Cryptocurrency: Jefferson vs Central Banks

[grarpamp]

https://schiffgold.com/commentaries/thomas-jefferson-vs-the-federal-reserve/

https://avalon.law.yale.edu/18th_century/bank-tj.asp
https://founders.archives.gov/documents/Jefferson/98-01-02-3562

The Federal Reserve is the engine that drives one of the biggest, most
powerful governments in the history of the world.

Without the Fed, it would be difficult, if not impossible, for the
government to fund its foreign wars, its massive, unsustainable social
programs, the ever-growing police state, and the tangled web of
corporate welfare programs. It’s almost certain none of this would
exist as we know it today – not even close. The federal government
would truly be limited.

Although the Federal Reserve is relatively new within the scope of
American history, its roots go back to the early days of the republic
and the First Bank of the United States, chartered by Congress on Feb.
25, 1791.

A national bank was the brainchild of Alexander Hamilton. His
rationale wasn’t much different from those who later came up with the
Federal Reserve. Hamilton thought a central bank was necessary to
stabilize and improve the fledgling nation’s credit and to better
manage the financial business of the United States government.

The notion of a national bank but wasn’t without its detractors. One
of the most vocal opponents of the bank was Thomas Jefferson who
argued that it was unconstitutional.

The debate was really about more than chartering a bank. At its core,
it was an argument about the extent of federal power. Jefferson held
to the promise of the ratification debates – that federal authority
would remain carefully circumscribed by the enumerated delegated
powers. Given that the Constitution doesn’t authorize Congress to
charter corporations, much less a national bank, Jefferson argued that
it was an unconstitutional act.

On the other hand, Hamilton pivoted from the position he took during
the ratification debates and justified his project by invoking the
doctrine of “implied powers.” His arguments foreshadowed how federal
policies of every imaginable stripe would be justified moving forward.
Arguably, Hamilton’s arguments for the First Bank of the United States
set the foundation for much of the federal overreach we have today.

Jefferson and Hamilton both wrote documents making their cases for the
establishment of the bank. Jefferson wrote his Opinion on the
Constitutionality of a National Bank first.

He rested his argument on the Tenth Amendment, writing:

    “I consider the foundation of the Constitution as laid on this
ground: That  ‘all powers not delegated to the United States, by the
Constitution, nor prohibited by it to the States, are reserved to the
States or to the people.’ [XIIth amendment.] To take a single step
beyond the boundaries thus specially drawn around the powers of
Congress, is to take possession of a boundless field of power, no
longer susceptible of any definition.”

He then succinctly stated his conclusion.

    “The incorporation of a bank, and the powers assumed by this bill,
have not, in my opinion, been delegated to the United States, by the
Constitution.”

Jefferson proceeded to outline the various clauses of the Constitution
supporters of the bank used to constitutionally justify and explained
why they failed to bear the burden of that power.

The primary justification was the Commerce Clause, but Jefferson
argued that “to erect a bank, and to regulate commerce, are very
different acts.” Erecting a bank actually creates an institution of
commerce, and as Jefferson pointed out, “to make a thing which may be
bought and sold, is not to prescribe regulations for buying and
selling.”

He went on to argue that if erecting a bank is an exercise of the
commerce power, it would be void because it would also impact commerce
within individual states.

    “For the power given to Congress by the Constitution does not
extend to the internal regulation of the commerce of a State, (that is
to say of the commerce between citizen and citizen,) which remain
exclusively with its own legislature; but to its external commerce
only, that is to say, its commerce with another State, or with foreign
nations, or with the Indian tribes.”

Next Jefferson tackled the General Welfare Clause, pointing out that
Congress cannot lay and collect taxes for any purpose it pleases, “but
only to pay the debts or provide for the welfare of the Union.”
Likewise, Congress can’t do anything it pleases to promote the
“general welfare.” It can only further the general welfare by laying
taxes and acting within its enumerated powers.

