America's History of Empowering Wealth Read online

  America’s History of Empowering Wealth

  Understanding the Consequence of Money Controlling Political Power

  By Jarl Jensen

  TABLE OF CONTENTS

  The Constitution and the Problem with Representational Government

  What America Can Learn From the Economic Failure of 1861

  History of Our Financial System — How Banks Ended Up in the Federal Reserve

  The Dark Beginnings of America’s Federal Reserve

  How German Manipulation of Currency Lead to Global Monetary Rules After WWII

  The Bretton Woods Agreement and the New Global Order

  America’s Addiction to Debt

  The Consequences of a Slave Nation

  Why ‘Trade War’ is an Oxymoron

  Nixon’s Devastating Legacy

  Why the Government Keeps Bailing Out the Banks

  The Misplaced Economic Policies in a Representative Democracy

  The Constitution and the Problem with Representational Government

  There is a lot of hypocrisy in American political history. The Civil War had as much to do with business interests as a desire to end slavery, for example. Or take the Federal Reserve. An entity created to stabilize the consumer economy has created a nation built on debt that only serves the interests of the financial sector.

  But perhaps the largest hypocrisy of all is the Constitution. Written in the guise of democracy and emancipation from the tyranny of European monarchs, it only served to underscore deep lines of inequality already well-formed in American society. Like it or not, the constitution was written by wealthy property owners at a time when slavery still existed. The result was a partial representational democracy designed to shed light on property owners only - and leave the rest of the population in darkness.

  The Purpose of the Constitution

  The founding fathers were rich white men with considerable economic and social power. Although they may have tried to move beyond individual biases, the Constitution they drafted set strict limits on voting rights. Only those with property could vote – which at the time meant rich white men ONLY.

  Why was a property such a defining feature?

  A few assumptions lay beneath the decision to limit voting rights to property owners. Including:

  Slaves should not be able to vote. There was no question about slaves remaining below the standard of acceptable American citizenship. Of course, the only way to keep them from joining civil society was to make property ownership a prerequisite for voting.

  Only the wealthiest landowners could vote. There were “landed qualifications” for voters to determine whether or not they were sufficiently wealthy to have a say.

  Property owners have more of a vested interest in politics than the landless. James Madison wrote that property rights are as important as personal rights. He also wrote that these areas of life are the “two greatest subjects on which governments are to act.” The founding fathers assumed the first and foremost task of government was to control the interaction of conflicting economic interests.

  They believed pure democracy was weak. The goal of the Constitution was never to create a genuinely democratic state. The assumption was that genuine democracy was a vulnerable system, one that would inevitably lead to the dissolution of private property. As Madison wrote elsewhere in The Federalist, the landless proletariat fighting for their collective rights would usurp the primacy of individual property rights. Privileged white men with property and power could not stand for such upheaval.

  Based on these assumptions, the founding fathers created a representational democracy designed to defend and support the primacy of individual property rights. But was it done out of selfish interest or the good of the country?

  If you ask Charles Beard, the founding fathers used property rights to protect personal economic interest rather than defend the principle of land ownership for all. In his progressive take on the economic rationale behind the Constitution, Beard argues that a “cohesive” elite were involved in drafting the Constitution to suit their ends and keep the landless laborers out of politics.

  Wealth Should Not Equal Importance

  Frankly, who can argue with Beard’s take on the matter? We can see the impact of the Constitution still today. Rich people control the opinions of elected representatives because they fund vast portions of the election campaign. All this comes at the expense of the majority – which is ironically how the founding fathers wanted it.

  Progressive leaders through the years have done exceptional work to get voting rights for women and African Americans. However, until we ban unlimited political donations, the inequality enshrined in the Constitution will continue to leave average citizens in the dark.

  The Wealthy Control Both Political Parties

  The influence of wealth on elected officials goes beyond voting. The laws that are passed by our elected officials are often written by lobbyists. Lobbyism is a burgeoning industry that is tantamount to legal bribery. Politicians leave office a lot wealthier then when they enter, the system is virtuous for those politicians that support the interests of their wealthy donors. However, always putting money interest first is often unproductive just look at America’s health care costs, it’s military industrial complex and of course the federal reserve.

  Finally, lets recognize that both Democrats and Republicans are funded by lobbyists. This realization should make you realize that the political lines are drawn to keep the population divided on issues the lobbyists do not care about. So, while the average citizen thinks the other party is crazy the lobbyists are writing legislation and getting it passed into law. The media plays the role of catering to the left or the right, never delving deep enough into any issue to expose their own hypocrisy. Because, lets face it, half the country can’t disagree with the other half unless both sides were being hypocrites. So, if you understand why democrats are the same as republicans and vise versa, then you are close to the solution.

