
Kalm wrote rather extravagantly that "its fine appearance, good regula
tions, agreeable situation, natural advantages, trade, riches and power, are
by no means inferior to those of any, even of the most ancient, towns in
Europe."
Thus we can see what is possible when statesmen and patriots
are ruling a land, instead of privilege granters, such as we have
been ruled and ruined by, and have been suffering under, during
recent years. The money barons of England, however, during that
period, could not stand to see the people of the colonies continue in
prosperity after the cause thereof had been brought to their atten
tion. Peter Cooper, one of our early patriots, described the situa
tion as follows :
When Franklin was brought before the Parliament of Great Britain
and questioned as to the cause of the wonderful prosperity growing up
in the colonies, he plainly stated that the cause was the convenience they
found in exchanging their various forms of labor one with another by
paper money, which has been adopted; that this paper money was not
only used in the payment of taxes, but in addition it had been declared
legal tender. It rose two and three per cent, above the par of gold and
silver as everybody preferred its use. One of its advantages was its

§Vol 6, pages 299 and 300.

28
 security against theft, as it could be easily carried and 'hidden on account
of its having no bulk, as all kinds of specie must necessarily have. After
Franklin explained this to tlhe British Government as the real cause of
prosperity they immediately passed laws forbidding the payment of taxes
in that money. This produced such great inconvenience and misery to the
people that it was the principal cause of the Revolution. A far greater
reason for a general uprising than the tea and stamp act was the taking
away of the paper money.
In 1751 Parliament had passed an act forbidding the issue of
paper money in the New England Colonies except for certain stated
objects; but these exceptions were sufficiently broad to cover the
flotation of paper money in time of war and often even in time of
peace.* However, in 1763 Parliament extended the restriction to
all colonies and declared all acts for issuing paper money void.f
This was the straw that broke the camel's back. Sumner, in his
History of American Currency, concedes on page 30 that: "There
can be no doubt that the bitterness engendered by this conflict was
one great cause of the Revolution." Most of our historians would
have us believe that taxation without representation was the cause
of the Revolution. Depriving the colonies of their paper money,
and not the Stamp Tax, was the great cause of the Revolution, and
this is confirmed by the opinions of John Adams, Franklin and
others of that period.^ John Twells, of London, an able English
writer, had this to say in referring to colonial paper money and
its abolition :
This was the monetary system under which the American colonists
prospered to such an extent that Burke said of them: "Nothing in the
history of the world is like their progress." It was a wise and beneficial
system and its effects were most conducive to the happiness of the people.
Half the value of his land was advanced to the head of the family in
notes which circulated as money. With these notes he could hire labor
and purchased implements of husbandry and cattle; and thus, where with
out these notes, one acre could be cleared and stocked in a year, ten would
by the assistance of the paper money advanced, be reclaimed from the
forest and rendered productive. In an evil hour the British Government
took away from America its "representative money" commanded that no
more paper bills of credit should be issued, that they should cease to be
legal tender; and collected the taxes in hard silver. This was in 1773.
Now mark the consequences. This contraction of the circulating medium
paralyzed all the industrial energies of the people. Ruin seized upon
these once flourishing colonies : the most severe distress was brought
home to every interest and every family; discontent was urged on to
desperation, till, at last "human nature" as Dr. Johnstons phrases
it,

arose
and asserted its rights.
Here are the consequences
:

In 1775 the Congress first met in Philadelphia. In 1776 America be

came an independent state.
•Channing, History of the United States, Vol. n, page 501 The American Nation— A History,
J

Vol.
6,

page 299.
tSumner, History of American Currency, page 42.
tSee The American Nation— A History, Vol.
6,

page 180.

29
 CHAPTER II

THE REVOLUTIONARY PERIOD*

Bitter disputes having arisen between the colonies and the

Mother Country, a congress of the colonies, known as the First Con
tinental Congress, assembled at Philadelphia on September 5, 1774,
and, after unavailing appeals to the English Government, resolved
to raise and equip an army of 20,000 men. On May 10, 1775, the
Second Continental Congress convened to deliberate upon the state
of public affairs growing out of the dispute with Great Britain.
This Congress, with the acquiescence of the people, assumed ple
nary powers of government and the management of the war, and
on June 15, 1775, appointed George Washington Commander-in-
chief. The powers of this Congress were undefined since there was
no written Constitution. As stated by Prof. Davis Rich Dewey in
his "Financial History of the United States"f:
It must constantly be borne in mind that tihere was no real national
government; Congress was little more than a debating association made
up of representatives of the several new states; legislation was practically
limited to recommendations instead of the enacting of law; and when Con
gress voted recommendations it was assumed that the States would sup
port by appropriate legislation the votes of their respective delegations.

Without any real power of enforcing any action, however, the

Continental Congress exercised many of the usual functions of sov
ereign governments, including the organization of a diplomatic
service and the conclusion of treaties with foreign States, the rais
ing and equipping of armies, the establishment of a post office and
the creation of a national currency. Delegates in most instances
were appointed by popular conventions or legislatures. There was
just one house or body of this Congress, and the colonies enjoyed
equality of representation therein.
The Declaration of Independence^ was finally agreed upon by
the Continental Congress on July 4, 1776, although the delegates
from New York withheld voting thereon on that date. On July 9th,
however, a convention in New York pledged the support of that
state and later the Declaration was fully signed on behalf of all of
the thirteen states.
•Data confirming most of the material set forth in this Chapter can be found in Volume XIX
of The New International Encyclopaedia (Edition published in 1905) in the treatise on the United
States under the headings of Congress, on page 684, History, on page 687, War of Independence, on
page 705 and The Confederation, on page 707.
tl2th edition, pub. 1934, page 37.
tThe Declaration of Independence is set forth verbatim and the history relating thereto may
be found in Vol. VI of The New International Encyclopedia, on pages 45 to 47.

30
 The Continental Congress became confronted with the task of
financing the Revolutionary War. No power had been delegated to
the Congress to raise revenue by taxation ; so it was forced to rely
upon the issuance of bills of credit, the proceeds of loans, foreign
and domestic, and requisitions upon the various States, which the
latter could honor or not as they saw fit. The situation which ex
isted with reference to the bills of credit (the Continental cur
rency), has been well stated by Dewey in his "Financial History
of the United States" on page 38, as follows :
With no power of taxation, Congress could with little consistency
pledge itself for redemption, hut had to place the pledge upon the several
states. This reliance was a vain hope, for the States, instead of rendering
their proportionate shares, increased the difficulties hy making note issues
of their own.
From 1775 to 1783, it is estimated that the income of the Con
tinental Treasury, estimated in specie, amounted to $65,863,825.00,
of which about $37,800,000.00 was secured through the issuance of
bills of credit, $19,416,000.00 through loans, and $5,795,000.00,
through requisitions upon the states. National credit, however,
finally sank so low that in 1781 the Continental bills of credit had
fallen to one per cent of their face value, the Congress having been
compelled to resort largely to these bills for its financing. It was
practically impossible, during the greater part of the Revolution
ary period, for Congress to borrow money at home or abroad. The
foreign loans from France and Spain were rather in the nature of
subsidies than of real loans.
During the War, however, the people apparently rallied to the
support of the Congress and the currency that was issued held up
quite well at first in spite of Congress' lack of power to tax, and in
spite of the fact that a tremendous amount of counterfeiting, su
perinduced by England as one means of fighting the colonies, was
engaged in.
The efforts which were employed by England to discredit the
Continental currency through counterfeiting and the difficulty
which she had in making those efforts become successful, have been
set forth in Bolles' Financial History of the United States, 1774 to
1789,* as follows :
Counterfeiting, however, was not confined solely to individuals. The
British Government also embarked in the business. General Howe abetted
and patronized those who were engaged in making and pushing these
spurious issues into circulation. In the same papers which published
British official documents and proclamations might be found advertise
ments like the following:
•Pages 151 to 153. ;

31
 "Persons going into the other colonies may be supplied with any num
ber of counterfeited Congress notes for the price of the paper per ream.
They are so nearly and exactly executed that there is no risk in getting
them off, it being almost impossible to discover that they are not genuine.
This has been proved by bills of a very large amount, which have been
successfully circulated."
"A shipload of counterfeit continental money," says Phillips. "coming
from Britain, was captured by an American privateer. Persons accom-
paying an English flag of truce are known to have largely made use of
the opportunity for disseminating the fraudulent notes ; emissaries from
New York endeavored to obtain from the mills, paper similar to that used
by Congress for its omissions."
Many in Great Britain and elsewhere believed, that, if Continental
paper money could be destroyed, the Americans would be obliged to sub
mit, from lack of funds to maintain their cause. This is why the British
Government promoted so extensively the business of counterfeiting. But
General Clinton wrote truthfully, in January, 1780 :
"Every day teaches me the futility of calculations founded on its
failure. No experiments suggested by your Lordship, no assistance that
could be drawn from the power of gold, or the arts of countefeiting have
been left unattempted. But still the currency, like the widow's cruise of oil,
has not failed the Congress. My hopes on this head, I must acknowledge,
were much higher twelve months since than today. With the appearance
of an enormous quantity, still it is all the debt whidh the people have to
struggle with, and in this view, and when compared with that of other
nations, it shrinks into a very inconsiderable sum. ... I shall, nevertheless,
my Lord, continue assiduous in the application of those means intrusted
to my care ; if they cannot work its destruction, yet they can embarrass
the government, and make the carrying on of the war more precarious,
burdensome and less energetic."

