Other People's Money: How Banking Worked In The Early American Republic

Abstract

How Banks Worked (and Sometimes Did Not Work) in the Early Republic Trying to understand the workings of American banking and finance before the Civil War can be baffling. There was no central bank and no national currency, but rather a mostly decentralized system of banks of varying sorts that circulated thousands of different paper banknotes throughout the country. Counterfeiting was widespread, banknote values fluctuated wildly and varied from place to place, and chains of credit and debt created through promissory notes and bills of exchange easily became byzantine. Fundamental instability was endemic to the economy, and only the exigencies of the war itself led policymakers to craft an economic order that began to resemble that of the modern world.