The Forgotten History of Money

By

Dick Bachert (with a humble bow to my friend F.Tupper Saussy and his research in “The Miracle on Main Street”)

Part 1 of a 3 part series

I wrote this a number of years ago when things were NOT going well with the economy. Trust me: They WILL get ugly once again as man -- or certain men -- cannot resist playing God. We continue to violate the universal, immutable laws of economics at our great peril.

Despite the apparent economic strength of the American economy, history proves that EVERY house of cards eventually comes down.  And the higher the card house, the harder the fall when it finally comes. And when it does, the more freedoms we will voluntarily surrender to "restore order."  It was the Founders' concern about this historically valid problem which prompted their attempt -- now ignored -- to keep American "money" sound and honest.

Dick Bachert 1998

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This is the fascinating story of the efforts by certain of the Founding Fathers to prevent the economic distress we find all about us today. It is also a sad story on the basis that modern, "sophisticated" Americans have abandoned the corrective institutional mechanism that remains in place to this day.  As you read it, think about a world with many fewer S&L, banking and political scandals and economic problems now considered the norm.

"Blood running in the streets. Mobs of rioters and demonstrators threatening banks and legislatures. Looting of shop and home. Strikes and unemployment. Trade and distribution paralyzed. Shortages of food. Bankruptcies everywhere. Court dockets overloaded. Kidnappings for heavy ransom. Sexual perversion, drunkenness, lawlessness rampant. The wheels of government are clogged, and we are descending into the vale of confusion and darkness.  No day was ever more clouded than the present.  We are fast verging on anarchy and confusion. (George Washington in a 1786 letter to James Madison, describing the effects of fiat paper money inflation then ravaging America in the pre-Constitutional period.)

"The annihilation (of the paper money) was so complete that barber-shops were papered in jest with the bills; and sailors, on returning from cruises, being paid off in bundles of this worthless money, had suits made of it, and with characteristic lightheartedness, turned their loss into frolic by parading through the streets in decayed finery which in its better days had passed for thousands of dollars." (Contemporary writer, Breck, 1786)

"Paper money polluted the equity of our laws, turned them into engines of oppression, corrupted the justice of our public administration, destroyed the fortunes of thousands who had confidence in it, enervated the trade and husbandry, and the manufactures of our country, and went far to destroy the morality of out people." (Peletiah Webster, 1786)

At the drafting of the U.S. Constitution, there were many "Friends of Paper Money" present.  On August 16, 1787, when  the discussion arose on Article 1, Section 8, the proposed wording was this:  "The Legislature of the United States  shall have the power to...coin money...and emit bills of credit of the United States."

A hot argument ensued on the power to emit bills of credit, which is another way of saying "printing paper money". 

Here are the actual words James Madison wrote describing the debate in his diary:

"Mr.G.Morris moved to strike out  "and emit bills of credit."  If the United States had credit, such bills would be unnecessary; if they had not, unjust and useless. 

MADISON: Will it not be sufficient to prohibit the making them a tender?  This will remove the temptation to emit them with unjust views.  And promissory notes in that shape may in some emergencies be best. 

MORRIS: Striking out the words will leave room still for notes of a responsible minister which will do the good without the mischief.  The monied interest will oppose the plan of the Government, if paper emissions be not prohibited.

COL. MASON: Though he had a mortal hatred to paper money, yet as he could not foresee all emergencies, we was unwilling to tie the hands of the Legislature [Legislature = Congress].

MR. MERCER: (A friend to paper money) It was impolitic...to excite the opposition of all those who were friends to paper money.

MR. ELSEWORTH thought this was a favorable moment to shut and bar the door against paper money.  The mischiefs of the various experiments which had been made, were now fresh in the public mind and had excited the disgust of all the respectable part of America.  By withholding the power from the new Government, more friends of influence would be gained to it than by almost anything else...Give the Government credit, and other will offer.  The power may do harm, never good.

MR. WILSON: It will have a most salutary influence on the credit of the United States to remove the possibility of paper money.  This expedient can never succeed whilst its mischiefs are remembered, and as long as it can be resorted to, it will be a bar to other resources.

MR. READ thought the words, if not struck out, would be as alarming as the mark of the Beast in Revelation.

MR. LANGDON had rather reject the whole plan than retain the three words "and emit bills". 

The motion for striking out carried.