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Hidden History: According to Benjamin Franklin, the real reason for the Revolutionary War has been hid from you

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  • Wed, Aug 18, 2010 - 09:49pm

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    DrKrbyLuv

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    Hidden History: According to Benjamin Franklin, the real reason for the Revolutionary War has been hid from you

American history has been a compendium of our ongoing battle with the privately controlled Bank of England, beginning with the revolutionary war.  To understand our history, we need to go back to Benjamin Franklin who is often called the “father of paper money” though it been used thousands of years earlier (more accurately, he was the father of colonial American paper money).

Franklin’s paper money was a primary reason for fighting America’s War for Independence.  But first, let’s explore colonial scrip money… 

In 1729 he wrote “A Modest Enquiry into the Nature and Necessity of a Paper Currency.” 

“This pamphlet, a brilliant tour de force, was well received by the common people. The rich, however, hate it, but they have no writers among them able to answer it. Franklin’s arguments carry the day, and the paper money bill gains a majority in the [Pennsylvania] assembly.”  – link

Colonial srip was very succesful:

There was abundance in the Colonies, and peace was reigning on every border. It was difficult, and even impossible, to find a happier and more prosperous nation on all the surface of the globe. Comfort was prevailing in every home. The people, in general, kept the highest moral standards, and education was widely spread.”  – Benjamin Franklin

No doubt, many of the colonies were doing very well, especially Pennsylvania and Massachusetts where the amount of new paper money was controlled.  But not all the colonies had the same success as earlier attempts in South Carolina resulted in a currency deprecation. A system was clearly needed and Franklin forged that system with his – “A Modest Enquiry into the Nature and Necessity of a Paper Currency.”

Franklin begins his pamphlet by noting that a lack of money to transact trade within the province carries a heavy cost because the alternative to paper money is not gold and silver coins, which through trade have all been shipped off to England, but barter.  Barter, in turn, increases the cost of local exchange and so lowers wages, employment, and immigration.  Money scarcity also causes high local interest rates, which reduces investment and slows development.  Paper money will solve these problems.

But what gives paper money its value?  Here Franklin is clear throughout his career: It is not legal tender laws or fixed exchange rates between paper money and gold and silver coins but the quantity of paper money relative to the volume of internal trade within the colony that governs the value of paper money.  An excess of paper money relative to the volume of internal trade causes it to lose value (depreciate).  

First, Franklin points out that gold and silver are of no permanent value and so paper monies linked to or backed by gold and silver, as with bank paper money in Europe, are of no permanent value.  Everyone knew that over the previous 100 years the labor value of gold and silver had fallen because new discoveries had expanded supplies faster than demand.  The spot value of gold and silver could fluctuate just like that of any other commodity and could be acutely affected by unexpected trade disruptions.  Franklin observes in 1729 that “we [Pennsylvanians] have already parted with our silver and gold” in trade with England, and the difference between the value of paper money and that of silver is due to “the scarcity of the latter.”

Second, Franklin notes that land is a more certain and steady asset with which to back paper money.  For a given colony, its supply will not fluctuate with trade as much as gold and silver do, nor will its supply be subject to long-run expansion as New World gold and silver had been. Finally, and most important, land cannot be exported from the province as gold and silver can.  He then points out that Pennsylvania’s paper money will be backed by land; that is, it will be issued by the legislature through a loan office, and subjects will pledge their lands as collateral for loans of paper money.

Finally, Franklin argues that “coined land” or a properly run land bank will automatically stabilize the quantity of paper money issued — never too much and never too little to carry on the province’s internal trade.  If there is too little paper money, the barter cost of trade will be high, and people will borrow more money on their landed security to reap the gains of the lowered costs that result when money is used to make transactions.  A properly run land bank will never loan more paper money than the landed security available to back it, and so the value of paper money, through this limit on its quantity, will never fall below that of land. 

If, by chance, too much paper money were issued relative to what was necessary to carry on internal trade such that the paper money started to lose its value, people would snap up this depreciated paper money to pay off their mortgaged lands in order to clear away the mortgage lender’s legal claims to the land.  So people could potentially sell the land to capture its real value.  This process of paying paper money back into the government would reduce the quantity of paper money in circulation and so return paper money’s value to its former level.

