The Gold Standard Before the Civil War | Murray N. Rothbard

A lecture presented by Murray N. Rothbard at the Ludwig von Mises Institute’s first conference, “The Gold Standard, An Austrian Perspective,” held in Washington, DC; November 16-17, 1983.

Source: The Gold Standard Before the Civil War | Murray N. Rothbard – YouTube

http://www.readrothbard.com/the-gold-standard-before-the-civil-war-murray-n-rothbard

TRANSCRIPT
00:00
the my gentle theme today is the gold
00:05
standard American history and banking in
00:08
American history the and by the way
00:12
approaches the several myths which have
00:14
been propounded by most economic a story
00:16
as if not all I wouldn’t say all the
00:18
most dental recent years and the 22 most
00:24
important bits that I want to focus on
00:25
is the first one is that the which
00:30
you’ve all probably heard if you read
00:32
about colonial monetary history is that
00:35
the colonial America suffer from a great
00:38
shortage of species shortage of gold and
00:40
silver and therefore because of the
00:44
shortage colonial governments had to
00:46
print lots of paper money to make up for
00:49
the steeps deficiency that’s as 11 Miss
00:56
Jessica we will examine the second myth
00:59
which is a whole has a whole bunch of
01:00
subheads which will take me more than
01:03
enough time you go into as the is the
01:06
myth of the central banks in the united
01:07
states have the role of the central
01:09
bank’s has always been to restrain the
01:11
evil expansionary impulses of the and
01:16
tendencies of private banks and the
01:19
private banks are free banks if they’re
01:21
allowed their head tend to inflate too
01:23
much and therefore you need the central
01:25
bankers to the wise patriotic patron or
01:29
on high or God out of the machine to fix
01:33
things up to control them and to
01:35
moderate them restrain their
01:37
expansionary tendencies and a sub sub
01:42
variant of that of course is this this
01:43
is true that means of the private banks
01:47
or the state banks as they were called
01:48
in American history because most of the
01:51
banks were shorted by the states that
01:53
the state bank must have been shaping of
01:55
the bet they must have hated the central
01:57
bank and wish for its extermination the
02:01
the brunt of my talk is that the exact
02:03
opposite has been true in all these
02:04
cases the in the case of the central
02:08
bank the state banks were all for it
02:10
and fought hard for its continuation or
02:13
establishment okay myth number one about
02:18
colonial America the we started off as
02:23
it sits it should seem peculiar too weak
02:26
to an economist its characteristic that
02:29
most historians don’t know anything
02:31
about economics most economist don’t
02:33
know anything about history for an
02:35
economist that sounds very peculiar you
02:37
it should be a red flag of the bull to
02:40
start talking about a shortage of
02:41
species with the and if Coney America
02:43
suffered from terrible money shortage
02:46
why couldn’t we buy species I mean there
02:49
was after World transportation going
02:50
back and forth it was plenty of trade
02:52
back and forth to Europe there are
02:54
plenty of scones silver and gold coins
02:57
around why couldn’t we simply buy them
02:59
transport species to it to America and
03:02
use it since that’s the first the first
03:04
thing we should you know set off a
03:05
liteon ones noodle it’s true the British
03:09
government suffering mercantilist
03:11
fallacies as we as most American
03:13
governments that did too they’re
03:15
actually important parcel the same or
03:16
British Empire passed the law of the the
03:20
Americans colonies couldn’t have mints
03:23
and also try to keep British species in
03:26
Britain however we didn’t need British
03:29
species a matter of fact is the most of
03:31
the coins that we used were Spanish
03:34
silver dollars so which we can import
03:38
from Spain and we also use later on
03:42
austrian maria theresa sovereigns units
03:47
etc so we didn’t really need english
03:50
coin and we used spanish and other
03:52
foreign coin portuguese coins austrian
03:54
coins etc etc so the first problem then
03:58
is a if there was a so-called shortage
04:00
of species why don’t we buy any my
04:02
didn’t Americans simply expire stuff
04:04
from abroad so it turns out because
04:07
whenever an economist hears the word
04:09
shortage he or she should immediately
04:11
start saying well anyway means shortage
04:12
there is no shortage in a free market
04:14
there’s plenty of scarcity in the free
04:16
market as we all know there’s there’s no
04:18
shortage there’s no situation you can’t
04:20
fire
04:20
something for example is Rembrandt’s are
04:23
very scarce quite obviously in the other
04:24
hand there’s no room branch shortage I’m
04:26
hurt anybody bellyaching about I
04:27
Rembrandt shortage if you want to pay a
04:30
million and a half dollars you can find
04:31
a Rembrandt to buy ok so the question
04:34
then is what’s interfering with us with
04:38
this mechanism that the doesn’t permit
04:40
doesn’t permit shortage as a matter of
04:42
fact a shortage is only the result of
04:44
government intervention of a maximum
04:47
price control kind of if if for example
04:50
a government suddenly decreed for some
04:53
obscure reason course you people in the
04:54
heart of government know better than I
04:56
do why would they do such a thing they
04:58
might suddenly decree a wonder bread
05:00
which is now selling out of something
05:01
like 89 cents a loaf should only sell
05:04
for ten cents in loaf in order to help
05:05
the American masses eat their wonder
05:07
bread Mike’s every kid deserves at least
05:09
a loaf a day so if a government then
05:13
decreed this and said okay from now on
05:14
as a maximum price control of ten cents
05:16
and every loaf of Wonder Bread we they
