Quarterly Journal of Austrian Economics

Volume 14, Number 1 (Spring 2011)

In The Mystery of Banking, Murray Rothbard explained how the origins of central banking in the US were rooted in a lobbying effort by Robert Morris and other “nationalists” to create a bank modeled after the Bank of England that would subsidize their businesses with cheap credit and other forms of corporate welfare. This paper argues that there was more to it than that, namely, that the chief proponent of a central bank, Alexander Hamilton, wanted the bank to be a more comprehensive engine of political corruption because of his belief that, without such corruption, government would be too small and ineffective. Members of Congress had to be “bought off” if they were to support the nationalists’ economic agenda, Hamilton believed, and a central bank was necessary to achieve that goal.