Andrew Jackson's War on the Money Monopoly

The president had a bullet lodged in his chest and gold coins in his pocket. His enemy controlled America's entire money supply. What happened next changed American finance for 200 years.

In 1833, President Andrew Jackson did something unthinkable - he destroyed the most powerful financial institution in America. The Second Bank of the United States controlled the nation's money, could create credit from nothing, and when challenged, its president deliberately crashed the economy to prove his power.

This isn't just history - it's prophecy. Jackson's war against paper money, central banking, and financial manipulation mirrors today's debates about the Fed, Bitcoin, and currency debasement.

In this episode, we explore:

• How Nicholas Biddle weaponized a recession to fight Jackson
• Why Jackson carried gold coins and refused paper money
• The "pet banks" disaster that followed victory
• How destroying the Bank led to 80 years without central banking
• The secret Jekyll Island meeting that created something worse
• Why real estate is the ultimate hedge against monetary manipulation

Since 1971, the dollar has lost 87% of its value. The Fed can print trillions with a keystroke. But they can't print land. They can't print apartment buildings. Understanding Jackson's war helps us see why owning real assets - not paper promises - is the only timeless strategy.

The pattern always repeats: centralize power, corruption follows, revolution destroys it, chaos ensues, then even more centralization. Know where we are in the cycle.