Need for more unity of action had been felt by the Continental
Congress shortly after it started working. Accordingly, the Ar
ticles of Confederation were drafted and later adopted by Congress
in November 1777. They were not ratified by all the states, how
ever, until in March, 1781, when it was realized by many that the
central Government was very little bettered by reason thereof, and
that its financial position was made very little, if any, stronger.
Its treasury was empty; it was burdened with a foreign debt of
$8,000,000.00, domestic obligations of $30,000,000.00, and its paper
currency of nearly $90,000,000.00 had by this time become worth
less. The Congress, even under the Articles of Confederation, had
no power to provide for discharging these obligations. It could only
make recommendations to the states and urge them to provide their
share toward the expenses of the Government, and was wholly
without power to enforce, either upon individuals or upon the
States, a compliance with its requirements, while, furthermore, the
States were themselves in debt, and unable as well as unwilling to
respond to the demands of Congress. Attempts were made to

82
amend the Articles but without success. From this state of affairs
the country was rescued by the adoption of the Federal Constitu
tion, which gave Congress adequate power over the source of the
national revenue, besides other powers inherent in a national legis
lature.
Thus, the ultimate worthlessness of the Continentals proves
virtually nothing in so far as monetary science is concerned. Ob
viously it demonstrates that the paper currency of a government
stripped of the power of taxation, of the power to prescribe legal
tender and of the power to punish counterfeiting, will, in all prob
ability, become worthless. It does not prove in the least that a legal
tender currency will depreciate or become worthless, which is ir
redeemable so far as gold or some other precious metal is concerned
but which is redeemable in taxes and carefully guarded against
counterfeiting. In fact, the stubborn resistance of the continentals
against depreciation at first, even in the face of great counterfeit
ing, tends to prove the very reverse.
Any depreciation of state currencies during the Revolutionary
War, —during that period of loss in man power and further great
loss in economic power in an age of scarcity, —also proves abso
lutely nothing against the successful functioning of a managed cur
rency system during the present day and age. On the other hand
the confusion caused by the differences in values of the different
state currencies during that period did prove the advisability of
prohibiting state control over money* and of vesting full control
thereof in the Federal Government-}-.
The resulting worthlessness of the continentals gave rise to
the term 'not worth a continental' and to the disparaging use of the
term 'printing press money'. The continentals were simon pure
printing press money because of the fact that there was very little
authority to back them up besides the printing presses that printed
them. To cite the results of the continenals for the purpose of dis
crediting the term 'printing press money' and then applying that
term to the paper currency issued by our present strong Federal
Government, which now has full powers of taxation and other pow
ers to protect the currency, is the grossest sort of a fraud. Another
cry that is thrown out to discredit paper currency is "fiat money."
To cite the continentals as an example of fiat money is another
fraud. The virtual lack of authority of the Continental Congress

'Article I, Section 10 of the Conititution.

tArticle I, Section 8, Clause 5 of the Constitution.

88
left the Continentals hanging in the air without any potent fiat.*
The fact that they lacked an effective fiat to back them — the fact
that they were not in truth fiat money — was a very important
cause in their becoming worthless. Thus, a searching analysis of
early American History pulls off the mask of the deceptive terms
used in an effort to prejudice public opinion against the establish
ment of an honest and adequate money system.

•In January, 1776, the Congress passed the following resolution: "Resolved, therefore, that any
person who shall hereafter be so lost to all virtue and regard for his country, as to refuse to
receive said bills in payment, or obstruct or discourage the currency or circulation thereof, . . .
shall be deemed, published and treated as an enemy in this country and precluded from all trade
or intercourse with the inhabitants of these colonies." This resolution was not law, the Congress
had no means of enforcing it and it amounted to nothing more than a recommendation to the
states and to committees of safety to treat as enemies of their country those who refused to
receive the bills at their face value, and it never accomplished its object. However, even if this
had been an enforcible law it must be clear that a mere law of that sort cannot be very effective
without the taxation "fiat" to give money a governmental redemption and circulation value.
Fiat money with the taxation "fiat" behind it must be clearly distinguished from fiat money
without a taxation "fiat." See Vol XXIII Encyclopaedia Britannica (9th edition), page 741

84
 CHAPTER

III
THE FIRST AND SECOND UNITED STATES BANKS

The establishment of the Constitution of the United States

became fully effective on June 21, 1788 through ratification by the
ninth State. As already pointed out (Introduction), the Constitu
tion provides that Congress (and not group of bankers) shall

a
have power to coin money and to regulate the value thereof, and
the Supreme Court has held that Congress has power under the
Constitution to issue paper money and to prescribe same as legal
tender.
The ink with which the Constitution had been written had
hardly become dry before group of financial racketeers initiated
a

movement for subverting the Constitutional power of Congress

a

over money. While today we hear great acclaim about returning to

and abiding by, the provisions of the Constitution, yet how many
of those, who are the loudest in the appeals for returning to the
Constitution, actually wish to abide by all of its provisions? It has
become so extremely fashionable to eulogize the Constitution, re
gardless of the objects of the eulogist, that, as was stated by one
of our early Senators, "I feel an involuntary apprehension of mis
chief" on the part of many of those who indulge in eulogy. Many
of those who now clamor for the protection of the Constitution have
never before given one tinker's damn for the Constitution, and par
ticularly when stood in their way of obtaining ill gotten gain.
it

Yes, — many of those who are the loudest in their acclaim for the
Constitution actually hope to create confusion, and detract atten
tion from the efforts which are being made to take from them the
special privileges which they enjoy through subversion of the
a

hereinbefore referred to provisions of the Constitution! Is not

it

time that we returned to the fulfillment of those provisions?

In the early part of the year
1791, Alexander Hamilton suc
ceeded in inducing Congress to pass bill granting charter to
a
a

group of private bankers for the creation of what was to become

known as the First Bank of the United States. This charter was
to give this bank power to issue bank notes, which would be ac
cepted by the Government in payment of taxes and duties and
other amounts payable to the Government and would be given suffi
cient backing by the Government so as to circulate freely as money.
These notes, in fact, were made legal tender.* The only money
"The Story of Money by Norman Angell, page 277.

85
which the new Government had at the time was gold and silver,
and the supply of those metals was insufficient for the needs of the
Country. The Country, furthermore, was in need of a uniform
currency. Most of the business at the time was being carried on
with specie (gold and silver), which had been obtained largely
through foreign loans ; and with State notes and bank notes, which
varied considerably in value and caused confusion. It might be
well to note at this point that the coinage Act which was adopted
in 1792, set up a bimetallic system with free coinage of silver and
gold at a ratio of 15 to 1. In urging the enactment of the bill for
granting the charter for the Bank, Hamilton contended that the
Government could not trust itself with the issuance of paper money
and stated that: "The stamping of paper is an operation so much
easier than the laying of taxes, that a government in the practice
of paper emissions, would rarely fail, in any such emergency, to
indulge itself too far in the employment of that resource".*
The great depreciation of the continentals was fresh in every
one's mind, although all the causes underlying such depreciation
could not have been fully comprehended. The effects rather than
the causes predominated in the minds of the people and Hamilton's
bill passed in Congress. Hamilton's warning undoubtedly set forth
the great danger in connection with the issuance of paper money.
It, therefore, must constantly be kept in mind, and must be care
fully guarded against. However, the taking of this function from
the Government and placing it in the hands of private bankers is
in violation of the Constitution and is worse than jumping from
the frying pan into the fire, — particularly during the present age of
great production devices and facilities. The greed of the Bankers,
as shown by our recent history, is so great that their administra
tion of the system concentrates wealth and brings greater disaster
to the people than an improvident administration by the Govern
ment. Even if the Bankers were able to administer it free of the
influence of greed, the Banker money system still would only result
in eventual disaster for it is thoroughly unsound. It is usurious in
nature, and is based upon debt rather than upon wealth. In facing
the monetary dilemma, some effectual method must be adopted for
regulating the issuance of currency other than the unsound and
greed inspired banker method, even if some of the limits on issu
ance should be written into the Constitution.
When the bill for the creation of this bank was submitted to
President Washington for his signature, the President hesitated
considerably before signing. He held grave doubts as to its con
stitutionality. He, therefore, sought out the advice and opinions of
•Angell, The Story of Money, page 275.

