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Chapter 11 Money & Banking. From cattle to the dollar. Cattle A nimal skins, including deer and elk bucks Tobacco Wampum- white conch and black mussel shells. Functions of Money. Medium of Exchange Salary comes from Latin term “ salarium ” Romans got paid in salt Measure of Value

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from cattle to the dollar
From cattle to the dollar
  • Cattle
  • Animal skins, including deer and elk bucks
  • Tobacco
  • Wampum- white conch and black mussel shells
functions of money
Functions of Money
  • Medium of Exchange
    • Salary comes from Latin term “salarium”
    • Romans got paid in salt
  • Measure of Value
  • Store of Value
money in early societies
Money in early societies
  • China= Tea leaves compressed into “bricks”
  • Russia= compressed cheese
  • East African Masai= miniature iron spears fastened together to form a necklace
m oney
Money
  • Commodity money- money that has an alternative use as an economic good or commodity
  • Flat money- money by government decree
characteristics of money
Characteristics of Money
  • Portability- easily transferrable
  • Durability
  • Divisibility into smaller units
  • Limited Availability
early banking
Early Banking
  • 1811 state banks became popular
  • Each bank issued their own currency as long as it was backed with gold and silver reserves
  • By the Civil War, the US had more than 1600 banks issuing more than 10,000 kinds of money
    • Different currency for each bank
    • Temptation to issue too many notes
    • Counterfeiting
the greenback standard
The Greenback Standard
  • 1862 Congress passed the Legal Tender Act
    • Print $150 million US notes
    • Help support the Civil War
  • Greenbacks
  • National Currency
  • Gold certificates
  • Silver certificates
  • Treasury coin notes
gold standard
Gold Standard
  • 1900 Congress passed the Gold Standard Act
  • Price of gold was $20.67 an ounce
  • Money could be exchanged for gold
  • Ended during the Depression in the 1930’s
gold standard1
Gold Standard
  • Advantages
    • Security
    • Prevents the govt. from printing too much money
  • Disadvantages
    • Gold stock may not grow fast enough to support a growing economy
    • Everyone can convert to gold, depleting the stock
    • Gold prices are variable
    • Risk of failure
modern banking
Modern Banking
  • 1863 Congress passed the National Banking Act
  • 1913 Congress created the Federal Reserve System
    • Federal reserve notes
    • FDIC & NCUA

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other depository institutions
Other Depository Institutions
  • Demand Deposit Accts (checking accounts)
  • Mutual Savings Banks
  • Savings and Loan Associations
  • Credit Unions