Revive Lincoln’s Monetary Policy: an Open Letter to President Obama

By Ellen Brown

April 10, 2009  –

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 books. 1

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.”

In 1865, Lincoln was assassinated. According to historian W. Cleon
Skousen:

“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 at 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
article:

“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 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.

Ellen Brown, J.D., wrote this article in April, 2009, for Path to a
New Economy, a collection of online articles for YES! Magazine, on
economic and financial solutions. Ellen 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 eleven books
include the bestselling 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.

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