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by Steven Wayne Pattison, ©2011

Benjamin Franklin, a Founding Father, was also a statesman, scientist, musician, inventor, writer, and newspaper editor

(Mar. 2, 2012) — By reading the following, you will learn the reason for our current situation and the solution.

Forty-eight (48) Percent Of Americans Believe Another Great Depression Is Likely In The Next 12 Months – 19 Reasons – Written by “admin” – Posted on June 29th, 2011:

“Yes, I certainly believe that an economic collapse is coming.  But that doesn’t mean that it will necessarily happen within the next year.”

Two of the most interesting items of the ‘19 Reasons’ listed are:

#7 – State and local governments all over the United States are cutting their budgets and are implementing brutal austerity measures.  For example, one small town in Alabama has actually decided that they are simply going to stop paying pension benefits to their retirees.  In other areas, teachers and police officers are being fired in massive numbers. UBS Investment Research is projecting that state and local governments in the U.S. will combine to slash a whopping 450,000 jobs by the end of next year.

#8 – The middle class in the United States is being systematically ripped to shreds.

Other people’s opinions – ‘Middle Class’ is a term describing people who are not too rich nor poor but right in the middle. The income that falls into the middle class range is $50,000. Read More

My opinion is that the ‘Middle Class’ is the working class and without them, this world, including the rich and the poor, would end as we know it. There are so many sick and retired people and children that depend on this class of people. They work so everyone has electricity, heat, drinking water, and food just to mention a few things that are so important to everyone, and if they were not paid for, what would happen is anyone’s guess!

In my opinion, this could all be solved in a very short time if more People understood what we use as money. If the People do nothing, the System as we know it would collapse. Our current system is driven with fiat money and without it, what do you think would happen? The banklords or their agents are the ones who are causing this to happen, and it will happen on their terms in the year they want it to happen. Just look at what history tells us!

Another one of the items of the ‘19 Reasons’ list is:

#19 – The American people are extremely pessimistic about the economy right now.  According to one recent poll, 56 percent of Americans have lost sleep due to the economy and about three-quarters of Americans believe that the nation is on the wrong track.

It is not “anyone’s guess” because what is happening today has happened before! The Agricultural Depression of 1730-1750 in England was going on for 20 years while the Colonies were having the best economy of their life. Life in the Colonies before the 1750s was very prosperous. Benjamin Franklin wrote:

“There was abundance in the Colonies, and peace was reigning on every border. It was difficult, and even impossible, to find a happier and more prosperous nation on all the surface of the globe. Comfort was prevailing in every home. The people, in general, kept the highest moral standards, and education was widely spread.” Internet search

When Benjamin Franklin went over to England to represent the interests of the Colonies, he saw a completely different situation: the working population there was gnawed by hunger and poverty. “The streets are covered with beggars and tramps,” he wrote. He asked his English friends how England, with all its wealth, could have so much poverty among its working classes. Internet search

During Elizabeth’s long reign, the England suffered from high prices and severe economic depression, especially in the countryside, during the 1590s. Internet search

This depression was most likely the reason for many people coming to the Colonies during this time period.

By 1700, the Virginia colonists had made their fortunes through the cultivation of tobacco, setting a pattern that was followed in Maryland and the Carolinas. Internet search

“Currency Issues to Overcome Depressions in Pennsylvania, 1723 and 1729” is located in the ‘Journal of Political Economy © 1938 but is not found at The University of Chicago Press.  However, it states, in part:

The Economic Intelligence Service of League of Nations has pointed out that the years since 1929 the turning point from depressions to economic revival in practically every country was “characterized by an increase in the supply of money”. – First Internet search results – “Your search – The Economic Intelligence… – did not find any results.” But it is posted here – http://www.jstor.org/pss/1824000 but clicking on the URL did not work! If  the  following search Currency Issues to Overcome Depressions in Pennsylvania, 1723 … does not work you can go to this search and the first one on the list as of the time I wrote this line may work. Hopefully it will still work if you want to read it.

But on page 167 from an out-of-print volume from the National Bureau of Economic Research Publication Date: 1987 with the Volume Title of ‘Money in Historical Perspective’, states the following:

“Today, the situation is very different. Extensive historical and statistical investigations have been conducted into the role of money in the United States. These investigations gives no support to the views expressed in the Rudclgfe Report. In the United Kingdom, too, as in the United States, the evidence is that the quantity of money has a significant influence on the level of economic activity.”

