New Federal Money Laws
Let’s continue our journey through America’s real money history. Up until this time, central banks had limited charters and there were no federal laws that regulated money. All this was about to change. As the civil war broke out, states demanded to leave the union. Something needed to be done to finance the Union Army. Let’s continue with the next event
The Civil War presented another opportunity for the bankers to get control of America. President Abraham Lincoln needed money for the war. He went with his Secretary of the Treasury Solomon P. Chase, to get loans to finance the war. The banks in New York offered the Union loans that had an interest rate between 24 to 36 percent. Lincoln refused.
An old friend of Lincoln’s, Colonel Dick Taylor of Chicago was put in charge of solving the problem of how to finance the civil war. His solution was recorded as this.
“Just get Congress to pass a bill authorizing the printing of full legal tender treasury notes… and pay your soldiers with them and go ahead and win your war with them also.”
Therefore, Lincoln pushed through the Legal Tender Act of 1862. Under that act, the U.S. government printed debt-free money. This debt-free money was known as “Greenbacks” because of the green ink on the back of the notes. The US printed $450 Million dollars in interest-free “Green-backs” from the period of 1862 to 1864. Abraham Lincoln founded the Secret Service. It was their job to find and prosecute counterfeiters.
Abraham Lincoln was shot dead by John Wilkes Booth on April 14th, 1865. This event was just three years later. The role of the Secret Service expands. In addition to tracking and ending counterfeit operations, they also are responsible for protecting the president.
After the Civil War, Bankers purchased government bonds in exchange for banknotes. This is how money was created at this time.
The National Banking Acts of 1863 and 1864 were two United States federal banking acts that established a system of national banks for banks and created the United States National Banking System. They encouraged the development of a national currency backed by the bank holdings of U.S. Treasury securities. These acts established the Office of the Comptroller of the Currency as part of the United States Department of the Treasury and authorized the Comptroller to examine and regulate nationally chartered banks. The legacy of these Federal Banking Acts is its impact on the national banking system as it stands today and its support of a uniform national U.S. banking policy.
If a bank could not redeem its banknotes for real money like gold or silver, the bank had committed fraud, and it was subject to prosecution. If redemption demands exhausted their gold or silver reserves, these banks could rediscount the Real Bills to obtain gold or silver.
In 1866, congress passed The Contraction Act. This act reduced the number of greenbacks in circulation. In 1866, there were 1.8 billion Greenbacks in circulation. By 1876, there were 600 million in circulation. At this point, gold and silver can still be used as money.
James A. Garfield became president in 1881. Throughout Garfield’s extended congressional service after the Civil War, he fervently opposed the Greenback. He gained a reputation as a skilled orator. President Garfield advocated a bi-metal monetary system.
Here is an actual quote from Garfield’s inaugural address. You can see his support of a bi-metal monetary system.
“The prosperity which now prevails is without parallel in our history. Fruitful seasons have done much to secure it, but they have not done all. The preservation of the public credit and the resumption of specie payments, so successfully attained by the Administration of my predecessors, have enabled our people to secure the blessings which the seasons brought.
By the experience of commercial nations in all ages it has been found that gold and silver afford the only safe foundation for a monetary system. Confusion has recently been created by variations in the relative Value of the two metals, but I confidently believe that arrangements can be made between the leading commercial nations which will secure the general use of both metals. Congress should provide that the compulsory coinage of silver now required by law may not disturb our monetary system by driving either metal out of circulation. If possible, such an adjustment should be made that the purchasing power of every coined dollar will be exactly equal to its debt-paying power in all the markets of the world.
The chief duty of the National Government in connection with the currency of the country is to coin money and declare its value. Grave doubts have been entertained whether Congress is authorized by the Constitution to make any form of paper money legal tender. The present issue of United States notes has been sustained by the necessities of war; but such paper should depend for its value and currency upon its convenience in use and its prompt redemption in coin at the will of the holder, and not upon its compulsory circulation. These notes are not money, but promises to pay money. If the holders demand it, the promise should be kept.”
