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 …show more content…
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, its closest rival. Domitrovic also appreciated the stability the gold standard provides if managed correctly because it limits inflation and slows rises in consumer prices. In addition, it limits the government’s ability to create money as the government can only print money if there is enough gold to back
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.
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
money.In the line “To be made of it !” Gioia uses a hyperbole by referring to rich people as being
world began to use this item as a means of currency. Leading in the production of this element
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.
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.
Friedman, Milton and Jacobson Schwartz, Anna. A Monetary History of the United States, 1867-1960. Princeton, 1963
First and foremost, Adam Smith was very conscious of how the wealth was unequally distributed amongst the poor versus the wealthy, and how and if this distribution continued it would leave the poor at a disadvantage, in the sense they will never have the opportunity to move ahead and will always be at the mercy of those who possessed more wealth. Mr. Smith viewed economics contrarily than the mercantilist. Compared to the days of old, the views of economics and mercantilism based wealth on the amount of gold and silver the nation provided, and how the import of goods from other countries would adversely affect the wealth of a country, as the reality was, trade was notably one-sided, it only benefited the seller and not the buyer, and it was believed that countries can only become wealthy by making other nations or countries poorer. However Mr. Smiths’ views were in contrast, believing the wealth of a nation was centered around production and commerce and not gold and silver, his belief also viewed trade as a positive, as it could only increase productivity, and both parties would benefit from the exchange the seller as well as the buyer. (Smith, 1776)
The gold standard is a necessary element of a healthy economy because a fiat currency can effectively destroy its own value. Before World War Two, Germany had severe problems with the inflation of their currency that reached absurd quantities. There were times during the 1920’s that a German family would buy their food at lunch because by the time evening came around the price of food had doubled or tripled. The US government has not yet returned our property rights since it took away the gold backing of the dollar during Nixon’s presidency. Reintroducing the gold standard would be the best thing that could happen for the future of the US economy. A gradual long term transition to full gold standard using a temporary fractional reserve of gold with regulated imports and exchange value for gold would increase the growth and stability of the US economy. This would serve as the best plan because the gold-backed money would be beneficial to the economy’s growth in the long term, the regulation of gold
Adam smith then wrote the book, which was considered very influential: The wealth of nations.
As humans developed and became sophisticated we needed ways other than just barter to exchange goods. Currency began in Anatolia in 12,000 BC with the distribution of obsidian to the people. In 9,000 BC trade began in the Mediterranean with the use of grain and cattle as a way to trade. (Wikipedia) In these times money was based on their marketability and utility, this means that although they did not use what we think as currency at this time such as coins and bills, if they were an agricultural society they would trade grains for cereals and things that involved grain because of their process ability. The use of gold was traced back to the fourth millennium BC in Egypt and the use of silver at the same time in Mesopotamia. Ancient Greece used similar coinage that began approximately in 700 BC. There are three periods in the time of Ancient Greece. The Archaic, Classical and Hellenistic periods, all of which have a different variation of currency.
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.
Adam Smith had some particular views that helped shape the economy today. He believed in an environment with free competition that functioned in unity with the common natural laws. All of Smith’s work in the “Wealth of Nations” became an ideal lead for the economic world hundreds of years ago. It is still today looked at by numerous scholars and taught by many. Even though many people believe that Smith thought that no government was the best government, however he did have a few areas where he believed there should be government intervention.
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
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