Editor’s note: I excerpt from this introduction and link to the two-part series about America’s money because this is one of those things that most of us don’t have much exposure to — but should.
Edited by Lawrence W. Reed:
Introduction
Money is a middleman, a medium of exchange. You trade a good or a service for it not because you intend to consume it (unless you’re a numismatist) but because you want to pass it on in exchange for what you’re really after.
That’s why a restaurant may frame its first earned dollar and hang it on the wall, but it happily parts with every dollar it earns thereafter. Because it’s at least one side of every transaction—and both sides in the case of purchasing one currency with another—whatever affects money will affect virtually everything else in the modern marketplace.
Get it right, and money can grease the wheels of a prosperous economy. Get it wrong, and it becomes the poison that ruins the soup.
As a policy issue, money ranks high in importance in American history. Rare is the decade in the country’s nearly 250 years that it wasn’t at the center of critical national debates.
A year before the Declaration of Independence, the Second Continental Congress began wrestling with how to pay for a war against Britain. It printed paper money until it became nearly worthless.
Later, the new federal government attempted a policy of bimetallism by which gold and silver would circulate together as the nation’s media of exchange. Most of the time, however, one metal drove the other overseas or into other, non-monetary uses. Americans had silver coins in their pockets at the time of the War of 1812 but gold coins by the time of the Mexican War in the 1840s.
During the Civil War, payment in precious metals was suspended so both sides could crank up the printing presses again. The result was serious price inflation in the North and complete monetary destruction in the South.
Read more “America’s Money: A History”: Foundation for Economic Education
