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How did the central government of the United States finance itself under the Articles of Confederation?

How did the central government of the United States finance itself under the Articles of Confederation?


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The Congress of the Confederation couldn't levy taxes. State governments were the ones with the power to control commerce with other states and nations even. It also has the power to levy tax.

If the unicameral congress was the one responsible for maintaining its continental army, and couldn't levy tax, what was the source of its money?


The Congress of the Confederation could "ascertain" and "appropriate" money from states or make "requisitions" on the States, as is stated in the Articles of Confederation:

The United States in Congress assembled shall have authority… to ascertain the necessary sums of money to be raised for the service of the United States, and to appropriate and apply the same for defraying the public expenses - to borrow money, or emit bills on the credit of the United States, transmitting every half-year to the respective States an account of the sums of money so borrowed or emitted - to build and equip a navy - to agree upon the number of land forces, and to make requisitions from each State for its quota, in proportion to the number of white inhabitants in such State; which requisition shall be binding, and thereupon the legislature of each State shall appoint the regimental officers, raise the men and cloath, arm and equip them in a solid- like manner, at the expense of the United States

Taxes versus requisitions kind of sounds like six one way, half dozen the other. First, note that appropriating money from the states means that Congress has no control over how those funds are raised (which imports and commodities will have excises). My understanding is also that taxing powers allow funds to be raised for whatever reasons a legislature might choose (i.e., the tax revenue isn't earmarked before collection). In a booming economy, revenue goes up and the legislature can choose to spend more. "Requisition power" makes it clear that the Congress only has the ability to demand funds from the states up to the amount required to fulfill its duties. Also, requisition leaves open the possibility of payments in kind (as you can see in the proposed amendment below, that says states may "pay or furnish" requisitions).

Of course, the states often ignored the Congress's requisitions, so it's debatable how much "requisition power" the Congress actually had. Proposed amendments to the Articles focused on how to get states to pay:

Art. 15. That the respective States may be induced to perform the several duties mutually and solemnly agreed to be performed by their federal Compact, and to prevent unreasonable delays in any State in furnishing her just proportion of the common Charges of the Union when called upon, and those essential evils which have heretofore often arisen to the Confederacy from such delays, it is agreed that whenever a requisition shall be made by Congress upon the several States on the principles of the Confederation for their quotas of the common charges or land forces of the Union Congress shall fix the proper periods when the States shall pass Legislative Acts complying therewith and give full and compleat effect to the same and if any State shall neglect, seasonably to pass such Acts such State shall be charged with an additional sum to her quota called for from the time she may be required to pay or furnish the same, which additional sum or charge shall be at the rate of ten per Cent pr. annum on her said Quota, and if the requisition shall be for Land forces, and any State shall neglect to furnish her quota in time the average expence of such quota shall be ascertained by Congress, and such State shall be charged therewith, or with the average expence of what she may be deficient and in addition thereto from the time her forces were required to be ready to act in the field with a farther sum which sum shall be at the rate of twelve per Cent per Annum on the amount of such expences.


For the most part they borrowed the money. A lot of the money was borrowed from France and Holland who were both eager to make trouble for the British. For example, in June of 1787 John Adams borrowed 1 million guilders from Holland on behalf of the Congress. The congress also issued a lot of domestic debt, notably bonds they called "loan-office certificates." The army was largely disbanded after the British surrender in the Battle of Yorktown in 1781 and by 1784 was a small force. The major expense for the country was the interest on the debt. For example, in 1787 military expenses were $176,000 and interest on the debt was $871,000.

Another source of income was sales of land from the western territories to pioneers.

They also "requisitioned" money from the several states. For example, here is the list of assessments from 1787:

Of course, in many cases the states did not pay, or paid only a portion of what the Congress docked them.


Articles of Confederation: Primary Documents in American History

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Author:
Ken Drexler, Reference Specialist, Researcher and Reference Services Division

Created:December 15, 2018

Last Updated: January 8, 2019


Creating the United States Road to the Constitution

The Continental Congress adopted the Articles of Confederation, the first constitution of the United States, on November 15, 1777, but the states did not ratify them until March 1, 1781. The Articles created a loose confederation of sovereign states and a weak central government, leaving most of the power with the state governments. Once peace removed the rationale of wartime necessity the weaknesses of the 1777 Articles of Confederation became increasingly apparent. Divisions among the states and even local rebellions threatened to destroy the fruits of the Revolution. Nationalists, led by James Madison, George Washington, Alexander Hamilton, John Jay, and James Wilson, almost immediately began working toward strengthening the federal government. They turned a series of regional commercial conferences into a national constitutional convention at Philadelphia in 1787.

&ldquoAn opinion begins to prevail that a general convention for revising the articles of Confederation would be expedient.&rdquo

John Jay to George Washington, March 16, 1786

Benjamin Franklin’s Proposed Plan of Confederation, 1775

Shortly after the revolutionary war began at Concord and Lexington, Benjamin Franklin submitted this plan for a united colonial confederation or American republic to the Continental Congress on July 21, 1775.

Thomas Jefferson, a fellow delegate, annotated his copy of Franklin’s plan, which began a national debate on the creation of an American Republic.

Benjamin Franklin. Plan for a Confederation, July 21, 1775. Printed document annotated by Thomas Jefferson. Thomas Jefferson Papers, Manuscript Division. Library of Congress (46.01.01) [Digital ID#s us0046a_2, us0046a, us0046a_1]

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Writing the Articles of Confederation

In 1781, James Madison (1751&ndash1836) asked Thomas Jefferson (1743&ndash1826) for his account of those tumultuous pivotal days in which the Declaration of Independence and the Articles of Confederation were drafted. Recognizing the importance of the process for the Revolution and for posterity, Thomas Jefferson prepared his notes of the proceedings in Congress, June 7&ndashAugust 1, 1776. On this page, Jefferson’s notes reflect his interest in Article XVII, about representation in Congress.

Thomas Jefferson. Notes on Debates in the Continental Congress, June 7&ndashAugust 1, 1776 [ante 1781]. James Madison Papers, Manuscript Division, Library of Congress (046.05.01) [Digital ID#s us0046_05p1, us0046_05a]

Thomas Jefferson. &ldquoNotes of Proceedings in Congress on Drafting the Articles of Confederation and Perpetual Union,&rdquo [July 12&ndashAugust 1, 1776]. Thomas Jefferson Papers, Manuscript Division, Library of Congress (046.03.00) [Digital ID# us0046_03p1]

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Articles of Confederation Emerge from Congress in 1777

After undergoing more than a year of planning and compromise in the Continental Congress, the Articles of Confederation and Perpetual Union Between the States was finally ready to be sent to the states for ratification. Nearly four years would pass before all thirteen states had ratified the document&mdashMaryland being the last to ratify on March 1, 1781&mdashand it was put into action. The Articles provided for a one-house legislature, a weak executive, no national power of taxation, a lack of standard currency, and voting by state&mdashflaws that would eventually lead to its failure.

United States Continental Congress. Articles of Confederation and Perpetual Union Between the States. . . . Lancaster: Francis Bailey, 1777. Pamphlet. Rare Book and Special Collections Division, Library of Congress (048.05.00) [Digital ID# us0048_05]

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Articles of Confederation Ratified

The Articles of Confederation and Perpetual Union was the first constitution of the United States. After more than a year of consideration, it was submitted to the states for ratification in 1777, but not enough states approved it until 1781. The Articles provided for a weak executive branch, no national power of taxation, and voting by states.

