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130-611: The party's name referred to the non- gold backed paper money, commonly known as " greenbacks ", that had been issued by the North during the American Civil War and shortly afterward. The party opposed the deflationary lowering of prices paid to producers that was entailed by a return to a bullion -based monetary system, the policy favored by the Republican and Democratic parties. Continued use of unbacked currency, it

260-659: A $ 10 gold eagle was also approved, containing 247.5 grains (16.0377 g) fine gold. Hamilton therefore put the U.S. dollar on a bimetallic standard with a gold–silver ratio of 15.0. American-issued dollars and cents remained less common in circulation than Spanish dollars and reales (1/8th dollar) for the next six decades until foreign currency was demonetized in 1857. $ 10 gold eagles were exported to Europe where it could fetch over ten Spanish dollars due to their higher gold ratio of 15.5. American silver dollars also compared favorably with Spanish dollars and were easily used for overseas purchases. In 1806 President Jefferson suspended

390-412: A fixed exchange rate , governments were hamstrung in engaging in expansionary policies to, for example, reduce unemployment during economic recessions . According to a 2012 survey of 39 economists, the vast majority (92 percent) agreed that a return to the gold standard would not improve price-stability and employment outcomes, and two-thirds of economic historians surveyed in the mid-1990s rejected

520-476: A gold bullion standard whenever gold bars are offered, or a gold exchange standard whenever other gold-convertible currencies are offered. John Maynard Keynes referred to both standards above as simply the gold exchange standard in his 1913 book Indian Currency and Finance . He described this as the predominant form of the international gold standard before the First World War, that a gold standard

650-481: A gold exchange standard , where the government guarantees a fixed exchange rate, not to a specified amount of gold, but rather to the currency of another country that is under a gold standard. This became the predominant international standard under the Bretton Woods Agreement from 1945 to 1971 by the fixing of world currencies to the U.S. dollar , the only currency after World War II to be on

780-498: A parallel bimetallic standard (where gold circulates at a floating exchange rate to silver) or reverted to a mono-metallic standard. France was the most important country which maintained a bimetallic standard during most of the 19th century. The English pound sterling introduced c.  800 CE was initially a silver standard unit worth 20 shillings or 240 silver pennies. The latter initially contained 1.35 g fine silver, reduced by 1601 to 0.464 g (hence giving way to

910-716: A 1% premium, and by the German Reichsbank partially suspending free payment in gold, though "covertly and with shame". Some countries had limited success in implementing the gold standard even while disregarding such "rules of the game" in its pursuit of other monetary policy objectives. Inside the Latin Monetary Union , the Italian lira and the Spanish peseta traded outside typical gold-standard levels of 25.02–25.42F/£ for extended periods of time: In

1040-541: A 1-to-1 rate — thereby netting the speculator a tidy profit. The Greenback Party of 1876 drew the support almost exclusively from farmers — few urban workmen cast ballots for the Greenback ticket. The situation changed somewhat in the summer of 1877, however, when a strike movement erupted across the country, leading to the suppression of local strike actions by Federal troops and a radicalization of workers. A myriad of local political organizations, independent not only of

1170-581: A broader existence the following year, issuing a convention call in August 1874 urging all "greenback men" to assemble at Indianapolis in November to form a new national political party. The result of this call was an undelegated gathering of individuals held in November in Indianapolis which was more akin to an organizational conference than a formal convention. No new party was formally established, but

1300-601: A charter. By the 1860s, over half of states had such a law on the books. However, the National Banking Act of 1864 (ch. 106, 13  Stat.   99 ; June 3, 1864) brought a close to the issue by establishing federally-issued bank charters, which took banking out of the hands of state governments. The first bank to receive a national charter was the First National Bank of Philadelphia, Pennsylvania (Charter #1). The first new national bank to open

1430-403: A default on loans and setting off a financial chain reaction. Runs began on banks, causing a series of bank failures, and manufacturers shuttered their production, laying off workers. Dozens of marginal railroads went bankrupt while unemployment skyrocketed. A lengthy depression ensued, continuing through 1878. Pressure was placed on Congress to alleviate the business crisis through reinflation of

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1560-486: A fixed maximum rate in terms of the local currency, the reserves necessary to provide these remittances being kept to a considerable extent abroad. Its theoretical advantages were first set forth by Ricardo (i.e. David Ricardo , 1824) at the time of the Bullionist Controversy. He laid it down that a currency is in its most perfect state when it consists of a cheap material, but having an equal value with

1690-478: A fixed price. First emerging in the late 18th century to regulate exchange between London and Edinburgh, Keynes (1913) noted how such a standard became the predominant means of implementing the gold standard internationally in the 1870s. Restricting the free circulation of gold under the Classical Gold Standard period from the 1870s to 1914 was also needed in countries which decided to implement

1820-454: A free-entry banking regime, the system remained poorly integrated across state lines. Though all banknotes were uniformly denominated in dollars, notes would often circulate at a steep discount in states beyond their issue. In the end, well-publicized frauds arose in states like Michigan, which had adopted free entry regimes but did not require the redeemability of bank issues for specie. The perception of dangerous " wildcat banking ”, along with

1950-534: A gold–silver ratio of 15.2, higher than prevailing ratios in Continental Europe. Great Britain was therefore de jure under a bimetallic standard with gold serving as the cheaper and more reliable currency compared to clipped silver (full-weight silver coins did not circulate and went to Europe where 21 shillings fetched over a guinea in gold). Several factors helped extend the British gold standard into

2080-475: A governing Executive Committee was named for the prospective "National Independent Party", with the body assigned the task of composing a declaration of principles and issuing another call for a formal founding convention. Several regional conventions took place in 1875, merging the activities of local political parties towards a single end. Most of those attending these initial gatherings were farmers or lawyers, with few urban wage workers or trade union officials —