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Transcript

SPEAKER_00: 0:01

Welcome to the Timeless Investor Show. I'm Ari Van Gemeren, and today we're diving into one of the most brutal financial battles in American history. A story where literal bullets met balance sheets, where a sitting president destroyed the most powerful financial institution in the country, where the aftermath taught us lessons about money, power, and the price of principle that still echoed This is the story of President Andrew Jackson versus the Second Bank of the United States. And if you think today's Fed debates are intense, wait until you hear what happened when Old Hickory decided to kill a monster. This is an epic story for many, many reasons. I first came across it in The Creature from Jekyll Island, have since bought books on Andrew Jackson It is a fascinating story and one that, frankly, every investor needs to know, needs to understand, needs to get how central banking works and what it means for investors of all stripes, why it matters, why this story, this random story from the beginning of the 1800s matters today. It is critical. I will add as a side note, it's a very interesting side note. President Donald J. Trump hung up a portrait of Andrew Jackson in his office. There's something to that. What it is, I'll leave it to you to determine because the point of this podcast and show and the Timeless Investor is not to delve into today's politics or talk too much about what's happening in today's current US politics. But let's just say there's something to be said for President Trump hanging up an image of the man whose reputation was killing a monster, staking a beast, killing some institutional thing. Let me Bye. Just to help elaborate this point, let me paint you a picture of who we are dealing with here. Andrew Jackson was not some Ivy League economist debating monetary theory and so on. This was a man who walked around with a bullet permanently lodged in his chest from a duel, orphaned by 14, scarred by British sabers as a child prisoner of war. A man who built his legend at the Battle of New Orleans. battle, fought weeks after the War of 1812 had officially ended, but a battle that cemented his reputation. It cemented it. It took a war that the Americans had basically lost, right? The British had been able to successfully invade Washington, D.C., burn the White House to the ground, impose their will on the new country. Yet at the Battle of New Orleans, led by Andrew Jackson, after the war was over, the Americans won a decisive victory against the British, and it allowed the American spirit to stay alive. We won a battle. By the way, Side note, the War of 1812 is where our national anthem comes from. The siege of Fort McHenry was an actual battle witnessed and truly written by the author, Francis Scott Key, watching the battle happen in the War of 1812. Interesting details. But here's a detail about Jackson that I find fascinating about his monetary philosophy. The man carried gold and silver coins in his pockets, always He insisted on using them for transactions. He literally refused to use paper money when he could. This wasn't like a personal preference. It was a political philosophy made flesh. Jackson believed that real money was metal you could hold, not promises printed on paper. And this is critical to understand because Jackson's entire war against the bank was really a war against paper money itself. He saw paper currency as the tool of speculation, manipulation, and theft from honest workers. Gold and silver, that was God's money, nature's money, the people's money. So by the time he reached the White House in 1829, Jackson had already formed his worldview, the common man versus the aristocracy, the producer versus the parasite. And in his mind, the Second Bank of the United States was the ultimate parasite. Creating paper money from nothing while honest Americans worked for real money. Now, to understand why Jackson saw the bank as a monster, we need to understand what this thing actually was. The second bank of the United States wasn't just a bank. It was the bank. Created in 1816 after the financial chaos following the War of 1812, it held all federal deposits. It could discipline state banks by demanding specie payments. Specie, by the way, is gold, gold and silver payment. It issued what was essentially a national currency. And here's a detail that Griffin points out in the creature from Jekyll Island that should, if you understand what's happening, make you upset. The bank was capitalized at$35 million. But get this, private investors only had to put up$7 million in actual specie. The rest, they could pay with government bonds or even IOUs. The government itself ponied up$7 million. So we had a private bank that was using government money and and paper promises to control the entire nation's financial system. It should sound familiar because it's the same playbook the Federal Reserve would use a century later. The bank had branches across the country and it was run by Nicholas Biddle, a Philadelphia patrician who was everything Jackson wasn't. Polished, Princeton educated at 15, fluent in Greek and Latin by 12. Where Jackson saw corruption, Biddle saw civilization. Where Jackson saw tyranny Biddle saw necessary order. These two men were on a collision course that would reshape American finance for the next century. So here's where it gets interesting. In 1832, Biddle made a fatal, fatal miscalculation. He pushed Congress to recharter the bank four years early, thinking he could corner Jackson in an election year. If Jackson vetoed, he looked like an enemy of stability. If he signed, Biddle wins. And Biddle was making the calculation because he knew that Jackson was opposed to his bank. But Biddle did not understand his opponent. Jackson didn't He unleashed a populist cannon blast that still rings through American politics. Listen to this language from his veto message. I love this. It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. When the laws undertake to make the rich richer and the potent more powerful, the humble members of society have a right to complain of the injustice of their government. This wasn't just beautiful rhetorical language. This was war. And