The Kirtland Bank

[Daniel Peterson]

I just wanted to call everybody's attention to the transcript that has been posted at FAIR of McKay White's excellent presentation on the Kirtland Bank (aka the Kirtland Safety Society), which has often been used by critics to attempt to paint Joseph Smith as corrupt:

http://www.fairlds.org/FAIR_Conferences/2009_The_Kirtland_Safety_Society.html

[Glenn101]

I just wanted to call everybody's attention to the transcript that has been posted at FAIR of McKay White's excellent presentation on the Kirtland Bank (aka the Kirtland Safety Society), which has often been used by critics to attempt to paint Joseph Smith as corrupt:

http://www.fairlds.org/FAIR_Conferences/2009_The_Kirtland_Safety_Society.html

I predict that this will make absolutely no difference to most of the critics.

[Deborah]

I predict that this will make absolutely no difference to most of the critics.

After all, it's a faithful Mormon who has researched this therefore he is biased and unreliable.

It was indeed an excellent discussion. I for the first time actually understood what it was all about.

[LeSellers]

I predict that this will make absolutely no difference to most of the critics.

And I predict that the sun will rise tomorrow, whether there are clouds or not.

Lehi

[Bob Crockett]

The selective prosecution angle needs much more development. The legal advice Joseph Smith obtained in the face of the law also needs more development.

[Daniel Peterson]

I agree that it will make absolutely no difference to the critics. Nothing ever does.

The real audience for such things is, primarily, those who are questioning -- whether members or investigators. They really want to know.

Believers will find it interesting, and perhaps even useful. Enemies will, by and large, ignore it or dismiss it, and will simply repeat the time-worn and tired old formulae. But it will genuinely help those who might have been troubled by the matter and who are lucky enough to encounter it.

The selective prosecution angle needs much more development. The legal advice Joseph Smith obtained in the face of the law also needs more development.

Others are, of course, entirely welcome to contribute their research and insights. More than welcome, in fact. I hope they will join in. The more, the merrier.

[Helmuth]

In your next High Priests group meeting, hold up a twenty dollar bill and ask why it's worth twenty dollars. If anybody gets the right answer, it'll be a lucky guess. Money has a very significant role in society, yet few every think about that. To see what we have money for, let's look at where we'd be without it.

Without money, we'd be stuck in a barter economy. In a barter economy, you can't buy and sell because you don't have any money to do that with. You can only trade one good for another.

The trouble is, you have to have something worth trading. And even if you do, you have to find someone who wants what you've got, and that someone has to have something you want. Think of the poor soul who gets the ceramic chicken at the white elephant gift party. No chance of trading that one. Trade can be a long and costly process, and, frankly, there's a better way.

It took a long time, but eventually the ancient Sumerians figured out that if you gave a chunk of metal a unit of value, you could buy things with it. Thus began the idea that an object could represent a unit of value. It didn't have to be metal. The object could also be rocks, sea shells, or paper.

In 1837, they used gold, silver, and copper coins called specie, or hard money.

There were a lot of people in favour of hard money and nothing else, like those who rejected Orson Hyde's charter application.

But an economy with only specie runs into some serious problems. While you wouldn't get a banking crisis, your economy can grow only as fast as you can mine gold, silver, and copper. And specie gets rid of barter only so long as there's enough specie to go around.

R. McKay White has a serious misunderstanding about the nature of money. "Your economy can grow only as fast as you can mine"? Get real. Oh well, his misunderstanding is no worse than many professional economists.

[LeSellers]

R. McKay White has a serious misunderstanding about the nature of money. "Your economy can grow only as fast as you can mine"? Get real. Oh well, his misunderstanding is no worse than many professional economists.

I had the same thought.

He does make a good point, though, when he says that for all we focus on money, very, very few of us know what it is. He is a case in point.

Lehi

[ERayR]

R. McKay White has a serious misunderstanding about the nature of money. "Your economy can grow only as fast as you can mine"? Get real. Oh well, his misunderstanding is no worse than many professional economists.

My impression of the point of his presentation was that if for solid safe growth your money has to be tied to something with some intrinsic value, most generally gold and silver. If you unhook your money (currency) from the precious metal that gives it its value and just print money you immediatly begin to lesson its buying power. All you have then is script printed on paper. Your economy may inflate but with no real growth. There is nothing behind it but paper, printing presses and hot air.

That fits pretty well with the economics that I learned. Your economy will function ok with the script as an exchange mode untill those who hold the script want something of value and there is nothing of value left to redeem the script. No matter how much script you have there is nothing to redeem it with. Then it all comes crashing down around your ears.

[LeSellers]

My impression of the point of his presentation was that if for solid safe growth your money has to be tied to something with some intrinsic value, most generally gold and silver.

