Guest Post: The 1785 Struggle Over Concentrated Banking Power

By William Hogeland, the author of the narrative histories Declaration and The Whiskey Rebellion and a collection of essays, Inventing American History who blogs at Cross posted from New Deal 2.0

How a farmer, a weaver, and a backwoods prophet took on the money interest in founding-era politics — and won.

One of the better-known episodes in American founding finance occurred in 1791, when Alexander Hamilton, the first Treasury Secretary, proposed forming the United States’ first central bank. James Madison of Virginia, serving in the House of Representatives, objected. Prefiguring the Republican lawmakers who recently pledged not to introduce legislation without first citing the constitutional provision enabling it, Madison asserted that because the Constitution doesn’t grant Congress a specific power to form banks, a national bank would be unconstitutional.

Hamilton famously responded by arguing that if a power to do something is constitutional, then powers necessary to doing it must be constitutional too, even when not enumerated. If Congress determines that exercising its power to do anything “necessary and proper” in the discharge of its duties calls for forming a bank, it can form a bank. Any unconstitutionality, for Hamilton, would require a specific prohibition against banks (”Congress shall make no law…,” etc.).

So that’s typically how history students and readers get introduced to a key founding moment in American public finance: ideologically, intellectually and legally, in the context of a constitutional dispute between the lions of ratification Hamilton and Madison, two thirds of the “Publius” who authored “The Federalist,” now coming at odds in the fledgling republic. Anyone hoping to find anything related to how money and credit might flow to ordinary Americans will be disappointed. Hamilton was arguing for the nationalist finance agenda he’d been pursuing since becoming a young protégé of the financier Robert Morris in the early 1780s. Democratic ideas about popular finance were just what Morris and Hamilton had been trying to quell. With a national government in place at last, central banking would be critical.

And in opposing central banking, Madison was arguing on behalf of security in property, limits on power, representative consent, and a land-based economy. He condemned Hamilton’s finance plan as crass, urban, and Yankee: un-republican, that is, to Madison. No democrat, Madison would never have endorsed paper currencies, legal relief for the debtor class, and demands by the less propertied for better access to the franchise — the program advocated by American populist regulators</a> in their struggle against elite finance. Madison’s famous “Federalist No. 10″ expresses a genteel revulsion for paper finance and social equality at least as deep as Robert Morris’s.

It’s therefore been easy for many well-regarded historians — riveted by great men, perpetually rehearsing the Hamilton-Madison binary — to dismiss founding-era democratic finance theory and practice. Robert Whitehill? Herman Husband? William Findley? Names rarely conjured. The irony is that to Alexander Hamilton and Robert Morris, those names were anything but obscure. Little-remembered today, they made Morris seethe with exasperation precisely over issues of central banking and public debt. Our founding egalitarians’ successes and failures complicate received historical binaries and offer intriguing models for today’s struggles over public and private finance.

Robert Whitehill was a farmer, Herman Husband a career activist, William Findley a weaver. All lived in western parts of Pennsylvania, where antipathy prevailed both for big planters tying up land and eastern slicksters tying up money and credit. Whitehill led an early 1770s movement for western independence from Philadelphia, as important to his constituency as American independence from England. Husband had led the North Carolina Regulation in the 1760s, barely escaping hanging; as a fugitive in the Pennsylvania wilderness, he experienced Biblical visions of a democratically ruled America, the New Jerusalem. Findley was a natural pol, anything but visionary: he thrived under Jefferson but exemplifies the rough-and-tumble politics of the Jackson era.

What the three shared, along with passion for democratic finance, was sudden electability under the new Pennsylvania Constitution, which in 1776 shocked famous founders from John Adams to Hamilton by smashing the old Whig connection between representative rights and property ownership. (Whitehill helped write it.) With the unpropertied voting in Pennsylvania, Husband entered the Pennsylvania assembly in the mighty year of 1776, Whitehill and Findley in the early 1780s. For the first time, democratic finance was no longer a crowd protest but a legislative effort.

Husband really was a prophet. He proposed such things anathema to the creditor class as going off the gold standard and managing a slow, deliberate rate of paper depreciation; imposing taxes on wealth and income; making those taxes progressive; and instituting programs for supporting the elderly after they could no longer work. Prefiguring Bretton Woods, the New Deal, and Great Society by nearly two centuries, Husband became known as “the madman of the Alleghenies.”

Whitehill and Findley attacked the bank that Robert Morris had founded in Philadelphia. Its charter belonged to the people of Pennsylvania, they asserted, not Morris, and the bank served no public function, existing only to enrich its founders. They proposed revoking the charter, establishing a land bank for small-scale lending, and issuing legal-tender paper to enable small transactions and debt relief. They wanted the electorate, via representatives in the assembly, to regulate public and private finance on behalf of ordinary working people.

Robert Morris himself was serving in the assembly, so floor debate was intense. His merchant constituents were panicking. Investors everywhere in America relied on the bank for gigantic, poorly secured loans to fund their speculations in the land bubble, the bond rollercoaster, and their own fabulous lifestyles. James Wilson, one of the bank’s directors, had personally borrowed more than $250,000 from the bank for the purpose of wild speculation. Wilson too served in the Pennsylvania assembly, and in hopes of saving the charter, he and Morris found themselves forced to duke it out with the low-rent likes of Whitehill and Findley.

In a stunning benchmark legislative victory for popular finance, the Pennsylvania assembly did revoke the bank’s charter. When the charter came up in the next session, the assembly refused to reinstate it. The people had won. Rich men far and wide gasped in fear of what a democratic American legislature might achieve. Morris announced that a mob was confiscating his property. But for once there was nothing he could do. In a democratic process of republican government, struggling against an enormously powerful money interest in politics, economic fairness had prevailed. That was 1785.

Skeptics of our early democratic finance point to Pennsylvania’s bumpy ride under its 1776 constitution, suggesting that the Whitehills, Husbands, and Findleys turned out to be naive in comparison to men like Morris, Wilson, and Hamilton — financial sophisticates who could quote the philosopher David Hume and the economist Jacques Necker. Morris was “financier of the Revolution,” after all. Wilson was the brilliant lawyer who helped author the U.S. Constitution.

