Monetary sovereignty
Encyclopedia
A state
is generally considered monetarily sovereign to the extent that it retains the following legal rights
:
deemed legal tender
for payment of taxes and legal debts. Historically, states have operated on a variety of currencies (see History of Money
) and a change in legal tender is typically the result of an economic/political revolution/crisis (see History below).
, depts. of the treasury
, monetary authorities
, finance ministers
and central banks.
monopoly
. This right is typically executed through the prosecution of fraud
and counterfeiting, and the regulation
of legal currencies, both foreign and domestic.
: Shortly after Julius Caesar
seized control of the Roman Republic
in 49 BCE, he also seized partial monetary sovereignty by coining his own imperial currency and passing a law to restructure debts so that ultimately one fourth of all debts were eliminated.
Jewish-Roman wars
: After the Roman Empire seized control of Jerusalem in 63 BCE
, they usurped the monetary sovereignty of the Jews
by forcing them to use the Tyrian shekel
for payment of their Temple
tax, despite the fact that the Tyrian shekel bore the image of the Phoenician
god
Baal
. This was probably a contributing factor, when Jesus
physically forced the money changers out of the Temple in the new testament
story of the Cleansing of the Temple. In addition the thirty pieces of silver later given to Judas
for the betrayal of Jesus to the Romans
are likely to have been Tyrian shekels. After the Jews captured Jerusalem from the Romans both in the First Jewish Revolt of 66 CE and again in the Bar Kochba Revolt of 132-135 CE, they restored their monetary sovereignty by issuing the First Jewish Revolt Coinage
and then the Bar Kochba Revolt coinage
.
Medieval England: For hundreds of years the British Monarchy issued a currency of royal tally sticks (ie. debts to the crown). In the 17th century, the Bank of England
began to add royal tally sticks to their capital reserves, but the royal tally system was officially retired in 1826.
Plano Real
: In 1994 Brazil
issued a new form of legal tender, the Unidade Real de Valor or Unit of Real Value
as part of a set of measures, known as the Plano Real
, intended to stabilize inflation
of the Brazilian Real
.
European sovereign debt crisis: When the European Union
was formed in 1993, most member states chose the euro
for legal tender. Since the European Central Bank
controls issuance, retirement and to some extent monopoly rights on the euro, these states have partially transferred their monetary sovereignty to that bank. The current debt crisis
has sparked debates about whether debtor states should reclaim full monetary sovereignty by leaving the euro.
developed, the early Americans utilized a heterogeneous mix of both foreign and domestic currencies. The domestic currency, generally known as colonial scrip
, was issued by colonial governments, individuals and corporations. Since colonial scrip increased the liquidity
of colonial debtors relative to the British pound
, these currencies were widely popular within the colonies but strongly derided by the British. For example, Adam Smith
denounced colonial currencies in his book, "The Wealth of Nations
", as a "violent injustice" to the creditor and a "scheme of fraudulent debtors to cheat their creditors" (Book II, Chapter II). The British Empire
reasserted its monetary sovereignty over the colonies with the Currency Acts
of 1751 and 1764, which prohibited the use of colonial scrip as legal tender. As a source of further tension, the British Empire, heavily indebted from the Seven Years' War
and seeking revenues to support British troops in North America, issued the Stamp Act of 1765
and the Townshend Acts
of 1767, thereby intensifying taxation
upon colonists lacking representation within the British state. This system of "Taxation without Representation" was explicitly forbidden by the Rights of Englishmen
. In 1774 the First Continental Congress
asserted the monetary sovereignty of the colonies by demanding redress for these and other Intolerable Acts
.
Continentals and Free Bimetallism
: In 1776 the Second Continental Congress
issued the Declaration of Independence
and then partially financed the ensuing American War of Independence by issuing continental currency. However, these "Continentals" rapidly devalued due to overproduction, poor management and economic warfare
in the form of rampant counterfeiting. After the collapse of the continental currency, the War of Independence was primarily financed through the Bank of North America
, established in 1781 with loans from France
, Spain
, the Netherlands
and the "Financier of the Revolution", Robert Morris. When the Philadelphia Convention
ratified the United States Constitution
in 1787, they established a free
bimetallic
standard for legal tender
, partially in order to avoid a repeat of the continental currency's inflation
debacle.
- Debt
, Taxation
and Fixed
Bimetallism
: In 1790 President George Washington
appointed Alexander Hamilton as United States Secretary of the Treasury
. During his time as Treasurer, Hamilton wrote a series of reports and letters promoting the expansion of federal sovereignty. Hamilton's proposals were generally opposed by Thomas Jefferson
, James Madison
and others who favored a small federal government with limited sovereignty as outlined by the United States Constitution
. Although this conflict ultimately led to the formation of the American two-party political system
, Hamilton was largely successful in extending the monetary sovereignty of the federal government through the passage of following policies:
Land Speculation and the End of the First Bank of the United States
: When Hamilton left office in 1795, his successor, Oliver Wolcott Jr.
, informed congress that more funds were required to service the federal deficit. He offered the option of increased taxation but instead recommended that congress sell their shares in the First National Bank
. Congress agreed and sold their shares. From this time until the War of 1812
the federal government operated on deficit for 2 years and on a surplus for 14 years. When the real estate bubble collapsed in 1796-1797, thousands of Americans went bankrupt, many of them were also punished with years in debtors' prison, including Robert Morris and the father of Robert E. Lee
.. This led to the passage of the Bankruptcy Act of 1800, which was repealed only 3 years later. In 1811 congress chose not to renew the charter of the First National Bank
, thereby removing the monetary rights granted by the Bank Bill. The First Bank of the United States
became a regular private bank and was ultimately bought out by Philadelphia philanthropist, Stephen Girard
.
: President Andrew Jackson
fervently opposed the Second Bank of the United States
. He vetoed the renewal of its charter in 1832 and in 1834 he famously declared, "Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out!" When the charter of the Second Bank expired in 1836, it became a regular bank and eventually collapsed 5 years later.
: In 1861-62 Abraham Lincoln
authorized the Dept. of Treasury
's to issue debt-free demand notes
as part of financing
the United States Civil War.
