The Monetary System Why Gold, Paper & Coins?

The Monetary System QUESTION (in your notes) : Why is a dime smaller than a penny or nickel?

The Monetary System Early trade was done through Bartering = Exchanging goods/services In ancient and even 100 years ago people exchanged something other than coins or paper money. Doctors as recently as 1900 accepted chickens, pigs and other items in exchange for medical care Early trade was done through Bartering = Exchanging goods/services In ancient and even 100 years ago people exchanged something other than coins or paper money. Doctors as recently as 1900 accepted chickens, pigs and other items in exchange for medical care

The Monetary System Various forms of $ have been used since about 2000 B.C.E. starting with Gold. Money on its own has little value –It exists only in the value of the goods & services it represents –It is strengthened when gold or silver is used to “back” the money Various forms of $ have been used since about 2000 B.C.E. starting with Gold. Money on its own has little value –It exists only in the value of the goods & services it represents –It is strengthened when gold or silver is used to “back” the money

The Monetary System Gold was used in ancient cultures because it was rare and desirable Coin from 670 BCE - ancient Turkey First coin printed in the Colonies in Boston

The Monetary System China was 1st to use paper money c AD Sweden was the 1st western nation to use paper money in 1661 Around 1600 people stored their gold with goldsmiths. They were given a paper receipt. This receipt was then used to make purchases because the receipt was backed by gold China was 1st to use paper money c AD Sweden was the 1st western nation to use paper money in 1661 Around 1600 people stored their gold with goldsmiths. They were given a paper receipt. This receipt was then used to make purchases because the receipt was backed by gold

The Monetary System Today paper money is not redeemable in gold –The Civil War, World War I and Great Depression changed this. Today paper money is not redeemable in gold –The Civil War, World War I and Great Depression changed this. Confederate $10 bill

The Monetary System Today the U.S. Federal Reserve controls money –The U.S. Government is the biggest economic consumer –Think of the Fed Reserve as an airplane regulating height 2 ways –Fiscal policy Use of federal powers of taxes, borrowing & spending to counteract ups and downs in the economy –Federal Reserve System A network of 12 federal banks that regulate all U.S. banks It controls how much money is printed or taken out of circulation Sets interest rates Today the U.S. Federal Reserve controls money –The U.S. Government is the biggest economic consumer –Think of the Fed Reserve as an airplane regulating height 2 ways –Fiscal policy Use of federal powers of taxes, borrowing & spending to counteract ups and downs in the economy –Federal Reserve System A network of 12 federal banks that regulate all U.S. banks It controls how much money is printed or taken out of circulation Sets interest rates

The Monetary System FDIC = Federal Deposit Insurance Company It is a government agency that protects against bank failure. Each account in an FDIC regulated bank is covered up to $250,000. FDIC = Federal Deposit Insurance Company It is a government agency that protects against bank failure. Each account in an FDIC regulated bank is covered up to $250,000.