Secretary of the Treasury Albert Gallatin: “The provisions of the Constitution were universally considered as affording a complete security against the danger of paper money.”

Albert_Gallatin

Albert Gallatin. Source: Wikipedia

 

Albert Gallatin may be among the most neglected among the most important of the founders of America. An emigrant from Switzerland, founder of New York University, a powerful leader of the Jefferson-Madison anti-federalist Democratic-Republican party, rising to become the early equivalent of the House Majority Leader; created what would become the House Ways and Means Committee, fought the federalist programs, and fought Alexander Hamilton’s agenda throughout the Washington administration.

Historian Joseph J. Ellis wrote that Gallatin “was short, balding and hawk-nosed, but his unimpressive appearance and lingering Genevan accent belied intellectual powers second to none among the rising generation of Republican leaders. Gallatin was only forty, and he was the one man in America capable of going toe-to-toe with Hamilton in debate over fiscal policy and comfortably holding his own.”

And then he was appointed secretary of the treasury by President Jefferson, serving through Madison, the longest of any Treasury Secretary,  He is honored with a statue in front of the Treasury Building, hard by the White House, in Washington, DC.

And notwithstanding his opposition to Hamilton’s program, Gallatin, upon assuming office, ended up supporting the financial institutions Hamilton created in all major respects — including the Bank of the United States, which Jefferson and Madison so adamantly opposed. A wonderful financier, Gallatin proceeded to begin to pay down the national debt — almost halving it (while borrowing to finance the purchase of the Louisiana Territory, doubling America’s size) from $80 million in 1801, and to $45 million, in part by mothballing the Navy and forcing the Army to make do with very little. The War of 1812 drove the debt back up again to a new record, $123 million, notwithstanding tax increases to help fund it.

It is of exceptional interest how very specific and lucid were Gallatin’s observations, in an essay prepared for the American Quarterly Review of December 1830, "Considerations on the Currency and Banking System of the United States"

“THE framers of the Constitution of the United States were deeply impressed with the still fresh recollection of the baneful effects of a paper money currency, on the property and on the moral feeling of the community. It was accordingly provided by our National Charter, that no state should coin money, emit bills of credit, make any thing but gold and silver coin a tender in payment of debts, or pass any law impairing the obligation of contracts and the power to coin money and to regulate the value thereof, and of foreign coin, was, by the same instrument, vested exclusively in Congress. As this body has no authority to make any thing whatever a tender in payment of private debts, it necessarily follows, that nothing but gold and silver coin can be made a legal tender for that purpose, and that Congress cannot authorize the payment, in any species of paper currency, of any other debts but those due to the United States, or such debts of the United States as may, by special contract, be made payable in such paper. All the engagements previously contracted at home, by the United States, were expressed in Spanish dollars; all the moneys of account of the several states, were estimated and payable in that coin; there might be some uncertainty as to the precise weight of pure silver which it contained; and the assays made at the time, may not, for want of proper means, have had all the accuracy of which that process is susceptible. But they were made in good faith; and the Act of Congress of the year 1791, which declared that the dollar of the United States should contain 371¼ grains of pure silver, has irrevocably fixed that quantity as the equivalent of a dollar of account, and as the permanent standard of value, according to which all contracts must be performed. The relative legal value of gold and foreign coins to that standard, may from time to time be varied, provided that neither shall be so overrated, as to authorize the payment of a debt with an amount in such coin of a less actual value, than that of the silver to which it may be made to correspond.

The provisions of the Constitution were universally considered as affording a complete security against the danger of paper money. …

Gold and silver are the only substances, which have been, and continue to be, the universal currency of civilized nations. It is not necessary to enumerate the well-known properties which rendered them best fitted for a general medium of exchange. They were used, not only as ornaments and objects of luxury, but also for that particular purpose, from the earliest times. We learn from the most ancient and authentic of records, that Abraham was rich in cattle, in silver, and in gold; that he purchased a field for as much money as it is worth, and in payment weighed four hundred shekels of silver, current (money) with the merchant. And when we see that nations, differing in language, religion, habits, and on almost every subject susceptible of doubt, have, during a period of near four thousand years, agreed in one respect; and that gold and silver have, uninterruptedly to this day, continued to be the universal currency of the commercial and civilized world, it may safely be inferred, that they have also been found superior to any other substance in that permanency of value, which is the most necessary attribute of a circulating medium, in its character of the standard, that regulates the payment of debts, and the performance of contracts. …

There is not, however, in nature, any perfect or altogether permanent standard of value. There is not a single commodity, the relative value of which, as compared to that of all other commodities, is not subject to great and permanent changes as well as to temporary fluctuations. But it will be found, that the nature of the demand for precious metals, the comparative regularity of the supply, and especially their much greater durability and intrinsic value, than those of any other substance otherwise fitted for a circulating medium, restrain the fluctuations to which the relative value is liable, within far narrower limits, than is the case with any other commodity which might have been selected for a currency.

Lewis E. Lehrman, founder and chairman of the Lehrman Institute, as a young man occasionally adopted the nom de plume of “A. Gallatin.” Lehrman famously has repeatedly represented the gold standard as “the least imperfect monetary system tested in the only laboratory we human beings have available to us: the laboratory of human history.” [Viz. Lehrman’s March 17, 2011 testimony at a hearing before the Monetary Policy Subcommittee of the House Financial Services Committee, chaired by Congressman Ron Paul.] Lehrman thus is in perfect solidarity with Gallatin's statement that there is “not, however, in nature, any perfect or altogether permanent standard of value” but that “the nature of the demand for precious metals, the comparative regularity of the supply, and especially their much greater durability and intrinsic value, than those of any other substance otherwise fitted for a circulating medium, restrain the fluctuations to which the relative value is liable, within far narrower limits, than is the case with any other commodity which might have been selected for a currency.

Albert Gallatin: The provisions of the Constitution were universally considered as affording a complete security against the danger of paper money.

Next: The First Bank of the United States

Previous: Thomas Jefferson