the people loved it. Jackson won re-election in a landslide. The battle lines were drawn. Jackson and the people versus Biddle and the bankers. And here's where Jackson went full scorched earth. Vetoing the recharter was not enough. The bank's charter wouldn't expire until 1836. And until then, it still held. all federal deposits. It was still the monster. Wounded, but alive. So in 1833, Jackson pulled the trigger on what I would call the nuclear option. He ordered the removal of all federal funds from the second bank. Think about the audacity of this move for a second. By law, only the Secretary of Treasury could remove the deposits. Jackson's own Treasury Secretary, Louis McLean, refused. So did the next one, William Duane. Both men thought it was rash, potentially illegal, and definitely dangerous. So Jackson's response, he fired both of them. Finally, he found Roger Taney. Yes, for those of you that know your history, the same Roger Taney who would later author the Dred Scott decision, who would execute the order. Jackson began moving federal deposits into various state chartered banks, his so-called pet banks, often selected more for political loyalty than financial prudence. And now things get wild. Nicholas Biddle, watching his institution get gutted, decides to fight back with the only weapon he had left, economic warfare. This is crazy, by the way, guys. This entire story is absolutely wild. Like we think politics today is crazy. I mean, this is pre-Civil War. It's probably the craziest thing they saw at this point. Obviously, it got much worse by the time the Civil War actually started, but this is wild. Biddle started tightening credit Think about this for a second. He tightened credit to fight back against Jackson. He started calling in loans, deliberately trying to induce a financial panic to force Jackson to back down. But here's the truly sinister part that my main man, Griffin, from the creature from Jack Lyle, emphasized. Biddle was not subtle about it. He wrote to his branch managers, nothing but the evidence of suffering will produce any effect on Congress. Our only safety is in pursuing a steady course of firm restriction. I don't know why a patrician accent immediately evokes a British accent, but there it is. Let that sink in. The head of America's central bank was deliberately creating evidence of suffering among ordinary Americans to win a political battle. Businesses failed. Workers lost jobs. Farmers lost their land. All orchestrated by one man controlling the money supply. Please pause and think about that for a second. The head of the Bank of the United States basically started a recession on purpose to win a political fight. He called it disciplining the economy. I might call it economic terrorism. I don't know. There's a lot of names for it. And this is crucial. It actually proved Jackson's point. Should any one person or institution have the actual power to crash the economy? Biddle's response to being challenged was to demonstrate exactly why he shouldn't have that power in the first place. It's like a hostage taker proving why they shouldn't have hostages by shooting one. But Jackson didn't blink. Old hickory indeed. The chaos that followed only reinforced this message. No institution should wield this kind of power over the nation's economy. Jackson famously said, the bank is trying to kill me, but I will kill it. Jackson won. By 1836, the bank's charter expired and the monster was dead. Jackson rode off into retirement, convinced he had saved the Republic. But within months of his departure, all hell broke loose. The Panic of 1837 wasn't a single event. It was a slow-moving catastrophe that revealed what happens when you just destroy something without replacing it. Here's the sequence. When Jackson scattered federal deposits into pet banks across the country, those banks did what unsupervised, politically connected banks do. They went on the lending bench. Easy credit flooded the system. Western land speculation went insane. State banks printed money with little regard for actual specie backing. And so to rein it in, Jackson issued the Species Circular in 1836. Public lands could only be bought with gold or silver, not paper currency. The goal was to restore monetary discipline. The result was a liquidity crisis. And to understand this situation, understand this. The West at this time was truly the Wild West. It was unsettled. People were flooding into it. It was the land of opportunity, pushing West, pushing West, manifest destiny, all these different things that Americans talk about today in school. And to promote speculation, well, to promote development of the land, the federal government made it easy to lend. And there were very loose requirements on these banks. So it was ripe for blatant speculation. And you throw in the injection of a bunch of money into the ecosystem. This is not theory, guys. I just want to say this. Sometimes in today's system, the money amounts are so big that we fall into, I think, I mean, I can speak for myself. I certainly fell into the trap of not understanding it because it did like it was the scale was so large. But you take a bank that's limited by how much it has to lend. by other regulations and rules, and then you pump it with money, what is it going to do? And you pump that into an ecosystem that's already crazy. And the result, as I said, of all this, and the species circular in 1836, which again required gold or silver to close on land, not paper money, because these banks could print their own money. The result was a liquidity crisis. People scrambled to exchange their now relatively worthless paper for species. Gold and silver flowed out of the country. Credit marks and when the Bank of England raised interest rates in 1836, cutting off British capital to the US, the whole house of cards started to collapse. Banks failed, businesses shuttered, unemployment surged, cotton prices, the backbone of American exports cratered, states defaulted on their debts. The country plunged into a depression that will last for years. Jackson was gone. His successor, Martin Van Buren, took the fall, nicknamed Martin Van Buren. ruin as the economy crumbled around him. So here's what's fascinating about Jackson's victory. After