Archive for the 'Benjamin Franklin' Category

The Housing-Bubble and the American Revolution

TIM ARANGO | nytimes.com | November 30, 2008

INSURRECTION Members of the Sons of Liberty raise a “Liberty Pole” to protest the rule of King George III.

INSURRECTION Members of the Sons of Liberty raise a “Liberty Pole” to protest the rule of King George III.

When Benjamin Franklin returned to America in 1762, after almost five years in London, he was shocked at the housing prices.

“The expence of living is greatly advanc’d in my absence,” he commented. “Rent of old houses, and value of lands … are trebled in the past six years.”

Franklin, it seems, had come home to a real estate bubble. It eventually popped — bringing on a credit crunch and deep recession that was the macroeconomic backdrop to the American Revolution.

Sound familiar?

The parallels between the current economy and the one Franklin saw highlight a debate among historians: how big a role did economics, as opposed to ideas, play in fomenting revolution?

“I think there’s reason to doubt the Revolution would have happened as it did if it weren’t for these economic conditions,” said Ronald W. Michener, an economics professor at the University of Virginia, in a radical departure from today’s popular notion that the Revolution was a product primarily of grand ideas about self-government.

Gordon S. Wood, a professor at Brown University and perhaps the pre-eminent living historian on the subject, counters: “There was a great deal of instability, but that is hardly an explanation for the Revolution. I don’t think you can make a strong argument for an economic interpretation of the Revolution.”

Professor Michener and his collaborator, Robert W. Wright, a financial historian at New York University, plan to do just that. The tandem worked for several years on a manuscript arguing that the American Revolution was a direct result of the economic malaise that followed the French and Indian War. Continue reading ‘The Housing-Bubble and the American Revolution’

How Benjamin Franklin Made New England Prosperous

The following historical story is taken from a radio address given by Congressman Charles G. Binderup of Nebraska, some 50 years ago and was reprinted in Unrobing the Ghosts of Wall Street:

Colonies More Prosperous Than The Home Country

Before the American War for Independence in 1776, the colonized part of what is today the United States of America was a possession of England. It was called New England, and was made up of 13 colonies, which became the first 13 states of the great Republic. Around 1750, this New England was very prosperous. Benjamin Franklin was able to write:

“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.”

When Benjamin Franklin went over to England to represent the interests of the Colonies, he saw a completely different situation: the working population of this country was gnawed by hunger and poverty. “The streets are covered with beggars and tramps,” he wrote. He asked his English friends how England, with all its wealth, could have so much poverty among its working classes.

His friends replied that England was a prey to a terrible condition: it had too many workers! The rich said they were already overburdened with taxes, and could not pay more to relieve the needs and poverty of this mass of workers. Several rich Englishmen of that time actually believed, along with Mathus, that wars and plague were necessary to rid the country from man-power surpluses.

Franklin’s friends then asked him how the American Colonies managed to collect enough money to support their poor houses, and how they could overcome this plague of pauperism. Franklin replied:

“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.”

Thanks To Free Money Issued By The Nation

His friends could not believe their ears, and even less understand this fact, since when the English poor houses and jails became too cluttered, England shipped these poor wretches and down-and- outs, like cattle, and discharged, on the quays of the Colonies, those who had survived the poverty, dirtiness and privations of the journey. At that time, England was throwing into jail those who could not pay their debts. They therefore asked Franklin how he could explain the remarkable prosperity of the New England Colonies. Franklin replied:

“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.”

The Bankers Impose Poverty

The information came to the knowledge of the English Bankers, and held their attention. They immediately took the necessary steps to have the British Parliament to pass a law that prohibited the Colonies from using their scrip money, and then ordered them to use only the gold and silver money that was provided in sufficient quantity by the English bankers. Then began in America the plague of debt-money, which has never since brought so many curses to the American people.

The first law was passed in 1751, and then completed by a more restrictive law in 1763. Franklin reported that one year after the implementation of this prohibition on Colonial money, the streets of 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 circulating medium of exchange had been reduced by half.

