11. First Bank of the Unites States

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Length: {4:20 minutes}

Summary of Chapter 11: The First Bank of the United States

In 1790, less than three years after the Constitution was signed, Alexander Hamilton, the first Secretary of the Treasury, proposed a bill to establish a new privately owned central bank, the First Bank of the United States (B.U.S.). This proposal came at a time when Amschel Rothschild declared his famous dictum about controlling a nation’s money.

Hamilton, seen as an instrument of international bankers, wanted to create the B.U.S. Interestingly, his early career included work with Robert Morris, head of the Bank of North America. Hamilton believed that a manageable national debt could be beneficial. After extensive debate, Congress granted the First Bank of the United States a 20-year charter in 1791.

The First Bank of the United States, located in Philadelphia, had a monopoly on issuing U.S. currency. Although 80% of its stock was held by private investors, the U.S. government purchased the remaining 20%, ostensibly to provide the capital for private owners through loans, reflecting a fractional reserve lending scheme.

The bank’s name was chosen to obscure its private control, similar to the Bank of England. Its investors’ identities were hidden, but it was widely believed that the Rothschilds were influential behind the scenes. The bank was promoted as a means to stabilize the banking system and curb inflation. However, within five years, the U.S. government borrowed $8.2 million from the bank, leading to a 72% increase in prices.

Thomas Jefferson, as Secretary of State, lamented this borrowing and wished for a constitutional amendment to prevent such federal borrowing. Many Americans today share this frustration, watching the government accrue debt. The First Bank of the United States was not the first privately owned central bank in America, as it followed the pattern of the Bank of North America, where government funds kickstarted a private banking venture, a setup considered a scam by critics.

The chapter concludes with a segue into the story of how a single man in Europe managed to manipulate the British economy during the Napoleonic era.

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