Excellent article. I am familiar with the subject matter and found nothing I disagreed with or thought was unfair. I, of course, agree with Hamilton and List and Carey. It is blindingly obvious to me.
There was one thing you mention that is new to me: your small section on Hamilton and fractional reserve banking. Am I right that you think Hamilton would have preferred a "pure" fiat currency? But that he advocated one out of expediency and his spirit of compromise?
We are all quite busy, but I would very much like to read more of your thoughts on this subject.
PS. I appreciate the amount of work it takes to write something like this post. Fwiw, I think you succeeded and the effort was worth it.
Thank you. Hamilton in some places did talk about paper money being equally as useful as gold and silver. In 1791 in defending the constitutionality of the Bank he said:
"Money is the very hinge on which commerce turns. And this does not mean merely gold & silver, many other things have served the purpose with different degrees of utility. Paper has been extensively employed.
"It cannot therefore be admitted with the Attorney General, that the regulation of trade between the States, as it concerns the medium of circulation & exchange ought to be considered as confined to coin. It is even supposeable in argument, that the whole, or the greatest part of the coin of the country, might be carried out of it."
But in his actual Report on the Bank in 1790 he said that paper money emissions by Governments
"are of a nature so liable to abuse, and it may even be affirmed so certain of being abused, that the wisdom of the Government will be shewn in never trusting itself with the use of so seducing and dangerous an expedient. In times of tranquillity, it might have no ill consequence, it might even perhaps be managed in a way to be productive of good; but in great and trying emergencies, there is almost a moral certainty of its becoming mischievous. The stamping of paper is an operation so much easier than the laying of taxes, that a government, in the practice of paper emissions, would rarely fail in any such emergency to indulge itself too far, in the employment of that resource, to avoid as much as possible one less auspicious to present popularity. If it should not even be carried so far as to be rendered an absolute bubble, it would at least be likely to be extended to a degree, which would occasion an inflated and artificial state of things incompatible with the regular and prosperous course of the political œconomy."
His ignorance of the royal prerogative of coinage seems to be the one important area in which he was on the level of his contemporaries. I suspect that this ignorance of money matters was the result of the East India Company getting the free coinage act of 1666 passed, which undermined the ancient principle of money being a creature of the State. Very few people made the effort to criticize this development, so the idea of governments directly issuing money was eventually almost forgotten in the English-speaking world. There was also of course a bias against paper money in America resulting from the inflation of the Revolutionary Continental notes (entirely the result of British counterfeiting and the paper emissions of the individual States, though not many people were aware of this at the time). This is something I intend to cover in my next series of articles. For more on the free coinage act of 1666 and the Revolutionary paper money, see Alexander Del Mar's "The History of Money in America: From the Earliest Times to the Establishment of the Constitution."
Thanks for the reply. This is the one area where I presonally disagree strongly with Hamilton. It's such an important subject to me that it almost overwhelms everything else if I am not careful.
Myself, I distinguish strongly and carefully between money and currency. Money is a much larger set than and contains currency. And I am not sure as a historical matter that currency has always been the perogative of the Monarch.
Monarchs of course desire that all currency be under their control and they can use taxation and laws to make it de facto the case.
And I think it should be myself.
It just seems to me that fractional reserve is a poison pill that will eventually kill the nation. But I am no-one and Hamilton was Hamilton. So....
Mitchell-Innes' seminal work on The Credit Theory of Money. It absolutely overturned all my prior thinking about money. It's never been refuted as far as I know. It is mostly just ignored.
Thanks again and you helped me clarify my thinking in Hamilton. I suppose I am 100% on board with the caveat that the currency should be "pure" fiat (non-fractional reserve). Though Hamilton being Hamilton I am un-nerved by the disagreement.
Excellent article. I am familiar with the subject matter and found nothing I disagreed with or thought was unfair. I, of course, agree with Hamilton and List and Carey. It is blindingly obvious to me.