Automatic stabilization or a natural equilibrium of the amount of paper money within the province results from decentralized market competition within this monetary institutional setting.  – link 

When the colonies united to fight for their freedom, congress issued Continental dollars (redeemable in silver and gold) to pay for the war.  Unfortunately, the U.S. had no gold or silver and promised to pay later.  The value of the currency deprecated since many knew that it was unlikely that they would ever be able to redeem the obligation.  And England printed large amounts of counterfeit Continentals to devalue the currency.

In a letter to Joseph Quincy in 1783, Franklin claims that he predicted this outcome and had proposed a better paper money plan, but that Congress had rejected it…around 1781 Franklin writes a tract called “Of the Paper Money of America.”  In it he argues that the depreciation of the Continental dollar operated as an inflation tax or a tax on money itself.  As such, this tax fell more equally across the citizenry than most other taxes.  – link 

The term “fiat” money is very misleading, as you can see the colonial scrip was backed by the collateral of land.  And so it is today, as private Federal Reserve notes are backed by the people and property of the United States.  The banks may profitably create it for virtually free but it is backed by us; so why does our nation pay others for money that we alone secure?

On to the Revolutionary War….

Before the war, the colonies sent Benjamin Franklin to England to represent their interests.  Franklin was greatly surprised by the amount of poverty and high unemployment.  It just didn’t make sense, England was the richest country in the world but the working class was impoverished, he wrote “The streets are covered with beggars and tramps.”  

It is said that he asked his friends in England how this could be so, they replied that they had too many workers.  Many believed, along with Mathus, that wars and plague were necessary to rid the country from man-power surpluses.

“We have no poor houses in the Colonies; and if we had some, there would be nobody to put in them, since there is, in the Colonies, not a single unemployed person, neither beggars nor tramps.”  – Benjamin Franklin

He was asked why the working class in the colonies were so prosperous.

“That is simple. In the Colonies, we issue our own paper money. It is called ‘Colonial Scrip.’ We issue it in proper proportion to make the goods and pass easily from the producers to the consumers. In this manner, creating ourselves our own paper money, we control its purchasing power and we have no interest to pay to no one.”  – Benjamin Franklin

Soon afterward, the English bankers demanded that the King and Parliament pass a law that prohibited the colonies from using their scrip money.  Only gold and silver could be used which would be provided by the English bankers.  This began the plague of debt based money in the colonies that had cursed the English working class.

The first law was passed in 1751, and then a harsher law was passed in 1763.  Franklin claimed that within one year, the colonies were filled with unemployment and beggars, just like in England, because there was not enough money to pay for the goods and work. The money supply had been cut in half.

Franklin, who was one of the chief architects of the American independence, wrote:

“The Colonies would gladly have borne the little tax on tea and other matters had it not been the poverty caused by the bad influence of the English bankers on the Parliament, which has caused in the Colonies hatred of England and the Revolutionary War.”  – Benjamin Franklin

This opinion was confirmed by great statesmen of his era: 

“I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the government at defiance. The issuing power (of money) should be taken away from the banks and restored to the people to whom it properly belongs.”  – Thomas Jefferson

History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling the money and its issuance.  – James Madison

“Banks have done more injury to the religion, morality, tranquility, prosperity, and even wealth of the nation than they can have done or ever will do good.”  – John Adams

English historian, John Twells, wrote about the money of the colonies, the colonial Scrip:

“It was the monetary system under which America’s Colonies flourished to such an extent that Edmund Burke was able to write about them: ‘Nothing in the history of the world resembles their progress. It was a sound and beneficial system, and its effects led to the happiness of the people.

In a bad hour, the British Parliament took away from America its representative money, forbade any further issue of bills of credit, these bills ceasing to be legal tender, and ordered that all taxes should be paid in coins. Consider now the consequences: this restriction of the medium of exchange paralyzed all the industrial energies of the people.  Ruin took place in these once flourishing Colonies; most rigorous distress visited every family and every business, discontent became desperation, and reached a point, to use the words of Dr. Johnson, when human nature rises up and assets its rights.”

Peter Cooper, industrialist and statesman wrote:

“After Franklin gave explanations on the true cause of the prosperity of the Colonies, the Parliament exacted laws forbidding the use of this money in the payment of taxes. This decision brought so many drawbacks and so much poverty to the people that it was the main cause of the Revolution. The suppression of the Colonial money was a much more important reason for the general uprising than the Tea and Stamp Act.”

Our Founding Fathers knew that without financial independence and sovereignty there could be no other lasting freedoms.  Our freedoms and national sovereignty are being lost because most people do not understand our money system.