2210-554: A group of reform-minded farmers and political activists declared themselves free of the two established parties and established themselves as the Independent Party. One of the founding members, John C. Wilde, is cited several times in a northern Michigan newspaper from 1898 explaining the reasons for the beginning of the Party. The group nominated a slate for statewide office, running on a platform which called for expansion of

2340-464: A period of protracted inflation during the Civil War. Between the years 1860 and 1865, the cost of living nearly doubled. As is the case in all inflationary periods, there were winners and losers created by the significant fall in currency value, with banks and creditors receiving less real value from the loans repaid by debtors. Pressure began to build in the financial industry for a rectification of

2470-404: A quick military victory proved ephemeral and in the wake of Southern victories the federal government found it increasingly difficult to sell the government bonds necessary to finance the war effort. Two 1861 bond sales of $ 50 million each conducted through private banks went without a hitch, but bankers found the market for the 7.3% securities soft for a third bond issue. A general fear arose that

2600-495: A standard of this type was made by Holland. The free coinage of silver was suspended in 1877. But the currency continued to consist mainly of silver and paper. It has been maintained since that date at a constant value in terms of gold by the Bank's regularly providing gold when it is required for export and by its using its authority at the same time for restricting so far as possible the use of gold at home. To make this policy possible,

2730-580: A switch to gold by several European countries in the 1870s and led as well to the suspension of the unlimited minting of silver 5-franc coins in the Latin Monetary Union in 1873. The following countries switched from silver or bimetallic currencies to gold in the following years (Britain is included for completeness): The gold standard became the basis for the international monetary system after 1873. According to economic historian Barry Eichengreen , "only then did countries settle on gold as

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2860-802: A system of national banks chartered at the federal level, and created the United States National Banking System. They encouraged development of a national currency backed by bank holdings of U.S. Treasury securities and established the Office of the Comptroller of the Currency as part of the United States Department of the Treasury . The Act shaped today's national banking system and its support of

2990-478: A time of frenetic railway construction and associated land speculation. Rather than a managed system of national railroad construction through public works or leaving the construction of lines strictly to market forces, Congress attempted to spur the growth of the industry through the grant of enormous tracts of public lands to privately owned railway companies. In May 1869, the First transcontinental railroad across

3120-813: A uniform U.S. banking policy. At the end of the Second Bank of the United States in 1836, the control of banking regimes devolved mostly to the states. Different states adopted policies including a total ban on banking (as in Wisconsin), a single state-chartered bank (as in Indiana and Illinois), limited chartering of banks (as in Ohio), and free entry (as in New York). While the relative success of New York's "free banking" laws led several states also to adopt

3250-500: A yet another form of currency, also backed by government bonds rather than gold and redeemable in United States Notes. This non-gold-based currency became the functional equivalent of greenbacks in circulation, further expanding the money supply. With the production of consumer goods impacted by the conversion of factories to wartime production and the expansion of the money supply, the United States of America experienced

3380-608: Is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold . The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from the late 1920s to 1932 as well as from 1944 until 1971 when the United States unilaterally terminated convertibility of the US dollar to gold, effectively ending the Bretton Woods system . Many states nonetheless hold substantial gold reserves . Historically,

3510-407: Is the only possible means of bringing China onto a gold basis ... The classical gold standard of the late 19th century was therefore not merely a superficial switch from circulating silver to circulating gold. The bulk of silver currency was actually replaced by banknotes and token currency whose gold value was guaranteed by gold bullion and other reserve assets held inside central banks. In turn,

3640-541: The Mexican–American War . However, the revenue generated this way was limited without a national currency. This became more urgent during the Civil War, when Congress and Lincoln were struggling to finance the war efforts. Without a national mechanism for issuing currency, the Lincoln administration could not exploit the powers and loopholes that, for example, Britain could with its central bank, in order to finance

3770-675: The National Labor Reform Party . Joining organized labor were the organized farmers in the form of the Patrons of Husbandry , commonly known as the Grange . Established in 1867, the Grange concerned itself with the monopoly power exerted by railroads, which used various aggressive pricing mechanisms for its own benefit against the farmers who shipped commodities over its lines. When the Grangers turned to politics around

3900-588: The Populist Party . By the middle of the 1880s, Greenback Labor nationally was losing its labor-based support, in part as a result of craft union voluntarism and in part as a result of Irish defections back to the Democratic Party. Historian Paul Kleppner has observed that one of the traditional functions of third parties in the American political system has been the raising of new issues,

4030-637: The Straits dollar of 24.26 g silver was fixed at 28 pence (or £1 = 8 4 ⁄ 7 dollars; ratio 28.4). Nearly similar gold standards were implemented in Japan in 1897, in the Philippines in 1903, and in Mexico in 1905 when the previous yen or peso of 24.26 g silver was redefined to approximately 0.75 g gold or half a U.S. dollar (ratio 32.3). Japan gained the needed gold reserves after

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4160-420: The U.S. House of Representatives : 46th United States Congress , March 4, 1879 - March 3, 1881. 47th United States Congress , March 4, 1881, to March 3, 1883. 48th United States Congress , March 4, 1883, to March 3, 1885. 49th United States Congress , March 4, 1885, to March 3, 1887. 50th United States Congress , March 4, 1887, to March 3, 1889. Gold standard A gold standard

4290-487: The U.S. Treasury itself suspending redemption of its own Treasury notes . The gold standard was thus effectively suspended. United States Secretary of the Treasury Salmon P. Chase had already anticipated the coming financial crisis, proposing to Congress the establishment of a system of national banks, each empowered to issue banknotes backed not with gold but with federal bonds. This December 1861 proposal