President Garfield was shot by Charles J. Guiteau on July 2nd, 1881. He died from medical complications on September 19th, 1881.
The Number of greenbacks in circulation was greatly reduced due to the contraction act. This created a shortage of money supplies across the nation.
In 1906, the U.S. stock market was doing well and setting records, but it began to decline towards the end of the year. In March 1907 the U.S. stock market crashed. Numerous conspiracy theories allege that elite New York bankers were responsible.
The 1907 Bankers’ Panic, was a financial crisis that occurred in the United States when the New York Stock Exchange fell almost 50% from its peak the previous year. On March 12th of that year, the Dow Jones Industrial Average was 86.53 percent. On March 13th the market fell again and went to 83.12 percent. On March 14th The Dow Jones Average crashed again and it was at 76.23. The next 6 months saw a steady decline in the stock market
In those days America had something called Trust Banks. These banks were separate from public banks and investment banks. Trust banks were administrators of trust funds. These banks also managed money on behalf of estates, wills, and things of that nature. Many of these banks made loans to stock market speculators. They took securities as collateral. When the stock market crashed it not only hurt the investors, it hurt the banking system too.
On October 21st there was a run on The Knickerbocker Trust Co. The bank closed the next day after an auditor discovered that the bank’s funds had been depleted. The bank’s president shot himself.
J.P. Morgan was called upon by President Teddy Roosevelt to help put an end to the panic, which he was able to do.
The panic of 1907 resulted in a congressional investigation that ended up concluding that a central bank was “necessary” so that these kinds of panics would not ever happen again.
The Federal Reserve was set up about 6 years later. The legislation was written on Jekyll Island and it was pushed through by Senator Nelson Aldrich
The U.S. House of Representatives voted on the Federal Reserve Act on December 22nd, 1913. The Senate voted the next day on December 23, 1913. The Senate agreed to it by a vote of 43 yeas to 25 nays with 27 not voting.
A significant portion of Congress was either sleeping at the time or was already at home with their families celebrating the holidays.
“A great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men who, even if their action be honest and intended for the public interest, are necessarily concentrated upon the great undertakings in which their own money is involved and who necessarily, by very reason of their own limitations, chill and check and destroy genuine economic freedom. This is the greatest question of all, and to this statesmen must address themselves with an earnest determination to serve the long future and the true liberties of men.”
In 1913, the 16th Amendment was added to the Constitution. This made the income tax a permanent part of the U.S. tax system. The Internal Revenue System or IRS was set up the same year the Federal Reserve became law.
Between 1922 and 1930, the Federal Reserve increased the U.S. money supply by 62 percent. This is about 7 percent a year on average. This was a period in time known as “The Roaring 20s”.
In addition to all of this, highly leveraged “margin loans” became very common during this decade. Investments were made in the stock market using these margin loans. The only problem with these loans was the fact that they could be recalled at any moment.
In October 1929, the New York bankers started calling in these margin loans on a massive scale. This created the initial crash that launched the Great Depression.
Instead of expanding the money supply in response to this crisis, the Federal Reserve decided to contract the money supply.
It has been reported the U.S. money supply contracted by eight billion dollars between 1929 and 1933. That was an extraordinary amount of money in those days. Over one-third of all U.S. banks went bankrupt. Some of the New York bankers were able to buy up other banks and all kinds of other assets for pennies on the dollar. Some people gained wealth while many others became poor.
Every major currency left the gold standard during the Great Depression. This put an end to what is known as the classical gold era. Great Britain was the first to do so. Facing an onslaught of speculative attacks on the pound and in turn depleting gold reserves, in September 1931 the Bank of England ceased exchanging pound notes for gold, and the pound was floated on the foreign exchange.
The United States Gold Reserve Act of January 30th, 1934 required that all gold and gold certificates held by the Federal Reserve be surrendered and vested in the sole title of the United States Department of the Treasury.