No one would disagree with that, until you start insisting that only gold and silver have intrinsic value. Land has intrinsic value. In the long run, it has more value than do either (or both) metals.

Anything may serve that purpose as long as people need it or want it. Food may be the basis for a monetary system, as may cloth or tobacco (but not in Salt Lake City ). The biggest problem with any of these is that they are not as convenient as metal since they may be consumed or may rot. They do not store value well.

If you unhook your money (currency) from the precious metal that gives it its value and just print money you immediatly begin to lesson its buying power. All you have then is script [sic] printed on paper. Your economy may inflate but with no real growth. There is nothing behind it but paper, printing presses and hot air.

Indeed, a process we are seeing before our very eyes, even as we speak, so to speak.

That fits pretty well with the economics that I learned. Your economy will function ok with the script as an exchange mode untill those who hold the script want something of value and there is nothing of value left to redeem the script. No matter how much script you have there is nothing to redeem it with. Then it all comes crashing down around your ears.

Gold can undergo the same devaluation. In time of extreme want, people may well prefer a pound of bread to a pound of gold, or an egg to an ounce of silver. And a paper note may have been worth five ounces of silver may not buy the same egg if the silver is not itself readily available.

Money is nothing more than a commodity that serves as a store of value. Its form can be virtually anything, but it always comes down to the willingness of people in general to accept it at face value as an intermediary between (or among) various barters or trades.

Money makes things cheaper because the people in the trade don't need to worry about the additional costs of additional trades to get what they actually want for what they traded away in the first place.

Lehi

[USU78]

There's another angle I'd be interested in seeing developed: Who were the players in and what were their motivations for turning down the application for Ohio State charter for the Kirtland Bank?

Why turn them down?

Were others similarly situated also turned down?

Were others with lesser cash reserves granted charters before and/or after the Kirtland Bank turndown?

USU "Who's seen a thing or three" 78

[ERayR]

'

No one would disagree with that, until you start insisting that only gold and silver have intrinsic value. Land has intrinsic value. In the long run, it has more value than do either (or both) metals.

Anything may serve that purpose as long as people need it or want it. Food may be the basis for a monetary system, as may cloth or tobacco (but not in Salt Lake City ). The biggest problem with any of these is that they are not as convenient as metal since they may be consumed or may rot. They do not store value well.

Indeed, a process we are seeing before our very eyes, even as we speak, so to speak.

Gold can undergo the same devaluation. In time of extreme want, people may well prefer a pound of bread to a pound of gold, or an egg to an ounce of silver. And a paper note may have been worth five ounces of silver may not buy the same egg if the silver is not itself readily available.

Money is nothing more than a commodity that serves as a store of value. Its form can be virtually anything, but it always comes down to the willingness of people in general to accept it at face value as an intermediary between (or among) various barters or trades.

Money makes things cheaper because the people in the trade don't need to worry about the additional costs of additional trades to get what they actually want for what they traded away in the first place.

Lehi

I can't argue with you at all. I am trying to remember my impressions of Bro White's talk. I think that what I went away with, and was in agreement with is that you can't grow your ecomomy any faster than your supply of what gives the money (paper)its value. This has traditionally been some kind of precious metal. When the money supply grows faster than what is backing it then there is serious problems. As you have pointed "a process we are seeing before our very eyes, even as we speak, so to speak".

[Pahoran]

I can't argue with you at all. I am trying to remember my impressions of Bro White's talk. I think that what I went away with, and was in agreement with is that you can't grow your ecomomy any faster than your supply of what gives the money (paper)its value. This has traditionally been some kind of precious metal. When the money supply grows faster than what is backing it then there is serious problems. As you have pointed "a process we are seeing before our very eyes, even as we speak, so to speak".

Actually I think you have it backwards. Here's the quote:

But an economy with only specie [i.e. coins] runs into some serious problems. While you wouldn't get a banking crisis, your economy can grow only as fast as you can mine gold, silver, and copper. And specie gets rid of barter only so long as there's enough specie to go around.

IOW, when the only money is metal coins, then you have problems if the supply of money can't keep up with the growth of the economy.

Regards,

Pahoran

[Daniel Peterson]

As I understood McKay White's talk, Pahoran is correct. The other criticisms here have misunderstood Brother White.

[wenglund]

There's another angle I'd be interested in seeing developed: Who were the players in and what were their motivations for turning down the application for Ohio State charter for the Kirtland Bank?

Why turn them down?

Were others similarly situated also turned down?

Were others with lesser cash reserves granted charters before and/or after the Kirtland Bank turndown?

