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The wealth and poverty of nations summary
The wealth and poverty of nations summary
Critical analysis of the wealth of nations
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Adam Smith wrote in his masterpiece, the wealth of nations, “It is the necessary, though very slow and gradual consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another” (Smith, 2005). This propensity in human nature led to the development of currency – a medium of exchange accepted by a community of people. For centuries, gold and silver were used around the world as currency; in 1834 the United States, formerly on a bimetallic standard, converted to a gold de facto standard. This policy made it so the dollar was backed by gold at a ratio of $20.67 per ounce. The Gold standard was used until August 15, 1971 when President Richard Nixon
Brian Domitrovic, PhD, Chairman of the Department of History at Sam Houston State University, stated in his article The Gold Standard: The Foundation of Our Economy’s Greatness that, “From the first full year that the constitution’s outline of the gold standard took effect, 1790, until 1913, the year the Federal Reserve came into existence and the serial dismantling of the gold standard began, the United States economy increased in size, in real terms, by just about 150-fold” (Should The United States Return To The Gold Standard?, 2013). This record of growth was so large that the United States’ economy was over twice as large as Germany’s, our closest rival. Domitrovic also appreciated the stability the gold standard provided if managed correctly, because it limited inflation and slowed rises in consumer prices. In addition, it limited the government’s ability to create money as the government could only print money if there was enough gold to back
First, in order to function properly, countries have to follow rules to avoid deflation or inflation. However, if a country wanted to, they could easily deflate or inflate their economy by breaking said rules. The second major flaw of the gold standard is that there is not enough gold in the world to serve as money anymore because there is too much money in circulation. The process of mining gold is dangerous, expensive and difficult as it is hard to find. The process of printing dollar bills is quick, easy and cheap. Why go through the effort to mine more gold when the fiat system has arguably done just as well? The choice is clear, the gold standard has been replaced by a new, better standard – the fiat
On a stop in Colorado during a business trip to California in 1883, Coin became fascinated with silver and took up a pick to try his hand at mining. Calling his mine “Silver Bell,” Harvey’s mine was the second largest producer in the area; however, due to the increase in transportation costs, increasing labor unrest, and the plummeting market value of silver, Harvey abandoned his mine. From Coin’s mining days, he formed an interest in silver as opposed to gold as the U.S. monetary system standard. In 1891, he became the chairman of the Trans-Mississippi Congress, whose interest was in promoting legislation that would benefit the states west of the Mississippi.
Throughout the past decade, costs of everything have skyrocketed. According to Source C, America used to have “five and dime stores;” now its a dollar store. In addition, no one can buy anything with just a penny anymore. The source also made a fair observation that these worthless zinc disks are, “behind chair cushions or at the back of sock drawers next to your old tin-foil ball. Quarters and dimes circulated; pennies disappear because they are literally more trouble than they are worth.” According to a New York Times article, “it takes nearly a dime today to buy what a penny bought back in 1950.” The penny is still stuck in the 1950s while America just keeps moving on. As stated by Mark Lewis in his concept of establishing a bill, “the bill would not ban pennies, but merely discourage their use by establishing a system under which cash transactions would be rounded up or down.” (Source A) This motive will help keep the America exceed and
He states that the financial system was based on competing state banks with no central bank which promoted a rapid economic growth. As the American banking system developed the money supply developed with it. The federal government began the banking system through the issuing of specie but as the capitalist system developed the banking structure developed as well. During the Civil War, the North printed Greenbacks that drove gold from the domestic circulation to help pay for war necessities. The Greenbacks, however, were rarely used in the South expressing the different economies of the North and the South at the time of the Civil War. With differing economies and the growth of specie and paper money, Brands argues that the basis of knowledge about the money system of this time lays a foundation for how Carnegie, Rockefeller, and others were able to manipulate the market and gain wealth. Leading into price manipulation by those in corporate
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 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.
