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Tuesday, April 20, 2010
Friday, January 15, 2010
Thursday, October 30, 2008
President Andrew Jackson vs. Federal Banking
To provide a little historical background to the recent government bailout of several failed economic institutions in this country I wanted to post my findings on the historical relationship between American government and banking from the administratoin credited with making the most meaningfull changes to American government's economic policy.
Most who are familiar with this countries history know that Andrew Jackson, our 7th president abolished the notion of a government backed financial institution in addition to being the only president in history to nearly pay off the national debt. The following are several quotes I found extremely relevant to our situation today. I only wish the the leaders of our great country would open the history books occasionally for they may just find the answers to some of their most perplexing decisions. Andrew Jackson in his decision to veto legislation renewing the charter of the Second Bank of the United States made several key points of which I will quote and then offer my opinion in paraphrase...
"Every monopoly and all exclusive privileges are granted at the expense of the public, which ought to receive a fair equivalent. The many millions which this act proposes to bestow on the stockholders of the existing bank must come directly or indirectly out of the earnings of the American people. It is due to them, therefore, if their Government sell monopolies and exclusive privileges, that they should at least exact for them as much as they are worth in open market. The value of the monopoly in this case may be correctly ascertained."
In words almost directly related to our current governmental banking establishment Jackson states that a financial institution backed by our government which in turn derives its primary source of revenue from the public it governs is inherently monopolistic. This is a radical point of view when compared to the modern day practice of taxation. Andrew Jackson saw the direct relationship between our representative democracy and the funding provided by it's voting tax base. And with that direct relationship he states that having a single financial institution to manage the contributions of the tax base is not in the best interest of the people.
"It is not conceivable how the present stockholders can have any claim to the special favor of the Government."
Again he speaks almost directly to the current relationship of the Federal Reserve and Treasury Departments. Stockholders is referring to the interest of the Second Bank of the United States. He is stating why should they be given the privilege of exclusively handling the tax contributions of the American people through contract or law.
"But this act does not permit competition in the purchase of this monopoly. It seems to be predicated on the erroneous idea that the present stockholders have a prescriptive right not only to the favor but to the bounty of Government. It appears that more than a fourth part of the stock is held by foreigners and the residue is held by a few hundred of our own citizens, chiefly of the richest class."
Jackson could not have stated this more eloquently and I think this statement needs no explanation. Why are we now so mindlessly ignoring the wisdom of lessons past learned. Additionally he states his concern for the amount of foreign interest controlling the American tax reserves. I can only wonder what the foreign interests in the Federal Reserve are now.
The economic infrastructure in the era in which these statements where issued was dramatically different. Economic depression was much more common do to non-standard banking practices. Jackson made great changes with establishment of the gold standard and several other economic initiatives. Jackson's background amazingly enough was in law not in economics with no formal education, so it's rather interesting that he was the first truly fiscal conservative president. I encourage everyone to read President Jackson's Veto Message Regarding the Bank of the United States; July 10, 1832. From what I can gather during Jackson's administration the country experienced violent swings in the economy due to the drastic changes he made to it's economic policy and the backlash he received from the banks involved. Despite his efforts a federal bank was still implemented some years later.
This blog post is mainly to help me understand current events as related to history. I would be somewhat of a hypocrite given my own financial history to call foul the recent government bailouts. I hope however that I could hold the United States government to a higher standard. One thing is for certain, Treasury Secretary Paulson and Fed chairman Bernaky hold the largest single tax payer investment in American history. I hope they are able to manage it better then their bussiness associates have managed their's.
I just have to include one more quote before I must go back to work else suffer my own financial crisis. I think this statement can sum up the whole issue...
"But this proposition, although made by men whose aggregate wealth is believed to be equal to all the private stock in the existing bank, has been set aside, and the bounty of our Government is proposed to be again bestowed on the few who have been fortunate enough to secure the stock and at this moment wield the power of the existing institution. I can not perceive the justice or policy of this course. If our Government must sell monopolies, it would seem to be its duty to take nothing less than their full value, and if gratuities must be made once in fifteen or twenty years let them not be bestowed on the subjects of a foreign government nor upon a designated and favored class of men in our own country. It is but justice and good policy, as far as the nature of the case will admit, to confine our favors to our own fellow-citizens, and let each in his turn enjoy an opportunity to profit by our bounty."
