Friday, November 18, 2011

Thomas Jefferson and banks

Many of the leaders of our country in the early days were suspicious of the powers of banks.  In that day, they issued their own paper money (the US did not until the Civil War) and held most public debt.  As modern Americans have learned, sometimes they exercise a great deal of power, both political and financial. 

As a second installment of a series of Jefferson quotes, I am posting a collection of bank-related statements by Jefferson, mostly from his letters.  Some of his ideas I think are outmoded, such as his preference for "hard money" (gold and silver), but his adversion to banks would seem to have much in common with the Occupy Wall Street supporters.  I hope you find these thought-provoking.

=====================================================
Everything predicted by the enemies of banks, in the beginning, is now coming to pass. We are to be ruined now by the deluge of bank paper. It is cruel that such revolutions in private fortunes should be at the mercy of avaricious adventurers, who, instead of employing their capital, if any they have, in manufactures, commerce, and other useful pursuits, make it an instrument to burden all the interchanges of property with their swindling profits, profits which are the price of no useful industry of theirs.


Letter to Thomas Cooper, 1814.
*************************
Put down the banks, and if this country could not be carried through the longest war against her most powerful enemy without ever knowing the want of a dollar, without dependence on the traitorous classes of her citizens, without bearing hard on the resources of the people, or loading the public with an indefinite burden of debt, I know nothing of my countrymen. Not by any novel project, not by any charlatanerie, but by ordinary and well-experienced means; by the total prohibition of all private paper at all times, by reasonable taxes in war aided by the necessary emissions of public paper of circulating size, this bottomed on special taxes, redeemable annually as this special tax comes in, and finally within a moderate period.


Letter to Albert Gallatin, 1815
***********************
The system of banking we have both equally and ever reprobated. I contemplate it as a blot left in all our constitutions, which, if not covered, will end in their destruction, which is already hit by the gamblers in corruption, and is sweeping away in its progress the fortunes and morals of our citizens.


Letter to John Taylor (28 May 1816)
*****************************
Certainly no nation ever before abandoned to the avarice and jugglings of private individuals to regulate according to their own interests, the quantum of circulating medium for the nation — to inflate, by deluges of paper, the nominal prices of property, and then to buy up that property at 1s. in the pound, having first withdrawn the floating medium which might endanger a competition in purchase. Yet this is what has been done, and will be done, unless stayed by the protecting hand of the legislature. The evil has been produced by the error of their sanction of this ruinous machinery of banks; and justice, wisdom, duty, all require that they should interpose and arrest it before the schemes of plunder and spoliation desolate the country.


Letter to William C. Rives (1819)
**************************
If the debt which the banking companies owe be a blessing to anybody, it is to themselves alone, who are realizing a solid interest of eight or ten per cent on it. As to the public, these companies have banished all our gold and silver medium, which, before their institution, we had without interest, which never could have perished in our hands, and would have been our salvation now in the hour of war; instead of which they have given us two hundred million of froth and bubble, on which we are to pay them heavy interest, until it shall vanish into air... We are warranted, then, in affirming that this parody on the principle of 'a public debt being a public blessing,' and its mutation into the blessing of private instead of public debts, is as ridiculous as the original principle itself. In both cases, the truth is, that capital may be produced by industry, and accumulated by economy; but jugglers only will propose to create it by legerdemain tricks with paper.


ME 13:423
********************
The art and mystery of banks... is established on the principle that 'private debts are a public blessing.' That the evidences of those private debts, called bank notes, become active capital, and aliment the whole commerce, manufactures, and agriculture of the United States. Here are a set of people, for instance, who have bestowed on us the great blessing of running in our debt about two hundred millions of dollars, without our knowing who they are, where they are, or what property they have to pay this debt when called on; nay, who have made us so sensible of the blessings of letting them run in our debt, that we have exempted them by law from the repayment of these debts beyond a give proportion (generally estimated at one-third). And to fill up the measure of blessing, instead of paying, they receive an interest on what they owe from those to whom they owe; for all the notes, or evidences of what they owe, which we see in circulation, have been lent to somebody on an interest which is levied again on us through the medium of commerce. And they are so ready still to deal out their liberalities to us, that they are now willing to let themselves run in our debt ninety millions more, on our paying them the same premium of six or eight per cent interest, and on the same legal exemption from the repayment of more than thirty millions of the debt, when it shall be called for.


ME 13:420
**********
That we are overdone with banking institutions which have banished the precious metals and substituted a more fluctuating and unsafe medium, that these have withdrawn capital from useful improvements and employments to nourish idleness, that the wars of the world have swollen our commerce beyond the wholesome limits of exchanging our own productions for our own wants, and that, for the emolument of a small proportion of our society who prefer these demoralizing pursuits to labors useful to the whole, the peace of the whole is endangered and all our present difficulties produced, are evils more easily to be deplored than remedied.


Letter to Abbe Salimankis (1810) ME 12:379 The Writings of Thomas Jefferson "Memorial Edition" (20 Vols., 1903-04) edited by Andrew A. Lipscomb and Albert Ellery Bergh, Vol. 12, p. 379; also quoted at "Thomas Jefferson on Politics & Government : Money & Banking" at University of Virginia.

****************************************************************
Note:  "ME" refers to the "Memorial Edition" of the writings of Thomas Jefferson