Monetary History, a Chronology

Edward J. Dodson

[January, 2000]

1609

• Bank of Amsterdam established in Holland. The bank was authorized take in coinage from all over and (after charging a fee) remint the coinage with a standard weight of gold and silver content.
  
  The bank then established a credit for the depositor, which circulated as a fully redeemable bank note.
  
  Thus, the Bank of Amsterdam, during this period of full reserves, served as an international bank of deposit.

1766

• William Pitt, Prime Minister of England on indirect taxation: "There is a method by which you can tax the last rag from the back, and the last bite from the mouth, without causing a murmur against high taxes, and that is, to tax a great many articles of daily use and necessity so indirectly that the people will pay them and not know it. Their grumbling will then be of hard times, but they will not know that the hard times are caused by taxation."

1814

• Hartford Convention, where Federalists met to promote secessin of the New England staes and seek a separate peace with Britain.

1817

• David Ricardo on money: "Experience shows that neither a state nor a bank ever has had the unrestricted power of issuing money without abusing that power; in all states, therefore, the issue of paper money ought to be under some check and control; and none seems so proper for that purpose as that of subjecting the issuers of paper money to the obligation of paying their notes either in gold coin or bullion."

1819

• Bank of Amsterdam failed due to losses generated by loans to the Dutch government and commercial interests.

mid-1800s

• John Stuart Mill become one of the first political ecnomists to suggest paper currency could be an efficient and appropriate substitute for coinage and certificates of deposit, so long as the quanity in circulation corresponded to the production of goods and services. This is roughly what economists such as Milton Friedman have suggested with the so-called "monetary rule."

1876

• Reichsbank established as central bank of a unified German state, virtually without discussion after several years of financial panic.

late-1800s

• Economist Wilhelm Roepke observed in 1937 that: "The close of the 19th century brought the beginnings of a real international monetary homogeneity paralleling that existing on the national level, thanks to the gold standard which united all countries within the framework of one monetary system."

late-1800s

• In A History of Interest Rates (1963), Sidney Homer writes: Nineteenth-century Ministers of Finance or Chancellors of the Exchequer thought of the burden of their national debts in terms of the annual interest charge against the revenues rather than in terms of a principal amount which must be repaid. Principal repayment only occurred when it was considered a benefit to the state. Refundings were almost always conversions at lower rates."

1900

• Britain's national debt stood at 639 million pounds. This figure represented a decline from earlier in the century.

early-1900s

• Historian Carroll Quigley writes in Tragedy And Hope (1966), that the world's dynastic bankers were pursuing "nothing less than to create a world system of financial control in private hands to dominate the poliical system of each country and the economy of the world as a whole."
  
  In Britain, the Round Table Groups were formed as a first step to, as described by Lord Milner (a British secretary of state for war), "seek to federate the English-speaking world along lines laid down by Cecil Rhode..." who funded the project. This effort included Thomas W. Lamont, head of the House of Morgan in the U.S.

early-1900s

• Council on Foreign Relations organized in U.S. Edward Gay, an economic historian and founding member wrote: "When I think of the British Empire as our inheritance I think simply of the natural right of succession. That ultimate succession is inevitable."

1914

• Louis Brandeis wrote a series of articles for Harpers Weekly attacking the nation's entrenched financiers as a "financial oligarchy."

1920

• Between 1890-1924 cosolidation of English banking interests reduced the number of joint-stock banks from 104 to 18, only 5 of which held 84% of all deposits.

1925

• Winston Churchill, as Britain's Chancellor of the Exchequer, restored Britain to the gold standard, which caused a rush by holders of sterling to convert currency into gold at the artificially low exchange rate. Britain had to stop convertibility in 1931.

1929-1933

• In the U.S. the stock of money fell by over a third, and one-fifth of the commercial banks holding one-tenth of all deposits collapsed.

1930

• Hawley-Smoot Tariff Act passed in U.S.

1930-1933

• Country after country erected stiff trade barriers and contributed to deepening depression.
  
  Only France and Belgium had permitted their currencies to fall against sterling during the 1920s, which temporarily made their exports very cheap and kept their economies going.

1933

• Banking Act passed in the U.S. declaring all coins and currency of the U.S. legal tender.

1930s

• The "gold exchange standard" replaced the "gold standard" once and for all.

1943

• Harry Dexter White and John Maynard Keynes contribute to a plan for the postwar international monetary system. The decision was made to have the U.S. dollar replace sterling as the primary currency of international exchange.

1945

• U.S. emerged from the Second World War with its industrial plant modernized and intact and in possession of most of the world's gold reserves.
  
  However, the U.S. government also acquired a national debt of some $250 billion.

1946-1958

• Purchasing power of the U.S. dollar fell by one-third.

1952

• The British Labour leader and historian R.H. Tawney on wealth distribution in England: "Where conditions are such that two-thirds of the wealth is owned by approximately one per cent of the population, the ownership of the property is more properly regarded as the badge of a class than as the attribute of a society."

1965

• Conservative economist Henry Hazlitt describes the steady growth in government expenditures as "an open conspiracy not to pay the national debt."

1968

• Milton Friedman writes: "The link between gold and the quantity of money has become a rubber band. ...Whether desirable or not, it is impossible to restore now the close link that prevailed before 1933."

1970

• Libertarian Murray Rothbard calls for privatization of the minting of coinage and reestablishment of the gold standard.

1971

• Richard Nixon takes the U.S. off fixed exchange rates and suspends convertibility of dollars for gold at an official price.

1972

• Decentralist author and philosopher, Ralph Borsodi, designs a new money system for introduction into sociieties left empoverished by modernization. A model system of local currency (backed by basic commodities) is established in India and in then in the U.S. in New Hampshire (the "Exeter experiment" with "Constants").

1974

• Economist Leonard Silk writes: "The reconstructed world monetary system was founded on the strength of the American economy, ... the dollar and on the deficits in the U.S. balance of payments. Therein lay a serious contradiction: A strong dollar and chronic deficits in the U.S. balance of payments would in time prove to be incompatible; either the dollar would weaken or the American deficits would have to be ended. There was a further contradiction: If the American deficits ended, the flow of dollars that was providing the monetary reserves for world economic expansion would also cease."

1977

• Henry Wallich, member of the FED's Board of Governors expresses his optimism that the FED actions will steady the economy.

1978

• 1978 U.S. national debt reached $1 trillion.
• U.S. consumers were paying over $40 billion annually for imported oil.
• Exchange value of the U.S. dollar had fallen by four-fifths between 1973-1978.
• Dollar denominated debt owed by the LDCs to the international bankers reached $240 billion. The resulting demand for dollars kept its exchange value from falling even more than it had.