Kick off 3/24 1.Why does our money look the way it does? (shape, designs, etc.) 2.If you could design a new dollar bill, what would it look like?

Monetary Standards

I. Monetary Standards Defined The mechanism for keeping the money supply – Portable – Divisible – Durable – In limited supply

II. Pre Civil War Monetary Standards A.The Federal Government 1.Could produce only coin (commodity money) 2.Not ___________ to produce paper money B. State Banks 1.Produced their own paper currency backed by gold or silver 2.Wildcat banks – banks that overproduced currency 3. Problems (even with honest banks) Too many currencies (colors, sizes, etc.) Temptation to __________ ___________________ Trade over long distance

III. The Civil War and Monetary Standards Need for money to fight the ___________forced Federal Government (and Confederate Government) to print currency for the first time since the Revolution A._____________________(because they were green) 1.No gold or silver backing 2.Legal tender – must be accepted to pay debts B.National Banking System 1.People feared Greenbacks would lose value and stopped using them 2.Nationally chartered banks issued currency backed by ___________________________ Government got money to pay for the war Currency was __________________ 3.Tax on state currency forced private currencies out of production

III. The Civil War and Monetary Standards C.Other Currencies 1.Gold certificates – paper currency backed by gold in the __________________ 2.Silver Certificates – paper currency backed by silver in the treasury and silver dollar coins

IV. The Gold Standard A.The Gold Standard Act (1900) 1.Put the US on __________standard – currency represents equal amount of gold in the treasury 2.Greenbacks and NB notes were still used B.Advantages of a gold standard 1.___________________________________ 2.___________________________________ C.Disadvantages of a gold standard 1.Gold supply must match ___________________ 2.Mass redemption if government is not honest 3.Gold price ________________________ D.Abandoning the gold standard 1.Mass redemption during the ______________________ 2.Law requiring disclosure of possession of _________of gold 3.Gold Reserve Act 1934 Gold _________________from citizens Currency off the gold standard

V. The Inconvertible Fiat Standard Fiat money that is not backed by ____________ A.Managed Money Supply 1.Quantity of money in circulation is controlled by the _______________________________ 2.Currency consists of coins and Federal Reserve Notes B.Success of currency depends on: 1.Portability – bills are easy to carry around 2.Durability – bills and coins can withstand use 3.Divisibility – any value can be made 4.Limit supply Amount is controlled by _________________policies _______________________ are prosecuted