The Gold Reserve Act outlawed most private possession of gold, forcing individuals to sell it to the Treasury. The U.S. Exchange Stabilization Fund was established at the Treasury Department by a provision in the Gold Reserve Act of January 30th, 1934. 31 U.S.C. § 5117. The Gold Reserve Act authorized the ESF to use such assets for exchange market stabilization to deal in government securities.
The Classical Gold era was brought to an end largely because of the great depression. It was replaced by the Gold Reserve Act. A year earlier Executive Order 6102 had made it a criminal offense for any American to own gold. All gold and gold certificates held by the Federal Reserve had to be surrendered and vested in the sole title of the United States Department of the Treasury. Private possession of gold was outlawed, forcing individuals to sell it to the Treasury. The Treasury stored the gold in the United States Bullion Depository at Fort Knox and other locations.
The Bretton woods system eventually replaced the Gold Era and set up an international central banking system through the IMF. It set up a fixed exchange rate system. In the process of building an international economic system as World War II was still raging, 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire.
Under this system, a country’s government decides the worth of its currency in terms of either a fixed weight of gold, a fixed amount of another currency, or a collection of currencies also known as a basket of currencies. The central bank of a country under Bretton Woods remains committed at all times to buy and sell its currency at a fixed price. The central bank provides the foreign currency needed to finance payment imbalances.
The Bretton Woods system was set up after World War II. It gave birth to the International Monetary Fund. The Marshal Plan was a strategy to rebuild Europe. The plan was used to build the new economic system. U.S. dollars were placed in central banks around the world as a reserve currency. a nation would issue its currency based on the amount of reserve. The foreign government’s currency value is now based on the amount of American dollars in reserve. In the process of this plan, we saw the Bretton Woods economic system emerge.
Due to the cost of the Vietnam War, and entitlement spending aka the War on Poverty, America’s spending was out of control. We had more dollars in circulation than gold to back the dollars. Nations around the world were nervous because of the debt America began to accumulate. They wanted to cash their reserves in for our gold. Because of this, we were removed from the Gold Standard on August 15th, 1971 by Richard Nixon.
This ended the Bretton woods system and a fixed rate system for our currency was now traded for a floating rate system. Gold was no longer used to redeem U.S. paper in other countries. Many speculate that our currency became fiat at this time. The truth is our currency has always been fiat. It is issued by law or decree. Every nation that used the US dollar as a reserve became fiat as soon as they were o longer able to trade American dollars for gold. Now the precious metal was stripped away from the global monetary system. This event is called the Nixon Shock.
Once we were removed from any form this global gold standard, the petrodollar system was set up. America left the gold standard under FDR. the nixon shock was something totally different. The United States entered into agreements with OPEC and other Arab nations. We agreed to protect these nations with our military and we promised them wealth. The only thing we asked for in return is that these nations sell their oil using US dollars only.
The US suffers through the 1973 oil crisis started in October 1973. While the main reason cited for this by the media is a shortage of oil supply around the world, later it was discovered that this was an actual oil embargo. The Arab Nations say that the embargo is in response to the U.S. decision to re-supply the Israeli military during the Yom Kippur war.
Oil is still sold using only US dollars at this time. This drives the cost of oil up and it raises the demand for US dollars around the world. More of America’s currency is being exported so it can be used overseas. The members of the Organization of Arab Petroleum Exporting Countries or OAPEC enforce the embargo. This group is made up of the Arab members of OPEC, plus Egypt, Syria and Tunisia.
The energy crisis hits America and drives the price of oil up even more. Jimmy Carter starts the Department of Energy in 1977. All of this serves to increase global demand for the dollar as supply and demand issues for oil arise. Jobs begin to be exported as other nations seek to import industry and obtain US dollars so they could buy oil.
On September 11 2001, America is attacked when four airplanes are hijacked. Two of these planes fly into the world trade center. One plane flies into the Pentagon, the last plane crashes. These events affect America’s economy and the stock market falls as soon as it opens. The focus of the nation moves to wartime policies. America rebounds quickly.
