2013년 2월 20일 수요일

[자료] Brief History of the Gold Standard in the United States (2011)

지은이: Craig K. Elwell
June 23, 2011.
Congressional Research Service,

※ A reading note of this reader with excerpts. ( cf. [자료: some readings in] gold standard & issues in monetary systems )

* * *

※ Summary:

The U.S. monetary system is based on paper money backed by the full faith and credit of the federal government. The currency is neither valued in, backed by, nor officially convertible into gold or silver. Through much of its history, however, the United States was on a metallic standard of one sort or another. (...) This report briefly reviews the history of the gold standard in the United States. It is intended to clarify the dates, during which the standard was used, the type of the gold standard in operation at the various times, and the statutory changes used to alter the standard and eventually end it. It is not a discussion of the merits of such a system.

(...) During the Civil War, the government issued legal tender paper money that was not redeemable in gold or silver, effectively placing the country on a fiat paper system. In 1879, the country was returned to a metallic standard; this time a single one: gold. (...) In 1900, the United States reaffirmed it commitment to the gold standard and relegated silver to small denomination money.

Throughout the period under which the United States had a metallic standard, paper money was extensively used. A variety of bank notes circulated, even without being legal tender. Various notes issued by the Treasury also circulated without being legal tender. This uses of paper money is entirely consistent with a gold standard. Much of the money used under a gold standard is not gold, but promises to pay gold. To help ensure that the paper notes theretofore issued by banks were honored, the government created the national bank system in 1863. In 1913, it created the Federal Reserve System to help ensure checks were similarly honored. The creation of the Federal Reserve System did not end the gold standard.

The gold standard ended in 1933 when the federal government halted convertibility of notes into gold and nationalized the private gold stock. The dollar was devalued in terms of its gold content, and made convertible into gold for official international transactions only. Even this quasi-gold standard became difficult to maintain in the 1960s. Over the period 1967-1973, the United States abandoned its commitment to convert dollars into gold in official transactions and stopped trying to maintain its value relative to foreign exchange. Despite several attempts to retain some link to gold, all official link of the dollar to gold were severed in 1976.


Gold Standards

(...)

 _ What Is a Gold Standard?

A gold standard uses goldㅡdirectly or indirectlyㅡas money. In a pure gold standard, gold itself is used in transactions, with all prices in essence expressed in terms of the amount of gold needed for purchase. Because gold may alloyed with baser metal,[1] and its weight impossible to ascertain without proper scales, it became common to mint it into coins so that its purity and weight were certified by an authority (usually by the government). Such coins typically also become a unit of account, so that instead of being specified in the number of grains of gold of a certain purity, prices are expressed in terms of dollar, guineas, doubloons, drachma, etc.

A monetary system can also be regarded as a gold standard if representatives of gold are used in exchange. For example, paper notes can be part of a gold standard if they represent a claim to gold. However, "claim" can be ambiguous. Typically, people think of paper currency as part of a gold standard if the notes are "backed" by gold, that is, if there is for every note outstanding a certain quantity of gold stored as "cover."

Backing, however, may be largely irrelevant. For paper to represent gold, it must be regarded as equivalent to a given quantity and purity of gold. In general, this equivalent is achieved by "convertibility," the commitment to exchange the notes for gold on demand. For the purpose of this report, a paper money system in which notes are convertible on demand by the issuer into gold of a given weight and purity is regarded as a gold standard.

 _ Legal Tender

Legal tender is something that by law must be accepted in satisfaction of obligations denominated in currency. Should a suit arise over a commercial or public transaction, the law holds that a monetary obligation is satisfied if these notes have been "tendered" in the correct amount.[2]

Under such a law, it is still possible to make a contract in something other than the legally designated currency. A vendor, for example, may specify that the payment needed to induce provision of a service will not be accepted in legal tender. But if payment for an ^obligation^ not otherwise specified is tendered in the legally designated medium, it must be accepted at face value. If some medium is made legal tender, payment of thant medium for a debt cannot be refused on the grounds that the designated currency is not money.

Issuing money is something else. It is possible to issue currency without making it legal tender. The government canㅡand hasㅡpaid out various forms of notes that have circulated as currency, but have not been declared legal tender. Full-bodied gold or silver coins may be issued without making them legal tender. At the same time, tender status can be conferred on the coins or notes of another country. Consequently, the monetary standard and legal tender can be different things.


Basically Silver: 1792-1834: (...)

Basically Gold: 1834-1862: (...)

