Econ Ch 11 Sec 2
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the mechanism designed to keep money portable, durable, divisible, and limited in supply
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monetary standard
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printed during the Revolutionary War, but became too abundant and caused people to distrust the government's money unless it was coin
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Continental dollars
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Which articles prevented the government from printing paper money and instead left that power to private banks?
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Article 1 Section 8, Article 1 Section 10
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banks that received their charter to operate from the state government. Able to issue their own paper money by printing them in local shops.
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State banks
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How did state banks assure the public that their money was useful?
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notes could be exchanged for gold and silver
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fraudulent banks that printed large amounts of currency in remote areas to make currency redemption difficult
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wildcat banks
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problems with currency
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each bank issued currency in different sizes, colors, and denominations; temptation to issue too many notes; counterfeiting
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Which war forced politically powerful local bankers to comply with changes concerning banking?
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Civil War
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After selling _____ did not work in order to supply the Civil War, Congress decided to print _____ ________ for the first time since the constitution was adopted.
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bonds; paper currency
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fiat currency that must be accepted in payment for debts. AKA greenbacks
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legal tender
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passed in 1862, authorized the Union government to print United States notes
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Legal Tender Act
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federal fiat currency that did not have gold or silver backing.
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United States notes
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how did Congress prevent greenbacks from becoming worthless like the continental dollars?
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Establishing the national banking system
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privately owned banks that received their operating charters from the federal government
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National banks
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paper currency of uniform appearance that is backed by US government bonds
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National bank notes/national currency
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A 10% tax was issued on all privately issued bank notes in order to force
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state chartered banks to join the NBS
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paper currency backed by gold placed on deposit the the United States Treasury
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gold certificates
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paper currency backed by silver dollars and bullion placed on reserve with the Treasury
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silver certificates
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paper currency issued by the Treasury that was redeemable in both gold and silver
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Treasury coin notes
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5 types of paper currency issued before banking system was overhauled in 1913
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greenbacks, national currency, gold certificates, silver certificates, treasury coin notes
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monetary standard under which the basic currency unit is equal to and can be exchanged for a specific amount of gold
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Gold standard
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fixed the price of gold at $20.67 per ounce
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Gold standard act
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Advantages of gold standard
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people more secure about money; prevented overprinting (couldn't print more than they could back in gold)
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Disadvantages of gold standard
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gold stock may not grow fast enough; lots of people may decide to convert currency into gold, draining reserves; price of gold is not fixed; political risk of failure
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Because people felt more secure holding onto gold as opposed to paper currency, what did President Franklin D Roosevelt do?
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declared a national emergency that anyone holding more than $100 worth of gold/gold certificates must file a disclosure form with the Treasury
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required citizens, banks, and businesses to turn in their gold and gold certificates over to the US government
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Gold Reserve Act
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monetary standard under which fiat money supply cannot be converted into silver or gold by its citizens
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inconvertible fiat money standard
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government or a designated agent controls the quantity, composition, and quality of the money supply
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managed money supply
