Banking History & Effects

Currency Act, the cause of Revolutionary War

Wikipedia http://en.wikipedia.org/wiki/Currency_Act, In the Documentary the Money Master’s it is asserted that the removal of the right to issue currency by the colonial banks brought on an economic depression which fuel discontent in the American colonies and that this was the underlying cause for the discontent that brought on the American revolt against England. This is backed up by quotes by Benjamin Franklin, who during that period was colonies chief voice in England.

Has history been rewritten? Below is evidence is supporting evidence in the form of the Currency Acts, and that they caused “financial difficulties”. Moreover, the revolt of taxation, which required payment in gold, is a revolt both against taxation without representation and the Currency Acts. These acts were considered “a major grievance.” The economic downturn prior to the Revolutionary War brought on by Parliament forcing on the colony a tight currency policy was the cause for revolt. After the war Congress hotly debated whether it should adopt a British type banking system with its independent Bank of England. It did, but then let its chart expire--jk.

Currency Act

From Wikipedia, the free encyclopedia

The Currency Act is the name of several acts of the Parliament of Great Britain that regulated paper money issued by the colonies of British America. The acts sought to protect British merchants and creditors from being paid in depreciated colonial currency. The policy created tension between the colonies and Great Britain, and was cited as a grievance by colonists early in the American Revolution.

Act of 1751

The first act, the Currency Act of 1751 (24 Geo. II c. 53), restricted the emission of paper money by the colonies of New England. These colonies had issued paper fiat money known as "bills of credit" to help pay for military expenses during the French and Indian Wars. Because more paper money was issued than what was taxed out of circulation, the currency depreciated in relation to the British pound sterling. The resultant inflation was harmful to merchants in Great Britain, who were forced to accept the depreciated currency from colonists for payment of debts.

The act limited the future emission of bills of credit to certain circumstances. It allowed the existing bills to be used as legal tender for public debts (i.e. paying taxes), but disallowed their use for private debts (e.g. for paying merchants).^[1]

Act of 1764

The Currency Act of 1764 (4 Geo. III c. 34) extended the 1751 act to all of the British colonies of North America. Unlike the earlier act, this statute did not prohibit the colonies from issuing paper money, but it did forbid them from designating future currency emissions as legal tender for public or private debts. This tight money policy created financial difficulties in the colonies, where gold and silver were in short supply.^[2] Benjamin Franklin, a colonial agent in London, lobbied for repeal of the act over the next several years,^[3] as did other agents.

The colonial government of the Province of New York insisted that the Currency Act prevented it from providing funds for British troops in compliance with the Quartering Act. As a result, in 1770, Parliament gave permission (10 Geo. Ill c. 35) for New York to issue £120,000 in pa

paper currency for public but not private debts.^[4] Parliament extended these concessions to the other colonies in 1773 by amending the Currency Act of 1764 (13 Geo. III c. 57), permitting the colonies to issue paper currency as legal tender for public debts.^[2] According to historian Jack Sosin, the British government had made its point:

After nine years, the colonial agents had secured a paper currency for the provinces. But the Americans had tacitly, if not implicitly, acknowledged the authority of Parliament. And in the final analysis this was all the imperial government wanted.^[5]

Legacy

The Currency Acts created tension between the colonies and the mother country, and were a contributing factor in the coming of the American Revolution. In all of the colonies except Delaware, the acts were considered to be a "major grievance".^[6] When the First Continental Congress met in 1774, it issued a Declaration of Rights, which outlined colonial objections to certain acts of Parliament. Congress called on Parliament to repeal the Currency Act of 1764, one of seven acts labeled "subversive of American rights".^[7]

However, according to historians Jack Greene and Richard Jellison, the currency debate was no longer really a "live issue" in 1774, due to the 1773 amendment of the act. The controversy's most important impact was psychological, in that it helped convince many colonists that Parliament did not understand or care about their problems. Colonial leaders came to believe that the

References

Notes

1. ^ Allen, 96–98.

2. ^ ^a ^b Allen, 98.

3. ^ Morgan, 128.

4. ^ Sosin, 196.

5. ^ Sosin, 198.

6. ^ Greene and Jellison, 517.

7. ^ Reid, 265.

8. ^ Greene and Jellison, 518.

Bibliography

Allen, Larry. The Encyclopedia of Money. 2nd edition. Santa Barbara, Calif: ABC-CLIO, 2009. ISBN 9781598842517.

Greene, Jack P. and Richard M. Jellison. "The Currency Act of 1764 in Imperial-Colonial Relations, 1764–1776". The William and Mary Quarterly, Third Series, Vol. 18, No. 4 (October 1961), 485–518.
Morgan, David. The Devious Dr. Franklin, Colonial Agent: Benjamin Franklin's Years in London. Macon, Georgia: Mercer University Press, 1999.
Reid, John Phillip. Constitutional History of the American Revolution, III: The Authority to Legislate. Madison: University of Wisconsin Press, 1991. ISBN 0-299-13070-3.
Sosin, Jack M. "Imperial Regulation of Colonial Paper Money, 1764–1773". Pennsylvania Magazine of History and Biography, Volume 88, Number 2 (April 1964), 174–98.