So in judging the relative effectiveness of popular versus elite finance, it’s worth considering some outcomes. The sophisticates Morris and Wilson, like many of our best-certified wizards today, persisted in speculating well past the point where rationality would suggest stopping, often in manifestly dubious ventures. The unabashed scale and mounting danger of their adventuring will sound familiar. In a time of widespread economic depression, Morris at one point owned most of western New York and many millions of acres in Pennsylvania and the South. Wilson borrowed at rates of up to 30% to invest, among other things, in what turned out to be the Yazoo land fraud in Georgia.

And inevitably, just as today, it all came crashing down. Wilson was serving on the U.S. Supreme Court when his increasingly desperate throwing of good money after bad finally landed the great legal scholar in debtors prison. Our mighty founding financier Robert Morris? He ended up in debtors prison too. In 1800, the first Bankruptcy Act was passed — in large part to get Robert Morris out of jail.

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  1. ScottS

    Thanks, William. Fascinating stuff.

    My law 101 textbook discussed how frequently companies had their charters revoked (usually banks) until the 20th century. I think it’s an idea that needs to come back into vogue.

    1. Seth

      YES. If “corporations are people too”, then we the ability to subject them to capital punishment.

    2. indio007

      Not just corporations , governments as well.
      Massachusetts had it’s Charter annulled. So would have Connecticut if they didn’t hide it’s charter in a tree.

  2. psychohistorian

    When do we start discussing the multinational banks and corporations?

    How about multinational fascism? Just a conspiracy theory or do we have a titular world government behind Davos and just not know it?

    Who, along with the Koch brothers owns all those banks and companies….and now clearly, our government? I suspect these folks laugh at talk of charter revoking of companies. If they are TBTF and Too Big To Prosecute then why are deluded into thinking we just need to get Delaware to force corporations to be socially moral and ethical.

    What comes after jaded….besides better or more drugs?

    1. DownSouth

      psychohistorian asks: “When do we start discussing the multinational banks and corporations?”


      The old Jacksonian resonances of Whig-Democratic conflict containing as they did still older rhythms of the Jeffersonian-Federalist struggle, were all but obliterated by the massive realignment of party constituencies that had accompanied the [Civil] war and its aftermath. The memories and even some of the slogans of ancestral debates still persisted in the postwar American ethos, but they no longer possessed a secure political home. Sectional, religious, and racial loyalties and prejudices were used to organize the nation’s two major parties into vast coalitions that ignored the economic interests of millions.


      The foundations of modern America were constructed out of the cultural materials fashioned in the Gilded Age. The economic, political, and moral authority that “concentrated capital” was able to mobilize in 1896 generated a cultural momentum that gathered in intensity until it created new political guidelines for the entire society in twentieth-century America. Not only was previously unconsolidated high ground captured in behalf of the temporary needs of the election of 1896, but the cultural tactics tested and polished during the course of the campaign for “honest money” set in place patterns of political conduct that proved enduring. After McKinley’s impressive victory in 1896, these patterns became fully consolidated within the next generation of the Progressive era and proved adequate during a brief time of further testing during the New Deal. They have remained substantially unquestioned since, and broadly describe the limits of national politics in the second half of the twentieth century. The third party movement of the Populists became, within mainstream politics, the last substantial effort at structural alteration of hierarchical economic forms in modern America. Accordingly, twentieth-century American reform has in a great many ways proven to be tangential to matters the Populists considered the essence of politics. This reality points to the continuing cultural power exerted by the political and economic values which prevailed in the Gilded Age and which today serve to rationalize contemporary life and politics to modern Americans.

      The narrowed boundaries of modern politics that date from the 1896 campaign encircle such influential areas of American life as the relationship of corporate power to citizen power, the political language legitimized to define and settle public issues within a mass society yoked to privately owned mass communications and to privately financed elections, and even the style through which the reality of the American experience—-the culture itself—-is conveyed to each new generation in the public and private school systems of the nation. In the aggregate, these boundaries outline a clear retreat from the democratic vistas of either the eighteenth-century Jeffersonians or the nineteenth-century Populists.

      Understandably, during such a moment of cultural consolidation priorities were not quickly isolated or identified; it took awhile for the full implications of the era to become evident. But the power of the hegemony achieved in 1896 was perhaps most clearly illustrated through the banishment of the one clear issue that animated Populism throughout its history—-the greenback critique of American finance capitalism. The “money question” passed out of American politics essentially through self-censorship. This result, quite simply, was a product of cultural intimidation. In its broader implications, however, the silencing of debate about “concentrated capital” betrayed a fatal loss of nerve on the part of those Americans who, during Populism, dared to speak in the name of authentic democracy.


      The demonstrated effectiveness of the new political methods of mass advertising meant, in effect, that the cultural values of the corporate state were politically unassailable in twentieth-century America.


      When the long Republican reign came to an end in 1932, the alternatives envisioned by the Democrats of the New Deal unconsciously reflected the shrunken vistas that remained culturally permissible. Aspirations for financial reform on a scale imagined by greenbackers had expired, even among those who thought of themselves as reformers. Inevitably, such reformers had lost the possibility of understanding how the system worked. Structural reform of American banking no longer existed as an issue in America. The ultimate cultural victory being not merely to win an argument but to remove the subject from the agenda of future contention, the consolidation of values that so successfully submerged the “financial question” beyond the purview of succeeding generations was self-sustaining and largely invisible.

      [T]he real economies of scale are not technical, but artificial, produced by the monopolistic practices of suppliers and purchasers and further undergirded by federal subsidy and tax policies.


      [T]he idea of a democratic monetary system—-the operative dynamic of American Populism—-is simply not something that Americans seem any longer to aspire to. It is not practical to have such large democratic goals. Thus does modern sophistication serve as a defense for modern resignation…

      The Populist fear that corporate concentration would undermine the popular autonomy necessary to the preservation of authentic democratic dialogue has been realized. Modern politics takes place wholly within the narrowest boundaries of the corporate state.
      ▬Lawrence Goodwyn,
      The Populist Moment

      1. DownSouth

        And by the way, psychohistorian, there is democracy happening in the world—- the multinational banks and corporations are being discussed—-just not in America.

