Posted on 07/27/2012 8:48:59 PM PDT by DeaconBenjamin
I thought it would be interesting to look at the evolution of the U.S. currency system, particularly in the pre-WWII period.
Here is the relevant graph. The source of the data is:
http://fraser.stlouisfed.org/publication/?pid=38&tid=21
Today, we use Federal Reserve Notes pretty much exclusively for our currency. However, it was not always that way -- certainly not before the Fed was created in 1913. As you can see, there was quite a menagerie of stuff out there. What is this stuff?
Federal Reserve Bank notes are apparently notes issued by the Federal Reserve regional banks, such as the St. Louis Fed. Not seen anymore.
Federal Reserve Notes are the "dollar bills" we use today.
National Bank Notes are notes issued by private commercial banks. This was organized under a system known as the National Bank System. There were over three thousand commercial banks issuing their own bank notes, each one with their own design, all of them linked to gold of course. This system pretty much died out in the late 1930s.
United States Notes are the "greenbacks" printed by the U.S. government during the Civil War. For the most part, they remained in circulation, and are now collector's items.
Minor coin is non-silver and non-gold coins, basically pennies and nickels.
Subsidiary silver is silver coins in less than a one-dollar denomination, namely, quarters and dimes.
Treasury Notes of 1890 were something issued in 1890 by the U.S. Treasury. They were significant for a few years.
Silver Certificates were notes issued by the U.S. government, redeemable in silver. Wikipedia on Silver Certificates.
Standard Silver Dollars were $1 silver coins, such as Morgan Dollar and Peace Dollars.
Gold Certificates were notes issued by the U.S. government, redeemable in gold. Wikipedia on gold certificates.
Gold Coin is, you guessed it, coins made of gold.
Here is a simplified version of the same chart, showing the ratio of metal coins to paper money, during that time period.
What we can see here is that gold and silver coins made up a relatively small fraction of U.S. currency, even in the 1880s, and certainly by the 1920s the currency in use was overwhelmingly paper. The notion that a gold standard system means "gold and silver coins" is exceedingly antiquarian, and was not the case at all during this period in the U.S.
That the Federal Reserve Note should become popular, and in the end the sole type of U.S. currency, is not particularly surprising. People want uniformity in their currency.
We are basically describing how the U.S. currency went from a rather varied mix of items to one single monopoly currency issuer, the Federal Reserve. The postwar period is not as interesting as the 1880-1941 period, but it helps us finish our story.
The source of the data is:
http://fraser.stlouisfed.org/docs/publications/bms/1941-1970/section11.pdf
During World War II especially, the number of Federal Reserve Notes in circulation expanded dramatically, while other forms of currency basically held even. Why? As was the case during World War I as well, the Fed was under pressure by the Treasury to maintain Treasury yields at low, fixed rates. This entailed buying Treasury bonds with "the printing press," in this case almost literally so.
Federal Reserve Bank notes are apparently notes issued by the Federal Reserve regional banks, such as the St. Louis Fed. They had a bit of a burst during WWII, and then died out.
Federal Reserve Notes are the "dollar bills" we use today.
National Bank Notes are notes issued by private commercial banks. This was organized under a system known as the National Bank System. There were over three thousand commercial banks issuing their own bank notes, each one with their own design, all of them linked to gold of course. This system pretty much died out in the late 1930s. The notes here are basically collector's items.
United States Notes are the "greenbacks" printed by the U.S. government during the Civil War. These are basically collector's items.
Minor coin is non-silver and non-gold coins, basically pennies and nickels. This expands considerably after 1965, because half dollars, dimes and quarters, which had been made of 90% silver, were then produced in base metals. So, minor coin then encompasses all coins.
Subsidiary silver is silver coins in less than a one-dollar denomination, namely, quarters and dimes. This is combined with Minor coin after 1965.
Silver Certificates were notes issued by the U.S. government, redeemable in silver. These were significant for quite a few years after WWII, and then disappeared when the silver coins went to base metals. Wikipedia on Silver Certificates.
Standard Silver Dollars were $1 silver coins, such as Morgan Dollar and Peace Dollars.
Gold certificates were basically collector's items.
We see that, by the end of this period, the currency consists entirely of Federal Reserve Notes, base metal coins, and what amounts to collector's items.
interesting
@ 31 USC § 5112 - Denominations, specifications, and design of coins
The way is right there in the law, the will isn't in D.C..
It would be interesting to overlay inflationary cycles and recessions on this chart.
There is no intrinsic value in any of our paper OR coin today — and look at the explosion of the amount in circulation. It looks like precious metals were about 1/3 of the money in circulation from 1880 to 1900. It must have been difficult for government to debase our money when paper money was backed by gold and silver and actual gold and silver comprised over 1/3 of the money in circulation.
after the fall of this civilization, when rebuildng society I would bet that oil and gas or even wheat or sugar would be used to back currencies.
Just a thought
Sorry but he is wrong. Back here we have records wherein land was purchased using gold nuggets as currency for many years 1865-1912, which never showed up in any study such as this stupoid one. They probably never checked anyone`s business journal logs/receipts from those years in the local historical society archives... Duhhhhh
ping to read tomorrow ping
thx
I don’t see “electronic currency” on the charts.
My paycheck is deposited in my bank.
I go on-line and pay my bills.
I buy almost everything with a debit card.
My budget allows me $10 per workday “pocket money”, and if I don’t “need” that, I don’t get it; that “pocket money” is the only “cash”— paper and coin— I ever see from all the earning and spending I do.
Not complaining, it’s convenient; I do wish there was an actual store of value somewhere that these electronic transfers represented.
He identifies his source as the St. Louis Fed. Your beef is with them.
And what was the volume of electronic money in 1970, the last year in the study?
My wife got one in her tip jar the other day. Are they still redeemable?
Not for silver. But they will give you four clad quarters for one.
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