Most who are familiar with this countries history know that Andrew Jackson, our 7th president abolished the notion of a government backed financial institution in addition to being the only president in history to nearly pay off the national debt. The following are several quotes I found extremely relevant to our situation today. I only wish the the leaders of our great country would open the history books occasionally for they may just find the answers to some of their most perplexing decisions. Andrew Jackson in his decision to veto legislation renewing the charter of the Second Bank of the United States made several key points of which I will quote and then offer my opinion in paraphrase...
"Every monopoly and all exclusive privileges are granted at the expense of the public, which ought to receive a fair equivalent. The many millions which this act proposes to bestow on the stockholders of the existing bank must come directly or indirectly out of the earnings of the American people. It is due to them, therefore, if their Government sell monopolies and exclusive privileges, that they should at least exact for them as much as they are worth in open market. The value of the monopoly in this case may be correctly ascertained."
In words almost directly related to our current governmental banking establishment Jackson states that a financial institution backed by our government which in turn derives its primary source of revenue from the public it governs is inherently monopolistic. This is a radical point of view when compared to the modern day practice of taxation. Andrew Jackson saw the direct relationship between our representative democracy and the funding provided by it's voting tax base. And with that direct relationship he states that having a single financial institution to manage the contributions of the tax base is not in the best interest of the people.
"It is not conceivable how the present stockholders can have any claim to the special favor of the Government."
Again he speaks almost directly to the current relationship of the Federal Reserve and Treasury Departments. Stockholders is referring to the interest of the Second Bank of the United States. He is stating why should they be given the privilege of exclusively handling the tax contributions of the American people through contract or law.
"But this act does not permit competition in the purchase of this monopoly. It seems to be predicated on the erroneous idea that the present stockholders have a prescriptive right not only to the favor but to the bounty of Government. It appears that more than a fourth part of the stock is held by foreigners and the residue is held by a few hundred of our own citizens, chiefly of the richest class."
Jackson could not have stated this more eloquently and I think this statement needs no explanation. Why are we now so mindlessly ignoring the wisdom of lessons past learned. Additionally he states his concern for the amount of foreign interest controlling the American tax reserves. I can only wonder what the foreign interests in the Federal Reserve are now.
The economic infrastructure in the era in which these statements where issued was dramatically different. Economic depression was much more common do to non-standard banking practices. Jackson made great changes with establishment of the gold standard and several other economic initiatives. Jackson's background amazingly enough was in law not in economics with no formal education, so it's rather interesting that he was the first truly fiscal conservative president. I encourage everyone to read President Jackson's Veto Message Regarding the Bank of the United States; July 10, 1832. From what I can gather during Jackson's administration the country experienced violent swings in the economy due to the drastic changes he made to it's economic policy and the backlash he received from the banks involved. Despite his efforts a federal bank was still implemented some years later.
This blog post is mainly to help me understand current events as related to history. I would be somewhat of a hypocrite given my own financial history to call foul the recent government bailouts. I hope however that I could hold the United States government to a higher standard. One thing is for certain, Treasury Secretary Paulson and Fed chairman Bernaky hold the largest single tax payer investment in American history. I hope they are able to manage it better then their bussiness associates have managed their's.
I just have to include one more quote before I must go back to work else suffer my own financial crisis. I think this statement can sum up the whole issue...
"But this proposition, although made by men whose aggregate wealth is believed to be equal to all the private stock in the existing bank, has been set aside, and the bounty of our Government is proposed to be again bestowed on the few who have been fortunate enough to secure the stock and at this moment wield the power of the existing institution. I can not perceive the justice or policy of this course. If our Government must sell monopolies, it would seem to be its duty to take nothing less than their full value, and if gratuities must be made once in fifteen or twenty years let them not be bestowed on the subjects of a foreign government nor upon a designated and favored class of men in our own country. It is but justice and good policy, as far as the nature of the case will admit, to confine our favors to our own fellow-citizens, and let each in his turn enjoy an opportunity to profit by our bounty."
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