Deflation Made Simple II

The Story of Real Money (Entry 123)

As arrogance and corruption were taking hold locally, the House of Orange was busily expanding its reach across the Channel. In order to understand the connection between these two phenomenon it is useful to examine not only what brought William and Mary from the United Provinces to London to become the co-monarchs of the kingdoms of England, Scotland, and Ireland, but also the financial condition of the political economy into which these two monarchs were received — especially those of England, the more dominant of the three united kingdoms.

By 1685 when he died, Charles II had been seated on the English throne for a quarter of a century, and British colonial expansion on the North American continent had greatly expanded.

The English had been latecomers to overseas trade, and like the Spanish were more colonial in their orientation than the Dutch. Trade with the East Indies was now dominated by the Dutch and trade with Central and South America and the Caribbean was dominated by the Portuguese and Spanish. The French and the British found it easier to negotiate with, and eventually dominate the native peoples of North America than to contest the East Indian trade routes of the Portuguese and Dutch and the American colonies of the Portuguese, Dutch, and Spanish.

The English colonial expansion of North America was also motivated by another set of circumstances.

The struggle between Charles I and the British Parliament that led to the former’s beheading and eleven years of dictatorial rule under the questionable republican government of Oliver Cromwell and his son Richard was not to be repeated — well, at least, not in the same manner — between the British Parliament and Charles II. In order to win back his father’s throne Charles II had to agree to certain constraints on his royal power. Among these was a constraint on the king’s ability to tax his subjects; this power would be vested in the authority of the British Parliament. It was a constraint that our own founding fathers would take to heart when they assigned the power of the purse to the House of Representatives while drafting the US Constitution in 1787 more than a century later.

In an effort to get around this severe financial constraint Charles II borrowed money from local English nobility that he paid back with proprietary land grants in North America. In effect, American soil occupied by Native Americans was expropriated by the English Crown to pay for the English king’s consumptive lifestyle in London, England.

At the close of the 2nd Anglo-Dutch War (1664-67) the North American Dutch colony, New Netherland, was ceded to the British and renamed New York after Charles II’s younger brother, James, the Duke of York, whom the king appointed governor of the ceded territory. Additional land along the Hudson River was awarded to other British nobles who helped pay the king’s extraordinary expenses.

Accordingly, the colony of Pennsylvania was awarded to William Penn in an effort to settle a large debt that the king owed the Penn family. Furthermore, a royal charter was issued in 1663 to eight of the king’s most loyal supporters to form the Colony of Carolina situated between the Spanish-held colony of Florida and the English colony of Virginia. In effect, the British land grab of North America was motivated, in part, by a spendthrift king and his English aristocratic friends — not the English people who were far humbler in their relations with Native Americans. Well, at least, initially.

This said, there were other, far more devious financial schemes, by which the English king raised money denied him by Parliament, and these would find their origin in Amsterdam where financial corruption was taking hold.

In liberty, or not at all,
Roddy A. Stegemann, First Hill, Seattle 98104