![]() The late 19th century is known as the Gilded Age, during which U.S. During this period, economic growth in America was nothing short of miraculous. ![]() Every piece of paper currency (such as gold certificates and Treasury Notes) could be exchanged for physical gold on demand. The Gilded Ageįrom 1873 to 1933, the US gold standard operated in its purest form. Gold served as the bedrock for economic value across the entire developed world. Until the devastating impact of WWI, nearly all Western nations (as well as many nations in Latin America and Asia) kept their currencies pegged to gold.Įvery currency was linked to every other currency at a fixed exchange rate, which made international trade extremely efficient. The “Crime of 1873,” as it is now known, drastically decreased the money supply in the US. Grant officially demonetized silver with the Coinage Act of 1873, which ended the US bimetallic standard. France, Belgium, Italy, Switzerland, Denmark, Sweden, Norway, the Netherlands, and Japan quickly followed suit, marking the beginning of the international gold standard. In 1871, Germany replaced its multiple silver-based currencies with a unified gold backing. In the decade following the Civil War, the United States returned to gold and silver-backed money. The greenback’s market value deteriorated quickly, forcing the government to remove greenbacks from circulation and reinstate the bimetallic standard. Without restrictions on money creation, the government soon cranked up the money printer.Īs greenbacks flooded the economy, inflation took hold. The US government declared greenbacks as legal tender, which encouraged citizens to use them in everyday transactions. However, expenses soon surpassed the value of precious metals in America’s coffers, which forced the government to issue its first fiat currency: the greenback.įiat money, like the dollar bills we use today, has no intrinsic value. On April 12, 1861, the Confederate Army attacked South Carolina’s Fort Sumter, officially beginning the US Civil War.Īt first, the government tried issuing gold-backed Treasury Notes to fund the war. Every piece of paper represented direct convertibility to physical gold or silver. This effectively pushed the United States onto a gold standard, though the nation still technically functioned on the bimetallic standard.ĭuring this period, Americans did use paper currency such as banknotes and Treasury Notes. The California Gold Rush also increased the supply of domestic gold. This Coinage Act boosted the gold-to-silver ratio to 16-to-1. To remedy this problem, Congress passed the Coinage Act of 1834. circulation, leaving silver coins as the primary unit of exchange. The gold-to-silver ratio was set at 15-to-1, meaning one ounce of gold was valued at 15 times one ounce of silver.Īt the time, international markets valued gold at a higher rate (15½-to-1) against silver. dollar the nation’s official unit of money. The Coinage Act of 1792 established the United States Mint, which produced, circulated, and regulated coinage in the United States. In 1792, Treasury Secretary Alexander Hamilton launched the first Coinage Act, unifying the US financial system. In the sixteen years following America’s independence from Great Britain, Americans primarily used foreign coins, such as the Spanish silver dollar, as currency. What’s done is done, but learning the lessons of history might help us make better decisions about the future of money. dollar into a fiat currency.Įvery iteration of American money, from the silver standard to the gold standard to modern fiat, had both die-hard proponents and staunch critics. remained on a quasi-gold standard, until President Nixon officially converted the U.S. The US gold standard operated in its purest form throughout the late-19th and early 20th centuries, until FDR confiscated all privately held gold in 1933. began transitioning to a gold standard, which became official with the demonetization of silver in 1873. From 1792 to 1834, silver served as the primary backing. monetary system throughout the 19th and 20th centuries, the advantages and disadvantages of each, and how they might have impacted human flourishing.įor its first 200 years as an independent nation, America functioned on some version of a metallic standard. In this article, we will explore major shifts in the U.S. The United States emerged as a world power for many reasons, including strong democratic ideals and advantageous geography. In ancient Egypt, the Roman Empire, the Great British Empire, and every powerful civilization in between, economics played a vital role in the preservation of power. Human progress follows the rise and fall of great empires. But where did modern money come from? How does this inform the future? Creating an Economic Empire Inflation, depression, innovation, human flourishing - the US monetary system has played an integral role in each of these issues for centuries.
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