The reason the Colonies were doing so well before 1750 is that they were printing their own money, and therefore, there was no shortage of ‘pieces of paper’ used as money to complete the barter from one to another. Bartering with ‘pieces of paper’ with an agreed-on value allows producers to sell their products over state lines and to the world.

Benjamin Franklin – And the Birth of a Paper Money Economy by Farley Grubb, Professor of Economics, University of Delaware, and National Bureau of Economic Research:

Functions of money:

Medium of exchange: Acts as a go-between to make it easier to buy and sell goods or services or pay debts. Allows buyers and sellers to avoid the difficulties associated with barter exchanges of goods and services.

Store of value: Allows people to transfer the purchasing power of their present money income or wealth into the future, ideally without a loss of value. Stores purchasing power between the time money is earned and the time it is spent.

Unit of account: Serves as a way to measure and compare the value of goods and services in relation to one another. When comparing prices, individuals can determine if one good is a better buy than another. It also allows people to keep accurate financial records.

The second paragraph on page 3 states:

There are two distinct epochs of paper money in America. The first began in 1690 and ended with the adoption of the U.S. Constitution in 1789. In this first epoch the legislatures of the various colonies (later states) directly issued their own paper money — called bills of credit — to pay for their own governments’ expenses and as mortgage loans to their citizens, who pledged their lands as collateral. This paper money became useful as a circulating medium of exchange* for facilitating private trade within the colony/state issuing it. By legal statute and precedent, people could always use their paper money to pay the taxes and mortgage payments owed to the government that had issued that specific paper money, which, in turn, gave that money a local “currency.” There could be as many different paper monies as there were separate colonies and states.

And on the same page, top of right column:

Between the late 18th and early 20th centuries, banks backed their issuances of paper money — bank notes — with reserves of gold and silver coins. Under normal conditions, bank notes were convertible at face value on demand into that money. Today, these gold and silver backing and convertibility conditions have been replaced with other assets and regulations.

Benjamin Franklin’s life spans most of the first epoch of paper money, and he is its most insightful analyst and ardent defender. He did not create the first paper money in America, nor was he yet born when it was first used. However, these early experiments with paper money, beginning in 1690 in New England (the colonies) and in the first two decades of the 18th century in the Carolinas, New York, and New Jersey, were limited emergency wartime exercises, temporary in design. Beginning in the 1720s colonial legislatures began to move toward issuing paper money with a view to making it a permanent fixture within their colonies. Pennsylvania was an important leader and the most successful colony in this movement. It is the birth of this permanent peacetime paper money supply that Franklin will affect.

No other American was involved over as long a period of time with so many different facets of colonial paper money as was Benjamin Franklin — certainly no other American with such a preeminent stature in science, statesmanship, and letters. Franklin arrived in Philadelphia the year paper money was first issued by Pennsylvania (1723), and he soon became a keen observer of and commentator on colonial money. He wrote pamphlets, treatises, and letters about paper money. He designed and printed paper money for various colonies. He entertained ideas about and proposed alternative monetary systems. As an assemblyman for the colony of Pennsylvania, he was involved in the debates during the 1740s and 1750s over the management of that colony’s paper money agement of that colony’s paper money. As a lobbyist for various colonies to the British court, he dealt with conflicts over colonial paper money that arose between Britain and her colonies in the 1760s and 1770s. (The conflicts over colonial paper money during this time period was one of the main reasons for our war with England!) Finally, at the end of his life as one of the preeminent Founding Fathers at the 1787 Constitutional Convention, he participated in constitutionally ending the first epoch and so helped usher in the second epoch of paper money in America. Franklin is arguably the preeminent authority on paper money in America in this period.

