When the first Europeans settled in what would become the United States, the need of a currency to make trade easier rapidly arose. Before the US Dollar as we know it, the American Colonies went through several currency systems. Since most settlers were from the United Kingdom, the colonies were under the authority of the crown, and used the British system of pounds, shilling and pence. The use of Spanish dollars was also very widespread, and the name of the country’s official currency comes from this common practice. While the first trades took place with British or Spanish currency or commodities, the Massachusetts Bay Colony was the first to issue some paper currency, which it denominated in British terms at first, and then in both British and Spanish terms. For the first time in the colonies, a colonial authority delivered a piece of paper, regardless of the Crown’s opinion, which people trusted would be worth money. This was therefore the first fiat currency of the colonies, which would later become the United States of America. In this paper, we will explore the evolution of fiat currency in the United States, and the process that led to the adoption of the US Dollar still in use today. It will cover the period from 1690 to 1863, separated in three parts that correspond to currency evolution: Colonial currency from 1690 to 1775, the Revolution and the first banks from 1775 to 1860, and finally the US Dollar, the Legal Tender Act and the National Banking Act from 1860 onwards. 1690-1764: Colonial Currency In the early years of the British Colonies, business and trade were very important because they were major factors of growth. Therefore, there had to be little barriers to trade in the newly founded colonies, and the... ... middle of paper ... ...n, Ala.: Ludwig Von Mises Institute, 2002. Print. United States. Boston Federal Reserve. History of Colonial Money. N.p., n.d. Web. 24 Oct. 2013. United States. Congress. An Act to Provide a National Currency, Secured by a Pledge of United States Bonds, and to Provide for the Circulation and Redemption Thereof Approved June 3, 1864. S.l.: S.n., 1864. Print. United States. Congress. Declaration and Resolves of the First Continental Congress. N.p.: n.p., 1774. Web. 19 Oct. 2013. United States. Congress. House. N.p., n.d. Web. 23 Oct. 2013. United States. Massachusetts' House of Representatives. An Act for Drawing in the Bills of Credit of the Several Denominations Which Have at Any Time Been Issued by This Government and Are Still Outstanding, and for Ascertaining the Rate of Coin'd Silver in This Province for the Future. N.p.: n.p., 1749. Web. 17 Oct. 2013.
It was expected to result in a favorable balance of trade, with imports not exceeding exports. The significance of this term is that this system allowed gold and silver to flow into England, bringing economic expansion. As a result, these mercantile policies laid the ground for overseas colonization and allowed England to rise as a challenge to Spanish power in the New World.
In a similar economic revolution, the colonies outgrew their mercantile relationship with the mother country and developed an expanding capitalist system of their own. In England, the common view was that the colonies only purpose was to compliment and support the homeland. This resulted in a series of laws and protocols called th...
As the new century approached, a national crisis began to develop in the United States. The nation faced a severe depression, nationwide labor unrest and violence, and the government’s inability to fix any of the occurring problems. The Panic of 1893 ravaged the nation and became the worse economic crisis of its time. The depression’s ruthlessness contributed to social unrest and weakened the monetary system’s strength, leading to a debate over what would be the foundation of the national currency. As the era ended, the US sought to increase its power and strength.
“When on December 22, 1775, the British Parliament prohibited trade with the colonies, Congress responded in April of 1776 by opening colonial ports—this was a major step towards severing ties with Britain.” (history.state.gov) The colonies no longer depend solely on British goods, but had set up strong trading agreements with numerous countries. These agreements sustained the colonies. By setting up trade agreements with other countries, the colonies had, in a way, become “independent’ from the necessity for British goods. These British goods had become obsolete to the goods of rival
Unfortunately for the National Government, Congress did not have any power to collect taxes from people in each individual state. The Congress could ask for money, but could not by any mean force states to pay them. The National Government greatly needed money to cover expenses and debts. Congress could not pay the Nation’s debt, which meant they could not provide much needed programs and services for the states. With that issue being addressed, it is obvious the Nation had problems with their currency. With no uniform currency for the Nation, each state came up with their individual currency. Every state’s value of a dollar had differences in what they worth. By printing their own money, the Nation’s currency became practically worthless, while the state’s currency was worth quite a bit.