05:18
would there would be a very there would
05:20
be an instantaneous shortage and in
05:21
other words people rush out and buy
05:23
wonder bread for a dime a loaf they
05:25
shift from silver cup and tasty bread
05:28
and pepperidge farms all the other
05:29
goodies because it’s not only a dime
05:31
meantime the Wonder Bread manufacturers
05:33
would stop producing one who bred for
05:35
dymal loaf and so we’d have it very
05:37
quickly a wonder bread shortage I
05:40
couldn’t find out on the shelf a black
05:42
market with undeveloped people of
05:44
mysterious folks and with raincoats a
05:46
shady street corner and offering hot
05:48
Wonder Bread for five dollars a loaf so
05:52
the whole phenomenon of the shortage
05:54
shortage only exists I think it’s safe
05:56
to size figure to say that a shortage
05:59
only exists in the world when there’s a
06:01
government maximum price control below
06:03
the free market level so therefore the
06:07
the constant complaining about a
06:10
shortage of species in the colonial
06:12
America should let one leave one on a
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thing well what must there must be some
06:17
government involved somewhere and indeed
06:19
there was the specifically
06:26
we have Russians law which is a
06:27
sovereign charming which is
06:29
unfortunately this is a sort of a side a
06:32
side point but I think some interesting
06:34
one questions laws is almost always
06:37
stated incorrect like it stated the
06:40
first person the first person I can
06:42
think I’ve been able to find I did some
06:44
studying of this who a Nazi at
06:47
aggressions law without Gresham of
06:49
course and its way before Gresham with
06:51
Aristophanes rate Greek satiric play
06:53
writers as marvelous play the frogs and
06:56
in the Frog he he enunciates the
06:58
incorrect version of Gresham’s law which
07:00
is the bad money drives good money out
07:02
of the market the in other words the
07:04
implications are something peculiar
07:06
about money we’re for bad money or
07:08
coming money of the based money they
07:11
appreciated money if it’s if it’s
07:12
circulating side by side of a good money
07:14
say gold that somehow goal will
07:16
disappear and paper will out-compete it
07:19
or bad money when I competed and this is
07:22
this is very peculiar because usually
07:24
usually on the free market just the
07:25
opposite usually good product so I’ll
07:27
compete bad products if you have a radio
07:29
doesn’t work competing with radios to do
07:31
work the non-working radio is going to
07:33
sapir pretty quickly even without a show
07:35
whatever other government Bureau so but
07:40
unfortunately Aristophanes stated
07:42
incorrectly said he had a little poem
07:44
about it he said first of all he said in
07:47
our republic bad citizens have preferred
07:48
to good just as bad money circulates
07:50
while good money disappears Aristophanes
07:53
it’s interesting you can say that now
07:55
even let me have a little poem where he
07:58
suffer four year old and standard pieces
08:00
valued and approved and tried here among
08:03
the Grecian nations and in all the world
08:04
beside recognized in every realm for
08:06
trustee stamp and pur si are rejected
08:09
and abandoned for the trash of yesterday
08:11
for a vial of built her a tissue Graci
08:14
counterfeit and base okay so the first
08:18
as far as I can find out first proper
08:20
statement aggressions law which stated
08:22
it correctly was by the late 14th
08:24
century french physicist astronomer and
08:27
mathematician Nicola REM who stated the
08:31
correct way he was at them when I become
08:32
Bishop of Lisieux and essentially saying
08:36
that if the well said quote if the fixed
08:38
legal ratio of a coins
08:39
from the market value of the metals the
08:42
coin which is underrated entirely
08:43
disappears from circulation and the coin
08:45
which is overrated alone remains current
08:47
beautiful statement essentially in other
08:49
words if the government puts if there
08:51
are two monies circulating if the
08:53
government puts a maximum price control
08:55
on a good money and a minimum price
08:57
control between the two of them on the
09:00
lousy money the good money will
09:01
disappear from circulation there’s a
09:04
compulsory but was people then pay their
09:06
debts and so forth and crummy money and
09:08
hold on to the good one either courting
09:10
it or exporting and abroad so the 14th
09:13
century or we already had that that
09:15
position and the great astronomer
09:17
Nicolaus Copernicus it was also a canon
09:22
lawyer artist and physician I was asked
09:25
by the king of Poland of offer war for
09:28
proposals for currency reform everything
09:29
was messed up on the currency so the
09:32
early 16th century he set forth him s IM
09:34
money which he used the correct version
09:36
of direct questions law saying of the
09:38
government / / / value is a 1 1 coin of
09:43
one money under advise the other under
09:45
the under value one will be hoarded
09:46
melted down or exported and the coat the
09:49
grated coin alone remains of circulation
09:51
okay so he had the whole thing on Russia
09:53
himself apparently the denunciations law
09:56
indeed but he was not the one who made
09:59
the famous memorandum on it which is
10:00
really sir thomas smith was a big big
10:02
shot tudor official and bureaucrat and
10:05
financier any rate so the greatly the
10:09
true version of correct version of
10:10
Gresham’s law is simply an application
10:12
as Mises pointed out many times an
10:15
application of the theory price control
10:18
causing shortages to money to to money’s
10:20
operating side by side well what
10:24
happened including America’s precisely
10:25
they working out of this this of the
10:29
Gresham’s law in action the for one
10:33
thing the what the colonial governments