4420-814: The election of 1886 , only two dozen Greenback candidates ran for the House, apart from another six who ran on fusion tickets. Again, Weaver was the party's only victory. Much of the Greenback news in early 1888 took place in Michigan, where the party remained active. In early 1888, it was not clear if the Greenback Party would hold another national convention. The 4th Greenback Party National Convention assembled in Cincinnati , Ohio , on May 16, 1888. There were so few delegates who attended that no actions were taken. On August 16, 1888, George O. Jones , chairman of

4550-535: The silver standard and bimetallism have been more common than the gold standard. The shift to an international monetary system based on a gold standard reflected accident, network externalities , and path dependence . Great Britain accidentally adopted a de facto gold standard in 1717 when Isaac Newton , then-master of the Royal Mint , set the exchange rate of silver to gold too low, thus causing silver coins to go out of circulation. As Great Britain became

4680-511: The "gold points" (in the example above, cases existed of the pound climbing above 25.42 francs or falling below 25.02 francs). Central banks were found to pursue other objectives other than fixed exchange rates to gold (like e.g., lower domestic prices, or stopping huge gold outflows), though such behavior is limited by public credibility on their adherence to the gold standard. Keynes described such violations occurring before 1913 by French banks limiting gold payouts to 200 francs per head and charging

4810-482: The "rules" actually observed during the classical gold standard era from 1873 to 1914, however, reveal how much more powerful national central banks actually are in influencing price levels and specie flows, compared to the "self-correcting" flows predicted by the price-specie flow mechanism. Keynes premised the "rules of the game" on best practices of central banks to implement the pre-1914 international gold standard, namely: Central banks were also expected to maintain

4940-465: The 1780s, Thomas Jefferson , Robert Morris and Alexander Hamilton recommended to Congress that a decimal currency system be adopted by the United States. The initial recommendation in 1785 was a silver standard based on the Spanish milled dollar (finalized at 371.25 grains or 24.0566 g fine silver), but in the final version of the Coinage Act of 1792 Hamilton's recommendation to include

5070-448: The 1870s, when the growing popularity of checks and the declining profitability of national bank currency issues caused a resurgence. The granting of charters led to the creation of many national banks and a national banking system which grew at a fast pace. The number of national banks rose from 66 immediately after the Act to 7,473 in 1913. Initially, this rise in national banking came at

5200-672: The 1874 elections in Wisconsin, California, Iowa and Kansas. This led the Chicago Weekly Tribune to state that the movement offered, "an opportunity to accomplish something for the country at large — not for the farmers merely, but for all who live by their industry, as distinguished from those who live by politics, speculations and class-legislation." Frustrated by their inability to get Democrats or Republicans to adopt inflationary monetary policy, southern and western leaders of monetary reform met in Indianapolis and proposed

5330-535: The 19th century, namely: A proclamation from Queen Anne in 1704 introduced the British West Indies to the gold standard; however, it did not result in the wide use of gold currency and the gold standard, given Britain's mercantilist policy of hoarding gold and silver from its colonies for use at home. Prices were quoted de jure in gold pounds sterling but were rarely paid in gold; the colonists' de facto daily medium of exchange and unit of account

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5460-453: The 19th century. Gold functioned as a medium for international trade and high-value transactions, but it generally fluctuated in price versus everyday silver money. A bimetallic standard emerged under a silver standard in the process of giving popular gold coins like ducats a fixed value in terms of silver. In light of fluctuating gold–silver ratios in other countries, bimetallic standards were rather unstable and de facto transformed into

5590-575: The Bank of Holland has kept a reserve, of a moderate and economical amount, partly in gold, partly in foreign bills. Since the Indian system (gold exchange standard implemented in 1893) has been perfected and its provisions generally known, it has been widely imitated both in Asia and elsewhere ... Something similar has existed in Java under Dutch influences for many years ... The Gold-Exchange Standard

5720-601: The Greenback Party broadened its platform to include support for an income tax , an eight-hour day , and allowing women the right to vote . Ideological similarities also existed between the Grange ( The National Grange of the Order of Patrons of Husbandry ) and the Greenback movement. For example, both the Grange and the GAP favored a national graduated income tax and proposed that public lands be given to settlers rather than sold to land speculators . The town of Greenback, Tennessee ,

5850-567: The Hayes administration as a leading spokesman for those national politicians who wanted the nation's money supply used to expand commerce and fund westward expansion of the nation, not repay in gold the interest on civil war bonds Eastern bankers had bought to fund much of the civil war effort but whose antebellum lending practices to the South had helped slavery flourish. His 1875 national debates with hard money New York Governor Stewart L. Woodford set

5980-679: The National Currency Act, was passed in the Senate by a 23–21 vote, and was supplemented a year later by the National Banking Act of 1864. The goals of these acts was to create a single national currency, a nationalized bank chartering system, and to raise money for the Union war effort. The Act established national banks that could issue National Bank Notes which were backed by the United States Treasury and printed by

6110-671: The North American continent was completed, bringing many localities to within reach of a national market for the first time. A frenzy to complete additional railway lines to open up new frontier areas for development followed, a situation in which the United States government and the great railroad companies of the day maintained a common interest. In an effort to speed such development, Congress granted cash loans and some 129 million acres (52.2 million hectares) of publicly owned land to subsidize construction. A great part of this massive stockpile of land needed to be converted into cash by

6240-577: The Republican and Democratic Parties but also of the fledgling Greenback Party sprung up around the country, concentrated in the states of Ohio , Pennsylvania , and New York . In the late 1870s, the party controlled local government in a number of industrial and mining communities and contributed to the election of 21 members in the United States Congress independent of the two major parties. The movement found particular success at

6370-494: The Sino-Japanese War of 1894–1895. For Japan, moving to gold was considered vital for gaining access to Western capital markets. In the 1920s John Maynard Keynes retrospectively developed the phrase "rules of the game" to describe how central banks would ideally implement a gold standard during the prewar classical era, assuming international trade flows followed the ideal price–specie flow mechanism . Violations of

