Lincoln’s Monetary Breakthrough (Ellen Brown)

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.”

Lincoln was assassinated in 1865.

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