The Founders’ Views on Sound Money and Central Banking

by K. C. Webster

The economic crisis that our nation faces at the present time was entirely preventable and would never have occurred if the United States had not been taken off the gold standard in 1933. Our country is suffering today, because we didn’t follow the advice of the Founding Fathers, and began printing money un-backed by gold. History has proven that paper money without an underlying value, or fiat money, always leads to the destruction of a nation, and that out of the destruction comes economic chaos followed by tyranny. After decades of printing fiat money, the dollar is worth a fraction of its original value, and we are unconstitutionally bailing out banks and corporations with taxpayer money.

The Founding Fathers knew from history and their own hard experience that fiat money could destroy the nation. During the Revolutionary War, they had paid the new nation’s debts with paper dollars called Continental Currency. Unfortunately, then as today, the more paper money they printed, without a commensurate rise in production, the less value the money had. As a result of the widespread inflation that occurred, the money was practically worthless, and the term “not worth a Continental” was coined.

When the delegates to the Constitutional Convention met in Philadelphia to revise the Articles of Confederation in 1787, one of their first and foremost thoughts concerned the money system that would be created by the new federal government. Oliver Ellsworth of Connecticut demanded that we “shut and bar the door against paper money.” While James Wilson, a delegate from Pennsylvania went on record as stating that the new government should: “remove the possibility of paper money.” South Carolina delegate Pierce Butler stated that “disarming the government of such power” would be the proper course to follow. John Langdon of New Hampshire was perhaps the most vocal of the anti-paper money proponents, telling his fellow delegates that he would rather: “reject the whole Constitution” than allow the government the power to issue paper money. During the ratification process, James Madison discussed the “pestilent effects of paper money.”

In Article I, Section 8, the Constitution authorizes Congress to perform only three functions regarding money: 1. Establish a mint to stamp people’s precious metals into coinage of a fixed size, weight, and purity. 2. Determine and publish the value of the various foreign coinage then circulating in the country. 3. Create a standard of weights and measures so that everyone would be able to carry out normal transactions.

Unfortunately, bills authorizing the issuance of paper money started soon after the new nation came into being. Fortunately for the American people, the Supreme Court of that era either struck down these laws or declared them to be unconstitutional, and very little fiat money was printed in the United States.

Thomas Jefferson felt so strongly about the unwieldy power that banks could leverage over the citizens of a free country that he was moved to express his greatest fears regarding this subject on more than one occasion. While many of the founders shared his views, Jefferson was by far the most eloquent and prolific writer on the banking and money topics. In arguing against a central bank, Jefferson wrote: “I sincerely believe that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity under the name of funding, is but swindling futurity on a grand scale.” Jefferson, who along with James Madison, bitterly opposed Alexander Hamilton’s plans for what would become America’s first central bank, The Bank of The United States, was well aware of the danger of giving the power to create money to a private banking cartel. He warned the American people of the impending danger of allowing private banks, not the government, to control the nation’s money supply: “If the American people allow private banks to control the issue of their currency, first by inflation then by deflation, the banks and the corporations will grow up around them, and will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.”

Jefferson, like many of the Founding Fathers, knew history, and he was well aware of the dangerous effect that globalist ideals could have upon a country. Long before American businessmen embraced the concept of corporate globalism, and became more concerned with protecting global markets than the sovereignty of their own country, Jefferson wrote: “Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that for which they draw their gains.” He added, “I hope that we will crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country.” Unfortunately, the printing of billions of unbacked paper dollars by the Federal Reserve - which is not a Federal institution, but a private bank, and has no reserves - has brought the United States to the brink of the bankruptcy and economic ruin that Jefferson warned his countrymen about over 200 years ago.

Jefferson and the founding fathers would not have endorsed the billions of dollars in bailout money that our elected representatives have unconstitutionally gifted to their corporate friends and bankers. The historian George Santanya wrote: “Those who fail to learn the lessons of history are condemned to repeat them.” If the American people do not demand a return to sound money, meaning money backed by gold and silver, abolish the Federal Reserve, and return to sound banking practices, we will continue down the road to destruction and tyranny that so many nations have followed throughout the ages.

K.C. Webster