After victory in the
Revolutionary War of Independence the Constitution was
written which was used as a guide to the creation of a
central national Bank called the First Bank of the
United States, the National Mint was authorized by the
Coinage Act and the silver dollar was
established as the unit of money and lawful tender in
the United States of America.
Early American Currency History: Colonial Era
American Currency History: This short history of currency used by early Americans enables a better
understanding of what was happening in the country in terms of money
and why the First Bank of the United States was established.
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During
the Colonial Era there was no United States and therefore there
was no United States currency and no central bank
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Although there was no specific
U.S. currency, forms of money were required as payment for goods
and services and for the repayment of debts
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Three
types of money were used in the colonies of British America -
Commodity money, paper money and specie (coins)
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Commodity money: Commodities were articles of trade such as
beaver skins, produce, tobacco and wampum (beads or shells
used as money by Native American Indians)
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Paper
money: Printed paper used as a substitute for specie (coins)
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Specie
(coins): Specie were gold and silver coins. Specie is a form
of visible wealth, and not merely representing it, as bills
and notes do
American Currency
History:
Paper Money and Bills of Credit
American
Currency History: During the
Colonial era there was a shortage of gold and silver coins - the
British failed to supply the colonies with enough coins and refused
to allow the colonists to make money. Colonists had to barter (using
commodity money). In 1690 the Massachusetts Bay Colony were the
first to issue paper money as a response to the shortage of coins
and in order to meet the high demand for trade. The paper money was
in the form of Bills of Credit (also known as Bills of Exchange or
Promissory Notes). These were signed documents, based as money on
the credit of the colony, containing a written promise to pay a
stated sum in gold or silver to a specified person at a specified
date or on demand to pay debts.
American Currency History: The Revolutionary War
American Currency History: During the Revolutionary War, starting in 1795, the Continental
Congress began issuing paper money known as Continental currency, or
Continentals. And all of the first thirteen colonies, which would
soon become independent states, also issued paper money to pay for
military expenses. The paper money should have been backed by gold
or silver, but not all of it was. Paper money rapidly depreciated,
the famous phrase "Not worth a Continental" comes from this
era.
American Currency History: The State Banks
American
Currency History: The Revolutionary War had ended in victory but the
nation had a substantial war debt which was also shared by the
individual states. There was no common currency, so many states
opened state banks and printed their own money.
American Currency History: The Constitution
The collapse
of the Continentals prompted the delegates to the Constitutional
Convention to include the gold and silver clause into the
Constitution so that the individual states could not issue bills of
credit, or "make any Thing but gold and silver Coin a Tender in
Payment of Debts."
American Currency History: The National Mint - the First U.S. Coins and the Dollar
On April 30, 1789 George Washington became the first
president of the United States of America. The
National Mint was established and
authorized by the Coinage Act of April 2, 1792. The purpose of the
National Mint was to regulate the coinage of the United States. The
purpose of the Coinage Act was to establish the silver dollar as the
unit of money and lawful tender in the United States of America.
American Currency History: The First Bank of the United States
American Currency History: The federal government
realized that all of the states needed to be united under a single
financial system. The nation also needed a single line of currency
to finance its war debts. The creation of a central bank to
supervise and issue the currency would achieve these goals. Having a
central bank and a standard American currency would help to improve
trade. States were
free to charter however many intrastate banks they wished. The
First Bank of the United
States, the National Bank, was not solely responsible for the
nation's supply of bank notes. It was responsible for only 20% of
the currency supply - the state banks accounted for the rest.
American Currency History
Additional articles have been
provided detailing the History of American Currency including
the Second Bank of the U.S.,
Henry Clay and the
'American System', the
Panic of 1819, the
Bank War and
the Pet Banks and Wildcat Banks.
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