Crime of '73 and (un)Free Silver
: After silver
was demonetized by the Coinage Act of 1873, the Free Silver movement aimed to remonetize silver and restore the bimetallic
money system. The movement generally pitted debtors, who hoped that silver would provide them with an increase in liquidity
, against creditors, who largely controlled the gold
supply. Bimetallism
was promoted by the Populist Movement
, and William Jennings Bryan
famously comdemned the monometallic gold standard
in his Cross of Gold speech
. The Farmers' Alliance
also promoted bimetallism, since many farmers had fallen into debt through the crop-lien system
. Bimetallism was opposed by a powerful group of creditors including railroad monopolies, banks, and commodity brokers, who eventually defeated the Free Silver movement with the establishment of the Federal Reserve System
at Jekyll Island in 1910.
and the Federal Reserve System
:
Executive Order 6102
and Gold Reserve Act
: On April 5, 1933, U.S. President Franklin D. Roosevelt issued Executive Order 6102
"forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates within the continental United States" and thereby criminalized the possession of monetary gold by any individual, partnership, association or corporation. The Gold Reserve Act
of 1934 reinforced state control of gold both by ordering the transfer of all gold and gold certificates from the Federal Reserve to the Departement of Treasury and by changing the nominal price of gold from $20.67 per troy ounce to $35. In 1935 the Supreme Court judgment, Norman vs. Baltimore & Ohio Railroad Co., reaffirmed the state's currency monopoly by invalidating gold clauses
.
Executive Order 11110
: On June 4, 1963 President John F. Kennedy
issued Executive Order 11110
granting the Secretary of the Treasury the authority to issue debt-free silver certificates. However in March 1964, a few months after President Kennedy was assassinated, the Secretary of the Treasury halted redemption of silver certificates for silver dollars and all redemption in silver ceased on June 24, 1968.
Nixon Shock
: In 1971 U.S. President Richard Nixon
asserted the right of legal tender by canceling the direct convertibility of the United States dollar
to gold
. In 1977 Congress reaffirmed the state's immunity from gold claims but legalized the use of gold clauses
for private obligations (new contracts) in accordance with 31 U.S.C. § 5118(d)(2).
State (polity)
A state is an organized political community, living under a government. States may be sovereign and may enjoy a monopoly on the legal initiation of force and are not dependent on, or subject to any other power or state. Many states are federated states which participate in a federal union...
is generally considered monetarily sovereign to the extent that it retains the following legal rights
Rights
Rights are legal, social, or ethical principles of freedom or entitlement; that is, rights are the fundamental normative rules about what is allowed of people or owed to people, according to some legal system, social convention, or ethical theory...
:
- The right of legal tender - to choose which currenciesCurrencyIn economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
are acceptable as legal tenderLegal tenderLegal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Paper currency is a common form of legal tender in many countries....
for payment of taxesTaxTo tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
and other legal debts. - The right of issuance and retirement - to control the issuance and retirement of any coinCoinA coin is a piece of hard material that is standardized in weight, is produced in large quantities in order to facilitate trade, and primarily can be used as a legal tender token for commerce in the designated country, region, or territory....
or fiatFiat moneyFiat money is money that has value only because of government regulation or law. The term derives from the Latin fiat, meaning "let it be done", as such money is established by government decree. Where fiat money is used as currency, the term fiat currency is used.Fiat money originated in 11th...
currency. - The right of currency monopoly - to maintain a currency monopolyMonopolyA monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
by effective control of competing currencies.
Right of legal tender
The right of legal tender grants the power to determine the currencyCurrency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
deemed legal tender
Legal tender
Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Paper currency is a common form of legal tender in many countries....
for payment of taxes and legal debts. Historically, states have operated on a variety of currencies (see History of Money
History of money
The history of money spans thousands of years. Numismatics is the scientific study of money and its history in all its varied forms.Many items have been used as commodity money such as natural scarce precious metals, cowry shells, barley, beads etc., as well as many other things that are thought of...
) and a change in legal tender is typically the result of an economic/political revolution/crisis (see History below).
Right of issuance and retirement
The right of issuance and retirement grants the power to issue and retire the legal tender. The state generally extends this right to a variety of public and private institutions, for example private banksBank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
, depts. of the treasury
United States Department of the Treasury
The Department of the Treasury is an executive department and the treasury of the United States federal government. It was established by an Act of Congress in 1789 to manage government revenue...
, monetary authorities
Monetary authority
Monetary authority is a generic term in finance and economics for the entity which controls the money supply of a given currency, and has the right to set interest rates, and other parameters which control the cost and availability of money...
, finance ministers
Finance minister
The finance minister is a cabinet position in a government.A minister of finance has many different jobs in a government. He or she helps form the government budget, stimulate the economy, and control finances...
and central banks.
Right of currency monopoly
The right of currency monopoly grants the power to maintain a currencyCurrency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
monopoly
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
. This right is typically executed through the prosecution of fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
and counterfeiting, and the regulation
Regulation
Regulation is administrative legislation that constitutes or constrains rights and allocates responsibilities. It can be distinguished from primary legislation on the one hand and judge-made law on the other...
of legal currencies, both foreign and domestic.
Examples
- Monetary sovereignty is sometimes called money power.
- Sustainable EconomicsSustainable EconomicsSustainable Economics is the economic study of sustainability....
is the study of how a stateState (polity)A state is an organized political community, living under a government. States may be sovereign and may enjoy a monopoly on the legal initiation of force and are not dependent on, or subject to any other power or state. Many states are federated states which participate in a federal union...
survives on limited resources. - Throughout history a variety of tactics have been employed to disrupt or control the monetary sovereignty of a state, for example warWarWar is a state of organized, armed, and often prolonged conflict carried on between states, nations, or other parties typified by extreme aggression, social disruption, and usually high mortality. War should be understood as an actual, intentional and widespread armed conflict between political...
, debtDebtA debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...
, regulatory captureRegulatory captureIn economics, regulatory capture occurs when a state regulatory agency created to act in the public interest instead advances the commercial or special interests that dominate the industry or sector it is charged with regulating. Regulatory capture is a form of government failure, as it can act as...
, speculatory attacksSpeculative attackA speculative attack is a term used by economists to denote a precipitous acquisition of something by previously inactive speculators. The first model of a speculative attack was contained in a 1975 discussion paper on the gold market by Stephen Salant and Dale Henderson at the Federal Reserve Board...
, currency warsCurrency warCurrency war, also known as competitive devaluation, is a condition in international affairs where countries compete against each other to achieve a relatively low exchange rate for their own currency. As the price to buy a particular currency falls, so to does the real price of exports from the...
, beggar they neighborBeggar thy neighbourIn economics, a beggar-thy-neighbour policy is an economic policy through which one country attempts to remedy its economic problems by means that tend to worsen the economic problems of other countries.- Original application :...
economic policies, economic warfareEconomic warfareEconomic warfare is the term for economic policies followed as a part of military operations during wartime.The purpose of economic warfare is to capture critical economic resources so that the military can operate at full efficiency and/or deprive the enemy forces of those resources so that they...