36
the members of his cabinet. Attorney General Edmund Randolph
told him that it was unconstitutional. Thomas Jefferson, who has
been credited with having had as much to do with writing the Con
stitution as anyone else, said that it was absolutely repugnant to
the Constitution. One of the warnings of Thomas Jefferson was :
If the American people ever allow private banks to control the issue
of the currency, first by inflation and then by deflation, the banks and cor
porations that will grow up around them will deprive the people of all
property until their children will wake up homeless on the continent their
fathers conquered.
Inasmuch as the creation of this bank was one of Alexander
Hamilton's pet plans, he naturally stated to the President that it
was constitutional and, as this fell under his department of the
Government, he was able to exercise enough influence to induce the
President to sign the bill, which granted a charter for 20 years. This
probably had as much to do with drawing the lines of political
thought at that time as anything else — Thomas Jefferson on one
tide and Alexander Hamilton on the other. It probably had as
much to do as anything with Thomas Jefferson's founding of the
party which is today known as the Democratic Party. That fact
certainly is significant when we are forced to realize that it was a
Democratic administration that enacted the legislation which gave
birth to the Federal Reserve System. Thomas Jefferson's knowl
edge of the sinister influences exercised by bankers when in con
trol of the issuance of the National medium of exchange caused him
to assert that:
I believe that banking institutions are more dangerous to our liberties
than standing armies. Already they have raised up a money aristocracy
that has set the Government at defiance. The issuing power should be
taken from the banks and restored to the Government and the people, to
whom it rightfully belongs.
The charter of the First Bank of the United States, having
been limited to 20 years, expired in the year 1811. An attempt was
made to get a bill passed in Congress for the renewal of the char
ter. The Bank, however, had been in operation long enough to en
able some to see how powerful it could become and how dangerous
it would be to the general welfare. Considerable opposition, there
fore, had developed and the bill for renewal did not pass.
In putting an end to the Bank, however, Congress committed
the error of failing to make provision for the loss in currency that
was occasioned by the retirement of the Bank's notes. Business
thereupon became transacted largely by means of state bank notes,
and both state banks and state bank note issues increased. In 1811,
the Secretary of the Treasury estimated the note circulation of
these banks at $46,000,000.00 and by 1814 it swelled to $100,000,
37
000.00. During this time the Country got into war with England,
which is referred to as the War of 1812. Trade became crippled
during the war, and specie became drained from the Country. The
banks of the time suspended specie payments, and the values of the
various bank notes became dependent upon the vagaries of bank
management.* This confused state of affairs aided the bankers
interested in the establishment of a new United States bank in their
efforts towards having a charter granted for a new bank, and in
1816 such a charter was granted, creating what is known as the
Second Bank of the United States. The duration of this charter
was also limited to 20 years.
In the year 1828, Andrew Jackson was elected President of the
United States. President Jackson entertained a strong distrust of
banks and particularly of this powerful bank known as the Second
Bank of the United States. During the time that Andrew Jackson
was President of the United States, Mr. Nicholas Biddle was Presi
dent of the Bank. Some writers tell us that during the latter part
of General Jackson's first term as President that Mr. Biddle went
to him and told him that if he would permit the Bank to establish
branches in all of the principal cities of the United' States that the
bankers would be able to control the politics of the Country and
that they would then support him for President as long as he wished
to continue in the Presidency. President Jackson is then alleged to
have declared that if this was true, that he was opposed to the
scheme and that he would do everything in his power to prevent an
extension of the Bank's charter, which was to expire in 1836.
Whether this version is true or is just fiction, the writer does not
know, but it is apparent from a study of Andrew Jackson's life and
character that he was too patriotic, and was a man of too much
character, to yield to such a temptation. If true, it can be likened
to that biblical account of the life of Jesus Christ when He went up
into the mountain and was tempted by Satan, who told the Master
that he would make Jesus the ruler of the Nations of the World if
Jesus would follow him.
Regardless of the exact nature of the events that led up to
the open battle that followed between President Jackson and the
Second United States Bank, the President of the Bank, Mr. Biddle,
decided to force the issue before the holding of the 1832 election.
During the early part of 1832 an application was made to Congress
for a renewal of the Charter, although the charter was not to ex
pire until 1836. Congress voted to renew the charter but President
Jackson vetoed the bill. This then made the Second Bank of the
•The New International Encyclopaedia (1905), Vol. XHI, pages 715 and 716.

38
United States the great issue of the 1832 Presidential campaign. It
probably was during this battle that President Jackson stated :
If Congress has the right under the Constitution to issue paper money
it was given them to be used by themselves, not to be delegated to indi
viduals or corporations.
This campaign became one of the hottest and bitterest cam
paigns in history and the Bank, or those interested in it, spent mil
lions of dollars throughout the Country in an effort to prevent the
re-election of Andrew Jackson. Nevertheless, Andrew Jackson was
re-elected, and, in fact, by a landslide. The great issue of the cam
paign had been so completely aired that the people clearly saw
what a corrupt and dangerous institution was embodied in this Sec
ond United States Bank. As a result they stood by Andrew Jack
son and continued him in office as President. Thus, the Bank's seek
ing a renewal of its charter just before the 1832 election, and its
effort to embarrass Jackson and to force the issue on him, proved
to be a boomerang. By re-electing Jackson the people had clearly
expressed their opposition to a renewal of the Bank's charter and
the matter of granting a renewal was absolutely killed with the
election.
Following the election, President Jackson had the funds of
the Government removed from the Bank and placed on deposit in
various State banks, and in 1836 the Bank died a natural death
through the expiration of its charter.
It is doubtful if there is any better means of getting a picture
of the nature of that institution than to read President Jackson's
farewell address of March 4, 1837, of which the following is an
excerpt:
The immense capital and peculiar privileges bestowed upon it (The
Second Bank of the United States) enabled it to exercise despotic sway
over the other banks in every part of the country. From its superior
strength it could seriously injure, if not destroy, the business of any of
them which might incur its resentment: AND IT OPENLY CLAIMED
FOR ITSELF THE POWER OF REGULATING THE CURRENCY
THROUGHOUT THE UNITED STATES. IN OTHER WORDS, IT
ASSERTED (AND UNDOUBTEDLY POSSESSED) THE POWER TO
MAKE MONEY PLENTY OR SCARCE AT ITS PLEASURE, AT ANY
TIME AND IN ANY QUARTER OF THE UNION, BY CONTROL
LING THE ISSUES OF OTHER BANKS AND PERMITTING AN
EXPANSION OR COMPELLING A GENERAL CONTRACTION OF
THE CIRCULATING MEDIUM, ACCORDING TO ITS OWN WILL
The other banking institutionswere sensible of its strength, and they soon
generally became its obedient instruments, ready at all times to execute
its mandates.***
In the hands of this formidable power, thus organized, was also placed
unlimited dominion over the amount of the circulating medium, giving it
the power to regulate the value of property and the fruits of labor in every

89
 quarter of the Union, and to bestow prosperity or bring ruin upon any city
or section of the country as might best comport with its own interest or
policy.****
YET, IF YOU HAD NOT CONQUERED, THE GOVERNMENT
WOULD HAVE PASSED FROM THE HANDS OF THE MANY TO
THE HANDS OF THE FEW, AND THIS ORGANIZED MONEY
POWER FROM ITS SECRET CONCLAVE WOULD HAVE DIC
TATED THE CHOICE OF YOUR HIGHEST OFFICERS AND COM
PELLED YOU TO MAKE PEACE OR WAR, AS BEST SUITED
THEIR OWN WISHES. THE FORMS OF YOUR GOVERNMENT
MIGHT FOR A TIME HAVE REMAINED, BUT ITS LIVING SPIRIT
WOULD HAVE DEPARTED FROM IT.*** LET US ABIDE BY THE
CONSTITUTION AS IT IS WRITTEN, OR AMEND IT IN THE CON
STITUTIONAL MODE IF IT IS FOUND TO BE DEFECTIVE."
Compare the Second Bank of the United States, as described
by that great Democratic President, Andrew Jackson, with that vi
cious private institution, bearing the cloak of a Government name,
known as the Federal Reserve System. And to think that this lat
ter institution was created by a Democratic Administration ! Why,
— if Thomas Jefferson and Andrew Jackson could have turned
over in their graves they certainly would have done so on Decem
ber 23, 1913, when the Federal Reserve Act became law. Again
using the words of Andrew Jackson, the Government has now
"passed from the hands of the many to the hands of the few" and
while "the forms of *****Government" may still remain "its living
spirit" has practically departed from it." Yes —it is time that we
were returning to the Constitution of the United States. It would
also seem that it is about time the Democratic Party was returning
to the principles of Thomas Jefferson and Andrew Jackson. It is
about time that the people again conquered by recovering control
of the Government, as they did during the time of Andrew Jackson.

