The Mystery of Money and Banking – An Alternative Money System 95% or more of our money is account money 5% or less of our money is coins and bills

US MONETARY HISTORY PUBLICPRIVATE Colonial scripCommodity money all 13 coloniestobacco, beaver skins,... Continental currencyFirst Bank of the US 1775 – – 1811 United States MintSecond Bank of the US 1792 – present1816 – 36 Legal Tender Acts (“greenbacks”) Federal Reserve System 1762, – present

Colonial currencies There 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.moneyBritish America commodity moneyspecie (coins)paper moneycashtobacco beaverwampum 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.Spanish dollar 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". medium of exchangeProvince of Massachusetts Bay 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.bills of creditfiat money

Continental currency After 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]American Revolutionary WarContinental Congress 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]depreciated Another problem was that the British successfully waged economic warfare by counterfeiting Continentals on a large scale. Benjamin Franklin later wrote:economic warfare counterfeitingBenjamin Franklin 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.Legal Tender ActAmerican Civil WarUnited States Notes 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.Chief JusticeSalmon P. ChaseFifth AmendmentSecretary of the TreasuryUlysses GrantJoseph BradleyWilliam Strong

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)