10:37
did started to undervalue under a value
10:42
species and over value their own crummy
10:44
pound notes of their Massachusetts and
10:47
other governments were putting out in
10:49
other words engaging and continuing the
10:51
basement
10:52
of their own currency units and
10:54
artificially overvaluing actually
10:58
undervaluing a species so the result was
11:01
a species disappearing and too much
11:05
Massachusetts paper and not enough
11:07
species in the circulation so the whole
11:13
written paper which goes through all the
11:15
statistics on this I’m sure there’s
11:16
nothing more deadly in the world on here
11:18
statistics being read i was spare you
11:20
all that plenty right that’s the that’s
11:22
what happens the the definition of the
11:27
shilling is also being manipulated so
11:29
the shelling will have more and more
11:31
less and less weight to it less and less
11:33
weight of silver the Massachusetts
11:35
shilling and Lee Connecticut’s shilling
11:37
each one competitively debasing in order
11:39
to try to subsidize their exports and
11:41
and limit their imports and trying to
11:44
bring species into this country into a
11:46
colony in neither case it really worked
11:48
very well while this was going on the
11:53
two important things happen on the
11:55
history of money in the 1690s it was a
11:58
dramatic decade for the history of the
12:00
world money won that one thing that
12:02
happened was that the government’s
12:04
discovered government paper they hadn’t
12:06
used it before as far as I can see
12:08
outside of China which of course
12:10
invented both paper and printing long
12:12
before we did in the West and therefore
12:14
I went through the whole cycle about
12:15
several centuries before the West did
12:17
but of course nobody knew what was going
12:19
on in China so it’s totally isolated
12:20
kind of situation outside of China there
12:24
had been no government paper money
12:25
issues before 1690 1692 the actually
12:30
1690 the there had been banked paper
12:34
banknotes paper banknotes and government
12:37
coins which the government was
12:37
progressively debasing by juggling
12:40
standards of weight but they hadn’t been
12:42
any actually government issues of paper
12:43
money this is this the invention of
12:45
government paper land belongs to the
12:47
credit of the blame of Massachusetts the
12:49
Royal Government of Massachusetts what
12:51
happened was that the there was a custom
12:54
in those days for Massachusetts troops
12:55
to go out and raid a plunder to the
12:58
French and Quebec and actually the Nova
13:01
Scotia the French that had a French were
13:04
very productive Fisher
13:05
they didn’t have too many people up
13:07
there but had a lot of fish and furs and
13:09
so forth every every three or four years
13:11
Massachusetts Massachusetts troops will
13:12
go up there and plundering and they come
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back with a loot to Boston and
13:16
auctioning off and pay the soldiers out
13:18
of them out of the proceeds sort of a
13:20
pirate expedition best way I can
13:21
describe it and this was one of the
13:26
customs of Massachusetts which we don’t
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hear about only you know laying my
13:30
Centennial’s venir à and the French
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being outnumbered usually lost well this
13:36
time the French one listen before 1690
13:38
was a plunder expedition we go out there
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and steal a steal the fish on the furs
13:42
and they had a good fort there they’re
13:44
ready for us any way they want so the
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troops come back not only with no booty
13:49
you know loot and also not getting paid
13:51
as a great one of the great insights we
13:54
have in history is that money and in the
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course of history when soldiers don’t
13:57
get paid they get very very edgy okay
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they have a lot of edgy people with guns
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this makes the government the very upset
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very very worried I don’t like this so
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Massachusetts government’s wildly
14:12
looking around for some way to pay like
14:13
the soldiers and they could think of
14:16
course didn’t have any credit they
14:17
didn’t have any gold as usual in a
14:20
physical shape as true veteran with any
14:22
government say so why don’t you just
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make sure issue paper notes call it
14:27
pounds and to pay them with that hoped I
14:29
hope this works so in the summer 1690
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Massachusetts issue the first government
14:35
paper money in the Western moral 7,000
14:38
pounds of paper notes to pay the
14:40
salaries of these soldiers and they
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couldn’t issue just couldn’t just say
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paper couldn’t just say pounds because
14:46
they wouldn’t be accepted so
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Massachusetts made a solemn twofold
14:49
pledge you know about pledges and
14:51
politics to pledges which they would
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ever swear ever always the key one that
14:57
they redeem the notes and species in a
14:58
few years few years is vague but now a
15:01
few years and to that would absolutely
15:03
make no further issues of paper money
15:05
this was at seven thousand pounds of men
15:07
on a quit well as usually happens in the
15:11
situation paper the discovery paper