6500-495: The Treasury of the Grant administration George S. Boutwell formally abandoned the contraction policy and embraced the ongoing state of political inertia. Currency policy emerged as a hot topic in national politics, with politically active farmers and representatives of the fledgling national trade union movement endorsing a weak greenback-type currency as conducive to the needs of these groups as debtors. A looser currency supply

6630-445: The U.S. Treasury issue specie (coinage or "hard" currency) in exchange for greenback currency upon its presentation for redemption beginning on January 1, 1879, thus returning the nation to the gold standard. Together, these measures created an inflexible currency controlled by banks rather than the federal government. Greenbacks contended that such a system favored creditors and industry to the detriment of farmers and laborers. In 1880,

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6760-571: The accumulated metal to redeem the greenback currency on January 1, 1879. This deflationary move further tightened the already contracting economy, moving currency reform higher on the list of objectives of politically minded farmers. With the Democratic Party still discredited in the minds of many Northerners for its pro-Southern orientation and the Republican Party dominated by pro-gold interests, conditions had become ripe for

6890-422: The act, state legislatures typically issued bank charters on a case-by-case basis, taking into consideration whether the area needed a new bank, and if the applicant was of good moral standing. As this system could be subject to corruption, states began passing "free banking" laws in 1837, which meant that any applicant who filled out the correct paperwork and deposited an in-kind payment to the state would be granted

7020-407: The agricultural development of the land which they had to sell. Populations skyrocketed and marginal lands were sold and settled. In 1873, the economic bubble burst. The Panic began with a crisis in the overextended railroad industry, when the brokerage house Jay Cooke & Company found itself unable to sell enough Northern Pacific Railroad bonds to meet its financial obligations, leading to

7150-467: The banking system included hiring a new staff, being hands-on with several aspects such as "personally evaluating applications for bank charters and consoled prospective bankers", and "assisting in the design of the new national bank notes, and arranged for their engraving, printing, and distribution." As an result of McCulloch's efforts, many banks were just not willing to conform to his system of operations. This prompted Congress to pass "a 10 percent tax on

7280-401: The basis for their money supplies. Only then were pegged exchange rates based on the gold standard firmly established." Adopting and maintaining a singular monetary arrangement encouraged international trade and investment by stabilizing international price relationships and facilitating foreign borrowing. The gold standard was not firmly established in non-industrial countries. As feared by

7410-551: The bills was about as good as the green ink printed on one side, hence the name "greenbacks." The Second Legal Tender Act , enacted July 11, 1862, a Joint Resolution of Congress, and the Third Legal Tender Act , enacted March 3, 1863, expanded the limit to $ 450 million. The largest amount of greenbacks outstanding at any one time was calculated as $ 447,300,203.10. The National Bank Act (ch. 58, 12  Stat.   665 ; February 25, 1863), originally known as

7540-615: The civil war, a controversial major general of Union forces during the war, and a Republican turned Democrat after the Grant Administration. His national debates on Greenback monetary policy led the party's growth and influence as spokesmen against the post-war redevelopment of monopolistic gold-based capitalism. Ewing's advice to Andrew Johnson had helped point the administration towards an anti-gold-standard Treasury department. Ewing served in Congress from 1877 to 1881 during

7670-423: The convention: The paper currency, commonly called 'legal tenders' or 'greenbacks,' was actually paid out for value received as so much gold, when gold could not be obtained ... But whether our currency will always be on a par with gold or not, ... the commercial and industrial prosperity of a country do not depend upon the amount of gold and silver there is in circulation. Our prosperity must continually depend upon

7800-508: The country's gold supply was inadequate and that the nation would soon leave the gold standard . In December runs on deposits began in New York City , forcing banks there to disburse a substantial part of their hard metal reserves. On December 30, 1861, New York banks suspended the redemption of their banknotes with gold. This spontaneous action was followed shortly by banks in other states suspending payment on their own banknotes and

7930-674: The creation of a new political party for currency reform. They would meet again in Cleveland to formally launch the Greenback Party in 1875. The Greenbackers condemned the National Banking System , created by the National Banking Act of 1863, the harmonization of the silver dollar ( Coinage Act of 1873 was in fact the "Crime of '73" to Greenback), and the Resumption Act of 1875, which mandated that

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8060-475: The creation of national banks, set out a plan for establishing a national currency backed by government securities held by other banks, and gave the federal government the ability to sell war bonds and securities (in order to help the war effort ). National banks were chartered by the federal government, and were subject to stricter regulation; they had higher capital requirements and were not allowed to loan more than 10% of their holdings. A high tax on state banks

8190-405: The currency, pitting railroad promoters and the iron industry against Eastern bankers and the merchant elite, who favored a stable, gold-based currency. Although those favoring currency expansion won the day in Congress, which passed an Inflation Bill calling for a $ 46 million boost in output of National Bank notes that would raise the ceiling on unbacked currency back to $ 400 million, the legislation

8320-526: The decline of the Byzantine Empire's economic influence. However, economic systems using gold as the sole currency and unit of account never emerged before the 18th century. For millennia it was silver, not gold, which was the real basis of the domestic economies: the foundation for most money-of-account systems, for payment of wages and salaries, and for most local retail trade. Gold functioning as currency and unit of account for daily transactions

8450-417: The developing international financial system. Due to the inflationary finance measures undertaken to help pay for the U.S. Civil War , the government found it difficult to pay its obligations in gold or silver and suspended payments of obligations not legally specified in specie (gold bonds); this led banks to suspend the conversion of bank liabilities (bank notes and deposits) into specie. In 1862 paper money

