Cryptos, taxes and rye whiskey
As anyone whose has followed the erratic rise of crypto-currencies will have noted, governments are very uneasy with any alternative to the national currency. Even if they have almost no national currency to be defensive about.
What hard currency there was in the United States could be found in the urban areas, but precious little in the countryside. Lacking access to banks, farmers just grew all the grain they were able, sold what they could, ate what they needed, and then turned the rest into whiskey as a durable, transferable store of wealth. Basically, their savings accounts were in whiskey where it would sit until cash was needed, when it was sold.
The system worked well-enough, but Alexander Hamilton didn’t like it. Hamilton was not, despite what you might have gleaned from the Broadway musical, a Puerto Rican rapper. Born out of wedlock on the island of Nevis in the British West Indies, he bounced around the Caribbean before being taken in by a wealthy merchant and sent to New York for law school. As one of the founding fathers, and the one who laid the ground work for the new republic’s financial system. Hamilton thought that raising revenue via a land tax was a bad idea because that was the way the rich and powerful stored their wealth and not being born into it, he didn’t want to poke that bear. He was about as elitist as any orphaned bastard made good can be.
Out in the country, however, the bumpkins were storing their wealth in whiskey barrels. Urban elites were drinking a lot of the stuff and didn’t want to bother them, so he thought he’d tax the poor peasants actually creating the value. Enter the Whiskey Excise Tax to the tune of 60 cents per gallon at a time when whiskey would fetch about $1.40 per.
Grating though it was, the issue wasn’t exactly the tax itself, but how it had to be paid. In the rural areas, there wasn’t much hard currency with which to pay it. The obvious solution was to let the people pay the tax in kind (read: in whiskey). Hamilton didn’t want the taxes paid in whiskey, he wanted cash. So the farmers were forced to liquidate assets (the whiskey) at a discount (triggered by the forced sale) in order to pay the taxes on said asset.
Somewhat predictably, this triggered a revolt in 1794 called the Whiskey Rebellion. It spread out through western Pennsylvania and Virginia. The action gets dismissed now but at the time, President Washington sent more federal troops against the rebels than were ever massed against the British during the revolution. And that was that for America’s first alternate currency. Well, not entirely.
The strange postscript to George Washington’s brutal crushing of the Whiskey Rebellion is that, on his retirement he became one of the biggest whiskey producers in the new republic and managed to invent rye whiskey in the bargain. More precisely, the operation was the idea of Scot named James Anderson, who’d been born into the fringe of Scotch whisky royalty. By Anderson’s day, the industry had been practically mothballed by the English tax laws that had the industry. Anderson was a successful farm manager (but not land owner) in Scotland where, like America, farmer and distiller were never far apart. With the industry crippled from London, Anderson, his wife and seven children sailed for the New World.
Anderson was a man of ambition and tried to get himself hired as the farm manager at George Washington’s plantation, Mount Vernon, while the man was still president. He didn’t get the job but while working at another plantation wrote again to a retired Washington with a scheme to start a distilling operation. He started on 1 January 1797.
Washington was an aristocrat, but land-rich and cash poor. In short, he was a tightwad. He fussed at Anderson over every expense, including that of barely. So the wily Scot found a cheaper alternative. Crop rotation was a well-established farming technique. To prevent the nutrients in the soil from becoming exhausted by over farming, you let a field lay fallow for a season. Unplanted soil erodes easily, so to combat this, you plant covering crop that isn’t taxing on the soil, but prevents erosion. A common crop for this was rye, which was thought to be inedible. Anderson looked down and said, “This stuff is cheap and it’s all over the place.”
He made 11,000 gallons of rye the first year fetched about $7,500, or about. $150,000 today.
Soon Mount Vernon was the largest distiller in the country. The Marquis de Lafayette - America’s borrowed war hero – sampled the rye and reportedly it made a fine impression on the man. Back when the French had something to live for other than wine, they were fairly open to new drinks.
What about that loathsome Whiskey Tax Washington had brutally enforced during his presidency? Fortunately for his bottom line, Washington was a notorious and brazen tax cheat. He more or less dared Congress to press the issue. They backed down, a nation needs its myths.
And you need a drink...
This article was adapted from Drunk as Lords (Burnaby)