Fractional Banking
The bank was allowed to issue three or four times more paper notes or loans than it had in assets. This is called "fractional banking" because the bank has only a fraction of the assets needed to back up the paper money or credit which it has issued.
Once again Jefferson protested: "The banks themselves were doing business on capitals [assets], three-fourths of which were fictitious...." 186
Jefferson foresaw that the banks would inflate the economy by loaning out fictitious paper money (with no assets behind it). This would "boom" the economy. Then, when the financiers had lured borrowers into a precarious position, they would call for a "bust" and foreclose on the property for which the bank had virtually furnished nothing.
At the first signs of a pending "bust," Jefferson lamented:
"This fictitious capital ... is now to be lost, and to fall on somebody; it [the bank] must take on those who have property to meet it, and probably on the less cautious part, who, not aware of the impending catastrophe, have suffered themselves to contract, or to be in debt, and must now sacrifice their property of a value many times the amount of the debt. We have been truly sowing the wind, and are now reaping the whirlwind." 187
Amazingly, this disastrous pattern of "boom and bust" has been repeated off and on for over 200 years without the cause of it being corrected. A sound monetary reform program is still begging for a hearing.
An Economy of Debt Instead of Wealth
The financiers who gained control of American finance built the economy on debt instead of wealth. Jefferson's protest came out as follows:
"At the time we were funding our national debt, we heard much about "a public debt being a public blessing"; that the stock representing it was a creation of active capital for the aliment of commerce, manufactures and agriculture. This paradox was well adapted to the minds of believers in dreams...." 188
Jefferson, Jackson, and Lincoln all tried to get the monetary program turned around so that Congress would issue its own money and banks would be required to loan on existing assets rather than use fictitious money based on merely a fraction of their assets. In other words, they wanted to get rid of the "boom and bust" cycle. At one point when the idea seemed to be catching on, the London Times came out with a frantic editorial stating:
"If that mischievous financial policy, which had its origin in the North American Republic during the late war in that country (the Civil War), 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 have all the money necessary to carry on its commerce. It will become prosperous beyond precedent in the history of the civilized governments of the world. The brains and the wealth of all countries will go to North America. That government must be destroyed or it will destroy every monarchy on the globe." 189
A Pressing Opportunity
All of this should demonstrate that somewhere up the trail, the leadership of the United States has an opportunity to add one more burst of momentum to the upward thrust of the 5,000-year leap. It will be a monumental monetary reform based on the principles which the Founders understood but were never able to implement. As Jefferson said toward the latter days of his life:
"We are overdone with banking institutions, which have banished the precious metals, and substituted a more fluctuating and unsafe medium.... These have withdrawn capital from useful improvements and employments to nourish idleness.... [These] are evils more easily to be deplored than remedied." 190
On another occasion, Jefferson lamented:
"We are completely saddled and bridled, and ... the bank is so firmly mounted on us that we must go where [it] will guide." 191
Sixteenth Principle: The government should be separated into three
branches -- legislative, executive, and judicial.
America's three-headed eagle
A popular pastime among political writers in ancient times was attempting to decide what form of government was best. Some argued for a monarchy with a single, powerful ruler. Others preferred an aristocracy where the "best families" of the nation were allowed to rule. Yet a third favored a pure democracy where decisions were to be made by the whole people. Unfortunately none of these systems furnished the security and justice which were expected of them.
Then came Polybius.
Polybius was a Greek who lived 204 to 122 B.C. Next to Herodotus and Thucydides, Polybius is recognized as the greatest of all Greek historians. When Greece was conquered by Rome, Polybius was deported to the Roman capital. Previously, Polybius had rendered illustrious public service to the Achaean League, a confederation of city states. However, he quickly recognized the advantages of the Roman republic which had been set up to govern millions. Polybius became a friend and ally of Rome, traveling widely on military and diplomatic missions to Europe, Asia, and Africa. His rich practical and scholarly experience finally culminated in his writing forty books of history!
The Political Insights of Polybius
Polybius Proposes a "Mixed" Constitution
Baron Charles de Montesquieu
The Foundation for What Became America's Three-headed Eagle
A Single Executive
Development of "Separation of Powers" in America
John Adams Pushes Separation-of-Powers Doctrine
John Adams Studies the "Divine Science" of Good Government
Basic Principles of Sound Constitutionalism Unpopular at First
John Adams Writes Separation of Powers into a State Constitution
The Modern Apostle of the Divine Science of Good Government Unappreciated for a Century
A Constitution for 300 Million Freemen
The Political Insights of Polybius
Polybius felt there was an element of genius in each of the three types of government being discussed by philosophers. A monarchy had the executive strength needed to direct the administration of the government, particularly in time of war. An aristocracy, on the other hand, represented the vested interests of wealth and the developed resources of the nation. A democracy, meanwhile, represented the interests of the masses of the population without which neither a monarchy nor an aristocracy could exist.