[United States Continental Congress]. Articles of Confederation and Perpetual Union Between the States of. . . . Williamsburg, Virginia: J. Dixon & W. Hunter, 1778. Rare Book and Special Collections Division, Library of Congress (048.04.00) [Digital ID# us0048_04]

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Articles of Confederation Ratified

After Maryland’s ratification established the Articles of Confederation as the first United States constitution, Thomas Rodney (1744&ndash1811), a delegate to the Continental Congress from Delaware, recorded in his diary on March 1, 1781, that &ldquothe Completion of this grand Union & Confederation was announced by Firing thirteen Cannon on the Hill&rdquo in Philadelphia.

Thomas Rodney. Diary entry, March 1, 1781. Rodney Family Papers, Manuscript Division, Library of Congress (48.00.00) [Digital ID# us0048, us0048_1, us0048_2, us0048_3, us0048_4]

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Confederation Congress Elects A President

Between March 1, 1781, when the Articles of Confederation were enacted, and November 5, 1781, when a new Congress convened, Samuel Huntington and Thomas McKean served briefly as presidents of the body. Samuel Johnston had declined the presidency when elected. When the first Confederation Congress met on November 5, 1781, it elected John Hanson (1715&ndash1783), delegate from Maryland, as its president. In this letter, Charles Thomson (1729&ndash1824), secretary of Congress, informs George Washington of Hanson’s election. According to the Articles, the president of the Congress presided only over Congress George Washington, chosen after the ratification of the Federal Constitution, was the first president of the United States.

Letter from Charles Thomson to George Washington, November 5, 1781. Manuscript. George Washington Papers, Manuscript Division, Library of Congress (48.01.00) [Digital ID# us0048_01]

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Northwest Ordinance Prohibits Slavery

When the Confederation Congress began planning the organization of the territories north and west of the Ohio River, Thomas Jefferson and his congressional committee moved against mainstream eighteenth-century thought to draft regulations that prohibited in the territories slavery or involuntary servitude except for convicted criminals. Although Jefferson envisioned that the prohibition would go into effect in 1800, the final ordinance of 1787 contained an immediate ban.

Committee of Congress. Draft Report of Northwest Ordinance, March 1784. Broadside with emendations by Thomas Jefferson. Thomas Jefferson Papers, Manuscript Division, Library of Congress (49.00.00) [Digital ID# us0049]

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New States in the West and Northwest

While Congress considered an ordinance to govern the newly won territory west of the Appalachian Mountains and northwest of the Ohio River, Thomas Jefferson outlined plans for the boundaries of six unnamed new states, which he ironically referred to as &ldquoNew Colonies.&rdquo

Thomas Jefferson. Plan for Boundaries in Western Territory, [1784]. Manuscript document. Thomas Jefferson Papers, Manuscript Division, Library of Congress (49.01.00) [Digital ID# us0049_01]

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Congress Drafts Northwest Ordinance

When the Confederation Congress began planning the organization of the territories north and west of the Ohio River, Thomas Jefferson and his congressional committee acted outside of mainstream eighteenth-century thought in drafting regulations to immediately prohibit slavery or involuntary servitude for anyone except convicted criminals. The final plan for western territories in 1787 did prohibit slavery.

Printed draft of the Northwest Ordinance of 1784. Virginia Gazette, May 15, 1784. Serial and Government Publications Division Library of Congress (049.02.00) [Digital ID# us0049_02p1]

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Call to Revise Articles of Confederation

In this 1786 letter to George Washington, John Jay (1745&ndash1829), a Continental Congress delegate from New York and later the first Chief Justice of the Supreme Court, expressed what most U.S. leaders had come to believe: that &ldquoan opinion begins to prevail that a general convention for revising the articles of Confederation would be expedient.&rdquo It was clear that George Washington was the fulcrum around which plans to revise or even replace the articles often revolved.

Letter from John Jay to George Washington, March 16, 1786. Manuscript. George Washington Papers, Manuscript Division, Library of Congress (50.00.00) [Digital ID# us0050]

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&ldquoThe Source of the Evil is the Nature of the Government&rdquo

With these words, Henry Knox (1750&ndash1806), George Washington’s former artillery commander, described to Washington an uprising of indebted farmers and laborers in Massachusetts led by Daniel Shays in 1786 and 1787. Shays’ Rebellion was caused by excessive land taxation, high legal costs, and economic depression following the American Revolution, which threatened the stability of the Confederation. The protest was one of several that exposed the need to curb the excesses and inequities of state governments and led men such as Knox and Washington to seek remedies in a stronger national government.

Letter from Henry Knox to George Washington, December 17, 1786. Manuscript. George Washington Papers, Manuscript Division, Library of Congress (50.01.00) [Digital ID#s us0050_01p1, us0050_01p2, us0050_01p3]

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Revolt in Massachusetts

Abigail Adams (1744&ndash1818) predicted that the 1786 rebellion in Massachusetts led by Daniel Shays (ca. 1741&ndash1825) &ldquowill prove sallutary to the state at large,&rdquo even though it was led by &ldquoignorant, wrestless desperadoes, without conscience or principals.&rdquo Many in the United States believed a strong national government was needed to prevent such local uprisings against legitimate government. Shays and Job Shattuck (1736&ndash1819), both veterans of the Revolutionary Army and leaders of the 1786 rebellion, are depicted in this scene.

Letter from Abigail Adams to Thomas Jefferson, January 29, 1787. Manuscript. Thomas Jefferson Papers, Manuscript Division, Library of Congress (050.02.01) [Digital ID#s us0050_02p1, us0050_02p2]

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Madison and Washington Consider Confederation

In 1785, James Madison and George Washington were in the midst of a written conversation about ways to create a stronger national government. Both men believed that the confederation government might have to sink lower before the time would be right for a successful &ldquomeeting of Politico-Commercial Commssrs. from all states&rdquoa meeting that would occur in Philadelphia two years later.

Letter from James Madison to George Washington, December 9, 1785. Manuscript. George Washington Papers, Manuscript Division, Library of Congress (51.00.00) [Digital ID#s us0051, us0051_1, us0051_2, us0051_3]

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Annapolis Meeting Leads to a Broader National Convention

In September 1786, delegates from five states met in Annapolis, Maryland, ostensibly to discuss barriers to trade under the Articles of Confederation. The commissioners decided that not enough states were represented to make any substantive agreement. Despite the failure of the &ldquoAnnapolis Convention&rdquo to attract broad support, the nationalist delegates who had attended it, including Alexander Hamilton and James Madison, pressed on with a recommendation for a national convention to address defects in the Articles of Confederation.

Letter from James Madison to James Monroe, September 11, 1786. Manuscript. James Madison Papers, Manuscript Division, Library of Congress (51.01.00) [Digital ID# us0051_01]

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Financial Crisis Fears

In 1786 James Monroe (1758&ndash1831), then a congressman from Virginia, expressed fears that the rejection of efforts to grant a national impost for revenue &ldquoendangers the govt&rdquo and &ldquowill most probably induce a change of some kind.&rdquo These fears of economic instability and lack of operating funds for the national government fueled calls for a national convention to revise the Articles of Confederation.

Letter from James Monroe to James Madison, September 12, 1786. Manuscript. James Madison Papers, Manuscript Division, Library of Congress (051.02.00) [Digital ID# us0051_02p1]

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Washington and Madison Plan for a New Government

In this letter written in 1787 on the eve of the federal Constitutional Convention, James Madison warns George Washington of the dangers from both temporizers and radicals. Madison also sketches his plans for a new federal government and constitution to be formulated in Philadelphia. Proportional representation and a national legislative veto over state laws were just two of Madison’s major proposals.

