Economic Outlook: History of the Dollar

The history of the dollar and its relationship to gold, from the Revolutionary War to the present.

| March/April 1983

  • history of the dollar - gold dollar sign
    The history of the dollar until recently was intimately tied to gold.
    Illustration by Fotolia/Anatoly Maslennikov

  • history of the dollar - gold dollar sign

Congressman Ron Paul places much of the blame for the world's current economic woes on "the deliberate destruction of the dollar," and he (along with coauthor Lewis Lehrman) has traced that destruction, in great detail, in the book The Case for Gold.

We think this publication provides an interesting view of the economic disasters that are affecting us all today. It also reaffirms the wisdom of Daniel Webster, who said many years ago, "Of all the contrivances for cheating the laboring classes of mankind, none has been found more effectual than that which deludes them with paper money."

Based on Paul and Lehrman's book, here is a brief history of the dollar — the rise and fall of our American currency.

The High Cost of War

To finance our Revolutionary War, the Continental Congress issued paper money in great quantities. As a result, the currency fell, over a period of about 4 1/2 years, from a value of one paper dollar per one gold dollar to about 1,000 to one, giving rise to the phrase, "not worth a continental."

In 1792, to correct this situation, a bimetallic dollar standard with the dollar defined as a weight of 371.25 grains of pure silver and/or a weight of 24.75 grains of pure gold was established, and a somewhat imperfect gold standard remained in effect throughout the nineteenth century with the following notable exceptions.

During the War of 1812, the federal government in flagrant violation of property rights permitted banks to stop all gold and silver redemption of notes and deposits, and yet force their own debtors to repay their loans as usual!

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