On the 200 Year Anniversary, The Real Debate Begins Again
In January 1811, The First Bank of the United States (BUS) was brought down. Two hundred years later, The Federal Reserve Bank has gradually become the central point of most political discussion in America. For added fuel to the debate, Congressman Ron Paul has just been appointed Chairman of the Domestic Monetary Policy Subcommittee of the House of Representatives, effective January 2011. In many ways, Ron Paul represents the tradition of Thomas Jefferson who was the most outspoken opponent of the BUS, while our current Treasury Secretary could be compared to Alexander Hamilton who was the most outspoken advocate of a central bank.
As in modern times, it was not only a monetary debate but an ideological conflict that consisted of two camps -- Jefferson supporters and Hamilton supporters. Those who followed Hamilton had a tendency to side with greater authority for the central government, while those who sided with Jefferson supported a view that revolved around the notion of protecting the liberty of citizens. As part of this ideological debate, Hamilton advocated a need for the central government to control the monetary system; while Jefferson propounded that government control of money is anathema to a free society. The purviews of these two ideological goliaths were crystallized around the debate over the bank -- the nucleus of their debates indeed. President Washington often had to mediate over this issue.
Jefferson's assumptions rested on his empirical understanding of the way in which the British Empire had become corrupted by financiers closely tied to the central bank. Other parts of Europe had identical experiences. Jefferson devoted extensive time to studying the collapse of past empires such as the Romans who saw the government's gradual debasement of their currency over centuries.
Hamilton's worldview was diametrically opposed to Jefferson's as he was largely influenced by Hobbes, who emphasized a need for a strong central government in his famous book Leviathan. Hence, control over money should also rest in the hands of the central government. As a child in the Caribbean, Alexander Hamilton led a life of hardship where one tragedy followed the next. He saw many of the evil things that man is capable of. He carried a negative view with him to New York where he then experienced many years of war reaffirming his cynical view of human behaviour. Perhaps it was a lifetime exposed to man's crueller elements which led him to the view that men must be controlled -- to prevent all of the evils of society from occurring.
Thomas Jefferson was raised in much different circumstances. Jefferson was part of the most affluent echelon of society. He was provided with the best education available. He had servants and people in his life whom he could trust and count on. Jefferson was largely influenced by John Locke who was viscerally opposed to all forms of central government. Locke loathed all forms of coercion and held that the primary function of government is to protect property. Perhaps Jefferson's life of fortune had a major influence in forming his view that man is capable of benevolence and altruism when left free from government coercion.
Regardless of the root of their opposing views, Jefferson and Hamilton debated vehemently. In 1791 Hamilton won the debate by successfully establishing The First Bank of The United States. Jefferson later conceded that this was the most tragic defeat of his entire life. Even though Jefferson lost this battle to Hamilton, as President he later went on to push for its abolishment. In 1811, after he had left office, Jefferson openheartedly witnessed the Bank's charter removed -- victory at last.
As the story goes, monetary policy remained at the forefront of all political debate throughout the next century, until a Federal Reserve Bank was established in 1913. Since that time, monetary policy has been pushed to the side in mainstream political discussion. Although many perceive the bank as a branch of the Federal government this body has been able to operate free from any oversight by the American people, in a very secretive manner. In stealth, the Federal Reserve has averted all of the necessary criticisms it has deserved over the decades, as the principal culprit in creating the business cycle. Having evaded public scrutiny for way too many years, the Fed is now the focus of the public's eye, in light of the recent economic catastrophe it created.
As the one man in DC that has spoken out against the Fed for decades, Ron Paul has just been nominated as The Chairman of the Domestic Monetary Policy Subcommittee in the 112th Congress. Congressman Paul will certainly keep this debate at the forefront of public debate as it was in the early years of America. Despite his growing support, Ron Paul cannot abolish The Federal Reserve in one swift swoop as was done in 1811 or 1836; however the debate will certainly move back to its original position -- at the center of public debate. Let's get started.