Historical Sketch

In the early 17th century began the British settlement of the east coast of North America, from which emerged thirteen colonies until the 1770s. In 1774, the First Continental Congress with delegates from 12 colonies created a confederation structure and initiated the secession from the British colonial power. The formal declaration of independence was passed on the Second Continental Congress in July 1776. The armed war of liberation had started in 1775 and lasted until 1783, when Britain acknowledged independence and sovereignty of the United States. The 1789 constitution transformed the confederation into a federal state. After the 1783 Treaty of Paris, the United States hat extended to the Mississippi river. The continental expansion beyond the extent of the thirteen original states occurred in two major steps. The mid-west territories were acquired from France in the so-called "Louisiana Purchase" of 1803. In the second half of the 1840s, the territories up to the Pacific Ocean were gained through the absorption of the Republic of Texas in 1845 and the subsequent the Mexican-American War in 1848. The North-East territories were ceded by Britain in 1846. The dispute over the slavery in the newly acquired territories led to the secession of seven slave-holder states, beginning with South Carolina in 1860. In March 1861, the Confederate States of America were proclaimed. The subsequent civil war lasted until April 1865 and ended with the collapse of the secession and restoration of state unity and the union-wide abolition of slavery.

Monetary History Overview

In the British settlements the predominant medium of exchange were foreign trade coins like the Spanish Dollar in silver. British accounting was but British specie remained scarce, and the trade coins were overvalued compared with the European markets. As a consequence, accounting currencies in the different colonies which were determined by the local valuation of the Spanish trade coins and differed considerably from the metropolitan rating of 50 Pence Sterling per Spanish Dollar. There was a considerable spread between Georgia (with a modest 17% overvaluation) and South Carolina (87%). In May 1775, the Second Continental Congress decided in its first session to introduce the Spanish Dollar as common unit of account. To finance the war efforts a paper money issuance was authorized, the so-called "Continental Dollar". Over-issuance during the War of Independence led to depreciation of paper against specie down to 2.5% in 1780. On the tenth session of the Continental Congress in July 1785, a re-establishment of a specie coinage in the standard of the Spanish Dollar was decided. The first coinage act of August 1786 could not be implemented in the aftermath of the war. The second coinage act of April 1792, finally, created the United States Dollar as a bimetallic currency with circulating gold and silver. The creation of a central bank was controversial. Already the confederation had tried to establish the "Bank of North America" in 1781 but the opponents of central authorities brought it down four years later. Two attempts to establish a "Bank of the United States" were made 1791 and 1816, but neither bank survived, and the topic was not taken up again for a century. In the different states, paper money was issued by commercial banks without oversight. The "free banking" era produced a series of bank failures which finally triggered the passing of the National Banking Acts of 1863-1864. Issuing banks had to fulfil conditions to qualify for the so-called "National Notes". Central banking was introduced fifty years later, when the Federal Reserve began operations in 1914. The "Federal Reserve Notes" replaced the government paper money that had been issued since 1814. The "National Notes" issued by commercial banks remained legal tender and were outmoded only in the economic crisis of the 1930s. The US Dollar kept the bimetallic standard, with two revisions of the gold-to-silver ratio in 1834 and 1837, until free silver minting was suspended in 1873. The transition to the gold standard was formalized in 1900. It remained in place until 1933 when circulating gold was withdrawn, and its possession even outlawed, as a consequence of the 1929 economic crisis. In January 1934, the gold standard was restored at a 41% lower level, without circulating gold being reinstated. At the end of the Second World War, the gold standard of the US Dollar formed the basis of the World's post-war monetary system. The agreements at the Bretton Woods conference of July 1944 made the US Dollar convertible into gold, and the currencies of the participating countries got pegged to the Dollar. Initially, 33 currencies established so-called par values. More currencies joined the fixed exchange rate system during the 40 years of its existence, the par values being occasionally revised or suspended. In the late 1960s, the United States had growing difficulties to guarantee the gold parity of the Dollar, and in July 1971, convertibility was suspended. In December, the US Dollar got devalued against gold by about 8%, and another 10% devaluation was done in February 1973. The Bretton Woods system did not survive this although the gold parities nominally continued until April 1978. By then, most currencies had either floated their exchange rate or pegged it to the US Dollar, or another currency, without gold backing. The US Dollar has remained the reference currency of the world economy. Its value against the IMF Special Drawing Rights (SDR) unit, the successor of the gold par value and defined as a currency basket of the World's leading economies, has decreased by about 28% since 1970.

The United States joined the International Monetary Fund (IMF) on 27.12.1945 as a founding member.

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