Gold Standard Act

Last updated
Gold Standard Act
Great Seal of the United States (obverse).svg
Long titleAn Act to define and fix the standard of value, to maintain the parity of all forms of money issued or coined by the United States, to refund the public debt, and for other purposes.
NicknamesGold Standard Act of 1900
Enacted bythe 56th United States Congress
EffectiveMarch 14, 1900
Citations
Public law Pub. L. Tooltip Public Law (United States)  56–41
Statutes at Large 31  Stat.   45
Legislative history
  • Introduced in the House as H.R. 1
  • Passed the House on December 18, 1899 (192–152)
  • Reported by the joint conference committee on March 6, 1900; agreed to by the Senate on March 6, 1900 (44–26) and by the House on March 13, 1900 (172–127)
  • Signed into law by President William McKinley on March 14, 1900

The Gold Standard Act was an Act of the United States Congress, signed by President William McKinley and effective on March 14, 1900, defining the United States dollar by gold weight and requiring the United States Treasury to redeem, on demand and in gold coin only, paper currency the Act specified. [1]

Contents

The Act formalized the American gold standard that the Coinage Act of 1873, which demonetized silver, and the Resumption Act of 1875, which made all legal tender notes redeemable in gold at the Treasury, had established by default. [2] [3] Before and after the Act, silver currency including silver certificates and the silver dollar circulated at face value as fiat currency not redeemable for gold. [4]

The Act fixed the value of one dollar at 25.8  grains of 90% pure gold, equivalent to about $20.67 per troy ounce, very near its historic value. American circulating gold coins of the period comprised an alloy of 90% gold and 10% copper for durability.

After the realigning election of 1932 following the onset of the Great Depression, from March 1933 the gold standard was abandoned, and the Act abrogated, by a coordinated series of policy changes including executive orders by President Franklin D. Roosevelt, [5] new laws, [6] and controversial Supreme Court rulings.

After World War II international agreements comprising the Bretton Woods system formally restored foreign central banks' ability to exchange United States dollars for gold at a fixed price. World trade growth increasingly stressed this system, which was abandoned in the Nixon shock of 1971. [7] Attempts to reform the Bretton Woods system quickly proved unworkable and failed. All modern currencies thus became fiat currencies freely floating and subject to market forces despite capital controls imposed by some central banks, with gold as a commodity.[ dubious discuss ]

See also

Related Research Articles

<span class="mw-page-title-main">Gold standard</span> Monetary system based on the value of gold

A gold standard is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from the late 1920s to 1932 as well as from 1944 until 1971 when the United States unilaterally terminated convertibility of the US dollar to gold, effectively ending the Bretton Woods system. Many states nonetheless hold substantial gold reserves.

The Specie Payment Resumption Act of January 14, 1875 was a law in the United States that restored the nation to the gold standard through the redemption of previously unbacked United States Notes and reversed inflationary government policies promoted directly after the American Civil War. The decision further contracted the nation's money supply and was seen by critics as an exacerbating factor of the so-called Long Depression, which struck in 1873.

The Sherman Silver Purchase Act was a United States federal law enacted on July 14, 1890.

Seigniorage, also spelled seignorage or seigneurage, is the difference between the value of money and the cost to produce and distribute it. The term can be applied in two ways:

Federal Reserve Notes are the currently issued banknotes of the United States dollar. The United States Bureau of Engraving and Printing produces the notes under the authority of the Federal Reserve Act of 1913 and issues them to the Federal Reserve Banks at the discretion of the Board of Governors of the Federal Reserve System. The Reserve Banks then circulate the notes to their member banks, at which point they become liabilities of the Reserve Banks and obligations of the United States.

<span class="mw-page-title-main">United States Note</span> Type of paper money that was issued from 1862 to 1971 in the United States

A United States Note, also known as a Legal Tender Note, is a type of paper money that was issued from 1862 to 1971 in the United States. Having been current for 109 years, they were issued for longer than any other form of U.S. paper money other than the currently issued Federal Reserve Note. They were known popularly as "greenbacks", a name inherited from the earlier greenbacks, the Demand Notes, that they replaced in 1862. Often termed Legal Tender Notes, they were named United States Notes by the First Legal Tender Act, which authorized them as a form of fiat currency. During the early 1860s the so-called second obligation on the reverse of the notes stated:

This Note is a Legal Tender for all debts public and private except Duties on Imports and Interest on the Public Debt; and is receivable in payment of all loans made to the United States.

<span class="mw-page-title-main">United States one-hundred-dollar bill</span> Current denomination of United States currency

The United States one-hundred-dollar bill (US$100) is a denomination of United States currency. The first United States Note with this value was issued in 1862 and the Federal Reserve Note version was first produced in 1914. Inventor and U.S. Founding Father Benjamin Franklin has been featured on the obverse of the bill since 1914, which now also contains stylized images of the Declaration of Independence, a quill pen, the Syng inkwell, and the Liberty Bell. The reverse depicts Independence Hall in Philadelphia, which it has featured since 1928.

<span class="mw-page-title-main">Silver certificate (United States)</span> Paper currency used between 1878 and 1964

Silver certificates are a type of representative money issued between 1878 and 1964 in the United States as part of its circulation of paper currency. They were produced in response to silver agitation by citizens who were angered by the Fourth Coinage Act, which had effectively placed the United States on a gold standard. The certificates were initially redeemable for their face value of silver dollar coins and later in raw silver bullion. Since 1968 they have been redeemable only in Federal Reserve Notes and are thus obsolete, but still valid legal tender at their face value and thus are still an accepted form of currency.

