THE FED, BITCOINS, AND

INFLATION1. A BRIEF HISTORY OF MONEY

Dale R. DeBoer, PhDDepartment of Economics, UCCS

Why not go without money?

Avoidance of barter trade

Why not go without money?

Avoidance of barter trade

What should be used?

Medium of exchange

Unit of account

Store of value

Standard of deferred payment

What have we used?

Colonial period

http://www.philadelphiafed.org/educati

on/teachers/resources/money-in-

colonial-times/

http://www.frbsf.org/education/teacher

-resources/american-currency-

exhibit/independence

What have we used?

Colonial period

Shortage of coinage

Spanish Dollar

Specie

Bills of credit

Private representative money

What have we used?

Colonial period

The first central banks

First Bank of the United States

1791-1811

Conversion of fiat “Continentals” to

convertible currency

What have we used?

Colonial period

The first central banks

First Bank of the United States

Second Bank of the United States

1816-1836

Stabilize/expand fractional reserve

banking

What have we used?

Colonial period

The first central banks

Bi-metallic standard

Coinage Act of 1834

$1 at 1.50g gold

Silver to gold ratio: 16 to 1

What have we used?

The first central banks

Bi-metallic standard

United States Notes

1862-1971

Fiat money

What have we used?

The first central banks

Bi-metallic standard

United States Notes

1862-1971

Fiat money

What have we used?

Bi-metallic standard

United States Notes

Silver Certificates

1878-1964

What have we used?

United States Notes

Silver Certificates

Gold Standard Act (1900)

Suspended during WWI and

terminated in 1933

What have we used?

Silver Certificates

Gold Standard Act (1900)

Federal Reserve Act (1913)

Federal Reserve Notes

What have we used?

Gold Standard Act (1900)

Federal Reserve Act (1913)

Bretton Woods System (1944)

$35 per 1 oz. gold

$1 at 0.81g gold

What have we used?

Federal Reserve Act (1913)

Bretton Woods System (1944)

Nixon Shock and the end of Bretton

Woods (1971 to 1973)

Pure floating fiat currency

What have we used?

Bretton Woods System (1944)

Nixon Shock and the end of Bretton

Woods (1971 to 1973)

The Fed’s dual mandate (1978)

How well did they work?

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980

Nominal GDP Growth,

Historical Statistics

How well did they work?

0

5

10

15

20

25

30

1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980

Unemployment Rate,

Historical Statistics

How well did they work?

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

1800 1820 1840 1860 1880 1900 1920

Retail Inflation,

Historical Statistics

How well did they work?