Thomas Paine on Paper Money
do we need a federal reserve?
read what our founding fathers thought!
I remember a German farmer expressing as much in a few words as the whole subject
requires; "money is money, and paper is paper."
All the invention of man cannot make them otherwise. The alchemist may cease his labors,
and the hunter after the philosopher's stone go to rest, if paper can be metamorphosed
into gold and silver, or made to answer the same purpose in all cases.
Gold and silver are the emissions of nature: paper is the emission of art. The value of gold
and silver is ascertained by the quantity which nature has made in the earth. We cannot
make that quantity more or less than it is, and therefore the value being dependent upon
the quantity, depends not on man. Man has no share in making gold or silver; all that his
labors and ingenuity can accomplish is, to collect it from the mine, refine it for use and give
it an impression, or stamp it into coin.
Its being stamped into coin adds considerably to its convenience but nothing to its value. It
has then no more value than it had before. Its value is not in the impression but in itself.
Take away the impression and still the same value remains. Alter it as you will, or expose it
to any misfortune that can happen, still the value is not diminished. It has a capacity to
resist the accidents that destroy other things. It has, therefore, all the requisite qualities
that money can have, and is a fit material to make money of — and nothing which has not all
those properties can be fit for the purpose of money.
Paper, considered as a material whereof to make money, has none of the requisite qualities
in it. It is too plentiful, and too easily come at. It can be had anywhere, and for a trifle.
There are two ways in which I shall consider paper.
The only proper use for paper, in the room of money, is to write promissory notes and
obligations of payment in specie upon. A piece of paper, thus written and signed, is worth
the sum it is given for, if the person who gives it is able to pay it, because in this case, the
law will oblige him. But if he is worth nothing, the paper note is worth nothing. The value,
therefore, of such a note, is not in the note itself, for that is but paper and promise, but in
the man who is obliged to redeem it with gold or silver.
Paper, circulating in this manner, and for this purpose, continually points to the place and
person where, and of whom, the money is to be had, and at last finds its home; and, as it
were, unlocks its master's chest and pays the bearer.
But when an assembly undertakes to issue paper as money, the whole system of safety and
certainty is overturned, and property set afloat. Paper notes given and taken between
individuals as a promise of payment is one thing, but paper issued by an assembly as
money is another thing. It is like putting an apparition in the place of a man; it vanishes with
looking at it, and nothing remains but the air.
"When an assembly undertakes to issue paper as money, the whole system of safety and
certainty is overturned, and property set afloat."Money, when considered as the fruit of
many years' industry, as the reward of labor, sweat and toil, as the widow's dowry and
children's portion, and as the means of procuring the necessaries and alleviating the
afflictions of life, and making old age a scene of rest, has something in it sacred that is not
to be sported with, or trusted to the airy bubble of paper currency.
By what power or authority an assembly undertakes to make paper money, is difficult to say.
It derives none from the Constitution, for that is silent on the subject. It is one of those
things which the people have not delegated, and which, were they at any time assembled
together, they would not delegate. It is, therefore, an assumption of power which an
assembly is not warranted in, and which may, one day or other, be the means of bringing
some of them to punishment.
I shall enumerate some of the evils of paper money and conclude with offering means for
preventing them.
One of the evils of paper money is that it turns the whole country into stock jobbers. The
precariousness of its value and the uncertainty of its fate continually operate, night and
day, to produce this destructive effect. Having no real value in itself it depends for support
upon accident, caprice, and party; and as it is the interest of some to depreciate and of
others to raise its value, there is a continual invention going on that destroys the morals of
the country.
It was horrid to see, and hurtful to recollect, how loose the principles of justice were left,
by means of the paper emissions during the war. The experience then had should be a
warning to any assembly how they venture to open such a dangerous door again.
As to the romantic, if not hypocritical, tale that a virtuous people need no gold and silver,
and that paper will do as well, it requires no other contradiction than the experience we
have seen. Though some well-meaning people may be inclined to view it in this light, it is
certain that the sharper always talks this language.
There are a set of men who go about making purchases upon credit, and buying estates
they have not wherewithal to pay for; and having done this, their next step is to fill the
newspapers with paragraphs of the scarcity of money and the necessity of a paper
emission, then to have a legal tender under the pretense of supporting its credit, and
when out, to depreciate it as fast as they can, get a deal of it for a little price, and cheat
their creditors; and this is the concise history of paper money schemes.