Paper Money in the Antebellum Period

Throughout the period before the Civil War, there was no legal-tender paper money in the United States. Yet a variety of paper money existed and circulated as readily as coin. These included private bank notes, some Treasury notes, and (in large transactions) financial instruments called bills of exchange. In each case, these paper claims were promised to pay gold or silver. Consequently, they were integral part of the metallic monetary standard.

 _ Bank Notes

Various banks conducted much of their business based on the issuance of notes. Taking deposits and making loans, the banks needed only a fraction of their total assets held as coin on hand. The rest could be held in the form of interest-bearing loans, and issued as notes promising to pay the bearer on demand an amount of gold or silver on presentation of the notes. The notes were not legal tender, but circulated on the strength of the promise to redeem.

Sometimes the notes passed at a discount that represented the possibility that they would be dishonored. And the discount varied with the disance from the bank and its reputation for soundness. The congressional chartered First and Second Bank[s] of the United States were able to issue such notes on a national scale through branches throughout the country. These notes were not legal tender, but tended to pass at par with no discount (i.e., at face value).[16] By presenting for redemption the notes of state-chartered banks that it received from custmers, the Bank of the United States was able to help state banks notes remain at par as well.[17]

(...)

 _ Circulating Treasury Notes

Starting for the first tie the War of 1812, the Treasury issued Treasury notes that promised to pay gold or silver at a future date. These were in many ways indistinguishable from other forms of Treasury debt, because they typically bore interest.[18] The notes, however, were especially suited to be used in transactions, and therefore were used as money even though they were ^not^ legal tender.

Notes that circulated usually were of denominations low enough to be useful in commerce, were the same general size as bank notes, andㅡmost importantㅡwere receivable for taxes. The receivability feature guaranteed that they were always worth at least their face value. (...)

 _ Bills of Exchange: (...)


Fiat Paper Money: 1862-1879[19]

(...) In 1862, therefore, the government issued for the first time notes that were not convertible either on demand or at a specific future date, and that were declared legal tender.[20]

Known as "greenbacks," these notes were legal tender for everything but custom duties, which had to be paid in gold or silver.[21] The government made no specific promise to convert such notes to gold or silver. Hence, ^it abandoned the gold standard^. Holders of greenbacks could obtain gold or silver in the marketplace, but one dollar in greenbacks could no longer buy 23.22 grains of gold because the government no longer stood ready to maintain the dollar at its mint price.

(...)


A True Gold Standard: 1879-1933

Although much of the monetary debate of the 1870s was about ending the paper money standard and reestablishing gold convertibility, a relatively minor recodification of law in 1873 turned out to have enormous implications for the monetary system.[26] In defining the dollar and the coins of the United States, the legislation omitted the 412.5 grain silver dollar. Consequently, it eliminated silver as anything but fractional currency. What followed was the only period in U.S. history that can strictly be called a gold standard: 1879-1933.

 _ Silver and Silver Certificates: (...)

 _ Gold Certificates and Treasury Notes

In addition to issuing full-bodies gold coins, the government during this period also issued gold certificates. Essentially, these were promises to pay gold to the holder of the note of demand. They provided the public with money that that was easier to carry and transfer. The law specified the amount of gold that had to be held in reserve for the notes.

(...)

 _ National Bank Notes

Another significant change had occurred during the Civil War: the creation of the national bank system. The federal government instituted a system of chartering banks.[30] These banks, like the state banks before them and the Bank[s] of the United States, had the power to issue their own notes.

However, the notes had to be backed up by government bonds held on deposit with the Comptroller of the Currency. Because the bonds earned interest and the notes did not, banks made profits from the issuance of bank notes. The notes were not legal tender, but passed readily at their face value because they were redeemable in gold or legal tender notes. The quantity issued was limited by the amount of government bonds eligible to be held as collateral.[31]

State bank note were driven out of circulation by means of a punitive tax of 10% imposed on them. The new national bank notes were of uniform design. Thus, soundly backed by safe assets, these notes provided a safe and uniformㅡbut still privately issuedㅡpaper currency for the country.

 _ Gold Standard Act of 1900

(...) in 1900, the government reaffirmed its commitment to the gold standard.[32] The gold dollar was declared the standard unit of account, and all forms of money issued by the government were to be maintained at parity with it. For the first time, a gold reserve for government-issued paper notes was formally established. Greenbacks, silver certificates, and silver dollars continued to be legal tender, and were redeemable in gold. Treasury notes were discontinued and recalled.

