Working Paper: NBER ID: w10702
Authors: Peter L. Rousseau
Abstract: The transition of the U.S. money supply from the mixture of paper bills of credit, certificates, and foreign coins that circulated at various exchange rates with the British pound sterling during the colonial period to the unified dollar standard of the early national period was rapid and had far-reaching consequences. This paper documents the transition and highlights the importance of this standardization in bringing order to the nation's finances and in facilitating the accumulation and intermediation of capital. It describes how the struggle of the colonies to maintain viable substitutes for hard money set the stage for the financial leaders of the Federalist period, led by Alexander Hamilton, to settle upon the dollar, attach it to a convertible metallic base, and create a national Bank that issued notes denominated in the new monetary unit. It also presents recently-constructed estimates of the U.S. money stock for 1790-1820 and relates them to measures of the nation's early modernization.
Keywords: No keywords provided
JEL Codes: E44; N11; N21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| transition to a unified dollar standard (F33) | accumulation and intermediation of capital (E22) |
| establishment of a national bank (E60) | improved financial conditions (G59) |
| lack of credible commitment to redeem paper money (E42) | depreciation (D25) |
| depreciation (D25) | hindered economic growth (F69) |
| transition to a unified dollar standard (F33) | improved organization of the nation's finances (H63) |
| transition to the dollar (F31) | rapid expansion of the money stock (E50) |
| rapid expansion of the money stock (E50) | increased financial depth (O16) |
| increased financial depth (O16) | economic modernization (O14) |