Letter from James Madison to George Washington, April 16, 1787. Manuscript. George Washington Papers, Manuscript Division, Library of Congress (52.00.02) [Digital ID#s us0052_2, us0052, us0052_1, us0052_3, us0052_4, us0052_5]

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Setting for the Creation of the Federal Constitution

Delegates to the Federal Constitutional Convention of 1787 created the instrument of government in the East Room on the first floor of the Pennsylvania State House, which is known as Independence Hall because the American Declaration of Independence was adopted here on July 4, 1776. In order to secure secrecy the delegates took an oath and met behind closed doors and windows with pulled drapes.

John Rubens Smith. Sketch of the State House In Philadelphia, [1829]. Pencil drawing. Prints and Photographs Division, Library of Congress (53.01.00) [Digital ID# LC-USZ62-113780]

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Independence Hall

Delegates to the Federal Constitutional Convention of 1787 created the instrument of government in the East Room on the first floor of the Pennsylvania State House (known today as Independence Hall) on Chestnut Street, Philadelphia. The delegates took an oath of secrecy and met behind closed doors and windows with pulled drapes throughout the often hot and humid Delaware Valley summer. This engraving shows a view of the State House from High Street.

William Birch & Son. &ldquoHigh Street, from Ninth Street,&rdquo from The City of Philadelphia in the State of Pennsylvania, North America, As it Appeared in the Year 1800. . . . Hand-colored engraving. Springland, Pennsylvania: William Birch and Son, 1800. Rare Book and Special Collections Division, Library of Congress (54.00.02) [Digital ID# us0054_04]

William Birch & Son. &ldquoState-house with a View of Chestnut Street, Philadelphia&rdquo from The City of Philadelphia . . . Hand-colored engraving. Philadelphia: William Birch & Son, 1800. Rare Book and Special Collections Division, Library of Congress (54.00.00) [Digital ID# us0054]

William Birch & Son. &ldquoBack of the State-house,&rdquo from The City of Philadelphia in the State of Pennsylvania, North America, As it Appeared in the Year 1800. . . . Hand-colored engraving. Springland, Pennsylvania: William Birch and Son, 1800. Rare Book and Special Collections Division, Library of Congress (54.00.01) [Digital ID# us0054_1]

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Congress Adopts the Northwest Ordinance

The Northwest Ordinance, adopted by the Confederation Congress on July 13, 1787, established a precedent for the organization of territories outside of the nation’s original thirteen states. A minimum of five territories or states were to be created. Each was to have a republican government with an executive, legislative council (upper house), assembly, and judiciary. Not only was the territory north and west of the Ohio River to be settled by Americans and admitted into full statehood in the union, but the Ordinance stipulated that those territories would be free from slavery or involuntary servitude and have a bill of rights.

United States Continental Congress. Ordinance for the Government of the Territory of the U.S. Northwest of the Ohio. New York, 1787. Broadside. Rare Book and Special Collections Division, Library of Congress (049.04.00) [Digital ID# us0049_04]

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Congress Adopts the Northwest Ordinance

The Northwest Ordinance, adopted by the Confederation Congress on July 13, 1787, established a precedent for the organization of territories outside of the nation’s original thirteen states. A minimum of five territories or states were to be created. Each was to have a republican government with an executive, legislative council (upper house), assembly, and judiciary. Not only was the territory north and west of the Ohio River to be settled by Americans and admitted into full statehood in the union, but the Ordinance stipulated that those territories would be free from slavery or involuntary servitude and have a bill of rights. Nathan Dane (1752&ndash1835), who authored the clause prohibiting slavery, annotated this copy.

United States Continental Congress. An Ordinance for the Government of the Territory of the U.S. Northwest of the Ohio. New York: 1787. Rare Book and Special Collections Division, Library of Congress (049.03.00) [Digital ID# us0049_03]

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Crucible for the Creation of the American Republic

Philadelphia, site of both Continental Congresses, was one of the most urban, advanced cities in America in the eighteenth century. Originally drawn by George Heap (1714&ndash1752), a surveyor and mapmaker in Philadelphia, and Nicolas Scull (1687&ndash1762), Surveyor General of the Province of Pennsylvania, this map was engraved and published by Matthäus Albrect Lotter (1741&ndash1810), and shows streams, roads, and names of the landowners in the vicinity of Philadelphia. The bottom of the map contains an illustration of the State House, home of the second Continental Congress and the Federal Convention of 1787.

Matthäus Albrect Lotter. A Plan of the City and Environs of Philadelphia. [Augsburg: M.A. Lotter, 1777]. Hand-colored engraved map. Geography and Map Division, Library of Congress (053.03.00) [Digital ID# ar132200]

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Fear of Wasting George Washington’s Political Capital

James Madison expressed a fear that George Washington would waste his political capital by attending an &ldquoabortive&rdquo convention. Madison wondered if Washington should hold off on his appearance until some progress had been made, suggesting that Benjamin Franklin might provide &ldquosufficient dignity into the Chair&rdquo of the convention until the proper time. Washington had left Virginia by the time Edmund Randolph received this letter and arrived in Philadelphia in time to help Madison and other members of the Virginia delegation to draft a proposed plan of government, known as the &ldquoVirginia Plan.&rdquo

Letter from James Madison to Edmund Randolph, April 15, 1787. Manuscript. James Madison Papers, Manuscript Division, Library of Congress (052.02.00) [Digital ID# us0052_02]

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Fear of Wasting Washington’s Political Capital

James Madison worried that George Washington would waste his political capital by attending an &ldquoabortive&rdquo convention. He thought Washington should delay his appearance until some progress at the Constitutional Convention had been made and suggested that in the meantime, Benjamin Franklin might provide &ldquosufficient dignity into the Chair.&rdquo Before Madison could address the matter, however, Washington had already left for Philadelphia, as indicated by this letter from John Dawson (1762&ndash1814), a fellow Virginian, who realized the high stakes of the convention.

Letter from John Dawson to James Madison, April 15, 1787. Manuscript. James Madison Papers, Manuscript Division, Library of Congress (052.03.00) [Digital ID# us0052_03]

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Not Worth a Continental

During the American Revolution the Continental Congress issued paper currency to finance the Revolutionary War. These notes, called &ldquoContinentals,&rdquo had no backing in gold or silver, but were instead backed by the &ldquoanticipation&rdquo of tax revenues. Easily counterfeited and without solid backing, the notes quickly lost their value, so that the term &ldquonot worth a Continental&rdquo became common slang. After the war Congress and the state governments continued to produce money contributing to what Madison referred to as the &ldquomortal diseases&rdquo of the government under the Articles of Confederation and resulting in calls for a new federal constitution to strengthen the national government.

United States Continental Congress. Paper currency, 1775&ndash1777. Printed by Hall and Sellers Rhode Island. Paper Currency, 1786. Printed by Southwick and Barber. Marian Carson Collection, Manuscript Division, Library of Congress (136.00.00) [Digital ID # us0136]

United States Continental Congress. Paper currency, 1775&ndash1777. Printed by Hall and Sellers Rhode Island. Paper Currency, 1786. Printed by Southwick and Barber. Marian Carson Collection, Manuscript Division, Library of Congress (136.01.00) [Digital ID# us0136_01]

United States Continental Congress. Paper currency, 1775&ndash1777. Printed by Hall and Sellers Rhode Island. Paper Currency, 1786. Printed by Southwick and Barber. Marian Carson Collection, Manuscript Division, Library of Congress (136.02.00) [Digital ID# us0136_02]

United States Continental Congress. Paper currency, 1775&ndash1777. Printed by Hall and Sellers Rhode Island. Paper Currency, 1786. Printed by Southwick and Barber. Marian Carson Collection, Manuscript Division, Library of Congress (136.03.00) [Digital ID# us0136_03]

United States Continental Congress. Paper currency, 1775&ndash1777. Printed by Hall and Sellers Rhode Island. Paper Currency, 1786. Printed by Southwick and Barber. Marian Carson Collection, Manuscript Division, Library of Congress (136.04.00) [Digital ID# us0136_04]

United States Continental Congress. Paper currency, 1775&ndash1777. Printed by Hall and Sellers Rhode Island. Paper Currency, 1786. Printed by Southwick and Barber. Marian Carson Collection, Manuscript Division, Library of Congress (136.05.00) [Digital ID# us0136_05]

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Plans to Revise the Articles of Confederation

Rufus King (1755&ndash1827), a member of the Confederation Congress and a delegate to the Federal Constitution Convention of 1787, expressed concern for a 1785 Massachusetts legislative call for a national convention to revise the Articles of Confederation. In his letter to Nathan Dane (1752&ndash1835), a Massachusetts delegate to the Confederation Congress and architect of the Northwest Ordinance of 1787, King correctly predicted that any new government would be less republican and that the larger states would want more control of the new government. The Massachusetts delegates refused to submit the request to Congress or to the other states.

