Until February 21, 1957, a significant portion of the currency floating around the new nation was foreign made. The US Mint was created just 60 years prior and had only just become able to produce enough coin to meet demand in the United States. The Coinage Act of 1857 prohibited the use of foreign currencies, like the Spanish silver dollar, as US currency. Prohibiting foreign currency was a way for the United States federal government to gain control over an important part of everyone’s lives.
After the law went into effect, the Spanish dollar and other alternatives were still valued with a certain fixed exchange rate and redeemable at the US Treasury for US minted currency, but they were not allowed for use in everyday transactions, or for written contracts. The law took many years to be fully implemented and changed the method of doing business in the country drastically. No longer could businesses accept any form of currency so long it was based in gold or silver, they now required freshly minted US coins.
Long term, government control of the currency made possible the switch away from a standard value based on gold or silver content, to what is called a fiat currency, which we still have today. With a fiat currency, the government has the ability to influence inflation, the cost of borrowing, and many other aspects of the economy. While today only a minority of people advocate a return to the gold standard or some other commodity-based currency, new movements like Bitcoin are challenging the monopoly of any one government on determining the value of money.
- What effect do you think this law had on US business at the time?
- Is this an appropriate action for the federal government?
- Have you ever used Bitcoin? Do you know what it is and how it works?
- How often do you still pay in cash, versus using a debit or credit card for purchases? What difference do you think this makes in your spending habits?
Dwight Schrute Buck. Digital image. reddit. February 14, 2019. https://www.reddit.com/r/DunderMifflin/comments/8r4w0h/exchange_rate_according_to_dwight_schrute_the/