  What America Can Learn From the Economic Failure of 1861

  The American Civil War was as much an economic struggle as an ideological one. Lincoln often spoke about why slavery had to end in order for American society to actually reflect its founding principles of democracy and human liberty. However, emancipation was not the only reason to take up arms against the South. By 1861 a number of economic forces had crystallized into a seemingly unsustainable mix of rich Southern plantation owners who refused to pay taxes, and a burgeoning industrial economy in the North looking for a supply of workers and a new consumer market. As Tony Horowtiz writes in his 150 year reflection on the Civil War, historians now agree that “very few northerners went to war seeking or anticipating the destruction of slavery.”

  In 1861 the Government Was Small and Bankrupt

  The United States was a decentralized territory up until the Civil War. State and local authorities handled all their regional responsibilities, and the notion of a united collection of states was not on most people’s minds. In the years leading up to the Civil War, the federal government had no central reserve bank, operated on a measly budget, and had a standing army of 14,000 men. When a law was passed to levy State-wide taxes to generate some government revenue, the Southern refused to comply and seceded instead, a decision that forced Lincoln to take a stand.

  What most people don’t realize is that white supremacy was so entrenched in both the North and South that true racial justice was always a myth. After slavery was abolished, the 4 million or so slaves were forced to live under slavery by another name: a lack of employment, Black Codes that controlled where a black person could do business, Jim Crow laws, and lynching for (sometime
s) arbitrary reasons. Economic hardship and institutionalized racism have held the African-American population back ever since.

  Why Did the South Secede?

  A decentralized federation of states worked perfectly for Southern plantation owners. They could sit back and enjoy the profit derived from slave population, showing no signs of slowing down. The cotton market was booming in 1860 and slaves were being sold to the South in record numbers. Crops could be sold for pure profit to the Northern factories, so the need to find markets for trade was simply not a concern. An aristocratic class grew out of this economic imbalance; a class of whites that became greedy and resentful of Northern abolitionists and nation-building advocates encroaching on the gold mine that was slavery.

  The First Failure of America

  Abraham Lincoln was left with only two options. If he let the South separate, he would be forced to give up on the American dream and gains in potential tax revenue for the government. Given how broke the government was in the 1850s, the economic incentive to fighting was incredibly intense. On the flip side, justifying a civil war was never an easy task because it meant a huge loss of life.

  In the end, Lincoln chose to wage war in the interest of emancipation and government revenue. He knew that the Southerners had far more resources at their disposal than the bankrupt government. If this wealthily class were left to its own devices, slavery would never end, and wealth inequality would persist across the country. It was in many ways the first failure of America because it showed how a powerful and greedy portion of our society could bring the whole economy to ruin.

  And make no mistake about it: this was an economic struggle between the North and South. The Confederate South as a nation would have continued to drain the north of wealth. Northern farms could not compete with slave owning southern farms. The low-cost production of the south would continue to be a commercial success because of their lower prices. In short, slavery was an economic threat to the north and trade with Europe. Northerners, for their part, were concerned about a future under the national rule of slaveholding interests, and what it might mean for white labor. Given all these pressing economic issues, the anguish of black slaves was hardly the most pressing concern, no matter what revisionist Civil Rights historians tell you.

  A Lesson for Today

  Although the crisis was over 150 years ago, there’s a vital lesson to be learned for today; the realization that corporate greed and digital automation is wreaking havoc on our economy just like slavery did.

  Corporations are like the greedy and resentful plantation owners who refused to pay taxes while making an enormous profit from slavery. In today’s terms, slavery has morphed into automation. These corporations see an opportunity to make a profit as more important than ensuring human decency. Why else would they be advocating for automation when they know full well it puts people out of work? They are isolated from the needs of the nation, and they don’t care.

  The government, for their part, is more unstable than it was in 1861. At least back then the government had enough courage to face the Southern aristocrats and fight for human decency. In today’s economic climate, corporations get tax breaks while the national debt continues to rise.

  Conclusion

  It is about time we learned the important lessons from our past and do something to prevent the continued deprivation of our economic well-being and common decency. The battle against automation is here, and we need answers.

  History of Our Financial System — How Banks Ended Up in the Federal Reserve

  During Abraham Lincoln’s reign, America’s national bank went bankrupt.

