Thomas Tooke

On the original purpose of banking from Elbridge Gerry Spaulding

In Unreserved Banking on August 14, 2012 at 2:06 am

Elbridge Gerry Spaulding is known for his “history of the legal tender paper money issued during the Great Rebellion being a loan without interest and a national currency”, and as a chief promoter of fiat money to finance the civil war. However there is a speech which is quite interesting called “One Hundred Years of Progress in the Business of Banking”, which Spaulding gave at the Meeting of the Bankers Association.

He wrote:

” In collecting historical facts I have frequently adopted the verbatim statements of those who have previously written upon the subject. The Bank of Venice, the first establishment of the kind in Europe, was established in 1171, and owed its existence of the Crusades, and the necessity of the government obtaining means for conducting these wars. It was originally a bank of deposit, and in the earlier days of the institution these deposits were not subject to draft, as is generally the case with banks of this kind. These deposits could, however, at the pleasure of the owner, be transferred on the books of the bank. This system was at a later period discontinued, and the deposits became subject to draft. This bank continued in existence without interruption until it was overthrown by the revolutionary army of France in 1797.

The Bank of Genoa was projected in the year 1345, but did not go into full operation till 1497. It was for centuries an important institution in that commercial city, but in 1800 it shared the same fate as the Bank of Venice, by being pillaged by the French army under Massena.

The Bank of Amsterdam was founded in 1609,  Holland being then possessed of a large foreign trade. This bank was only a bank of deposit, and the money in its possession was transferred on the books of the institution at the pleasure of its owner or owners. The primary object in the establishment of the bank was to give a standard of certain value to bills which might be drawn upon Amsterdam — rendered necessary by the depreciation of the coin owing to its having been worn or clipped. Here these coins were received on deposit, and had their value established by weight or fineness. It was not the design on founding the institution that the funds should at any time be lent out, but should remain in its vaults. However, the directors having lent to the governments of Holland and Friesland a large sum of money, the fact became known on the invasion of the French army, and produced the ruin of the institution. The Bank of Hamburg was established in the year 1619. This institution is a bank of deposit and circulation, which circulation was upon fine silver in bars.

Bank of England.

The Bank of England was established in 1694 — William and Mary then being on the Throne. To the war with France, and the extreme difficulty experience by the Government in raising funds for the war, is the institution of the monopoly due. Like the earliest of these institutions, the Bank of Venice, it owes its existence to the wants of the Government which gave it life. The idea first originated with Mr. William Patterson, a merchant of London, who readily saw that the Government, which had been paying interest at the rate of from 20 to 40 per cent. per annum, would, without much hesitation, grant exclusive and almost unlimited privileges to such parties as would in turn furnish it with a fixed and permanent loan at a reasonable rate of interest. The plan being brought to the attention of the King, was submitted to the Privy Council, where the details were completed, and it was laid before Parliament. There, however, it met the violent opposition of a formidable party. Nevertheless, the bill was carried by the Government, and on April 25th, 1694, became law. It was provided that the capital, ₤1,200,000 should be permanently lent to the Government at 8 per cent. per annum; and that in addition to the interest, an allowance of ₤4,000 per annum should be made by the Government for the management of the debt.

The capital has, at various periods, been as follows:

1694, ₤ 1,200,000

1697, ₤ 2,201,171

1708, ₤ 4,402,343

1709, ₤ 5,058,547

1710, ₤ 5,559,996

1722, ₤ 8,959,996

1742, ₤ 9,800,000

1746, ₤ 10,780,000

1782, ₤ 11,642,400

1816, ₤ 14,553,000

Since first this institution was founded, its capital and the loan to the Government have been nearly identical in amount. The following are the dates of the several renewals of the charter, with the amount of Government debt at each period, to wit:
1694, ₤ 1,200,000

1697, ₤ 1,200,000

1708, ₤ 3,375,027

1713, ₤ 3,375,027

1742, ₤ 10,700,000

1764, ₤ 11,686,800

1781, ₤ 11,686,800

1833, ₤ 11,015,100

1844, ₤ 11,015,100

The management of the entire public debt of Great Britain is placed in the hands of the Bank of England, for which service it has received compensation which has from time to time varied in amount, according to circumstances. During the year 1845 this compensation was ₤94,111 19s. 10d. The Bank of England is a striking example of the combined power of public authority and private influence in sustaining the Government of England, as well as the agricultural, manufacturing and commercial business of that empire. This bank has been the chief agent in sustaining the British Government in the long and exhausting wars in which she has been engaged. ”

” The bank of England is the fiscal agent of the Government”.

Well, this is unequivocal, central banks are a mean to an end, those are there to finance the government the trade was to grant a monopoly of issuing the currency which would be very lucrative to whomever that bank would belong to. In exchange for that monopoly the bank would fund the government. This is very clearly stated by one of the chief proponent of the Greenback during the civil war, Elbridge Gerry Spaulding.   It will become clear how it initially functioned from the account from E.G. Spaulding during the civil war. Before that banks were issuing private money, or bank notes backed by coins. So today, we still have a war currency and a central bank whose primary responsibility is to fund the Government debts, nothing more, nothing less. At least Spaulding is honest about the design of this system. As per the so called “central bank independence”, this probably the most silly joke that one could come up with, maybe to the exception of Germany´s bundesbank, since the very purpose of a central bank is to lower the cost of borrowing from the Government at the expense of the population.

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