In the beginning of the 1830s, the United States experienced a short period of expansion and a prosperous economy. Land sales, new taxes, such as the Tariff of 1833, and the newly constructed railroads brought a lot of money into the government’s possession; never before in the history of the country had the government experienced a surplus in its national bank. By 1835, the government was able to accumulate enough money to pay off its national debt. Much of the country was happy with this newly accumulated wealth, but President Jackson, before leaving office in 1836, issued what is called a Specie Circular. Many local and state governments liked to save specie, or gold and silver, and use paper money to take care of transactions. President Jackson, in his Specie Circular, said that the Treasury was no longer allowed to accept paper money as payment for the sales of land and the like. Most, if not all, of the country did not like this, and as a result many banks restricted credit and discontinued the loans. The effects of Jackson’s Specie Circular took effect in 1837, when Martin van Buren became president. All investors became scared, and in 1837, attempted to withdraw all of their money at once. Soon after this, unemployment and riots occurred in many cities, and the continued expansion of the railroad ceased to be.
...h he had favored central banking for most of his life, in 1970 he had begun advocating denationalizing money. In his opinion private enterprise’s that issued distinct currencies, he argued, would have an incentive to maintain their currency’s purchasing power. Which would then mean that customers could choose among competing currencies. Now, whether they would revert to a gold standard or not was a question that Hayek was too much of a believer in spontaneous order to predict. With the collapse of communism in Eastern Europe at the time, some economic consultants had considered Hayek’s currency system as a replacement for fixed-rate currencies.
Money makes exchange much easier, because people can trade their goods for money and use the money to buy other things. In the Bible money was silver or gold, a precious metal, and America was on a gold standard throughout most of her history. In 1933 we shifted to a silver standard and in 1968 our silver certificates were replaced with Federal Reserve Notes (Remy, 2008). Today’s paper money is not backed by anything except the government’s promise that it is good. Money with no precious metal backing allows the central government to spend more than it collects in taxes, because the Federal Reserve Board can print new money, thus increasing the money supply, anytime there is a need. This is what causes inflation and is one way that the Federal Reserve Board has overstepped Biblical principles in economic policy. Greg Anthony writes that “one of the Biblical signs of a nation backsliding is the condition of its currency and the degree of honesty in its weights and measures” (Anthony, 1988, p. 28). When the money supply is increased, either through printing more money or credit-expansion, the purchasing power of the dollar falls, and businesses must increase the prices they charge to keep up with their own higher costs. Inflation encourages debt, deceives people about pay increases and future wealth accumulations, is a hidden theft tax, and decreases capital available for
Friedman, Milton and Jacobson Schwartz, Anna. A Monetary History of the United States, 1867-1960. Princeton, 1963
Money is the backbone of America. Without it anarchy would break out and bargaining would fail as people would claim the trade wasn’t fair. Thievery would explode across the globe and some lazy people would have no motivation to work. While most people believe that money is important, the question is whether all money is important. For centuries, the penny has shared a role in American currency and has served a great purpose. In the past, pennies could buy candies, slices of bread, and many other things all on their own. But as time changed, so has the value of the penny. As costs went up, the value of the penny went down. And with its lesser value, some people wonder if it’s even worth it to keep the penny around.
Adam smith wrote in his masterpiece, the wealth of nations, “It is the necessary, though very slow and gradual consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another”. This propensity in human nature led to the development of currency – a medium of exchange accepted by a community of people. For centuries gold and silver were used around the world as currency; in 1834 the United States, formerly on a bimetallic standard, converted to a gold de facto standard. This policy made it so the dollar was backed by gold at a ratio of $20.67 per ounce. The Gold standard was used until August 15, 1971 when President Richard Nixon announced that the United States would no longer redeem currency for gold. (Bordo, n.d.) Instead a fiat monetary system – currency not backed by gold – would be used. Both systems have their advantages and
In today’s world, gold is viewed as something that a person would put on their fingers, in their ears, or around their necks to show wealth. In the late 1800s, gold was used a lot differently than how it is today. Symptoms of gold fever were making their way around the United States at an extremely rapid pace. Everyone wanted to jump on the chance at possibly making more money than they would ever need on finding gold. These men and women would literally go to the extremes just to sink their picks and shovels into gold rich ground. Everyone who wanted to jump on the chance at becoming rich had to bear treacherous trails to arrive at Dawson, a city in the Klondike where miners thought they could finally pull some gold from the ground.
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.
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.
Today, couple of monetary forms are completely upheld by gold or silver. Subsequent to most world monetary standards are fiat cash, the cash supply could increment quickly for political reasons, bringing about inflation. The