Revive Lincoln’s Monetary Policy: an Open Letter to President Obama -- Ellen Brown

[Emillereid]

of all the ideas bandied about to fix our ailing economy, I think this one is best. Kill the Federal Reserve and let's print our own damn money and fund a New New Deal! I urge everyone to read Ellen's book - "Web of Debt." www.webofdebt.com

Revive Lincoln’s Monetary Policy: an Open Letter to President Obama
by Ellen Brown

Dear President Obama:
The world was transfixed on that remarkable day in January when, to poetry, song, and dance, you gazed upon Abraham Lincoln’s likeness at the Lincoln Memorial and searched for wisdom to navigate these difficult times. Indeed, you have so many things in common with that venerable President that one might imagine you were his reincarnation in different dress. You are both thin and wiry, brilliant speakers, appearing on the national stage at pivotal times. Fertile imaginations could envision you coming back triumphantly as one of those slaves you freed, to prove once and for all the proposition that all men are created equal and can achieve great things if given a fighting chance. But as Wordsworth said, our birth is but a sleep and a forgetting; and if that is true, you may have forgotten a more subtle form of slavery from which Lincoln freed his countrymen, even if you were there at the time. You may have forgotten it because it has been omitted from the history books, leaving Americans ill-equipped to interpret the lessons of our own past. This letter is therefore meant to remind you.

We are now met on another battlefield of that same economic war that visited Lincoln and the Founding Fathers before him. President Obama, the fate of our economy and the nation itself may depend on how well you understand Lincoln’s monetary breakthrough, the most far-reaching “economic stimulus plan” ever implemented by a U.S. President. You can solve our economic crisis quickly and permanently, by implementing the same economic solution that allowed Lincoln to win the Civil War and thus save the Union from foreign economic masters.
Lincoln’s Monetary Breakthrough
The bankers had Lincoln’s government over a barrel, just as Wall Street has Congress in its vice-like grip today. The North needed money to fund a war, and the bankers were willing to lend it only under circumstances that amounted to extortion, involving staggering interest rates of 24 to 36 percent. Lincoln saw that this would bankrupt the North and asked a trusted colleague to research the matter and find a solution. In what may be the best piece of advice ever given to a sitting President, Colonel Dick Taylor of Illinois reported back that the Union had the power under the Constitution to solve its financing problem by printing its money as a sovereign government. Taylor said:

“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. If you make them full legal tender … they will have the full sanction of the government and be just as good as any money; as Congress is given that express right by the Constitution.”


The Greenbacks actually were just as good as the bankers’ banknotes. Both were created on a printing press, but the banknotes had the veneer of legitimacy because they were “backed” by gold. The catch was that this backing was based on “fractional reserves,” meaning the bankers held only a small fraction of the gold necessary to support all the loans represented by their banknotes. The “fractional reserve” ruse is still used today to create the impression that bankers are lending something other than mere debt created with accounting entries on their books. 1 ....more at link...

http://www.yesmagazine.org/article.asp?ID=3394

[Grinchie]

1. I was wondering how long it would take for this fact to arise.

It's disconcerting that it hasn't been used already, so I tend to think that the Fed Owns the Obama administration already.

[patriotvoice]

2. Look to North Dakota: they're doing it right with state "credit unions."

And local currency can't hurt, either:
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=170x11325

[RoyGBiv]

3. Where to begin ...

This keeps getting recs without comments, so I'm going to offer some comments that will hopefully bring out those who seem to think this is a good idea applicable to the present circumstances to explain just why they think this.

This article is full of misstatements of fact and bizarre conclusions that display an astonishing lack of understanding of the mid-19th century financial system for one who purports to be an exceptional researcher.

Just some highlights ...

First, Ms. Brown says this plan of Lincoln's has been omitted from the history books. This is absurd.

The debate over and implementation of the Legal Tender Acts is one of the most well-known political episodes from the Civil War era. Entire books have been written on just these laws, what led to them, and what resulted. Further, the Legal Tender Cases, the series of Supreme Court cases after the Civil War that first declared these laws unconstitutional and then, later, overruled that initial declaration, form a cornerstone of American jurisprudence and have inspired an outpouring of scholarship beginning in the 1870s that still hasn't ended. Since Ms. Brown has her JD, one would assume she would know this.

Second, what is Ms. Brown actually suggesting President Obama do, print money? The Legal Tender Acts authorized the Treasury to print fiat currency, i.e. currency not backed by specie. We already do that.

The purpose of the acts, beyond funding the war, was to avoid taking further loans at high interest *and* to avoid raising taxes. (That last part is almost always left out of discussions of this variety.) The latter was the real problem from the beginning. For political reasons, Republicans in Congress didn't want to raise taxes at the outset of the war. They didn't think then that the war would last long enough to justify a broad system of coercive taxation. So, originally, they tried loans, but the problem with the loans, boiled down, was that there was only so much specie in the nation's banks, and the $150 million that had been authorized depleted the nation's financial system far, far quicker than it was being replenished. The result, the beginning of January 1862, was a collapse of the nation's financial system.

As a related aside, later in the article Ms. Brown claims that this plan did not result in hyperinflation. Actually, what's she's doing is using the tactic of appropriating the argument in favor of using fiat currency and using it improperly. It is true, as she says, that the use of fiat currency does not naturally result in hyperinflation. Beyond that, she loses course. Hyperinflation did occur during the Civil War. The value of a greenback printed in 1862 was half that when Lee surrender in 1865. It had fallen as low as 40 cents on the dollar after Chase's departure.