Letter from Rufus King to Nathan Dane, September 17, 1785. Manuscript. Nathan Dane Papers, Manuscript Division, Library of Congress (051.03.00) [Digital ID# us0051_03p2]

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Washington Voices Doubts About a &ldquogeneral Convention&rdquo

In early 1786 George Washington (1732&ndash1799) recognized that the Articles of Confederation needed to be revised, but he still harbored doubts about calling a &ldquogeneral Convention.&rdquo Despite his fears that a bad solution or a failed attempt to change the Articles might worsen America’s economic and political conditions, Washington believed that &ldquosomething must be done, or the fabrick must fall.&rdquo

Letter from George Washington to John Jay, May 18, 1786. Letter book. George Washington Papers, Manuscript Division, Library of Congress (050.03.00) [Digital ID# us0050_03]

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Thomas Jefferson on Black Education

Robert Pleasants (1723&ndash1801), a Virginia Quaker who had recently freed his own eighty slaves, wrote to Thomas Jefferson asking his support for education for slave children in order to prepare them for freedom. Responding to his letter, Jefferson suggested that private efforts would be inadequate and that state support would be necessary to provide education for slaves &ldquodestined to be free.&rdquo

Letter from Thomas Jefferson to Robert Pleasants, [August 27, 1796]. Manuscript. Thomas Jefferson Papers, Manuscript Division, Library of Congress (048.03.00) [Digital ID# us0048_03]


How Did the States Limit the Powers of the Central Government Under the Articles of Confederation?

The Articles of Confederation, the document that outlined how the United States would be governed prior to the Constitution, was written in 1775 on the principle of individual state independence and gave no power to the central government. The Articles outlined a loose alliance of sovereign states rather than a country, but because the central government could not even levy taxes, the Constitution was drafted in 1787.

When the Articles of Confederation were created, the budding American nation was in the process of fighting for its freedom from an oppressive distant government. Benjamin Franklin, a proponent of independence, drafted a set of articles that gave power almost entirely to local government.

According to the Articles, the central government would have no executive branch or direct judicial system. It would not be able to levy taxes or draft an army. In fact, it would not be able to directly act on its citizens at all. In theory, the central government would be involved in decisions that affected the thirteen states, but each of the states had power to overrule the very weak federal government. The Constitution written in 1787 was built on a system of checks and balances, but the Articles of Confederation offered no measures to keep individual states in check, even if their policies hurt the nation as a whole.


The early Americans accumulated a lot of debt associated with the Revolution. The federal government assumed the debt of the colonies and sought to pay it off by taxing imports and imposing excise taxes on products such as alcohol, tobacco and refined sugar. Congress passed an excise tax on all distilled spirits in 1791, causing an uprising among farmer/distillers in the western part of Pennsylvania. The Whiskey Rebellion ended with President George Washington mobilizing 13,000 militiamen from multiple states and arresting 150 rebellious farmers. Only two were convicted of treason and they were later pardoned.

In peacetime during America's early decades, most of the federal government’s revenue came from import taxes called tariffs. The U.S. Congress passed the Tariff Act of 1789 to help generate revenue to pay off its war debts and to encourage and protect manufacturers in the northern states. Congress also passed major tariff bills in 1816, 1824, 1828 and 1832.


Why Did the Founding Fathers Create a Constitution Based

The founding fathers wanted to create a constitution because many believed that the national government had to be stronger than what it had been with the use of the Articles of Confederation. But at the same time they were fearful of human nature and how often it could be seen in the history of other countries such as Britain, for people in the position of power to infringe on the rights of others, by becoming hungry with power. Taking this into account, they wanted to create a government with another power to keep order and to govern.

But also make sure there were sufficient checks put in place so that the government could never exercise power that threatens individual liberties. The constitution created a government with a written set of rules to follow which it could not infringe upon. This in itself was one way to create a limited government, which is a main factor in why the founding fathers created a constitution. The Founding fathers also wanted to divide power in different ways, in another attempt to prevent its future abuse.

The three main concepts within the constitution are separation of powers, cheques and balances, and federalism. The founding fathers originally debated where power should ultimately lie Alexander Hamilton suggested that a unitary system would be the best. This is where the power lies with the central authority many knew that this would never work, as the country is far too big and diverse. There were even hints at a monarchy but George Washington quickly made his feelings on the idea open.

‘It is an idea I must view with adherence and reprimand with severity’ George mason on the other hand was in support of a confederate system, this is where the states would be split up , and then all have to agree on individual issues. There are very few examples of a confederate system working, and it is clear to see why it would not work in in America, as it would be very difficult to get all the states to agree on individual issues, due to the diversity of the country.

The solution to this problem was suggested by James Madison, which was quite simply a mixture of the two systems unitary and confederate. This is where power is divided between central and state government. National or delegated powers are powers only exercised by the national government, examples of this today would be the right to print money, and the right to declare war. Some examples of concurrent or shared powers are the right to borrow money, and make and enforce law. An example of a state or reserved power is the right to regulate intrastate commerce or create corporation laws.

This was done for two main reasons, the first being to limit centralised power, and presidential power, and secondly so that states would agree to the constitution. The states also agreed for two other reasons , one being the Connecticut compromise, and the other being the Bill of rights , which most American historians just count as part of the original constitution, but it wasn’t actually added till 4 years later, Madison claimed it was important as ‘You must specify your liberties’. The Connecticut compromise was created to keep the small states happy, so that they would agree to the constitution.

The geographically small states wanted representation based on population, not on size of state, when the biggest states with the smallest population wanted it to be based on the flat rate. So the political compromise was that in the House of Representatives, representation was based on population, and in the senate it was based on the geographical size of a state. The bill of rights is a document that American historians claim is part of the original constitution, although it was sent off to the individual states 4 years later.

It was there to clearly show the rights of the people, so that they could never be taken away. The 1st amendment included freedoms such as freedom of assembly and free speech or the 2nd amendment which is the right for everyone to bear arms. It is often shouted out by gun associations when the government tries to put restrictions on the ownership of guns. The founding fathers put this in place so that it would outline in more the detail the precise freedoms of the people, which also helped to convince the smaller states.

The constitution splits the power given to national government into three branches, which are separate from each other: the legislature, the executive, and the judiciary. The separation of powers was based on the ideas of Montesquieu, with him ‘L’esprit de lois’ which means the spirit of the law. The executive plays the role of administrating law. The president does this in many ways , for example he executes federal laws and programs, conducts foreign policy , commands the armed forces, negotiates treaties and other such roles.