destroying the second bank, the United States entered a period without any central banking authority. From 1836 to 1913, nearly 80 years, no central bank, no lender of last resort, no coordinated monetary policy. The results? Let me be clear. This period, which is often romanticized by hard money advocates and libertarian economists, was anything but smooth. We had devastating panics in 1837, 1857, 1873, 1893, and 1907. Each one triggered waves of bank failures, economic depression, and political unrest. But here's something that people miss. During these panics, who got hurt? Not the big New York banks. They actually consolidated power during each crisis, buying up failed competitors for pennies on the dollar. J.P. Morgan acted as America's unofficial central bank during the panic of 1907, he personally deciding which banks lived and which died. The American economy was like a tall ship in rough seas, buoyant at times, but with no keel to keep it from capsizing when the winds turned. And each time it capsized, the same financial interest that Jackson had fought against grew stronger. And this is the tragic irony. Jackson's destruction of centralized banking didn't destroy financial concentration. It just moved it from a quasi-public institution to purely private hands. Instead of Nicholas Biddle controlling credit, you had J.P. Morgan. Instead of the second bank, you had a cartel of New York banks. Which brings us to the ultimate punchline of Jackson's war. In 1910, a group of the most powerful bankers in America met in secret on Jekyll Island, Georgia. They came on a private railroad car using first names only, pretending to be duck hunters. Their mission, to design a new central bank that would look like a government institution, but actually be controlled by private banking interests. The result was the Federal Reserve Act of 1913. And here's the kicker. It created something far more powerful than anything Nicholas Biddle ever dreamed of. The Fed can create money from nothing, what Griffin calls the Mandrake Mechanism. It's privately owned by member banks who receive dividends. It purchases government money with money it creates out of thin air. Jackson thought he was killing the monster. Instead, he just forced it to evolve. The creature that emerged from Jekyll Island was smarter, subtler, and infinitely more powerful than the second bank ever was. Now, critics like G. Edward Griffin, the author of The Creature from Jekyll Island, argues that markets self-correct, that booms and busts are natural, and that the market, like water, finds its own level of left unmanipulated. And there is truth in this. Markets do self-correct eventually. But here's the rub. Eventually can mean years of human suffering, unemployment, starvation, lost savings, ruined lives. The Panic of 1837's self-correction took nearly a decade. During the Depression of the 1870s, it took longer. And yet, and this is where it gets interesting, Griffin and others point out something crucial. Between 1837 and 1913, despite the panics, America experienced the greatest economic expansion in human history. We went from an agricultural backwater to the world's largest industrial power. Real wages rose, innovation expanded, exploded. The railroads, electricity, the telephone, mass production, all of these emerged during this supposedly chaotic period without central banking. The panics were generally sharp but short. They cleared out speculation quickly rather than prolonging it with money printing. Bad investments failed fast instead of becoming zombie companies kept alive by cheap credit. It was economic Darwinism. Brutal but effective. Now compare that to today where we paper over every crisis with more money printing, creating what I would call phantom prosperity. Asset prices rising, not from real value creation, but from currency debasement. Look at China, the rise of zombie cities, zombie corporations. I mean, talk about a non-capitalist, non-free floating market, right? China has institutionalized the process of allowing sick and unwell companies, sick and unwell developers, sick and unwell cities that don't even deserve to live to survive. by printing money. The question here is not whether markets stabilize. It's whether societies can afford to wait. But also, and Jackson understood this intuitively, it's whether the cure of central banking is worse than the disease of periodic panics. So what can we take from Jackson's war on the bank, other than that it's a fascinating character struggle of old hickory versus the East Coast patrician, a clash of cultures that in many ways still continues to this very day, and help define the founding of this country itself. It's complicated. That's what we can take from it. It's complicated, and that's exactly why it's so valuable for us as timeless investors. On one hand, Jackson struck a powerful blow against entrenched financial interest. He reminded the country that democracy means accountability, that no institution should be too powerful to challenge. And there was a lot, in my humble opinion, there was a lot of historical backing for this perspective. When institutions get too powerful, when power gets too centralized, when the common man doesn't have a stake in the system, it, in my opinion, is an existential threat for democracy. I've talked about this a lot. We've written about it a lot. The Gracchi brothers in the institutionalized and chronic ownership of land and were killed for it, and one could argue that the Roman Republic failed as a result of their being wiped out. It happens throughout history, and I think Jackson was onto something. On the other hand, Jackson left behind a financial system that was theoretically less stable, more prone to panic, and ultimately incapable of managing the demands of a growing industrial economy. In killing the monster, Jackson may have created a new An economy untethered, vulnerable to the very forces he tried to protect it from. Because the financial interests and the major banks continue to grow and prosper in this period. Arguably, J.P. Morgan and team grew dramatically during this period. And J.P. Morgan himself's personal stature dramatically rose at this time. So here's why this matters today. I already hit on this a little