question: The Great Depression. I’ve never quite understood how money was so scarce.
comment: At the time the US was on the gold standard, which meant that for every ounce of gold the government owned they could print $20 in currency. The only way that the government was able to print new money, therefore, was to buy up more gold. This worked out ok between the late 1800's and early 1900's because the amount of gold being mined in the world was coincidentally about the same as what was needed for the US to print enough currency to create an average of 2% inflation each year - which is about what you need to maintain a healthy economy - and the US economy was strong enough to enable the US government to actually be able to afford to buy up all that gold. Starting in the mid 20's population and economic growth had outpaced the rate at which gold was being mined, and the US wasn't able to acquire enough gold to generate 2% inflation per year. This lack of currency caused inflation to go negative, by 1928 the US was experiencing -2% inflation every year. This is called deflation. When a country experiences deflation people begin to horde money, hoping that the longer they hold it the more valuable it will become. When people horde money they essentially remove it from the economy, which begins what is known as a "deflationary spiral" where more deflation means more money hording which leads to even more deflation. By 1933 this spiral had caused the inflation rate in the US to plummet to -10%. That doesn't mean that the money vanished - the US had the same amount of currency in 1933 as it did in 1929. But that money was locked away in the bank accounts of a relatively small number of well off people where it was completely inaccessible to the working class, who relied on their now non-existent paycheck to survive. This situation ultimately reversed in 1934 when the US passed laws which seized all of the gold in the country and revalued the US dollar - both of which allowed the government to print a massive amount of currency, resulting in inflation surging back to about 5%.
passages: In the early economic history of the United States, cycles of inflation and deflation correlated with capital flows between regions, with money being loaned from the financial center in the Northeast to the commodity producing regions of the [mid]-West and South. In a procyclical manner, prices of commodities rose when capital was flowing in, that is, when banks were willing to lend, and fell in the depression years of 1818 and 1839 when banks called in loans. Also, there was no national paper currency at the time and there was a scarcity of coins. Most money circulated as banknotes, which typically sold at a discount according to distance from the issuing bank and the bank's perceived financial strength.
   BULLET::::- In the early 1930s more people emigrated from the United States than immigrated to it.
  
  BULLET::::- With little economic activity there was scant demand for new coinage. No nickels or dimes were minted in 1932–33, no quarter dollars in 1931 or 1933, no half dollars from 1930 to 1932, and no silver dollars in the years 1929–33.
  
  BULLET::::- The U.S. government sponsored a Mexican Repatriation program which was intended to encourage people to voluntarily move to Mexico, but thousands, including many U.S. citizens, were deported against their will. Altogether about 400,000 Mexicans were repatriated.
   While there were numerous bank failures during the Great Depression, most banks in developed countries survived, as did most currencies and governments. The most significant monetary change during the depression was the demise of the gold standard by most nations that were on it. In the U.S., the dollar was redeemable in gold until 1933 when U.S. citizens were forced to turn over their gold (except for 5 ounces) for fiat currency (See: Executive Order 6102) and were forbidden to own monetary gold for the next four decades. Subsequently, gold was revalued from $20.67 per ounce to $35 per ounce. U.S. dollars remained redeemable in gold by foreigners until 1971. Gold ownership was legalized in the U.S. in 1974, but not with legal tender status.
   After the end of World War II, the U.S. held $26 billion in gold reserves, of an estimated total of $40 billion (approx 65%). As world trade increased rapidly through the 1950s, the size of the gold base increased by only a few percentage points. In 1950, the U.S. balance of payments swung negative. The first U.S. response to the crisis was in the late 1950s when the Eisenhower administration placed import quotas on oil and other restrictions on trade outflows. More drastic measures were proposed, but not acted upon. However, with a mounting recession that began in 1958, this response alone was not sustainable. In 1960, with Kennedy's election, a decade-long effort to maintain the Bretton Woods System at the $35/ounce price begun.
   The United States had no national paper money until 1862 (greenbacks used to fund the Civil War), but these notes were discounted to gold until 1877. There was also a shortage of U.S. minted coins. Foreign coins, such as Mexican silver, were commonly used. At times banknotes were as much as 80% of currency in circulation before the Civil War. In the financial crises of 1818–19 and 1837–41, many banks failed, leaving their money to be redeemed below par value from reserves. Sometimes the notes became worthless, and the notes of weak surviving banks were heavily discounted. The Jackson administration opened branch mints, which over time increased the supply of coins. Following the 1848 finding of gold in the Sierra Nevada, enough gold came to market to devalue gold relative to silver. To equalize the value of the two metals in coinage, the US mint slightly reduced the silver content of new coinage in 1853.
   The third was after the Civil War, sometimes called The Great Deflation. It was possibly spurred by return to a gold standard, retiring paper money printed during the Civil War.
  