Checks and balances another main factor of the constitution comes in here, as the people get to keep a check on the president every 4 years with the presidential election, which stops any tyranny of powers. This can also be seen in another branch of government. The legislature passes law, this is done through congress. Congress is made up of the Senate and the House of Representatives. Its roles include regulating interstate and foreign commerce , creating and maintaining the armed forces , printing money, declaring war , and other such roles.

The power here is limited in two ways, which is exactly what the founding fathers wanted it’s done through a 6 year change of the senate, which rotates 1/3 of its members for election every 2 years. This is also done in the House of Representatives, as they have to run for re-election every 2 years, this means that representatives have to get things the public want done, or they can just be kicked out. This keeps power in the hands of the many, which is also how they wanted to constitution to work. The last branch is the Judiciary, its role is to interpret and enforce the law.

It is able to stay separate from the other branches, as it operates heavily outside the government, but also because ‘nothing maintains the independence of the judiciary more than its permanency in office’. It is also tied to the other two branches, as if the president wants to pass a law, it must get through congress and through the Supreme Court, as they can rule it unconstitutional, so the founding fathers created a system so that every branch was a check on each other, this also creates a system, where politics becomes the art of compromise.

This system of checks and balances means that all the branches have to work together, and have to compromise. Congress holds its check on the president in different ways, such as Congress is able to impeach and remove a president, although impeachment does require a 2/3 majority of house, and removal 2/3 of the senate. Congress can also override a presidential veto, this also requires a 2/3 majority in both houses, but this system means that no one branch can hold far more power than another which is another example of why the founding fathers chose such a system.

It also holds other powers such as rejecting treaties which limits presidential foreign policy. Congress also holds checks over the judiciary. It can do this by proposing constitutional amendments, and impeaching and removing judges with the 2/3 majority in the senate. This also shows us that the judiciary can never hold too much power over the president or congress, which is another example of how the founding fathers wanted the constitution to work. There are also powers given to the other two branches of government, which help to keeps checks, so that they can all counter each other with enough majority.

But a problem with this is that it can lead to political gridlock, and this means very little can get done, which is not what the founding fathers intended. To conclude, the founding fathers created a constitution that meant that power could never be held within the hands of the few, but with the many. It also created checks on power in every branch of government, not just from the people, but from the branches themselves acting as checks against each other.

They had wanted to create a system that worked this way, because of the tyranny that could be seen in other countries. This is why George Washington destroyed any idea of a monarchy, he wanted the United States of America to be founded on principles the promoted compromise, and freedom, and equality. It was also meant to act as a block on any future tyranny, or corruption of power, but it also creates problems in itself, as it can lead to political gridlock, but no political system is perfect.


Specific Empirical Findings from the Constitutional Convention and the Ratifying Conventions

Financial Securities

The financial securities holdings of the founders often had a significantly large influence on their behavior and founders with such financial assets were often aligned with each other on the same issue. These findings are in contrast to a strongly held view among many historical scholars that the founders’ financial securities holdings had little or no influence on their behavior or that these founders were not aligned on common issues. For a small number of the issues considered at the Philadelphia convention, the founders’ financial securities holdings mattered. Moreover, during the ratification process, the financial securities holdings had a major influence. Specifically, delegates with private securities holdings (private creditors) or public securities holdings (public creditors), and especially delegates with large amounts of public securities holdings (generally, Revolutionary War debt), were significantly more likely to vote in favor of ratification.

This does not mean that all securities-holding delegates voted together at the constitutional conventions. What it does mean is that the holdings of financial securities, controlling for other influences, significantly increased the probability of supporting some of the issues at the Philadelphia convention, particularly those issues that strengthened the central government (or weakened the state governments). For example, one issue that the securities holders were more likely to have supported was a proposal to absolutely prohibit state governments from issuing paper money. This means that the securities holders (creditors) at the convention desired to constrain the states’ ability to inflate away the value of their financial holdings through expansion of the supply of state paper money. Not surprisingly, the twelve founders at Philadelphia with private securities holdings voted unanimously in favor of the prohibition. Likewise, those with public securities holdings were significantly more likely to have favored it. The evidence indicates that a founder at Philadelphia with any public securities holdings, who at the same time possessed the average values of all other interests represented at the convention, was 26.5 percent more likely to vote yes than was an otherwise average delegate with no public securities holdings. With respect to the ratification process, a delegate’s financial securities holdings, controlling for other influences, significantly increased his probability of voting in favor of ratification at his state convention. An implication that can be drawn from this evidence is that to the extent some delegates with financial securities holdings did not support strengthening the central government, or did not vote for ratification, it was the effects of their other interests that influenced them to vote “no.”

Slaveowners

The view of many historical scholars is that delegates who were slaveowners and those who represented slave areas generally supported strengthening the central government and supported ratifying the Constitution. While this may be correct as far as it goes, the issue of the influence of slaveholdings on the behavior of the Founding Fathers, as is the influence of any factor, is actually more complex. The quantitative evidence indicates that, although a majority of the slaveowners and a majority of the delegates from slave areas, may have, in fact, voted for issues strengthening the central government or voted for ratification, the actual influence of slaveholdings or representing slave areas per se was to significantly decrease a delegate’s likelihood of voting for strengthening the central government or voting for ratification.

As with the findings for financial securities holdings, this does not mean that all slaveholding delegates or all delegates from slave areas voted together at the various constitutional conventions. What it does mean for the Philadelphia constitutional convention is that slaveholdings, controlling for other influences, decreased the probability of voting at the convention for issues that would have strengthened the central government. For example, one issue that slaveholders at Philadelphia were less likely to have supported was a proposal that would have given the national legislature an absolute veto over state laws, which would have greatly strengthened the central government. This means that if the national veto had been put into the Constitution at Philadelphia, which it was not, the national Congress, especially if it had a majority of non-slaveholding representatives, could have vetoed state laws concerning slavery, for example. This would have given the national Congress the power to limit the economic viability of slavery, if it so chose. Not surprisingly, the evidence suggests that a delegate at Philadelphia who owned the most slaves at the convention, for example, and had average values of all other interests, was one-twelfth as likely to have voted yes on the national veto than an otherwise average delegate with no slaveholdings. Likewise, during the ratification process, slaveholdings, controlling for other influences, significantly decreased the probability of voting in favor of ratification at the state ratifying conventions. An implication from this evidence is that in the case of the slaveholding delegates and the delegates from slave areas, who did vote to strengthen the central government or did vote for ratification, it was the effects of their other interests that influenced them to vote “yes.”

Commercial Interests

The modern evidence confirms that the framers and the ratifiers of the Constitution, who were from the more commercial areas of their states, were likely to have voted differently from individuals from the less commercial areas. Delegates who were from the more commercial areas were significantly more likely to have voted for clauses in the Constitution that strengthened the central government and were significantly more likely to have voted for ratification in the ratifying conventions. The Founding Fathers who were from the more isolated, less commercial areas of their states were significantly less likely to support strengthening the central government and significantly less likely to vote for ratification.

Local and State Office Holders

But surprisingly, the findings for the ratification of the Constitution strongly conflict with the nearly unanimous prevailing scholarly view that the localism and parochialism of local and state officeholders were major factors in the opposition to the Constitution’s ratification. The modern quantitative evidence, in fact, indicates that there were no significant relationships whatsoever between any measure of local or state office holding and the ratification vote in any ratifying convention for which the data on officeholders were collected.