All the perplexities confusion and distress in America arise not from defects of the Constitution, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit and circulation.  -John Adams

Larry

  • Wed, Aug 18, 2010 - 10:12pm

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    Peak Prosperity Admin

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    Re: Hidden History: According to Benjamin Franklin, the …

Larry, thanks for bringing this up!  I did a paper on BenF. in high school (way back when), and needless to say, this info was not available to put into the paper. 

History is written by the victors…..and those “victors” are a very evil group!

Keep it coming!

  • Wed, Aug 18, 2010 - 10:58pm

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    Re: Hidden History: According to Benjamin Franklin, the …

 

Fascinating piece, Larry. Like Logan, I’ve never heard of this aspect of American history. Quite illuminating.

Thanks.

  • Thu, Aug 19, 2010 - 01:33am

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    Re: Hidden History: According to Benjamin Franklin, the …

WOW! You mean to say the banking families that plague us today in their ownership of our Federal Reserve banking system are the very same ones who plagued our Founders? That’s like 300 years of a concerted effort to steal our hard earned wages. It’s like slavery of a sort or usury on an unfathomable scale.

  • Thu, Aug 19, 2010 - 01:59am

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    Re: Hidden History: According to Benjamin Franklin, the …

[quote=Tycer]

WOW! You mean to say the banking families that plague us today in their ownership of our Federal Reserve banking system are the very same ones who plagued our Founders? That’s like 300 years of a concerted effort to steal our hard earned wages. It’s like slavery of a sort or usury on an unfathomable scale.

[/quote]

Tycer you have your tongue firmly planted in your cheek I take it.

Larry 

Once again you have brought the issue to the table that is the key to the 3 E’s. I think I am going to give you a new name ” Fess” ( short for Professor)

V

  • Thu, Aug 19, 2010 - 04:47pm

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    Re: Hidden History: According to Benjamin Franklin, the …

I think it’s about time we quit screwing around and get down to business what needs to be done.  The end debt money and the begining of freedom.  300 years is far to long a free ride for these guys.

  • Thu, Aug 19, 2010 - 04:50pm

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    Re: Hidden History: According to Benjamin Franklin, the …

Larry — a most intriguing and illuminating piece with regards to the history of paper money in the colonies, as well as Benjamin Franklin’s role in it.  However, I still think that it comes across as much too single-minded with a focus on paper money alone, without fully exploring how other factors both influenced and were influenced by that history.  Note — I do not take issue with your narrative regarding paper money in its own sense, as I find it to be very cogent.  I just think that looking at it in the absence of certain intertwined factors makes it out to be more of a singular factor when it was, in reality, one of many.  These factors are: demographic shifts in England fueling its colonial expansion (compared to wholly different demographics in the colonies), the role of the commons in the colonies and the enclosure movement in England, the beginnings of the industrial revolution in England, and the Seven Years’ War ending Britain’s policy of benign neglect toward the colonies.

1. The reasons for poverty in England went back to the original founding of the Virginia colony — that is, a population that had bounced back from the Black Death combined with the enclosure movement that literally shut the majority of people out of the commons that they had depended upon since the Middle Ages.  It was no accident that a good many of the people shipped to the colonies as indentures were either in debtors’ prisons or sentenced for the strict vagrancy laws of the time.  This demographic shift of a larger population occupying a static area of land actually helped fuel England’s expansionism as much as a desire to keep up with the Spanish, Portuguese, Dutch and French did.  It helped relieve growing social unrest at home in the face of growing inequality (that later skyrocketed with the onset of the industrial revolution and all the centralization of wealth and resources that accompanied it).

2.  The demographics in the colonies were almost opposite those in Mother England.  Land was not even an issue — so long as the Natives occupying it could be pushed off in one way or another.  Expansionism provided the ultimate safety valve for social unrest in the colonies — as evidenced both by the result of an early attempt to block it in Bacon’s Rebellion, as well as Fredrick Jackson Turner’s “The Significance of the Frontier in American History.”  There was no “enclosure” movement in the Americas and the concept of a commons held for use by all was still socially enforced.  It was still vibrant in the American South even in the years right before the Civil War (a core part of the yeoman’s sense of political rights).

