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Federal Reserve System: Difference between revisions
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{{Main|History of central banking in the United States}} | {{Main|History of central banking in the United States}} | ||
The first attempt at a national currency was during the | The first attempt at a national currency was during the American Revolutionary War. In 1775, the Continental Congress, as well as the states, began issuing paper currency, calling the bills "[[Early American currency|Continentals]]".<ref>{{Cite web |title=Timeline of U.S. Currency History |url=https://uscurrency.gov/history-american-currency |archive-url=https://web.archive.org/web/20161004114334/https://uscurrency.gov/history-american-currency |archive-date=October 4, 2016 |access-date=June 8, 2016 |publisher=U.S. Currency Education Program}}</ref> The Continentals were backed only by future tax revenue, and were used to help finance the Revolutionary War. Overprinting, as well as British counterfeiting, caused the value of the Continental to diminish quickly. This experience with paper money led the United States to strip the power to issue Bills of Credit (paper money) from a draft of the new Constitution on August 16, 1787,<ref>{{Cite web |title="Mr. Govr. MORRIS moved to strike out "and emit bills on the credit of the U. States" – If the United States had credit such bills would be unnecessary: if they had not, unjust & useless. ... On the motion for striking out N. H. ay. Mas. ay. Ct ay. N. J. no. Pa. ay. Del. ay. Md. no. Va. ay. N. C. ay. S. C. ay. Geo. ay." |url=http://avalon.law.yale.edu/18th_century/debates_816.asp |access-date=April 30, 2012 |publisher=Avalon.law.yale.edu}}</ref> as well as banning such issuance by the various states, and limiting the states' ability to make anything but gold or silver coin legal tender on August 28.<ref>US Constitution Article 1, Section 10. "no state shall ..emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts;"</ref> | ||
In 1791, the government granted the [[First Bank of the United States]] a charter to operate as the U.S. central bank until 1811.<ref name="A Brief History of Our Nation's Paper Money">{{Cite web |last=Flamme |first=Karen |title=1995 Annual Report: A Brief History of Our Nation's Paper Money |url=http://www.frbsf.org/publications/federalreserve/annual/1995/history.html |archive-url=https://web.archive.org/web/20100227093922/http://www.frbsf.org/publications/federalreserve/annual/1995/history.html |archive-date=February 27, 2010 |access-date=August 26, 2010 |publisher=Federal Reserve Bank of San Francisco}}</ref> The First Bank of the United States came to an end under [[James Madison|President Madison]] when Congress refused to renew its charter. The [[Second Bank of the United States]] was established in 1816, and lost its authority to be the central bank of the U.S. twenty years later under [[Andrew Jackson|President Jackson]] when its charter expired. Both banks were based upon the Bank of England.<ref>{{Cite book |url=https://books.google.com/books?id=EkUTaZofJYEC |title=British Parliamentary reports on international finance: the Cunliffe Committee and the Macmillan Committee reports |publisher=Ayer Publishing |year=1978 |isbn=978-0-405-11212-6 |quote=description of the founding of Bank of England: 'Its foundation in 1694 arose out the difficulties of the Government of the day in securing subscriptions to State loans. Its primary purpose was to raise and lend money to the State and in consideration of this service it received under its Charter and various Act of Parliament, certain privileges of issuing bank notes. The corporation commenced, with an assured life of twelve years after which the Government had the right to annul its Charter on giving one year's notice. Subsequent extensions of this period coincided generally with the grant of additional loans to the State'}}</ref> Ultimately, a third national bank, known as the Federal Reserve, was established in 1913 and still exists to this day. | In 1791, the government granted the [[First Bank of the United States]] a charter to operate as the U.S. central bank until 1811.<ref name="A Brief History of Our Nation's Paper Money">{{Cite web |last=Flamme |first=Karen |title=1995 Annual Report: A Brief History of Our Nation's Paper Money |url=http://www.frbsf.org/publications/federalreserve/annual/1995/history.html |archive-url=https://web.archive.org/web/20100227093922/http://www.frbsf.org/publications/federalreserve/annual/1995/history.html |archive-date=February 27, 2010 |access-date=August 26, 2010 |publisher=Federal Reserve Bank of San Francisco}}</ref> The First Bank of the United States came to an end under [[James Madison|President Madison]] when Congress refused to renew its charter. The [[Second Bank of the United States]] was established in 1816, and lost its authority to be the central bank of the U.S. twenty years later under [[Andrew Jackson|President Jackson]] when its charter expired. Both banks were based upon the Bank of England.<ref>{{Cite book |url=https://books.google.com/books?id=EkUTaZofJYEC |title=British Parliamentary reports on international finance: the Cunliffe Committee and the Macmillan Committee reports |publisher=Ayer Publishing |year=1978 |isbn=978-0-405-11212-6 |quote=description of the founding of Bank of England: 'Its foundation in 1694 arose out the difficulties of the Government of the day in securing subscriptions to State loans. Its primary purpose was to raise and lend money to the State and in consideration of this service it received under its Charter and various Act of Parliament, certain privileges of issuing bank notes. The corporation commenced, with an assured life of twelve years after which the Government had the right to annul its Charter on giving one year's notice. Subsequent extensions of this period coincided generally with the grant of additional loans to the State'}}</ref> Ultimately, a third national bank, known as the Federal Reserve, was established in 1913 and still exists to this day. | ||