        From yesterday’s Links:

        As long as you say there is no hope, then there will be no hope, but if you go down and take a stance, then there will be hope.
        ▬Asmaa Muhfouz, Egypt, 2011

        But again, Goodwyn saw that democracy became dysfunctional in America in 1896 and predicted that if democracy were to happen somewhere in the world, it would not be in the United States:

        [T]he relatively expansive pre-industrial sensibilities that had animated Thomas Jefferson, George Mason, and the original anti-Federalists gradually lost that strand of democratic continuity and legitimacy which, in fact, connected their time and their possibility to our own through the actions of Americans who lived in the interim: the Populist connecting link was lost to the heritage. The egalitarian current that was part of the nation’s wellspring became not a constantly active source of ideas, but a curious backwater, eddying somewhere outside both the conveyed historical heritage and the mainstream of modern political though that necessarily builds upon that heritage.

        The result is self-insulation: the popular aspirations of the people of the “third world” in the twentieth century have easily become as threatening to modern Americans as the revolt of their own farmers was to goldbugs eighty years ago. Though American foreign policy and American weapons have defended anachronistic feudal and military hierarchies in South America, Africa, and Asia, such actions being justified at home as necessary to the defense of “democracy,” neither the policy nor the justifications has proved notably persuasive to the non-Americans who are the mass victims of such hierarchies. The resulting unpopularity of America puzzles Americans. The policies themselves, however, are not debatable within the limits of public dialogue sanctioned in modern America. Under such constraints, the ultimate political price that Americans may be forced to pay for their narrowed cultural range in the twentieth century has emerged as a question of sobering dimension.

        1. Toby

          Good stuff DownSouth!

          However, these matters are indeed being discussed in the US, just not in the mainstream (as elsewhere in the Western world). Denis Kucinich recently gave a fiery speech at Madison, Wisconsin, where he dedicated a couple of minutes to the money system and the extremely important notion of democratic money:

          I’m no fan of demagogy, nor do I agree with everything Kucinich says, not by a long shot, but I think I recognize sincerity when I see it, and regardless of whether debate of democratic money is initiated by the ‘Left’ or the ‘Right’ it needs to be ‘out there’ firmly in the public’s mind. Without democratic money democracy can only be a sham.

          And to anyone who is in any doubt as to how skillful the propaganda and public relations machines are, I urge you to watch The Century of the Self, and/or read “The Hidden Persuaders” (written in the 1950s by Vance Packard). The entire “freedom=democracy=free market=freedom” tautology is a myth deliberately spun to keep the “dangerous crowd” numb and pacified, yet ready for war to ‘defend freedom.’

          We ordinary folk are waking up, but our awakening needs to speed up!

  3. Toby

    Prefiguring Bretton Woods, the New Deal, and Great Society by nearly two centuries, Husband became known as “the madman of the Alleghenies.”

    Some are mad, some are truly visionary. Knowing which is which at the time is probably impossible. It’s a cultural curse, because we desperately need visionaries now, and those who present us with change that gets at the deepest roots of modern decadence, fraud and corruption are ignored or ridiculed. People like Jacque Fresco, Franz Hoermann, and Charles Eisenstein have a very hard time finding mainstream appeal, but this time around, we don’t have two centuries wiggle-room to find out if they’re mad or gifted.

    Learning to study dispassionately the very attributes and ‘strengths’ needed to establish and maintain the status quo du jour seems a feat beyond us. For it is precisely money in its current form, as well as quantity- and measurement-obsessed Cartesian dualism, which have delivered so much, but now threaten catastrophe if we don’t progress quickly and purposefully beyond them. If we don’t get that trick under our belts we might not make it much further.

    1. DownSouth

      Toby said: “…to establish and maintain the status quo du jour…”

      A while back a commenter here on NC linked this debate between Foucault and Chomsky.

      All debates about establishing and maintaining “the status quo du jour” seem to boil down to a debate about human nature. You and I, if I recall correctly, have crossed swords on this subject before.

      In these debates nurture is used to denominate the opposite of human nature, nurture in today’s lexicon having morphed into structure. There are genetic determinists like Richard Dawkins of The Selfish Gene fame who believe that structure doesn’t matter (or for all intents and purposes doesn’t matter), those like Chomsky who believe that structure matters, and those like Foucault who believe that structure is the only thing that matters.

      Recent scientific breakthroughs in the area of neuroscience, psychology, biology and anthropology come down heavily in support of Chomsky’s position.

      When it comes to the question of growth, a question you often raise, I wonder what human nature has to say. Many people think the notion that the-penultimate-goal-of-society-is-perpetual-growth is a modern one, and a normative one. “The irrational nineteenth-century belief in unlimited progress has found universal acceptance chiefly because of the astounding development of the natural sciences,” Hannah Arendt observes in Crises of the Republic.

      Progress gives an answer to the troublesome question, And what shall we do now? The answer, on the lowest level, says: Let us develop what we have into something better, greater, et cetera. (The, at first glance, irrational faith of liberals in growth, so characteristic of our present political and economic theories, depends on this notion.)

      Arendt says it is Marx who “finally strengthened more than anybody else” this “politically most pernicious doctrine of the modern age, namely that life is the highest good, and that the life process of society is the very centre of human endeavor.” “Not freedom but abundance became now the aim of revolution,” she concludes.

      After reading Carroll Quigley, however, I wonder if the notion that the-penultimate-goal-of-society-is-perpetual-growth is indeed of recent vintage. In fact, his very definition of civilization is predicated on growth. Here’s how he defines civilization:

      A producing society with an instrument of expansion.

      Unlike Arendt, Quigley offers no normative judgment of growth but instead says:

      The society as a whole has become adapted to expansion; the mass of the population expect and desire it. A society that has an instrument of expansion expands for generations, even for centuries. People’s minds become adjusted to expansion. If they are not “better off” each year than they were the previous year, or if they cannot give their children more than they themselves started with, they become disappointed, restless, and perhaps bitter. At the same time the society itself, after generations of expansion, is organized for expansion and undergoes acute stresses if expansion slows up.

      The historical timeframe that Quigley examines is from 6000 B.C. (when the first civilization, Mesopotamian, came into existence in what today we call Iraq) to the present. This timeframe is of course but a blink of the eye in terms of human evolution. Human nature is almost identical to what it was 8,000 years ago. The structure that humans live within, however, has evolved dramatically.

      According to Hillard Kaplan and Michael Gurven writing in Moral Sentiments and Material Interests, hominids lived as hunter-gathers for the vast majority of their evolutionary history (which has lasted over two million years).” So if we want insights into human nature, it seems to me that we would have to examine the conditions under which human nature evolved, which is in hunter-gatherer societies.

