Abraham Lincoln Saved America from Central Banking TyrannySubmitted by Shamus_McMises on Tue, 09/17/2013 - 23:41
There seems to be a group of people that view Lincoln as some kind of an anti-central-banker prophet for the cause of "debt-free" currency. This sentiment is one which is particularly confounding when one considers Lincoln's affiliations and agenda throughout his political career. Along with ending the concept of a federal government whose powers are justly derived from the consent of the states and their citizens, Lincoln also could be called the father of the modern monetary-dictatorship. He was a fierce defender of the Whig Party platform and advocate of an American central bank, he was also a mercantilist who continuously supported a more nationalist, centrally planned economic system.
Lincoln did all that he could to expand the federal government's role in economic planning. Passing the Legal Tender act in 1862, which forced the acceptance of the greenbacks that Lincoln had issued to pay for the war effort. He then signed the National Banking Act of 1863 which imposed a tax on currencies issued through the state banks. He also was in favor of grand government spending projects like the transcontinental railroad which he signed into law and over-saw the beginning of its construction. The transcontinental railroad ended up being a massive example of government waste and corruption, running many multiples over budget, and leading the United States into an era of rail subsidies which became the center of an economic crash in 1873.
To be sure, a currency which can be manipulated through central bank policy is always a bad idea as it will always lead to cyclical fluctuations and economic instability, and Lincoln's version of monetary policy was not different. The claim that the currency created under the National Bank Acts of 1863 and 1864 was debt free, meaning that the government did not have to go into debt to a bank to issue new currency, is not actually true. Though the federal government was the actual issuer of the national currency, it also issued treasury bonds to the banks to hold as reserve behind the cash it was handing out. It was actually far closer in execution to the system of currency creation which exists today than most would admit. And, more importantly, this means that the government actually did pay interest to the banks for doling out and accepting their currency.
Just the mere fact that Lincoln was in favor of a central bank further proves his vision of a subordinate position for the state governments, as well as it demonstrates his lack of concern for any real constitutional limitations on the federal government's ability to legislate. The national banking debate had been at the center of the divide in US politics from the very inception of the constitution. Those that did not acknowledge the danger to liberty brought about by a highly centralized national government took the stance, which was first used by Alexander Hamilton to institute the National Banking Act of 1791, that Article One Section Eight of the enumerated powers gave virtually unlimited power to the congress to pass legislation on anything which could be defined as being for the general welfare of the citizens of the United States. Hamilton argued that the term general welfare specifically included anything concerning the general interests of learning, agriculture, manufacturing and commerce.
Those that opposed this interpretation cited the fact that such a broad reading would essentially make the previous enumerated powers pointless and that to even argue such a position was absurd, as the language used in Article One Section Eight was also used in the Articles of Confederation and understood for years prior as nothing that could extend the powers of the national legislature beyond what had specifically been delegated to them. Nonetheless, it is this specific clause which has served the uses of the federal government to denigrate the states into the subordinate, province-like, position that they now hold. This was the position of Lincoln. He used it to crush the sovereignty of the state governments in the legislature just as he crushed their ability to resist his tyranny on the battlefield.
There are many brilliant pieces of writing about Lincoln's true stance on abolition and the real motives behind his invasion of the South. This post is simply to point out the fallacy of those who praise Lincoln as an endearing free-marketeer; as a man who bravely stood between the American economy and the tyranny of the international bankers and their evil debt-based money. This position is plainly untrue. Lincoln may not have contracted out the creation of American currency, but he did issue treasury bonds to the banks to hold as reserve in place of gold that he promised to pay, plus interest, in the future. The American tax payer DID pay interest to banks for dispensing currency. And the money supply WAS inflated and mismanaged to pay for an illegal and unjust war and many wasteful government spending programs. And finally, Lincoln also set in stone the broad interpretation of Article One Section Eight, which has been used to justify all of the encroachments committed by the American government against the liberties of the people, leading to the despotic consolidation under which we must endure today.