    “In like manner, they are not to do anything they please to
provide for the general welfare, but only to lay taxes for that
purpose. To consider the latter phrase, not as describing the purpose
of the first, but as giving a distinct and independent power to do any
act they please, which might be for the good of the Union, would
render all the preceding and subsequent enumerations of power
completely useless. It would reduce the whole instrument to a single
phrase, that of instituting a Congress with power to do whatever would
be for the good of the United States; and, as they would be the sole
judges of the good or evil, it would be also a power to do whatever
evil they please. It is an established rule of construction where a
phrase will bear either of two meanings, to give it that which will
allow some meaning to the other parts of the instrument, and not that
which would render all the others useless. Certainly no such universal
power was meant to be given them. It was intended to lacce them up
straitly within the enumerated powers, and those without which, as
means, these powers could not be carried into effect.” [Emphasis
original]

Jefferson drove his point home by pointing out a very inconvenient
fact for Hamilton – the Philadelphia Convention debated and rejected
delegating the power to charter corporations.

On one of the final days of the convention, James Madison proposed the
federal government be delegated the authority “to grant charters of
incorporation where the interest of the U.S. might require & the
legislative provisions of individual State may be incompetent.”

Rufus King of Massachusetts objected specifically on the grounds that
“It will be referred to the establishment of a Bank, which has been a
subject of contention in those Cities (New York and Philadelphia). He
also warned that “In other places it will be referred to mercantile
monopolies.”

George Mason of Virginia proposed limiting the power to charting
corporations for the construction of canals. “He was afraid of
monopolies of every sort, which he did not think were by any means
already implied by the Constitution as supposed by Mr. Wilson.”

Ultimately, the convention rejected the proposal completely. Historian
Dave Benner wrote, “This casts overwhelming doubt on the notion that
the Constitution allowed Congress to form such monopolies. No
enumerated power to grant monopolies and corporate charters was ever
included in the document, and during the ratification campaign, none
of the Constitution’s advocates cited the presence of such a power.”

But Hamilton’s arguments didn’t rely on the existence of any delegated
power. Instead, he appealed to the existence of unwritten “implied
powers.”

In response to Jefferson’s appeal to the Tenth Amendment and that the
federal government can only exercise delegated powers, Hamilton
affirmed it, and then effectively nullified its limiting force. He
wrote, “The main proposition here laid down, in its true signification
is not to be questioned.” But he continued, insisting, “It is not
denied that there are implied well as express powers, and that the
former are as effectually delegated as the latter.”

But who decides the extent of these implied powers? Who determines
their limits? In effect, Hamilton sets up an almost unlimited
reservoir of power the general government can dip into in order to
take whatever actions it deems appropriate. This was a 180-degree
reversal from the position he took during the ratification debates
when he insisted that the new general government would only exercise
limited powers.

Hamilton primarily based his defense of the national bank on the
“necessary and proper clause,” citing it as the source of these
“implied” powers. While Jefferson relied on a very narrow definition
of “necessary and proper,” Hamilton used the phrase to milk implied
powers out of the Constitution.

The debate centered on the meaning of the word necessary. Jefferson
took a very narrow view, arguing that the government can carry out all
of its enumerated powers without a national bank. “A bank therefore is
not necessary, and consequently not authorized by this phrase.”

    “It has been urged that a bank will give great facility or
convenience in the collection of taxes, Suppose this were true: yet
the Constitution allows only the means which are ‘necessary,’ not
those which are merely ‘convenient’ for effecting the enumerated
powers. If such a latitude of construction be allowed to this phrase
as to give any non-enumerated power, it will go to everyone, for there
is not one which ingenuity may not torture into a convenience in some
instance or other, to some one of so long a list of enumerated powers.
It would swallow up all the delegated powers, and reduce the whole to
one power, as before observed. Therefore it was that the Constitution
restrained them to the necessary means, that is to say, to those means
without which the grant of power would be nugatory.”

