The Story of Real Money (Entry 196)
After having stated clearly what made for a solid lending bank, John Law explained how a bank that lent counterfeit into existence (promeritum ex-nihilo) could overcome the chronic shortage of money in a local economy, but place at risk the liquidity of its depositors to the benefit of a nation.
To this end he used his own misconception of the original constitution of the Amsterdamsche Wisselbank — a bank that by the time of Law’s treatise was known by everyone in Europe who had occasion to deal in cross-currency trade. Rather, than focusing on the seminal warehouse, currency, and accounting (giro) functions that had made the Wisselbank world renown, Law depicted the bank in much the same way that his English contemporaries in London had when they formed the Bank of England.
By the constitution of this bank, the whole sum for which credit is given, ought to remain there, to be ready at demand; yet a sum is lent by the managers for a stock to the lumbar [banker, money lender], and ’tis thought they lend great sums on other occasions. So far as they lend they add to the money, which brings a profit to the country, by employing more people, and extending trade; they add to the money to be lent, whereby it is easier borrowed, and at less use [lower rate of interest]; and the bank has a benefit: but the bank is less sure, and tho’ none suffer by it, or are apprehensive of danger, its credit being good; yet if the whole demands were made, or demand greater than the remaining money, they could not all be satisfied, till the bank had called in what sums were lent.” Pages 66-67
No clearer statement in the English language of a 17th century Scotsman could describe the benign attitude with which the criminal forefathers of modern, Western, fractional reserve banking viewed their trade. Indeed, this statement is a clear exposé of the mentality of the man that Louis XV of France (actually the King’s Regent) would soon hire to “fix” the financial disaster that he was about to inherit from his soon-to-be-deceased father created during this latter’s successful bid to unite the kingdoms of France and Spain against the Austrian Hapsburgs.
Indeed, by the time of John Law’s treatise the Wisselbank was nearly a century old, and, as we witnessed earlier, the bank had already begun showing signs of weakness a half-century into its development after its founding in 1609.
Now, I will not bother you with John Law’s objections to those who resisted the temptation of promeritum-ex-nihilo. For, these latter failed to offer a substantive, alternative solution — one of which I have already, several times, made mention — to the chronic money shortage with which all of Europe’s warring nations and heads of state were confronted.
Perhaps the contemporary American conservative movement can learn from this failure. For, insisting on the past — simply because the past has held on for so long — is not enough to overcome the rapidly advanced, seductive genius of the likes of John Law in Edinburg, Scotland and William Paterson in London, England, and whatever help these two and others like them received when the gates of London were opened to Manasseh ben Israel by Lord Cromwell in 1653.
In several brief decades several millennia and centuries of sound money practices were quickly set aside by the genius of financial thieves who sold their monetary chicanery to Great Britains’ warring political elite and the French Crown. And, for the past three centuries and longer — with but brief interludes of sanity and prosperity in the new American Republic that was taking hold on the other side of the Atlantic — all of humanity has dearly suffered.
But, let us not yet jump ocean, for the story of John Law has not yet been told. In fact, it has just begun. Will you be there on Monday as well?
In liberty, or not at all,
Roddy A. Stegemann
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