, cyberwarfare, propagandaPropagandaPropaganda is a form of communication that is aimed at influencing the attitude of a community toward some cause or position so as to benefit oneself or one's group....
, etc. - The economic theory of optimum currency areas studies the conditions under which a group of states may (or may not) benefit economically by using a common currency as legal tenderLegal tenderLegal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Paper currency is a common form of legal tender in many countries....
. - The issuance or destruction of currency by those whom the state has not granted this right is called counterfeitingCounterfeitTo counterfeit means to illegally imitate something. Counterfeit products are often produced with the intent to take advantage of the superior value of the imitated product...
or fraudFraudIn criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
. - Under a system of free bankingFree bankingFree banking refers to a monetary arrangement in which banks are subject to no special regulations beyond those applicable to most enterprises, and in which they also are free to issue their own paper currency...
the state, if it existsAnarchyAnarchy , has more than one colloquial definition. In the United States, the term "anarchy" typically is meant to refer to a society which lacks publicly recognized government or violently enforced political authority...
, essentially grants full monetary sovereignty to the individual. - Under most systems of fractional reserve banking the state grants private banksBankA bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
the right to issue and retire currency in the form of loans, typically under the restriction that loans do not exceed deposits by an agreed upon money multiplierMoney multiplierIn monetary economics, a money multiplier is one of various closely related ratios of commercial bank money to central bank money under a fractional-reserve banking system. Most often, it measures the maximum amount of commercial bank money that can be created by a given unit of central bank money...
, whose inverse is called the reserve requirementReserve requirementThe reserve requirement is a central bank regulation that sets the minimum reserves each commercial bank must hold of customer deposits and notes...
.
World history
Ancient RomeAncient Rome
Ancient Rome was a thriving civilization that grew on the Italian Peninsula as early as the 8th century BC. Located along the Mediterranean Sea and centered on the city of Rome, it expanded to one of the largest empires in the ancient world....
: Shortly after Julius Caesar
Julius Caesar
Gaius Julius Caesar was a Roman general and statesman and a distinguished writer of Latin prose. He played a critical role in the gradual transformation of the Roman Republic into the Roman Empire....
seized control of the Roman Republic
Roman Republic
The Roman Republic was the period of the ancient Roman civilization where the government operated as a republic. It began with the overthrow of the Roman monarchy, traditionally dated around 508 BC, and its replacement by a government headed by two consuls, elected annually by the citizens and...
in 49 BCE, he also seized partial monetary sovereignty by coining his own imperial currency and passing a law to restructure debts so that ultimately one fourth of all debts were eliminated.
Jewish-Roman wars
Jewish-Roman wars
The Jewish–Roman wars were a series of large-scale revolts by the Jews of Iudaea Province and Eastern Mediterranean against the Roman Empire. Some sources use the term to refer only to the First Jewish–Roman War and Bar Kokhba revolt...
: After the Roman Empire seized control of Jerusalem in 63 BCE
Siege of Jerusalem (63 BC)
-Bibliography:** Josephus, Flavius. William Whiston, A.M., translator . . Auburn and Buffalo, New York: John E. Beardsley. Retrieved 15 July 2010.*****...
, they usurped the monetary sovereignty of the Jews
Jews
The Jews , also known as the Jewish people, are a nation and ethnoreligious group originating in the Israelites or Hebrews of the Ancient Near East. The Jewish ethnicity, nationality, and religion are strongly interrelated, as Judaism is the traditional faith of the Jewish nation...
by forcing them to use the Tyrian shekel
Tyrian shekel
Tyrian shekels were coins of Tyre, which in the Roman Empire took on an unusual role as the medium of payment for the Temple tax in Jerusalem, and subsequently gained notoriety as a likely mode of payment for Judas Iscariot...
for payment of their Temple
Temple in Jerusalem
The Temple in Jerusalem or Holy Temple , refers to one of a series of structures which were historically located on the Temple Mount in the Old City of Jerusalem, the current site of the Dome of the Rock. Historically, these successive temples stood at this location and functioned as the centre of...
tax, despite the fact that the Tyrian shekel bore the image of the Phoenician
Phoenicia
Phoenicia , was an ancient civilization in Canaan which covered most of the western, coastal part of the Fertile Crescent. Several major Phoenician cities were built on the coastline of the Mediterranean. It was an enterprising maritime trading culture that spread across the Mediterranean from 1550...
god
God
God is the English name given to a singular being in theistic and deistic religions who is either the sole deity in monotheism, or a single deity in polytheism....
Baal
Baal
Baʿal is a Northwest Semitic title and honorific meaning "master" or "lord" that is used for various gods who were patrons of cities in the Levant and Asia Minor, cognate to Akkadian Bēlu...
. This was probably a contributing factor, when Jesus
Jesus
Jesus of Nazareth , commonly referred to as Jesus Christ or simply as Jesus or Christ, is the central figure of Christianity...
physically forced the money changers out of the Temple in the new testament
New Testament
The New Testament is the second major division of the Christian biblical canon, the first such division being the much longer Old Testament....
story of the Cleansing of the Temple. In addition the thirty pieces of silver later given to Judas
Judas
Judas is the anglicized Greek rendering of the Hebrew name Yehudah , also rendered in English as Judah.-People:...
for the betrayal of Jesus to the Romans
Roman Empire
The Roman Empire was the post-Republican period of the ancient Roman civilization, characterised by an autocratic form of government and large territorial holdings in Europe and around the Mediterranean....
are likely to have been Tyrian shekels. After the Jews captured Jerusalem from the Romans both in the First Jewish Revolt of 66 CE and again in the Bar Kochba Revolt of 132-135 CE, they restored their monetary sovereignty by issuing the First Jewish Revolt Coinage
First Jewish Revolt coinage
First Jewish Revolt coinage was issued by the Jews after the Zealots captured Jerusalem and the Jewish temple from the Romans in 66 AD at the beginning of the First Jewish Revolt...
and then the Bar Kochba Revolt coinage
Bar Kochba Revolt coinage
Bar Kochba Revolt coinage were coins issued by the Jews during the Bar Kochba revolt against the Roman Empire of 132-135 AD.During the Revolt, large quantities of coins were issued in silver and copper with rebellious inscriptions, all being overstruck over foreign coins, when a file was used to...
.
Medieval England: For hundreds of years the British Monarchy issued a currency of royal tally sticks (ie. debts to the crown). In the 17th century, the Bank of England
Bank of England
The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...
began to add royal tally sticks to their capital reserves, but the royal tally system was officially retired in 1826.
