||This transcription appears in the August 14, 2009 issue of Executive Intelligence Review.
(May 9, 2009)
The video from which the following is transcribed is posted at http://archive.larouchepac.com/node/10192. Subheads have been added.
Michael Kirsch: Today's historians are incompetent, because they don't understand the difference between Adam Smith's feudal Europe, where private banks had arbitrarily given value to money, holding the sovereignty of nations hostage to the amount of this money they have, or go into debt to private banks to have, on the one side, and on the other, Alexander Hamilton's revolutionary hypothesis of 1779-1781, a system where governments have no need of going into debt to private banks, or praying to the market to create money upon which the nation subsists.
The purpose of the right of free government is to break from arbitrary authority, which is why we don't tolerate kings and queens in this country. But what about the arbitrary authority of the private banks?
Whether this difference is understood will determine whether civilization will survive the current breakdown crisis of the world economy. Understanding this difference lies in the lesson of the contrast of 1776, when independent colonies were only free in name, and not in fact, versus Hamilton's vision of 1779-1781, of a government fully capable of carrying out the mission of the stated intent of the Declaration of Independence, a lesson which weaklings in the government today, don't want to understand.
"Why not?" you ask. Because they would have to actually mean, that which they merely pay lip service to, truly internalize the historical responsibility it demands, and make the enemies of sovereign government want to kill them.
Who do you think Hamilton and Washington were up against? What resistance do you think Hamilton had to encounter, when he forged the system for which the Constitution was formed?
A 1779 Letter
When a change in principle reorganizes matter according to its presence, that state of organization can continue to exist without the presence of the principle for a while, but soon, as when the principle of life leaves its host, the loss of the governing force will cause it to lose its governing state. Thus, with the United States continuing to act in ways contrary to our revolutionary U.S. Constitution, acting more like a feudal nation of 18th-Century Europe, civilization will revert to a population capacity which such structures of government and economy could support at that time.
In 1779, as aide-de-camp to General Washington, Hamilton began writing to leading members of the Continental Congress that the credit of the nation was being lost, and current methods had to be changed. We were acting as a motley of disunified states, without the power to carry out a unified intention. Confronted with this situation, he chose to take personal responsibility for securing the rights of mankind, for which he had written extensively in defense of the Revolution. Hamilton looked to the higher battle which the problem implied, a problem that had doomed all earlier civilizations in Europe and elsewhere.
In April 1781, he wrote to the leading financier of the Continental Congress, Robert Morris, with a proposal that began a transformation of history: "It is by introducing order into our finances, by restoring public credit, not by winning battles, that we are finally to gain our object."
Hamilton wrote to Morris, with a way to outflank the problem of the collapsing value and increasing scarcity of the Continental paper currency, a way to support the Continental Congress with enough funds, despite the facts that the states were broke, and hesitant to supply the Congress. Rather than depending on loans from abroad, private individuals, or scarce taxes, which no matter how fast they were gathered, were spent even faster, the way the government could secure a permanent paper credit, was to construct a National Bank:
"It would promote commerce, by furnishing a more extensive medium, which we greatly want in our circumstances. I mean, a more extensive, valuable medium. The tendency of the National Bank is to increase public and private credit, industry is increased, commodities are multiplied, agriculture and manufactures flourish, and herein consists the true wealth and prosperity of the State. By converting the currency produced through loans of the bank, into a real and successful instrument of trade, it would increase the quantity and strength of the currency."
Morris was convinced, and the Congress chartered the Bank of North America that year, a bank whose sole reason for existence was to facilitate the development of a national economy.
In old Europe, a bank's money came from private property of nobles. But the money which the National Bank loaned came from bills of credit created by a sovereign government, credit as an expression of intention, not credit of a pledge to pay. And since the initial capital which formed the bank would put the nation as a whole, rather than the states, in debt, the new national debt served as a powerful cement to the union, a spur to industry, thus transforming the meaning of debt, altogether"A national debt, if it is not excessive, will be to us a national blessing; it will be a powerful cement of our union."
