Tom Paine on the "Decline and Fall of the English System of Finance" (1796)
About this Quotation:
Paine noticed a long-term cycle in the relationship between war, finance, and changes in government. He studied the previous 100 years and 6 majors wars which Britain had fought since 1697 and observed the following connection: wars disrupted the economy and were becoming increasing expensive to finance, governments sought new financial means to finance their wars and turned to debt and paper money as a short term solution, increasing debt and inflation led to political difficulties which sometimes resulted in revolutionary changes in government. Ludwig von Mises also noted a similar connection in his writings about Germany, Austria, and Russia during and immediately after World War One.
Other quotes from this week:
- 2009: James Mill on the natural disposition to accumulate property (1808).
- 2007: James Madison argues that the constitution places war-making powers squarely with the legislative branch; for the president to have these powers is the “the true nurse of executive aggrandizement” (1793)
- 2005: Bernard Mandeville uses a fable about bees to show how prosperity and good order comes about through spontaneous order (1705)
- 2004: John Taylor on how a “sound freedom of property” can destroy the threat to Liberty posed by “an adoration of military fame” and oppressive governments (1820)
Other quotes about Money & Banking:
- 2009: Ludwig von Mises argues that sound money is an instrument for the protection of civil liberties and a means of limiting government power (1912)
- 2009: Ludwig von Mises lays out five fundamental truths of monetary expansion (1949)
- 2008: 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)
- 2008: Ludwig von Mises identifies the source of the disruption of the world monetary order as the failed policies of governments and their central banks (1934)
- 2008: Ludwig von Mises shows the inevitability of economic slumps after a period of credit expansion (1951)
- 2008: Henry Vaughan argues that it is the voluntary and “universal concurrence of mankind”, not the laws, which makes money acceptable as a medium of exchange (1675)
- 2007: Friedrich Hayek rediscovers the importance of Henry Thornton’s early 19th century work on “paper credit” and its role in financing the British Empire (1802)
8 September, 2008
 | Tom Paine on the "Decline and Fall of the English System of Finance" (1796) |
In 1796 Thomas Paine wrote a pamphlet called "The Decline and Fall of the English System of Finance", in which he noticed a pattern of increasing public debt and paper currency in the 100 years and 6 majors wars which Britain had fought since 1697:
It is worthy of observation, that every case of failure in finances, since the system of paper began, has produced a revolution in governments, either total or partial. A failure in the finances of France produced the French revolution. A failure in the finance of the assignats broke up the revolutionary government, and produced the present French Constitution. A failure in the finances of the Old Congress of America, and the embarrassments it brought upon commerce, broke up the system of the old confederation, and produced the federal Constitution. If, then, we admit of reasoning by comparison of causes and events, the failure of the English finances will produce some change in the government of that country.
The full passage from which this quotation was taken can be be viewed below (front page quote in bold):
It is worthy of observation, that every case of failure in finances, since the system of paper began, has produced a revolution in governments, either total or partial. A failure in the finances of France produced the French revolution. A failure in the finance of the assignats broke up the revolutionary government, and produced the present French Constitution. A failure in the finances of the Old Congress of America, and the embarrassments it brought upon commerce, broke up the system of the old confederation, and produced the federal Constitution. If, then, we admit of reasoning by comparison of causes and events, the failure of the English finances will produce some change in the government of that country.
As to Mr. Pitt’s project of paying off the national debt by applying a million a-year for that purpose, while he continues adding more than twenty millions a-year to it, it is like setting a man with a wooden leg to run after a hare. The longer he runs the farther he is off.
When I said that the funding system had entered the last twenty years of its existence, I certainly did not mean that it would continue twenty years, and then expire as a lease would do. I meant to describe that age of decrepitude in which death is every day to be expected, and life cannot continue long. But the death of credit, or that state that is called bankruptcy, is not always marked by those progressive stages of visible decline that marked the decline of natural life. In the progression of natural life age cannot counterfeit youth, nor conceal the departure of juvenile abilities. But it is otherwise with respect to the death of credit; for though all the approaches to bankruptcy may actually exist in circumstances, they admit of being concealed by appearances. Nothing is more common than to see the bankrupt of to-day a man in credit but the day before; yet no sooner is the real state of his affairs known, than every body can see he had been insolvent long before. In London, the greatest theatre of bankruptcy in Europe, this part of the subject will be well and feelingly understood.