[edit] External links

Currency Act of 1751 24 Geo. II c. 53
Currency Act of 1764 4 Geo. III c. 34
Currency Act of 1773 13 Geo. III c. 57

http://en.wikipedia.org/wiki/American_Revolution

all that is on the currency act in Wikipedia.

In 1764, Parliament enacted the Sugar Act and the Currency Act, further vexing the colonists. Protests led to a powerful new weapon, the systematic boycott of British goods.

Obviously there is a need for a currency and an orderly way to direct the economy through a structure that would provide the service of today’s financial institutions. However, this role ought to be performed by a government that is free from dependence upon banking and have also have the citizens of the United States meaningfully review their performance of banking based upon the good they do for the masses. This is what we ought to have. What we have is that the national and local banks have a review system consisting of investors measuring performance on the profits generated--a system of greed. The financial institutions are a child of our government and our government is fed by its child--jk.

On Colonial Banking from and relying upon Wikipedia at http://en.wikipedia.org/wiki/Nicholas_Biddle_(banker), http://en.wikipedia.org/wiki/Second_Bank_of_the_United_States

http://en.wikipedia.org/wiki/First_Bank_of_the_United_States

http://en.wikipedia.org/wiki/File:General_Jackson_Slaying_the_Many_Headed_Monster_crop.jpg Jackson slaying

The First Bank was a bank chartered by the United States Congress on February 25, 1791. The charter was for 20 years. The Bank was created to handle the financial needs and requirements of the central government of the newly formed United States, which had previously been thirteen individual colonies with their own banks, currencies, financial institutions, and policies.

Hamilton was a student of both the French finance minister Jacques Necker and his British counterpart Chancellor of the Exchequer Robert Walpole (in addition to his own extensive reading). Hamilton devised a bank for the whole of the country, not just for sections or states.

Officially proposed by Alexander Hamilton, Secretary of the Treasury, to the first session of the First Congress in 1790, the concept for the Bank had both its support and origin in and among Northern merchants and more than a few New England state governments. It was, however, eyed with great suspicion by the representatives of the Southern States, whose chief industry, agriculture, did not require centrally concentrated banks, and whose feelings of states' rights and suspicion of Northern motives ran strong …. Secretary of State Thomas Jefferson and Representative James Madison, like most members of Congress opposed Hamilton’s recommendation. Many Americans were concerned that a national bank would result in a "money-monopoly" increasing interest rates and harming the very business interests it was supposed to protect.

A bill to charter the First Bank passed and Washington signed after long consideration and doubts on April 25, 1791. The bill had the following conditions:

That the Bank was to be a private company.
That the Bank would have a twenty year charter running from 1791 to 1811, after which time it would be up to the Congress to renew or deny renewal of the bank and its charter; however, during that time no other federal bank would be authorized; states, for their part, would be free to charter however many intrastate banks they wished.

That the Bank, to avoid any appearance of impropriety, would:

1. be forbidden to buy government bonds.

2. have a mandatory rotation of directors.

3. neither issue notes nor incur debts beyond its actual capitalization.

That foreigners, whether overseas or residing in the United States, would be allowed to be Bank of the United States stockholders, but would not be allowed to vote.
That the Secretary of the Treasury would be free to remove government deposits, inspect the books, and require statements regarding the bank's condition as frequently as once a week.^[3]

The bank's charter expired in 1811 under President James Madison. The bill to re-charter failed in the House of Representatives by one vote, 65 to 64, on January 24, 1811. It failed in the Senate when Vice President George Clinton broke a tie vote that February 20. In 1816, however, Madison revived it in the form of the Second Bank of the United States.

Nicholas Biddle in 1816 was appointed by President Monroe as federal government director of the Second Bank of the United States (hereafter SBUS). Because of tight credit policy instituted in 1819, the SBUS was blamed for the Panic of 1819. In Tennessee, Andrew Jackson was hard-pressed to pay his debts in this period. He developed a lifelong hostility to all banks that were not completely backed by gold or silver. This meant, above all, the Second Bank of the United States.

The "Bank War" of 1832–36 was initiated by Biddle when he decided to apply for the Bank's re-charter four years before the charter was scheduled to expire. Until 1832, Jackson, for three years, had ignored the Bank and Biddle. But, once challenged, he decided to veto the bill to re-charter the bank, which was being pushed by Senator Henry Clay of Kentucky in preparation for another Presidential run later that year. Jackson, well-known as a man whom one did not want to anger, still harbored ill will towards Clay from the 1824 Presidential election. Clay's strategy failed, and Jackson gained great support from the public for his veto. Clay lost to Jackson again in November despite massive funding of over $3 million in bankers' support [an early example of the political arm of banking}.

