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Show COLLEGE OF SOCIAL & BEHAVIORAL SCIENCE Matthew G. Chilcote Luciano Pesci FIAT CURRENCY IN THE HISTORY OF THE UNITED STATES Matthew G. Chilcote (Luciano Pesci) Department of Economics University of Utah The issue of fiat currency, backed only by the word of the government and not precious metals, has proven controversial throughout our nation's history. For the larger part of its history, currency in the United States was backed by gold and silver. However, w h e n occasions have arisen that caused the currency to be overly volatile due to these ties to precious metals, the government has suspended or discontinued the policy of redeemability. This debate over whether to maintain, leave, or return to a metallic standard has been a fixture of politics since the beginning of the United States. This paper examines the evolution of the dollar with special focus on two instances where the United States has issued fiat currency in lieu of currency backed by precious metals. In the first instance, which was during and following the Civil War, the currency was eventually returned to a gold standard. The second, which dates from 1971 until the present, is still a political issue with many today. This paper examines the benefits and drawbacks of using fiat currency as well as h o w the United States has historically moved away from metallic standards in times of crisis. |