United States resumes specie payments
On January 1, 1879, after fourteen years of irredeemable greenback paper currency, the United States Treasury resumed paying out gold for paper dollars at the pre-Civil War rate. The Resumption Act of 1875 had set the date four years in advance, giving the Treasury time to accumulate enough gold to back the outstanding paper. Resumption put the US fully on the gold standard and effectively pegged the dollar to the pound sterling and the German mark for the next half-century. It also collapsed the political space for the Greenback movement, which had advocated for paper currency expansion, and set up the populist battles over silver that culminated in William Jennings Bryan's 1896 presidential run.
The fourteen-year gap between the end of the Civil War and full specie resumption is one of the longest unsupported paper currency periods in US history outside of wartime. The greenbacks circulated at a discount to gold for the entire period, sometimes as low as 35 cents on the dollar. Resumption restored par, but the political resentment of the contraction it required (deflation cost farmers and debtors substantially) fueled American populism for the next twenty years.
04 · Gold Standard
In the late 19th century most major economies agreed to peg their currencies to gold at a fixed rate. Currencies became effectively interchangeable. The arrangement imposed discipline — you couldn't print more money than you held gold — but it also made economies brittle: a gold outflow forced an immediate contraction in money supply, regardless of real-world conditions.
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