Jackson in September 1833 removed federal funds from SBSU--by far their biggest depositor. To fight back, Biddle decided to shrink the money supply and cause a recession in 1834 in order to force Jackson to accept a re-charter bill. The Bank demanded that old loans be repaid. It made no new loans. There was a brief recession in the first half of 1834, but another bill to re-charter failed in the House on April 4. That was the last time the issue ever came before Congress. And so, the Bank was doomed. Its charter expired in April, 1836. In 1839, Biddle resigned from his post of Bank President, and in 1841, the Bank finally failed. Biddle was arrested and charged with fraud; he was later acquitted. He died soon after while still involved in civil suits.

The Second Bank of the United States was chartered in 1816, five years after the First Bank of the United States

lost its own charter. The SBUS was in no sense a national bank but rather a privately held banking corporation. The bank had a unique relationship with the federal government that gave it access to substantial profits. Its role as the depository of the federal government's revenues made it a political target of banks chartered by the individual states which either objected to … the B.U.S.'s relationship with the central government. The Second Bank of the United States was initially headquartered in Carpenters' Hall, Philadelphia, the same as the First Bank, and had branches throughout the nation.

The Second Bank was chartered by many of the same congressmen who in 1811 had refused to renew the charter of the original Bank of the United States. The predominant reason that the Second Bank of the United States was chartered was that in the War of 1812, the U.S. experienced severe inflation and had difficulty in financing military operations. Subsequently, the credit and borrowing status of the United States were at their lowest levels since its founding [not surprising given the role of the Bank of England & that the US was at war with England].

Like the First Bank, the Second Bank was also chartered for 20 years, and also failed to get its charter renewed. It existed for 5 more years as an ordinary bank before going bankrupt in 1841. Financial difficulties following the war including inflation were causal factors that lead Madison and congress to charter the SBUS in 1816. Loose credit policy of the bank in produce a boom in land sales (in 1819 sales totaled 55 million acres) resulted in an economic bubble.

By the early 1830s, President Jackson had come to thoroughly dislike the Second Bank of the United States because of its fraud and corruption. Jackson then had an investigation done on the Bank which he said established “beyond question that this great and powerful institution had been actively engaged in attempting to influence the elections of the public officers by means of its money.” [Influence elections is not called a “corruption”, for it is the norm today] Jackson is considered primarily responsible for its demise, seeing it as an instrument of political corruption and a threat to American liberties.^[5] In his message regarding his veto^[6], Jackson used language which appeared to resonate mostly with common citizens while attacking the predominantly rich and in many cases foreign stockholders of the current bank.

On Colonial Banking from and relying upon Wikipedia at http://en.wikipedia.org/wiki/Nicholas_Biddle_(banker), http://en.wikipedia.org/wiki/Second_Bank_of_the_United_States

http://en.wikipedia.org/wiki/First_Bank_of_the_United_States

http://en.wikipedia.org/wiki/File:General_Jackson_Slaying_the_Many_Headed_Monster_crop.jpg Jackson slaying the hydra.

A bill to charter the First Bank passed and Washington signed after long consideration and doubts on April 25, 1791. The bill had the following conditions:

That the Bank was to be a private company.

That the Bank would have a twenty year charter running from 1791 to 1811, after which time it would be up

to the Congress to renew or deny renewal of the bank and its charter; however, during that time no other federal bank would be authorized; states, for their part, would be free to charter however many intrastate banks they wished.
That the Bank, to avoid any appearance of impropriety, would:

1. be forbidden to buy government bonds.

2. have a mandatory rotation of directors.

3. neither issue notes nor incur debts beyond its actual capitalization.

That foreigners, whether overseas or residing in the United States, would be allowed to be Bank of the United States stockholders, but would not be allowed to vote.
That the Secretary of the Treasury would be free to remove government deposits, inspect the books, and require statements regarding the bank's condition as frequently as once a week.^[3]

The bank's

charter expired in 1811 under President James Madison. The bill to re-charter failed in the House of Representatives by one vote, 65 to 64, on January 24, 1811. It failed in the Senate when Vice President George Clinton broke a tie vote that February 20. In 1816, however, Madison revived it in the form of the Second Bank of the United States.

The Second Bank of the United States was chartered in 1816, five years after the First Bank of the United States lost its own charter. The SBUS was in no sense a national bank but rather a privately held banking corporation. The bank had a unique relationship with the federal government that gave it access to substantial profits. Its role as the depository of the federal government's revenues made it a political target of banks chartered by the individual states which either objected to … the B.U.S.'s relationship with the central government. The Second Bank of the United States was initially headquartered in Carpenters' Hall, Philadelphia, the same as the First Bank, and had branches throughout the nation.

founding [not surprising given the role of the Bank of England & that the US was at war with England].

actively engaged in attempting to influence the elections of the public officers by means of its money.” [Influence elections is not called a “corruption”, but it is the norm today] Jackson is considered primarily responsible for its demise, seeing it as an instrument of political corruption and a threat to American liberties.^[5] In his message regarding his veto^[6], Jackson used language which appeared to resonate mostly with common citizens while attacking the predominantly rich and in many cases foreign stockholders of the current bank.

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