The Preamble

The Preamble of the U.S. Constitution&mdashthe document&rsquos famous first fifty-two words&mdash introduces everything that is to follow in the Constitution&rsquos seven articles and twenty-seven amendments. It proclaims who is adopting this Constitution: &ldquoWe the People of the United States.&rdquo It describes why it is being adopted&mdashthe purposes behind the enactment of America&rsquos charter of government. And it describes what is being adopted: &ldquothis Constitution&rdquo&mdasha single authoritative written text to serve as fundamental law of the land. Written constitutionalism was a distinctively American innovation, and one that the framing generation considered the new nation&rsquos greatest contribution to the science of government.

The word &ldquopreamble,&rdquo while accurate, does not quite capture the full importance of this provision. &ldquoPreamble&rdquo might be taken&mdashwe think wrongly&mdashto imply that these words are merely an opening rhetorical flourish or frill without meaningful effect. To be sure, &ldquopreamble&rdquo usefully conveys the idea that this provision does not itself confer or delineate powers of government or rights of citizens. Those are set forth in the substantive articles and amendments that follow in the main body of the Constitution&rsquos text. It was well understood at the time of enactment that preambles in legal documents were not themselves substantive provisions and thus should not be read to contradict, expand, or contract the document&rsquos substantive terms.

But that does not mean the Constitution&rsquos Preamble lacks its own legal force. Quite the contrary, it is the provision of the document that declares the enactment of the provisions that follow. Indeed, the Preamble has sometimes been termed the &ldquoEnacting Clause&rdquo of the Constitution, in that it declares the fact of adoption of the Constitution (once sufficient states had ratified it): &ldquoWe the People of the United States . . . do ordain and establish this Constitution for the United States of America.&rdquo

Importantly, the Preamble declares who is enacting this Constitution&mdashthe people of &ldquothe United States.&rdquo The document is the collective enactment of all U.S. citizens. The Constitution is &ldquoowned&rdquo (so to speak) by the people, not by the government or any branch thereof. We the People are the stewards of the U.S. Constitution and remain ultimately responsible for its continued existence and its faithful interpretation.

It is sometimes observed that the language &ldquoWe the People of the United States&rdquo was inserted at the Constitutional Convention by the &ldquoCommittee of Style,&rdquo which chose those words&mdashrather than &ldquoWe the People of the States of . . .&rdquo, followed by a listing of the thirteen states, for a simple practical reason: it was unclear how many states would actually ratify the proposed new constitution. (Article VII declared that the Constitution would come into effect once nine of thirteen states had ratified it and as it happened two states, North Carolina and Rhode Island, did not ratify until after George Washington had been inaugurated as the first President under the Constitution.) The Committee of Style thus could not safely choose to list all of the states in the Preamble. So they settled on the language of both &ldquoWe the People of the United States.&rdquo

Nonetheless, the language was consciously chosen. Regardless of its origins in practical considerations or as a matter of &ldquostyle,&rdquo the language actually chosen has important substantive consequences. &ldquoWe the People of the United States&rdquo strongly supports the idea that the Constitution is one for a unified nation, rather than a treaty of separate sovereign states. (This, of course, had been the arrangement under the Articles of Confederation, the document the Constitution was designed to replace.) The idea of nationhood is then confirmed by the first reason recited in the Preamble for adopting the new Constitution&mdash&ldquoto form a more perfect Union.&rdquo On the eve of the Civil War, President Abraham Lincoln invoked these words in support of the permanence of the Union under the Constitution and the unlawfulness of states attempting to secede from that union.

The other purposes for adopting the Constitution, recited by the Preamble&mdash to &ldquoestablish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity&rdquo&mdashembody the aspirations that We the People have for our Constitution, and that were expected to flow from the substantive provisions that follow. The stated goal is to create a government that will meet the needs of the people.

As noted, the Preamble&rsquos statements of purpose do not themselves grant powers or confer rights the substantive provisions in the main body of the Constitution do that. There is not, for example, a general government power to do whatever it judges will &ldquopromote the general Welfare.&rdquo The national government&rsquos powers are specified in Article I and other provisions of the Constitution, not the Preamble. Congress has never relied on the Preamble alone as the basis for a claimed power to enact a law, and the Supreme Court has never relied on the Preamble as the sole basis for any constitutional decision. Still, the declared purposes for the Constitution can assist in understanding, interpreting, and applying the specific powers listed in the articles, for the simple reason that the Constitution should be interpreted in a manner that is faithful to its purposes.


1 An Act of War

Under the Articles of Confederation, the main purpose of the national government was to coordinate resources for the war effort against Britain. It was therefore the duty of the federal legislature, formally called the Congress of the Confederation, to organize and maintain the Continental Army. The Articles of Confederation gave Congress the authority to appoint military officials, but not to draft soldiers it was up to the states to contribute men for the armed forces.


The History of Banking Control in the United States

The dictatorship of the bankers and their debt-money system are not limited to one country, but exist in every country in the world. They are working to keep their control tight, since one country freeing itself from this dictatorship and issuing its own interest- and debt-free currency, setting the example of what an honest system could be, would be enough to bring about the worldwide collapse of the bankers’ swindling debt-money system.

This fight of the International Financiers to install their fraudulent debt-money system has been particularly vicious in the United States of America since its very foundation, and historical facts show that several American statesmen were well aware of the dishonest money system the Financiers wanted to impose upon America and of all of its harmful effects. These statesmen were real patriots, who did all that they possibly could to maintain for the USA an honest money system, free from the control of the Financiers. The Financiers did everything in their power to keep in the dark this facet of the history of the United States, for fear that the example of these patriots might still be followed today. Here are some facts that the Financiers would like the population not to know:

The happiest population

Benjamin Franklin

We are in 1750. The United States of America does not yet exist it is the 13 Colonies of the American continent, forming "New England", a possession of the motherland, England. Benjamin Franklin wrote about the population of that time: "Impossible to find a happier and more prosperous population on all the surface of the globe." Going over to England to represent the interests of the Colonies, Franklin was asked how he accounted for the prosperous conditions prevailing in the Colonies, while poverty was rife in the motherland:

"That is simple," Franklin replied. "In the Colonies we issue our own money. It is called Colonial Scrip. We issue it in proper proportion to make the products 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 English bankers, being informed of that, had a law passed by the British Parliament prohibiting the Colonies from issuing their own money, and ordering them to use only the gold or silver debt-money that was provided in insufficient quantity by the English bankers. The circulating medium of exchange was thus reduced by half.

"In one year," Franklin stated, "the conditions were so reversed that the era of prosperity ended, and a depression set in, to such an extent that the streets of the Colonies were filled with unemployed."

Then the Revolutionary War was launched against England, and was followed by the Declaration of Independence in 1776. History textbooks erroneously teach that it was the tax on tea that triggered the American Revolution. But Franklin clearly stated:

"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."

The Founding Fathers of the United States, bearing all these facts in mind, and to protect themselves against the exploitation of the International Bankers, took good care to expressly declare, in the American Constitution, signed at Philadelphia in 1787, Article 1, Section 8, paragraph 5:

"Congress shall have the power to coin money and to regulate the value thereof."

The bank of the bankers

But the bankers did not give up. Their agent, Alexander Hamilton, was named Secretary of Treasury in George Washington’s cabinet, and advocated the establishment of a federal bank to be owned by private interests, and the creation of debt-money with false arguments like: "A national debt, if it is not excessive, will be to us a national blessing. The wisdom of the Government will be shown in never trusting itself with the use of so seducing and dangerous an expedient as issuing its own money." Hamilton also made them believe that only the debt-money issued by private banks would be accepted in dealing abroad.

