Chapter 11 Section 1 The Evolution of Money. Before today’s currency, people practiced a barter...
-
Upload
noreen-parks -
Category
Documents
-
view
218 -
download
4
Transcript of Chapter 11 Section 1 The Evolution of Money. Before today’s currency, people practiced a barter...
The Evolution of Money
• Before today’s currency, people practiced a barter economy – a moneyless system that relied on trade
• People traded fish, milk, shoes, anything valuable
The 3 Functions of Money
1. Medium of Exchange – something accepted as payment
2. Measure of Value – a common denominator that can be used to express worth
3. Store of Value –property that allows people to be saved until later
Money in Colonial America
• Continental dollars were printed to finance the Revolutionary War
• Specie – money in the form of coins made from silver and gold
CURRENCY TYPE:
Limited Availabilit
y?Portable? Divisible? Durable?
Culture of the
Society
1.
2.
3.
4.
5.
6.
7.
Monetary StandardThe mechanism
designed to keep the money portable, durable, divisible,
and limited in supply
Currency in the United States
1. Continental Dollars2. Private Bank Notes3. Greenbacks4. National Bank Notes5. Gold & Silver Certificates6. Treasury Coin Notes7. Modern Federal Reserve Notes
Growth of State Banking• State Banks – banks
that operate from state government
• At first, most state banks printed only the amount of currency they could reasonably back with their gold and silver reserves
Problems With Currency
• Each bank issued its own form of money
• Banks could print more money whenever it wanted
The Greenback Standard
• During the Civil War, Congress wanted to make one standard monetary unit
• United States Notes – a new federal fiat paper currency that had no gold or silver backing
National Currency• To make sure greenbacks would not
become worthless, the U.S. created a National Bank to keep things uniform
Alexander Hamilton - Founder
Thomas Jefferson – against it
The Gold StandardA monetary standard where the basic
currency unit is equal to a specific amount of gold
• Advantages: – people felt more secure– prevented the government from printing too
much money
• Disadvantages:– gold stock might not grow fast enough (the price
of gold might not change dramatically over time)
• Federal Reserve System – 1913, the nation’s first true central bank
• Central Bank – a bank that can lend to other banks in times of need
The Federal Reserve System
• For membership in the Fed, all national banks were required to become “members” (part owners)
• The Fed was organized as a corporation – hopeful members had to purchase shares of stock in the system
The Federal Reserve
• It is privately owned, but the Fed is publically controlled… The president appoints with congressional approval
• Federal Reserve Notes – paper currency issued by the Fed
The Great Depression• During this time, banks did not
have deposit insurance for their customers
• Customers rushed to withdraw their funds, called a run on the bank
Federal Deposit Insurance Corporation
• FDIC –insures customer deposits in the event of a bank failure
Dealing with Failed Banks
• Bank failures were also an issue in the 1980’s
• FDIC can seize the bank and either sell it to a stronger bank or liquidate it and pay off the depositors
• This worked for any bank – S&L’s, commercial banks, etc.
US Currency Timeline
Create a timeline and label each of the different types of currency used in the United States.
• For each currency be sure to label:– The time period it was used– If it had any faults or problems– If it was backed by any guarantee
As seen in the video clip, more and more societies are switching to electronic currency (credit cards). Consider the 4 characteristics
needed for money to be successful.
• Do you think using electronic currency is a smart or risky idea? Why?
• What are the pros and cons to electronic currency?
• What does this tell us about our culture?
Explain your answer in at least one PARAGRAPH.