National Banks

[My Name Is Kate]

Could someone explain, in simple terms, if possible, what is the relationship of a national bank to the federal government? Does the government own the bank, and if so, who authorizes the government to own the bank? Do foreign interests and wealthy people primarily own a national bank? What is the relationship of a national bank to other banks?

Was paper money pretty much always the currency in use in the United States, or is that something that began when national banks were created? Is paper money, theoretically, at least, backed by gold, silver, etc.?

Is "credit" something like imaginary money that exists only on paper, and is not backed by anything of value, such as gold or silver?

I came across the following article, after following up on some footnotes in "Sic Semper Tyrannis" by William L. Richter.

http://orrinwoodwardblog.com/2012/06/30/...s-courage/

I have only a glimmer of an idea of all the corruption that might ensue from a national banking system. But what would be the alternative to that? Where would all the money come from that is necessary for the country to exist and progress, etc., etc., etc.?

Help! I'm lost...

[Eva Elisabeth]

(10-17-2013 01:19 AM)My Name Is Kate Wrote:  Was paper money pretty much always the currency in use in the United States, or is that something that began when national banks were created?

http://www.ronscurrency.com/rhist.htm
BTW, roughly 47% of the US public debts are owned by foreign investors, first of all China and Japan.
http://www.treasury.gov/resource-center/...ts/mfh.txt

[BettyO]

Great links!

Thanks, Eva -

One of the reasons that the Confederacy failed supposedly was because there was not enough gold to back up their paper currency.

[Eva Elisabeth]

Betty, if you ever have some time to waste, this is a good (and long...) article on the CW finance:
http://www.abrahamlincolnsclassroom.org/...=224#cooke

[LincolnMan]

Didn't President Andrew Jackson try and shut down National Banks?

[BettyO]

(10-17-2013 03:02 PM)Eva Elisabeth Wrote:  Betty, if you ever have some time to waste, this is a good (and long...) article on the CW finance:
http://www.abrahamlincolnsclassroom.org/...=224#cooke

Eva -

Thanks for the link to this fascinating site!

[Eva Elisabeth]

My name is Kate,

since no one else has yet replied to your questions - hope it's ok if I do. Normally I do not dare to comment on such current and partly "national" topics. Also others sure could do much better. (It's a pity Mr. Richter didn't reply!) On the other hand any is maybe still better than no answer at all, hope my humble attempts help a bit (my mother taught economics).

AFAIK, before Richard Nixon stopped the convertibility of the US dollar to gold in the early 1970ies, each dollar was indeed backed by and thus had the value of a specific, fixed amount of gold.

I assume (but don't know!) in the US the situation is similar to Germany/Europe, where the paper money and the coins represent only 10% of the total money, 90% is (virtual) "book money", which is just to a little percentage backed by "real reserves/values" like gold or real estate. (BTW, I think a vast amount of the US paper money circulates outside the US.) Large business or international credits e.g. are usually part of the book money. If you as a private person take a small credit, you (can) get real paper money.

One of, if not THE main value to back money is economy. Any credit on the international level in the end is backed by the reputation, the economy and the economic prospects of a country, which is estimated and rated by credit rating agencies, like Moody's or Fitch.

I recently read that all the world's existing gold would make a cube of 20 by 20 by 20 meters (20m~65,6 feet). That's not as big as one would estimate, is ist? BTW, the US has the largest gold reserves, Germany is #2 (and has a large portion deposited in the US). At the beginning of the year there was a dissonance between Germany and the US. Germany wanted all its gold back that had been deposited in New York, but the US refused this because it would have appeared as if the dollar was considered less trustworthy. And, indeed, the US was ranked one grade lower by some credit rating agencies afterwards (that was not the only reason). But I don't know on what they finally agreed.

Theoretically, a (our) federal bank can create vast amounts of money (there are certain restrictions, but no restriction without exception) e.g. to decrease debts or in case too many investors/customers want to dispose of their money at once, but this on the other hand leads to inflation.
Another general alternative to get rid of debts is bankruptcy, see e.g. the "Lehman Brothers" some years ago. The "Deutsche Bank" was one of the backers, or better they recommended and sold stocks to their customers, many common people who hoped to make a little money with their savings. They lost it all. Countries could also declare bankruptcy or be declared bancrupt, but usually it's tried to be prevented.
Forgive me this now: "bancrupt" comes from Italian "banca rotta" ("rotten table"). In Siena, where the first European banking industry began (was, I think ~ 13th century), the business was first executed on tables on the market square. When a dealer failed and lost his customers' money, to warn the other customers, his table was broken.

The "inner banking system" (the relationship between national and state banks etc.) in the US is definetely different to ours, I'd like to learn about that, too.

[Craig Hipkins]

(10-17-2013 01:19 AM)My Name Is Kate Wrote:  Could someone explain, in simple terms, if possible, what is the relationship of a national bank to the federal government? Does the government own the bank, and if so, who authorizes the government to own the bank? Do foreign interests and wealthy people primarily own a national bank? What is the relationship of a national bank to other banks?

Was paper money pretty much always the currency in use in the United States, or is that something that began when national banks were created? Is paper money, theoretically, at least, backed by gold, silver, etc.?

Is "credit" something like imaginary money that exists only on paper, and is not backed by anything of value, such as gold or silver?

I came across the following article, after following up on some footnotes in "Sic Semper Tyrannis" by William L. Richter.

http://orrinwoodwardblog.com/2012/06/30/...s-courage/

I have only a glimmer of an idea of all the corruption that might ensue from a national banking system. But what would be the alternative to that? Where would all the money come from that is necessary for the country to exist and progress, etc., etc., etc.?

Help! I'm lost...

Kate, Great questions! The National Bank that was the brainchild of Hamilton and his supporters, and the one that Andrew Jackson (There were actually two) spent years attempting to crush is a completely different entity than the so called National Bank today. The Federal Reserve of today which many people erroneously believe to be an extension of our government is actually a privately run institution that consists of 12 banks that are controlled by the main arm out of New York. There have been a few good books written on the origin of the Federal Reserve that have come out in recent years. One wonders what Lincoln would have thought of todays monetary system!

Craig

[Jim Garrett]

On a slightly different note, Abraham Lincoln banked at Riggs. For 150 years, Riggs was THE BANK in Washington. Jefferson Davis closed his account the same week Lincoln opened his. Other notables who banked at Riggs included W.T. Sherman, Theodore Roosevelt and Douglas MacArthur. The President of the Bank was W.W. Corcoran who lived next to John Slidell on Lafayette Square. Corcoran was a man of deep Southern sympathies and sat out the war in Europe, refusing to take sides. When Seward bought Alaska, the Russians wanted gold and the government did not have enough. The government borrowed the gold from Riggs.

I worked at Riggs back in the 80's. They prided themselves on their history. They had a number of Lincoln's checks including two notables. One was written out to "Mr. Johns, a very sick man" and the other to "An old Negro Man with One Leg". Unfortunately, Rigg's was asleep at the wheel when interstate banking rolled into town. Also, the principal owner, Joe L. Albritton used it as his own private piggy bank, laundering money for unscrupulous foreign dictators. Back in the 80's, their catchphrase was "the most important bank, in the most important city, in the world".