Thomas Jefferson, the Secretary of State, was strongly opposed to that project, but President Washington was finally won over by Hamilton’s arguments. A federal bank was thus created in 1791, the "Bank of the United States", with a 20 years’ charter. Although it was termed "Bank of the United States", it was actually the "bank of the bankers", since it was not owned by the nation, but by individuals holding the bank’s stocks, the private bankers. This name of "Bank of the United States" was purposely chosen to deceive the American population and to make them believe that they were the owners of the bank, which was not the case. The charter for the Bank of the United States ran out in 1811, and Congress voted against its renewal, thanks to the influence of Thomas Jefferson and Andrew Jackson:

Andrew Jackson

“If Congress," Jackson said, "has a right under the Constitution to issue paper money, it was given them to use by themselves, not to be delegated to individuals or corporations."

Thus ended the history of the first Bank of the United States. But the bankers did not play their last card.

The bankers launch the war

Nathan Rothschild, of the Bank of England, issued an ultimatum: "Either the application for the renewal of the charter is granted, or the United States will find itself involved in a most disastrous war." Jackson and the American patriots did not believe the power of the international moneylenders could extend so far. "You are a den of thieves-vipers," Jackson told them. "I intend to rout you out, and by the Eternal God, I will rout you out!" Nathan Rothschild issued orders: "Teach these impudent Americans a lesson. Bring them back to Colonial status."

The British Government launched the War of 1812 against the United States. Rothschild’s plan was to impoverish the United States through this war to such an extent that the legislators would have to seek financial aid. which, of course, would be forthcoming only in return for the renewal of the charter for the Bank of the United States. Thousands were killed, but what does that matter to Rothschild? He had achieved his objective the U.S. Congress granted the renewal of the Charter in 1816.

Abraham Lincoln is assassinated

Abraham Lincoln was elected President of the United States in 1860, under the promise of abolishing the slavery of the blacks. Eleven southern States, favourable to the human slavery of the black race, then decided to secede from the Union, to withdraw from the United States of America: that was the beginning of the Civil War (1861-1865). Lincoln, being short of money to finance the North’s war effort, went to the bankers of New York, who agreed to lend him money at interest rates varying from 24 to 36 percent. Lincoln refused, knowing perfectly well that this was usury and that it would lead the United States to ruin. But his money problem was still not settled!

His friend in Chicago, Colonel Dick Taylor, came to his rescue and put the solution to him: "Just get Congress to pass a bill authorizing the printing of full legal tender treasury notes, and pay your soldiers with them, and go ahead and win your war with them also."

This is what Lincoln did, and he won the war: between 1862 and 1863, in full conformity with the provisions of the U.S. Constitution, Lincoln caused $450 million of debt-free Greenbacks to be issued, to conduct the Civil War. (These Treasury notes were called "Greenbacks" by the people because they were printed with green ink on the back.)

Lincoln said: "Government, possessing the power to create and issue currency and credit as money, and enjoying the right to withdraw both currency and credit from circulation by taxation and otherwise, need not and should not borrow capital at interest as the means of financing governmental work and public enterprise… The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government’s greatest creative opportunity."

Lincoln called the Greenbacks "the greatest blessing the American people have ever had." A blessing for all, except for the bankers, since it was putting an end to their racket, to the theft of the nation’s credit and issuing interest-bearing money. So they did everything possible to destroy these Greenbacks and sabotage Lincoln’s work. Lord Goschen, spokesman of the Financiers, wrote in the London Times (Quote taken from Who Rules America by C. K. Howe, and reproduced in Lincoln Money Martyred by Dr. R. E. Search):

"If this mischievous financial policy, which has its origin in North America, shall become indurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without a debt. It will have all the money necessary to carry on its commerce. It will become prosperous without precedent in the history of the world. That Government must be destroyed, or it will destroy every monarchy on the globe." (The monarchy of the money lenders.)

First, in order to cast discredit on the Greenbacks, the bankers persuaded Congress to vote, in February of 1862, the "Exception Clause", which said that the Greenbacks could not be used to pay the interest on the national debt, nor to pay taxes, excises, or import duties. Then, in 1863, having financed the election of enough Senators and Representatives, the bankers got the Congress to revoke the Greenback Law in 1863, and enact in its place the National Banking Act. (Money was then to be issued interest-bearing by privately-owned banks.)

This Act also provided that the Greenbacks should be retired from circulation as soon as they came back to the Treasury in payment of taxes. Lincoln heatedly protested, but his most urgent objective was to win the war and save the Union, which obliged him to put off till after the war the veto he was planning against this Act and the action he was to take against the bankers. Lincoln nevertheless declared:

"I have two great enemies, the Southern army in front of me and the bankers in the rear. And of the two, the bankers are my greatest foe."

Lincoln was re-elected President in 1864, and he made it quite clear that he would attack the power of the bankers, once the war was over. The war ended on April 9, 1865, but Lincoln was assassinated five days later, on April 14. A tremendous restriction of credit followed, organized by the banks: the currency in circulation in the country, which was, in 1866, $1,907 million, representing $50.46 for each American citizen, had been reduced to $605 million in 1876, representing $14.60 per capita. The result: in ten years, 56,446 business failures, representing a loss of $2 billion. And as if this was not enough, the bankers reduced the per capita currency in circulation to $6.67 in 1887!

William Jennings Bryan: “The banks ought to get out”

William Jennings Bryan

Lincoln’s example nevertheless remained in several minds, as far along as 1896. That year, the Presidential candidate for the Democrats was William Jennings Bryan, and once again, history textbooks tell us that it was a good thing that he did not succeed in his bid for the Presidency, since he was against the bankers’ "sound money", the money issued as a debt, and against the gold standard. Bryan said:

"We say in our platform that we believe that the right to coin and issue money is a function of Government. We believe it. Those who are opposed to it tell us that the issue of paper money is a function of the bank, and that the Government ought to get out of the banking business. I tell them that the issue of money is a function of Government, and that the banks ought to get out of the Government business. When we have restored the money of the Constitution, all other necessary reforms will be possible, but until this is done, there is no other reform that can be accomplished."

The Fed: The most gigantic trust

Finally, on December 23, 1913, the U.S. Congress voted in the Federal Reserve Act, which took away from Congress the power to create money, and which handed over this power to the Federal Reserve Corporation. One of the rare Congressmen who had understood all the issue at stake in this Act, Representative Charles A. Lindbergh Sr. (Rep-Minnesota), father of the famous aviator, said:

Charles A. Lindbergh

"This Act establishes the most gigantic trust on earth. When the President (Wilson) signs this bill, the invisible government of the Monetary Power will be legalized. The worst legislative crime of the ages is perpetrated by this banking and currency bill."

The education of the people

What allowed the bankers to finally obtain the complete monopoly of the control of credit in the United States? The ignorance among the population of the money question. John Adams wrote to Thomas Jefferson, in 1787:

"All the perplexities, confusion and distress in America arise, not from defects in the Constitution, not from want of honor or virtue, so much as downright ignorance of the nature of coin, credit, and circulation."

Lincoln’s Secretary of Treasury, Salmon P. Chase, stated publicly, shortly after the passage of the National Banking Act, in 1863:

Salmon P. Chase

"My agency in promoting the passage of the National Banking Act was the greatest financial mistake of my life. It has built up a monopoly which affects every interest in the country. It should be repealed, but before that can be accomplished, the people will be arrayed on one side, and the banks on the other, in a contest such as we have never seen before in this country."

Automobile manufacturer Henry Ford said:

"If the people of the nation understood our banking and monetary system, I believe there would be a revolution before tomorrow morning."

The education of the people, that’s the solution! It is precisely the method advocated by the "Michael" Journal: to build a force in the people through education, so that the sovereign government of each nation will have the courage to stand up to the bankers and issue its own money, as President Lincoln did. If only all those in favour of an honest money system understood their responsibilities for spreading the "Michael" Journal! Social Credit, which would establish an economy where everything is organized to serve the human person, is precisely aiming to develop personal responsibility, to create responsible people. Each mind won over to Social Credit is an advance. Each person formed by Social Credit is a force, and each force acquired is a step towards the victory. And for the last seventy years, how many forces have been acquired!… If all of them were active, it is really before tomorrow morning that we would obtain the implementation of the Social Credit proposals!

