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Monetary Innovation in America

Published online by Cambridge University Press:  03 March 2009

Richard Sylla
Richard Sylla
Affiliation:
Professor of Economics and Business, North Carolina State University, Raleigh, North Carolina 27650.
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Abstract

Monetary innovation, the development of new forms of money, has not received much systematic study from economic historians. This essay presents a framework for analyzing the determinants of monetary innovation and illustrates the argument by means of a sketch of monetary innovation in America from colonial times to the present.

Type
Papers Presented at the Forty-First Annual Meeting of the Economic History Association
Information
The Journal of Economic History , Volume 42 , Issue 1 , March 1982 , pp. 21 - 30
Copyright
Copyright © The Economic History Association 1982

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References

1 The errors are not symmetric. The inflation that might (but not necessarily does) result from monetary innovation could avoid some—perhaps most—of the real resource costs of sole reliance on the precious metals for money. One wonders whether this asymmetry can explain why history, as some allege, has an inflationary bias.Google Scholar

2 Jones, Alice Hanson, in her recent book, Wealth of a Nation to Be (New York, 1980)Google Scholar, Chap. 5, shows that financial assets of the colonists circa 1774 were quite small in relation to their real assets, and also that “cash”, which includes precious metals in monetary forms, was a small part of financial assets. But silversmithing was very common in the colonies, and it has been suggested recently that conversion of silver coin to plate, which could be marked and easily identified, was a good method to minimize risks of theft. See Mulholland, James A., A History of Metals in Colonial America (University, Alabama, 1981), pp. 86ff.Google Scholar

3 Nussbaum, Arthur, A History of the Dollar (New York, 1957), p. 4.Google Scholar

4 Ibid., pp. 6–7.

5 Ibid.

6 Ibid., pp. 5, 21.

7 Friedman, Milton and Schwartz, Anna J., A Monetary History of the United States, 1867–1960 (Princeton, 1963), Table A-1, pp. 704–08.Google Scholar

8 See, for example, James, John A., Money and Capital Markets in Post-Bellum America (Princeton, 1978)Google Scholar, Neal, Larry, “Trust Companies and Financial Innovation, 1897–1914”, Business History Review, 45 (Spring 1981), 35–51Google Scholar, and my The American Capital Market, 1846–1914 (New York, 1975).Google Scholar

9 For an excellent survey of these regulations, see Jones, Homer, “Banking Reform in the 1930s” and the “Discussion” by Schwartz, Anna, both in Walton, Gary M., ed., Regulatory Change in an Atmosphere of Crisis (New York, 1979), pp. 79–99.CrossRefGoogle Scholar