  The fourth was in 1930–1933 when the rate of deflation was approximately 10 percent/year, part of the United States' slide into the Great Depression, where banks failed and unemployment peaked at 25%.
   Another theme is "silver". China and Mexico used it for their currency and the US used it for smaller coins. From 1879 to 1897, there was a populist push to switch the gold-backed dollar to silver. The US Treasury bought silver, but that didn't help when the country was on gold. Later, during the Great Depression, the US bought gold at inflated prices to help silver miners. The result was tragic for the money supplies of China and Mexico.
   The vast majority of the increase, , were the result of imports from abroad. This consisted of out of foreign mines (largely from South Africa), out of foreign central bank reserves (mostly France and the United Kingdom), with the balance from other sources (principally private holdings in India). Only was from gold acquired in January 1934 under the gold buying program of Executive Order 6102 (which required individuals and institutions deliver to the government all but a small amount of their gold coin and bullion), and from domestic production and return of scrap gold and coin after January. 
   During the Great Depression, every major currency abandoned the gold standard. Among the earliest, the Bank of England abandoned the gold standard in 1931 as speculators demanded gold in exchange for currency notes or in settlement of debts, threatening the solvency of the British monetary system. This pattern repeated throughout Europe and North America. In the United States, the Federal Reserve was forced to raise interest rates in order to protect the gold standard for the US dollar, worsening already severe domestic economic pressures. After bank runs became more pronounced in early 1933, people began to hoard gold coins as distrust for banks led to distrust for paper money, worsening deflation and depleting gold reserves.
   In the Money (1933 film)
  
  In the Money is a 1933 American pre-Code comedy film directed by Frank Strayer from an original screenplay by Robert Ellis. Starring Richard "Skeets" Gallagher, Lois Wilson, and Warren Hymer, the film was produced and distributed by the common tandem duo of Poverty Row studios, Invincible Corp. and Chesterfield Motion Pictures. It premiered on November 7, 1933.
  
  Section::::Cast list.
  
  BULLET::::- Richard "Skeets" Gallagher as Spunk Hobbs
  
  BULLET::::- Lois Wilson as Mary "Lambie" Higginbottom
  
  BULLET::::- Warren Hymer as "Gunboat" Bimms
  
  BULLET::::- Sally Starr as Babs Higginbottom
  
  BULLET::::- Arthur Hoyt as Professor Higginbottom
   The value of the U.S. dollar declined significantly during wartime, especially during the American Civil War, World War I, and World War II. The Federal Reserve, which was established in 1913, was designed to furnish an "elastic" currency subject to "substantial changes of quantity over short periods", which differed significantly from previous forms of high-powered money such as gold, national bank notes, and silver coins. Over the very long run, the prior gold standard kept prices stable—for instance, the price level and the value of the U.S. dollar in 1914 was not very different from the price level in the 1880s. The Federal Reserve initially succeeded in maintaining the value of the U.S. dollar and price stability, reversing the inflation caused by the First World War and stabilizing the value of the dollar during the 1920s, before presiding over a 30% deflation in U.S. prices in the 1930s.
   Over the past three centuries what has been accepted by the public as money has been expanded from gold and silver coins to include first bank notes and then bank deposits subject to transfer by check (cheque). Until recently, most economists would have agreed that money stopped at that point. No such agreement exists today, and the definition of money appropriate to present circumstances is debated. Since the 18th century, economists have known that the amount of money in circulation is an important economic variable. As the theories became more carefully specified in the 19th and early 20th centuries, they included a variable called the money supply.
   Sometimes distinguished from manillas mainly by their wearability are a large number of regional types called 'Bracelet' monies and 'Legband' monies. Some are fairly uniform in size and weight and served as monies of account like manillas, but others were actually worn as wealth display. The less well off would mimic the movements of the 'better off' who were so encumbered by the weight of manillas that they moved in a very characteristic way. The larger manillas had a much more open shape.
  
  Section::::History.
  
  Section::::History.:Origins.
   BULLET::::- 1930–33 – In the wake of the Wall Street Crash of 1929, 9,000 banks close, wiping out one third of the money supply in the United States.
  
  BULLET::::- 1933 – Executive Order 6102 signed by U.S. President Franklin D. Roosevelt forbade ownership of gold coin, gold bullion, and gold certificates by US citizens beyond a certain amount, effectively ending the convertibility of US dollars into gold.
   Marked Money
  
  Marked Money is a 1928 American silent action film directed by Spencer Gordon Bennet and starring Tom Keene, Tom Kennedy and Virginia Bradford.
  
  The film's sets were designed by the art director Edward C. Jewell.
  
  Section::::Cast.
  