Plano Real
Plano Real
The Plano Real was a set of measures taken to stabilize the Brazilian economy in early 1994, under the direction of Fernando Henrique Cardoso as the Minister of Finance, during the presidency of Itamar Franco....
: In 1994 Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...
issued a new form of legal tender, the Unidade Real de Valor or Unit of Real Value
Unidade Real de Valor
The Unidade Real de Valor, or URV , was a non-monetary reference currency created in March 1994, as part of the Plano Real in Brazil...
as part of a set of measures, known as the Plano Real
Plano Real
The Plano Real was a set of measures taken to stabilize the Brazilian economy in early 1994, under the direction of Fernando Henrique Cardoso as the Minister of Finance, during the presidency of Itamar Franco....
, intended to stabilize inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
of the Brazilian Real
Brazilian real
The real is the present-day currency of Brazil. Its sign is R$ and its ISO code is BRL. It is subdivided into 100 centavos ....
.
European sovereign debt crisis: When the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
was formed in 1993, most member states chose the euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
for legal tender. Since the European Central Bank
European Central Bank
The European Central Bank is the institution of the European Union that administers the monetary policy of the 17 EU Eurozone member states. It is thus one of the world's most important central banks. The bank was established by the Treaty of Amsterdam in 1998, and is headquartered in Frankfurt,...
controls issuance, retirement and to some extent monopoly rights on the euro, these states have partially transferred their monetary sovereignty to that bank. The current debt crisis
Debt crisis
The debt crisis is the general term for the proliferation of massive state debts relative to tax revenues, especially in reference to Latin American during the 1980s, and the United States and the European Union since the mid-2000s.-See also:...
has sparked debates about whether debtor states should reclaim full monetary sovereignty by leaving the euro.
1776 - 1790
Colonial Scrip and Taxation Without Representation: As the economy of the thirteen coloniesThirteen Colonies
The Thirteen Colonies were English and later British colonies established on the Atlantic coast of North America between 1607 and 1733. They declared their independence in the American Revolution and formed the United States of America...
developed, the early Americans utilized a heterogeneous mix of both foreign and domestic currencies. The domestic currency, generally known as colonial scrip
Colonial Scrip
Early American currency went through several stages of development in the colonial and post-Revolutionary history of the United States. Because few coins were minted in the thirteen colonies that became the United States in 1776, foreign coins like the Spanish dollar were widely circulated....
, was issued by colonial governments, individuals and corporations. Since colonial scrip increased the liquidity
Accounting liquidity
In accounting, liquidity is a measure of the ability of a debtor to pay his debts as and when they fall due. It is usually expressed as a ratio or a percentage of current liabilities.-Calculating liquidity:...
of colonial debtors relative to the British pound
Pound sterling
The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence...
, these currencies were widely popular within the colonies but strongly derided by the British. For example, Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
denounced colonial currencies in his book, "The Wealth of Nations
The Wealth of Nations
An Inquiry into the Nature and Causes of the Wealth of Nations, generally referred to by its shortened title The Wealth of Nations, is the magnum opus of the Scottish economist and moral philosopher Adam Smith...
", as a "violent injustice" to the creditor and a "scheme of fraudulent debtors to cheat their creditors" (Book II, Chapter II). The British Empire
British Empire
The British Empire comprised the dominions, colonies, protectorates, mandates and other territories ruled or administered by the United Kingdom. It originated with the overseas colonies and trading posts established by England in the late 16th and early 17th centuries. At its height, it was the...
reasserted its monetary sovereignty over the colonies with the Currency Acts
Currency Act
The Currency Act is the name of several acts of the Parliament of Great Britain that regulated paper money issued by the colonies of British America. The acts sought to protect British merchants and creditors from being paid in depreciated colonial currency...
of 1751 and 1764, which prohibited the use of colonial scrip as legal tender. As a source of further tension, the British Empire, heavily indebted from the Seven Years' War
Seven Years' War
The Seven Years' War was a global military war between 1756 and 1763, involving most of the great powers of the time and affecting Europe, North America, Central America, the West African coast, India, and the Philippines...
and seeking revenues to support British troops in North America, issued the Stamp Act of 1765
Stamp Act 1765
The Stamp Act 1765 was a direct tax imposed by the British Parliament specifically on the colonies of British America. The act required that many printed materials in the colonies be produced on stamped paper produced in London, carrying an embossed revenue stamp...
and the Townshend Acts
Townshend Acts
The Townshend Acts were a series of laws passed beginning in 1767 by the Parliament of Great Britain relating to the British colonies in North America. The acts are named after Charles Townshend, the Chancellor of the Exchequer, who proposed the program...
of 1767, thereby intensifying taxation
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
upon colonists lacking representation within the British state. This system of "Taxation without Representation" was explicitly forbidden by the Rights of Englishmen
Rights of Englishmen
The rights of Englishmen are the perceived traditional rights of British subjects. The notion refers to various constitutional documents that were created throughout various stages of English history, such as Magna Carta, the Declaration of Right , and others...
. In 1774 the First Continental Congress
First Continental Congress
The First Continental Congress was a convention of delegates from twelve of the thirteen North American colonies that met on September 5, 1774, at Carpenters' Hall in Philadelphia, Pennsylvania, early in the American Revolution. It was called in response to the passage of the Coercive Acts by the...
asserted the monetary sovereignty of the colonies by demanding redress for these and other Intolerable Acts
Intolerable Acts
The Intolerable Acts or the Coercive Acts are names used to describe a series of laws passed by the British Parliament in 1774 relating to Britain's colonies in North America...
.
Continentals and Free Bimetallism
Bimetallism
In economics, bimetallism is a monetary standard in which the value of the monetary unit is defined as equivalent both to a certain quantity of gold and to a certain quantity of silver; such a system establishes a fixed rate of exchange between the two metals...
: In 1776 the Second Continental Congress
Second Continental Congress
The Second Continental Congress was a convention of delegates from the Thirteen Colonies that started meeting on May 10, 1775, in Philadelphia, Pennsylvania, soon after warfare in the American Revolutionary War had begun. It succeeded the First Continental Congress, which met briefly during 1774,...
issued the Declaration of Independence
Declaration of independence
A declaration of independence is an assertion of the independence of an aspiring state or states. Such places are usually declared from part or all of the territory of another nation or failed nation, or are breakaway territories from within the larger state...
and then partially financed the ensuing American War of Independence by issuing continental currency. However, these "Continentals" rapidly devalued due to overproduction, poor management and economic warfare
Economic warfare
Economic warfare is the term for economic policies followed as a part of military operations during wartime.The purpose of economic warfare is to capture critical economic resources so that the military can operate at full efficiency and/or deprive the enemy forces of those resources so that they...
in the form of rampant counterfeiting. After the collapse of the continental currency, the War of Independence was primarily financed through the Bank of North America
Bank of North America
The Bank of North America was a private business chartered on December 31, 1781 by the Congress of the Confederation and opened on January 7, 1782, at the prodding of Superintendent of Finance Robert Morris. This was thus the nation's first de facto central bank. It was succeeded in its role as...