  Was our economic system better before? And how did the bankers get so invested in the Federal Reserve?

  In 1913, the Federal government created the Federal Reserve to stabilize the American economy. It was America’s first central bank, and before long it brought major restructuring to the lending laws in the country. Only ten years after it was created, the Feds moved the dollar to a fractional gold reserve, making it far easier to lend more freely.

  But was our economic system better before? And how did the bankers get so invested in the Federal Reserve? Here is a brief history of our financial system:

  The Lincoln Presidency and Bankruptcy

  The merchant class was generally opposed to Lincoln because he supported the abolition of slavery.

  The northern industrialists did have their way after all, as the ending of slavery produced a cheap labor class looking for work in the free states — exactly the kind of push factory owners needed to meet increasing demand.

  During Abraham Lincoln’s reign, America’s national bank went bankrupt. It was due to a number of factors that Lincoln, in some cases, exacerbated. In the 1860s the Union economy grew as train lines and roads were being constructed farther into the Midwest and the South. These projects required plenty of support from the banks, which were thus not prepared to deal with the economics of an encroaching Civil War.

  The merchant class was generally opposed to Lincoln because he supported the abolition of slavery, an industry which was producing huge material profits for a large portion of society at that point. The northern industrialists did have their way after all, as the ending of slavery produced a cheap labor class looking for work in the free states exactly the kind of push factory owners needed to meet increasing demand. The industrial revolution flourished and economic growth was consistent for decades.

  The End of the Industrial Revolution

  By 1907, the industrial revolution had brought prosperity to whole segments of the population previously living in poverty. However, the government had outspent itself and found itself bankrupt once again. This time it was due to a lack of gold in their reserves, and since the dollar was tied to gold, the government could no longer lend money out to maintain consistent growth. It was at this point that the commercial banks stepped in. JP Morgan personally financed all the outstanding debt that the government owed. In exchange, the government gave up control of the financial system by 1913.

  World War I and the Fractional Gold Reserve

  In this new monetary environment, the government was powerless to stop the commercial banks from doing as they pleased. The newly formed Federal Reserve was incentivized to increase lending so they moved the dollar to a fractional gold reserve. Previously, the government was only allowed to print currency if they had the full gold amount in their possession. In a fractional gold reserve system, the fed only needed a small percentage of gold in their possession relative to the amount of money they lend. A period of massive lending began, and tons of paper money was printed to help service loans. Introducing a fractional gold reserve was the major contribution made by the Federal Reserve in its early years-consequences of which are being felt, even today.

  Nixon and the Floating Currency Exchange

  By the time Nixon took office, the disparity between lending practices and gold reserves was beyond repair. Given the economic fluctuations of the late 1960s, and the impetus to fund the Vietnam War without restraint, Nixon decided to remove the gold standard entirely and create a floating exchange rate system. It was undoubtedly a decision influenced by the demands of the banks, who had always been unhappy with the gold standard  a standard that limited lending opportunities.

  A Rigged System Without Enough Controls

  The unfortunate downside of the floating exchange system is asset prices such as housing and real estate increase taking up more and more of peoples pay check. The cost of living has increased tremendously since the 1970s, while wages has remained stagnant. This works for the banks — who make their money from lending to businesses and the wealthy — but for most Americans having to work harder despite the advances in technology it seems almost cruel. The gold standard provided a top limit to the amount of money that could be printed to fund loans even if it was extremely fractionalized. Today’s limitless lending creates tremendous benefits for banks and the wealthy. T
he middle class and poor see almost no benefits which can be observed by the wealth disparity emerging in America and all over the world. Therefore, we can say the system is rigged because only a select few benefit from it.

  What else do you need to know about America’s rigged system? Subscribe at Optimizing America.

  The Dark Beginnings of America’s Federal Reserve

  We are all familiar with the Great Depression of 1929. For a week at the end of October, the market lost over $30 billion, which in today’s currency is over $439 billion. In a panic, investors flooded Wall Street to exchange paper currency for gold. Many who went to their bank could no longer retrieve their money because the bank had run out of liquidity. The banks were virtually bankrupt. People lost their money and the banks shut down.

  But why would the banks not return money to their customers? Surely the banks had enough cash in reserve to cover the savings of their customers. As it turns out, they didn’t.

  The Federal Reserve and the Fractional Gold Reserve System

  The cause of the bank failures has more to do with Federal Reserve policy than any other economic factor.