40
 CHAPTER IV
THE CIVIL WAR PERIOD
Following the termination of the Second United States Bann.,
the major portion of business was again carried on by means of
State bank notes. The next important phase of our monetary his
tory thereafter occurred during the Civil War period.
In aiding in the financing of the War it was decided that the
Government issue its own legal tender notes, which became com
monly referred to as "greenbacks". Three issues of these notes
were authorized. The first issue was authorized by the Act of Feb
ruary 25, 1862, which provided for the issuance of $150,000,000.00
of notes. The next issue was authorized by the Act of July 11, 1862,
for $150,000,000.00 and the third issue by the Act of January 17,
1863, for $100,000,000.00 which issue was increased to $150,000,-
000.00 by the Act of March 3, 1863.* Thus, there never were any
more than $450,000,000.00 United States notes in circulation at
any one time, and, in fact, this amount was never fully in circula
tion at any one time.
The banking interests were bitterly opposed to the issuance of
this type of currency, and their reasons for opposing it were quite
succinctly stated a number of years later (1872) in a circular sent
out by Wall Street bankers to all the banks throughout the Coun
try, which read as follows:
It is advisable to do all in your power to sustain such prominent daily
and weekly newspapers, especially the agricultural and religious press, as
will oppose the issuance of greenback paper currency money, and that you
also withhold patrorage or favors from all applicants who are not willing
to oppose the government issue of money. To repeal the law creating
National Bank Notes, or to restore to circulation the government issue of
money, will provide the people with money, and will therefore seriously
affect your individual profits as bankers and lenders.

When the bankers learned in 1862 that efforts were being made
to have a bill enacted for the issuance of the United States notes,
they conspired in an effort to find some means of discrediting this
type of currency. The original bill provided for the making of ev
ery dollar full legal tender for all debts. However, there were a
number of subservient representatives of the banking fraternity
in the Senate, so the bankers won a battle in the Senate for having
amendments inserted which made certain exceptions in the legal
tender quality of the notes. These exceptions were noted on the
"Dewey, Financial History of the United States, pages 284-288.

41
face of the notes by the infamous trick exception clause, which
reads as follows :
This note is a legal tender at its face value for all debts, public and
private, except duties on imports and interest on the public debt.

This was the sting of death whereby the bankers were enabled
to discredit the greenbacks, and to make a handsome profit on gold.
Being crippled in their usefulness as a legal tender the greenbacks
were made to depreciate in comparison with specie.
The manner in which the bankers profited on gold as a result
of the foregoing exception clause was as follows : Since this clause
excepted the use of the greenbacks by the Government in paying
interest on the public debt, the Government in paying interest
on its bonds had to pay same to the bankers in gold or other
specie. The bankers had a corner on the gold outside the U.
S. Treasury; so when the importers paid the duties on their im
ports to the Government (which under one of the exceptions men
tioned above could not be paid with the greenbacks), they had to
go to the bankers for gold. The bankers made them pay a premium
in greenbacks for the gold coin, which at times exceeded two dol
lars in greenbacks for each dollar of gold coin. The banker with
his bonds then again drew out of the Government the gold as in
terest and was again ready for the next importer who was com
pelled to buy gold. The effect of these exceptions in the greenbacks
therefore, was to increase the tariff on imports, but instead of the
Government getting the increase the bankers got it.
While the greenbacks depreciated in terms of gold, neverthe
less they circulated at par so far as the general run of business
was concerned. However, a different conclusion is apt to be drawn
from a reading of most histories, because of the way in which the
historians, in their over-zealous efforts to discredit greenback cur
rency, play up the depreciation of the greenbacks in comparison
with gold. Greenbacks, U. S. Government fractional notes, national
bank notes, state bank notes and minor coins circulated on a par
ity.* These, in fact, were the only forms of money in actual circu
lation and prices of things in general had to be fixed and considered
in terms of these forms of money. Charles Howell, who lived dur
ing this period, and therefore knew what he was talking about,
stated the following, among other things, in his book on "Civilized
Money" (published in 1895) f:
The greenbacks never in the least depreciated, for they were the
measure of the unit of account in all transactions — they were the measure
of exchangeable values of all commodities; and specie was not in ciroula-
•Kemmerer on Money (1934) by Prof. E. W. Kemmerer, page 66, also see page 62.
tPages 37 and 38.

42
 tion at all from 1862 to 1879. Gold was used by the bankers with which
to gamble, and they appreciated the commercial value of gold to an enor
mous degree — at one time it took $285.00 in greenbacks to buy $100.00 in
gold. But that does not signify that the greenbacks in the least depre
ciated. The government received them at par for bonds the same as it
received gold. No. The greenbacks never depreciated ; and had they been
a full legal tender for all debts, public and private, gold never would have
appreciated and the good people of this nation would have been saved
nearly a billion dollars which flowed into the coffers of the banks which
held the gold before the resumption of specie payments. The battle won
by the bankers on that memorable 25th day of February, 1862, enabled the
bankers to demand and receive gold interest on their bonds held against
the government; and then, to get the gold, import duties were made pay
able in gold. The banks held the gold and, as gold was made exclusive

it,
for certain uses, the bankers were enabled to gamble with and the
people paid the bills.

Thus, the depreciation of the greenbacks in terms of gold was

no more noticeable in every day business than the recent govern
mental change in the price of gold from $20.67 per ounce to $35.00
per ounce.
Of course, not strictly accurate to say that the greenbacks
is
it

did not depreciate in value. All money, in fact, depreciated in value

in proportion to the increase in general prices during that period.
But the same thing happened during and following the World War
when prices doubled and trebled. Has anyone been making any
hullabaloo about the Federal Reserve notes (as well as all other
kinds of money) depreciating in value through rise in prices,
a
during 1918 to 1920, for the purpose of discrediting them on the
ground of depreciation?
Considering the general level of prices in the year 1860 as 100
per cent, the relative course of prices during the Civil War period
was as follows*
:

Year Prices
1860 100
1861 100.6
1862 117.8
1863 148.6
1864 190.5
1865 216.8

Thus, the inflation of prices during that period was not at all
unusual, and was not as great as during the World War period.
The issuance of the greenbacks were not the sole, in fact the ma
if

jor, cause for the inflation of prices. During that period there was
quite an increase in the issuance of State bank notes.f Prof. Dewey
•Dewey, Financial History of the United States, page 294
tDewey, Financial History of the United States, page 292.

48
in his "Financial History of the United States", on page 293,
states that the general rise in prices during the Civil War period
"cannot be attributed alone to the issue of paper currency; other
factors were at work, such as increased taxation and the insatiable
consumption of provisions and materials of war". Under the law
of supply and demand prices can be inflated (in other words will
rise) through an increased demand for goods as well as through
an increase in the supply of money. Thus, it is doubtful if there
would have been much of an increase in prices except for the other
forces at work at the time, and this would have been particularly
true if all private bank issues had been prohibited, as should be
done at all times. In this connection, attention is further called to
the fact that the big increase in prices, as shown by the above
chart, did not take place until 1864 and 1865, which was two and
three years after the issuance of the greenbacks.

Prior to passing on to a consideration of other matters in

volved in our monetary history, one more thing should be noted.
The history of the greenbacks would not be complete without con
sidering the following statement contained in a letter written to
Col. Edmund Taylor in December, 1864 :
Chase thought it a hazardous thing, but we finally accomplished it and
gave ito the people of this Republic, THE GREATEST BLESSING THEY
EVER HAD— THEIR OWN PAPER TO PAY THEIR OWN DEBTS.
That statement could have been written by only one man. The
man who penned it could only have been occupying one position
when it was written. It was, in fact, written by none other than
Abraham Lincoln, President of the United States !
The other outstanding monetary event of the Civil War period
was the enactment of the National Banking Act. When Congress
met in December, 1862, it was confronted with a deficit of $276,-
900,000.00.* It was thought that the Government needed the aid
of the bankers during that crisis. The price which the large finan
ciers demanded for their aid was the enactment of the National
Banking Act, which was passed by Congress, and was approved by
the President on February 25, 1863. One writer has referred to
this as the first and only known instance of the bribing of a Presi
dent of the United States. Such reference, however, has been made
without casting any aspersion whatsoever upon the President, but
solely as one means of calling attention to the character of the pa
triotism of the large financiers, which is primarily, if not entirely
in most cases, dollar "patriotism". President Lincoln was con
fronted with one of two evils. Either he had to accede to the
*Dewey, Financial History of the United States, page 310

44
bankers' demands or confront the possibility of losing the War and
having the Union permanently disunited. He apparently felt that,
in the interests of the general welfare, the former was the lesser of
the two evils.
The National Banking Act provided for the chartering of pri
vately owned National Banks. The Act granted to these banks the
privilege of issuing bank notes to circulate as money by depositing,
with the Treasurer of the United States, Government bonds, upon
which the banks would, nevertheless, continue to draw interest,
thus drawing interest from two sources — from the Government on
the bonds and from the public upon the bank notes loaned out as
money. Under this Act the banks were able to issue bank notes to
the extent of 90 per cent of the market value (and not merely the
gold value) of the bonds so deposited (not exceeding, however, 90
per cent of the par value) f.
The international bankers in their efforts to bring about the
enactment of the National Banking Act distributed among the other
banks of the Country, in the year 1862, the circular known as the
Hazard Circular, which contained the following:
Slavery is likely to be abolished by the war power and chattel slavery
abolished. This I and my European friends are in favor of, for slavery
is but the owning of labor and carries with it the care of the laborers
while the European plan, led on by England, is that capital shall control
labor by controlling wages.
The great debt that capitalists will see to it is made out of the war,
must be used to control the volume of money. To accomplish, this the
bonds must be used as a banking basis.
We are now waiting for the Secretary of the Treasury to make this
recommendation to Congress.
It will not do to allow the greenback, as it is called, to circulate as
money any length of time, as w€ cannot control that.
But we can control the bonds and through them the bank issues.