      So in conclusion, I would think that the scope of your search for truth, and for solutions to our current predicaments, would go beyond that of Quigley, and certainly beyond that of Arendt.

      As a mild criticism, and hopefully a constructive one, I believe the scope of your analysis and investigation to be rather narrow, more in line with that of Arendt. And as I think you probably already know, I consider Arendt to be the preeminent political philosopher of the 20th century. But looking forward, I think a more global multidisciplinary analysis, and here I’m talking both in terms of space and of time, will be needed. That is, at least, if we are to have any hope of coming up with the solutions that you are so earnestly searching for.

      1. DownSouth

        And please don’t take my admiration of Arendt to mean that I believe she was the most innovative figure of 20th century politics. She was an observer and recorder extraordinaire, but not terribly innovative. The award for innovation I would have to give to Mohandas Gandhi.

      2. Toby

        I am narrow and repetitive at this blog because I find no purchase here. I am here so often because, from where I sit, this is the lion’s den. Another problem I have is posting while at work (naughty and rushed), another is missing the meat of the debate because I’m sleeping in CET in Germany.

        I’ve mentioned him before and I’ll mention him again. Charles Eisenstein is responsible for quite a large portion of my thinking. Recently I am coming to enjoy the economics of Franz Hoermann, but that is just economics, though very bold for a professor of the dismal science. They, plus the resource-based economy I often mention and Jacque Fresco’s analysis, are where I’m coming from, broadly speaking. Having sympathy with their work requires an almost total upending of the current paradigm, right down to our notions of ourselves as separate beings looking down on nature from our egos, and including money, what money is or should be, education, the nation state, and so on. Everything needs to be changed for any meaningful change to occur.

        So, if I appear narrow, it is because the scope of what I believe will not be swallowed by people here. I look for chinks, but find few, if any. And now I’ve gone public on that, but disclosure is probably a good thing. ;-)

        Perhaps, DownSouth, you would find the Zeitgeist, Moving Forward online film interesting, for all its abrasive scientific positivism. If you speak German, Hoermann’s “Das Ende des Geldes” is also worth a look.

        1. DownSouth


          I’ve got Zeitgeist Moving Forward saved to my favorites and will watch it.

          I’m not too much into inovation. To tell the truth, I’m still just trying to figure out where we are and how we got here.

          Furthermore, I believe that inovation is for those who both do and think. A lot of innovation is stumbled into, or arrived at by the process of trial and error. This sort of serendepity and trial and error both involve doing, and not mere thinking.

          My current situation doesn’t allow for much doing.

          1. Toby

            Furthermore, I believe that inovation is for those who both do and think. A lot of innovation is stumbled into, or arrived at by the process of trial and error. This sort of serendepity and trial and error both involve doing, and not mere thinking.

            At risk of jumping the gun, I would say from the above that you and Jacque Fresco have a lot in common. If ever there were a thinker who does, it is he. One story. He disbanded a Florida-based Klu Klux Klan group by gaining their leader’s trust and slowly talking him, then the group around. It took him a month and a half. This as one part of his multi-decade endeavour (he is now 95 and still going strong) to define a methodology for redirecting civilization towards sustainability. I don’t agree with everything he says, but with a helluva lot of it.

            Thanks for meeting me on my ground!

          2. Toby

            One last thing before I turn to my own work. I think we probably agree that the nature/nurture dichotomy is at bottom false. For me then, the idea of accumulating wisdom is far more interesting, because, when set in the totality of the universe, we can experience/see wisdom as a universal process — C. S. Holling talks about this, as does Buckminster Fuller and many others I’m sure. In the end we cannot possibly be outside the universe rationally observing inevitable entropy and weeping at the futility of it all, we are the universe experiencing itself as ongoing complexity and advances in wisdom. The ride is bumpy, of course, and nothing is written, and is certainly not ‘about us,’ but we are as much ‘it’ as everything else is. I find that beautiful. That I, and others, see beauty, means the universe contains and has learned about beauty.

          3. DownSouth

            Toby said: “I think we probably agree that the nature/nurture dichotomy is at bottom false.”

            If you mean there’s a continuum between human nature and nurture I could certainly agree with that. As Quigley observes, we invent categories like nature and nurture because “logic and rationality do not apply to continua.” He goes on to explain:

            We deal with continua rationally either by dividing them into arbitrary intervals to which we give names, or by giving names to the two ends of the continuum and using these terms as if the middle ground did not exist at all. This last method is called “polarizing continuum…

            Such polarization of continua is so common and so familiar that we come, frequently, to accept our categories as real instead of being arbitrary and imaginary, as they usually are.

            In this regard I read something the other day in Stephen Toulmin’s Cosmopolis that just flabbergasted me. He doesn’t cite any references, but he says there are “cultural differences in the recognition of colors” and that “Euclidean idealizations of spatial relations have proved to be more relevant and intelligible for people in some kinds of cultures than others.” Unbelievable, no? I wish he had cited references, because I’d like to know more.

          4. Toby

            You really should look into Charles Eisenstein ( He has a lot to say on colour recognition in chapter two of his book, in particular based on the tribe of ‘primitives’ called the Piraha (if memory serves). They have no numbers; seeing everything as unique they have no need to count beyond one. Nor can they be taught to count (many anthropologists have tried), nor can they understand abstract representations such as writing. A preacher-missionary who went to convert them to Christianity was himself converted by them to atheism. He calls them true empiricists. Eisenstein:

            And if we had no words for color at all, might we not see a world painted in the tens of millions of colors that the human eye is capable of discerning? How much richer and more alive such a world would be. Each moment a visual feast. Perhaps it is the increasing abstraction of ourselves from the world, to which language contributes, that explains why “fifteen years ago people could distinguish 300,000 sounds; today many children can’t go beyond 100,000 and the average is 180,000. Twenty years ago the average subject could detect 350 shades of a particular color. Today the number is 130.”
            [The quote is from Joseph Chilton Pearce in “The Biology of Transcendence”. I can’t find the relevant section on the Piraha.]