  BULLET::::- Frank Coghlan Jr. as Boy
  
  BULLET::::- Tom Keene as Clyde
  
  BULLET::::- Tom Kennedy as Bill Clemons
  
  BULLET::::- Bert Woodruff as Capt. Fairchild
  
  BULLET::::- Virginia Bradford as Grace Fairchild
  
  BULLET::::- Maurice Black as Donovan
  
  BULLET::::- Jack Richardson as Scudder
  
  BULLET::::- Mark Hamilton as Mariner Bill
  
  Section::::Bibliography.
   Between 1933 and 1974 American citizens could not legally own gold, with some exceptions. It was not until 1985 that the U.S. Treasury began minting Gold and Silver Eagle Coins after the multi-decade moratorium. While the sale of collectors' bullion and "proof" coinage did not altogether cease during this period, there were few convenient (or legal) ways for the average person to acquire or circulate specie in the United States.
   Passage of the Federal Reserve Act of 1913 was one of Wilson's most enduring legislative accomplishments, for he successfully negotiated a compromise between Wall Street and the agrarians. The plan built on ideas developed by Senator Nelson Aldrich, who discovered the European nations had more efficient central banks that helped their internal business and international trade. The new organization divided the country into 12 districts, with a Federal Reserve Bank in each, all supervised by a Federal Reserve Board. These banks were owned by local banks and served as depositories for the cash reserves of member banks. Until the Federal Reserve Act, the U.S. government had left control of its money supply largely to unregulated private banks. While the official medium of exchange was gold coins, most loans and payments were carried out with bank notes, backed by the promise of redemption in gold. The trouble with this system was that the banks were tempted to reach beyond their cash reserves, prompting periodic panics during which fearful depositors raced to turn their bank paper into coin. With the passage of the act, greater flexibility in the money supply was assured, and provision was made for issuing federal reserve notes—paper dollars—to meet business demands. The Fed opened in 1914 and played a central role in funding the World War. After 1914, issues of money and banking faded away from the political agenda.
   In the early history of the United States there was no national currency and an insufficient supply of coinage. Banknotes were the majority of the money in circulation. During financial crises many banks failed and their notes became worthless. Also, banknotes were discounted relative to gold and silver, the discount depending on the financial strength of the bank.
   The need for these war materials created a huge spurt in production, thus leading to promising amount of employment in America. Moreover, Britain chose to pay for their materials in gold. This stimulated the gold inflow and raised the monetary base, which in turn, stimulated the American economy to its highest point since the summer of 1929 when the depression began.
  
  By the end of 1941, before American entry into the war, defense spending and military mobilization had started one of the greatest booms in American history thus ending the last traces of unemployment.
  
  Section::::Facts and figures.
   The Federal Reserve, created in 1913 in response to the Panic of 1907, did not expand national money supply during this time period. The regional Federal Reserve Banks took different approaches to the panic.
   As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth ... to provide men with buying power. ... Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. ... The other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.
  
  Section::::Biography.
   Nor were it hard to substitute in the place of Money [gold and silver] (were a comptency of it wanting) what should be equivalent unto it. For Money is but the Fat of the Body-Politick, whereof too much doth often hinder its agility, as too little makes it sick... so doth Money in the State quicken its Action, feeds from abroad in the time of Dearth at home.'
   In the United States, the lasted between 1837 and 1866, when almost anyone could issue paper money. States, municipalities, private banks, railroad and construction companies, stores, restaurants, churches and individuals printed an estimated 8,000 different types of money by 1860. If an issuer went bankrupt, closed, left town, or otherwise went out of business, the note would be worthless. Such organizations earned the nickname of "wildcat banks" for a reputation of unreliability; they were often situated in remote, unpopulated locales said to be inhabited more by wildcats than by people. The National Bank Act of 1863 ended the "wildcat bank" period. See also: History of free banking.
   The third economic downturn was the depression of the late 1830s to 1843, following the Panic of 1837, when the money supply in the United States contracted by about 34 percent with prices falling by 33 percent. The magnitude of this contraction is matched only by the Great Depression. A fundamental cause of the Panic of 1837 was depletion of Mexican silver mines. Despite the deflation and depression, GDP rose 16 percent from 1839 to 1843, partly because of rapid population growth.
   Schrauwers similarly examines a situation where paper money was introduced for the first time, in early nineteenth century Ontario, Canada. Paper money, or bank notes, were not a store of wealth; they were an I.O.U., a "promisory note," a fetish of debt. Banks in the era had limited capital. They didn't loan that capital. Instead, they issued paper notes promising to pay that amount should the note be presented in their office. Since these notes stayed in circulation for lengthy periods, banks had little fear they would have to pay, and so issued many more notes than they could redeem, and charged interest on all of them. Utilizing Bourdieu's concept of symbolic capital, Schrauwers examines the way that elite social status was converted into economic capital (the bank note). The bank note's value depended entirely on the public's perceptions that it could be redeemed, and that perception was based entirely on the social status of the bank's shareholders.
  
raw_presuppositions: Money was scarce during the Great Depression.
raw_corrections: Money was not scarce during the Great Depression.