The first currency to be issued in U.S was called continentals and was in period from1775-1791. Therefore, this was the country’s first paper money and was printed by Continental Congress to finance American Revolution. However, this currency led to inflation that eventually accelerated as war progressed (Meltzer 19). People lost their faith in these fiat money notes hence the slogan “Not worth a continental” meaning changed to “utterly worthless”
Fiat money is actually the money, which derives its value from law or government regulation. Thus, this is a term that is used when this money is used as a nation’s main currency. This is to say that it is the legal tender as declared by the government of a country. In addition, this money does not have intrinsic value.
The first United States central bank was established in 1791. The bank headquarter was in Philadelphia but was opposed by numerous Agrarian Minded Americans who were uncomfortable with this powerful bank (Meltzer 28).
The Congress in 1811 declined to renew the first United States bank after the expiry of its 20-year charter.
The next United States attempt to establish central bank was in 1816 but Andrew Jackson vowed to kill this attempt when he was elected in 1828 as the president.
After the failure of the second attempt to establish the central bank, in 1836 to 1865, the unchartered free banks and state chartered banks took hold. This was the period when banks started to offer demand deposits and this was aimed to enhance commerce. This led to the establishment of New York Clearing Association in 1853. The National Banking Act was established in 1863. This established various measures of the currency stability in a growing nation (Meltzer 35).
1907 was a very ruthless year because severe banking panic was experienced. The stage was essentially set for the decentralized central bank from 1908 to 1912. It was in 1912 when Willis and Glass labored over the central bank proposal and in December they presented it to Wilson (Meltzer 67). This led to the establishment of Federal Reserve System in 1913 after some modifications were made to the central bank proposal by Willis and Glass.
Meltzer, Allan H. A History of the Federal Reserve. Chicago: University of Chicago Press, 2003.