            And yes, since Carl Jung I’ve been fascinated with his idea of uniting the opposites, which your quotes on continua remind me of. Fritjof Capra’s “Web of Life”, for example, is great on the arbitrary nature of objects, on how “mind and world arise together.” Capra: “Ultimately—as quantum physics showed so dramatically—there are no parts at all.” And again: “isolating a pattern in this complex network by drawing a boundary around it and calling it an “object” will be somewhat arbitrary.” Thanks to, it seems, the ‘separation’ from nature humanity initiated when it began to tame nature via farming and animal husbandry, we have wandered deeper and deeper into the ego-based illusion of being a separate observer gaining more and more control of Not-Us, the environment, an illusion which found pure expression in Cartesian Dualism, and from which we have only just begun to escape.

            Anyway, I must get back to work.

      3. nonclassical

        Structure is absolutely necessary, but only IF “highly adaptive”. These are not mutually exclusinve. Some of us work very hard, for years and years, to so “internalize”. in the real, physical world.

        However, problems begin in the abstract, mental version. We
        do a very poor job, in my experience, using language functionally in that “abstract”.

        If we consider humans as “rational” BEings, we should judge
        on the basis of BEhavior. Have humans ever, historically BEhaved based on “rationale”, or rather on self-interest.

        Therefore, the best “way” to proceed might be to indulge rational self-interest. Considereing “Rationale”, like religion, the first rule must be to allow another equal rationale. So, our problem, logically, is one of authoritarianism-dictate of “equal rationale”.

        As we view political machination, aimed at manipulation, as Yves might note, on the basis of hierarchy of “information”
        and access to, the obvious dictates involve transparency, oversight, accountability. Obviously it is these missing elements politically and economically, that create contradiction.

  4. But What Do I Know?

    Great stuff! Didn’t Pennsylvania have a land-backed currency in the colonial years. If I have read it correctly, it was self-extinguishing (like a conventional mortgage) and an exception to the proposition that all fiat currencies go to zero value (though perhaps it wasn’t a fiat currency.)

    Anyway, thanks for the article.

  5. craazyman

    Wow. Interesting stuff!

    Can you imagine if all the banksters were in Club Fed debtors prison together today? I wonder if they’d get a few rounds of golf in before the gourmet dinner. Or whether they’d have to play putt putt out in the asphalt exercise yard before a rubber chicken and the 8 o’clock movie.

    Either way, they’d still live better than many of their victims, probably.

    Amazing that dudes like Wilson and Morris actually went to jail in those days.

  6. Simple Simon

    That’s probably the most interesting thing I’ve read on this blog in months – as were the responses.
    Good to see some people starting to think about how to bring about a change.
    A bit more of this would be great. It would be great for the site also.
    I say this because without it, we wouldn’t need payed bloogers to counter arguments or even (heaven forbid) govt sensorship to shut down this once extremely interesting site – it would just cease to exist due to extreme bordom on the part of the readership.

    1. Toby

      I (politely) second that.

      We’re way beyond the need to prove, over and over again, that decadence and corruption rule the land. We need to initiate open debate on solutions that get to the heart of the problem, and nothing lies deeper than the money system itself. Many great ideas for reform are out there, and have been for a very long time. It’s now up to “We the People” to spread them and demand open and honest inquiry.

      1. F. Beard

        I third that.

        I appreciate Yves tenacity and intelligence in exposing the current corruption, but for Heaven’s sake, the system itself was born in fraud and is based on theft of purchasing power.

        Banking was conceived in iniquity and was born in sin The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take this power away from them, and all the great fortunes disappear, and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of Bankers and pay the cost of your own slavery, let them continue to create money and control credit. Attributed to Josiah Stamp by Silas W. Adams in The Legalized Crime of Banking (1958) from

        1. ScottS

          Haha, I thought you might, F. Beard.

          If it makes you happy, you and I can start denominating prices relative to the consumer price index. For example, a hamburger is .10 CPI, electricity is .01 CPI per Watt, a car is 10,000 CPI.

          So the prices don’t change with inflation, because we define away inflation. And if energy becomes scarce, the cost is spread across all purchases.

          I’ve also been thinking about a high-tech barter system. The idea is inspired by a Planet Money podcast that studied the BP oil spill and asked regulators how they decide how much to fine transgressors (or, more specifically how does one value a pelican). Regulators use the identity property — one pelican is worth the cost of producing one pelican.

          So my barter system is a database where two people record a transaction, and the value of the activity is recorded, and the cost is ignored. So if someone “sells” you wood for a roof, the seller has an IOU for some amount of wood from the buyer. The buyer can extinguish this debt by providing the same amount and quality of wood, or, more likely, trading the debt for an IOU they own for selling something or performing some work, based on some exchange rate.

          Deciding the exchange rate (what is roof-quality wood worth in lbs of bacon?) and keeping the system honest are difficult.

          I think the exchange rate could be done by a relative voting system. People are asked to decide which is more valuable, a lb of bacon or a lb of wood? A lb of wood, or a lb of aluminum? Etc.

          As for keeping it honest, I think splitting the “markets” up into tiny fractions of a few dozen people would make lying mostly useless (self-policing). But that limits the usefulness, since I can only exchange with a small circle. To solve that, you would have to pay a small audit fee to trade your IOUs on a larger market, and an audit would verify that the transaction actually took place (no “counterfeiting”).

          1. aletheia33

            in the current time bank movement, the currency is time. this is so egalitarian as to raise interesting problems and choices. at any rate, in a time bank system, an hour of anyone’s time equals an hour of anyone else’s. it’s mostly exchange of services, but goods can be exchanged also. an hour of babysitting would be equivalent in value to the amount of fuel wood the woodcutter can produce in an hour. the time one gives is banked, and one can spend one’s hours earned to buy any services or goods on offer in the system. the earliest time bank in the u.s. was started in portland maine some years ago and is still active. they are starting up in many other cities now. an effort is in progress to link them all to enable long-distance exchanges as well as local ones. the “thinker” behind the time bank movement was edgar cahn. one can find more at wikipedia on “time banking,” its aims, problems, criticisms, etc.

            i have heard of at least one group that has been working on developing a new banking system for some years now. unfortunately, their website is not very clearly presented, but it might be of interest:

            and i think there are movements in various states to form state-run banks, as reported by ellen brown:

          2. F. Beard

            I advocate total liberty in private money creation so any ethical scheme could be tried. My bet is that common stock is the ideal private money form and would eventually prevail.

            Common stock money is similar to conventional money in that it is backed by performing assets but unlike conventional money all money recipients SHARE in the assets.

            In the free banking era, banks could have been ethical and issued their own common stock as money but instead issued multiple claims to the same precious metal. The public was hoodwinked into accepting pieces of paper with only a PROBABLE (at best) possibility of redemption in shiny metals!