"The love of gold and silver may produce covetousness, but covetousness, when not
connected with dishonesty, is not properly a vice."But why, since the universal customs of
the world has established money as the most convenient medium of traffic and commerce,
should paper be set up in preference to gold and silver? The productions of nature are
surely as innocent as those of art; and in the case of money, are abundantly, if not infinitely,
more so. The love of gold and silver may produce covetousness, but covetousness, when
not connected with dishonesty, is not properly a vice. It is frugality run to an extreme. But
the evils of paper money have no end. Its uncertain and fluctuating value is continually
awakening or creating new schemes of deceit. Every principle of justice is put to the rack,
and the bond of society dissolved. The suppression, therefore, of paper money might very
properly have been put into the act for preventing vice and immorality.
The pretense for paper money has been that there was not a sufficiency of gold and silver.
This, so far from being a reason for paper emissions, is a reason against them.
As gold and silver are not the productions of North America, they are, therefore, articles of
importation; and if we set up a paper manufactory of money, it amounts, as far as it is able,
to prevent the importation of hard money, or to send it out again as fast it comes in; and by
following this practice we shall continually banish the specie, till we have none left, and be
continuously complaining of the grievance instead of remedying the cause.
Considering gold and silver as articles of importation, there will in time, unless we prevent
it by paper emissions, be as much in the country as the occasions of it require, for the
same reasons there are as much of other imported articles. But as every yard of cloth
manufactured in the country occasions a yard the less to be imported, so it is by money,
with this difference, that in the one case we manufacture the thing itself and in the other
we do not. We have cloth for cloth, but we have only paper dollars for silver ones.
As to the assumed authority of any assembly in making paper money, or paper of any kind, a
legal tender, or in other language, a compulsive payment, it is a most presumptuous
attempt at arbitrary power. There can be no such power in a republican government: the
people have no freedom — and property no security — where this practice can be acted:
and the committee who shall bring in a report for this purpose, or the member who moves
for it, and he who seconds it merits impeachment, and sooner or later may expect it.
Of all the various sorts of base coin, paper money is the basest. It has the least intrinsic
value of anything that can be put in the place of gold and silver. A hobnail or a piece of
wampum far exceeds it. And there would be more propriety in making those articles a legal
tender than to make paper so.
It was the issuing base coin, and establishing it as a tender, that was one of the principal
means of finally overthrowing the power of the Stuart family in Ireland. The article is worth
reciting as it bears such a resemblance to the process practiced in paper money.
Brass and copper of the basest kind, old cannon; broken bells, household utensils were
assiduously collected; and from every pound weight of such vile materials, valued at four
pence, pieces were coined and circulated to the amount of five pounds normal value. By the
first proclamation they were made current in all payments to and from the King and the
subjects of the realm, except in duties on the importation of foreign goods, money left in trust,
or due by mortgage, bills or bonds; and James promised that when the money should be
decried, he would receive it in all payments, or make full satisfaction in gold and silver. The
nominal value was afterwards raised by subsequent proclamations, the original restrictions
removed, and this base money was ordered to be received in all kinds of payments As brass
and copper grew scarce, it was made of still viler materials, of tin and pewter, and old debts of
one thousand pounds were discharged by pieces of vile metal amounting to thirty shillings in
intrinsic value. (Leland's History of Ireland, vol. iv. p. 265.)
Had King James thought of paper, he needed not to have been at the trouble or expense
of collecting brass and copper, broken bells, and household utensils.
The laws of a country ought to be the standard of equity, and calculated to impress on the
minds of the people the moral as well as the legal obligations of reciprocal justice. But
tender laws, of any kind, operate to destroy morality, and to dissolve, by the pretense of
law, what ought to be the principle of law to support, reciprocal justice between man and
man — and the punishment of a member who should move for such a law ought to be death.
When the recommendation of Congress, in the year 1780, for repealing the tender laws was
before the Assembly of Pennsylvania, on casting up the votes, for and against bringing in a
bill to repeal those laws, the numbers were equal, and the casting vote rested on the
speaker, Colonel Bayard.
"I give my vote," said he, "for the repeal, from a consciousness of justice; the tender laws
operate to establish iniquity by law." But when the bill was brought in, the House rejected
it, and the tender laws continued to be the means of fraud.
If anything had or could have a value equal to gold and silver, it would require no tender
law; and if it had not that value it ought not to have such a law; and, therefore, all tender
laws are tyrannical and unjust and calculated to support fraud and oppression.