8580-407: The emergence of a new political organization to challenge the political hegemony of the two established parties of American politics. The Greenback Party emerged gradually from the consolidation of like-minded state -level political organizations of differing names. According to historian Paul Kleppner , the origin of the Greenback Party is to be found in the state of Indiana , where early in 1873

8710-456: The expense of state banking—the number of state banks dwindled from 1,466 in 1863 to 247 in 1868. Though state banks were no longer allowed to issue notes, local bankers took advantage of less strict capital requirements ($ 10,000 for state banks vs. $ 50,000–200,000 for national banks) and opened new branches en masse. These new state banks then served as competition for national banks, growing to 15,526 in number by 1913. The years leading up to

8840-658: The financial system of the United States of America, creating vast new war-related expenditures while disrupting the flow of tax revenue from the Southern United States , organized as the Confederate States of America . The act of Southern secession prompted a brief and severe business panic in the North and a crisis of public confidence in the Federal government. The government's initial illusions of

8970-400: The form of circulating gold sovereigns as well as banknotes that were convertible at par into sovereigns or Bank of England banknotes. Canada introduced its own gold dollar in 1867 at par with the U.S. gold dollar and with a fixed exchange rate to the gold sovereign. Up until 1850 only Britain and a few of its colonies were on the gold standard, with the majority of other countries being on

9100-606: The gold bullion standard. The use of gold as money began around 600 BCE in Asia Minor and has been widely accepted ever since, together with various other commodities used as money , with those that lose the least value over time becoming the accepted form. In the early and high Middle Ages , the Byzantine gold solidus or bezant was used widely throughout Europe and the Mediterranean, but its use waned with

9230-468: The gold exchange standard was just one step away from modern fiat currency with banknotes issued by central banks, and whose value is secured by the bank's reserve assets, but whose exchange value is determined by the central bank's monetary policy objectives on its purchasing power in lieu of a fixed equivalence to gold. The final chapter of the classical gold standard ending in 1914 saw the gold exchange standard extended to many Asian countries by fixing

9360-408: The gold it professes to represent; and he suggested that convertibility for the purposes of the foreign exchanges should be ensured by the tendering on demand of gold bars (not coin) in exchange for notes, so that gold might be available for purposes of export only, and would be prevented from entering into the internal circulation of the country. The first crude attempt in recent times at establishing

9490-526: The gold price relative to silver; this drove silver money from circulation because it was worth more in the market than as money. Passage of the Independent Treasury Act of 1848 placed the U.S. on a strict hard-money standard. Doing business with the American government required gold or silver coins. Government accounts were legally separated from the banking system. However, the mint ratio (the fixed exchange rate between gold and silver at

9620-544: The gold standard has three benefits that made its use popular during certain historical periods: "its record as a stable nominal anchor; its automaticity; and its role as a credible commitment mechanism." The gold standard is supported by many followers of the Austrian School , free-market libertarians , and some supply-siders . The United Kingdom slipped into a gold specie standard in 1717 by over-valuing gold at 15 + 1 ⁄ 5 times its weight in silver. It

9750-708: The gold standard on the ideal assumption of international trade operating under the price–specie flow mechanism proposed by economist David Hume wherein: In practice, however, specie flows during the classical gold standard era failed to exhibit the self-corrective behavior described above. Gold finding its way back from surplus to deficit countries to exploit price differences was a painfully slow process, and central banks found it far more effective to raise or lower domestic price levels by lowering or raising domestic interest rates. High price level countries may raise interest rates to lower domestic demand and prices, but it may also trigger gold inflows from investors – contradicting

9880-608: The gold standard while guaranteeing the exchangeability of huge amounts of legacy silver coins into gold at the fixed rate (rather than valuing publicly held silver at its depreciated value). The term limping standard is often used in countries maintaining significant amounts of silver coin at par with gold, thus an additional element of uncertainty with the currency's value versus gold. The most common silver coins kept at limping standard parity included French 5-franc coins , German 3-mark thalers , Dutch guilders , Indian rupees , and U.S. Morgan dollars . Lastly, countries may implement

10010-514: The government itself. The quantity of notes that a bank was allowed to issue was proportional to the bank's level of capital deposited with the Comptroller of the Currency at the Treasury. To further control the currency, the Act taxed notes issued by state and local banks, essentially pushing non-federally issued paper currency out of circulation. Since the establishment of the Republic, state governments had held authority to regulate banks. Before

10140-474: The greenback currency from circulation, a necessary first step towards restoration of the gold standard. In response, Congress passed the Contraction Act of 1866 , calling for the withdrawal of $ 10 million in United States Notes within the first 6 months and an addition $ 4 million per month thereafter. Substantial contraction of the physical money supply followed. About $ 44 million in greenback currency

10270-465: The high expenses involved. Previously, the damage that would be done to state banks by national competition was sufficient to prevent significant national bank chartering. But using the war crisis, Lincoln was able to expand this effort. One of the first attempts to issue a national currency came in the early days of the Civil War when Congress approved the Legal Tender Act of 1862 , allowing

10400-497: The idea that the gold standard "was effective in stabilizing prices and moderating business-cycle fluctuations during the nineteenth century." The consensus view among economists is that the gold standard helped prolong and deepen the Great Depression . Historically, banking crises were more common during periods under the gold standard while currency crises were less common. According to economist Michael D. Bordo ,

10530-419: The industry, the enterprise, and the busy internal trade and a true independence of foreign nations, which a paper circulation, well based on credit, has always been found to promote. The Greenback movement argued that the previous effort of using an unbacked currency had been sabotaged by monied interests, which had prevailed upon Congress to restrict the functionality of the notes — declaring them unsuitable for

10660-436: The issue of $ 150 million in national notes known as greenbacks and mandating that paper money be issued and accepted in lieu of gold and silver coins. The bills were backed only by the national government's promise to redeem them and their value was dependent on public confidence in the government as well as the ability of the government to give out specie in exchange for the bills in the future. Many thought this promise backing

