2. MONEY

3. BARTER ECONOMY MONEYLESS, TRADE-BASED ECONOMY

4. Functions of Money Medium of Exchange –Instead of borrowing Measure of Value –Shows worth Store of Value –You can use money in the future You can’t hold on to agricultural goods all year, they rot

5. CHARACTERISTICS OF MONEY Portability Durability Divisibility Limited availability

6. TYPES OF MONEY

7. COMMODITY MONEY MONEY THAT HAS AN ALTERNATE USE AS AN ECONOMIC GOOD Ex: Trading furs in colonial French America

8. SPECIE (HARD CURRENCY) GOLD AND SILVER COINS

9. Advantages of “Hard Money” 1.Security in uncertain times 2.Controls gov’t. presses (they want to appear to have enough gold to back the paper)

10. Disadvantages of “Hard Money” 1.Must have enough gold to meet demand 2.In a “panic” money goes away and economy shrinks 3.Gold is bought at “market price” but notes are redeemed at a fixed price

11. FIAT MONEY (FIDUCIARY CURRENCY) MONEY BY GOVERNMENT DECREE (ACCEPTED BY PUBLIC) Based on Fidelity or trust

12. PAPER MONEY CAN BE BACKED BY GOLD OR SILVER BUT COULD ALSO BE FIAT MONEY

13. The Dollar (USD) 1.Word originates from the “thaler” 2.Divided into tenths 3.Created by Franklin & Hamilton

14. Colonial & State Bank Notes 1690-1861 1.Each bank printed its own money (7,000 different notes circulated!) 2.Too many notes printed w/o specie to back them 3.Counterfeiting was easy

18. Greenbacks 1862-1971 (U.S. Notes) 1.Fiat money 2.Declared “legal tender” by U.S. gov’t. 3.State bank-issued notes taxed at 10% to eliminate them

21. Gold Certificates 1865-1933 Paper money backed by U.S. Treasury gold

25. Silver Certificates 1878-1968 1.Money backed by U.S. Treasury silver 2.Replaced silver coins 3.Introduced to help miners and farmers during hard times

28. Federal Reserve Notes 1914-Present 1.Inconvertible fiat money 2.Issued by the Federal Reserve System (NOT U.S. gov’t.) 3.Notes greater than $100 were no longer printed after 1945

34. U.S. Coinage

35. Half Cents 1793-1857

36. Large Cents 1793-1857

37. Small Cents 1856-present

38. Two Cents 1864-1873

39. Three Cents 1864-1873

40. Half Dimes/Nickels 1794-present

41. Dimes 1796-present

42. Twenty Cents 1875-1878

43. Quarters 1796-present

44. Half Dollars 1794-present

45. Dollars 1794-present

46. Central Banking in the United States “First” Bank of the U.S. 1791-1811 –Some funding provided by Federal Gov’t. –Conflicts with the 80+ state banks

47. Central Banking in the United States “Second” Bank of the U.S. 1816-1833 –Created because state banks issued too much paper not backed by specie –President Andrew Jackson “killed” this bank because he opposed centralized control

48. Central Banking in the United States Federal Reserve System 1913-present –“The Fed” is our current central bank –Government-created, autonomous institution –FDIC was created in 1933 to insure depositors’ money