The development of the National Banking System throughout

the entire Country was rather slow at firsts and the original Act
was considered defective in some particulars. The Act was recast
by the law of June 3, 1864, which among other things made it more
convenient for the conversion of State banks into national corpora
tions. As a further restraint on State Banks and as a stimulus
for reorganization, the Act of March 3, 1865, was passed which
placed a tax upon State bank note issues of 10 per cent annually,
beginning with July 1, 1866. This Act soon forced State bank
notes into permanent retirement.
It is doubtful if anyone can explain the benefits which the
tDewejr, Financial History of the United States, page 326.

45
bankers were able to derive from the enactment of the National
Banking Act during the early period of the system, any more
clearly than the Bankers of that period themselves. On June 25th,
1863, the London banking firm of Rothschild Brothers wrote the
following letter to the banking firm of Ikleheimer, Morton and
Vandergould, which had headquarters at No. 3 Wall Street,
New York, U. S. A. :
A Mr. John Sherman has written us from a town in Ohio, U. S. A.,
as to the profits that may be made in the National Banking business under
a recent act of your Congress, a copy of which act accompanied his letter.
Apparently this act has been drawn upon the plan formulated here last
summer by the British Bankers' Association and by that Association rec
ommended to our American friends as one that if enacted into law, would
prove highly profitable to the banking fraternity throughout the world.

Mr. Sherman declares that there has never before been such an oppor
tunity for capitalists to accumulate money, as that presented by this act
and that the old plan, of State Banks is so unpopular, that the new
scheme will, by mere contrast, be most favorably regarded, notwithstanding
the fact that it gives the National Banks an almost absolute control of
the National finances. "The few who can understand the system," he says,
"will either be so interested in its profits, or so dependent on its favors,
that there will be no opposition from that class, while on the other hand,
the great body of the people, mentally incapable of comprehending the tremen
dous advantages that capital derives from the system, will bear its burdens
without complaint, and perhaps without even suspecting that the system is
inimical to their interests."
Please advise us fully as to this matter, and also, state whether or not
you will be of assistance to us, if we conclude to establish a National
Bank in the Qty of New York. If you are acquainted with Mr. Sherman
(he appears to have introduced the National Banking act), we will be glad
to know something of him. If we avail ourselves of the information he
furnished, we will of course make due compensation.
Awaiting your reply, we are, etc.
Ikleheimer, Morton & Vandergould replied by a letter dated
July 5th, 1863, as follows:
We beg leave to acknowledge the receipt of your letter of June 25th,
in which you refer to a communication received from the Hon. John
Sherman of Ohio, with reference to the advantages and profits of an
American investment, under the provisions of our National Banking Act.
The fact that Mr. Sherman speaks well of such an investment, or of
any similar one, is certainly not without weight, for that gentleman pos
sesses in a marked degree, the distinguishing characteristics of the success
ful modern financier. His temperament is such that whatever his feelings
may be they never cause him to lose sight of the main chance. He is
young, shrewd and ambitious. He has fixed his eye upon the presidency
of the United States, and is already a member of Congress. He rightly
thinks he has everything to gain both politically and financially (he has
financial ambitions too), by being friendly with men and institutions hav
ing large financial resources, and which at times, are not too particular
in their methods, either of obtaining governmental aid, or protecting

46
 themselves against unfriendly legislation. We trust him here implicitly.
His intellect and ambition combine to make him exceedingly valuable to us.
Indeed, we predict that if his life be spared, he will prove to be the best
friend the monied interests of the world have ever had in America.
As to the organization of a National Bank here, and the\ nature and profits
of such an investment, we beg leave to refer to our printed circular enclosed
herein. Inquiries by European capitalists, concerning this matter, have been
so numerous, that for convenience we have had our views with rgard to it put
into printed form.
Should you determine to organize a bank in this city, we shall be glad
to aid you. We can easily find financial friends to make a satisfactory di
rectory, and to fill any official positions not taken by the personal repre
sentatives you will send over.

The printed circular referred to in the foregoing letter was

follows :
We have had so many inquiries of late as to the method of organizing
national banks under the recent act of congress, and as to the profits that
may reasonably be expected from such an investment, that we have
thought it best to issue this brief circular as an answer to all questions of
our friends and clients:
1. Any number of persons, not less than five, may organize a Na
tional Banking Corporation.
2. Except in cities having 6,000 inhabitants or less, a national bank
can not have less than $1,000,000 capital.
3. They are private corporations organized for private gain, and select
their own officers and employes.
4. They are not subject to the control of the state laws, except as
congress may from time to time provide.
5. They can receive deposits and loan the same for their own benefit.
6. They can buy and sell bonds, and discount paper and do a general
banking business.
7. To start a national bank on the scale of $1,000,000 will require the
purchase of that amount (par value) of U. S. Government bonds.
8. U. S. Government bonds can now be purchased at SO per cent dis
count, so that a bank of $1,000,000 capital can be started at this time with
only $500,000.
9. These bonds must be deposited with the U. S. Treasurer at Wash
ington, as security for the national bank currency, that on the making of
the deposit will be furnished by the government to the bank.
10. The U. S. Government will pay 6 per cent interest on the bonds,
in gold, the interest being paid semi-annually. It will be seen that at the
present price of bonds. the interest paid by the government, will of itself
amount to 12 per cent in gold, on all the money invested.
11. The U. S. Government, under the provisions of the national bank
ing act, on having the bonds aforesaid deposited with its treasurer, will
on the strength of such security, furnish national currency to the bank
depositing the bonds, to the amount of 90 per cent of the face of the
bonds, at an annual interest of only ONE per cent per annum. Thus the
deposit of $1,000,000 will secure the issue of $900,000 in currency.
12. This currency is printed by the U. S. Government in a form so

47
 like greenback money, that many people do not detect the difference, al
though the currency is but a promise of the bank to pay — that is, it is
the bank's demand note, and must be signed by the bank's president before
it can be used.
13. The demand for money is so great that this currency can be read
ily loaned to the people across the counter of the bank at a discount at
the rate of 10 per cent at 30 to 60 days' time, making about 12 per tent
interest on the currency.

14. The interest on the bonds, plus the interest on the currency which
the bonds secure, plus the incidentals of the business ought to make the
gross earnings of the bank amount to from 28 to 33 1/3 per cent. The
amount of dividends that may be declared will depend largely upon the
salaries the officers of the bank vote themselves, and the character
and rental charges of the premises occupied by the bank as a place of
business. In case it is thought best that the showing of profits should
not appear too large, the now common plan of having the directors buy
the bank buildings and then raising the rent and the salaries of the presi
dent and cashier may be adopted.
15. National banks are privileged to either increase or contract their
circulation at will and, of course, can grant or withhold loans as they may
see fit. As the banks have a national organization, and can easily act to
gether in withholding loans or extending time, it follows that they can by
united action in refusing to make loans, cause a stringency in the money
market and in a single week or even in a single day cause a decline in all
the products of the country. The tremendous, possibilities of speculation in
volved in this control of the money of a country like the United States, will
be at once understood by all bankers.

16. National banks pay no taxes on their bonds, nor on their capital,
nor on their deposits. This exemption from taxation is based on the theory
that the capital of these banks is invested in U. S. securities, and is a re
markable permission of the law.

17. The secretary may deposit the public money with any bank at
will, and to any amount. In the suit of Mr. Branch against the United
States, reported in the 12th volume of the U. S. Court of Claims Reports,
at page 287, it was decided that such "Government deposits are rightfully
mingled with the other funds of the bank, and are loaned or otherwise
employed in the ordinary business of the bank, and the bank becomes the
debtor of the United States precisely as it does to other depositors.

