Money and banking Essay Example | Topics and Well Written Essays - 500 words - 2

Money and banking - Essay Example Jefferson argues that since no mention of any mandate was present, Congress had no such right. Hamilton dismissed Jefferson’s arguments by citing that Congress has â€Å"necessary and proper powers† to implement the nation’s fiscal and monetary policy. He added that a central bank fits perfectly into this scheme, by making it easier for Congress to do the job. If there were one central bank coordinating all banks, Congress could easily hold one accountable. Eventually, Hamilton’s arguments won, and this would set the practice of establishing central banks for the years to come, beginning with the First Bank of the United States of America. (Johnson 7) This should be viewed actually as the triumph of the power of money over democracy. Money could be represented by paper marked by the government as legal tender. In itself, it is harmless to democracy. But left to the hands of unscrupulous individuals and bankers, money can be used to damage democracy as can be seen in the succeeding events. During the term of James Madison, the bill seeking to renew the First Bank’s Charter was defeated by a narrow margin. Madison liked the outcome, but chaos ensued. The War of 1812 made the US Government to focus its effort in surviving against England. As a result, state-chartered banks began issuing different fiat currencies with little value. Proponents of central banking then blamed Madison for such troubles. Near the end of his term, Madison was forced to sign the charter of the Second Bank of America, as this was the popular clamor of Representatives. (Johnson 9) Thus, although there were hopes that democracy will prevail over the system of credit, central banking won. This episode illustrates clearly the fact that because of money, efforts to implement what is good for the general public can be undermined. Fast forward to 1907,