By this new bank serving as a tool of the Continental Congress, Hamilton transformed the United States from a monetary system into a credit systemalmost. Because this campaign had only won its first battle in 1781. Under the 1780 Articles of Confederation, the Continental Congress did not have the power to organize a national economy. They couldn't bring the resources of the different states into one, unified process. They didn't have the power to organize a national system of taxation, or the power to regulate trade. Therefore, the Federal government effectively had no lasting credit. In this way, although the Bank of North America salvaged the nation's credit for the time being, and ensured the ability to win the Revolutionary War, the Federal government could not effectively supply the National Bank for the purpose it was established.
Needed: A Federal Constitution
Therefore, in identifying the deeper roots of the problem, Hamilton began organizing a broader audience for a national government with sufficient powers. Such reasoning meant sure defeat for the British Empire's new method of 1763, which had hoped to keep the colonies enslaved to the old system of monetary usury, by means of Adam Smith's "let it alone" approach to the economy. Fully conscious of this, and knowing the challenges of this global economy, Hamilton spit in the face of the British Empire, and committed to personally see through the realization of a new government.
From his Continentalist essays of '81-'82, his Statehouse organizing of '85, his leadership at the Annapolis Convention of '86, the Constitutional Convention of '87, to his Federalist Papers project of the same year, no obstacle would deter him from forming a lasting union. In 1790, as Secretary of Treasury in the Washington Administration, Hamilton could then initiate the powers he outlined in Article 1, Section 8: By means of the powers to pay the debts, provide for the common defense and general welfare, lay and collect taxes, regulate commerce, the Federal government could now ensure the power of its credit. In short, a full credit system could now be established.
Hamilton immediately initiated his system, first assuming all the debts of the states incurred during the war, into a national debt, which served as a driver to initiate the powers of government; and second, since the Bank of North America was insufficient for the task, having degenerated into a state similar to the purely state banks of Massachusetts and New York, established a new National Bank, housing the national debt.
After the establishment of this National Bank in 1790, in the next ten years, 30 state-chartered commercial banks sprang up, acting as nurseries of economic wealth, and, working in tandem with the National Bank, formed a national banking system, creating the medium of exchange which could facilitate the growth of the Federally directed economy.
A Functioning Credit System
Under the U.S. Constitution and Hamiltonian American System, the government has no need of money. It does not gather money, nor loan money, but rather, by the power implied in Article 1, Section 8's clause, to borrow money in the credit of the United States, it emits bills on the credit of the United States to the Treasury, which can then be turned into whatever serves the purposes of money, for the economy. Then, by receiving these bills of credit from Congress, the Treasury uses the National Bank to coordinate the distribution and allocation of this credit, for the nation's intention. This process creates a sovereign currency, which is a reflection of the nation's power to act, not something to be speculated upon.
Debt is redefined: A creation by government, through an emission of credit, a sovereign government does not go into debt to someone else. Rather, a government states its intention to carry out an action it deems necessary, and accounts for that action by an issuance of credit. The debt it creates will now be used to account for carrying out the purpose for which the credit was issued. There is no money involved in that process. Hamilton's revolution bluntly stated, that money in exchange, has no self-evident value outside that process, and is only a means by which the credit of government is transferred.
Economic value is redefined. The only value in a nation-state economy is that which serves to provide for the common defense and general welfare. Therefore, the credit system defines value as that which contributes to increasing the powers of labor to accomplish greater strides of development. The value of a currency is the power of the physical economy, increased by the process of government credit directed in such a fashion. Therefore, money only has value, if it is tied to the emission of credit.
The lesson lies before you, now: the difference between Hamilton's credit system and the monetary system currently strangling the world. The United States is the only government on the planet with the constitutional authority and obligation for a credit system. Only if the Federal government borrowed some guts from Hamilton, and used his credit system, releasing the government from the monetary shackles which it has created for itself, could we pull the United States and world off the current path which the bankrupt international monetary system guarantees.