, established in 1781 with loans from France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
, Spain
Spain
Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...
, the Netherlands
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
and the "Financier of the Revolution", Robert Morris. When the Philadelphia Convention
Philadelphia Convention
The Constitutional Convention took place from May 14 to September 17, 1787, in Philadelphia, Pennsylvania, to address problems in governing the United States of America, which had been operating under the Articles of Confederation following independence from...
ratified the United States Constitution
United States Constitution
The Constitution of the United States is the supreme law of the United States of America. It is the framework for the organization of the United States government and for the relationship of the federal government with the states, citizens, and all people within the United States.The first three...
in 1787, they established a free
Floating exchange rate
A floating exchange rate or fluctuating exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. A currency that uses a floating exchange rate is known as a floating currency....
bimetallic
Bimetallism
In economics, bimetallism is a monetary standard in which the value of the monetary unit is defined as equivalent both to a certain quantity of gold and to a certain quantity of silver; such a system establishes a fixed rate of exchange between the two metals...
standard for legal tender
Legal tender
Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Paper currency is a common form of legal tender in many countries....
, partially in order to avoid a repeat of the continental currency's inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
debacle.
1791 - 1811
Alexander HamiltonAlexander Hamilton
Alexander Hamilton was a Founding Father, soldier, economist, political philosopher, one of America's first constitutional lawyers and the first United States Secretary of the Treasury...
- Debt
Debt
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...
, Taxation
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
and Fixed
Price fixing
Price fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand...
Bimetallism
Bimetallism
In economics, bimetallism is a monetary standard in which the value of the monetary unit is defined as equivalent both to a certain quantity of gold and to a certain quantity of silver; such a system establishes a fixed rate of exchange between the two metals...
: In 1790 President George Washington
George Washington
George Washington was the dominant military and political leader of the new United States of America from 1775 to 1799. He led the American victory over Great Britain in the American Revolutionary War as commander-in-chief of the Continental Army from 1775 to 1783, and presided over the writing of...
appointed Alexander Hamilton as United States Secretary of the Treasury
United States Secretary of the Treasury
The Secretary of the Treasury of the United States is the head of the United States Department of the Treasury, which is concerned with financial and monetary matters, and, until 2003, also with some issues of national security and defense. This position in the Federal Government of the United...
. During his time as Treasurer, Hamilton wrote a series of reports and letters promoting the expansion of federal sovereignty. Hamilton's proposals were generally opposed by Thomas Jefferson
Thomas Jefferson
Thomas Jefferson was the principal author of the United States Declaration of Independence and the Statute of Virginia for Religious Freedom , the third President of the United States and founder of the University of Virginia...
, James Madison
James Madison
James Madison, Jr. was an American statesman and political theorist. He was the fourth President of the United States and is hailed as the “Father of the Constitution” for being the primary author of the United States Constitution and at first an opponent of, and then a key author of the United...
and others who favored a small federal government with limited sovereignty as outlined by the United States Constitution
United States Constitution
The Constitution of the United States is the supreme law of the United States of America. It is the framework for the organization of the United States government and for the relationship of the federal government with the states, citizens, and all people within the United States.The first three...
. Although this conflict ultimately led to the formation of the American two-party political system
Two-party system
A two-party system is a system where two major political parties dominate voting in nearly all elections at every level of government and, as a result, all or nearly all elected offices are members of one of the two major parties...
, Hamilton was largely successful in extending the monetary sovereignty of the federal government through the passage of following policies:
- Hamilton Tariff - The Tariff of 1789 was the second statute ever enacted by the new federal government of the United States. Most of the rates of the tariff were between 5 and 10 percent, depending on the value of the item. Hamilton was anxious to establish the tariff as a regular source of government revenueRevenueIn business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover....
and as an indirect subsidy to domestic manufacturers in order to counteract the United States' heavy dependence on foreign goods. However, the tariff was also seen as an indirect taxIndirect taxThe term indirect tax has more than one meaning.In the colloquial sense, an indirect tax is a tax collected by an intermediary from the person who bears the ultimate economic burden of the tax...
on Americans in the form of generally higher prices for both foreign and domestic manufactured goods. Farmers were particularly hurt by the higher prices, and this has been cited as a contributing factor to the American Civil WarAmerican Civil WarThe American Civil War was a civil war fought in the United States of America. In response to the election of Abraham Lincoln as President of the United States, 11 southern slave states declared their secession from the United States and formed the Confederate States of America ; the other 25...
. The tariff also led to Hamilton establishing the United States Revenue Cutter ServiceUnited States Revenue Cutter ServiceThe United States Revenue Cutter Service was established by Secretary of the Treasury Alexander Hamilton in 1790 as an armed maritime law enforcement service. Throughout its entire existence the Revenue Cutter Service operated under the authority of the United States Department of the Treasury...
in order to enforce tax collection.
- The Compromise of 1790Compromise of 1790The Compromise of 1790 was the first of three great political compromises made in the United States by the Northern and Southern states, occurring every thirty years, in an attempt to keep the Union together and prevent civil war...
- In 1790 Hamilton promoted a series of controversial bills, generally known as the Compromise of 1790Compromise of 1790The Compromise of 1790 was the first of three great political compromises made in the United States by the Northern and Southern states, occurring every thirty years, in an attempt to keep the Union together and prevent civil war...
. Since many states were indebted to both domestic and foreign creditors, Hamilton proposed consolidatingDebt consolidationDebt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan....
the states' debt under the federal government in order to more efficiently finance its payment. He further argued that the expectation of federal debt payments would create a vested interest in the success of the federal government among creditors and therefore a federal debt would be beneficial to the credit ratingCredit ratingA credit rating evaluates the credit worthiness of an issuer of specific types of debt, specifically, debt issued by a business enterprise such as a corporation or a government. It is an evaluation made by a credit rating agency of the debt issuers likelihood of default. Credit ratings are...
of the federal government. In opposition, Jefferson and others argued that, since many states had already paid their debts, it was unfair to hold them responsible for their neighbors' debts via the federal government. Since many of the solvent states were in the Southern United StatesSouthern United StatesThe Southern United States—commonly referred to as the American South, Dixie, or simply the South—constitutes a large distinctive area in the southeastern and south-central United States...
