Thomas Jefferson in a letter to John Taylor condemns the system of banking as “a blot” on the constitution, as corrupt, and that long-term government debt was “swindling” future generations (1816)

Thomas Jefferson

In his retirement to Montecello Thomas Jefferson (1743-1826) complained about the lack of any good bookshops. So he was delighted to receive from John Taylor (1753-1824) a copy of his new book An Inquiry into the Principles and Policy of the Government of the U.S. (1814). This prompted a letter to Taylor (May 28, 1816) which reflected upon the nature of republics and of government debt.

The system of banking we have both equally and ever reprobated. I contemplate it as a blot left in all our constitutions, which, if not covered, will end in their destruction, which is already hit by the gamblers in corruption, and is sweeping away in its progress the fortunes and morals of our citizens. Funding I consider as limited, rightfully, to a redemption of the debt within the lives of a majority of the generation contracting it; every generation coming equally, by the laws of the Creator of the world, to the free possession of the earth he made for their subsistence, unincumbered by their predecessors, who, like them, were but tenants for life… And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.

In this letter to John Taylor Thomas Jefferson has a very interesting and extended discussion about the true nature of republicanism. He defines it quite narrowly as “a government by its citizens in mass, acting and personally, according to rules established by the majority.” He then proceeds to list all the offices and branches of government where the practice falls short of the ideal, in other words where it has “deteriorated” from the founders' hopes and expectations. He blames this deterioration on “submission … to European authorities”, the existence of “speculators on government”, and to “the duperies of the people.” In the course of this exposition, Jefferson writes an extraordinary attack on the banking system and public finance, calling the former “a blot on the constitution”, corrupt, and destructive of wealth; the latter he describes as “more dangerous than standing armies” and “swindling futurity on a large scale.” This dour essay is lightened up considerably by Jefferson quoting part of a poem by Sir William Jones (1746-1794) on “What constitutes a State?”. His answer is not the physical infrastucture like battlements, moats, ports or church spires; but “high-minded men” who know their duties and their rights and are willing to defend them against tyrants. That is a true state according to Jefferson.