There was one thing you mention that is new to me: your small section on Hamilton and fractional reserve banking. Am I right that you think Hamilton would have preferred a "pure" fiat currency? But that he advocated one out of expediency and his spirit of compromise?
We are all quite busy, but I would very much like to read more of your thoughts on this subject.
PS. I appreciate the amount of work it takes to write something like this post. Fwiw, I think you succeeded and the effort was worth it.
Thank you. Hamilton in some places did talk about paper money being equally as useful as gold and silver. In 1791 in defending the constitutionality of the Bank he said:
"Money is the very hinge on which commerce turns. And this does not mean merely gold & silver, many other things have served the purpose with different degrees of utility. Paper has been extensively employed.
"It cannot therefore be admitted with the Attorney General, that the regulation of trade between the States, as it concerns the medium of circulation & exchange ought to be considered as confined to coin. It is even supposeable in argument, that the whole, or the greatest part of the coin of the country, might be carried out of it."
https://founders.archives.gov/documents/Hamilton/01-08-02-0060-0003
But in his actual Report on the Bank in 1790 he said that paper money emissions by Governments
"are of a nature so liable to abuse, and it may even be affirmed so certain of being abused, that the wisdom of the Government will be shewn in never trusting itself with the use of so seducing and dangerous an expedient. In times of tranquillity, it might have no ill consequence, it might even perhaps be managed in a way to be productive of good; but in great and trying emergencies, there is almost a moral certainty of its becoming mischievous. The stamping of paper is an operation so much easier than the laying of taxes, that a government, in the practice of paper emissions, would rarely fail in any such emergency to indulge itself too far, in the employment of that resource, to avoid as much as possible one less auspicious to present popularity. If it should not even be carried so far as to be rendered an absolute bubble, it would at least be likely to be extended to a degree, which would occasion an inflated and artificial state of things incompatible with the regular and prosperous course of the political œconomy."
https://founders.archives.gov/documents/Hamilton/01-07-02-0229-0003
His ignorance of the royal prerogative of coinage seems to be the one important area in which he was on the level of his contemporaries. I suspect that this ignorance of money matters was the result of the East India Company getting the free coinage act of 1666 passed, which undermined the ancient principle of money being a creature of the State. Very few people made the effort to criticize this development, so the idea of governments directly issuing money was eventually almost forgotten in the English-speaking world. There was also of course a bias against paper money in America resulting from the inflation of the Revolutionary Continental notes (entirely the result of British counterfeiting and the paper emissions of the individual States, though not many people were aware of this at the time). This is something I intend to cover in my next series of articles. For more on the free coinage act of 1666 and the Revolutionary paper money, see Alexander Del Mar's "The History of Money in America: From the Earliest Times to the Establishment of the Constitution."
Thanks for the reply. This is the one area where I presonally disagree strongly with Hamilton. It's such an important subject to me that it almost overwhelms everything else if I am not careful.
Myself, I distinguish strongly and carefully between money and currency. Money is a much larger set than and contains currency. And I am not sure as a historical matter that currency has always been the perogative of the Monarch.
Monarchs of course desire that all currency be under their control and they can use taxation and laws to make it de facto the case.
And I think it should be myself.
It just seems to me that fractional reserve is a poison pill that will eventually kill the nation. But I am no-one and Hamilton was Hamilton. So....
You provided quite a few reference works for me to read on fiat. So maybe I can provide an interesting one for you: https://www.newmoneyhub.com/www/money/mitchell-innes/index.html
Mitchell-Innes' seminal work on The Credit Theory of Money. It absolutely overturned all my prior thinking about money. It's never been refuted as far as I know. It is mostly just ignored.
Thanks again and you helped me clarify my thinking in Hamilton. I suppose I am 100% on board with the caveat that the currency should be "pure" fiat (non-fractional reserve). Though Hamilton being Hamilton I am un-nerved by the disagreement.
What is your take on Lyndon LaRouche? I was told my whole life he was a “crazier commie” but what you are say it seems similar to LaRouche’s ideas.