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Whether what you are saying is true or not - on face value it appears that when the founding fathers in the US were laying the groundwork for the new government

Whether what you are saying is true or not - on face value it appears that when the founding fathers in the US were laying the groundwork for the new government, it was envisaged that the role the federal government had would be smaller than it is now. Whether that is good or bad is a different argument, but it seems on face value to be a given it wasn't intended by those folks. The example given re the Fed - I don't believe there was any suggestion by the founding fathers of a central bank. Banks used to issue their own money.

kasey_junk 5y ago
Alexander Hamilton, famously wanted and got a central bank exactly for the purpose of issuing money. There’s a musical about it. George Washington suppressed a rebellion that started at least in part because the federal government was interfering with the use of whiskey as a medium of exchange. I’m fairly receptive to the Jeffersonian view that these were not good ideas for the federal government but claiming the founding fathers didn’t view them as federal powers just isn’t true.
- danielmarkbruce 5y ago
  That wasn't a central bank anything like a central bank acts today. It was more a "national bank". It wasn't lender of last resort. It didn't regulate other banks. Banks didn't have an account there. It didn't play a part in settling payments like the fed does now. You can read a little about that bank here: https://en.wikipedia.org/wiki/First_Bank_of_the_United_States https://en.wikipedia.org/wiki/First_Bank_of_the_United_State... By comparison, modern central banks like the Fed are very interwoven into the banking system and financial system and have a lot of power. They settle interbank payments. They set interest rates for short term lending between them. They regulate banks. They supervise banks. They do all kinds of buying and selling of securities. There isn't anything to my knowledge to suggest Hamilton was imagining something like the Fed.
  - kasey_junk 5y ago
    What Hamilton got was of course a watered down version of what he wanted precisely because of the Jeffersonian objections. He had argued even during the revolutionary war that there was a need for a Bank Of England equivalent in the States. The Bank of England also didn’t look exactly like a central bank does today but was an explicit instrument of governmental monetary policy. Hamilton and his supporters believed the federal government would fail without a similar institution so it’s just not correct to say that the founders didn’t envision a central bank. It was a contentious issue then like slavery was. If the central bank uses different technologies and processes now that’s to be expected. But even the original bank had as part of its central mission the management of federal monetary policy. Dealing with revolutionary war scrip and resolving a fiat currency were stated aims. The founders didn’t envision that the Department of State would send an ambassador to the UN either but it’s a natural extension of the duties of that department they did establish. Any appeal to the founders implies allowing for reasonable differences between the world of then and now or it’s a pointless appeal. And the founders certainly did envision a governmental central bank that enacted monetary policy. It was a central argument of the day.
    - danielmarkbruce 5y ago
      It's seems you know a lot more history than I do :) In all seriousness though - is there somewhere you can point to which shows the debate around a central bank that suggests they wanted the central bank to: clear interbank payments, set short term rates between banks (and themselves), act as a lender of last resort, regulate and supervise other banks? I've never seen anything that suggested anyone wanted to do any of those five things. I've only seen the arguments for functions which one would consider a national bank.
      - danielmarkbruce 5y ago
        Here are a couple docs I dug up, I'll read them later: https://founders.archives.gov/documents/Hamilton/01-07-02-0229-0003 https://founders.archives.gov/documents/Hamilton/01-07-02-02... https://www.philadelphiafed.org/-/media/frbp/assets/institutional/education/publications/the-first-bank-of-the-united-states.pdf https://www.philadelphiafed.org/-/media/frbp/assets/institut...
HWR_14 5y ago
> I don't believe there was any suggestion by the founding fathers of a central bank. Banks used to issue their own money. Where did you get that belief?
- danielmarkbruce 5y ago
  There are two parts there - which one? Banks certainly did issue their own money. And there wasn't a central bank - at least not as a central bank is defined today.
  - HWR_14 5y ago
    I clipped the quote incorrectly, but the part about the founders. Considering they established a national bank in the first two years, it seems like they did want a central bank.
    - danielmarkbruce 5y ago
      Gotcha - please see the discussion above. At least to my knowledge, there was never a discussion of a central bank like the Fed. The national bank proposal (and function) was just that - a national bank. It was the bank the government used, and they also acted as a commercial bank in some manner and did a few other things. They didn't do many/any of the things the Fed does.
      - HWR_14 5y ago
        I'm not sure what the fed does that a giant national bank doesn't, at least if you're looking at an old school bank like the Bank of teh US. They lend to other banks! They print money! They buy assets!
        danielmarkbruce 5y ago
        The big obvious ones: regulate and supervise other banks, settle interbank payments, explicitly act as a lender of last resort to stabilize the financial system as required. There are also other practical differences - for example, having a set, specific target for short term rates (the first bank of US didn't have a target rate, even if they did loosely have some ability to sort of influence rates).

