Money Matters

In order to "coin money and regulate the value thereof," Congress wasted no time in passing the “Mint Act” in 1792 to mint the first coins by the following year. The currency was based on the dollar coin, which was made in either gold or silver. Gold dollar coins were required by law to contain 24.75 grains of pure gold, and silver dollar coins contained 15 times that amount.

Although the government issued “treasury notes” during times of financial difficulties, such as during the War of 1812, the Mexican War (1846) and the 1857 “panic,” the first paper money was not issued until 1861, because of the desperate need for cash during the Civil War.

Congress established the Federal Reserve System in 1913. There are 12 Federal Reserve Banks across the nation, each given a letter of the alphabet and a number (which you can find on individual bills). For example, Kansas City, MO issues bills with a “J” inside the seal and below the upper left serial number.

Beginning with the Great Depression, many changes in our monetary system have taken place. Gold is no longer the medium of exchange. Although paper money is still used in transactions, more and more exchanges are made electronically between one’s bank and whatever business or entity is providing a service or commodity.

There’s a huge difference between a metallic system of gold and silver coins and an electronic system. As we have seen in the last year, enormous sums of our tax money are being spent by an out of control government with no thought as to how the debt is to be repaid.

Will we see similar hyperinflation as the Germans did during the Weimar Republic of the 1920’s? Their paper money became practically worthless as prices increased so rapidly that inflation exploded out of control. Could we see the day that a loaf of bread costs $1,000? If our current government doesn’t stop their headlong plunge into debt, we might.

“The modern Banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banks can in fact inflate, mint and unmint the modern ledger-entry currency.” --Major L. L. B. Angus