Third, Ms. Brown writes as though this plan was Lincoln's way of doing an end-run around the banks and bankers. This is not true at all. Bankers were some of the strongest supporters of the bills. Treasury Secretary Chase was actually opposed to the idea on principle in the beginning but was flooded with pleas from the financial community to come out in support and help convince Congress to pass it. In the event, Chase was convinced, in part by members of Congress, and then took on the issue as his own, at least before he sat on the Court later that initially declared the acts unconstitutional.

Bankers benefited strongly from the Legal Tender Laws, for many reasons.

Finally, I wonder why Ms. Brown left out the part of this little passion play about how her whole story and the focus on Edmund Dick Taylor comes from a discredited conspiracy theory that claims John Wilkes Booth was nothing more than an assassin for hire who worked for the highest bidder. His stance on slavery had nothing to do with it. His successful prosecution of the Civil War and the subjugation of the southern states was irrelevant. No, according to this theory, the reason Lincoln was assassinated was because he signed the legal tender acts, pissed off the bankers (who benefited from the acts, let us not forget), and with government insiders on the payroll, including some cabinet members like Stanton and former cabinet members like Chase, a conspiracy was formed to kill Lincoln. A part of the plan would then be to blame it all on the southern states by hiring a southern assassin.

Of course I know why Ms. Brown left that out. . .

[Emillereid]

4. I think you need to read Ellen's article more carefully ...

When Ellen says that the greenbacks were omitted from history books I think she means they are not part of the average person's understanding -- my American history text gives only a line or two to the issuance of greenbacks, but doesn't elaborate on their importance vis a vis the private banking system. I am very well read on most subjects, but I confess I only recently have begun to find out how little 'federal' there is in the Federal Reserve system. I used to think our government just printed the money - I had no idea that we borrowed from the fed.

Ellen does admit that prices rose during the greenback period because of the war, not because there was something inherently wrong with them though there coexistence with bank issued notes 'backed' by gold probably didn't help the matter. Now we have a system that relies on fiat currency - backed by the full faith of the US government but profiting the private banks - what a bunch of hooey. If we're going to back them, they should reflect goods and services that arise from real industry, not bankers manipulation. The Fed was created supposedly to minimize the business cycles - well it just isn't working.

You say: "The purpose of the acts, beyond funding the war, was to avoid taking further loans at high interest *and* to avoid raising taxes." Well according to my history book "For the first time Congress levied an income tax, which eventually amounted to 5 per cent on incomes from $600 - $5000 an d 10 per cent on incomes over that. In addition, taxes were levied on almost every conceivable article, such as food, tobacco, clothing, alcoholic beverages, and railroad tickets."

Whether or not the bankers liked the greenbacks seems debatable - certainly the English bankers didn't. A quick read around the internet it seems that the New York bankers were concerned about protecting their gold but they certainly made sure to bring down the greenbacks once the war was over.

Regarding conspiracy theories regarding Booth's motivation for killing LIncoln - I'm sure Ellen didn't mention them because she didn't need them for her argument. The basis of her argument is that we have the constitutional right to issue our own money and that there is historical precedent for so doing.

[RoyGBiv]

5. I read it very carefully ...

The reason I did so is that this is a new twist on a story that has been around for awhile. It's been the baby of people like Lyndon LaRouche, among others, and has become a legendary example of twisting a fact to meet a purpose. Regarding your last point, you're quite correct that she didn't need those details for her argument. In fact if she does mention those details, her argument gets associated with a southern apologist, right-wing/libertarian based conspiracy theory. The point, however, is that the whole basis of her story, focusing as it does initially on Edmund Taylor, comes straight from that conspiracy theory.

As an exercise, take her "quote" from Taylor. Run it through google. The first sentence is all you need. Notice what turns up. It's the same story repeated over and over again with details changed here and there and the focus altered for different purposes. But here's an interesting thing; none of these articles list the source of the story. Well, to be fair, a couple do, but they list the source of the source, e.g. a "quoted in ..." sort of deal. There's some commentary about Taylor in Herndon's writing on Lincoln (noting they didn't like each other, btw), and not much else. What's interesting is how the wording shifts with the purpose of the article you're reading and how it differs in subtle ways from the original.

Edmund Dick Taylor was a real person. He was in finance, among many other things, and this sort of thing was probably something he could have conceived. Certainly he believed he did. The actual source of this quote is a letter Edmund Taylor produced that he said was written to him by Abraham Lincoln. He did this as a part of an application to Congress in the 1888 for a pension. (50th Congress, Report No. 380 attached to HR 725, which I think was an appropriations bill.) He had actually served as a bearer of messages between Grant and Cairo, IL, so he deserved it for that if nothing else.

One of the odd things about the letter is that it refers to January, on or about the 16th, as the date Taylor gave him this idea. The idea of issuing fiat currency as a method of paying for war expenses had been floated in Congress back in 1861. The first of the bills was passed in February, 1862. It had been in committee back in January. Weird timing there.

Regarding taxes, yes, there were taxes. Taxes put into effect in 1861. They were not enough; they might have been had the war lasted one battle, as so many deluded themselves into believing. More taxes were put into place in 1862 and 1863 and 1864. They did this for politically expedient purposes rather than put into place an extensive system of taxation in January of 1862. In fact, one of the bills offered as an alternative to the first Legal Tender Act was a comprehensive tax plan. The debate about it is in the Congressional Record.