Franklin added that this was the original cause of the American Revolution – and not the tax on tea nor the Stamp Act, as it has been taught again and again in history books. The financiers always manage to have removed from school books all that can throw light on their own schemes, and damage the glow that protects their power.

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

“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.”

This point of view of Franklin was confirmed by great statesmen of his era: John Adams, Jefferson, and several others. A remarkable English historian, John Twells, wrote, speaking of 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.’”

John Twells adds:

“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.”

Another writer, Peter Cooper, expresses himself along the same lines. After having said how Franklin had explained to the London Parliament the cause of the prosperity of the Colonies, he 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.”

Today, in America as well as in Europe, we are under the regime of the Scrip of the Bankers instead of the scrip of the nation. Hence the public debts, everlasting interest charges, taxes that plunder purchasing power, with the only result being a consolidation of the financial dictatorship.

There is only one cure for America’s ultimate financial collapse and that is for Congress to exercise Clause 30 of the “Federal” Reserve Act, buy the outstanding shares of stock, shut down this unconstitutional system and sell off their assets to reimburse the people of this nation for this unspeakable theft of their wealth. This is the first installment of postings on this issue, new ones will be put up as soon as manpower allows.

Copyright © 1941 by Congressman Charles G. Binderup

BINDERUP, Charles Gustav, a Representative from Nebraska; born in Horsens, Denmark, March 5, 1873; when six months old immigrated to the United States with his parents, who settled on a farm near Hastings, Adams County, Nebr.; attended the county schools and Grand Island (Nebr.) Business College; engaged in agricultural pursuits near Hastings and Minden, Nebr., and also in the mercantile and creamery business at Minden, Nebr.; elected as a Democrat to the Seventy-fourth and Seventy-fifth Congresses (January 3, 1935-January 3, 1939); was an unsuccessful candidate for reelection in 1938 to the Seventy-sixth Congress and for election as an Independent in 1940 to the Seventy-seventh Congress; organized and was active in the Constitutional Money League of America in Minden, Nebr., until his death; died in Minden, Nebr., August 19, 1950; interment in Minden Cemetery.

Important Caveat

On November 11, 2007, I sent the following e-mail to Professor Farley Grubb, author of Creating the U.S. Dollar Currency Union,1748-1811: A Quest for Monetary Stability or a Usurpation of State Sovereignty for Personal Gain?, and Benjamin Franklin and the Birth of a Paper Money Economy:

Dear Professor Grubb,

Please find attached a copy of a transcript of a radio address given by Congressman Charles G. Binderup in 1941.

He quotes several times from Benjamin Franklin and Peter Cooper, without giving citations.

When I posted this article on my blogsite, several people asked for citations.

I would like to know whether the Franklin quotes are genuine, and if so, what are the sources.

Yours sincerely

Anthony Hopkins

He replied the following day:

Dear Anthony,

As far as the exactness of the Franklin quotes the person you should consult (the expert) is Professor J. A. Leo Lemay [lemay@english.udel.edu ] English Dept., University of Delaware, Newark, DE 19716. He is writing the definitive “Life of Franklin” –see his first 2 volumes.

Otherwise, to my ear the quotes seem in the spirit of Franklin but sound a bit paraphrased, even anachronistic (e.g. the reference to bankers seems out of place)…especially the latter quotes in the speech. But I could be wrong. I am not all knowledgeable about every word Franklin spoke. The best would be to check through the indexes of the standard sources on the writings of Franklin during the periods mentioned for the phrases…e.g. see THE PAPERS OF BENJAMIN FRANKLIN v. 1-38; or given that the senator was speaking in 1941, one of the older compilations of Franklin’s writings such as A. H. Smyth (1907) THE WRITINGS OF BENJAMIN FRANKLIN v. 1-10. Use the indexes of these to check for key phrases.