3.  The timing of the shift in British policy toward colonial scrip (1763) also encompasses an event that you neglected to mention — the end of the Seven Years’ War, better known in the United States as the French and Indian War.  William Pitt’s prosecution of the war was conducted by running up government debt, and the settlement of this debt after the war’s conclusion required the raising of taxes by Parliament.  Since, from Britain’s view, the war had been fought in order to protect its colonies, it felt that it was only fair that the colonies bore some of the financial burden.  Colonial scrip was useless to Parliament in this regard, as was barter.  The repayment of British lenders to the Crown could only be done in specie.  The colonies, as you correctly pointed out, did not have this in any significant quantity, although in the view of British authorities this was the colonies’ problem and not theirs.  This policy also came on the heels of the approach of benign neglect conducted by Robert Walpole as Prime Minister, under which the colonies were allowed to do pretty much as they pleased so long as their activities generally benefitted the British Crown.  It should also be noted here that demands of payment of taxes in hard currency is a common tactic for colonial powers to undermine local economies and customs.  It played that role in fomenting the American Revolution as well as the Whiskey Rebellion of the new Constitutional republic, not to mention how it was used in South Africa to compel natives participating in a traditional economy to abandon their lands and take up work as laborers in the gold mines.

Note — I still find the idea of land-based paper currency to be compelling.  I have read over the past few years of other ideas for paper currency, especially local ones, that are based upon actual productive assets such as grain.  Many of these currencies are set up to also decline in value the longer they are held, thus encouraging the re-introduction of them into the economy (and preventing the skewing of wealth that historically occurs under precious metal standards).

  • Thu, Aug 19, 2010 - 10:13pm

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    Re: Hidden History: According to Benjamin Franklin, the …

It is great to be with people that look at history as a continuation of the past rather than simply a record of events.

Tycer – love those zingers that cut to the point! 

V – you have a full quill and shoot at the mark.

Musings_from_th… wrote:

“…much too single-minded with a focus on paper money alone, without fully exploring how other factors both influenced and were influenced by that history.”

I concede the point…thanks for adding an important caveat to my OP.  Your argument is sound and well supported; there were other factors.  Maybe I should amend my OP from the “real reason” to the “primary cause” of the revolution from the viewpoint of the colonies? 

Prior to being revolutionaries, many of our founding fathers were loyal to England as the empire helped establish prosperity and “civilization.”  Eventually, the interests of the empire became counterproductive to the interests of the American colonies. 

In large measure, this may be attributed to the privately owned East India Trading Company.  They filled their coffers while taking power from the monarch and parliament.  They exploited reign resources, chattel slavery, debt slavery and drug trafficking (opium wars) while inflaming unnecessary wars for profit.

In my opinion, the East India Trading Company was the precursor, or modern entry point (it goes back much further) of the international bank cartel which rules the modern western world.  The issue has not changed; the interests of the privately owned financial empire subjugate the interests, lives and well being of the working people.

Larry

  • Fri, Aug 20, 2010 - 12:44am

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    Re: Hidden History: According to Benjamin Franklin, the …

DrKrbyLuv wrote:

It is great to be with people that look at history as a continuation of the past rather than simply a record of events.

I agree wholeheartedly!  Unfortunately, this is hardly a typical American POV.  I think that too many others subscribe to Henry Ford’s “History is bunk” dictum.

It is interesting that you bring up the role of the East India Company.  It is a prime example of the precursor not just to the banking cartel, but to the modern corporation itself — brought into being through a synergy of government AND business.  Juergen Habermas discussed this phenomena at length is The Structural Transformation of the Public Sphere.  According to his analysis, the modern state is, at its essence, a treasury bureaucracy — every other part of government exists to serve the treasury and extract rents for its use.  Likewise, the corporation (owing its mere existence to legal, or at that time, royal charter) was formed to serve both the interests of the state AND its shareholders.  The modern bureaucratic state and modern bureaucratic corporation evolved not as competitors, but as reflections of one another.  I think that this is a point that those who cling to stale, outmoded political ideologies of the left and right often miss, instead only focusing on one side of the equation while ignoring the other.

And as anyone who has done any kind of mathematics from algebra on up should know, you can’t figure anything out unless you look at the WHOLE equation, not just one side of it.

Thanks again for a great piece and some thought-provoking exchange.  Cheers!

  • Fri, Aug 20, 2010 - 01:58am

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    Re: Hidden History: According to Benjamin Franklin, the …

Musings, that was my take on the east india trading company as well.  The EITC represents the multinational corporations which have developed since.  The global corporations are cousins to the banksters, and will be until there is an end to the central banking system and nation states claim their sovereignity from the vampire squids and their malevolent cousins.

One can hope and educate, a few at a time!

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