By: Michael Boldin
Did Thomas Jefferson call the economic crisis?
“Every thing predicted by the enemies of banks, in the beginning, is now coming to pass. we are to be ruined now by the deluge of bank paper as we were formerly by the old Continental paper.”
That’s from a letter to Thomas Cooper in January 1814. And while it sure seems to apply today, Jefferson was actually observing – and predicting – the depression of 1815-21, and the Panic of 1819.
While the 1815 panic was considered the start of several years of just mild depression, a major financial crisis – the Panic of 1819 – followed. It featured widespread foreclosures, bank failures, unemployment, a collapse in real estate prices, and a slump in agriculture and manufacturing.
In other words, Jefferson called it.
At the height of the economic crisis, Jefferson replied to a letter from John Adams, warning that things would never change if people didn’t understand cause and effect:
“The evils of this deluge of paper money are not to be removed until our citizens are generally and radically instructed in their cause & consequences.”
Jefferson and Adams were also discussing Chapter 6 of the 1817 Treatise on Political Economy by Destutt de Tracy, with Adams citing a passage calling the printing of fiat paper money more ruinous and a greater theft than empires of old shaving off a little gold from their coins and passing them off as full-weight.
“a theft of greater magnitude & still more ruinous is the making of paper. It is greater because in this money there is absolutely no real value. It is more ruinous because by its gradual depreciation during all the time of its existence it produces the effect which would be produced by an infinity of successive deteriorations of the coin.”
You might be surprised to hear that Adams agreed, and actually took a stronger position than Tracy, writing to Jefferson:
“That is to say an infinity of successive felonious larcenies. If this is true as I believe it is we Americans are the most thievish people that ever existed, we have been stealing from each other for an hundred & fifty years.” [emphasis added]
If the American people were “the most thievish” ever in 1819 – just imagine what they’d think of us today.
Rather than learn from history – “we the people” have almost totally ignored it, rejecting so many foundational principles, including what qualifies as money.
Jefferson put it this way in 1788:
“paper is poverty … it is only the ghost of money, and not money itself.”
Here, Jefferson echoed Thomas Paine, writing 2 years earlier:
“Money is Money, and Paper is Paper. All the invention of man cannot make them otherwise.”
Richard Henry Lee agreed. In a 1787 letter to James Madison (who also opposed fiat, funny money):
“Knaves assure, and fools believe, that calling paper money, and making it tender, is the way to be rich and happy”
Money is money – and paper is paper.
That cannot be repeated often enough.
As we’re ruined today by yet another “deluge of bank paper” we shouldn’t be surprised about the economic crisis that’s coming clear all around us.
Patrick Henry was so opposed to this kind of monetary system that in the Virginia Ratifying Convention he said “paper money would be the bane of this country. I detest it.”
Like Jefferson, Patrick Henry predicted what happened in 1819 – and what is still happening today.
Until the people, as Jefferson noted, understand the “cause & consequences” – this will never stop happening.
George Washington understood this as well. Here, from a 1787 letter to Rhode Island Superior Court Judge and former Deputy Governor Jabez Bown:
“Paper money has had the effect in your State that it ever will have, to ruin commerce – oppress the honest, and open a door to every species of fraud and injustice.”
Thomas Paine may have summed it up best:
“The evils of paper money have no end.”