, Hamilton offered the compromise of moving the capital south from Philadelphia to Washington DC, in exchange for southern support of federal debt assumption. In 1790 this compromise was enacted into law by the passage of the Funding Act and the Residence ActResidence ActThe Residence Act of 1790, officially titled An Act for establishing the temporary and permanent seat of the Government of the United States, is the United States federal law that settled the question of locating the capital of the United States, selecting a site along the Potomac River...
.
- Whiskey TaxWhiskey RebellionThe Whiskey Rebellion, or Whiskey Insurrection, was a tax protest in the United States in the 1790s, during the presidency of George Washington. Farmers who sold their corn in the form of whiskey had to pay a new tax which they strongly resented...
- In order to pay off the debt assumed through the Funding Act, Hamilton promoted a prohibitionist whiskey tax on American whiskey producers, and congress enacted this tax in 1790. The tax was widely opposed on the western frontier, especially among cornCornCorn is the name used in the United States, Canada, and Australia for the grain maize.In much of the English-speaking world, the term "corn" is a generic term for cereal crops, such as* Barley* Oats* Wheat* Rye- Places :...
farmers, whose fierce resistance to taxation became known as the Whiskey Insurrection. While the federal government ultimately quashed armed resistance, many farmers still peacefully refused to pay and the tax was repealed in 1800.
- The Bank Bill of 1791Bank Bill of 1791The Bank Bill of 1791 is a common term for two bills passed by the First Congress of the United States of America on March 25 and February 2 of 1791.- Rights and Restrictions :...
- The Mint Act of 1792 -The Mint Act or Coinage Act of 1792 established a mintMint (coin)A mint is an industrial facility which manufactures coins for currency.The history of mints correlates closely with the history of coins. One difference is that the history of the mint is usually closely tied to the political situation of an era...
, the United States MintUnited States MintThe United States Mint primarily produces circulating coinage for the United States to conduct its trade and commerce. The Mint was created by Congress with the Coinage Act of 1792, and placed within the Department of State...
, providing free coinage at a fixedPrice fixingPrice fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand...
bimetallicBimetallismIn economics, bimetallism is a monetary standard in which the value of the monetary unit is defined as equivalent both to a certain quantity of gold and to a certain quantity of silver; such a system establishes a fixed rate of exchange between the two metals...
exchange rate of 15:1. Hamilton argued that the American economy would benefit from standardizedStandardizationStandardization is the process of developing and implementing technical standards.The goals of standardization can be to help with independence of single suppliers , compatibility, interoperability, safety, repeatability, or quality....
exchange. While Jefferson agreed that the federal government should regulate weights and measures, he argued that the arbitrageArbitrageIn economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices...
engendered by a fixedPrice fixingPrice fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand...
exchange rate established an indirect taxIndirect taxThe term indirect tax has more than one meaning.In the colloquial sense, an indirect tax is a tax collected by an intermediary from the person who bears the ultimate economic burden of the tax...
on Americans, while indirectly subsidizing international money changers. The federal government passed several more coinage acts in the 1800s, but had difficulty maintaining a fixedPrice fixingPrice fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand...
exchange rate within the context of global free marketsFree marketA free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts...
. Silver was ultimately demonetized by the Coinage Act of 1873 (aka "The Crime of '73").
Land Speculation and the End of the First Bank of the United States
First Bank of the United States
The First Bank of the United States is a National Historic Landmark located in Philadelphia, Pennsylvania within Independence National Historical Park.-Banking History:...
: When Hamilton left office in 1795, his successor, Oliver Wolcott Jr.
Oliver Wolcott, Jr.
Oliver Wolcott, Jr. was United States Secretary of the Treasury from 1795 to 1800 and the 24th Governor of Connecticut from 1817 to 1827.-Youth and education:...
, informed congress that more funds were required to service the federal deficit. He offered the option of increased taxation but instead recommended that congress sell their shares in the First National Bank
First National Bank
First National Bank may refer to:-Banking institutions :* First National Bank of Florida, based in Milton, Florida, with branches in Pensacola and other cities in the Florida Panhandle.* FNB Corporation of Hermitage, Pennsylvania...
. Congress agreed and sold their shares. From this time until the War of 1812
War of 1812
The War of 1812 was a military conflict fought between the forces of the United States of America and those of the British Empire. The Americans declared war in 1812 for several reasons, including trade restrictions because of Britain's ongoing war with France, impressment of American merchant...
the federal government operated on deficit for 2 years and on a surplus for 14 years. When the real estate bubble collapsed in 1796-1797, thousands of Americans went bankrupt, many of them were also punished with years in debtors' prison, including Robert Morris and the father of Robert E. Lee
Robert E. Lee
Robert Edward Lee was a career military officer who is best known for having commanded the Confederate Army of Northern Virginia in the American Civil War....
.. This led to the passage of the Bankruptcy Act of 1800, which was repealed only 3 years later. In 1811 congress chose not to renew the charter of the First National Bank
First National Bank
First National Bank may refer to:-Banking institutions :* First National Bank of Florida, based in Milton, Florida, with branches in Pensacola and other cities in the Florida Panhandle.* FNB Corporation of Hermitage, Pennsylvania...
, thereby removing the monetary rights granted by the Bank Bill. The First Bank of the United States
First Bank of the United States
The First Bank of the United States is a National Historic Landmark located in Philadelphia, Pennsylvania within Independence National Historical Park.-Banking History:...
became a regular private bank and was ultimately bought out by Philadelphia philanthropist, Stephen Girard
Stephen Girard
Stephen Girard was a French-born, naturalized American, philanthropist and banker. He personally saved the U.S. government from financial collapse during the War of 1812, and became one of the wealthiest men in America, estimated to have been the fourth richest American of all time, based on the...
.
1832 - 1860
The Bank WarBank War
The Bank War is the name given to the controversy over the Second Bank of the United States and the attempts to destroy it by President Andrew Jackson. At that time, it was the only nationwide bank and, along with its president Nicholas Biddle, exerted tremendous influence over the nation's...
: President Andrew Jackson
Andrew Jackson
Andrew Jackson was the seventh President of the United States . Based in frontier Tennessee, Jackson was a politician and army general who defeated the Creek Indians at the Battle of Horseshoe Bend , and the British at the Battle of New Orleans...
fervently opposed the Second Bank of the United States
Second Bank of the United States
The Second Bank of the United States was chartered in 1816, five years after the First Bank of the United States lost its own charter. The Second Bank of the United States was initially headquartered in Carpenters' Hall, Philadelphia, the same as the First Bank, and had branches throughout the...
