Week 3 MT

Week 3 MT - Week 3 State Building, the Territorialazation...

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Week 3 State Building, the Territorialazation of Money, and the Creation of the American Single Currency (McNamara) There were no stable currencies in America and that’s why foreign banks did not really trust them. Each state ha d its own money maker, or mint, which had adverse effects on its economy. Not until the Fed was created in 1913 did things stabilize. The transition of American single currency during the Civil War era were shaped by two dynamics 1. The role of war and wartime economic mobilization 2. the desire to create a single national market to facilitate economic development The characteristics of a modern Western state include: o The unity of state territory, bounded as much as possible with geographically defensible borders o a single currency and unified fiscal system o a single national language o unified legal system American state building has occurred somewhat differently than the European trajectory National Currency from an internal perspective: 1. Contributes to the organizational and bureaucratic development of state. 2. Plays a key role as it relates to the unification and development of national fiscal policy-making system. 3. Helps deepening and broadening national markets. Development of the American Single Currency o Is marked by two very important events 1. Development of a national currency in the Civil War era 2. Consolidation of monetary control in the US Federal Reserve
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o In the US Constitution it simply states that the US Congress has the power to coin money and regulate its value, w/ no specific outline for a single currency or central bank. o The pre-Revolutionary American colonies had a state bill system to use for debts and dealings with England. During the Revolutionary War it became necessary to issue a single paper currency the “continental”. o Until the mid nineteenth century Mexican Peso and other foreign currencies were widely used in the United States. The money was metal and was valued by the weight. The transition to paper money happened in the late 18 th century. o The First Bank was not similar to a modern Central Bank but allowed for the funding of public debt to promote national growth and one day to oversee the development of a single currency. But there was a competition between local money and state money. The Second Bank was closer step towards nationalizing the currency however it did not fully develop and state interests mostly caused the National Bank Acts that would take it closer to single currency to be vetoed. Second Bank mainly rationalized the flow of monies throughout the state banking system and offering some level of external discipline on state activities. Its charter outline helping in fiscal affairs of the government, but it did not assign responsibility for the provision of a sound and uniform currency. However was a very important step.
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This note was uploaded on 04/16/2009 for the course POL 173 taught by Professor Chase during the Spring '09 term at Brandeis.

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Week 3 MT - Week 3 State Building, the Territorialazation...

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