Revive Lincoln's Monetary Policy
An Open Letter to President Obama
by Ellen Brown, www.webofdebt.com
Dear President Obama:
The world was transfixed on that remarkable day in January when,
to poetry, song, and dance, you gazed upon Abraham Lincoln's likeness
at the Lincoln Memorial and searched for wisdom to navigate these
difficult times. Indeed, you have so many things in common with
that venerable President that one might imagine you were his reincarnation
in different dress. You are both thin and wiry, brilliant speakers,
appearing on the national stage at pivotal times. Fertile imaginations
could envision you coming back triumphantly as one of those slaves
you freed, to prove once and for all the proposition that all
men are created equal and can achieve great things if given a
fighting chance. But as Wordsworth said, our birth is but a sleep
and a forgetting; and if that is true, you may have forgotten
a more subtle form of slavery from which Lincoln freed his countrymen,
even if you were there at the time. You may have forgotten it
because it has been omitted from the history books, leaving Americans
ill-equipped to interpret the lessons of our own past. This letter
is therefore meant to remind you.
We are now met on another battlefield of that same economic war
that visited Lincoln and the Founding Fathers before him. President
Obama, the fate of our economy and the nation itself may depend
on how well you understand Lincoln's monetary breakthrough, the
most far-reaching "economic stimulus plan" ever implemented
by a U.S. President. You can solve our economic crisis quickly
and permanently, by implementing the same economic solution that
allowed Lincoln to win the Civil War and thus save the Union from
foreign economic masters.
Lincoln's Monetary Breakthrough
The bankers had Lincoln's government over a barrel, just as Wall
Street has Congress in its vice-like grip today. The North needed
money to fund a war, and the bankers were willing to lend it only
under circumstances that amounted to extortion, involving staggering
interest rates of 24 to 36 percent. Lincoln saw that this would
bankrupt the North and asked a trusted colleague to research the
matter and find a solution. In what may be the best piece of
advice ever given to a sitting President, Colonel Dick Taylor
of Illinois reported back that the Union had the power under the
Constitution to solve its financing problem by printing its money
as a sovereign government. Taylor said:
"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. If you
make them full legal tender . . . they will have the full sanction
of the government and be just as good as any money; as Congress
is given that express right by the Constitution."
The Greenbacks actually were just as good as the bankers' banknotes.
Both were created on a printing press, but the banknotes had
the veneer of legitimacy because they were "backed"
by gold. The catch was that this backing was based on "fractional
reserves," meaning the bankers held only a small fraction
of the gold necessary to support all the loans represented by
their banknotes. The "fractional reserve" ruse is still
used today to create the impression that bankers are lending something
other than mere debt created with accounting entries on their
Lincoln took Col. Taylor's advice and funded the war by printing
paper notes backed by the credit of the government. These legal-tender
U.S. Notes or "Greenbacks" represented receipts for
labor and goods delivered to the United States. They were paid
to soldiers and suppliers and were tradeable for goods and services
of a value equivalent to their service to the community. The
Greenbacks aided the Union not only in winning the war but in
funding a period of unprecedented economic expansion. Lincoln's
government created the greatest industrial giant the world had
yet seen. The steel industry was launched, a continental railroad
system was created, a new era of farm machinery and cheap tools
was promoted, free higher education was established, government
support was provided to all branches of science, the Bureau of
Mines was organized, and labor productivity was increased by 50
to 75 percent. The Greenback was not the only currency used to
fund these achievements; but they could not have been accomplished
without it, and they could not have been accomplished on money
borrowed at the usurious rates the bankers were attempting to
extort from the North.
Lincoln succeeded in restoring the government's power to issue
the national currency, but his revolutionary monetary policy was
opposed by powerful forces. The threat to established interests
was captured in an editorial of unknown authorship, said to have
been published in The London Times in 1865:
"If that mischievous financial policy which had its origin
in the North American Republic during the late war in that country,
should become indurated down to a fixture, then that Government
will furnish its own money without cost. It will pay off its
debts and be without debt. It will become prosperous beyond precedent
in the history of the civilized governments of the world. The
brains and wealth of all countries will go to North America.
That government must be destroyed or it will destroy every monarchy
on the globe."
Lincoln was assassinated in 1865. According to historian W. Cleon
"Right after the Civil War there was considerable talk about
reviving Lincoln's brief experiment with the Constitutional monetary
system. Had not the European money-trust intervened, it would
have no doubt become an established institution."
