Hamilton, as a merchant son of the Caribbean, probably understood what the Hanover's central bank had done for Britain in its wars with France for the entire 18th century. He wanted to do the same thing for the United States - to bind the saving and money hoarding citizens' interests to those of the Army and Navy's chronic need for funding. The City could buy the Crown's debt knowing that the Bank would always stand ready to be a counter-party. Ideally the Bank's notes would be convertible into specie but in any case they would be legal tender.

We seem to have come full circle. Just as Britain had nearly borrowed itself into debtor's prison, the U.S. has racked up extraordinary debts. But there is no reason to worry. The Fed can do what the Bank of England and the few surviving country banks had done: funnel all their depositor's money into government debt. The ironic result was to reassure everyone who had money that their savings would be completely safe. If that left businesses with no hope of borrowing from the banks, it also left them free to make whatever private deals they wanted outside of the Crown's regulations. It also meant that no usury laws applied. The notion of crowding out, which still holds sway, is based on the assumption that only banks can create credit. What Britons found was that they could look to shares and participation rights for speculation while keeping the bulk of their fortunes in the bonds that paid so many thousands a year to the eligible young men whom Ms. Austen used for heroes.

Now, if only someone could bring back a mind that could write about families and money and their sense and sensibility.





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