The Mystery of Money and Banking – An Alternative Money

System95% or more of our money is account money

5% or less of our money is coins and bills

US MONETARY HISTORYPUBLIC PRIVATE

Colonial scrip Commodity money

all 13 colonies tobacco, beaver skins, ...

Continental currency First Bank of the US

1775 – 81 1791 – 1811

United States Mint Second Bank of the US

1792 – present 1816 – 36

Legal Tender Acts (“greenbacks”)

Federal Reserve System

1762, 1764 1913 – present

Colonial currenciesThere were three general types of money in the colonies of British America: commodity money, specie (coins), and paper money. Commodity money was used when cash (coins and paper money) was scarce. Commodities such as tobacco, beaver skins, and wampum served as money at various times and places.

As in Great Britain, cash in the colonies was denominated in pounds, shillings, and pence. ... The coins in circulation in the colonies were most often of Spanish and Portuguese origin. The prevalence of the Spanish dollar in the colonies led to the money of the United States being denominated in dollars rather than pounds.

One by one, colonies began to issue their own paper money to serve as a convenient medium of exchange. In 1690, the Province of Massachusetts Bay created "the first authorized paper money issued by any government in the Western World".

The paper bills issued by the colonies were known as "bills of credit". Bills of credit were usually fiat money; that is, they could not be exchanged for a fixed amount of gold or silver coins upon demand.

Continental currencyAfter the American Revolutionary War began in 1775, the Continental Congress began issuing paper money known as Continental currency, or Continentals. ... During the Revolution, Congress issued $241,552,780 in Continental currency.[9]

Continental currency depreciated badly during the war, giving rise to the famous phrase "not worth a continental".[10] A primary problem was that monetary policy was not coordinated between Congress and the states, which continued to issue bills of credit.[11]

Another problem was that the British successfully waged economic warfare by counterfeiting Continentals on a large scale. Benjamin Franklin later wrote:

The artists they employed performed so well that immense quantities of these counterfeits which issued from the British government in New York, were circulated among the inhabitants of all the states, before the fraud was detected. This operated significantly in depreciating the whole mass....

Legal Tender Act (1862)Legal Tender Act of 1862 and ensuing litigation

The Legal Tender Cases primarily involved the constitutionality of the Legal Tender Act of 1862, ... enacted during the American Civil War. This act authorized issuance of paper money, United States Notes, to finance the war without raising taxes. The paper money depreciated in terms of gold and became the subject of controversy, particularly because debts contracted earlier could be paid in this cheaper currency.

In Hepburn, Chief Justice Salmon P. Chase held for a 4-3 majority of the Court that the Act was an unconstitutional violation of the Fifth Amendment. Ironically, Chief Justice Chase had played a role in formulating the Legal Tender Act of 1862, in his previous position as Secretary of the Treasury. On the same day that Hepburn was decided, President Ulysses Grant nominated two new justices to the Court, Joseph Bradley and William Strong, although Grant later denied that he had known about the decision in Hepburn when the nominations were made.[6] Bradley and Strong subsequently voted to reverse the Hepburn decision, in Knox v. Lee and Parker v. Davis, by votes of 5-4. The constitutionality of the Act was more broadly upheld thirteen years later in Juilliard v. Greenman.

The Mystery of Money and Banking – The Origins of the

Current System

“When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.”

– Frederic Bastiat, 1801 – 1850 political economist

If you give someone a gun, they can rob a bank. If you give someone a bank, they can rob a nation.

Adam Smith? Frederic Bastiat (1801 – 1850) Henry Simons William Patman Bureau of Engraving and Printing Chicago Plan (copy 656-7) Plato, Aristotle, Paulus, Berkeley,

Locke and Franklin, Del Mar, Knapp, AMI Infrastructure HR 2990

“Only puny secrets need protection.Big secrets are protected by public incredulity.”

– Marshall McLuhan, Take Today, The Executive as Dropout (1972)