Tuesday, January 1, 2019

Confederate dollars, that were also issued during this period, followed the fate of the Confederacy and were worthless by the end of the war.

23) As a lesson in how demand affects the value of non-commodity backed currency, Confederate dollars, that were also issued during this period, followed the fate of the Confederacy and were worthless by the end of the war.
3:09 PM - 1 Jan 2019
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Robby BallTweet text
 
 

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    1.  4 hours ago
      24) Officially, the US didn't begin with a gold standard, but with a "bimetallic" standard. Both gold and silver were used to define the monetary unit. The first coinage act defined the dollar as 371.25 grains of pure silver minted with alloy into a coin of 416 grains.
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    2.  4 hours ago
      25) Gold coins were also authorized in denominations of $10 (eagle) and $2.50 (quarter-eagle). The ratio of silver to gold in a given denomination was 15 to 1. This document provides a nice history of the gold standard.
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    3.  4 hours ago
      26) Following the Civil War, America went back to using money exclusively backed by either gold or silver. (But Lincoln's greenback seemed to put into the conscience of Americans the idea that paper currency not backed by gold or silver was an acceptable form of money.)
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    4.  4 hours ago
      27) During the 1800's state banks issued bank notes, certificates and coins of various denominations.
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    5.  4 hours ago
      28) During the War of 1812, the Treasury issued treasury notes that were a promise to repay an amount of gold or silver at a later date though they were not declared to be legal tender.
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    6.  4 hours ago
      29) During the Civil War, the Federal Government created a National Bank system that issued notes similar to ones issued by state banks. These notes were backed by government bonds.
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    7.  4 hours ago
      30) Because bonds earned interest and state issued notes did not, banks made profits from the issuance of these notes. The notes were not legal tender, but were accepted because they were redeemable in gold or in legal tender notes.
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    8.  4 hours ago
      31) State bank notes were soon driven out of circulation when a tax of 10% was imposed on them. The new national bank notes were of uniform design and were perceived to be a safe form of currency.
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    9.  4 hours ago
      32) Slowly, the federal government began forcing states out of the business of issuing currency. In many respects, this was the beginning of the end of gold standard although it would not come to fruition for many years.
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    10.  4 hours ago
      33) The early 20th century brought many challenges to the gold standard including the creation of the Federal Reserve and the first World War.
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    11.  4 hours ago
      34) At the onset of World War I, U.S. corporations owed large debts to European entities that they paid with gold. This caused large gold outflows from the US and on July 31, 1914, the New York Stock Exchange closed and the gold standard was temporarily suspended.
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    12.  4 hours ago
      35) To protect the exchange value of the dollar, the Treasury Department authorized state and national banks to issue emergency non-gold backed currency under the Aldrich-Vreeland Act. The newly created Federal Reserve would guarantee debts to foreign creditors.
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    13.  4 hours ago
      36) This strategy proved successful as an emergency measure, and the Aldrich-Vreeland notes were retired beginning in November 2014. The gold standard was restored when the New York Stock Exchange re-opened in December 1914.
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    14.  4 hours ago
      37) While the US remained neutral during World War I, it maintained a gold standard, doing so without restricting the import or export of gold from 1915 to 1917. Nations involved in the war suspended their gold standard.
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    15.  4 hours ago
      38) As the United States became involved in World War I, President Wilson banned gold exports, effectively suspending the gold standard for foreign exchange.
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    16.  4 hours ago
      39) After the war, the US and European countries slowly returned to their gold standards, though in a somewhat different form.
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    17.  4 hours ago
      40) The stock market crash of 1929 led to the Great Depression. Some have blamed the gold standard for the Great Depression. Others have blamed the Federal Reserve.
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    18.  4 hours ago
      41) During the Great Depression, every major currency abandoned the gold standard. Among the earliest was the Bank of England. In 1931, speculators demanded gold in exchange for currency, which threatened the solvency of the British monetary system.
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    19.  4 hours ago
      42) In the US, the Federal Reserve was forced to raise interest rates to protect the gold standard. After bank runs became more pronounced in early 1933, people hoarded gold as distrust for banks led to distrust of paper money.
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    20.  3 hours ago
      43) In 1933, Congress and the President suspended the gold standard except for foreign exchange. They revoked gold as legal tender for debts and banned private ownership of gold coins in significant amounts.
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    21.  3 hours ago
      44) Although the dollar would remain officially connected to the price of gold until 1971, for practical purposes, the true gold standard as it had been practiced ended in 1933.
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    22.  3 hours ago
      45) The Gold Reserve Act fixed the value of the dollar at $35 per ounce, making it very attractive for foreign buyers (and making foreign currencies more expensive). This led to more conversion of gold into dollars, allowing the U.S. to effectively corner the world gold market.
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    23.  3 hours ago
      46) The post-World War II Bretton Woods agreement valued all world currencies in terms of U.S. dollars. The U.S. government was required to maintain both a $35 per troy ounce market price of gold and the conversion to foreign currencies.
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    24.  3 hours ago
      47) By 1968, the system had become too complicated to manage. The effort to control the private market price of gold was abandoned and a two-tier system was put in place. All central-bank transactions in gold were insulated from the free market.
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    25.  3 hours ago
      48) Central banks traded gold between themselves at $35 per ounce but did not trade with the private market. The private market traded gold at the spot market price.
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    26.  3 hours ago
      49) In 1971, President Richard Nixon ordered the cancellation of the direct convertibility of the dollar to gold, ending the gold standard completely.
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    27.  3 hours ago
      49) Conclusions from the "Brief History of the Gold Standard in the United States"
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Posted by Robby Ball at 5:21 PM