          3. ScottS

            Thanks, Aletheia. The time bank is a great object lesson or special case of exactly what I am thinking. And it does exactly what I was hoping the concept would do — build community, and get the ball rolling without cash.

  7. alex

    Thanks for a fascinating history lesson. All too often I read “history” by self avowed populists that portray Jefferson, Madison and their Democratic-Republican party as the populist, egalitarian good guys, and Hamilton and the Federalists as the elitist bad guys. As this article points out, neither was populist or egalitarian.

    My take is that the Madison/Hamilton conflict was more about what type of economy we would have, with Madison promoting an agricultural economy, and Hamilton an industrial/trading one. In some ways I think this mirrors the UK’s Tory/Whig split, although I’m obviously not suggesting that the Democratic-Republicans had anything in common with the UK’s Tory party other than their preference for agriculture as the basis of the economy.

    In general trying to draw comparisons between the political factions of two hundred years ago and today’s factions is a fraught with problems. There are ways in which the Democratic-Republicans are like today’s Democrats, and ways in which they’re like today’s Republicans. Same for the Federalists. Some of the issues have changed, and of the ones that have not, the mix of positions in the various factions has changed dramatically. One way in which history is rhyming lately though is that both parties are run for the benefit of the plutocracy.

    1. DownSouth

      Does Elvis Presley seem radical today?

      To evaluate the Founding Fathers by today’s standards gives a highly distorted picture. Take Elvis, for instance. In his day he was an extremely controversial figure:

      Presley has already appeared six times on national television, but it is his appearance on The Milton Berle Show on June 5, 1956, that triggers the first controversy of his career. Presley sings his latest single, “Hound Dog,” with all the pelvis-shaking intensity his fans scream for. Television critics across the country slam the performance for its “appalling lack of musicality,” for its “vulgarity” and “animalism.” The Catholic Church takes up the criticism in its weekly organ in a piece headlined “Beware Elvis Presley.” Concerns about juvenile delinquency and the changing moral values of the young find a new target in the popular singer.
      Culture Shock

      But by today’s standards, and in comparison to Mick Jagger, or even more so to some of today’s popular musicians, he hardly seems radical. Yet no one would even remotely think of dethroning Elvis as “The King of Rock and Roll.” Yet there are those who would rob the Founding Fathers of their place in political and economic history, even though in their day they were quite radical, and extremely controversial.

      The following passage from Martin E. Marty’s essay “The Virginia Statute Two Hundred Years Later” helps provide some perspective:

      The Virginia event, by common consent, was the most decisive element in an epochal shift in the Western world’s approach to relations between civil and religious sphere’s of life after fourteen centuries. Often cited is the summary by Winfred E. Garrison:

      “For more than fourteen hundred years…it was a universal assumption that the stability of the social order and the safety of the state demanded the religious solidarity of all the people in one church. Every responsible thinker, every ecclesiastic, every ruler and statesman who gave the matter any attention, held it as an axiom. There was no political or social philosophy which did not build upon this assumption…all, with no exceptions other than certain disreputable and ‘subversive’ heretics, believed firmly that religious solidarity in the one recognized church was essential to social and political stability.”

      For those who like to speak of an “Age of Constantine” that began in the fourth century, there is reason to regard the Virginia act as the key moment of the end of that age and the beginning of a new one.

      And as the constitutional scholar Leo Pfeffer wrote in Liberties of an American: The Supreme Court Speaks:

      Certain it is that religious liberty is the progenitor of most other civil liberties. Out of the victory in the struggle for freedom of worship as one’s conscience dictates came victory in the struggle for freedom to print religious tracts [and therefore, eventually freedom of the press]… [F]reedom to assemble politically can be traced to the struggle of freedom to assemble religiously.

      The ethicist David Little in “Religion and Civil Virtue in America” elaborates further:

      For what is the idea of a fundamental moral right other than that every human being should be entitled to have protection against unwarranted outside interference or manipulation, especially of a coercive or an injurious sort? Such rights are supposed, in large measure, to guarantee and enforce an independent sphere of “personal operations”—-an internal forum of conscientious deliberation—-that is conducted according to the “laws of mind and spirit,” rather than according to the “laws of fist and club.”

      The constitutional consequence for us as people has been, of course, the development of a system of legally protected civil rights and liberties that only expands, as Leo Pfeffer suggests, the original right to free religious inquiry, exchange, assembly, and dissemination of ideas into our broader notions of free speech, free assembly, free press, and other freedoms. For Williams, Jefferson and Madison, all these civil rights and liberties flow, finally, from the elemental right of free conscience, which, as Jefferson eloquently put it, “we have never submitted, we could not submit.”

      1. alex

        “Does Elvis Presley seem radical today?”

        I’ve always been more of a Chuck Berry fan myself.

        I’m not trying to deny that the Founding Fathers were quite progressive, and seen as radical in their day. Obviously we have to view what they did in historical perspective. And despite their preservation of a plutocratic order, let alone the far greater matter of slavery, they generally made changes in what, from my 21st century perspective, is the right direction (waves flag, sings Star Spangled Banner, etc.).

        However we can overdo the radicalism notion. One of the reasons they and the rest of us ‘mericans were successful in creating a reasonably stable (the Late Unpleasantness excepted) country incorporating their progressive ideals was precisely because they weren’t quite as radical as we sometimes think. For example, the Virginia Statute was a logical extension of ideas of religious freedom that stemmed from the UK (starting with the English Civil War) and from the even more tolerant Dutch practices. Representative government was far from alien to Americans, given their experience of Colonial legislatures. Not long before the Revolution many complained of being deprived of their British liberties – something that they believed was their birthright. In many cases they didn’t so much as invent (to them) new rights, as seek to preserve those of which they were deprived.

        P.S. Not entirely OT, ever read “The First American Revolution: Before Lexington and Concord” (Ray Raphael)? Largely it’s about how the Americans more-or-less peacefully drove the British from all of Massachusetts (except Boston) before the skirmishes of Lexington and Concord, which is a topic I’ve seen little of elsewhere. Also, it’s discussion of the Intolerable Acts, and how the Massachusetts Government Act was the source of far more outrage than school/popular history books give it credit for, is excellent. Forget the damn tea tax, having their government unilaterally changed, and largely usurped, really pissed them off.

