When America first declared its independence, how did ex-colonists begin using new American currency without problems of acceptance, actual weight to the currency, or initial reputation?

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How was a new government just able to declare, “This shall be the money we use”, and have citizens accept it as well as use it to pay for goods? Especially when it was newly made and had no weight?

(spoken as a non American)

In: Economics

5 Answers

Anonymous 0 Comments

The colonies were producing their own currencies before independence, in addition there was some bartering for furs and similar items.

https://en.wikipedia.org/wiki/Early_American_currency

Anonymous 0 Comments

1. The new US Government ***didn’t*** declare “this is the money we will use”. Before the Coinage Act of 1792, each US State issued its own currency. and the Spanish silver Dollar circulated widely (to such a degree that Spanish and Mexican currency was still legal tender in the US until the Coinage Act of 1857)
1. Predictably, since each state issued its own currency (and directly competed with other states economically), trade both inside the US and with foreign countries was ***a bit of a clusterfuck***. The economic woes created by the weakness of the Federal Government was one of the several causes for the abandonment of that government under the Articles of Confederation and the writing of the US Constitution, where the US Federal Government would control currency and trade
2. American citizens (and the rest of the world) accepted the new American dollar specifically because it was pegged to the value (since they contained the same amount of silver) of the Spanish silver dollar, which was one of the most widespread and commonly-accepted currencies in the world at the time.

Anonymous 0 Comments

slowly and with difficulty, there is a good wikipedia page on it https://en.wikipedia.org/wiki/Early_American_currency, but basically all the states individually started issuing their own unbacked currencies for like 6 years before the federal government got around to using a loan of french silver to actually make a national currency, and state curriencies continued for almost another 100 years.

back in that day, a lot of currencies werw still gold/silver backed/coins, so it was easier to use multiple nation’s currencies in 1 market, just compare the weight, so people did thst a lot. the name “Dollar” is actually ripped off from a Spanish currency “Dollar” that was popular at the time

Anonymous 0 Comments

There’s nothing specific to America here.

>How was a new government just able to declare, “This shall be the money we use”, and have citizens accept it as well as use it to pay for goods?

The core to all this is having a reserve bank. The government declares that the central bank will accept this new currency as legal tender.

Which means all the other banks know that if they accept it, they can take it to the central bank, and exchange it for gold or whatever.

Which means that retailers can accept it, and they can take it to their bank, and similarly change it for other currencies.

Which means that citizens can accept it from other people, because they can take that currency to retailers and spend it on stuff.

The central bank is the key.

Anonymous 0 Comments

What other options did they have? The colonies were rather precious metal poor. None of the colonies were able to produce their own currency and imports of silver or gold coinage was limited.

Colonial copper coinage was issued in the late 1700s.

With no other options, they could declare anything was money, and they kind of did: Continental Currency was printed en masse and was rendered almost worthless, but eventually got redeemed (they paid the militias that were fighting the British with them) for pennies on the dollar.

Once that got settled out, it went back to precious metals. Gold and silver are worth their weight in gold and silver, worldwide.