The institution that became established instead was the Federal
Reserve, a privately-owned central bank given the power in 1913
to print Federal Reserve Notes (or dollar bills) and lend them
to the government. The government was submerged in a debt that
has grown exponentially since, until it is now an unrepayable
$11 trillion. For nearly a century, Lincoln's statue at the Lincoln
Memorial has gazed out pensively across the reflecting pool toward
the Federal Reserve building, as if pondering what the bankers
had wrought since his death and how to remedy it.
Building on a Successful Tradition
Lincoln did not invent government-issued paper money. Rather,
he restored a brilliant innovation of the American colonists.
According to Benjamin Franklin, it was the colonists' home-grown
paper "scrip" that was responsible for the remarkable
abundance in the colonies at a time when England was suffering
from the ravages of the Industrial Revolution. Like with Lincoln's
Greenbacks, this prosperity posed a threat to the control of the
British Crown and the emerging network of private British banks,
prompting the King to ban the colonists' paper money and require
the payment of taxes in gold. According to Franklin and several
other historians of the period, it was these onerous demands by
the Crown, and the corresponding collapse of the colonists' paper
money supply, that actually sparked the Revolutionary War.2
The colonists won the war but ultimately lost the money power
to a private banking cartel, one that issued another form of paper
money called "banknotes." Today the bankers' debt-based
money has come to dominate most of the economies of the world;
but there are a number of historical examples of the successful
funding of economic development in other countries simply with
government-issued credit. In Australia and New Zealand in the
1930s, the Depression conditions suffered elsewhere were avoided
by drawing on a national credit card issued by publicly-owned
central banks. The governments of the island states of Guernsey
and Jersey created thriving economies that carried no federal
debt, just by issuing their own debt-free public currencies.
China has also funded impressive internal development through
a system of state-owned banks.
Here in the United States, the state of North Dakota has a wholly
state-owned bank that creates credit on its books just as private
banks do. This credit is used to serve the needs of the community,
and the interest on loans is returned to the government. Not
coincidentally, North Dakota has a $1.2 billion budget surplus
at a time when 46 of 50 states are insolvent, an impressive achievement
for a state of isolated farmers battling challenging weather.3
The North Dakota prototype could be copied not only in every
U.S. state but at the federal level.
The Perennial Inflation Question
The objection invariably raised to government-issued currency
or credit is that it would create dangerous hyperinflation. However,
in none of these models has that proven to be true. Price inflation
results either when the supply of money goes up but the supply
of goods doesn't, or when speculators devalue currencies by massive
short selling, as in those cases of Latin American hyperinflation
when printing-press money was used to pay off foreign debt. When
new money is used to produce new goods and services, price inflation
does not result because supply and demand rise together. Prices
did increase during the American Civil War, but this was attributed
to the scarcity of goods common in wartime rather than to the
Greenback itself. War produces weapons rather than consumer goods.
Today, with trillions of dollars being committed for bailouts
and stimulus plans, another objection to Lincoln's solution is
likely to be, "The U.S. government is already printing its
own money - and lots of it." This, however, is a misconception.
What the government prints are bonds - its I.O.U.s or debt.
If the government did print dollars, instead of borrowing them
from a privately-owned central bank that prints them, Uncle Sam
would not have an eleven trillion dollar millstone hanging around
his neck. As Thomas Edison astutely observed:
"If our nation can issue a dollar bond, it can issue a dollar
bill. The element that makes the bond good, makes the bill good,
also. The difference between the bond and the bill is that the
bond lets money brokers collect twice the amount of the bond and
an additional 20%, whereas the currency pays nobody but those
who contribute directly in some useful way. _It is absurd to say
that our country can issue $30 million in bonds and not $30 million
in currency. Both are promises to pay, but one promise fattens
the usurers and the other helps the people."
A Wake-up Call
Henry Ford observed at about the same time:
"It is well enough that people of the nation do not understand
our banking and monetary system, for if they did, I believe there
would be a revolution before tomorrow morning."