Most of the advocates for tender laws are those who have debts to discharge, and who
take refuge in such a law, to violate their contracts and cheat their creditors. But as no law
can warrant the doing an unlawful act, therefore the proper mode of proceeding,
should any such laws be enacted in future, will be to impeach and execute
the members who moved for and seconded such a bill; and put the debtor and
the creditor in the same situation they were in, with respect to each other, before such a
law was passed.
Men ought to be made to tremble at the idea of such a bare-faced act of injustice. It is in
vain to talk of restoring credit, or complain that money cannot be borrowed at legal
interest; until every idea of tender laws is totally and publicly reprobated and extirpated
from among us.
"As to paper money, in any light it can be viewed, it is at best a bubble. Considered as
property, it is inconsistent to suppose that the breath of an assembly, whose authority
expires with the year, can give to paper the value and duration of gold. They cannot even
engage that the next assembly shall receive it in taxes. And by the precedent (for authority
there is none), that one assembly makes paper money, another may do the same, until
confidence and credit are totally expelled, and all the evils of depreciation acted over
again. The amount, therefore, of paper money is this, that it is the illegitimate offspring of
assemblies, and when their year expires, they leave a vagrant on the hands of the public….
Paper money is like dram-drinking, it relieves for a moment by deceitful sensation, but
gradually diminishes the natural heat, and leaves the body worse than it found it. Were not
this the case, and could money be made of paper at pleasure, every sovereign in Europe
would be as rich as he pleased. But the truth is, that it is a bubble and the attempt vanity.
Nature has provided the proper materials for money: gold and silver, and any attempt of
ours to rival her is ridiculous….
Paper money appears at first sight to be a great saving, or rather that it costs nothing; but
it is the dearest money there is. The ease with which it is emitted by an assembly at first
serves as a trap to catch people in at last. It operates as an anticipation of the next year's
taxes. If the money depreciates, after it is out, it then, as I have already remarked, has the
effect of fluctuating stock, and the people become stock-jobbers to throw the loss on each
other.
If it does not depreciate, it is then to be sunk by taxes at the price of hard money; because
the same quantity of produce, or goods, that would procure a paper dollar to pay taxes
with, would procure a silver one for the same purpose. Therefore, in any case of paper
money, it is dearer to the country than hard money, by all the expense which the paper,
printing, signing, and other attendant charges come to, and at last goes into the fire.
Suppose one hundred thousand dollars in paper money to be emitted every year by the
assembly, and the same sum to be sunk every year by taxes, there will then be no more
than one hundred thousand dollars out at any one time. If the expense of paper and
printing, and of persons to attend the press while the sheets are striking off, signers, etc.
be five percent., it is evident that in the course of twenty years' emissions, the one
hundred thousand dollars will cost the country two hundred thousand dollars. Because the
paper maker's and printer's bills, and the expense of supervisors and signers, and other
attendant charges will in that time amount to as much as the money amounts to; for the
successive emissions are but a recoinage of the same sum.
But gold and silver require to be coined but once, and will last a hundred years (better
than paper will one year) and at the end of that time be still gold and silver. Therefore, the
saving to government, in combining its aid and security with that of the bank in procuring
hard money, will be an advantage to both, and to the whole community.
The case to be provided against, after this, will be that the government do not borrow too
much of the bank, nor the bank lend more notes than it can redeem; and, therefore, should
anything of this kind be undertaken, the best way will be to begin with a moderate sum, and
observe the effect of it. The interest given the bank operates as a bounty on the
importation of hard money, and which may not be more than the money expended in making
paper emissions.
Thomas Paine (1737–1809) was an English pamphleteer, revolutionary, radical, and classical
liberal. Born in the market town of Thetford, England, he migrated to the American colonies at
the age of 37, just in time to take part in the American Revolution. His main contribution was
as the author of the powerful, widely read pamphlet, "Common Sense" (1776), advocating
independence for the American colonies from Great Britain. He is also known for "The
American Crisis" (1776–1783), a series of pamphlets supporting the American Revolution, and
"The Rights of Man" (1791) defending the early French Revolution.
"As to paper money, in any light it can be viewed, it is at best a bubble."
– Tom Paine
– Tom Paine
"the money masters!"
this is what paine warned us against!
this is what paine warned us against!
“Paper money eventually returns to its intrinsic value – ZERO”
Voltaire 1729
Voltaire 1729