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Franklin shocked them when he replied that the colonies simply did not have a great many poor and unemployed. At the time, the law in England required that everyone conduct all the commerce using bank notes from the then-privately owned Bank of England (Britain was forced to nationalize the bank following Bretton Woods and the decline of the British Pound as the global currency). The bank notes were loaned at interest so that the Bank of England grew richer and richer and the people poorer and poorer, no matter how hard they worked.
Ben Franklin pointed out that the colonies had wisely avoided this problem by simply issuing their own currency which circulated through commerce interest-free, that is to say without a portion of the profits of business and labor automatically going to the bankers via interest on those bank notes.
This act ordered the American colonies to thenceforth conduct all commerce ONLY using bank notes borrowed at interest from the Bank of England. And as a (desired) result, the ordinary people of the colonies were rapidly plunged into the same poverty and mass unemployment as the ordinary people of Britain, by being forced by their government into permanent and irrevocable debt to the private bankers.
"The refusal of King George 3rd to allow the colonies to operate an honest money system, which freed the ordinary man from the clutches of the money manipulators, was probably the prime cause of the revolution." -- Benjamin Franklin, Founding Father
This resulted in a threat from Nathan Mayer Rothschild against the US Government, "Either the application for renewal of the charter is granted, or the United States will find itself involved in a most disastrous war." Congress still refused to renew the charter for the First Bank of the United States, whereupon Nathan Mayer Rothschild railed, "Teach those impudent Americans a lesson! Bring them back to colonial status!" The British Prime Minister at the time, Spencer Perceval was adamantly opposed to war with the United States, primarily because the majority of England's military might was occupied with the ongoing Napoleonic wars. Spencer Perceval was concerned that Britain might not prevail in a new American war, a concern shared by many in the British government. Then, Spencer Perceval was assassinated (the only British Prime Minister to be assassinated in office) and replaced by Robert Banks Jenkinson, the 2nd Earl of Liverpool, who was fully supportive of a war to recapture the colonies. Financed at virtually no interest by the Rothschild controlled Bank of England, Britain then provoked the war of 1812 to recolonize the United States and force them back into the slavery of the Bank of England, or to plunge the United States into so much debt they would be forced to accept a new private central bank. And the plan worked. Even though the War of 1812 was won by the United States, Congress was forced to grant a new charter for yet another private bank issuing the public currency as loans at interest, the Second Bank of the United States. Once again, private bankers were in control of the nation's money supply and cared not who made the laws or how many British and American soldiers had to die for it.
In the new, more powerful Congress, Madison and Jefferson soon found themselves disagreeing with the Federalists on key issues dealing with federal debt and power. For example, the two men favored states’ rights and opposed Federalist leader Alexander Hamilton’s (c.1755-1804) proposal for a national bank. In 1792, Jefferson and Madison founded the Democratic-Republican Party, which has been labeled America’s first opposition political party. Jefferson, Madison and James Monroe (1758-1831) were the only Democratic-Republicans ever to become U.S. presidents, as the party divided into competing factions in the 1820s.
....Presidency and the War of 1812 In the presidential election of 1808, Madison defeated Federalist candidate Charles Cotesworth Pinckney (1745-1825) to become the nation’s fourth chief executive. Madison continued to face problems from overseas, as Britain and France had continued their attacks on American ships following the embargo. In addition to impeding U.S. trade, Britain took U.S. sailors for its own navy and began supporting American Indians in battles against U.S. settlers.
In retaliation, Madison issued a war proclamation against Britain in 1812. However, America was not ready for a war. Congress had not properly funded or prepared an army, and a number of the states did not support what was referred to as “Mr. Madison’s War” and would not allow their militias to join the campaign. Despite these setbacks, American forces attempted to fight off and attack British forces. The U.S. met defeat much of the time both on land and at sea, but its well-built ships proved to be formidable foes.
The British budget in 1814 reached £66 million, including £10 million for the Navy, £40 million for the Army, £10 million for the Allies, and £38 million as interest on the national debt. The national debt soared to £679 million, more than double the GDP. It was willingly supported by hundreds of thousands of investors and tax payers, despite the higher taxes on land and a new income tax.. The whole cost of the war came to £831 million. By contrast the French financial system was inadequate and Napoleon’s forces had to rely in part on requisitions from conquered lands
The most persuasive answer is offered by University of Virginia historian J.C.A. Stagg who is editing the Madison Papers. His book, Mr. Madison’s War, is the most comprehensive study of the politics of the era available. Stagg writes:
with a total population of barely half a million, the various provinces of Canada seemed to be the weakest links in the chain of British imperial power and many Americans assumed that they could be easily seized by the United States with its vastly superior population of nearly seven and one half million. Yet Canada did not seem in itself to be the source of the most important grievances that the United States wish to settle by war… For this reason, most opponents of the war never ceased to point out that the conquest of Canada promised neither to guarantee respect for American maritime rights nor even to reimburse the nation for the expense of the effort.
Stagg argues that for Madison “the policy of a Canadian war followed logically from his previous diplomatic strategies.” American policy under both Jefferson and Madison had been based on the assumption that the British Empire needed raw materials from North America. Legislative efforts to restrict British access to these resources had failed partly because the Canadas and adjacent parts of the northern United States provided the wheat, timber, and other commodities the British required. Once Canada was conquered, Madison believed the British would have to make peace on American terms both at sea and on the western..
The Panic of 1837 was a financial crisis in the United States that touched off a major recession that lasted until the mid-1840s. Profits, prices and wages went down while unemployment went up. Pessimism abounded during the time. The panic had both domestic and foreign origins. Speculative lending practices in western states, a sharp decline in cotton prices, a collapsing land bubble, international specie flows, and restrictive lending policies in Great Britain were all to blame.
The political support for the revival of a national banking system was rooted in the early 19th century transformation of the country from simple Jeffersonian agrarianism towards one interdependent with industrialization and finance. In the aftermath of the War of 1812 the federal government suffered from the disarray of an unregulated currency and a lack of fiscal order; business interests sought security for their government bonds. A national alliance arose to legislate a central bank to address these needs.
The political climate – dubbed the Era of Good Feelings – favored the development of national programs and institutions, including a protective tariff, internal improvements and the revival of a Bank of the United States Southern and western support for the Bank, led by Republican nationalists John C. Calhoun of South Carolina and Henry Clay of Kentucky was decisive in the successful chartering effort. The charter was signed into law by Madison on April 10, 1816.
Opposition to the Bank's revival emanated from two interests. Old Republicans, represented by John Taylor of Caroline and John Randolph of Roanoke characterized the Second Bank of the United States as both constitutionally illegitimate and a direct threat to Jeffersonian agrarianism, state sovereignty and the institution of slavery, expressed by Taylor's statement that "...if Congress could incorporate a bank, it might emancipate a slave".