The colonies were prohibited from trading with other countries, being limited to only Britain. Navy ships patrolled the area in search for smugglers and manufacturing in the colonies became restricted so it wouldn’t compete with the industries in Great Britain. Worker in the towns had less chances to work and earn money due to the restriction of
The demand for no taxation without representation was the primary force motivating the American revolutionary movement, and for many it became a symbol for democracy. Throughout the late 18th century, the British colony of America was oppressed by Parliament from "across the pond". This oppression included unequal rights compared to English citizens that lived on the mainland, unneeded taxation, and no representation in Parliament, which resulted in many laws that were unfavorable to the American colonists. It was this "taxation without representation" that was a powerful catalyst in firing up the American revolutionary movement. America was "all grown up", and no longer needed to be monitored on by Britain.
Friedman, Milton and Jacobson Schwartz, Anna. A Monetary History of the United States, 1867-1960. Princeton, 1963
During the Revolutionary War there was much need for a strong centralized government that would have been able to collect taxes. The states were able to issue currency and the government accepted this in exchange for specie. Specie was very hard to come by in the colonies and most states relied on foreign currency such as Spanish coins to back up their currencies. The Continental Congress issued a Continental Currency in 1775, but due to lack of faith in the currency, it rapidly fell in value and prices skyrocketed. They were abandoned in 1781. If it weren’t for a massive loan from the French, the war would have ended due to bankruptcy. During the time period of the Articles of Confederation, each state was able to issue it’s own currency. The lack of national currency in the United States lead to exchange problems between the states, and also made trading difficult for the U.S.
Trade was important to the Maritimes. Up to 1846 Britain had provided the British North American colonies with a market for their goods, but then began a policy of free trade. Because there were no tariffs placed on any country the colonies lost a sure market for their goods. Many colonists were concerned that some might consider union with the United States and the British North American colonies was brisk with large amounts of lumber and grain being imported by the U.S. When the Americans ended the Reciprocity Treaty in 1865, many Maritimers became uneasy about the economic future. It became apparent that in order to develop thriving trade; new economic links would have to be developed. 3
There is perhaps no other political issue in our contemporary society that is more pertinent, pervasive, and encompassing than a nation’s economy. From the first coins used in Greece and the Asia Minor in the 7th century BCE, to the earliest uses of paper money, history has proven time and time again that the control of a region’s economy is absolutely crucial to maintaining social stability and prosperity. Yet, for over a century scholars have continued to speculate why the United States, one of the world’s strongest and most influential countries, has one of the most unstable economies. Although the causes of this economic instability can be attributed to multiple factors, nearly all economists agree that they have a common ancestor: the Federal Reserve Bank – the official central bank of the United States. Throughout the course of this paper, I will attempt to determine whether or not there is a causal relationship between the Federal Reserve Bank’s monetary policies and the decline of the U.S. economy. I will do this through a brief analysis of the history and role of this institution, in addition to the central banking system in general. In turn, I will argue that the reckless and intentional manipulation of the economy by the Federal Reserve Bank, through inflation and the abolishment of the gold standard, has led to the current economic crisis in the United States.
The Gilded Age is a period of volatile development in American trade and cultivation. Gilded Age government were conquered by fraud, as representatives took inducements and content their groups with posh management jobs. The three major problem happened in during Glided age was Currency Reform, Social Darwinism and political corruption. The Currency Reform is one of the most significant problem commerce with finances was that of Currency Reform. However the corruption was so common during glided age. However because of that City government administrated by dishonest machines like” New York's Tammany Hall”. The simple problem reposes about the idea that the quantity of money in flow controls its worth. However, it shared by that knowledge about l that money that was not supported by solid funds.
Money has evolved with the times and is a reflection of the progress of man. Early money was a physical commodity, grain, gold or silver. During the vital stage, more symbolic forms of money such as certificates of deposit, bank notes, checks, letters of credit, bonds and other forms of negotiable securities came into prominence. Social development transformed money into a trust, “In God We Trust' it says on the back of the ten-dollar bill.” (The Ascent of Money, 27)
Paper money is more complex. From 1900 through 1971 (with the exception of during World War I), the US dollar was backed by gold, meaning its value was legally defined by a certain weight of the metal. That ended in 1971, when Richard Nixon shocked the world by breaking the link to gold and allowing the dollar’s value to be determined by trading in the foreign exchange markets. The dollar is valuable not because it’s as good as gold, but because you can buy goods and services produced in the United States with it—and, crucially, it’s the only form the US government will accept for tax payments. Among the Federal Reserve’s many functions is allowing the issuance of just the right quantity of dollars—enough to keep the wheels of commerce well greased without slipping into a hyperinflationary crisis.
Trade is a big part of the United Kingdoms success and growth, but because of the high price level of the pound, exporters were struggling to get the demand required.