"Paper Money: The Greatest Thievery in Human History"

Jacob Lawrence

Lightning Talk Presented: March 20, 2014
Published: March 30, 2014

In order to have a better understanding of what or how banking works and is today, it becomes crucially important to understand what money exactly is. Marco Polo in thirteenth century China recorded the first account of paper money. He records, "What they take is a certain fine white bast or skin which lies between the wood of the tree, and the thick outer bark, and this they make into something resembling sheets of paper, but black" (Sutton 26). The famous explorer continues, "All these pieces of paper are issued with as much solemnity and authority as if they were of pure gold or silver…Any one forging it would be punished with death" (28). The technical term for this type of currency is called fiat money. A very similar process is being practiced in America today.

The ability to turn worthless paper into gold is the greatest thievery in human history. The first time this fiat money appeared again after China was in America. This was the start not only in America for paper money but also in the British Empire and almost in the whole Christian world.

Massachusetts was falling deep into debt in 1690 with nothing to give their soldiers. Thus, the government printed money. In order to convince the citizens to accept this they had to make two promises. The first promise being that it would be completely backed by silver and gold as soon as they had sufficient supply. Secondly, no more paper money would be issued. Obviously, these two promises were later broken.

There are other ways to conduct business such as bartering and trading of course. Even tobacco was a popular medium of currency during colonial America. It had intrinsic value, could not be counterfeited, had great demand, and could not be increased unless with physical labor. You may say to yourself that sounds perfect. This is perfect until war. War is major source fiat money. The American Revolution expanded the money supply by 5000% in just a five-year span.

This becomes the introduction to inflation which is hard for most people to understand. Thomas Jefferson wrote: "Every one, through whose hands a bill passed, lost on that bill what it lost in value during the time it was in his hands. This was a real tax on him; and in this way the people of the United States actually contributed those millions of dollars during the war, and by a mode of taxation the most oppressive of all because the most unequal of all." This is probably the most accurate way to explain how inflation works and its effects on us.

Another subject, which can be complicated and hard for people to understand, is fractional-reserve banking. The basic principle to understand when talking about fractional-reserve banking is: the money put into the bank is only worth a fraction of it is worth in gold. Simply stating our money is not backed fully by gold and silver, previously stated. The reason why fractional-reserve banking is important is because that is how American banks work.

Now there is a basic understanding of what exactly money is. It is also crucial to understand where and who our money comes from. Our money today is being printed at the Federal Reserve. The Federal Reserve was conceived at the private resort of J.P. Morgan on Jekyll Island in 1910. The six men attending the secret meeting represented one-fourth of the entire world's wealth. These six men were: Abraham Piatt Andrew, Benjamin Strong, Frank A. Vanderlip, Henry P. Davison, Nelson W. Aldrich, and Paul M. Warburg. These all being very important men of the 19th century. The goal was to establish a system of creating money out of nothing for the purpose of lending, without the publics knowledge. Also they wanted the Federal Reserve to stop the growing competition from nations newer banks, get control of the reserves of all the banks, have the taxpayer pick up the loses, and finally convince Congress it was for the good of the public.

Throughout the 19th century the idea of central banks boomed and busted. Many people have the misconception that the Civil War was started because of slavery. This is only part of the reason for America's bloodiest war. Banking monopolies, legalized plunder, and territorial expansion into Latin America were major reasons for the Civil War. President Andrew Jackson was a major opponent against the banks saying "I am ready with the screws to draw every tooth and then the stumps," when referring to establishing a central bank.

To ensure the public that their deposits are safe and to ensure the bankers to give out loans, the creation of the Federal Deposit Insurance Corporation also better known as the FDIC was established. You can see it on every single bank in the country. This just basically means will always bailout the bank and the bank's patrons by creating money out of nothing. Has the Federal Reserve served its original purpose? This can be said to be true, for the people who manage it today. But what about the rest of the public that is becoming robbed of the property their fathers have founded.

Works Consulted

    Blodget, Henry. "Guess Who's Paying for the Greece Bailout? That's Right-You!" Business Insider 3 May 2010. Web. 12 Jan. 2014.

    Bogart, Ernest L. Economic History of the American People. New York: Green & Co., 1930. 172. Print.

    Griffin, G E. The Creature from Jekyll Island: A Second Look at the Federal Reserve. 5th ed. Westlake Village, CA: American Media, 2010. 20-24. Print.

    McNamara, Robert. "Financial Panics of the 19th Century Severe Economic Depressions Occurred Periodically." Mar. 2014. Web. 30 Jan. 2014.

    Noll, Franklin. "The United States Monopolization of Bank Note Production: Politics, Government, and the Greenback, 1862-1878." American Nineteenth Century History 13.1 (2012): 15-43. Academic Search Complete. Web. 18 Jan. 2014.

    Summer, William G. A History of American Currency. New York: Holt, 1884. 214. Print.

    Sutton, Anthony. The War on Gold. Sealbeach, CA: n.p., 1977. 26-28. Print.

    Turner, Dennis. When Your Bank Fails. Princeton, New Jersey: Amwell Publishing Inc., 1983. 141. Print.

    Wriston, Walter B. "Banking Against Disaster." New York Times 14 Sept. 1982. Web. 24 Feb. 2014.

Nineteenth century editorial cartoon showing Andrew Jackson slaying the banking interests.