. He vetoed the renewal of its charter in 1832 and in 1834 he famously declared, "Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out!" When the charter of the Second Bank expired in 1836, it became a regular bank and eventually collapsed 5 years later.
1861 - 1900
Demand NotesDemand Note
A Demand Note is a type of United States paper money that was issued between August 1861 and April 1862 during the American Civil War in denominations of 5, 10, and 20 US$...
: In 1861-62 Abraham Lincoln
Abraham Lincoln
Abraham Lincoln was the 16th President of the United States, serving from March 1861 until his assassination in April 1865. He successfully led his country through a great constitutional, military and moral crisis – the American Civil War – preserving the Union, while ending slavery, and...
authorized the Dept. of Treasury
United States Department of the Treasury
The Department of the Treasury is an executive department and the treasury of the United States federal government. It was established by an Act of Congress in 1789 to manage government revenue...
's to issue debt-free demand notes
Demand Note
A Demand Note is a type of United States paper money that was issued between August 1861 and April 1862 during the American Civil War in denominations of 5, 10, and 20 US$...
as part of financing
Finance
"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...
the United States Civil War.
Crime of '73 and (un)Free Silver
Free Silver
Free Silver was an important United States political policy issue in the late 19th century and early 20th century. Its advocates were in favor of an inflationary monetary policy using the "free coinage of silver" as opposed to the less inflationary Gold Standard; its supporters were called...
: After silver
Silver
Silver is a metallic chemical element with the chemical symbol Ag and atomic number 47. A soft, white, lustrous transition metal, it has the highest electrical conductivity of any element and the highest thermal conductivity of any metal...
was demonetized by the Coinage Act of 1873, the Free Silver movement aimed to remonetize silver and restore the bimetallic
Bimetallic
Bimetallic may refer to:*Bimetallism, a monetary standard in economics*Bimetallic strip, a temperature sensitive mechanical device*Binary alloy, in metallurgy, a mixture of two metals*Bimetallic coins...
money system. The movement generally pitted debtors, who hoped that silver would provide them with an increase in liquidity
Accounting liquidity
In accounting, liquidity is a measure of the ability of a debtor to pay his debts as and when they fall due. It is usually expressed as a ratio or a percentage of current liabilities.-Calculating liquidity:...
, against creditors, who largely controlled the gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
supply. Bimetallism
Bimetallism
In economics, bimetallism is a monetary standard in which the value of the monetary unit is defined as equivalent both to a certain quantity of gold and to a certain quantity of silver; such a system establishes a fixed rate of exchange between the two metals...
was promoted by the Populist Movement
Populism
Populism can be defined as an ideology, political philosophy, or type of discourse. Generally, a common theme compares "the people" against "the elite", and urges social and political system changes. It can also be defined as a rhetorical style employed by members of various political or social...
, and William Jennings Bryan
William Jennings Bryan
William Jennings Bryan was an American politician in the late-19th and early-20th centuries. He was a dominant force in the liberal wing of the Democratic Party, standing three times as its candidate for President of the United States...
famously comdemned the monometallic gold standard
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...
in his Cross of Gold speech
Cross of Gold speech
The Cross of Gold speech was delivered by William Jennings Bryan at the 1896 Democratic National Convention in Chicago on July 8, 1896. The speech advocated bimetallism. Following the Coinage Act , the United States abandoned its policy of bimetallism and began to operate a de facto gold...
. The Farmers' Alliance
Farmers' Alliance
The Farmers Alliance was an organized agrarian economic movement amongst U.S. farmers that flourished in the 1880s. One of the goals of the organization was to end the adverse effects of the crop-lien system on farmers after the American Civil War...
also promoted bimetallism, since many farmers had fallen into debt through the crop-lien system
Crop-lien system
The crop-lien system is a credit system that became widely used by farmers in the United States in the South from the 1860s to the 1920sAfter the American Civil War, farmers in the South had little cash. The crop-lien system was a way for farmers to get credit before the planting season by...
. Bimetallism was opposed by a powerful group of creditors including railroad monopolies, banks, and commodity brokers, who eventually defeated the Free Silver movement with the establishment of the Federal Reserve System
History of the Federal Reserve System
This article is about the history of the United States Federal Reserve System from its creation to the present.- Central banking in the United States prior to the Federal Reserve :...
at Jekyll Island in 1910.
1900 - Present
The Gold StandardGold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...
and the Federal Reserve System
Federal Reserve System
The Federal Reserve System is the central banking system of the United States. It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907...
:
Executive Order 6102
Executive Order 6102
Executive Order 6102 is an Executive Order signed on April 5, 1933, by U.S. President Franklin D. Roosevelt "forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates within the continental United States"...
and Gold Reserve Act
Gold Reserve Act
The United States Gold Reserve Act of January 30, 1934 required that all gold and gold certificates held by the Federal Reserve be surrendered and vested in the sole title of the United States Department of the Treasury....
: On April 5, 1933, U.S. President Franklin D. Roosevelt issued Executive Order 6102
Executive Order 6102
Executive Order 6102 is an Executive Order signed on April 5, 1933, by U.S. President Franklin D. Roosevelt "forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates within the continental United States"...
"forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates within the continental United States" and thereby criminalized the possession of monetary gold by any individual, partnership, association or corporation. The Gold Reserve Act
Gold Reserve Act
The United States Gold Reserve Act of January 30, 1934 required that all gold and gold certificates held by the Federal Reserve be surrendered and vested in the sole title of the United States Department of the Treasury....
of 1934 reinforced state control of gold both by ordering the transfer of all gold and gold certificates from the Federal Reserve to the Departement of Treasury and by changing the nominal price of gold from $20.67 per troy ounce to $35. In 1935 the Supreme Court judgment, Norman vs. Baltimore & Ohio Railroad Co., reaffirmed the state's currency monopoly by invalidating gold clauses
Gold clause
Gold clauses specified within business contracts allow the creditor the option to receive payment in gold or gold equivalent. A gold clause may prove valuable to the creditor in long term contracts, wherein questions may arise as to whether a currency in use at the time the contract was entered...
.
Executive Order 11110
Executive Order 11110
Executive Order 11110 was issued by U.S. President John F. Kennedy on June 4, 1963.This executive order delegated to the Secretary of the Treasury the president's authority to issue silver certificates under the Thomas Amendment of the Agricultural Adjustment Act.-Background:On November 28, 1961,...