Requesting that you will regard this circular as strictly confidential,

and soliciting any favors in our line that you may have to extend, we
are, etc.

The great profits derived as a result of the trick exception

clause in the greenbacks and as a result of the National Banking
Act, are what really and firmly established that powerful financial
monster known as Wall Street. Secretary of the Treasury Salmon
P. Chase had urged upon President Lincoln and Congress the
passage of the National Banking Act and was thereby quite instru
mental in bringing about its enactment. After seeing this law in
operation for some time and realizing the evil effects that flow
48
therefrom, Mr. Chase is alleged to have made the following
statement:
My agency in procuring the passage of the National Bank Act was
ithe greatest financial mistake of my life. It has built up a monopoly that
affects every interest in the country. It should be repealed. But before
this can be accomplished the people will be arrayed on one side and the
banks on the other in a contest such as we have never seen before in
this country.

Abraham Lincoln realized shortly before his death the evil

effects which were to flow from the creation of the National Bank
ing System as revealed by a letter which he wrote on November
21, 1864, to William P. Elkin, wherein he stated the following :
We may all congratulate ourselves that this cruel war is nearing its
close. It has cost a vast amount of treasure and blood. The best blood
of the flower of American youth has been freely offered upon our coun
try's altar that the Nation might live. It has been indeed a trying hour
for the Republic; but I see in the near future, a crisis approaching that
unnerves me and causes me to tremble for the safety of my country.
As a resuk of the war, corporations have been enthroned and an era
of corruption in high places will follow, and the money power of the
country will endeavor to prolong its reign by working upon the prejudices
of the people until all wealth is aggregated in a few hands, and the
Republic is destroyed. I feel at this moment more anxiety for the safety
of my country than ever before, even in the midst of war. God grant that
my suspicions may prove groundless.

Yes, — it is time that we were returning to the Constitution!

It would also seem that it is about time the Republican Party
returned to the principles of Abraham Lincoln, from which it has
almost entirely digressed!

49
 CHAPTER V*
THE CRIME OF 73 AND THE GOLD STANDARD
The gains which had been acquired through the enactment of
the National Banking legislation, however, were still insufficient
to satisfy the bankers, particularly were they insufficient to satisfy
the money lords of Great Britain, whose greed did not stop at
international boundary lines. Their greed, in fact, is never satis
fied. In 1873, the powerful banking interests of England sent
Mr. Ernest Seyd of England with $500,000.00 over to this Country
to bribe several members of our Congress to engineer the demone
tization of silver in this Country. In many British possessions
throughout the world the coin of the realm consisted of silver. By
hammering down the price of silver bullion in this Country through
demonetization of the silver, these British financiers saw an oppor
tunity of getting silver cheap in this Country and then sellng it at
a huge profit in other Countries. Also from the standpoint of
banking in this Country, the bankers were interested in reducing
the basic money to as small an amount as possible and then of
forcing the Country to do business on their costly bank credit.
Furthermore, by having the supply as low as possible, they saw
that it would be easier for them to gain complete control of it and
then to manipulate it as best suited their purposes. At practically
every session of Congress a new coinage Act had been enacted.
Those engineering this diabolical demonetization of silver decided
upon the plan of having a few key men in Congress bring about
this through deception and misrepresentation and through keeping
the other members of Congress ignorant of what was happening.
The new Coinage Act of 1873: was stealthily drafted so as to leave
out any provision for the free coinage of silver. When those pre
senting the bill in Congress called it up in Congress, they repre
sented to the other members that it was just the usual Coinage
Bill being enacted for the purpose of meeting minor changes
requested by the Treasury Department and that no material
changes were being made. Sometime afterwards when it became
generally known what had happened, Congressman after Congress
man declared (and the testimony of many of them appears in the
Congressional Record) that he did not know that this Act had
practically abolished silver as money and it is apparent from their
statements that a majority of Congress did not know what h"d
•For more details see: "A Tale of Two Nations" by W. H. (Coin) Harvey, and "Spiktns; toe
Gold" by Andrae B. Nordskog.

50
been done, and would not have stood for it had they known. Judge
Kelley, a Congressman from Pennsylvania, stated in Congress, and
his statement appears in the Congressional Record of the 45th
Congress, Second Session,* among other things, the following:
I was ignorant of the fact that it (the revision of the Coinage Act
of 1873) would demonetize the silver dollar or of its dropping the silver
dollar from our system of coins as were those distinguished Senators,
Messrs. Blaine, and Vorhees, who were then members of the House,
and each of whom, a few days since, interrogated the other: "Did you
know it was dropped when the bill passed?" "No," said Mr. Blaine.
"Did you?" "No," said Mr. Vorhees, "I do not think there were three
members in the House that knew it."

Senator Beck of Kentucky also stated in a speech appearing

in the Congressional Record, 45th Congress, f the following :
It (the bill demonetizing silver) never was understood by either
House of Congress. I say that with full knowledge of the facts. No news
paper reporter — and they are the most vigilant men I ever saw in obtaining
information — discovered that it had been done.

Even the President of the United States, General Grant, who

signed the bill, did not discover at first that the bill' he had signed
had demonetized silver. Some months after it was signed he
expressed surprise that silver was not "coming in to the market
to supply the deficiency in the circulating medium." Demonetiza
tion of silver by this means has frequently been referred to as the
"Crime of '73." It aided very materially in creating a shortage of
money, in causing panics and hard times and in producing great
distress among the people of our Country. After it became gen
erally known that silver had been demonetized in this manner,
efforts were made to get a law enacted providing for remonetization
but by that time the bankers had spread so much propaganda
throughout the Country in behalf of the gold standard and had
been able to exercise so much influence that the efforts in this
behalf failed.
During the period that followed this crime of 1873, the money
question became a very live topic and played an important part
in political campaigns. The Bryan-McKinley campaign of 1896
was fought out over the question of the free coinage of silver on
a 16 to 1 basis with gold. The Country came close to electing
William Jennings Bryan as President. Mr. Bryan advocated the
remonetization of silver on the foregoing basis. Except for the
vicious pressure that the money trust applied to prevent Bryan's
election, William Jennings Bryan, in all probability would have
been elected. Factory workers were informed that if Bryan was
•Vol. 7, Part 2, page 1605.
tVol. 7. Part 1, page 260.

51
elected that they would not need to return for work on the day
following the election. Notwithstanding, the fact that Bryan was
not elected, thousands of these factory workers were discharged
after the election. This is only one example, however, of the
trickery and methods which were used by the banking interests,
and those under their control, to defeat Bryan and the common
judgment of the people.

The Gold Standard Act of 1900

The culmination of the efforts towards fully establishing the

gold standard came a few years later. The financial measure
known as the "Gold-Standard Act" was passed by the Fifty-sixth
Congress, and signed by the President March 14, 1900. By this
Act the dollar, consisting of 25.8 grains of gold, nine-tenths fine,
was made the standard of value of our monetary system, and the
duty was imposed on the Secretary of the Treasury of maintaining
at a parity with that standard all forms of money issued or coined
(greenbacks, silver dollars, etc.). For this purpose the Secretary
was authorized to set aside $150,000,000.00 in gold coin and bullion
from the general funds of the treasury as a reserve fund with
which to redeem United States notes and treasury notes issued
under the Act of 1890. If at any time this fund were to fall below
$100,000,000.00 and the Secretary was unable to replenish it in
the usual manner he was authorized to borrow money by the issu
ance of bonds until the fund was restored to $150,000,000.00. The
Act did not affect the legal tender quality of the silver dollar
(although the free coinage of silver had previously been stopped by
the crime of '73 and thereby demonetized from a practical stand
point), but provided for the retirement of the treasury notes of
1890 as fast as silver bullion should be coined into dollars and
silver certificates issued in amounts equal to the treasury notes so
retired. The Act also amended the national banking law by pro
viding for the organization of banks in places of three thousand
inhabitants or less with a capital of $25,000.00 instead of
$50,000.00, as formerly ; and by allowing banks to issue circulation
on the bonds deposited up to the par value of the bonds, instead
of ninety per cent of their face value, as before.