 _ The Federal Reserve System During the Gold Standard


The End of the Gold Standard: 1933

In 1933, the gold standard was ended for the United State. Despite the creation of the Fed, a wave of bank runs resulted in massive bank failures over the period 1930-1933. The Fed failed to provide sufficient liquidity to enable the banks to meet their customers' demand for cash.

This failure was due in partㅡand possibly largelyㅡto the gold standard. For the Fed to generate enough cash to meet the public's changed demand for it, it would have had to create much more money and to lower interest rates. Lower interest rates, however, would have sped up the export of gold from the country as investors looked abroad for higher returns. Creating more paper money, moreover, would have created doubts about the ability of the United States to remain on gold. The greater these doubts, the greater the incentive to export gold, reducing gold reserves, and making it harder to maintain the dollar at its legal gold value. Hence, to keep the economy from collapsing, the Fed needed a policy of expansion. To stay on the gold standard it needed one of contraction. Until 1933, it largely went with the latter.

With the inauguration of Franklin Roosevelt, the government's policy changed. In a series of executive orders, legislative actions, and court decisions, the United States was taken off the gold standard. [개요:]
  • Convertibility into gold was suspended.
  • Private holdings of gold were nationalized. 
  • A new parity with gold was established amounting to a devaluation of approximately 40%. This parity was only important for international transactions, however. 
  • Because Americans could not hold gold, their dollars were not convertible. 
  • The gold value of the dollar was largely meaningless. With no convertibility, the result was a quasi-gold standard.
Shortly after taking office, President Roosevelt [상세절차:]
  1. closed the banks in order to stop the bank runs and the export of gold from the country. 
  2. His order also prohibited the banks from paying out gold or dealing in foreign exchange.[35] He did this based on the Trading With the Enemy Act of 1917,[36] which gave him broad powers over banking and currency. Although the 1917 act appeared to confer these powers only in wartime, President Roosevelt acted on the basis of a "national emergency" and summoned Congress to a special session to prepare legislation to confer the powers he wanted to deal with the situation.
  3. Three days later, Congress passed the Emergency Banking Act,[37: 1933년 3월] which amended the 1917 act to include national emergencies, retrospectively approved the President's action of the previous three days, and granted him power to regulate or prohibit the payment of gold. President Roosevelt promptly used these powers to continue the prohibition on gold transactions, even for banks that reopened.[38] 
  4. By executive order, on April 5, 1933,[39] the "hoarding" of gold was forbidden. Gold had to be turned in to the government at the official price of $20.67 per troy ounce. Essentially, the country's gold was nationalized. ([주]39. Executive Order 6102; this order was followed by a series of similar orders and proclamations over the course of the next few months.)
  5. This action was endorsed by Congress in a joint resolution.[40: 1933년 6월] The resolution called for a suspension of the gold standard and abrogated gold clauses.[41] 
  6. The Thomas Amendment to the Agricultural Adjustment Act of 1933 granted authority to the President to alter the gold content of the dollar, with power to reduce it to 50% of its previous value.[42] In addition, the amendment gave the President power to authorize the issuance of up to $3 billion in U.S. notes, and the power to compel the Fed to issue money to finance up to $3 billion in government borrowing.[43] It also set out new conditions for the issuance of more silver certificates.
Under the authority of the Thomas Amendment, the market price of gold was allowed to increase to $35 by January 1934. At that time the Gold Reserve Act[44] was passed, and the President thereby empowered to fix the new value of the dollar at not less than 60% of its previous value.[45] The Gold Reserve Act [:]
  • also gave legislative force to the nationalization of gold. Under its terms, title to all bullion and coin was vested in the U.S. Government, 
  • gold coin was withdrawn from circulation, and the Treasury Secretary was given control of all trading in gold. 
  • Private holding of gold were outlawed (except for numismatic and various industrial/artistic uses).[46]

(...)

The government's abrogation of gold clauses in contracts was upheld by the Supreme Court in February 1935.[49] Thus, the government could discharge all its interest and principal due in paper money. Because the dollar had depreciated due to official policy, it meant that the outlawing of gold clauses effectively reduced the amounts the government paid on its debts relative to what it would have paid in gold.


Quasi-Gold Standard: 1934-1973

Under the system adopted by the Gold Reserve Act of 1934, the United States continued to define the dollar in terms of gold. Gold transactions, however, were limited to official settlements with other countries' central banks. For an American citizen, the dollar no longer represented a given quantity of gold in any meaningful sense.

The gold standard without domestic convertibility was maintained under the Bretton Woods international monetary agreement of 1944.[50] (... ...)


Cutting the Links to Gold: 1967-1973 : (...)

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