Finally, setting the accuracy of the Franklin quotes aside, the passages in the senator’s speech are choked full of exaggerated and outright erroneous history. For example, the Currency Acts if 1751 and 1764 did not [REPEAT--DID NOT] prohibit the colonies from issuing paper money. Read the acts, and then look at what the colonies actually did. That these currency acts were the KEY spark to the revolution is highly doubtful.

Sincerely,

Farley

Farley Grubb, Professor and NBER Research Associate
Economics Dept.
University of Delaware
Newark, DE 19716
USA

Following Professor Grubb’s suggestion, I e-mailed Professor LeMay, asking him if the quotes were genuine and, if so, what their sources were. Here is his reply:

Dear Anthony,

I apologize for not reading what you sent before. I had just replied to a couple Nazi propaganda efforts that resurrect commonly, and I assumed you were asking about them.

There are, however, a number of strange statements in the quotation, though it reflects some of Franklin’s opinions. Of course the American colonies were generally regarded as partly New England, partly Middle Colonies, and partly Southern colonies. All had poor houses. Philadelphia had a fairly large one. Franklin disapproved of offering charity rather than work to healthy6 people, but he was also a chief founder and first President of the Pennsylvania Hospital (the first in America), which, like almost all hospitals in the eighteenth century, was a charity hospital.

He was an advocate of paper money, and Pennsylvania’s colonial paper money was sound and therefore never prohibited, though New England’s was unsound, inflationary, and finally prohibited (reasonably, it seems to me and probably to Farley Grubb) by Parliament, because it
became nearly worthless — before being prohibited. (It had become a dodge to pay off English creditors, rather than a reasonable medium of value.)

He also did think that America was generally better off than England and that its population was growing faster than England’s. (Thomas Malthus later used Franklin’s data.) That was true because of the available land in America (which, of course, the colonists took from
the Indians) and true in the South because of available land and the slave system. Indeed, Franklin said that the Indians in America lived better than the Irish in Ireland — because the latter were oppressed by the English landlords.

As for the causes of the American Revolution, the colonists had many complaints, but the most fundamental one was taxation without representation.

There are no accurate quotations from Franklin, though sometimes his point of view is reflected in the speech, but sometimes, too, it misrepresents him.

Best wishes,

Leo

I also put the words, “scrip”, “prosperous”, “poverty”, and “English bankers” in the search box on an online version of The Papers of Benjamin Franklin, and found nothing corresponding to the purported Franklin quotes in Binderup’s address.

I also went on the online version of The Writings of Benjamin Franklin and found the following article, Causes of the American Discontents Before 1768. In it, Franklin enumerates a number of grievance, including the following:

That on a frivolous complaint of a few Virginia Merchants, nine Colonies were restrained from making paper money, though become absolutely necessary to their internal commerce, from the constant remittance of their gold and silver to Britain. — But not only the interest of a particular body of Merchants, the interest of any small body of British Tradesmen or Artificers, has been found, they say, to out-weigh that of all the King’s subjects in the Colonies.

Thus, taking away from the colonists the right to issue their own money was indeed a grievance, but it was one of many and does not appear in the Declaration of Independence.

I made this point to Professor LeMay, who replied:

Dear Anthony,

Franklin objected to the English acts denying some colonies the right to make money because the Penns used that dodge to turn down the Pennsylvania Assembly bills. The Pennsylvania Assembly charged a small interest on the paper currency it issued, and that financed the
government. Penn (ie, Thomas Penn) scorned the assembly and wanted it at his mercy, so he generally had his governors turn down paper money bills. They said that Parliament would not want them to pass such bills. (They used that dodge rather than say Thomas Penn had forbidden them to do so, and taken out a bond for five thousand pounds that they would do
what he required.) But Parliament did not object to Pennsylvania’s issuing paper money — only to those colonies who issued nearly worthless paper money.

I suspect that had Franklin been in charge of the entire paper currency (as he was, to some degree, in part of 1775 and 1776), he would not have allowed the individual colonies to issue nearly worthless mediums of exchange.

On the other hand, Parliament behaved unreasonably to America in the Stamp Act and following years, and Franklin was a better propagandist than Parliament.

All best, Leo


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