52
 CHAPTER VI
THE FEDERAL RESERVE SYSTEM

The next matters of major importance in our monetary history

are associated with the Federal Reserve System. In 1907, there
was a bankers' panic, which arose in New York, where it did the
most damage. George W. Armstrong in "The Crime of '20" on
page 14, states that this panic resulted from a lack of currency.
This panic gave rise to the creation by Congress in 1908 of a
National Monetary commission with authority to investigate mone
tary problems in general. Senator Nelson W. Aldrich and Con
gressman Edward B. Vreeland, a Wall Street banker, were placed
in charge of this Commission. They drafted and presented to
Congress the famous Aldrich Bill. This called for the establish
ment of a central bank at Washington, styled the National Reserve
Association, with 15 branches to serve the different sections of
the Country. The central bank was to be governed by a board of
46 directors, and the bill required that at least 15 should not be
bankers. The bill provided that all demand deposits and circulat
ing notes of the Reserve Association should be covered to the
extent of 50 per cent by a reserve of gold or other lawful money.
The bill quite avowedly stood for a banker controlled central bank
ing system, with the right to issue notes to circulate as money.
The banking interests supported this bill but the late Con
gressman, Charles A. Lindbergh, the father of the famous Colonel
Lindbergh, very strenuously opposed the passage of the bill, and
so completely exposed its evils, with the aid of several other pro
gressives, including the late Senator Robert M. LaFollette, Sr.,
that the bill was defeated.
After the election of President Woodrow Wilson, however, a
new bill embodying the principle of the Aldrich bill, but containing
a few changes, including the name, was introduced in Congress,
for the creation of the Federal Reserve System. The large banking
interests having in their minds a fresh recollection of the defeat
which they had met in attempting to sponsor the Aldrich bill,
realized that the new Federal Reserve bill would have a better
opportunity of being passed if they openly opposed its enactment
instead of openly supporting it. As alluded to in another part of
this book, the Federal Reserve Act was approved and became law
on December 23, 1913.
It is not the purpose of this; book to go into the intricacies of
53
the Federal Reserve System.* However, the general nature of the
institution and some of its manipulations should be pointed out.
The Act provided for the establishment of twelve Federal
Reserve Banks. The United States was divided into twelve dis
tricts and one bank has been established in each district. General
control over the system is vested in the Federal Reserve Board,
which consists of seven members. This control includes the power
to limit and decrease the circulation of Federal Reserve notes.
The original bill provided that the seven directors should include
the Secretary of the Treasury, the Secretary of Agriculture, the
Comptroller of the Currency, and four other persons to be
appointed by the President with the consent of the Senate. At
least, one of the group of four was to be a person experienced in
banking. Under this arrangement it was thought that at least
three members would almost certainly be bankers, namely, the
Secretary of the Treasury, the Comptroller of the Currency and
the one banker member specified in the group of four. This was
unsatisfactory to the bankers, particularly the Wall Street group.
They wanted to be sure that at least a majority (at least 4) would
be bankers. As a result of their insistence! the law was enacted
so as to drop the Secretary of Agriculture as a member, and so as
to provide that the Board should consist of the Secretary of the
Treasury, the Comptroller of the Currency, and five members to be
appointed by the President with the consent of the Senate, at least
two of whom shall be persons experienced in banking or finance.
Thus, banker domination of the System was virtually insured
under the law, and that domination has always been in control,
although, as previously pointed out, the bankers are the most
improper persons on earth for controlling the issuance of money,
because of the direct antagonism of interest in that respect to the
interests of the producers. It may be, however, that there should
be banker representation for the purpose of furnishing banker
experience and banker advice, but there should be no banker
domination.
The Act provided for the ownership of the stock in the Fed
eral Reserve Banks by the member banks. The member banks are
privately owned national and state banking institutions which are
members of the System. All national banks are required to be
members. Thus, the Act set up a privately owned system as well
as a banker dominated system, notwithstanding the fact that it
is under the nominal control of the Government and has all the
appearances of a Simon-pure Government institution.
•See The Federal Reserve System— A Special Privilege, by Charles R. Adair; The Crime of
'20, by George W. Armstrong.
tArmstrong, The Crime of '20, page 31.

64
 The Act originally required a 40 per cent reserve in gold for
the issuance of Federal Reserve notes. Recent legislation of the
present Roosevelt Administration has changed this; so that today
there is virtually no limit on the amount of Reserve notes which
can conceivably be issued. While the Reserve notes have always
been backed by the Government and have circulated freely as
money, nevertheless, they have not always been full legal tender.
However, an Act was approved on June 5, 1933, which makes all
Reserve notes as well as all National Bank notes full legal tender
for all debts, public and private. Thus the limit has been reached
in authorizing private banks to issue money. The Federal Reserve
notes and National Bank notes have constituted the major portion
of the money which has been in circulation during recent years.
One of the most devastating manipulations of the Federal
Reserve System occurred during the year 1920. On May 18, 1920,
the Federal Reserve Board and the Federal Advisory Council met
in Washington, at which time resolutions were passed, ordering
the pursuance of a drastic policy of deflation for the avowed pur
pose of reducing prices and wages. While most of the members
of the Federal Reserve Board, on May 18, 1920, were of a banker
frame of mind and were in full accord with the policy of deflation
then adopted, nevertheless, one of the members, Mr. John S.
Williams, the Comptroller of the Currency, was not in accord with
the policy and dreaded the results which he knew (as did the other
members of the Board) would follow. At the Goldsborough hear
ing in Congress on April 14, 1932, one very reliable witness is
reported to have testified that he went to Mr. Williams in February
of 1920, and asked Mr. Williams when the Federal Reserve Board
was going to start to deflate. Mr. Williams, with tears in his eyes,
said they were going to begin on May 20th. Mr. Williams is
alleged to have told the Federal Reserve Board "you will bust a
great many Country banks," and he was answered, "It don't make
a damn bit of difference; there are too many of them already."
He then told the Board, "you are going to ruin a lot of farmers
throughout the Country," to which he was answered, "Well, they
have made so much money they won't work — let them bust." This
action of the Federal Reserve Board has been referred to as the
"Crime of '20." Within a period of approximately a year there
after, the amount of Federal Reserve notes in circulation was
reduced by a billion dollars or more. In addition to that, loans
were called and credit was drastically contracted, thus creating
the depression in 1921. During that depression hundreds of banks
in the West were broken and thousands of farmers were forced
into bankruptcy. From the year 1922 to 1928, the deflation policy
66
was released somewhat although less among the farmers than in
the eastern financial centers. As 1929 approached, money and
credit was denied more and more to the farmers and to the channels
of trade and was dumped more and more into Wall Street to help
the greedy speculators. As Mr. Leslie Erickson has stated in his
book entitled "The Bankers' Racket," "Billions of dollars for the
speculator but not a dollar for the farmer, the toiler and the indus
trialist." Finally, however, the screws were placed on the specu
lator. The stock market crash of 1929 ensued and deflation again
became the order of the day, creating, prolonging and aggravating
the so-called depression from which we are still suffering.
The present Federal Reserve System is a flagrant case of the
Government's conferring a special privilege upon bankers. The
Government hands to the banks its credit, at virtually no cost to
the banks, to be loaned out by the bankers for their own private
profit. Still worse, however, is the fact that it gives the bankers
practically complete control of the amount of money that shall be
in circulation. Not one dollar of these Federal Reserve notes gets
into circulation without being borrowed into circulation and with
out someone paying interest to some bank to keep it circulating.
Our present money system is a debt money system. Before a
dollar can circulate, a debt must be created. Such a system
assumes that you can borrow yourself out of debt. Trying to
operate under such a system has resulted in our people and the
Country getting deeper and deeper in debt until today it is ques
tionable whether all of the tangible property in the Country equals
in value the total par value of our public and private debts, which,
it has been estimated, are in excess of $200,000,000,000.00.
Our banker money system has in the past forced a money
shortage, as the basic forms of money under the system, such as
gold, silver, etc., have been seized by the banks and used as a basis
for the issuance of National Bank and Federal Reserve notes.
Under the present Roosevelt Administration practically all the
monetary gold has been seized by the Government. As matters
stand, practically no money gets into circulation which is not
loaned into circulation through the Federal Reserve and National
Banks. The Government by helping create a money shortage and
then handing over to the banks National Bank and Federal Reserve
Currency at the cost of printing, to be reloaned to the public at
high rates of interest, has become a party to the worst, the wicked
est and most atrocious form of usury conceivable. Imagine making
the people pay a usurious tribute to the; banks for the use of their
own money! The Biblical injunctions against usury have been
56
 flaunted in the most contemptuous manner. In Leviticus 25 :35 to
37, God has commanded :
And if thy brother be waxen poor, and fallen in decay with thee;
then thou shalt relieve him: yea, though he be a stranger, or a sojourner;
that he may live with thee.
Take thou no usury of himi, or increase : but fear thy God ; that thy
brother may live with thee.
Thou shalt not give him thy money upon usury, nor lend him thy
victuals for increase.

