Today, I am
accompanying my dear friend and colleague, Mr. David J. Pratt in a lecture at
the James Madison Museum
(http://www.thejamesmadisonmuseum.org/events).
Our lecture is entitled: ‘Banking on
the Future: Madison
and the Closure of the First National Bank’. We expanded on some of these themes.
In a letter to his esteemed philosopher and scholarly friend
Mr. John Taylor in 1816, Thomas Jefferson famously stated:
"I sincerely
believe that banking establishments are more dangerous than standing armies,
and that the principle of spending money to be paid by posterity, under the
name of funding, is but swindling futurity on a large scale."
While this sound bite has captured the #OWS crowd with
patriotic zealotry, the unquoted sections of the letter of May 28, 1816 are
equally or more admonishing of our current state. And in this week when Wall Street banks had to
cover their own “irrational exuberance” in the Facebook IPO bubble, we find a
world in which the funding of human enterprises is devoid of consideration as
much today as it was 200 years ago. With
JP Morgan unveiling its reckless synthetic illusions which have both helped the
bank manufacture illusory profits and distribute dividends at the expense of the
publicly-back accountability deferrals and with breathless CNN, Fox, and CNBC
commentators fawning over NASDAQ: FB complete with TD Ameritrade screen shots
instructing an uneducated populace into the abattoir of opaque speculation, all
of Jefferson’s concerns find themselves landing on a modern America and G-8
devoid of any creativity.
Consider:
“The system of banking
we have both equally and ever reprobated. I contemplate it as a blot left in
all our constitutions, which, if not covered, will end in their destruction,
which is already hit by the gamblers in corruption, and is sweeping away in its
progress the fortunes and morals of our citizens. Funding I consider as
limited, rightfully, to a redemption of the debt within the lives of a majority
of the generation contracting it; every generation coming equally, by the laws
of the Creator of the world, to the free possession of the earth He made for
their subsistence, unencumbered by their predecessors, who, like them, were but
tenants for life.”
Jefferson went on to lament
that, “Much I apprehend that the golden moment is past for reforming these
heresies.” What was the proximate cause of his melancholy? Setting aside Jefferson’s personal economic
proclivities which had frequently pitted his profligate consumption at odds
with moneylenders, Jefferson seemed to discern that, given the opportunity to
be swindled, the populace, in the main, would be seduced. Given his profound distrust of Alexander
Hamilton’s ‘big government’ impulses – fearing that they would undermine the
experiment of the Republic – he reflected that, “the evils flowing from the
duperies of the people are less injurious than those from the egoism of their
agents.” Resolute in his opposition to
the First Bank of the United States and facing a diminishing pool of allies in
his opposition to the expediency-laced formation of the Second Bank of the
United States, established in large part to deal with debts from the War of
1812, Jefferson was certain that the adverse consequences of sovereign banks
would lead to the undoing of his life’s aspirations.
From 1791 to 1836 – allowing for the nearly 4 year gap
between the expiration of the First Bank charter and the promulgation of the
Second Bank – furious debate raged over how a relatively new country, filled
with industrious people and unquantified resources, would grow. Two major wars, three financial panics, and
untold scandals later, our banking system and associated laws took their first
tentative step in to setting the economic stage for the Civil War.
So, in this week of irrational exuberance ranging from Jamie
Dimon’s callous façade regarding the reckless synthetic positions constructed
under his leadership at JP Morgan to Mark Zuckerberg’s gravity-defying circus
in which the final act will likely involve “audience participation” (think Water for Elephants), I find myself
intrigued by the news on the opposite side of the Earth.
In Mongolia,
“anti-investor” legislation – if you read Western pundits – was passed seeking
to insure that the nation would be able to participate in the development of
its vast metals and energy resources. Most
media outlets have followed the passive-aggressive narrative suggesting that
instilling fear of failing foreign investment should play a role in national
sovereignty. Tragically, these fear
mongers fail to understand that there are more resource investors in the world
than once controlled the market and, if asked to chose between cooperation with
nationalists or no access to energy and metals – participating access will
prevail. In New Ireland, Papua New
Guinea, facing the electoral consequences of
delayed justice, Prime Minister Peter O’Neill finally released $9 million held
by the Mineral Resource Development Corporation seeking to placate a rather
vocal voice that could swing his political fortunes. What was conspicuously absent from this
transaction was any meaningful participation in Newcrest Mining’s nearly $3
billion gold revenue – close to 20% of which is derived from its Lihir
operation.
During the next few weeks, I will be working with my
colleagues in the Pacific to educate a number of communities in an effort to
limit the “swindling of futurity”. It’s
as relevant in the U.S. as
it is in Papua New Guinea.
Ironically, what’s missing here is what’s
missing there. First, a public sector for
the people and by the people. Second,
a population taking the time to be informed.
And finally, recognition that linking productivity to socioeconomic benefit is
essential for any economy – regardless of political monikers. While many of you visit this blog on a
recurring basis each weekend, I trust that next week, as I’m in the midst of
one of the most significant resource conflict and violence-torn parts of the
globe, you take your InvertedAlchemy moment to reflect on this and other posts
and share this dialogue with others. In
so doing, we may rekindle the taper Jefferson
sought to light and reinvigorate a public accountability much needed in our
time.
Fair winds and
following seas until next time…