15:14
money is a wonderful thankful government
15:15
because
15:15
nothing much happens at first in the
15:17
world doesn’t come to an end you wish
15:18
your paper you pay off your debts
15:20
Hazel’s great prices go up a little bit
15:23
but not really too much at first so it
15:26
seems to the government they have a
15:26
magic sort of magic Open Sesame here
15:29
like way of Whitaker they can solve all
15:30
the problems they don’t have to increase
15:31
taxes you don’t have to nothing wouldn’t
15:34
much would happen just print money and
15:35
spend it what be so so in a few years
15:40
the idea of redemption faded away mean
15:42
it was forgotten the idea of species
15:44
Redemption and the pledge limit itself
15:46
evaporated only a few months as a matter
15:48
of fact as early as februari that means
15:49
two months after the issue of the they
15:51
swore up and down seven thousand pounds
15:53
of that said forever they said the seven
15:55
thousand pound a shoe had fallen far
15:56
short as they put it far short of their
16:01
needs right so they proceeded issue
16:04
40,000 pounds of new money ways that’s
16:07
fast like rev it up kid in order to pay
16:10
all the colonies that’s past present and
16:12
whatever and then again saying this is
16:15
the last this is it from now on this is
16:17
the final issue of course they kept
16:18
issue in forever for many years and only
16:22
one year the paper money it be
16:23
appreciated by forty percent and at that
16:27
point to pamphlets were written I don’t
16:29
know the names i think anonymous
16:31
pamphlets attacking the public now this
16:32
is interesting attacking a public for
16:33
being delinquent and such as they call
16:36
it for for for buying these notes italy
16:39
accepting these notes only forty percent
16:40
of forty percent awful they should be at
16:42
par they said after all the government
16:44
is a democratically elected government
16:46
its governor of their own choosing they
16:48
must therefore their honor bound to
16:50
consider these paper money at par with
16:52
species so of course these exhortations
16:55
didn’t work at that point on the year
16:57
later after the exhortations didn’t work
16:59
this is always happens by the way when
17:00
voluntary exhortations don’t work when
17:03
the government officials say okay you
17:04
you and you stop spending to stop
17:06
inflation let’s say and that’s obviously
17:09
doesn’t work then they say okay for now
17:11
on we take off the gloves you know the
17:13
old joke about Hitler okay from now on
17:15
no more mr. nice guy so the year later
17:20
they giving them a chance for to
17:22
voluntarily accept that appreciated
17:24
notes at par the Massachusetts
17:26
government made the paper money
17:27
compulsory
17:28
tender for all debts at par and that’s
17:30
course then of course be she starts
17:31
disappearing like mad and they kept
17:35
issuing more paper and paper keep
17:37
depreciating and the silver kept
17:39
disappearing okay this and then they try
17:46
to public land bank saying the land is
17:48
backing it and still issuing paper now
17:50
it doesn’t make much difference result
17:51
was still depreciation rapid inflation
17:53
disappearance of species this continued
17:56
this was then copied by most of the
17:57
other colonies if not all and resulting
18:00
in a coach shortage of species on quote
18:02
because government said here we have
18:04
forty percent appreciated notes you must
18:07
accept this as part of speech in
18:09
everybody sent us to you and they know
18:11
toward the species melted down or
18:13
senator broad okay when Parliament
18:19
finally prohibited all paper money
18:21
issues and 1750s the shortage was
18:26
eliminated shorter suddenly disappeared
18:28
as often happens okay that’s the that’s
18:32
money that’s the shortage of species it
18:36
the next major point is about central
18:39
banking and and and the relationship
18:42
with a bit of Lily private banks or
18:45
state backs as I said the the major the
18:48
usual contention is our myth is that the
18:50
central banking was necessary in order
18:52
to restrain the inflationary tendencies
18:54
of the private banks and therefore the
18:57
private banks were really against the
18:58
central banker try to eliminate it Mike
19:00
attaches the result just as the true
19:02
facts since be just as in the case of
19:04
the shortage were just the opposite true
19:08
facts worthy that the central bank was
19:10
put in by the banks in order to inflate
19:13
the money supply and able immoral to
19:15
inflate other was a central bank acts as
19:17
a car cartelisation device just as the
19:21
this is the farm price support program
19:24
the federal form support bra off since
19:26
nike 29 exactly there’s a cartel as a
19:29
giant cartelization of ice for farm
19:31
products so as the cut production and
19:33
raised prices or try to cut production
19:34
raise prices similarly the central bank
19:37
acts as a bank cartel device to enable
19:40
all the banks to inflate together
19:41
the the natural free banking checks on
19:44
inflation would be eliminated and
19:46
therefore the state the private banks
19:48
more or less usually either defended the
19:52
creation of the banks and central bank
19:54
and fought against their abolition and
19:56
contrast of them at the exact opposite
19:58
of the usual historical myth and as I
20:02
was actually said about the first met
20:04
the real story was of course the thief
20:05
instead of saying there’s a shortage of
20:07
species had to issue paper to fill in
20:11
the shortage is precisely the government
20:13
issue of paper that created the shortage
20:14
and so this is similarly the the banking
20:18
central bank situation is the exact
20:19
opposite of the usual historical story
20:23
ok the we start off with central banking
20:28
first of all in the app and during the