Today we the people are starting to understand our banking and
monetary system, and we are shocked, dismayed, and furious at
what we are discovering. The wizard behind the curtain turns
out to be a small group of men pulling levers and dials, creating
an illusory money scheme that, behind all the talk and bravado,
is mere smoke and mirrors. These levers are controlled by a privately-owned,
unaccountable central bank called the Federal Reserve, which has
recently dispensed billions if not trillions in funds to its banker
cronies, without revealing where these monies are going even under
Congressional inquiry or in response to Freedom of Information
Act (FOIA) requests. As Chris Powell pointed out recently in
conjunction with an FOIA request brought by Bloomberg News, which
the Fed declined to comply with:
"Any government that can disburse $2 trillion secretly, without
any accountability, is not a democratic government. It is government
of, by, and, for the bankers."4
There was a time when private central bankers were the heavyweights
in control, able to run their ultra-secret agenda with impunity;
but that era is coming to an end. The bankers are scrambling,
trying to patch up their crumbling creations with schemes, bailouts
and sleight of hand. That effort, however, must ultimately prove
futile. As investment adviser Rolfe Winkler said in a recent
"The great Ponzi scheme that is the Western World's economy
has grown so big there's simply no 'fixing' it. Flushing more
debt through the system would be like giving Madoff a few billion
to tide him over. Or like adding another floor to the Tower of
Babel. To what end? The collapse is already here. The question
is: How much do we want it to hurt? Using the public's purse
to finance 'confidence' in a system that is already kaput may
delay the Day of Reckoning, sure, but at the cost of multiplying
our losses. Perhaps fantastically."5
The bankers are on the run, feverishly trying to use the collapse
of the current system to steer us toward an "Amero"-style
North American currency, or a one-world private banking system
and privately-issued global currency that they and only they control.
We the people will not accept those solutions, however, no matter
how bad things get. We demand real solutions that empower us,
not further enslave us.
Abraham Lincoln had such a solution. President Obama, you can
finally bring his monetary solution to fruition. Manifest the
vision of Lincoln, Jefferson, Madison and Franklin, and we the
people will make sure you are placed in the pantheon of our greatest
leaders and are revered for all time. America's greatest days
can still be ahead of us; but for this to happen, we need to expose
and root out the deceptive banking scheme that would enslave us
to a future of debt and increasing homelessness in this great
country our forefathers founded. The time has come for democracy
to rise superior to a private banking cartel and take back the
power to create money once again. Such a transformation would
represent the most epochal and empowering shift that humanity
has ever seen. As you recently said:
"This country has never responded to a crisis by sitting
on the sidelines and hoping for the best. Throughout our history
we have met every great challenge with bold action and big ideas."
Your words are a timely reminder of our long legacy of action
and bold solutions in the face of adversity. Can we do this?
Yes we can.
For more information, see the writings of a variety of money reformers
including David Korten, Richard Cook, Stephen Zarlenga, Michael
Hudson and this author; articles collected at www.webofdebt.com/articles
and www.GlobalResearch.ca; the documentary videos "The Money
Masters" and "Money as Debt;" and proposed legislation
by Congressman Dennis Kucinich to nationalize the Fed, and by
Congressman Ron Paul to audit it (HR 1027).
1. See Ellen Brown, "Borrowing from Peter to Pay Paul: The
Wall Street Ponzi Scheme Called Fractional Reserve Banking,"
www.webofdebt.com/articles (December 29, 2008).
2. Congressman Charles Binderup in a 1941 speech, "How America
Created Its Own Money in 1750: How Benjamin Franklin Made New
England Prosperous." Binderup quotes historian John Twells
on this point.
3. E. Brown, "Turning the Tables on Wall Street: North Dakota
Shows Cash-starved States How They Can Create Their Own Credit,"
www.webofdebt.com/articles (March 11, 2009).
4. Chris Powell, "Fed Refuses to Disclose Recipients of
$2 Trillion," GATA (December 12, 2008).
5. Rolfe Winkler, "More Debt Won't Rescue the Great American
Ponzi," Option Armageddon (March 9, 2009).
Ellen Brown developed her research skills
as an attorney practicing civil litigation in Los Angeles. In
Web of Debt, her latest book, she turns those skills to an analysis
of the Federal Reserve and "the money trust." She shows
how this private cartel has usurped the power to create money
from the people themselves, and how we the people can get it back.
Her earlier books focused on the pharmaceutical cartel that gets
its power from "the money trust." Her eleven books include
Forbidden Medicine, Nature's Pharmacy (co-authored with Dr. Lynne
Walker), and The Key to Ultimate Health (co-authored with Dr.
Richard Hansen). Her websites are www.webofdebt.com and www.ellenbrown.com