What is money?
- store value
- medium of exchange
- unit of account
Types of money?
- commodity money
- representative money
- Fiat money
Central Banking debate:
Alexander Hamilton (who came from a poor background) vs. Thomas Jefferson (who came from a richer background).
Alexander Hamilton
- wanted a stronger national government, not states
- wanted a nation bank
- called for a president for life
- drafted a call to revise the Articles of Confederation
Thomas Jefferson
- concerned about too much control, not enough balance
- in favor of state's rights
- held to a strict interpretation of the Constitution
- favored weak central government
- opposed a national bank
History of central banking
Hamilton won out the debates and the first bank was established in 1791 for twenty years.
- second bank - 1816
- ended national business charter in 1836
- 1840-1850: hard money, free banking
- National banking acts of 1863, 64, 65
- A monopoly was formed in the guise of opposition to monopoly
Gold Standard Act of 1900
- standard for redemption of paper money
- allowed more elastic currency
- forbid use of silver and other precious metals
Gold Exchange Standard
- pseudo gold standard
- most countries kept reserves in a base currency
Federal Reserve Act of 1913 was instigated by the panic of 1907.
Federal Reserve Banks:
- only congress can create money
- Fed is quasi-private, government-sanctioned bank that issues "bills of credit" on behalf of Congress.
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