bit, but I'm going to hit it again. We are living through our own version of this debate. Central banks printing trillions. We are living through this debate. Where did the inflation of today come from? Well, first of all, how much money was printed during the COVID pandemic? How is that not going to have an impact? How does that not hurt wagers? How does that not hurt savers? Debates today about Bitcoin and decentralized finance. Questions about who controls the money and what that means for democracy. The Jackson story teaches us that destroying a flawed system without building something better isn't necessarily victory. It's just a delayed defeat. But it also teaches us that concentrated financial power left unchecked can become its own form of tyranny. When Nicholas Biddle could start a recession to win a political fight, he proved Jackson's point better than any speech ever could. And I'm going to make a, you know, there's a great, great quote, which my philosophy professor in college gave me a hard time for mentioning, but absolutely power corrupts absolutely it's such a trite phrase and he made fun of me for using it I remember the quote being like oh Ari and of course you trot out the quote absolute power corrupts absolutely but it's true and I don't know what we can take from Nicholas Biddle other than it does corrupt absolutely the man bankrupted tens of thousands of Americans to prove a political point I mean come on that's out of control okay All this aside, As investors, here's what I take from this saga. First, financial systems are more fragile than they appear. The second bank looked invincible until it wasn't and it was slain. Second, the cure can sometimes be worse than the disease. Jackson's pet banks and the subsequent speculation created way more chaos than the bank ever did. Third, and this is crucial, there is a reason that I as an investor and my company, Lombard Equities Group, and all of the timeless investor brands So let's not worry about that. Think about this. Since we broke the gold standard in 1971, the U.S. dollar has lost 87%. 87% of its purchasing value. What cost$1 then cost over$8 today. That's a 13x erosion in value. The Fed can print trillions with a keystroke, just like the central bank could create credit from nothing. But they cannot print land. They cannot print apartment buildings and supply chains. in cities. They cannot print cash flow from real tenants paying real rent for real shelter. And that is why real estate has been the ultimate hedge against currency debasement throughout history. In ancient Rome, farmland cost about 75 to 300 grams of gold per acre. Today, it's roughly the same in gold terms. The fiat price has exploded, but the real value measured in hard money remains stable. So when empires debase their currency and they all do it a It's the savers who get wiped out. The wage earners who watch their purchasing power evaporate. The landowners, they preserve wealth across centuries. Jackson understood this. That's why he was a land speculator himself before becoming president. He knew the difference between real wealth and paper promises. That is the timeless lesson. Not that we should destroy our financial institutions, although I'm not saying that that's not the right thing to do, but that we should never trust them completely. Build your wealth on foundations that can survive both the disease and the cure. Own things that hold value when currencies don't. Jackson, won his war. But what followed wasn't peace, it was drift. And that drift eventually led to the creation of the Federal Reserve in 1913. The irony here is thick. Jackson's victory against centralized banking ultimately led to even more centralized banking. His attempt to free the economy from manipulation created conditions that demanded even more manipulation. Consider this. The Federal Reserve could do everything Biddle did, but with sophistication that would blow his 19th century mind. Quantitative easing That's just creating money to buy government bonds. Exactly what the second bank did. But on a scale that would have given Jackson a stroke. The difference, we've wrapped it in enough complexity that most people today don't even understand what's happening. Griffin's research shows that the Fed isn't even truly federal. It's owned by private member banks who receive dividends from its operations. The banks earn interest on bonds they buy with money created from nothing. It's the Mandrake mechanism. Modern alchemy, where debt becomes money and money becomes control. Here's what I find most interesting and why this story matters for every investor listening. The pattern keeps repeating. We centralize power. It becomes corrupt. We destroy it in a revolution. Chaos falls. We centralize again, usually with even more power than before. Understanding this cycle isn't just history. It's like prophecy. It tells us where we are in the cycle and what's likely coming next. And if you're paying attention, it tells you why owning real assets, not paper money, is the timeless strategy. That, my friends, is the story of Andrew Jackson and the bank war. A president who had the courage or the recklessness, depending on your view, to destroy the most powerful financial institution in the country, who won the battle but may have ultimately lost the war, who killed the monster only to see its children return stronger than ever. The questions Jackson raised Who controls the money? Who benefits from that control? And what happens when that control is challenged? These are not just historical curiosities. They're the questions that define every financial epoch, including our own. If you found some value in this episode, please leave a review for the show. Share it with someone who's serious about understanding not just markets, but the forces that shape them. And remember, in the world of paper promises, digital illusions and everything else build something real. So, Something that can survive both the Jacksons and the Biddles of every generation. Because for most of us, we are not them. We are just trying to feed our families. Think well, act wisely, and build something timeless. I'm Ari Van Gammeren with the Timeless Investor Show, and I look forward to seeing you next week. Thank you.