Reviewing Ellen Brown's "Web of Debt:" Part I

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Benjamin Franklin so embraced the "new medium of exchange" that he's called "the father of paper money," then called "scrip." It made the colonies independent of British banks and let them "finance their local governments without" taxation. It was done in two ways, and most colonies used both:

-- direct issue "bills of credit" or "treasury notes;" essentially government-backed IOUs to be repaid by future taxes, with no interest owed bankers or foreign lenders; "they were just credits issued and sent into the economy on goods and services;" and

-- a system of generating "revenue in the form of interest by taking on the lending functions of banks; a government loan office called a 'land bank' (issued) paper money and (loaned) it to residents (usually farmers) at low interest rates....the interest paid....went into the public coffers, funding the government;" it was the preferred way to assure a stable currency rather than by issuing "bills of credit."

Pennsylvania did it best. It's 1723-established loan office showed "it was possible for the government to issue new money (in lieu of) taxes without inflating prices." For over 25 years, it collected none at all. The loan office provided adequate revenue, supplemented by liquor import duties. Throughout the period, prices remained stable.

Prior to this system, Pennsylvania lost "both business and residents (for) lack of available currency." With it, its population grew and commerce prospered. The "secret was in not issuing too much, and in recycling the money back to the government in the form of principal and interest on government-issued loans."

Colony-based British merchants and financiers objected strongly to Parliament. Enough so that in 1751, King George II banned new paper money issuance to force colonists to borrow it from UK bankers. In 1764, Franklin petitioned Parliament to lift the ban. In London, Bank of England directors asked him to explain colonial prosperity at a time Britain experienced rampant unemployment and poverty. It's because Colonial Scrip was issued, he stated, "our own money" with no interest owed to anyone. He added:

"You do not have too many workers, you have too little money in circulation, and that which circulates, all bears the endless burden of unrepayable debt and usury."

With banks loaning money into the economy, more was "owed back in principle and interest than was lent in the original loans (so) there was never enough in circulation to pay interest and still keep workers fully employed." Unlike banks, government can both lend and spend money in circulation - enough to pay "interest due on the money it lent, (keep) the money supply in 'proper proportion' and (prevent) the 'impossible contract' problem (of having) more money owed back on loans than was created (from) the loans themselves."

Franklin's efforts notwithstanding, the Bank of England got Parliament to pass a Currency Act making it illegal for the colonies to issue their own money. It turned prosperity into poverty because the money supply was halved with not enough to pay for goods and services. According to Franklin:

"the poverty caused by the bad influence of the English bankers on the Parliament" got colonists to hate the British enough to spark the Revolutionary War. "The colonies would gladly have borne the little tax on tea and other matters (if) England (hadn't taken their money), which created unemployment and dissatisfaction." So much that outraged people again issued their own money in spite of the ban. As a result, they successfully financed a war against a major power - with almost no hard currency and no taxation. Thomas Paine called it the Revolution's "corner stone."

However, British bankers responded by attacking its "competitor's currency," the Continental, driving down its value by flooding the colonies with counterfeit scrip. It was "battered but remained stable." Where Britain failed, speculators succeeded - "mostly northeastern bankers, stockbrokers and businessmen, who bought up the revolutionary currency at a fraction of its value after convincing people it would be worthless after the war." It had "to compete with states' paper notes and British bankers' gold and silver coins....The problem might have been avoided by making the Continental the sole official currency, but the Continental Congress (didn't have) the power to enforce" such an order - with no courts, police or authority to collect taxes "to redeem the notes or contract the money supply."

Having just rebelled against British taxation, colonists weren't about to let Congress tax them. Speculators took advantage and traded Continentals at discounts enough to make them worthless and give rise to the expression "not worth a Continental."

How the Government Was Persuaded to Borrow Its Own Money

John Adams once said: "there are two ways to conquer and enslave a nation. One is by the sword. The other is by debt." The latter method is stealth enough so people don't know what's happening and submit to their own bondage. Openly, nothing seems changed, yet a whole new system becomes master "in the form of debts and taxes" that people think are for their own good, not tribute to their captors. That's today's America writ large.

After the Revolutionary War, "British bankers and their Wall Street vassals" pulled it off by acquiring a controlling interest in the new United States Bank. It discredited paper scrip through rampant Continental counterfeiting and so disillusioned the Founders that they omitted mentioning paper money in the Constitution. Congress was given power to "coin money (and) regulate the value thereof, (and) to borrow money on the credit of the United States...." It left enough wiggle room for bankers to exploit to their advantage - but only because Congress and the president let them.

Alexander Hamilton bears much blame, the nation's first Treasury Secretary and Tim Geithner of his day (1789 - 1795). He argued that America needed a monetary system independent of foreign control, and that required a federal central bank - to handle war debts and create a standard form of currency. In 1791, it was created, hailed at the time as a "brilliant solution to the nation's economic straits, one that disposed of an oppressive national debt, stabilized the economy, funded the government's budget, and created confidence in the new paper dollars....It got the country up and running, but left the bank largely in private hands" - to be manipulated for private gain, much like today. Worse still, "the government ended up in debt for money it could have generated itself."

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I am a 72 year old, retired, progressive small businessman concerned about all the major national and world issues, committed to speak out and write about them.

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