10790-530: The limping standard of freely circulating legacy silver coins in order to prevent the further deterioration of the gold–silver ratio which reached 20 in the 1880s. After 1890 however, silver's price decline could not be prevented further and the gold–silver ratio rose sharply above 30. In 1893 the Indian rupee of 10.69 g fine silver was fixed at 16 British pence (or £1 = 15 rupees; gold–silver ratio 21.9), with legacy silver rupees remaining legal tender. In 1906

10920-429: The mint) continued to overvalue gold. In 1853, silver coins 50 cents and below were reduced in silver content and cannot be requested for minting by the general public (only the U.S. government can request for it). In 1857 the legal tender status of Spanish dollars and other foreign coinage was repealed. In 1857 the final crisis of the free banking era began as American banks suspended payment in silver, with ripples through

11050-690: The minting of exportable gold coins and silver dollars in order to divert the United States Mint 's limited resources into fractional coins which stayed in circulation. The United States also embarked on establishing a national bank with the First Bank of the United States in 1791 and the Second Bank of the United States in 1816. In 1836, President Andrew Jackson failed to extend the Second Bank's charter, reflecting his sentiments against banking institutions as well as his preference for

11180-537: The national committee, called a second session of the national convention. The second session of the national convention met in Cincinnati on September 12, 1888. Only seven delegates attended. Chairman Jones issued an address criticizing the two major parties, and the delegates made no nominations. With the failure of the convention, the Greenback Party ceased to exist. Many Greenback activists, including 1880 Presidential nominee James B. Weaver , later participated in

11310-471: The national currency, it is a matter of comparative indifference whether it actually forms the national currency ... The Gold-Exchange Standard may be said to exist when gold does not circulate in a country to an appreciable extent, when the local currency is not necessarily redeemable in gold, but when the Government or Central Bank makes arrangements for the provision of foreign remittances in gold at

11440-459: The national currency. (In Wisconsin in the same year, a short-lived Reform Party , also called Liberal Reform Party or People's Reform Party, a coalition of Democrats, reform -minded Republicans, and Grangers secured the election of William Robert Taylor as Governor of Wisconsin for a two-year term, as well as a number of state legislators, but it never formed a coherent organization.) The Indiana Independent organization cast its eyes upon

11570-445: The national system, increasing the number of national banks substantially. The National Banking Acts served to create the (federal-state) dual structure that is now a defining characteristic of the U.S. banking system and economy. The Comptroller of the Currency continues to have significance in the U.S. economy and is responsible for administration and supervision of national banks as well as certain activities of bank subsidiaries (per

11700-440: The notes of state banks, signaling its determination that national banks would triumph and the state banks would fade away." A later act, passed on March 3, 1865, imposed a tax of 10 percent on the notes of state banks to take effect on July 1, 1866. Similar to previous taxes, this effectively forced all non-federal currency from circulation. It also resulted in the creation of demand deposit accounts , and encouraged banks to join

11830-581: The onset of the silver rush from the Comstock Lode in the 1870s. Political agitation over the inability of silver miners to monetize their produce resulted in the Bland–Allison Act of 1878 and Sherman Silver Purchase Act of 1890 which made compulsory the minting of significant quantities of the silver Morgan dollar . National Bank Act The National Banking Acts of 1863 and 1864 were two United States federal banking acts that established

11960-432: The passing of the 10% tax on banknotes consisted of events surrounding the National Banking Act of 1864. During this time period, Hugh McCulloch was determined to "fight against the national banking legislation, which he rightly perceived as a threat to state-chartered banking. Although he tried to block the system's creation, he [McCulloch] was not determined to be its champion." Part of his plans to revamp this portion of

12090-405: The payment of taxes or national debt. This inevitably depreciated the value of the unbacked currency when circulated side by side with fully functional gold-backed notes, the Greenback movement argued. Moreover, this differential in values was exploited by speculators, who purchased unbacked currency at a severe discount with gold-backed notes and then pressured Congress into redemption of the same at

12220-502: The poor integration of the U.S. banking system, led to increasing public support for a uniform national banking regime. The United States Government, on the other hand, still had limited taxation capabilities and so had an interest in the seigniorage potential of a national bank. In 1846, the Polk Administration created a United States Treasury system that moved public funds from private banks to Treasury branches to fund

12350-426: The premise that gold will flow out of countries with high price levels. Developed economies deciding to buy or sell domestic assets to international investors also turned out to be more effective in influencing gold flows than the self-correcting mechanism predicted by Hume. Another set of violations to the "rules of the game" involved central banks not intervening in a timely manner even as exchange rates went outside

12480-484: The railways to finance their building activities, since railroad construction was a costly undertaking. New settlement had to be attracted to the virgin lands west of the Missouri River , which had been previously regarded by the public as worthless to the needs of agriculture due to insufficiencies of the soil as well as the arid climate. Millions of advertising dollars were spent by the railway companies promoting

12610-403: The ratio is below 15.5, and silver 5-franc coins whenever the ratio is above 15.5. The United States dollar was also bimetallic de jure until 1900, worth either 24.0566 g fine silver, or 1.60377 g fine gold (ratio 15.0); the latter revised to 1.50463 g fine gold (ratio 15.99) from 1837 to 1934. The silver dollar was generally the cheaper currency before 1837, while the gold dollar

12740-413: The shilling [12 pence] of 5.57 g fine silver). Hence the pound sterling was originally 324 g fine silver reduced to 111.36 g by 1601. The problem of clipped, underweight silver pennies and shillings was a persistent, unresolved issue from the late 17th century to the early 19th century. In 1717 the value of the gold guinea (of 7.6885 g fine gold) was fixed at 21 shillings, resulting in

