Don’t Give into a Protection Racket
The first American Revolution was fought, in part, because the British wanted to control our money. Ben Franklin is reported to have once said that the economy of the colonies was so prosperous because the colonies issued their own money, “colonial scrip,” issued in proportion to the level of goods and services in the economy. No interest was paid to anyone for it. The result was that the British declared the use of colonial scrip illegal.
Consolidation of money accompanied the consolidation of Federal power over the states with the Civil War, with the National Banking Act of 1863 and the two revisions which followed in 1864 and 1865. This legislation promoted currency notes issued by nationally chartered banks rather than state banks. The Act imposed a 10 percent tax on state banknotes, effectively eliminating non-federal currency from circulation.
The control of federal money was largely taken away from the government, with the Federal Reserve Act and secrecy following later.
It isn’t that we weren’t warned by the founders about the consolidation of power and credit. The request by Fed Chairman Bernanke and Secretary of the Treasury Paulson was delivered in the form of a Mafia protection racket: “Give us your money now or something bad will happen.” No serious explanation, no attempt at accountability, no willingness for transparency.
It may be that some type of bailout by the government is called for under the premise that the role of government is to protect innocent people from harm by others. And that mandate refers to financial harm as well as physical harm. But the bailout as requested does not sufficiently meet this basic test. Who is innocent and who is culpable must be established, and any bailout should be accompanied by protection of the innocent from financial harm and punishment for the guilty. If Congress does not proceed in a way that protects the innocent and simply pays extortion, they will only be compounding the problem.
Gordon L. Anderson is general secretary of the Professors World Peace Academy in St. Paul.
This commentary originally appeared in Volume 3 of “What’s a Free Marketeer to Think?”
Click here to read the entire volume.