The Hard Truth of Hard Money: In Our Republic's Youth, Presidential Candidates Openly Debated Central Banking, and Andrew Jackson Even Won Election as a "Hard-Money" Advocate. Today's Economic Crisis Requires a Similar Return to Sound Monetary Policy

Article excerpt

An economic crisis struck America seemingly out of nowhere. The nation was firmly in the grasp of a sharp financial downturn. The citizenry was unsure of its cause, how seriously it would endanger the nation's future, and how long it would last. Fear and confusion spread while a select few with a deep understanding of the monetary system attempted to educate the people about the real cause of the financial crisis. These individuals argued that the inflationary policies of the national bank were the root cause of the crisis and that the only solution was a sound monetary policy based on hard currency.

Thus began a vigorous public debate over the American monetary system and its role as the culprit of the current economic downturn. This "hard money" populism began to gain momentum with the masses. Numerous politicians were educated about the need for sound currency and were motivated to speak out against the central bank and its detrimental policies. The movement eventually rose to national prominence, and the American people elected a proponent of a hard-money system to the presidency. That president succeeded in putting an end to the national bank.

The aforementioned scenario might sound like a potential solution to the current economic crisis facing America, but it has actually already occurred in American history. These events took place following the financial panic of 1819. The followers of the populist hard-money movement have become what we now refer to as Jacksonian Democrats because they succeeded in electing a hard-money advocate, Andrew Jackson, to the presidency.

The Bank of the United States

Today's substance- and issue-free presidential debates bear little resemblance to those of the first one hundred or so years of our Republic's history, which saw candidates discussing the intricacies of monetary policy. At that time, the issue of central banking and monetary policy typically played a vital role in the national debate between the presidential candidates. The presidential debate over central banking dates all the way back to the days of our first president, George Washington. It was during Washington's administration that then-Secretary of the Treasury Alexander Hamilton proposed the creation of America's first central bank, the Bank of the United States (BUS). Washington asked his Cabinet members to submit letters to him with their own personal assessment of Hamilton's proposal. Then-Secretary of State and future President Thomas Jefferson claimed that the BUS was unconstitutional on two grounds: there was no clear authorization to be found within the document itself, and the states would have been hesitant to ratify a Constitution that allowed the federal government the power to create a national bank.

   The incorporation of a bank and the
   powers assumed have not, in my opinion,
   been delegated to the United
   States by the Constitution.
   They are not among the powers
   specially enumerated.... It
   is known that the very power
   now proposed as a means
   was rejected as an end by the
   Convention which formed the
   Constitution: a proposition was
   made to authorize Congress to
   open canals, and an emendatory
   one to empower them to
   incorporate but the whole was
   rejected, and one of the reasons urged
   in the debate was, that then they would
   have power to create a Bank, which
   would render the great cities, where
   there were prejudicies [sic] or jealousies
   on the subject, adverse to the
   reception of the Constitution.

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Hamilton opened the door for liberal interpretation of the Constitution with his opinion that the Constitution's "Necessary and Proper Clause" implied authorization for the federal government to create the BUS. This implied authorization argument was cemented as early constitutional law by Supreme Court Chief Justice John Marshall, a Hamiltonian, with the decision of McCulloch v. …