Franklin arrives in Philadelphia in 1723. He is 17 years old. Philadelphia’s population is about 6,000 and Pennsylvania’s population is about 35,000. The province is also in the doldrums. Franklin recalls seeing many vacant houses for rent, sluggish economic activity, and a decline in permanent inhabitants. He notes that just prior to 1723 foreign trade had stripped the colony of its gold and silver coins: Pennsylvanians had exchanged much of their gold and silver coins for manufactured goods brought in from Europe. Without this money, local trade within the colony is difficult to transact. In this era, the monetary medium of exchange between colonies and countries was gold and silver coins. These coins could also serve as a medium of exchange for internal trade within a colony or country. Pennsylvania did not produce gold or silver and could only procure these coins through trade. Pennsylvanians would typically export goods to Spanish and Portuguese America in exchange for gold and silver coins. These coins could either be kept in the colony to serve as a medium of exchange for internal trade or exported to Europe to pay for manufactured goods. If the coins were exported, the colony might not have enough of this money with which to facilitate internal trade within the colony. Franklin often points this out in his writings, saying that unless some measures are taken to prevent the export of gold and silver coins, foreign trade could lead to temporary shortages of gold and silver, thus inhibiting internal trade within the colony.

The Pennsylvania legislature issued its first paper money in 1723 — a modest amount of £15,000 (the equivalent of just over 48,000 Spanish silver dollars), with another £30,000 issued in 1724. This paper money was not linked to or backed by gold and silver money. It was backed by the land assets of subjects who borrowed paper money from the government and by the future taxes owed to the government that could be paid in this paper money. Franklin notes that after the legislature issued this paper money, internal trade, employment, new construction, and the number of inhabitants in the province all increased. This feet-on-the-ground observation, this scientific empiricism in Franklin’s nature, would have a profound effect on Franklin’s views on money throughout his life. He will repeat this youthful observation many times in his future writings on money.

My opinion is that the lack of a ‘pieces of paper’ with an agreed-on value in the hands of consumers has been the reason for most all Depressions in all countries of the world. Any problems with what all the People use today as money could be made even better than what the Colonists were using because of the Computers.

The rich believed there was a problem with the initial paper money issued by Pennsylvania in 1723 because it was due to expire in 1731. (Typically, paper money was issued with a time limit within which it could be used to pay taxes owed to the issuing government — the money paid in being removed from circulation. (Money paid in was being removed from circulation – appears as a way to keep inflation under control.)) There was considerable resistance from the wealthy and the political elite to a continuation of the paper money experiment for fear that the paper money might depreciate as it had in New England and South Carolina (Paper money losing value happens when there is too much money in circulation.). They wanted a return to gold and silver coins as the only money of the province. Just like today if the wealthy had money that was about to be removed from circulation they could have bought gold, silver or any other hard asset but note for the record back in those times the value of both metals had gone down in value too.

Our only solution is explained within an anonymous pamphlet from this same book (top right on page 5):

This pamphlet, a brilliant tour de force, is well received by the common people. The rich, however, hate it, but they have no writers among them able to answer it. Franklin’s arguments carry the day, and the paper money bill gains a majority in the assembly. In 1729, £30,000 in paper money is issued and another £40,000 in 1731, the latter being the first to be printed for Pennsylvania by Franklin, for which he receives £100 in payment.

Franklin begins his pamphlet by noting that a lack of money to transact trade within the province carries a heavy cost because the alternative to paper money is not gold and silver coins, which through trade have all been shipped off to England, but barter. Barter, in turn, increases the cost of local exchange and so lowers wages, employment, and immigration. Money scarcity also causes high local interest rates, which reduces investment and slows development. Paper money will solve these problems.

But what gives paper money its value? Here Franklin is clear throughout his career: It is not legal tender laws or fixed exchange rates between paper money and gold and silver coins but the quantity of paper money relative to the volume of internal trade within the colony that governs the value of paper money. An excess of paper money relative to the volume of internal trade causes it to lose value (depreciate). The early paper monies of New England and South Carolina had depreciated because the quantities were not properly controlled. So will the quantity of paper money in Pennsylvania be properly controlled relative to the demands of internal trade within the province?

First, Franklin points out that gold and silver are of no permanent value and so paper monies linked to or backed by gold and silver, as with bank paper money in Europe, are of no permanent value. Everyone knew that over the previous 100 years, the labor value of gold and silver had fallen because new discoveries had expanded supplies faster than demand. The spot value of gold and silver could fluctuate just like that of any other commodity and could be acutely affected by unexpected trade disruptions. Franklin observes in 1729 that “we [Pennsylvanians] have already parted with our silver and gold” in trade with England, and the difference between the value of paper money and that of silver is due to “the scarcity of the latter.”

Second, Franklin notes that land is a more certain and steady asset with which to back paper money. For a given colony, its supply will not fluctuate with trade as much as gold and silver do.