20:31
Revolutionary War there was no bank I
20:33
mean banks are not develop at that point
20:36
or they had disappeared the the first
20:39
commercial bank in New Republic was also
20:42
the first central bank the bank of north
20:44
america this was a this is a plan
20:48
fulfilling the nationalist program there
20:50
was one savory briefly about the
20:53
American Revolution American Revolution
20:55
such they consist of two groups of
20:57
people two groups of ideologies to
20:59
ideological very diametrically opposed
21:01
groups one group which is a majority of
21:04
the pup of the public i think is no
21:05
question about that which mostly in the
21:08
rural rural areas subsistence rural
21:11
areas believed in a very minimal
21:15
government as they believe the American
21:17
Revolution was a libertarian revolution
21:18
the object was to throw off big
21:21
government altogether not just the
21:22
British government but any any big
21:24
government and to eliminate almost all
21:28
government authority of cut taxes down
21:31
to an absolute minimum cut the budget
21:33
down absolute minimum have free trade
21:35
free markets gold or silver standard no
21:39
paper in other words extreme lays a fair
21:42
a libertarian program this was basically
21:44
the soquel anti-federalist position
21:48
which was held on a majority of a public
21:50
but the other hand he had a small but
21:53
powerful group of people
21:54
nationalists who call themselves the
21:55
Federalist because it sounds better the
21:59
Nationalists program which will leave
22:01
just the opposite the Nationalists
22:02
wanted to recreate the British Empire
22:04
without Britain and was regrade the
22:06
entire structure of a big government
22:09
mercantilist policies suchly back to the
22:11
old mercantilist policies with high
22:15
tariffs big big public works program
22:18
heavy public debt and high taxes to pay
22:22
for the public debt and they pay off the
22:25
public debt and a central bank which
22:28
would inflate the money supply in an
22:31
orderly manner of course orderly means
22:33
run by the government and using the
22:35
cheap money to subsidize favorite
22:37
business groups and favored projects so
22:40
basically the nationalists were
22:41
essentially the embryonic development of
22:44
what we have now since sort of looking
22:45
back saying okay these this is the
22:46
beginning of the welfare warfare state
22:51
the so they want a British Empire
22:55
without great britain and they wanted a
22:56
very strong president very strong
22:58
federal government and a very strong
23:00
president as the chief executive as
23:01
quasi monarch it’s not a name that in
23:04
fact so we have been the so-called
23:07
Hamiltonian vision it was really vision
23:09
of Robert Morris the first central
23:11
banker and Hamilton was his disciple and
23:14
mars vs mentor versus the so-called
23:17
Jeffersonian vision of the ultra minimal
23:19
government the okay Morris during during
23:24
the Revolutionary War for various
23:26
reasons became an economic and financial
23:28
dictator Czar of the whole system Morris
23:32
has been cold a financier of the
23:34
American Revolution that’s that’s the
23:35
name which has been attached to actually
23:37
as usual is the exact opposite was
23:40
correct the Merc revolution financed him
23:43
he stole he stole millions it’s
23:46
unbelievable he he was the first place
23:49
the accounting I mean people politicians
23:51
steal now of course but those days of
23:52
zone so rigorous accounting methods
23:55
there’s no independent audit there was
23:57
no GAO no nothing we still don’t know
23:59
how many millions he stole but basically
24:01
what happened was he got he was a very
24:03
wealthy merchant in Philadelphia
24:06
he he became the economic economic
24:09
financial azure of a Continental
24:11
Congress he then parcel out all the
24:14
contracts to all the war contracts
24:18
printing money or borrowing money
24:21
parceling old war contracts to his own
24:23
either his own firm or his own partners
24:26
or his own associates see the enormous
24:29
things were Robert Morris buys stuff
24:31
from France and Robert Morris ships and
24:33
the independent total interpenetration
24:35
of the Treasury Treasury funding
24:38
Treasury bank account so to speak in his
24:40
own bank account it’s almost impossible
24:41
to clear it up anyway millions got
24:44
siphoned from the taxpayer of a
24:47
consultant personal Pazin translation to
24:52
the pockets of Robert Morris and
24:53
associates so one of the things that
24:55
Morris was the chief nationalist he was
24:56
he he he was the main person how this
24:58
great vision of a new British Empire
25:00
without Britain and one of his visions
25:04
was to have a central bank which he of
25:05
course would run and he during during
25:07
the Revolutionary War he created the
25:09
shorter that he had Congress chart of
25:11
the stack of North America and
25:12
Philadelphia which is supposed to be the
25:14
first central bank it also it was also
25:16
the first commercial bank and one of the
25:19
privileges which the bank got was no
25:23
other commercial bank was allowed to
25:24
exist for at least 20 years except this
25:26
Bank in other words this is a monopoly
25:28
bank okay also the Treasury would put
25:33
all of its deposits in this bank the
25:37
bank notes would be receivable taxes to
25:39
the government federal state governments
25:40
are par with species and at separate a
25:44
central and of course the all the
25:46
federal debt would then be purchased by
25:48
the by the bank of north america the
25:52
addition of that the public debt which
25:55
Morrison has friends already had already
25:56
purchased could be deposited in the in
25:59
the bank and then they become Bank
26:02
backing for more bank notes so amorous
26:05
benefit of six ways to Sunday here as a
