Henry Clay and the Panic of 1819

Henry Clay was the founder of the Whig Party and Abraham Lincoln's mentor. The Whig Party was antecedent to today's Republican Party. Born in Virginia, his family moved to Kentucky when he was 14 in 1791. Clay became a lawyer and was a Democratic Republican, that is, a follower of Jefferson. Although the Democratic Republicans opposed the Federalists' plan to support business at the federal level, some Democratic Republicans favored government support for manufacturing and banking at the state level:

"Though Republicans generally rejected federal assistance to economic development, they debated whether state governments should establish or subsidize banks, transportation companies, or other corporations. Henry Clay's first major effort in the Kentucky state legislature was to come to the defense of just such a corporation, the embattled Kentucky Insurance Company."*

The Kentucky Insurance Company was given a monopoly to insure all Mississippi River cargoes in the state of Kentucky but it was also given the power to make loans and issue notes, i.e., paper money. Many Kentuckians opposed this proposal. However, Henry Clay, who had been elected to the state legislature in 1803 favored paper money because, according to Watson**:

"men like Clay were convinced that the availability of credit for new investments and a plentiful currency that could expand in volume with the needs of local business were absolutely essential for regional prosperity. When an effort began in 1804 to repeal the company's banking privileges, Clay leaped to its defense."

The opponents of the Kentucky Insurance Company won a Pyrrhic victory in that the monopoly of paper money issuance was withdrawn from the Kentucky Insurance Company but it was granted to several other banks. Paper money issuance proceeded handsomely in Kentucky.

Clay was elected to the House of Representatives in 1811. He was an advocate of aggressive military action against the British in 1812 and a mild opponent of slavery (he himself owned slaves). Participating with John Quincy Adams in the peace negotiation with the British in Ghent in 1814, Clay returned to Congress at a time when the Federalist Party gasped its final breath due to its opposition to the War of 1812. Watson notes that***:

"the lessons of the war had persuaded many leading Republicans that some of the Federalists' favorite measures had merit after all, including a national bank, a protective tariff and federal aid to internal improvements. The new policies appealed strongly to Henry Clay, and the congressman from Kentucky was in the forefront of efforts to adopt them."

The First Bank of the United States's charter had expired in 1811, but the War of 1812 motivated support for a Second Bank. The war also increased support for federal subsidies to manufacturing because many felt that military strategy required manufactures. Difficulties in transporting troops and men led to support among future Whigs for road building. John C. Calhoun, later the advocate of state veto power and state's rights (over slavery), argued that improved transportation would make the Republic smaller and so overcome Montesquieu's and others' concern that republics in large areas cannot survive. "Let us then...bind the Republic together with a perfect system of roads and canals."+ However, many Americans were++:

"worried about the corrupting power of monopolies and feared that the creation of a new class of moneyed capitalists based on paper wealth would undermine the moral and political fiber of the republic."

After the War of 1812 American trade with Europe grew rapidly, in part because of a famine in Europe+++:

"Inexperienced in the fluctuations of an unregulated market economy, government officials and officers of the newly chartered Second Bank of the United States cooperated merrily in feeding the boom, often profiting from banking and land speculation on their personal accounts.

"The party ended abruptly, however, when the BUS had to collect enough specie to make the final payment on the Louisiana Purchase.++++ Loans were suddenly called in, and the Bank demanded specie in exchange for its holdings of state bank notes. Suddenly deprived of credit, numerous urban businesses collapsed and discharged their employees. Thousand of borrowers could not pay their loans and lost homes, farms and businesses to the sheriff's auction. Coincidentally, a bumper crop in Europe cut demand for American foodstuffs and drove farm prices even lower. From a heyday of prosperity and expansion, the American economy was plunged into the rigors of high unemployment, widespread bankruptcy and the suspension of specie payments by banks.

"The panic struck in 1819, and parts of the economy continued to be affected throughout the first half of the 1820s. Fortunately, most Americans still lived on subsistence farms that provided food for their tables, regardless of the level of commodity prices or the prospects for waged labor...Banks demanded strict repayment of their loans but refused to honor their own obligations to pay specie...At the center of everything, the Bank of the United States was the strictest creditor of all, seeking to pay its own debts by pressing state banks and private customers with equal severity. Among the many lawyers who did a handsome business suing delinquent borrowers and foreclosing lands for the BUS, Henry Clay was one of the most active, with a heavy case load all over Kentucky and Ohio."

*Harry L. Watson. Andrew Jackson versus Henry Clay: Democracy and Development in Antebellum America. Boston: Bedford St. Martin's, 1998. p. 46.
**Ibid., p. 48.
***Ibid., p. 52
+John C. Calhoun, "Speech on Internal Improvements", February 4, 1817, in Robert L. Meriwether, ed., The Papers of John C. Calhoun, vol 1, 1807-1817, 23 vols, p. 401.
++Ibid., p. 55
+++Ibid., p. 56
++++Note that this government policy of Jefferson's precipitated the panic, as did the excessive paper money issuance which would not have been possible without government legalization and support of fractional reserve banking and banking monopolies.