: On June 4, 1963 President John F. Kennedy
John F. Kennedy
John Fitzgerald "Jack" Kennedy , often referred to by his initials JFK, was the 35th President of the United States, serving from 1961 until his assassination in 1963....
issued Executive Order 11110
Executive Order 11110
Executive Order 11110 was issued by U.S. President John F. Kennedy on June 4, 1963.This executive order delegated to the Secretary of the Treasury the president's authority to issue silver certificates under the Thomas Amendment of the Agricultural Adjustment Act.-Background:On November 28, 1961,...
granting the Secretary of the Treasury the authority to issue debt-free silver certificates. However in March 1964, a few months after President Kennedy was assassinated, the Secretary of the Treasury halted redemption of silver certificates for silver dollars and all redemption in silver ceased on June 24, 1968.
Nixon Shock
Nixon Shock
The Nixon Shock was a series of economic measures taken by U.S. President Richard Nixon in 1971 including unilaterally cancelling the direct convertibility of the United States dollar to gold that essentially ended the existing Bretton Woods system of international financial exchange.-Background:By...
: In 1971 U.S. President Richard Nixon
Richard Nixon
Richard Milhous Nixon was the 37th President of the United States, serving from 1969 to 1974. The only president to resign the office, Nixon had previously served as a US representative and senator from California and as the 36th Vice President of the United States from 1953 to 1961 under...
asserted the right of legal tender by canceling the direct convertibility of the United States dollar
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
to gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
. In 1977 Congress reaffirmed the state's immunity from gold claims but legalized the use of gold clauses
Gold clause
Gold clauses specified within business contracts allow the creditor the option to receive payment in gold or gold equivalent. A gold clause may prove valuable to the creditor in long term contracts, wherein questions may arise as to whether a currency in use at the time the contract was entered...
for private obligations (new contracts) in accordance with 31 U.S.C. § 5118(d)(2).
See also
- Bar Kochba Revolt coinageBar Kochba Revolt coinageBar Kochba Revolt coinage were coins issued by the Jews during the Bar Kochba revolt against the Roman Empire of 132-135 AD.During the Revolt, large quantities of coins were issued in silver and copper with rebellious inscriptions, all being overstruck over foreign coins, when a file was used to...
- Central bankCentral bankA central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...
- Cleansing of the Temple
- CurrencyCurrencyIn economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
- Currency crisisCurrency crisisA currency crisis, which is also called a balance-of-payments crisis, is a sudden devaluation of a currency caused by chronic balance-of-payments deficits which usually ends in a speculative attack in the foreign exchange market. It occurs when the value of a currency changes quickly, undermining...
- Debt crisisDebt crisisThe debt crisis is the general term for the proliferation of massive state debts relative to tax revenues, especially in reference to Latin American during the 1980s, and the United States and the European Union since the mid-2000s.-See also:...
- Economic collapseEconomic collapseThere is no precise definition of an economic collapse. While some might consider a a severe, prolonged depression with high bankruptcy rates and high unemployment an economic collapse, others would additionally look for a breakdown in normal commerce, such as hyperinfalation, or even a sharp...
- Economic history of the United StatesEconomic history of the United StatesThe economic history of the United States has its roots in European colonization in the 16th, 17th, and 18th centuries. Marginal colonial economies grew into 13 small, independent farming economies, which joined together in 1776 to form the United States of America...
- Finance ministerFinance ministerThe finance minister is a cabinet position in a government.A minister of finance has many different jobs in a government. He or she helps form the government budget, stimulate the economy, and control finances...
- First Jewish Revolt coinageFirst Jewish Revolt coinageFirst Jewish Revolt coinage was issued by the Jews after the Zealots captured Jerusalem and the Jewish temple from the Romans in 66 AD at the beginning of the First Jewish Revolt...
- Fractional reserve banking
- History of moneyHistory of moneyThe history of money spans thousands of years. Numismatics is the scientific study of money and its history in all its varied forms.Many items have been used as commodity money such as natural scarce precious metals, cowry shells, barley, beads etc., as well as many other things that are thought of...
- Liquidity crisisLiquidity crisisIn financial economics, liquidity is a catch-all term that may refer to several different yet closely related concepts. Among other things, it may refer to Asset Market liquidity In financial economics, liquidity is a catch-all term that may refer to several different yet closely related...
- Monetary authorityMonetary authorityMonetary authority is a generic term in finance and economics for the entity which controls the money supply of a given currency, and has the right to set interest rates, and other parameters which control the cost and availability of money...
- Money multiplierMoney multiplierIn monetary economics, a money multiplier is one of various closely related ratios of commercial bank money to central bank money under a fractional-reserve banking system. Most often, it measures the maximum amount of commercial bank money that can be created by a given unit of central bank money...
- Optimum currency areaOptimum currency areaIn economics, an optimum currency area , also known as an optimal currency region , is a geographical region in which it would maximize economic efficiency to have the entire region share a single currency. It describes the optimal characteristics for the merger of currencies or the creation of a...
- Plano RealPlano RealThe Plano Real was a set of measures taken to stabilize the Brazilian economy in early 1994, under the direction of Fernando Henrique Cardoso as the Minister of Finance, during the presidency of Itamar Franco....
- SovereigntySovereigntySovereignty is the quality of having supreme, independent authority over a geographic area, such as a territory. It can be found in a power to rule and make law that rests on a political fact for which no purely legal explanation can be provided...
- Speculative attackSpeculative attackA speculative attack is a term used by economists to denote a precipitous acquisition of something by previously inactive speculators. The first model of a speculative attack was contained in a 1975 discussion paper on the gold market by Stephen Salant and Dale Henderson at the Federal Reserve Board...
- StateState (polity)A state is an organized political community, living under a government. States may be sovereign and may enjoy a monopoly on the legal initiation of force and are not dependent on, or subject to any other power or state. Many states are federated states which participate in a federal union...
- Tally stickTally stickA tally was an ancient memory aid device to record and document numbers, quantities, or even messages. Tally sticks first appear as notches carved on animal bones, in the Upper Paleolithic. A notable example is the Ishango Bone...
- TaxTaxTo tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
- Taxation history of the United StatesTaxation history of the United StatesThe history of taxation in the United States began when it was composed of colonies ruled by the British Empire, French Empire, and Spanish Empire. After independence from Europe the United States collected poll taxes, tariffs, and excise taxes...
- United States Department of the TreasuryUnited States Department of the TreasuryThe Department of the Treasury is an executive department and the treasury of the United States federal government. It was established by an Act of Congress in 1789 to manage government revenue...