26:08
matter of fact he was supposed to have a
26:10
certain amount of species capital on the
26:11
bank he couldn’t raise enough species
26:13
when he did is he took a loan France
26:15
loan
26:16
four hundred thousand for 262 thousand
26:19
dollars in speech to the to America for
26:21
the war effort he appropriated Morris
26:23
appropriated 264,000 ah but put it in
26:25
the back in North America just to meet
26:27
the legal requirement for Fiji capital
26:30
so it’s great even get away with I
26:31
suppose after the war after after a year
26:37
or two after the war when the war was
26:39
coming to an end he began to lose
26:40
political power and quickly this he dis
26:45
disconnected the Mac North America as a
26:47
central bank it became then a straight
26:48
commercial banking he divested the
26:50
little government funding from it by the
26:53
way I think you know not justice is not
26:55
always triumph from the world as you all
26:56
know the case of Robert Morris however
26:58
justice triumphs he died about 10 years
27:01
later in debtors prison totally bankrupt
27:03
in debtors prison so I think no really
27:07
met his just desserts however being a
27:11
man in favor of the public that private
27:12
that everything else the however even
27:18
but Martha’s coming through defeat is a
27:20
disciple Alexander Hamilton continued on
27:22
and of course in the Constitution was
27:24
driven through the country in a
27:26
blitzkrieg vote in the middle of the
27:29
winter this is very important because
27:31
the those days the first of all I want
27:34
any roads then I mean not I would say no
27:36
rows but not many roads okay so as
27:39
communications were very sparse to say
27:41
the least federalist had control of all
27:44
cities and they also had control the
27:47
post office and by the way they use the
27:49
monopoly post office their advantage
27:51
they they deliberately speed it up any
27:53
communications between Federalist
27:55
leaders and they withheld communications
27:59
between anti-federalist later so they’ll
28:00
take eight months for Virginia anti
28:02
fellow us to get a sent a letter and I
28:05
photo of Massachusetts look like a week
28:06
to the federal as the communicate so at
28:10
any rate so they use this advantage they
28:12
push through the stuff in the middle in
28:13
the winter when it was icy icy roads
28:16
were no no good and the anti-federalists
28:18
couldn’t communicate with their people
28:19
who are essentially subsistence farmers
28:21
in the backwoods who kind of very
28:23
difficult to mobilize so so they use the
28:25
blitzkrieg approach and it was quite
28:27
effective and any rate even even so they
28:31
bought out mostly legislators in New
28:34
York for example New York voted two to
28:36
one against the Constitution to 21 when
28:39
they got to the state ratification
28:41
conventions which opposed to the side
28:43
the half of them shift of their vote or
28:47
many enough shippers vote to ratify even
28:50
though they they won their election on
28:51
the basis of a pledge to vote against
28:53
the Constitution they was they were
28:55
bought out literally and figuratively
28:57
many right as soon as the Nationalists
29:00
get on the power they push the
29:01
Constitution through one of the first
29:02
things that is set up the Hamilton the
29:03
central bank first bank of the United
29:05
States one of the major reasons
29:09
according to Hamlin was quote to
29:10
overcome the to overcome the alleged
29:12
quote scarcity of species were back
29:14
again says we being used now to to
29:17
justify simple back at any rate the
29:20
speed things up have been here the
29:23
historical myth is the first bank of
29:25
United States was extremely sound and
29:27
they repress the statement state banking
29:29
inflation etc etc just the opposite they
29:32
were not very soundly inflated quite a
29:35
bit and they spurred state banks to come
29:38
into action the after the first bank
29:40
came in the result was a lot of more
29:42
state banks a lot more inflated bracket
29:44
bank credit when the Jeffersonians got
29:48
in this is the old story works by the
29:50
way you won’t know too well the
29:52
Jeffersonian movements supposed to be
29:54
dedicated with the smashing this whole
29:56
apparatus smashingly the monopoly
29:58
Supreme Court the central bank the
30:02
tariff and all the rest of it as soon as
30:04
they got in as soon as they got in some
30:06
of Jefferson gets in the power he
30:07
becomes a homless quoting statesman on
30:09
quote other words he sells out because
30:12
where they now call pragmatic and so
30:16
what happens is the Democrat or Democrat
30:17
Republicans half of them become
30:20
pragmatists and they become very close
30:21
to the moderate Federalists that means
30:23
those who don’t didn’t want an absolute
30:24
monarchy and so what you have
30:27
and the 1818 15 or so you have an
30:30
amalgamation of Lee of a moderate
30:32
Republican as the moderate federalism
30:34
one big centrist blah or blob
30:37
essentially continuing and accelerating
30:40
the whole whole bank credit inflation
30:41
with a first bank first bank charter was
30:45
up in 1911 it was a big big fight
30:47
whether it should be it should be a
30:51
repeal or not Madison it was the epitome
30:54
of the eve of the centrist moderate the
30:56
pragmatic moderate opportunist moderate
30:59
was all in favor of it he tried
31:01
desperately to renew the bank but enough
31:04
people enough disgruntled federal s+
31:05
old-fashioned but they call old
31:07
Republicans amis hardcore Jeffersonian
31:10
types swung enough votes defeated by one
31:13
vote on the house and in the Senate so
31:17
at that point we could say well we
31:20
finally did not have a central bank of
31:21
the first time in American history then
31:24
we have free banking then no we didn’t
31:26