        1. DownSouth


          I haven’t read The First American Revolution: Before Lexington and Concord by Ray Raphael, but I think some of the same material is covered by Hannah Arendt in On Revolution and by Jonathan Schell in The Unconquerable World in his chapter called “Nonviolent Revolution, Nonviolent Rule”.

          And yes, the impetus for religious freedom was a logical extension of what had been going on in Europe for the past 300+ years. Stephen Toulmin has a wonderful chapter in Cosmopolis called “The 17th-Century Counter-Renaissance” where he theorizes that religious freedom was delivered a serious blow by the assassination of King Henry IV of France in 1610:

          Those historians may think our whole enterprise is pointless, but we can return here to the questions: “Why do cultural changes occur when they do? What kinds of occurrence are capable of initiating them? And what particular event led to an abandonment of 16th-century humanism?” In carrying our revised narrative to the next stage, we may take our courage in both hands, and interpret these questions directly and naively. One scene is well-documented, and whose relevance to our present problem is not hard to establish. It is the assassination of King Henri IV of France, better known in English as Henry of Navarre. To suggest that this even caused the shift from humanism to more rigorous, dogmatic modes of thought would be an exaggeration: it will be enough to see it as emblematic of changes that were ready to begin, or had already begun. Henry’s murder may or may not have been “epoch-making”; but, at least, we can take it as “epoch-marking.”


          Like the murder of President John Kennedy in November, 1963, the assassination of Henri IV was immediately seen as a historical turning point. There had been earlier unsuccessful attempts on his life, and his predecessor, the last Valois King, Henri III, had also died at the hands of an assassin. Though not exactly unexpected, Henri’s murder came as the final confirmation of people’s worst fears. His disappearance from the scene dashed the last hope of escaping from irresoluble conflicts.

          What is Toulmin speaking of when he talks of “16th-century humanism”? This from J.H. Elliott in Europe Divided: 1559-1598 I believe gives a vague sense of some of the religious and political issues involved:

          Although the second half of the sixteenth century was in many parts of Europe a period distinguished by the revival of constitutionalist ideas, it would hardly seem a coincidence, therefore, that these appeared more firmly established by the end of the century in those States where Protestantism had become the national faith. The conception of power as deriving from God through the people, and the idea of a contractual relationship between the ruler and the ruled—-these were the principles that had been confirmed and vindicated in the great upheavals in France and the Netherlands [The Religious Wars during the second half of the 16th century]

          Here’s Toulmin again recounting the murder of Henry in 1610 by a frustrated candidate to the Jesuit order, Francois Ravaillac:

          Succeeding to the throne in 1589, Henry was unable to control Paris, where the Catholic League was strong. In 1593, he formally renounced Protestantism, and was welcomed to Paris by the Archbishop of Bourges. Some people find his diplomatic comment, Paris vaut une Messe—-“If the price of Paris is going to Mass, it is worth paying”—-intolerably cynical: to him, it was unavoidable and realistic; without converting he could not handle the nation’s problems. Once he was securely established, he soon showed his determination to reduce the role of religion in politics: and with the Edict of Nantes (1598) he codified and regularized the position of his Protestant citizens.

          Rather than let his new Catholicism be a reason for persecuting his former fellow Protestants, he did his best to stabilize relations between the two religious parties, and guarantee civil liberties to the substantial minority of Protestant “Huguenots.” By the standards of the time, it was an act of courage and foresight: not surprisingly, it met with domestic opposition, and he found it hard to get it endorsed by the various regional parliaments, notably in Paris itself. The supporters of the Catholic League, in particular, continued to suspect him of duplicity, to the point of spreading a rumor that his project for a campaign against the Spanish possessions in Italy concealed a secret plant to seize Rome, and install a Protestant Pope.

          Centuries later, it is hard to see why for so long people resisted the notion that a loyal citizen of France might be a devout Protestant rather than a Catholic, or the other way around. Yet, if we are to feel the full force of the present narrative, we must try to understand this fact. From the start, the rise of French Protestantism had political overtones.


          Under Henry’s protection, the Protestant’s struggle shifted, as he intended, from the military into the political realm. Ravaillac’s dagger put an end to the improvement.


          In practical terms, Henry’s murder carried to people in France and Europe the simple message: “A policy of religious toleration was tried, and failed.” For the next forty years, in all the major powers of Europe, the tide flowed the other way. In England, Charles I wanted to arrange an accommodation between the Anglican Church and the Church of Rome, but most Anglicans were firmly anti-Papist and their views were shared by the Puritans and Presbyterians. In Spain and Austria, meanwhile, the Habsburgs, despite sizeable Protestant communities among their mine workers and craftsmen, as well as in the Czech nobility, were more and more committed to leading the Catholic cause. In fragmented Germany, political and religious rivalries persisted locally, ready to be aggravated by outside powers. Even in liberal Poland, to which Faustus Socinus had fled from Italy to set up and early Unitarian Church at Rakow, the King was persuaded to cancel the Protestants constitutional protection in the 1630s and re-impose Catholic domination. Then, only Holland survived as a haven of tolerance, to which Unitarians and other unpopular sects could retreat for protection.

          A series of brutal and destructive military campaigns ensued, and the Religious Wars were on again. As Michael Allen Gillespie recounts in The Theological Origins of Modernity, by conservative estimates the wars claimed the lives of 10 percent of the population of England, 15 percent in France, 30 percent in Germany, and more than 50 percent in Bohemia.

          So, as Toulmin goes on to inquire:

          In this blood-drenched situation, what could good intellectuals do?…By 1620, people in positions of political power and theological authority in Europe no longer saw Montaigne’s pluralism as a viable intellectual option, any more than Henry’s tolerance was for them a practical option. The humanists’ readiness to live with uncertainty, ambiguity, and differences of opinion had done nothing (in their view) to prevent religious conflict from getting out of hand: ergo (they inferred) it had helped cause the worsening state of affairs.

          In order to ameliorate the Religious Wars, Descartes and Hobbes initiated a project which had at its core a faith or self-confidence that an enlightened humanity could discover a ground for an apodictic or at least effectual truth that most people could agree upon. While this Enlightenment project inspired much of the Founding Fathers’ thinking, I nevertheless believe that it is quite easy to show that there was also a strong throwback to the Renaissance humanist thought of Rabelais and Montaigne that allowed for pluralism, difference of opinion and skepticism. And just like with Henri IV, by the standards of the time I believe this was an act of courage and foresight.