My opinion is that any hard assets held within our country could be used to back the People’s paper money. These hard assets could be put up as collateral and today be exchanged by computers to make it even easier to trade for what is needed for everyone to survive and prosper. The People would no longer need to go to a bank and ask for a loan. This means no interest would ever have to be paid which would result in just about no inflation or deflation. The People’s money should not be used outside of their country and only where the hard assets are held. This would also make the People more diligent of taking care of their assets unlike what is going on with people that use credit cards. Sure I believe we should have credit cards but all the Money is the People’s money and the People’s governments money which is all based off of what they own as hard assets. If you bought a section of land and developed it by building a home on it then you would have your amount of money increased which shows the value of your work. It would always be available for anyone with hard assets to put it to work without having to borrow it a bank like we do today. The system we have today allows the bank employee to decide your faint but it does not mean you would not be able to borrow money.  You have the Right to Contract within anyone else that is in our country that has hard assets that are available meaning that they have not spent all their money. This makes you responsible for what you spend. It also makes the Congress responsible too.

In 1832, Andrew Jackson vetoed the re-charter of the Second Bank of the United States and is reportedly the reason for the Banking Panic of 1837 (1837 – 1843), but the real reason was the used of Specie Circular Banknotes were losing their value causing Land sales to plummet because ‘Credit’ was not available to the general public. Does this sound like what is happening now? Businesses began to fail and Unemployment rose. The Panic of 1837  was really caused by  Bank of England and Dutch creditors raising interest rates which was the major reason for the sharp downturn in the American economy resulting in most if not all the Bank Panics of 1819, 1837, and 1857; and the Depression of 1839–1843. Banks throughout the United States suspended specie payments, in most states until the summer of 1838. After a short recovery in 1838 and 1839, banks in the south and west of the country suspended specie payments in October of 1839, and the economy slid into four years of deflation and recession.

All these panics and depressions were about Specie Circular Banknotes (A note issued by a bank representing its promise to pay a specific sum to the bearer on demand and acceptable as money), which cause less money in the hands of consumers.

More proof that gold or silver should not be used to back money is documented in the “Long Depression” that started in Europe, October of 1873-1896, a 23-year-long depression. Twenty is becoming the Theme. Digging a little deeper is more important than just settling for the first reported reason that caused this lengthy depression in the rest of the world.

The “Long Depression” is first reportedly caused by the collapse of the Vienna Stock Exchange and spread throughout the world. Continuing to dig deeper, you will learn that the collapse of the Vienna Stock Exchange was triggered by the fall in demand for silver internationally, which followed Germany’s Otto von Bismarck’s decision to abandon the silver standard in the wake of the Franco-Prussian war. In 1871 Bismarck extracted a large indemnity in gold from France and ceased minting silver thaler coins. Afterward, Germany extracted the huge indemnity from France of £200,000,000 in gold and used it to join Britain on a gold standard. Germany’s abandonment of the silver standard put further pressure on other countries to move to the gold standard. The first symptoms of the crisis were financial failures in the Austro-Hungarian capital, Vienna, which spread to most of Europe and North America by 1873. It was one of a series of economic crises in the 19th and early 20th centuries. In Great Britain, the result was two decades of stagnation called the “Long Depression,” which weakened Britain’s economic leadership in the world. In U.S. literature, this global event is usually known as “Panic of 1873″. The total amount of gold that was extracted was not reported in what I read, but whoever controlled the gold which became the new money of the system controlled all the countries and their governments.

Therefore, in 1873, the crisis was caused by Otto von Bismarck when he changed Germany over to the gold standard in conjunction with the new gold mark coin. The first metal used as a currency was silver for more than 4000 years, when silver ingots another name for silver bullion bars were used in trade.

Yes, there is a lot to do, but it is the only solution. It has been just too long for the banklords to use the sweat and labor of the Middle Class to finance their System of control.

Please read “THE RELATIONSHIP AMONG BANKLORDS, FIAT CURRENCY, AND ECONOMIC HARDSHIP” and documentation of how the banklords took over control of the People’s government here in the united States of America. Also please read Why Does the National Debt Continue to Rise? All of my postings can be found by clicking here.

Respectively submitted with all Rights Reserved,

/S/ Steven Wayne Pattison

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