It is an established historical fact that the term "usury" orig

inally meant the charging of any interest on the use of money
whatsoever, and that was its meaning at the time of the transla
tion of the Bible into English. It is doubly apparent, however,
that the charging of any interest was intended to be condemned
by the above Biblical admonition by reason of its positive injunc
tion against the taking1 of "increase" on the use of money. Usury
is also strongly condemned in many other parts of the Bible.
No doubt the charging of interest on money during the pe
riods of time covered by the Bible was unnecessary and was a
vicious and defenseless means of exploitation. Those were periods
when barter and exchange was used in carrying on a large portion
of business. Those periods were during an age of scarcity, an age
during which life was centered around the community and periods
of simple economic life and existence. The various parts of the
Bible were written in view of the economic backgrounds of the
different periods during which they were written. Whether it is
practical, during the present machine age under which we have
a mammoth and varied population, and a complex and intricate
economic system, to do away entirely with the charging of interest,
is a matter which cannot be treated and covered in a work of this
sort. Nevertheless, the same principle holds good today which was
invoked then. What was sought to be condemned was exploitation.
Exploitation is as bad today, and will be as wicked tomorrow, as
it was then.
It is difficult to understand how we can class ourselves as a
Christian and Godly civilization when we pursue as a Nation a
course such as this. Our banker money system is a great usury
conspiracy. It makes usury an inherent part of our money system.
It is economically unsound, and is a wicked, vicious, and defense
less method of exploitation. It is contrary to the laws of reason, to
the laws of nature and to the laws of God. Such a violation of the
laws of nature and of God could only have resulted in bringing the
great curses upon our civilization known as "depressions".
It is at least difficult to see, however, how the ordinary person

57
 can be condemned for taking interest on money while the present
money system and system of exploitation continues. With usury
being an inherent part of our money system the average person is
practically forced to follow suit. A money stringency is created
and he is compelled to borrow and pay interest on what he borrows.
When he has a surplus on hand he is forced as a matter of protec
tion against old age and the vicissitudes of the present system to
collect interest on his loans. When he reaches old age or is in
capacitated, his savings are very apt to be too small to warrant
living on the principal, and particularly in the face of the uncer
tainties of the duration of his old age. On the other hand, if he
places any money with an insurance company for an annuity, dur
ing old age or incapacity, his funds are automatically loaned out
. at interest for him. Thus, so long as the present system endures
the individual is virtually compelled to engage in usury to its full
est extent. Furthermore, no condemnation of the small individual
bank and banker is intended by the remarks herein contained.
They perform a useful purpose under the system as it now exists,
and many of our small bankers are men of the highest character
in our communities. Upholding the continuance of the present sys
tem, which forces usury to become an inherent part of our every
day living, is a violation of the ordinances of God ; — not the living
under such a system, and the carrying on, with virtual lack of
choice, thereunder!

The present Roosevelt Administration enacted legislation dur

ing the first year of its existence providing for the revaluation of
gold, making it possible, in using gold as a base, to issue more cur
rency against the gold held by the Government. Notwithstanding
this fact and notwithstanding the dire need for more money in cir
culation and the issuance by the Government of more and more tax
free securities, the Administration has failed to exercise the power
granted to it by the foregoing legislation for issuing more cur
rency. In fact, Senator Thomas of Oklahoma called attention on
the floor of the Senate one year after the law went into effect that
there was then less money in actual circulation than when the law
went into effect. In other words, the policy of the Administration,
is like preceding administrations, to do everything possible by
means of bonds, bonds and bonds. President Franklin D. Roosevelt
went into office vowing to drive the money changers from the
temple ; but instead of doing so he turned the "temple" almost com
pletely over to them. He has given the usurers more tax free se
curities than any President, during peace time, in history. He has
printed bonds instead of currency at a time when there has been
as great a need for more currency as at any time in history, if
68
not greater. It seems doubtful if the President was ever in actual
sympathy with the legislation. To quiet those who sponsored the
legislation he permitted it to be enacted, but reserved the power
of making use of it and has then just failed to do so. His Adminis
tration has made a record for producing one inconsistency after
another. He has played the part of the typical politician who kids
and tries to please everyone, but who in the end satisfies no one.
He has temporized, qualified and impotentized almost everything
that held forth some real hope. Having been born with a gold
spoon in his mouth and in a banker environment, it is difficult to
see how much could have been expected from him, which would
have worked out for the benefit of the masses. One thing of real
value has occurred, however, under the present Administration.
That was the passage of the Joint Resolution of Congress, of June
•
5, 1933, which declared all clauses making notes, bonds and other
contracts payable in gold coin, illegal; and the subsequent uphold
ing of same by the Supreme Court in the Gold Clause cases herein
before referred to. These "gold clauses" in notes, bonds, etc., were
trick clauses which would have produced the same results during
stringent circumstances which were produced by the trick excep
tion clause in the greenbacks. If the gold clauses could not have
been invalidated the Constitutional power of Congress over money
would have been rendered impotent. These clauses were an attempt
to deprive Congress of its power to prescribe legal tender. They
could have been used to embarrass the Government and to depre
ciate and discredit paper currency in the same subtle manner which
the financial racketeers have employed in the past. With the up
holding of the constitutionality of the foregoing Joint Resolution
by the Supreme Court, the Administration was plaeed in a position
to proceed safely with providing the Country with some real mone
tary reform. The Administration has revealed usurious tendencies
and sympathies by refusing to exercise its power, and by balking
every other attempt to provide the Country with direly needed ad
ditional currency, as demonstrated by the President's veto of the
Patman Bill for the payment of the soldiers' adjusted compensation
with new currency and by his resisting the new currency features
of the Frazier-Lemke farm mortgage refinancing bills.
In closing this brief review of our monetary history, including
some of the bald statements of the bankers of the past, it is only
fitting to note that the effrontery displayed by the declarations of
the bankers of the past has only been surpassed by the blundering
statements of some of the members of the banking fraternity of
the present. The President of the Pennsylvania Bankers' Associa
59
tion, Frank F. Brooks, while being carried away with his own elo
quence during a recent speech, declared :
I submit td you that the first business of the world today is to arm
its people wholesale with a few simple economic facts, and teach them
to believe those facts as they believe in their God.
Teach them to believe that to assail these facts is akin to challenging
the honor of their mothers.

Then Mr. Brooks proceeded to enumerate "several indisputable

facts" and among them he listed the following :
That neither troth nor logic can possibly support any accusation that
banking, with its long, proved and undisputed record of contribution to,
arid co-operation with, the economic progress of America, merits the
wholesale indiscriminate challenge to its morality, its economics and gen
eral status as a tried and true public servant.
That the casualty list of recent years reached its proportions — not
through falsity of bankers to their trusts — not through ignorance of sound
principles, but through falsity of public conception about the elementary
rules of banking.

Such nonsense! And notwithstanding the following apparent,

and commonly accepted fact, pointed out in the following words of
the late Will Rogers :
Ihave asked prominent men in America this question, "What group
have been more responsible for this financial mess. The Farmers?
Labor? Manufacturers? Tradesmen, or who?" And every man, Henry
Ford, Garner, Newt Baker, Borah, Curtis, Barney Baruch, every one of
'em without a moment's hesitation, said, "Why, the big bankers."

It is somewhat of a fashion, when anyone complains about

conditions in this Country or advocates any change, for some half
baked, Wall Street influenced, wiseacre to say : "Go over to Europe
and see how conditions are there, if you don't like it here." That is
the reason why many of us advocate change. We do not want to
continue getting nearer and nearer to the conditions of Europe.
Some of the causes for our nearing those conditions are some of
the systems which we borrowed from Europe years ago. We did
not get ourselves into bad economic conditions as soon here as they
did in Europe because those systems have been in operation in
Europe much longer than here, and our Country has been a newer
Country — one that has had many resources which it has taken time
to exploit. Our banker money system has been borrowed from
Great Britain and patterned after the Bank of England. It is the
same system which England used in exploiting our early colonies,
as well as its other colonial possessions. Our banker money system,
whereby the Government hands the money to our financial lords
and then permits them to collect tribute on the money from the
public, has been likened to the old feudalistic land system of Eng
land, whereby the land was divided among the various feudalistic

60
lords and by them loaned or let out to the people for high tribute.
The latter system became so oppressive to the people that it was
finally destroyed. It is time that we were destroying our oppressive
feudalistic banker money system. It is time that we were getting
back to the American (Constitutional) system of exclusive govern
ment issue and control over money!

61
 TABLE OF CONTENTS

Chapter Pw
Preface 3

Introduction
Preliminary Statement ^

How the Value of Money Is Changed..- 7

The Constitutional Power for the Regulation of the

Value Money 11

The Effects of a Fluctuating Money System 11

The Effects of Inflation and Deflation on Labor 13

Metallic Standards 14

Some Inflationary Disasters Cited in Support of

Metallic Standards 17

Gold Standard Advocates and Honest Money Opposition 19

The People Must Think for Themselves 20

I. The Colonial Period 21

II. The Revolutionary Period 30

III. The First and Second United States Banks 35

IV. The Civil War Period 41

V. The Crime of '73 and the Gold Standard 50

The Gold Standard Act of 1900 52

VI. The Federal Reserve System 53