<span class="mw-page-title-main">Executive Order 6102</span> 1933 U.S. executive order prohibiting the hoarding of gold currency

Executive Order 6102 is an executive order signed on April 5, 1933, by US President Franklin D. Roosevelt "forbidding the hoarding of gold coin, gold bullion, and gold certificates within the continental United States." The executive order was made under the authority of the Trading with the Enemy Act of 1917, as amended by the Emergency Banking Act in March 1933.

<span class="mw-page-title-main">Gold certificate (United States)</span> Certificate of ownership that gold owners held instead of storing the actual gold

Gold certificates were issued by the United States Treasury as a form of representative money from 1865 to 1933. While the United States observed a gold standard, the certificates offered a more convenient way to pay in gold than the use of coins. General public ownership of gold certificates was outlawed in 1933 and since then they have been available only to the Federal Reserve Banks, with book-entry certificates replacing the paper form.

Convertibility is the quality that allows money or other financial instruments to be converted into other liquid stores of value. Convertibility is an important factor in international trade, where instruments valued in different currencies must be exchanged.

<span class="mw-page-title-main">Gold Reserve Act</span> Act of the US Congress

The United States Gold Reserve Act of January 30, 1934 required that all gold and gold certificates held by the Federal Reserve be surrendered and vested in the sole title of the United States Department of the Treasury. It also prohibited the Treasury and financial institutions from redeeming dollar bills for gold, established the Exchange Stabilization Fund under control of the Treasury to control the dollar's value without the assistance of the Federal Reserve, and authorized the president to establish the gold value of the dollar by proclamation.

The history of the United States dollar began with moves by the Founding Fathers of the United States of America to establish a national currency based on the Spanish silver dollar, which had been in use in the North American colonies of the Kingdom of Great Britain for over 100 years prior to the United States Declaration of Independence. The new Congress's Coinage Act of 1792 established the United States dollar as the country's standard unit of money, creating the United States Mint tasked with producing and circulating coinage. Initially defined under a bimetallic standard in terms of a fixed quantity of silver or gold, it formally adopted the gold standard in 1900, and finally eliminated all links to gold in 1971.

<span class="mw-page-title-main">Silver standard</span> Monetary system

The silver standard is a monetary system in which the standard economic unit of account is a fixed weight of silver. Silver was far more widespread than gold as the monetary standard worldwide, from the Sumerians c. 3000 BC until 1873. Following the discovery in the 16th century of large deposits of silver at the Cerro Rico in Potosí, Bolivia, an international silver standard came into existence in conjunction with the Spanish pieces of eight. These silver dollar coins played the role of an international trading currency for nearly four hundred years.

<span class="mw-page-title-main">Money</span> Object or record accepted as payment

Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are: medium of exchange, a unit of account, a store of value and sometimes, a standard of deferred payment.

<span class="mw-page-title-main">United States dollar</span> Currency

The United States dollar is the official currency of the United States and several other countries. The Coinage Act of 1792 introduced the U.S. dollar at par with the Spanish silver dollar, divided it into 100 cents, and authorized the minting of coins denominated in dollars and cents. U.S. banknotes are issued in the form of Federal Reserve Notes, popularly called greenbacks due to their predominantly green color.

Bills of credit are documents similar to banknotes issued by a government that represent a government's indebtedness to the holder. They are typically designed to circulate as currency or currency substitutes. Bills of credit are mentioned in Article One, Section 10, Clause One of the United States Constitution, where their issuance by state governments is prohibited.

<span class="mw-page-title-main">Fiat money</span> Currency not backed by any commodity

Fiat money is a type of currency that is not backed by a precious metal, such as gold or silver, or backed by any other tangible asset or commodity. Fiat currency is typically designated by the issuing government to be legal tender, and is authorized by government regulation. Since the end of the Bretton Woods system in 1971, the major currencies in the world are fiat money.

From 1775 to 1779 the Continental Congress issued Continental currency banknotes. Then there was a period when the United States just used gold and silver, rather than paper currency. In 1812 the US began issuing Treasury Notes, although the motivation behind their issuance was funding federal expenditures rather than the provision of a circulating medium. In 1861 the US began issuing Demand Notes, which were the first paper money issued by the United States whose main purpose was to circulate. And since 1914 the US has issued Federal Reserve Notes.

References

  1. Including gold certificates, United States notes, Treasury notes, and later Federal Reserve notes, but excluding silver certificates and National Bank notes which were secured by government bonds issuing national banks had deposited with the Treasury. Though the Act did not require national banks to redeem their issued National Bank notes in gold coin, ordinarily they would, as might other banks.
  2. Taussig, F. W. (1900). "The Currency Act of 1900". The Quarterly Journal of Economics. 14 (3): 394–415. doi:10.2307/1882566. ISSN   0033-5533. JSTOR   1882566.
  3. Falkner, Roland P. (1900). "The Currency Law of 1900". The Annals of the American Academy of Political and Social Science. 16: 33–55. ISSN   0002-7162.
  4. Johnson, Joseph French (1900). "The Currency Act of March 14, 1900". Political Science Quarterly. 15 (3): 482–507. doi:10.2307/2140799. ISSN   0032-3195. JSTOR   2140799.
  5. Federal Reserve. "Roosevelt's Gold Program".
  6. Wikisource. "Joint Resolution of June 5, 1933".
  7. James Stuart Olson. Historical Dictionary of the Great Depression, 1929–1940. p. 131.

Further reading