Where Do We Go From Here?

In 1776 the nation's population was over three million, yet it produced leaders like Washington, Franklin, Jefferson and Adams. These were men of integrity, inner-directed, with a strong moral sense. Today America's population is over 300 million, 100 times larger, but our leaders lack vision, integrity and understanding. Part of the difference may be the transition from inner to other directedness that occurred beginning in the late nineteenth century as the media and centralized banking became dominant. This transformation led to professionalization of work, increased specialization, larger scale enterprise and personality that tends to be reflecting instead of visionary. Leadership is not a trait associated with fashionableness or consumerism.

America traded its moral vision for a Model T Ford and a radio broadcast.

The question is not so much where do we go from here, but rather what in ourselves inhibits greatness. America is only as great as its people. But a people addicted to mass consumption, groupthink, conformity and fashionable trends cannot be great.

Americas' coming economic decline is a product of the spiritual mediocrity to which America has been committed since the Progressive era. It is a product of the exchange of consumption for morals. It can be repaired only when Americans insist on thinking for themselves; on educating themselves as to liberty; and on freeing themselves from the addiction to fear, consumption and conformity that has dominated urban American society for the past century. From that transformation leadership and greatness will evolve.

Obama Slights Military

Bob Robbins and Larwyn have forwarded this Pajamas Media story about how Barack Obama snubbed the military gala on inauguration day. Since 1953 every president has attended it. Obama was the first to decline the invitation.

Barack Obama's election was unquestionably a positive for race relations and for healing the wrongs of the past. However, few voters were willing to ask questions of substance about Mr. Obama's opinions. Mr. Obama has long been associated with anti-American and left wing activists, to include Bill Ayers, ACORN and Jeremiah Wright. Thus, a snub of this kind reveals an underlying contempt for the US military which the left harbors. Undoubtedly Mr. Obama did not consider this move carefully, as he is usually wont to do. Mr. Wolf, the author of the Pajamas Media article, notes that Vice-President Biden attended. The sponsors of the event put a positive spin on President Obama's absence. Nevertheless, a snub of this kind reveals much about Mr. Obama's instincts.

Jesse Petrilla's "Seeds of Liberalism"

Jim Crum e-mailed about Jesse Petrilla's "Seeds of Liberalism" in Frontpagemag. Petrilla traveled to France to learn the effects of political correctness and terrorism on the French population. Apparently, extremist youth are keeping the French captive in their own country. Petrillo argues that France's "problems were brought on by their leftist politicians who feel the need to push socialist and other leftist policies." As well, the French government routinely suppresses free speech due to political correctness and fear:

"It saddened me to see that the conservative movement was truly underground there, for fear of reprisals from employers or angry leftists."

"The most troubling item we learned when speaking with local leaders and law enforcement is the existence of no-go zones around Paris and around other European cities. They are Islamic neighborhoods where police absolutely refuse to enter, and where if you are not a Muslim and you are caught driving through it you will have bricks thrown at your car and may not make it out alive."

There is a considerable degree of overt anti-Semitism among the insurgents, including the murder of Jews that the French government allows to occur repeatedly and with impunity. Amsterdam looks better on the surface, but the future of Holland is that it is going to become an Islamic Sharia state within a generation or two. Geert Wilders, whom Petrilla interviewed, said that the situation is "100 times as bad" as you think. As in France, freedom of speech is prohibited in Holland:

"Mr. Wilders was just brought up on charges the day after we met with him on grounds of inciting hate speech for his producing of the factual film called Fitna, which discussed the ideologies behind our Islamic extremist enemies."

Sharia Law is being enforced and corporal punishment is occurring in various Dutch neighborhoods. Dutch law is being bypassed by kanagroo religious courts.

The best I can assess from Mr. Petrillo's article is that self-destructive fools and cowards run western Europe. It is no longer a place of interest as a tourist destination, and it would seem to me that the days of western Europe's importance as a military ally and trading partner are numbered. If Petrilla's description is accurate, within two generations Holland and France will no longer be part of the western world. By then, of course, the United States will have significantly reduced its own power through economic and monetary incompetence as well. Conservatives who smugly watched George Bush and the Republican Party pursue inflationist subsidies to corrupt banking and Wall Street interests would do well to keep in mind that military strength depends on economic health, and the Republicans under Bush put many nails in the coffin of the nation's economic future, preferring to subsidize incompetently run big businesses to freeing up the economy from regulation, excessive taxation and government spending. The Bush-Obama "bailout plan" and the Bernanke Fed have been destructive of the nation's future. This interacts with military options in the future. The Republicans have done as much to facilitate the decline of the West as the "liberals" have.

The current situation cries for a new American revolution that wrests control of the nation from the self-destruction "progressive" media and the banking interests who now control the nation and the federal government.