          I think you give the Founding Fathers entirely too little credit.

      2. nonclassical

        One of my influences, many years ago assured me, we get all
        the “fair” we can ENFORCE..

  8. F. Beard

    Nice post! I just bookmarked Mr. Hogeland’s site.

    Yep, let’s get the debate on monetary reform going. The gold-bugs are relentless in their campaign for silly commodity monies and state backed usury. Being a true libertarian, rather that a fascist, I strongly object.

  9. F. Beard

    “The 1785 Struggle Over Concentrated Banking Power”

    I suppose diluted government backed theft of purchasing power is acceptable then by implication?

    How about this radical idea: A money model that does not steal at all?

    We have one already – common stock.

    Common stock as money:

    1) Common stock as money requires no borrowing or lending. Assets and labor would simply be bought with new stock issue. Thus no PMs, usury, or fractional reserves are required. This is a huge benefit since PMs, usury (see Deuteronomy 23:19-20) and fractional reserves are all suspect.
    2) All price inflation is born by the owners of the corporation since every receiver of the new common stock money is by definition a part owner of the corporation. This is an important moral consideration.
    3) Without fractional reserves or even lending, then deflation is not a serious threat.
    4) Since all money holders are part owners of the corporation then they could vote on how much new money is issued and for what purposes. Thus price inflation is under the control of only those affected by it.
    5) The assets of a corporation are typically performing assets though PMs could easily be accommodated too.
    6) Common stock as money shares wealth at the same times as it consolidates it for purposes of economies of scale. Labor problems should be non-existent since the workers would be paid in common stock and thus be part owners. The number of those with a stake in capitalism would increase. The need and desire for socialism should decrease.

      1. F. Beard

        Valuation can be a bit volatile. alex

        Volatility measured in what? Our current crooked, unstable, government backed monopoly money?

        Does it seem reasonable that the real value of a corporation should vary much in the short term? Is the value of real assets volatile?

        Is not that volatility a function of the huge leverage (buying on margin) that government backed counterfeiting allows?

  10. P FitzSimon

    Robert Morris wasn’t all bad. During the American Revolution and under the Articles of Confederation, as Superintendent of Finance, he continuously advocated for taxes and even bond issues to finance the revolution. Instead, Congress printed money until it lost all value and relied on begging and loans from France, Spain and the Netherlands. When the war ended they refused to honor the loans or to pay Continental troops their wage or pensions. In one case to keep the troops from revolting and marching on Congress, Morris bought paper, had it cut and printed into $10 notes and personally signed every note using his own name and credit. You can read this account in a recent biography of Robert Morris by Charles Rappelye.
    Morris was a wild speculator and risk taker who used his good credit to buy millions of acres of recently conquered Crown lands from the State of Massachusetts. Unfortunately his land did not appreciate in value as fast as his loans matured and as stated he did three years in debtors prison along with his partners.

    1. F. Beard

      Instead, Congress printed money until it lost all value and relied on begging and loans from France, Spain and the Netherlands. P FitzSimon

      That is debatable. The British engaged in massive counterfeiting of Continentals but even so they held up almost to the end of the Revolution or so says Ellen Brown. Still, the backing of fiat is the taxation authority of the government that issues it, so taxes are necessary to prevent price inflation UNLESS the government spends at less than the average economic growth rate of the economy.

    2. William Hogeland

      I wasn’t saying Morris was in any way bad. I’m just saying what he was doing. The invaluable support he gave the Revolution is inextricable from his self-dealing — but more important is how both are connected to his highly cogent agenda for the country and its finances. In my book “The Whiskey Rebellion” and in another “Founding Finance” post on New Deal 2.0, I dissent strongly from Rappleye’s defense of Morris — might interest you. Thanks for commenting …

  11. Kathleen4

    I may be naive, but Hannah Arendt and M. Gandhi are useful to this debate for their realization of limits to growth and sustainability of resources. Yves passionate and well written article the other day about optimal bank size gets to the crux of the matter. I do not agree with the analysis, because we are trapped in monetary fascism, but I think we are all asking what are the optimal limitations to regulate money and credit? Where should the source of money stem from and what form will it take? How do we suppose credit shall be handled? I believe the market has failed us on this one. I believe we should not all be dependent on a few globalized exchange indexes. My beliefs are not easy to put into practice. I heard from somewhere, which I unfortunately cannot quote, that the future will hold localized paper currencies. We should be looking for our own ways to have sustainable social investments, not impersonal investments in a globalized cartel of monetary-government-corporate fascists. I fully own the inflammatory language in my comment:)

  12. Jim

    Theoretical Foundations of Democracy

    For all of us who are looking for conceptual breakthroughs in dealing with our contemporary cultural/political/financial crisis I think it may be important to keep in mind the following:

    When looking, for example, at subject/object–are such terms primarily honorific (i.e they are terms created to paper over their uncertain status). Could it be that the status of both subject and object are so problematic that there is no firm basis for designating one as “inside” and the other as “outside.”

    In addition:

    Does there have to be a decision in order to have a problem in the first place? For example, many on this blog have argued that the origins our recent financial crisis can be found in the early 1980s while I tend to favor looking for the origins of this crisis in the early 1880s. In both formulations there appears to be an initial choice involved in where to situate the problem historically which is not transparently reflected in a situation that exists independently of our formulations.

    Take such apparent ontological and epistemological uncertainty, what is the best political system?

  13. William Wilson

    Having just read Terry Bouton’s book ‘Taming Democracy. “The People,” the Founders, and the Troubled Ending of the American Revolution’, I would like to suggest that many of the readers at NC would enjoy learning a bit about the attitudes of the Pennsylvanian equivalent of today’s ‘middle class’ when they faced the conditions imposed by the elites who lived in Philadelphia and who ran the government. Much of the misbehavior currently recognized to dominate the Federal government leadership occurred in Philly in the latter part of the 18th century led by the likes of Robert Morris and his elite co-conspirators. Many/most of this elite crowd played no role in the revolutionary war other than as opportunistic speculators; Morris was sort of the ultimate insider/wheeler-dealer and the teacher of Alex Hamilton. It will interest the readership of this well-documented book to learn that the post-revolutionary war depression era differs from the current economic mess qualitatively, but the same types of slick operators existed/acted then as today.

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