There is a quote going around these here Internets:
I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.
— Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802), 3rd president of US (1743 – 1826)
Thing is, while Thomas Jefferson did recognize one thing -- that repeated inflation-deflation cycles are a recipe from stripping wealth from the common people (see my note on deflationary spirals below, and how they benefit the wealthy by allowing them to pick up the assets of the common people for cheap) -- he did not understand why they happened, or how. He thought that if he simply disallowed banks from issuing gold notes (bank-issued currency backed by the gold in their vaults), this would suffice to solve the problem.
Like most folks of his era, Thomas Jefferson had no understanding of economics. The then-extant theory of economics was that gold was wealth, and that the purpose of commerce was to amass gold. The prevalent economic theory was mercantilism, which held that the goal of national policy was to amass gold (wealth) in the nation's vaults by exporting a lot and importing little. This theory, BTW, was responsible for the Boston Tea Party -- the goal of British policy was to force their colonies to buy their tea from British India rather than from cheaper Dutch or French sources, in order to prevent British gold from leaving British hands, and the American colonies simply did not get the point.
n any event, Thomas Jefferson was right, but wrong. All private banks create money via the power of fractional reserve lending. Whether private banks issue gold notes or a government-controlled central bank issues gold notes or fiat currency is irrelevant to the fact that fractional reserve lending creates money. The only way to achieve Thomas Jefferson's goal of complete government control over the money supply is either complete government control over all money -- which is not possible, money is, fundamentally, anything which can be used as a medium of exchange, if I can give you 1,000 shares of Cisco stock in exchange for 100 acres of land, this makes Cisco stock money -- or government intervention to inflate or deflate the money supply as various measures show is necessary. Which BTW is why stock market crashes have effects beyond the stock market, but I diverge from my lecture.
The other way to do it is to ban fractional reserve lending. The Muslim world did this, which is why the Muslim world is a fetid backwater, because without bank lending, economic activity slows to the crawl of what is doable with current resources rather than what is doable with the resources created by loaned money. Thomas Jefferson never suggested this, as far as I know. Fractional reserve lending had simply proven too useful over the past 100 years prior to this statement by Jefferson, after it had been invented (or reinvented) by British goldsmiths to make use of the gold on deposit with them. Given that, and given the lack of understanding of then-extant economic theory as to what constituted wealth and money, Jefferson's task was doomed to failure.
So: a) Jefferson did recognize a valid issue (i.e., that repeated inflation-deflation cycles strip wealth from the people -- and we're entering in the deflation part of that, feel good now?), but b) his solution simply will not work even if you do nationalize banks. Money isn't pieces of green toilet paper with pictures of dead people on it. Money is anything that can be traded for anything else of value. Short of a complete totalitarian police state, complete government control of the creation of money simply cannot be done -- a fact that Jefferson, who thought money was gold, would have had no chance of understanding.
-- Badtux the Economics Penguin