Unfortunately, none of these systems, when allowed to govern, provided equality, prosperity, justice, or domestic tranquility for the whole society. Polybius felt he understood why this was so:
"Even more keenly than Aristotle, he [Polybius] was aware that each form carried within itself the seed of its own degeneration, if it were allowed to operate without checks and balances provided by opposing principles. Monarchy could easily become tyranny, aristocracy sink into oligarchy [oppressive government by a few rich families], and democracy turn into mob rule of force and violence." 192
Polybius Proposes a "Mixed" Constitution
But since all three systems represented unique and essential elements for the governing of a people, why not combine them into a single system? Polybius saw the synthesizing process of all three ingredients beginning to develop in the Roman system, but shortly after Polybius died, the Romans abandoned their principles of a republic and eventually set up an emperor. Thus came to an end what Polybius had hoped would be the first three department constitution in history. He visualized the strength of a monarchy being assigned the executive duties of government; the interests of wealth and the "established order" would be represented in the Senate; the interests of the general populace would be represented in the popular Assembly. Polybius felt that if these three departments were set up as coordinated equals they could perform their necessary functions, but at the same time counter-balance one another as a restraining mechanism so that no one of them would acquire sufficient power to abuse the people.
This new approach to government was called a "mixed" constitution. It was a great idea, but it virtually died with Polybius. Not until the middle 1700s did the genius of Baron Charles de Montesquieu undertake to resurrect the inspired potenti
alities of a "mixed" constitution and submit it for the consideration of modern man.
Baron Charles de Montesquieu
Montesquieu became one of the best-educated scholars in France. Although his mother died when he was seven, and his father died when he was twenty-four, a wealthy uncle left him a title, a judicial office, and his whole fortune. Montesquieu traveled extensively throughout England and continental Europe. Then he spent approximately twenty years of research before he wrote his philosophical history called The Spirit of Laws. This has been described as "one of the most important books ever written," and certainly ranks as "the greatest book of the French 18th century." 193
The final writing required two solid years of uninterrupted labor and was completed in his huge study hall, sixty by forty feet, at his palatial residence in France. However, the book was so full of praise for the English system that it was never popular in France and was scarcely read. Nevertheless, it became famous elsewhere and was greatly admired by the Founders. It documented the practical possibility of a government based on "separation of powers" or a "mixed" constitution.
In Book XI, Montesquieu actually set forth the ingredients for a model constitution. The Founders admired it sufficiently to use many portions of it as a guide in their own work. However, the Founders' joint effort in constitution writing greatly excelled even that of Montesquieu. Nevertheless, to him must go the well-deserved credit for illuminating the minds of the Founders with the exciting possibilities of a government based on "separated" but "coordinated" powers.
The Foundation for What Became America's Three-headed Eagle
Montesquieu saw the separation of powers developing under the English system somewhat differently than Polybius had seen it in Rome.
Instead of the three departments of government being the executive, the senate, and the people's assembly, Montesquieu saw the powers of government developing along the lines of an executive, a legislature (of both an upper and a lower house), and an independent judiciary. In England the developing process was still in progress, but Montesquieu felt it was moving in the right direction.
The Parliament was gradually exercising increasing independence, which Montesquieu pronounced essential to liberty. However, he recognized that a legislature could be tyrannical if the executive did not retain some of its power to check it. Said he:
"When the legislative and executive powers are united in the same person, or in the same body of magistrates, there can be no liberty; because apprehensions may arise, lest the same monarch or senate [legislature] should enact tyrannical laws, to execute them in a tyrannical manner." 194
Montesquieu saw the legislature enacting the laws and the executive administering them. But he felt it was just as important to have an independent judiciary to interpret and enforce the laws:
"Again, there is no liberty, if the judiciary power be not separated from the legislative and executive. Were it joined with the legislative, the life and liberty of the subject would be exposed to arbitrary control, for the judge would then be the legislator. Were it joined to the executive power, the judge might behave with violence and oppression." 195
A Single Executive
Montesquieu recognized the weakness of the Roman system in setting up two or more consuls to preside over the people. On one occasion there were thirty executives in Greece. Montesquieu said this responsibility should be concentrated in a single person who can make decisions quickly and decisively and cannot escape either credit or blame for the consequences.