kasey_junk 5y ago

Alexander Hamilton, famously wanted and got a central bank exactly for the purpose of issuing money. There’s a musical about it. George Washington suppressed a rebellion that started at least in part because the federal government was interfering with the use of whiskey as a medium of exchange. I’m fairly receptive to the Jeffersonian view that these were not good ideas for the federal government but claiming the founding fathers didn’t view them as federal powers just isn’t true.

danielmarkbruce 5y ago
That wasn't a central bank anything like a central bank acts today. It was more a "national bank". It wasn't lender of last resort. It didn't regulate other banks. Banks didn't have an account there. It didn't play a part in settling payments like the fed does now. You can read a little about that bank here: https://en.wikipedia.org/wiki/First_Bank_of_the_United_States https://en.wikipedia.org/wiki/First_Bank_of_the_United_State... By comparison, modern central banks like the Fed are very interwoven into the banking system and financial system and have a lot of power. They settle interbank payments. They set interest rates for short term lending between them. They regulate banks. They supervise banks. They do all kinds of buying and selling of securities. There isn't anything to my knowledge to suggest Hamilton was imagining something like the Fed.
- kasey_junk 5y ago
  What Hamilton got was of course a watered down version of what he wanted precisely because of the Jeffersonian objections. He had argued even during the revolutionary war that there was a need for a Bank Of England equivalent in the States. The Bank of England also didn’t look exactly like a central bank does today but was an explicit instrument of governmental monetary policy. Hamilton and his supporters believed the federal government would fail without a similar institution so it’s just not correct to say that the founders didn’t envision a central bank. It was a contentious issue then like slavery was. If the central bank uses different technologies and processes now that’s to be expected. But even the original bank had as part of its central mission the management of federal monetary policy. Dealing with revolutionary war scrip and resolving a fiat currency were stated aims. The founders didn’t envision that the Department of State would send an ambassador to the UN either but it’s a natural extension of the duties of that department they did establish. Any appeal to the founders implies allowing for reasonable differences between the world of then and now or it’s a pointless appeal. And the founders certainly did envision a governmental central bank that enacted monetary policy. It was a central argument of the day.
  - danielmarkbruce 5y ago
    It's seems you know a lot more history than I do :) In all seriousness though - is there somewhere you can point to which shows the debate around a central bank that suggests they wanted the central bank to: clear interbank payments, set short term rates between banks (and themselves), act as a lender of last resort, regulate and supervise other banks? I've never seen anything that suggested anyone wanted to do any of those five things. I've only seen the arguments for functions which one would consider a national bank.
    - danielmarkbruce 5y ago
      Here are a couple docs I dug up, I'll read them later: https://founders.archives.gov/documents/Hamilton/01-07-02-0229-0003 https://founders.archives.gov/documents/Hamilton/01-07-02-02... https://www.philadelphiafed.org/-/media/frbp/assets/institutional/education/publications/the-first-bank-of-the-united-states.pdf https://www.philadelphiafed.org/-/media/frbp/assets/institut...

HWR_14 5y ago

> I don't believe there was any suggestion by the founding fathers of a central bank. Banks used to issue their own money. Where did you get that belief?

danielmarkbruce 5y ago
There are two parts there - which one? Banks certainly did issue their own money. And there wasn't a central bank - at least not as a central bank is defined today.
- HWR_14 5y ago
  I clipped the quote incorrectly, but the part about the founders. Considering they established a national bank in the first two years, it seems like they did want a central bank.
  - danielmarkbruce 5y ago
    Gotcha - please see the discussion above. At least to my knowledge, there was never a discussion of a central bank like the Fed. The national bank proposal (and function) was just that - a national bank. It was the bank the government used, and they also acted as a commercial bank in some manner and did a few other things. They didn't do many/any of the things the Fed does.
    - HWR_14 5y ago
      I'm not sure what the fed does that a giant national bank doesn't, at least if you're looking at an old school bank like the Bank of teh US. They lend to other banks! They print money! They buy assets!
      - danielmarkbruce 5y ago
        The big obvious ones: regulate and supervise other banks, settle interbank payments, explicitly act as a lender of last resort to stabilize the financial system as required. There are also other practical differences - for example, having a set, specific target for short term rates (the first bank of US didn't have a target rate, even if they did loosely have some ability to sort of influence rates).