USU "Who's seen a thing or three" 78

It is my understanding that there were two proposals made for a bank charter. The first proposal was made in December of 1836 by Orson Hyde. The second amended proposal was made in February of 1837, and included the names of 11 people, about half of which were not LDS. "Of the eleven names mentioned in the amendment submitted by Medary [on February 10th, 1837], six were Mormons (J. Smith, Rigdon, Whitney, W. Cowdery, H. Smith, and O. Cowdery). Five were non-Mormons (Adams, Allen, Bissell, Kingsbury, and Sharp). There is no published reference to non-Mormons being associated with the first charter proposal." (Dale W. Adams; BYU Studies Vol. 23, No. 4, pg.478)

LDS historians have suggested:

"In 1830, there were only eleven banks in Ohio; by 1834, when ten new bank charters were granted, there were a total of thirty-one. At that time the 'hard money' or 'loco foco' wing of the Democratic party gained control of the Ohio legislature and began turning down requests for charters. In 1835, all requests for additional charters were refused, while in 1836 only one of seventeen requests was granted. It was not until the loco focos were removed from control that the Ohio Legislature once again began granting charters"(Marvin S. Hill, C. Keith Rooker, Larry T. Wimmer, BYU Studies, Vol. 17, No. 4, p.437)

Thanks, -Wade Englund-

[wenglund]

R. McKay White has a serious misunderstanding about the nature of money. "Your economy can grow only as fast as you can mine"? Get real. Oh well, his misunderstanding is no worse than many professional economists.

Could you please explain what you believe to be the misunderstanding?

Thanks, -Wade Englund-

[katherine the great]

There's another angle I'd be interested in seeing developed: Who were the players in and what were their motivations for turning down the application for Ohio State charter for the Kirtland Bank?

Why turn them down?

Were others similarly situated also turned down?

Were others with lesser cash reserves granted charters before and/or after the Kirtland Bank turndown?

USU "Who's seen a thing or three" 78

In a nutshell: Jacksonian Democrats. The Ohio legislature was controlled by them and they were turning down applications left and right--not just the Saints.

[JangoStango]

After all, it's a faithful Mormon who has researched this therefore he is biased and unreliable.

It was indeed an excellent discussion. I for the first time actually understood what it was all about.

Do you understand why Joseph Smith fled the state?

[Helmuth]

IOW, when the only money is metal coins, then you have problems if the supply of money can't keep up with the growth of the economy.

As I understood McKay White's talk, Pahoran is correct. The other criticisms here have misunderstood Brother White.

Pahoran is exactly correct. I did not misunderstand that sentence. I disagree with Brother White based on a correct understanding of what he said/wrote.

Could you please explain what you believe to be the misunderstanding?

In the particular sentence I highlighted: the growth in supply of money does not constrain the growth of an economy. If mining can increase the amount of gold by 1% a year, that doesn't mean the economy can only grow 1% a year. It just means that as the economic productivity growth outpaces the money supply growth, there will be a gradual beneficial decrease in prices, such as experienced in the 19th century.

[Helmuth]

In a nutshell: Jacksonian Democrats. The Ohio legislature was controlled by them and they were turning down applications left and right--not just the Saints.

Interestingly, the Saints were overwhelmingly Jacksonian Democrats as well. An observer stated the Kirtland Saints were "Jacksonian Democrats, almost to a man" (quoted in Daniel Peterson's Notes on "Gadianton Masonry").

[USU78]

Pahoran is exactly correct. I did not misunderstand that sentence. I disagree with Brother White based on a correct understanding of what he said/wrote. In the particular sentence I highlighted: the growth in supply of money does not constrain the growth of an economy. If mining can increase the amount of gold by 1% a year, that doesn't mean the economy can only grow 1% a year. It just means that as the economic productivity growth outpaces the money supply growth, there will be a gradual beneficial decrease in prices, such as experienced in the 19th century.

If I'm barging wheat I grew (or pelts I trapped or shoes I made) back up the Erie Canal, I don't think much of your "beneficial" decreases.

[katherine the great]

Interestingly, the Saints were overwhelmingly Jacksonian Democrats as well.

I don't really find that particularly interesting or surprising. Most early Saints were the salt of the earth and not the elite.

[Deborah]

Do you understand why Joseph Smith fled the state?

Do you?

And what does that have to do with anything?

[wenglund]

I disagree with Brother White based on a correct understanding of what he said/wrote. In the particular sentence I highlighted: the growth in supply of money does not constrain the growth of an economy. If mining can increase the amount of gold by 1% a year, that doesn't mean the economy can only grow 1% a year. It just means that as the economic productivity growth outpaces the money supply growth, there will be a gradual beneficial decrease in prices, such as experienced in the 19th century.

Are you suggesting that money supply doesn't impact GDP?

Thanks, -Wade Englund-

[wenglund]

Do you understand why Joseph Smith fled the state?

If you are thinking it had anything directly to do with the KSS, you may want to think again. In fact, in terms of the KSS court issues under appeal at the time JS fled, and given the potential for successful appeal, it would have been in his interest to have stayed.

Thanks, -Wade Englund-