Chapter 13 2. The Right to Issue Currency and the American War of Independence

In the history textbooks on the analysis of the origin of the American War of Independence, more comprehensive and abstract discussions of major principles and significance have been adopted.Here we will explain the financial background of this revolution and its central role from another perspective. Most of the earliest people who went to the American continent to make a living were very poor poor people. They had almost no property and money except for simple luggage.At that time, no large-scale gold and silver mines had been discovered in North America, so there was an extreme shortage of currencies circulating in the market.In addition, the serious trade deficit with the mother country, Britain, caused a large amount of gold and silver currency to flow to the UK, which exacerbated the scarcity of currency in circulation.

A large number of products and services created by the new immigrants in North America through hard work cannot be fully and effectively exchanged due to the shortage of currency in circulation, which seriously restricts the further development of the economy.To cope with this difficulty, people have to use various alternative currencies to trade goods.Items with higher acceptance such as animal fur, shells, tobacco, rice, wheat, corn, etc. were used as money everywhere.In North Carolina alone, as many as seventeen different items were accepted as legal tender in 1715, and the government and the private sector could use these items to pay taxes, pay public and private debts, and buy and sell goods and services.At that time, all these alternative currencies were based on British pounds and shillings as accounting standards.In actual operation, since the fineness, specifications, acceptance and storability of these items vary greatly, it is difficult to carry out standard measurement. Therefore, although the urgent need of no currency has been alleviated to a certain extent, it still constitutes the basis for the development of the commodity economy. important bottleneck.

The long-term shortage of metal currency and the inconvenience of replacing physical currency have prompted the local government to jump out of traditional thinking and start a brand-new attempt, that is, the government prints and issues banknotes as a unified and standardized legal currency.The biggest difference between this kind of paper money and the popular bank notes in Europe is that it does not have any gold or silver objects as collateral, and it is a complete government credit currency.Everyone in the society needs to pay taxes to the government, and as long as the government accepts this banknote as a proof of tax payment, it has the basic elements of market circulation.

Sure enough, the new currency greatly promoted the rapid development of social economy, and the commodity trade became increasingly prosperous. The contemporary British Adam.Smith also noticed this new currency attempt by the North American colonial government. He was quite aware of the huge stimulus to business brought about by this banknote, especially for North America, which lacked metal currency, based on credit-based buying and selling. Allowing merchants to settle mutual credit balances on a monthly or annual basis, which will reduce (transactional) inconvenience.A well-regulated system of paper money, far from being inconvenient, may even have advantages in certain circumstances.

However, an unsecured currency is the natural enemy of bankers. Because there is no government debt as collateral, the government does not need to borrow from the bank the most scarce metal currency at that time, and the biggest weight in the hands of bankers suddenly loses its power. When Benjamin.When Franklin visited England in 1763, when the director of the Bank of England asked him why the colonies in the New World were so prosperous, Franklin replied: It is very simple.In the colonies we issue our own currency called Colonial Notes.We issue money in proportion to the needs of commerce and industry, so that products can be easily passed from producer to consumer.In this way, we create our own paper currency and guarantee its purchasing power without us (the government) paying interest to anyone.

This new paper currency would inevitably lead to the separation of the American colonies from the control of the Bank of England. The angry British bankers acted immediately, and the British Parliament under their control passed the Currency Act in 1764, which strictly prohibited the states in the American colonies from printing and issuing their own banknotes, and forced the local governments to use gold and silver to pay for all payments. Taxes to the UK government. Franklin painfully described the severe economic consequences of this bill for the colonial states. In just one year, the situation (in the colonies) was completely reversed. unemployed people.

If England did not deprive the colonies of the right to issue money, the colonists were happy to pay a small additional tax on tea and other commodities.The act created unemployment and discontent.The inability of the colonies to issue their own currency and thus permanently escape the control of King George III and international bankers was the primary cause of the American War of Independence. The founding fathers of the United States were quite aware of the Bank of England's control of British politics and the injustice of the people.At the age of only thirty-three, he completed the eternally famous American Declaration of Independence, the author and the third president of the United States, Thomas.Jefferson had a famous saying:

If the American people finally let the private banks control the nation's currency, the banks will dispossess the people, first through inflation and then deflation, until one morning when their children wake up, they have Lost their homeland and the continents their fathers had explored. When we listen to this passage of Jefferson in 1791 more than two hundred years later, we can't help but marvel at the astonishing accuracy of his foresight.Today, private banks in the United States really issue 97% of the country’s currency in circulation, and the American people really owe an astronomical debt of 44 trillion U.S. dollars to the banks. They may really wake up one day and lose their homes. and property, as happened in 1929.When the great pioneers of the United States inspected the history and the future with their wisdom and profound eyes, they wrote clearly in the eighth chapter of the first chapter of the US Constitution: Congress has the right to create and determine the value of money.