Wednesday, December 5, 2012

Abraham Lincoln on the "Fiscal Cliff" c. 1839

Excerpt from Lincoln archives c.1839 with the U.S. facing what looks like a previous "fiscal cliff" (FD: false metaphor!) of a proposed "sub-Treasury" scheme which looks like Lincoln surmised would severely reduce the amount of currency balances, that is THE SAVINGS, in possession of the non-government sector:
I have already said that the Sub-Treasury will reduce the quantity of money in circulation.
This position is strengthened by the recollection, that the revenue is to be collected in specie, so that the mere amount of revenue is not all that is withdrawn, but the amount of paper circulation that the 40 millions would serve as a basis to, is withdrawn; which would be in a sound state at least 100 millions.
When 100 millions, or more, of the circulation we now have, shall be withdrawn, who can contemplate, without terror, the distress, ruin, bankruptcy and beggary, that must follow.
The man who has purchased any article, say a horse, on credit, at 100 dollars, when there are 200 millions circulating in the country, if the quantity be reduced to 100 millions by the arrival of pay-day, will find the horse but sufficient to pay half the debt; and the other half must either be paid out of his other means, and thereby become a clear loss to him; or go unpaid, and thereby become a clear loss to his creditor.
What I have here said of a single case of the purchase of a horse, will hold good in every case of a debt existing at the time a reduction in the quantity of money occurs, by whomsoever, and for whatsoever it may have been contracted.
It may be said, that what the debtor loses, the creditor gains by this operation; but on examination this will be found true only to a very limited extent. It is more generally true that all lose by it.
The creditor, by losing more of his debts, than he gains by the increased value of those he collects; the debtor by either parting with more of his property to pay his debts, than he received in contracting them; or, by entirely breaking up in his business, and thereby being thrown upon the world in idleness.
The general distress thus created, will, to be sure, be temporary, because whatever change may occur in the quantity of money in any community, time will adjust the derangement produced; but while that adjustment is progressing, all suffer more or less, and very many lose every thing that renders life desirable. Why, then, shall we suffer a severe difficulty, even though it be but temporary, unless we receive some equivalent for it?
Some years later he would go on to become the first elected President of the newly formed Republican Party, and while in office, boldly exercise the absolute fiscal authority of the U.S. government.

Today we have members of the GOP making the derangement producing, so-called "Norquist Pledge" to do just the opposite of what the Party's founding President warns against here, that is, a pledge to seek to reduce the amount of balances of our nation's currency in the non-government sector.

What a bunch of manifest morons we have in the GOP leadership today in comparison to the intelligent insight exhibited by Abraham Lincoln here.

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