History of MoneyUS Dollar

History of Money
Money?
• Currency comes to mind when we hear the
word money . However, money is any commodity
which satisfies the following characteristics:
 Unit of account
 Store of Value
 Medium of exchange
Early Commodity Money
• Until around 3000BC,
3000BC
commodities such as
livestock and grain were
used as money for
many societies
China: 1200 BC
• Ancient Chinese Money
“cowries as money”
China: 1200 BC
• By 1000 BC, “tool
currencies” were
adopted. These were
miniature metal models
of spades, hoes, blades,
etc.
The First True Coins: 561 BC
• The Lydian King Croesus
created the first true
coin.
Middle Ages: 800 – 1500 AD
• Medieval coinage was
standardized by
Charlemagne when he
conquered most of
Europe around 800AD
Chinese Paper Currency: 806 AD
• Due to a severe copper
shortage, the Chinese
begin issuing paper
currency. Known as
Chao .
• Frequent reissues fuel
inflation
1100 AD: British Tally Sticks
• King Henry issued the
first Tally Sticks in
1100AD. This practice
lasted in England for
over 700 years!
Paper Money in Europe
• In the 1660’s, goldsmith’s
notes are accepted as
evidence of ability to pay.
These notes mark the first
use of Banknotes in
England.
The New World
• The colony of
Massachusetts was the
first colony to issue
paper currency in the
US
The First US Dollar
• To finance the
Revolutionary War,
the congress issued
“Continentals”. Due
to oversupply, they
rapidly became
worthless
The First Bank of the US
• The First bank of the US was chartered in 1789 by

Alexander Hamilton
The Second Bank of the US
• The Second Bank of the US was founded in 1816. Its

charter renewal was vetoed by Andrew Jackson in
1836
Free Banking: 1837-1866
• During the free banking era, virtually anyone could

open a “bank” and issue notes.
Free Banking: 1837-1866
• By 1860, it is estimated that up to 8,000 different notes were

in circulation with varying degrees of backing.
• An estimated 60% of all banknotes were counterfeit
1863: Lincoln signed the National Banking Act, which
created a dual banking system
National Banks State Banks

• Chartered and • Controlled by State
supervised by OCC Regulatory authorities
• Could issue national • Restricted from issuing
currency national currency
A National Currency
• Under the National Banking Act, notes were printed by the US

Treasury. National banks were required to purchase US
government bonds as backing for the notes. State bank notes
were taxed at 10% and were soon driven out of circulation.
Greenbacks
• The Federal Government issued “greenbacks” which

were declared legal tender.
Gold/Silver Certificates
• In an effort to increase precious metal reserves, the

government began issuing gold and silver certificates
in 1863
Gold/Silver Certificates
• Silver certificates continued to be issued until the

1960’s when the price of silver jumped to $1.29
The Federal Reserve System was created in 1913
by Woodrow Wilson
• The role of the Fed is to control the supply of

currency, as well as regulate the banking system
The Gold Reserve Act: 1934
• In order to deal with the
banking crisis, FDR
orders US citizens (as
well as the Fed) to
surrender all gold coins,
bullion, and certificates
to the US Treasury
The Gold Reserve Act: 1934
• Ownership of gold by
US citizens was illegal
until the law was
repealed in 1974!
Post Word War II
• The US emerged as victor
• Owing to the US’s

endeavors to aid in the
reconstruction of the war
torn Western Europe.
• Leading the Bretton Woods

System
• The US Dollar replaced the

Pound Sterling as the
global currency of choice
for international trade.
Post Word War II
• Global Currency of
Choice Means:
• All countries preferred to
keep the US dollar as
their reserve currency
• Value of most currencies
in the world became
dependent on the US
dollar
• Most of International
Trade was done through
US Dollars
Petro Dollar
• Global Currency of
Choice Means:
• All countries preferred to
keep the US dollar as
their reserve currency
• Value of most currencies
in the world became
dependent on the US
dollar
• Most of International
Trade was done through
US Dollars
Nixon Closes the Gold Window
• On August 15, 1971, Nixon closes the gold window and the US
dollar ceases to be convertible into gold. This marks the
beginning of the current anchorless system.
US Dollar a Fiat Currency
US Dollar a Fiat Currency
• Fiat money is a government-issued currency that

is not backed by a commodity such as gold.
• Fiat money gives central banks greater control
over the economy because they can control how
much money is printed.
• U.S. dollar is the most notable modern fiat
currency.
How the US Dollar is Valued
• Essentially the US dollar is valued by the level of confidence

Americans show towards their govt.
• Leaving the decision of how much US dollars to print in the hands of
a few people within the Federal Open Market Committee FOMC.
Printing of US Dollars
Yuan Dynasty Excessive Printing of
Chao
• The once mighty Yuan dynasty (1264-1368) founded by Kublai
Khan, which encompassed today’s: Burma, China, India, North
Korea, South Korea, Laos Mongolia, Russia, Hong Kong, Macao and
Vietnam.
• Ended in 1368 lasted merely 100 years
• Many Reasons are attributed to its demise like:
– Corruption
– Famine
– Attack by rebel Chinese groups 1367.
• The underlying cause is the excessive printing of Chao (paper money) to
service public works, finance wars and corruption.
 Causing massive inflation
 Massive devaluation of Chao
 Decline in the confidence of Chao among people
 Weakening of the state
 Unable to finance the army to fend off the rebel Chinese attacks which
started in 1367.
Printing of US Dollars
• Excessive printing of US dollars can cause the

global economy to collapse.
Modern Monetary Theory

(MMT)
Or
Modern Money

History of MoneyUS Dollar

Uploaded by

Copyright:

Available Formats

History of MoneyUS Dollar

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

History of MoneyUS Dollar

Uploaded by

Copyright:

Available Formats

History of Money

• The First bank of the US was chartered in 1789 by

• The Second Bank of the US was founded in 1816. Its

• During the free banking era, virtually anyone could

• By 1860, it is estimated that up to 8,000 different notes were

National Banks State Banks

• Under the National Banking Act, notes were printed by the US

• The Federal Government issued “greenbacks” which

• In an effort to increase precious metal reserves, the

• Silver certificates continued to be issued until the

• The role of the Fed is to control the supply of

• Owing to the US’s

• Leading the Bretton Woods

• The US Dollar replaced the

• Fiat money is a government-issued currency that

• Essentially the US dollar is valued by the level of confidence

• Excessive printing of US dollars can cause the

Modern Monetary Theory

You might also like