The history of US money 1

1. The history of US money 1 (text + cars) Mrs. Wehner

2. Money money money money • Portable • Limited availability • Durable • Divisible • Think PLaDD!

3. Worthless continentals • Our first money • $250 million printed • MUCH too plentiful • Worthless • People did not trust government paper money

4. States charter private banks • Strict requirements for gold deposits • People trusted the money • Some large corporations issue currency • Federal government only trusted for coins

5. Too many different currencies • As many as 30,000-40,000 different bills • Counterfeiting opportunities • Difficult to identify the valid ones • A few wildcat banks print too much money

6. Union government needs • Funding for war • Control over state banks

7. Greenbacks issued (1861) • Fiat money • Not backed by gold • Poor public response • Continentals remembered

8. NBA • Union’s monetary full court press • National Banking Act (1863) • System of nationally chartered and inspected banks • Gold certificates added • Crises continue and more reform is needed

9. Gold certificates save the day • 1863—2 years after greenbacks are introduced • People are reassured & use the money • Confidence in Union gov is restored

10. Not enough gold (Silver!) • Gold supply does not grow as fast as the economy • Financial difficulties of the 1870s so bad they result in the end of Reconstruction • 1878 silver certificates issued

11. Gold standard • Silver certificates don’t solve all problems • Price of gold fixed at $20.67 per ounce

12. The Fed • Federal Reserve System • True central bank • Can lend money to banks in crisis • Controls US money supply

13. Stock market crash • One of the events that resulted from the factors that caused the Great Depression Many banks fail due to “runs on the bank” • Many depositors lost all savings

14. 1933 and FDR • Bank Holiday IDs & shuts down failing banks • Gold and gold certificates worth more than $100 must be registered

15. And then • Gold and gold certificates called in • It became illegal to own gold in ingot form • Price of gold fixed again

16. this one took the metal out of our money Mr. Inconvertible Fiat Money of 1934 (driving a convertible)

17. Inconvertible fiat • 1934 Inconvertible Fiat Money Standard est. • Money has value because the government says it does • Paper money cannot be converted into gold or silver • Federal Reserve Notes

18. (convertible Fiat)

19. FDIC • Federal Deposit Insurance Corporation • Insured customer deposits if bank failed • First $2,500/person; now $250k • FSLIC insured S&L depositors

20. this President took us off the gold exchange standard in 1971 Now the dollar floats with all the other curren-cies And now our gold is safe.

21. Banking institutions back in the day • Commercial banks for Demand Deposit Accounts (checking accounts); interest on deposits limited • Savings banks for savings only; no checking until 1972 (NOW accounts—checking with interest) • Savings & Loan—mortgage banks; higher interest than commercial banks • Credit unions—non-profit, member owned. Checking acc. Called “share draft accounts”

22. Deregulation • 1980: removal /relaxation of government regulations and restrictions • No limits on commercial bank interest • No restrictions on S&L investments

23. S&L Crisis • Deregulation of industry put them in general competition • New types of investments made • their old loans had very low interest rates • Reserve requirements (the amount of deposits an institution must hold) for S & Ls were lower than requirements for commercial banks • Fewer federal inspectors = more fraud opportunities

24. Poor management • The major cause of bank failure

25. Changes in the 90s • Fewer differences among banking institutions • FDIC now insures Savings & Loan funds