It is interesting that in the American Constitutional Convention, there was a heated debate over the number of Presidents. The New Jersey Plan called for several. Governor Randolph of Virginia wanted at least three. James Wilson argued along the lines of Montesquieu that there should be only one.
Development of "Separation of Powers" in America
It may come as a surprise to modern Americans to learn how slowly the doctrine of "separation of powers" was accepted in America. The states were perfectly willing to set up a single executive, a separate legislature (usually with an upper and a lower house), and also an independent judiciary, but they were certainly not agreeable to setting up a three department government on the federal level.
It will be recalled that when the Articles of Confederation were written, neither an executive nor a judiciary was provided for. Provision was made for a Congress of representatives from the various states, but even the Congress had no taxing power or enforcement power. It was simply a "committee of the states."
John Adams Pushes Separation-of-Powers Doctrine
In 1776, when it first became apparent that the American people would have to set up their own government, John Adams practically stood alone in advocating a government built on a separation of powers. Even before the Declaration of Independence he was advocating a new national government with three separate departments but found himself severely criticized for such a revolutionary idea. Many years later John Adams wrote a letter to one of the other Founders, Dr. Benjamin Rush, dated April 12, 1809, in which he described his initial effort to get this principle adopted:
"I call you to witness that I was the first member of Congress who ventured to come out in public, as I did in January 1776, in my 'Thoughts on Government,' ... in favor of a government with three branches, and an independent judiciary. This pamphlet, you know, was very unpopular. No man appeared in public to support it but yourself. You attempted in the public papers to give it some countenance, but without much success. Franklin leaned against it. Dr. Young, Mr. Timothy Matlack and Mr. James Cannon, and I suppose Mr. George Bryan were alarmed and displeased at it. Mr. Thomas Paine was so highly offended with it that he came to visit me at my chamber at Mrs. Yard's to remonstrate and even scold at me for it, which he did in very ungenteel terms. In return, I only laughed heartily at him.... Paine's wrath was excited because my plan of government was essentially different from the silly projects that he had published in his 'Common Sense.' By this means I became suspected and unpopular with the leading demagogues and the whole constitutional party in Pennsylvania." 196
John Adams Studies the "Divine Science" of Good Government
It is interesting that John Adams should have been the first among the Founding Fathers to capture the vision of Montesquieu in setting up a self-repairing national government under the separation-of-powers doctrine. As we pointed out earlier, he looked upon politics as a "divine science," and determined to devote his life to its study. It will be recalled that during the Revolutionary War he wrote to his wife:
"The science of government is my duty to study, more than all other sciences; the arts of legislation and administration and negotiation ought to take [the] place of, indeed to exclude, in a manner, all other arts. I must study politics and war, that my sons may have liberty to study mathematics and philosophy. My sons ought to study mathematics and philosophy, geography, natural history and naval architecture, navigation, commerce, and agriculture, in order to give their children a right to study painting, poetry, music, architecture, statuary, tapestry, and porcelain." 197
Basic Principles of Sound Constitutionalism Unpopular at First
As indicated earlier, he had discovered that the selling of the principles of his "divine science" was not designed for the career of a man who wanted to become a popular politician. Here's the way he described his experiences:
"Upon my return from France in 1779, I found myself elected by my native town of Braintree a member of the Convention for forming a Constitution for the State of Massachusetts. I attended that Convention of near four hundred members. Here I found such a chaos of absurd sentiments concerning government that I was obliged daily, before that assembly, and afterwards in a Grand Committee, to propose plans and advocate doctrines, which were extremely unpopular with the greater number. Lieutenant-Governor Cushing was avowedly for a single assembly, like Pennsylvania. Samuel Adams was of the same mind. Mr. Hancock kept aloof, in order to be governor. In short, I had at first no supp
ort but from the Essex junto, who had adopted my ideas in the letter to Mr. Wythe.... They made me, however, draw up the Constitution, and it was finally adopted, with some amendments very much for the worse." 198
John Adams Writes Separation of Powers into a State Constitution
It is interesting that in spite of all the opposition John Adams encountered, he did succeed, almost singlehandedly, in getting his state to adopt a constitution based on separation of powers. For the first time in the world a constitution read:
"In the government of the Commonwealth of Massachusetts the legislative, executive and judicial powers shall be placed in separate departments, to the end that it might be a government of laws and not of men...." 199
The Modern Apostle of the Divine Science of Good Government
Unappreciated for a Century
The 5000 Year Leap: A Miracle That Changed the World Page 16