because what happened then was that the
31:27
begun of the war of 1812 and the war of
31:31
1812 was extremely unpopular in New
31:33
England or war with England no one had
31:38
most of the manufactured goods most of
31:39
the armament equipment and most of the
31:41
banks and so how was the how was the how
31:44
was the government has the Madison
31:45
ministration going to finance the war
31:46
effort the way they finance their was by
31:48
encouraging how much of new banks which
31:50
suddenly popped up in Pennsylvania and
31:52
Kentucky in other states essentially
31:55
money factories with almost no species
31:57
capital is printing paper dollars and
31:59
and using it to lend the brought to by
32:01
US government bonds so this is a sort of
32:05
a happy situation for the for the for
32:09
the banks I mean oo late but they have
32:11
only to do is to print new money and
32:12
they they buy the bonds on the taxpayers
32:15
are pledged to pay them back court
32:17
unquote plus interest this is good deal
32:20
if you can work it it create new money
32:23
and then you’re the feather fully for
32:25
the services you performed in the
32:26
country by creating new money then paid
32:28
back you you’re loaded on taxpayer the
32:30
next 30-40 years so what happened
32:33
however of course is the government the
32:36
administration had to pay use the money
32:38
in from the Pennsylvania
32:39
you’re Kentucky and cetera tube to buy
32:41
stuff in the England the lingo max is
32:43
not inflate and we wouldn’t want to pay
32:44
for the war effort anyway now we want
32:46
banks then call upon the inflated thanks
32:48
for redemption they didn’t have the
32:49
money how they going to pay it’s peachy
32:51
at that point we had a big watershed
32:55
situation in summer of 1814 the banks
32:59
were essentially bankrupt means a little
33:00
backs outside New England federal
33:02
government state governments that said
33:03
okay we will now permit the banks to
33:06
suspend species payments that means the
33:07
continuing operation continued lending
33:10
money printing money lending it out and
33:11
forcing their their debtors to pay them
33:13
back but they didn’t have to pay their
33:15
depositors over there noteholders they
33:18
were a leaf and responsibility a
33:20
contractual responsibility of paying
33:22
their the paper money and species so of
33:25
course they love that more banks than
33:26
popping that’s action and this continued
33:29
this situation of Lant individual paper
33:32
means isn’t like it’s just like I could
33:34
print dollars and symptoms and lend them
33:36
out this actually that was something
33:38
like that the situation continued for
33:40
two and a half years long after the war
33:43
after the war was over the the mass
33:46
administration now the Monroe
33:48
administration was confronted with a
33:50
choice they have to do something
33:51
couldn’t have a permanent system of
33:53
hundred banks in the country each
33:55
issuing dollars not having to pay for it
33:57
that’s obviously not going to work if
34:00
any length of time so what could be done
34:01
well though to two courses of two
34:04
courses of where offer to two policies
34:06
were offered one was the the old
34:08
fashioned Jeffersonian policy its
34:11
Oklahoma Republican which some of the
34:12
Federalists now went along with in order
34:13
to make trouble which was a policy of
34:16
forcing the banks to redeem Ross go out
34:18
and go out of business force the Baxter
34:21
a diamond gold and silver or else get
34:23
out this however was not was not not the
34:27
sort of thing the moderates
34:28
quote-unquote of any stamp and joy and
34:30
so the Madison the Monroe administration
34:33
made a deal with a banks to create a
34:35
central bank new central bank new second
34:38
magnum United States which were then
34:39
which were then validate which first of
34:42
all would validate all the uninflated
34:43
paper which had been going on for last
34:45
four years three years and also
34:47
continued
34:49
continue inflating the money supply
34:51
which they did so the second bank was
34:53
put through and it was it was then used
34:58
to Venice nada inflating like mad
35:00
printed six million dollars in these
35:03
areas where the banks were shaky and it
35:05
started printing on man inflating like
35:07
mad thereby creating a big boom and font
35:09
and the first big depression in united
35:11
states history of 1819 what’s again the
35:17
statement i am sure i don’t know on one
35:19
thing here the state banks were all for
35:20
it state bank swore favor the first bank
35:23
united states the wolf favor of keeping
35:24
it there against abolishing it there
35:26
were also all a favor of creating a
35:30
second bank but otherwise it would have
35:31
had to go under the also a couple of
35:35
worthy should be mentioned here as
35:37
instrumental in this whole operation the
35:41
first bank of the United States the
35:43
president was William Bingham was the
35:45
Philadelphia merchant who was the
35:48
partner Robert Morris am I continuing
35:50
the Philadelphia oligarchy connection
35:52
and during at the end of the during war
35:57
of 1812 Steven Gerrard it was the second
35:59
wealthiest person in the country the
36:00
Philadelphia merchant was heavily
36:03
invested in war debt he bought a lot of
36:05
government bonds and also heavily
36:06
invested in the first bank of United
36:08
States he then decided he want to create
36:10
another second bank of the United States
36:12
in order to one’s have a second bank by
36:15
all was more debt you know by local
36:16
government bonds from him which is be
36:18
very useful until then invest heavily in
36:21
the second bank so Gerard being
36:24
politically powerful team up with John
36:25
Jacob Astor the first of all theist
36:27
person who is also heavily invested in
36:30