12870-548: The silver North German thaler and South German gulden to the German gold mark , reflecting the sentiment of the first international monetary conference in 1867, and utilizing the 5 billion gold francs (worth 4.05 billion marks or 1,451 metric tons ) in indemnity demanded from France at the end of the Franco-Prussian War . This transition done by a large, centrally located European economy also triggered

13000-552: The silver standard. France and the United States were two of the more notable countries on the bimetallic standard . France's actions in maintaining the French franc at either 4.5 g fine silver or 0.29032 g fine gold stabilized world gold–silver price ratios close to the French ratio of 15.5 in the first three quarters of the 19th century by offering to mint the cheaper metal in unlimited quantities – gold 20-franc coins whenever

13130-470: The stage for a rapid but brief rise in party national influence. The Greenback Party was in decline throughout the entire Grover Cleveland administration. In the election of 1884 , the party failed to win any House seats outright, although they did win one seat in conjunction with Plains States Democrats, James B. Weaver , as well as a handful of other seats by endorsing the Democratic nominee. In

13260-518: The start of the 1870s, railroad price reform was chief on its agenda, with currency reform making it easier for debtors to repay their loans a distinctly lesser concern. The Greenback Party would be an alliance of organized labor and reform-minded farmers intent on toppling the political hegemony of the industrial- and banking-oriented Republican Party which ruled the North during the Reconstruction period . The late 1860s and early 1870s were

13390-477: The testing of their viability amongst the electorate, and the pressuring of established political parties to appropriate these issues as part of their own electoral agenda. In this the Greenback Party and the People's Party which followed it were ultimately successful, moving the Democratic Party to espouse looser monetary policy and an ultimate abandonment of the gold standard. The following were Greenback members of

13520-767: The union movement having been shattered and atomized following the Panic of 1873. The party nominated its first national ticket at a convention held in Indianapolis , Indiana in May 1876. The party's platform focused upon repeal of the Specie Resumption Act of 1875 and the renewed use of non-gold-backed United States Notes in an effort to restore prosperity through an expanded money supply . The convention nominated New York economics pamphleteer Peter Cooper as its presidential standard-bearer. Cooper declared to

13650-549: The use of gold coins for large payments rather than privately issued banknotes. The return of gold could only be possible by reducing the dollar's gold equivalence, and in the Coinage Act of 1834 the gold–silver ratio was increased to 16.0 (ratio finalized in 1837 to 15.99 when the fine gold content of the $ 10 eagle was set at 232.2 grains or 15.0463 g). Gold discoveries in California in 1848 and later in Australia lowered

13780-538: The use of state or private force to suppress union strikes . The organization faded into obscurity in the second half of the 1880s, with its basic program reborn shortly under the aegis of the People's Party , commonly known as the "Populists". Later, during the early 20th century, parts of the agenda from both parties were accomplished by the Progressives . The American Civil War of 1861 to 1865 greatly affected

13910-404: The value of local currencies to gold or to the gold standard currency of a Western colonial power. The Netherlands East Indies guilder was the first Asian currency pegged to gold in 1875 via a gold exchange standard which maintained its parity with the gold Dutch guilder . Various international monetary conferences were called up until 1892, with various countries actually pledging to maintain

14040-574: The various international monetary conferences, the switch to gold, combined with record U.S. silver output from the Comstock Lode , plunged the price of silver after 1873 with the gold–silver ratio climbing to historic highs of 18 by 1880. Most of continental Europe made the conscious decision to move to the gold standard while leaving the mass of legacy (and erstwhile depreciated) silver coins remaining unlimited legal tender and convertible at face value for new gold currency. The term limping standard

14170-545: The vibrant green ink used on the reverse side of the bill. A dual currency system emerged in which this fiat money circulated side by side with ostensibly gold-backed currency and gold coin, with the value of the former bearing a discount in trade. The greatest differential in value of these currencies came in 1864, when the value of a gold dollar equaled $ 1.85 in greenback currency. Congress finally enacted Treasury Secretary Chase's National Bank plan in January 1863, creating

14300-668: The weak currency situation. A change of heads at the Treasury Department in March 1865 proved the occasion for a change of course in American monetary policy. New Secretary of the Treasury Hugh McCulloch not only declared himself sympathetic to the banking industry's desire for restoration of a gold-based currency, but he declared the resumption of gold payments to be his primary aim. In December 1865, McCulloch formally sought approval from Congress to retire

14430-451: The world's leading financial and commercial power in the 19th century, other states increasingly adopted Britain's monetary system. The gold standard was largely abandoned during the Great Depression before being re-instated in a limited form as part of the post- World War II Bretton Woods system . The gold standard was abandoned due to its propensity for volatility, as well as the constraints it imposed on governments: by retaining

14560-505: The world's leading financial and industrial powers of the 19th century while the United States was an emerging power. By the time the gold–silver ratio reverted to 15.5 in the 1860s, this bloc of gold-utilizing countries grew further and provided momentum to an international gold standard before the end of the 19th century: The international classical gold standard commenced in 1873 after the German Empire decided to transition from

14690-520: Was vetoed by President Grant on April 22, 1874. The next Congress moved in the other direction, with the Republican leadership making use of steamroller tactics in order to finally resolve the dual currency situation through passage of the Specie Payment Resumption Act . Under the plan the government would accumulate a sufficient gold reserve over the next several years through the sale of interest-bearing bonds for gold, using

14820-554: Was The First National Bank of Davenport, Iowa (Charter #15). Additionally, the new Act converted more than 1,500 state banks to national banks. The National Bank Act of 1863 was passed on February 25, 1863, and was the first attempt to establish a federal banking system after the failures of the First and Second Banks of the United States, and served as the predecessor to the Federal Reserve Act of 1913. The act allowed