America’s economy crashes in a meltdown that occurred in 2008. This has a global impact and it is far-reaching. A few years later, China calls for a new global currency to replace the dollar. The global currency wars begin.
Do most Americans know this history today? Of course not, In fact, it is a rare thing that an American can even adequately explain what a central bank is much less explain what it does. It is critical that we educate as many Americans as possible about what is really going on in our financial institutions and why we need to make some truly fundamental changes. As long as nations allow international organizations to control their money they become doomed to surrendering their sovereignty to those who do not have their best interests at heart.
While there are some wild conspiracy theories surrounding the earliest banks, America’s money history, and the Rothschild dynasty, I cannot help but make one observation. Those in a position of leadership who helped the bankers got support from those very bankers. Those in a position of leadership who opposed the bankers found themselves targeted and persecuted. This has to go beyond coincidence simply because of the frequency of events.
I have also observed that anyone who had anything to do with our money and its laws and anyone who was involved in the central banking systems is on our currency.
George Washington signed the First Central Bank into law. He is on the one-dollar bill,
Thomas Jefferson opposed and was in opposition to the first central bank in our nation’s history. He is on the two-dollar bill
Abraham Lincoln pushed through the legal tender act and the government issued its own currency. He pioneered the greenback. He is on the 5 dollar bill.
Alexander Hamilton supported the first central banking structure and it failed. He also supported and pushed for its predecessor, The Bank of North America. He lobbied for the creation of The Bank of North America. He was its chief supporter. He is on the 10 dollar bill
Andrew Jackson paid off the national debt and ended the central bank’s power to issue currency. He is on the twenty-dollar bill
Ulysses S. Grant was our 18th president. There was a panic in 1873 that led to depression for 5 years. People wanted more paper currency in circulation. The contraction act reduced the supply. The Inflation Bill was pushed through on April 14, 1874, to increase the nation’s tight money supply. Many farmers and workers favored the bill, but Eastern bankers wanted a veto because of their reliance on bonds and foreign investors. On April 22, 1874, Grant unexpectedly vetoed the bill on the grounds that it would destroy the credit of the nation. He is on our 50 dollar bill.
Benjamin Franklin appeared before parliament in England. He represented America several times. He gave an account of the colonial script which was the money used by the colonist. After these events, England issued the stamp act. He is on our 100 dollar bill.
William McKinley is our 25th president. He secured the passage of the Gold Standard Act. He is on the 500 dollar bill. (No longer in circulation)
Stephen Grover Cleveland was the 22nd and 24th President of the United States. He is the only president to serve two non-consecutive terms. (1885–1889 and 1893–1897) In his second term, the panic of 1893 struck the nation. The panic was made worse by the acute shortage of gold that resulted from the free coinage of silver. Cleveland oversaw the repeal of the Sherman Silver Act. At the time, the repeal seemed a minor setback to silverites, but it marked the beginning of the end of silver as a basis for American money. Cleveland is on our 1,000 dollar bill. (No longer in circulation)
James Madison led the opposition against the First Bank of The United States (our first official central bank) He is on the 5,000 dollar bill
Salmon Portland Chase was an American politician and jurist who served as U.S. Senator. He served as Secretary of the Treasury in President Lincoln’s cabinet from 1861 to 1864, during the time of the Civil War. There were two great changes in American financial policy, the establishment of a national banking system, and the issue of paper currency. (The Greenback) He is on our 10,000 bill. (Not in circulation)
Finally Woodrow Wilson The man who gave us the Internal Revenue Service and signed the Federal Reserve Act into law! He is the man responsible for creating our last central bank! He is on our 100,000 dollar bill. (No longer in circulation)
It is interesting to note that the ink on the back of the $100,000.00 bill that the Federal Reserve used is RED! Irony thou art a cruel beast! If you want to see what any of these original notes looked like then use your favorite search engine to find pictures of them. A quick google search will bring up images of these notes.