war dead and that Bank of the United
36:32
States bonds stock the two of them got
36:36
together and pushed through the mass
36:39
administration the nomination the
36:42
appointments of Alexander Dallas to the
36:43
Secretary of Treasury again Philadelphia
36:46
pallid there’s Dallas was a lawyer for
36:47
the Girard interests and now let’s put
36:52
puts through the second Macklin with
36:53
tires of his job having been
36:55
accomplished Gerard also got as
36:58
president of the Bank William Jones
37:00
another fold
37:01
via chronium layer so they have a whole
37:02
Philadelphia connection which continues
37:04
on by the way for another 30 30 years or
37:06
so and running the whole central banking
37:08
operation the okay the another person I
37:16
should also mention here probably the
37:18
top moderate quote-unquote moderate
37:20
Jeffersonian Democrat Republican the
37:23
country the senator samuel Smith of
37:24
Maryland very powerful figure Smith in
37:29
the course of the of the inflation of
37:31
the bank of United States when I first
37:33
got started it was also outright cookery
37:36
going on enormous number of outright
37:38
thievery by the Baltimore and problem or
37:41
a branch of the of the be loved back in
37:45
the United States minions got siphoned
37:47
off into the pockets of the guy named
37:49
Buchanan and his clerk who was Buchanan
37:54
Buchanan was a partner of smithing
37:55
company spec you can accompany the the
37:57
major mercantile firm in Baltimore which
38:00
is owned by samuel Smith the senior
38:02
partner now since his to his his senior
38:05
partners and as his clerk was were the
38:08
two biggest crooks in this operation I
38:09
figure if Buchanan and the other guy
38:12
were we’re cooks could samuel Smith have
38:14
been far behind on his operation I
38:15
wouldn’t I would doubt it any rate the
38:19
bank United States continues on after
38:21
the creative the depression and Nicholas
38:26
Biddle then becomes the head of the bank
38:29
again part of the Philadelphia oligarchy
38:31
the last of the line of which started
38:33
with Robert Morris and when Andrew
38:35
Jackson comes and he starts a titanic
38:37
struggle which finally divests separates
38:40
the eliminates the central bank and
38:42
diverse the government from the banking
38:44
system which van buren and polk then
38:47
completed it should be pointed out
38:50
something we didn’t know until fairly
38:51
recently is that the state banks
38:53
basically were favor of Mac United
38:56
States one of the continuum and favored
38:58
Biddle on the famous fight against
38:59
Jackson so why did Jackson do what he
39:03
did because it’s basically he’s a
39:03
libertarian there’s a hard money
39:05
advocate and libertarian he’d read he
39:07
and his associates at red oil classical
39:09
economic literature and the previous
39:10
literature so to speak and we’re
39:12
convinced by it they also
39:14
or stung by the panic of 1819 they
39:15
realized the bank credit bank
39:18
contraction expansion and contraction
39:19
credit was responsible for the business
39:21
cycle and they were against it and if it
39:24
was thought that was ruin us and see
39:26
half of the first time classical liberal
39:29
libertarian audio log so to speak
39:30
responsible for a mighty and Titanic
39:32
reform the next step far there was
39:36
concern was eliminate the state banks
39:37
too and have a hundred percent gold
39:40
system they didn’t accomplish that but
39:43
largely because the slavery question
39:44
split the Democratic Party in half by
39:46
the late 40s 1840s ok the next uh I just
39:53
I just have trying to say just very
39:54
briefly about the Federal Reserve System
39:55
i could go on another couple of weeks on
39:57
that but the federal service was very
40:00
similar story and where’s the the
40:02
federal reserve system was put in by big
40:05
banks was the bill was written it took a
40:09
few years for jockeying around for
40:10
position and for exactly what sort of
40:13
war should be passed but all of them all
40:14
the banks were a favor of all the large
40:17
banks were in favor of the federal
40:19
reserve system in order to provide quote
40:22
elasticity unquote of the money supply
40:23
in order was in order to permit
40:25
inflation money expansion of money
40:28
supply which they couldn’t do very much
40:30
under the national banking system
40:31
they’re always they have ran up against
40:33
a stone wall especially during
40:34
recessions they wanted they wanted a
40:36
sluice gate a wonder of last resort
40:38
centralizer reserves in otherwise papa
40:40
government to come in and carta lies the
40:44
banking system for them and this is what
40:45
they did nobody in those days none of
40:47
the bankers in favour of a central bank
40:49
ordered restrain our evil appetite for
40:51
inflation quite the opposite they needed
40:54
a central bank in order to promote
40:55
coordinate and promote expansion money
40:58
which is essentially what they did and
41:00
essentially what they got from then on
41:02
the Federal Reserve I think more of very
41:05
happily confirm their their judgment and
41:08
has done this ever since is responsible
41:10
now for course of continuing and
41:11
accelerated inflation in between
41:13
responsible for a big depression as you
41:17
will probably know the federal reserve
41:19
was put in in order to stabilize the
41:22
business cycle supposedly is one of the
41:23
supposed advantages to eliminate the
41:26
questions inflation instead of that we
41:28
got the largest inflation most chronic
41:31
inflation the biggest depression America
41:32
history since the Fed has come on the
41:35
scene obviously must be doing something
41:37
wrong but more than something it itself
41:40
is wrong it is it is the it is the
41:42
problem and our cats thank you very much

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