14950-589: Was accomplished by growing the stock of money less rapidly than real output. By 1879 the market price of the greenback matched the mint price of gold, and according to Barry Eichengreen, the United States was effectively on the gold standard that year. The Coinage Act of 1873 (also known as the Crime of ‘73) suspended the minting of the standard silver dollar (of 412.5 grains, 90% fine), the only fully legal tender coin that individuals could convert silver bullion into in unlimited (or Free silver ) quantities, and right at

15080-454: Was believed, would better foster business and assist farmers by raising prices and making debts easier to pay. Initially an agrarian organization associated with the policies of the Grange , the organization took the name Greenback Labor Party in 1878 and attempted to forge a farmer–labor alliance by adding industrial reforms to its agenda, such as support of the 8-hour day and opposition to

15210-530: Was cheaper between 1837 and 1873. The nearly coincidental California gold rush of 1849 and the Australian gold rushes of 1851 significantly increased world gold supplies and the minting of gold francs and dollars as the gold–silver ratio went below 15.5, pushing France and the United States into the gold standard with Great Britain during the 1850s. The benefits of the gold standard were first felt by this larger bloc of countries, with Britain and France being

15340-496: Was generally impossible to implement before the 19th century due to the absence of recently developed tools (like central banking institutions, banknotes, and token currencies), and that a gold exchange standard was even superior to Britain's gold specie standard with gold in circulation. As discussed by Keynes: The Gold-Exchange Standard arises out of the discovery that, so long as gold is available for payments of international indebtedness at an approximately constant rate in terms of

15470-654: Was initially ignored by Congress, which in February 1862 decided instead to pass the First Legal Tender Act , authorizing the production of not more than $ 150 million of these legal tender United States Notes . Two additional issues were deemed necessary, approved in June 1862 and January 1863, so that by the end of the war some $ 450 million of this non-gold-backed currency was in circulation. The new United States Notes were popularly known as "greenbacks" due to

15600-556: Was intentionally set so high as to effectively prohibit further circulation of state bank and private notes. By this time the conversion from state banks to national banks was well underway. The constitutionality of the tax came before the Supreme Court in Veazie Bank v. Fenno , a case by a state-chartered Maine bank and the collector of internal revenue. The Court ruled 7–2 in favor of the government. State banks declined until

15730-484: Was levied to discourage competition, and by 1865 most state banks had either received national charters or collapsed. The 1864 act, based on a New York State law, brought the federal government into active supervision of commercial banks. Further acts passed in 1865 and 1866 imposed a tax to speed the adoption of the system. All banks (national or otherwise) had to pay a 10 percent tax on payments that they made in currency notes other than national bank notes. The tax rate

15860-399: Was made legal tender. It was a fiat money (not convertible on demand at a fixed rate into specie). These notes came to be called " greenbacks ". After the Civil War, Congress wanted to reestablish the metallic standard at pre-war rates. The market price of gold in greenbacks was above the pre-war fixed price ($ 20.67 per ounce of gold) requiring deflation to achieve the pre-war price. This

15990-474: Was named after the Greenback Party about 1882. The party seems to have made use of slightly different official names in some states, with the organization appearing on the ballot in the November 1880 Sacramento , California , city election as the "Greenback Labor and Socialist Party". Among its national spokesmen, although not the best known, was Thomas Ewing, Jr. , a noted Free State advocate in Kansas before

16120-560: Was not possible due to various hindrances which were only solved by tools that emerged in the 19th century, among them: The earliest European currency standards were therefore based on the silver standard , from the denarius of the Roman Empire to the penny (denier) introduced by Charlemagne throughout Western Europe, to the Spanish dollar and the German Reichsthaler and Conventionsthaler which survived well into

16250-410: Was only resolved by national central banks taking over the replacement of silver with national bank notes and token coins, centralizing the nation's supply of scarce gold, providing for reserve assets to guarantee convertibility of legacy silver coins, and allowing the conversion of banknotes into gold bullion or other gold-standard currencies solely for external purchases. This system is known as either

16380-529: Was predominantly the Spanish silver dollar . (Also explained in the history of the Trinidad and Tobago dollar .) Following the Napoleonic Wars, Britain legally moved from the bimetallic to the gold standard in the 19th century in several steps, namely: From the second half of the 19th century Britain then introduced its gold standard to Australia, New Zealand, and the British West Indies in

16510-487: Was seen as a way of breaking the perceived stranglehold on the national economy held by banks and wealthy industrialists. Chief among these supporters of so-called "Greenbackism" was the National Labor Union (NLU), established in 1866. This and other groups began to turn to political action in 1870 in an effort to advance their political agenda, with an August 1870 convention calling for the establishment of

16640-463: Was successfully withdrawn from circulation before a recession in 1867 helped fuel opposition in Congress to the deflationary redemption program. In February 1868, Congress terminated the Redemption Act and a state of what is today known as gridlock emerged, during which Congress refused to either formally leave the gold standard or to redeem its non-gold currency in circulation. Secretary of

16770-468: Was unique among nations to use gold in conjunction with clipped, underweight silver shillings, addressed only before the end of the 18th century by the acceptance of gold proxies like token silver coins and banknotes. From the more widespread acceptance of paper money in the 19th century emerged the gold bullion standard , a system where gold coins do not circulate, but authorities like central banks agree to exchange circulating currency for gold bullion at

16900-498: Was used to describe currencies whose nations' commitment to the gold standard was put into doubt by the huge mass of silver coins still tendered for payment, the most numerous of which were French 5-franc coins , German 3-mark Vereinsthalers , Dutch guilders and American Morgan dollars . Britain's original gold specie standard with gold in circulation was not feasible anymore with the rest of Continental Europe also switching to gold. The problem of scarce gold and legacy silver coins

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