As Louis Even wrote in 1960: "The obstacle is neither the financier, nor the politician, nor any avowed enemy. The obstacle lies in the passivity of too many Social Crediters who hope for the coming of the triumph of the Cause, but who leave it up to others to promote it."

In short, it is our refusal to take on our responsibilities that delays the implementation of Social Credit, of an honest money system. "Much will be asked of the man to whom much has been given" (Luke 12:48). Examine your consciences, dear Social Crediters personal conversion, one more step, let us take on our responsibilities: the victory has never been so close! Our responsibility is to make Social Credit known to others, by having them subscribe to the "Michael" Journal, the only publication that makes this brilliant solution known.

Social Credit bill passed by the US Congress in 1932

It is the education of the people that is necessary. Once the pressure from the public is strong enough, all the parties will agree with it. A fine example of this can be found in the Goldsborough bill of 1932, which was described by an author as a "Social Credit bill" and "the closest near-miss monetary reform for the establishment of a real sound money system in the United States":

"An overwhelming majority of the U.S. Congress (289 to 60) favored it as early as 1932, and in one form or another it has persisted since. Only the futile hope that a confident new President (Roosevelt) could restore prosperity without abandoning the credit-money system America had inherited kept Social Credit from becoming the law of the land. By 1936, when the New Deal (Roosevelt’s solution) had proved incapable of dealing effectively with the Depression, the proponents of Social Credit were back again in strength. The last significant effort to gain its adoption came in 1938." (W.E. Turner, Stable Money, p. 167.)

Even the dividend and the compensated discount, two essential parts of Social Credit, were mentioned in this bill, which was the "Goldsborough bill", after the Democratic Representative of Maryland, T. Allan Goldsborough, who presented it in the House for the first time on May 2, 1932.

Two persons who supported the bill especially hold our attention: Robert L. Owen, Senator of Oklahoma from 1907 to 1925 (a national bank director for 46 years), and Charles G. Binderup, Representative of Nebraska. Owen published an article, in March of 1936, in J. J. Harpell’s publication, "The Instructor", of which Louis Even was the assistant editor. As for Binderup, he gave several speeches on radio in the USA during the Depression, explaining the damaging effects of the control of credit by private interests.

Robert Owen

Robert Owen testified in the House, April 28, 1936: ". the bill which he (Goldsborough) then presented, with the approval of the Committee on Banking and Currency of the House — and I believe it was practically a unanimous report. It was debated for two days in the House, a very simple bill, declaring it to be the policy of the United States to restore and maintain the value of money, and directing the Secretary of the Treasury, the officers of the Federal Reserve Board, and the Reserve banks to make effective that policy. That was all, but enough, and it passed, not by a partisan vote. There were 117 Republicans who voted for that bill (which was presented by a Democrat) and it passed by 289 to 60, and of the 60 who voted against it, only 12, by the will of the people, remain in the Congress.

"It was defeated by the Senate, because it was not really understood. There had not been sufficient discussion of it in public. There was not an organized public opinion in support of it."

Once again, education is the main issue: Republicans and Democrats alike supported it, so there was no need for a third party or any sort of "Social Credit" party. Moreover, Owen admitted that the only thing that was lacking was the education of the population, a force among the people. That confirms the method used by the "Michael" Journal, advocated by Clifford Hugh Douglas and Louis Even.

The Goldsborough bill was titled: "A bill to restore to Congress its Constitutional power to issue money and regulate the value thereof, to provide monetary income to the people of the United States at a fixed and equitable purchasing power of the dollar, ample at all times to enable the people to buy wanted goods and services at full capacity of the industries and commercial facilities of the United States. The present system of issuing money through private initiative for profit, resulting in recurrent disastrous inflations and deflations, shall cease."

The bill also made provision for a discount on prices to be compensated to the retailer, and for a national dividend to be issued, beginning at $5 a month (in 1932) to every citizen of the nation. Several groups testified in support of the bill, stressing the bill provided the means of controlling inflation.

Ignorance among the population

The most ardent opponent in the Senate was Carter Glass, a fierce partisan of the Federal Reserve (private control of money) and a former Secretary of the Treasury. Besides, Henry Morgenthau, then Roosevelt’s Secretary of Treasury, who was strongly opposed to any monetary reform, said that Roosevelt’s New Deal should be given a trial first.

What mostly helped the opponents to the bill was the near ignorance of the money question among the population. and even in the Senate.

Some Senators, knowing nothing about the creation of money (credit) by banks, exclaimed: "The Government cannot create money like that! That will cause runaway inflation!" And others, while admitting the necessity for debt-free money, questioned the necessity for a dividend, or the compensated discount. But all these objections actually disappear after a serious study of Social Credit.

Quotes on money

Mayer Amschel Rothschild

"Let me issue and control a nation’s money and I care not who writes its laws." — Mayer Amschel Rothschild (1744-1812), founding father of international finance.

"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance." — US President James Madison.

"The money power denounces, as public enemies, all who question its methods or throw light upon its crimes." — William Jennings Bryan.

"Whoever controls the volume of money in any country is absolute master of all industry and commerce." — US President James A. Garfield.

Josiah Stamp

"Banking was conceived in iniquity and born in sin. Bankers own the earth. Take it away from them, but leave them the power to create money and control credit, and with the flick of a pen, they will create enough money to buy it back again. Take this great power away from the bankers and all the great fortunes like mine will disappear, and they ought to disappear, for this would be a better and happier world to live in. But if you want to continue the slaves of bankers and pay the cost of your own slavery, let them continue to create money and to control credit." — Sir Josiah Stamp, Director, Bank of England, 1940.

"The process by which banks create money is so simple that the mind is repelled." — John K. Galbraith, in "Money: Whence it came, where it went", p. 29.

"The banks do create money. They have been doing it for a long time, but they didn’t quite realise it, and they did not admit it. Very few did. You will find it in all sorts of documents, financial textbooks, etc. But in the intervening years, and we must all be perfectly frank about these things, there has been a development of thought, until today I doubt very much whether you would get many prominent bankers to attempt to deny that banks create credit." — H. W. White, Chairman of the Associated Banks of New Zealand, to the New Zealand Monetary Commission, 1955.

Thomas Edison and Henry Ford

Let us bring an end to this lesson with the quotations of two great American citizens.

Thomas Edison and Henry Ford

Thomas Edison: "Throughout our history some of America’s greatest men have sought to break the Hamiltonian imprint (Alexander Hamilton’s debt-money policy) on our monetary policy in order to substitute a stable money supply measured to the nation’s physical requirements. Lack of public and official understanding, combined with the power of banking interests who have imagined a vested interest in the present chaotic system, have so far thwarted every effort.

"Don’t allow them to confuse you with the cry of `paper money.’ The danger of paper money is precisely the danger of gold — if you get too much it is no good. There is just one rule for money and that is to have enough to carry on all the legitimate trade that is waiting to move. Too little and too much are both bad. But enough to move trade, enough to prevent stagnation, on the one hand, not enough to permit speculation, on the other hand, is the proper ratio.

"If the United States will adopt this policy of increasing its national wealth without contributing to the interest collector — for the whole national debt is made up of interest charges — then you will see an era of progress and prosperity in this country such as could never have come otherwise."

And a call from Henry Ford: "The youth who can resolve the money question will do more for the world than all the professional soldiers of history."


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