Ch. 11.2 Notes:Early Money & Banking

I. Different Money Standards during our History

A. State created banks (by1780s)

1. Can print money at any time

a. Bad because value will go down

2. Each state’s money looked different.

a. hard to exchange with other states

3. Money not backed by anything

• • •

B. “Greenbacks” during the Civil War (1861)

1. The Union and Confederate government

created their first national money to help

pay for the war

a. they overprinted and money was not

backed by anything

C. National Currency after Civil War (late 1800s)

1. First U.S. money after the civil war.

2. Gov. regulated the money’s creation

design, and distribution

3. Money looked the same

4. Gov. backed the money with

IOUs/Bonds

D. The Gold Standard (1900)

1. Gov backed the money with gold.

2. People can change money into gold if they

wish to do so

3. backing money with gold prevents

overprinting and made people feel secure.

= 400 troy ounce gold bar is worth

$467,200 (4/10)

•

E. Inconvertible Fiat Standard (1934)

1. Our current system

2. money is no longer backed by gold. May drain

the gold supply.

3. Money is now given value because it is backed

by the U.S gov.

II. Distribution of Money…………

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A. Bureau of Engraving & Printing, D.C

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B. Sent to 12 Fed Banks

C. Ordered by My BankD. I Withdraw it

• http://x-rates.com/ = Exchange Rates

• http://usrarecurrency.com/WebPgFl/K03040506H/Final1999$1SnK03040506H.jpg

= one dollar bill