Hamilton found this view too limiting. He wrote, “It is certain that
neither the grammatical nor popular sense of the term requires that
construction. According to both, necessary often means no more than
needful, requisite, incidental, useful, or conducive to.”

    “It is a common mode of expression to say, that it is necessary
for a government or a person to do this or that thing, when nothing
more is intended or understood, than that the interests of the
government or person require, or will be promoted by, the doing of
this or that thing. … To understand the word as the Secretary of State
does, would be to depart from its obvious and popular sense, and to
give it a restrictive operation, an idea never before entertained. It
would be to give it the same force as if the word absolutely or
indispensably had been prefixed to it.”

Jefferson hit the problem with Hamilton’s view on the head. It opens
up a door to virtually unlimited government power. This runs counter
to James Madison’s assurance in Federalist #45 that “the powers
delegated by the proposed Constitution to the federal government are
few and defined.” [Emphasis added]

Under Hamilton’s “implied power” doctrine and his loose reading of the
necessary and proper clause, there is very little the federal
government can’t do. After all, virtually anything could be defined as
“needful” or “useful” to the government. During the ratification
debates, opponents of the Constitution worried that the necessary and
proper clause would be construed exactly as Hamilton read it. At the
time, Hamilton swore they had nothing to worry about. In Federalist
#33, he wrote, “It may be affirmed with perfect confidence that the
constitutional operation of the intended government would be precisely
the same, if these clauses [necessary and proper and the supremacy
clause] were entirely obliterated, as if they were repeated in every
article. They are only declaratory of a truth which would have
resulted by necessary and unavoidable implication from the very act of
constituting a federal government, and vesting it with certain
specified powers.” [Emphasis added]

Hamilton pivoted from “specified powers” in 1788 to “implied powers”
just three years later.

In his push for a bank, Hamilton also invoked a rule of construction
very favorable to the government. He wrote, “This restrictive
interpretation of the word necessary is also contrary to this sound
maxim of construction, namely, that the powers contained in a
constitution of government, especially those which concern the general
administration of the affairs of a country, its finances, trade,
defense, etc., ought to be construed liberally in advancement of the
public good.”

This was not “a sound maxim of construction” at the time.

St. George Tucker was an influential lawyer and jurist, and he wrote
the first systematic commentary on the Constitution. Published in
1803, View of the Constitution of the United States served as an
important law book, informing the opinions of judges, lawyers and
politicians for the next 50 years. He explained that we should always
construe federal power in the most limited sense possible.

     “The powers delegated to the federal government, are, in all
cases, to receive the most strict construction that the instrument
will bear, where the rights of a state or of the people, either
collectively or individually, may be drawn in question.”

This is the exact opposite of Hamilton’s maxim. As “Light Horse” Harry
Lee put it during the Virginia ratifying convention, “When a question
arises with respect to the legality of any power, exercised or assumed
by Congress, it is plain on the side of the governed. Is it enumerated
in the Constitution? If it be, it is legal and just. It is otherwise
arbitrary and unconstitutional.”

When political power resides in the people, the default position
should always be to assume the most limited government power possible
– not the most liberal reading as Hamilton insisted.

Later in his life, Jefferson made a similar point in a letter to
William Johnson.

    “On every question of construction let us carry ourselves back to
the time when the Constitution was adopted, recollect the spirit
manifested in the debates, and instead of trying what meaning may be
squeezed out of the text, or intended against it, conform to the
probable one in which it was passed.”

There was no probable construction authorizing charting a national bank.

Reading Hamilton’s arguments for the bank, it becomes clear he was
trying to “squeeze” meaning – and power – out of the Constitution.
Under the limited general government promised by supporters of the
Constitution during ratification, including Alexander Hamilton, there
would have been no national bank.

Hamilton’s twisting of the Constitution to wring out new powers set
the stage for much the federal overreach that would follow. It was the
“foundation” for the “living breathing” Constitution we live under
today.