Whatever Happened To Penny Candy Ch 4

Dollar's History and Evolution

• A dollar isn't a piece of paper; it's an ounce of silver.
• Gold and silver have been used as money for millennia due to their durability, scarcity and wide desirability
• Money must be easily traded, portable, widely accepted, and resistant to corrosion.
• Many unusual items have been used as currency, including stones, cattle, beads, salt, fish, and shells.
• Coins solved the issue of determining the weight and purity of gold or silver by stamping the weight, fineness, and mint's name on them.
• The Joachimthaler, a one-ounce silver coin, was widely used in the Middle Ages, leading to the term "thaler", later shortened to dollar.
• Other currencies are also based on weights of precious metals (e.g., pound sterling, French franc, shekel).
• Money warehouses (banks) provided a safe place to store money.
• Banknotes (IOUs) represented stored precious metals, evolving into paper money in the US.
• Until the 1960s, US dollars were "Silver Certificates," redeemable for silver.
• Today's US dollar is a "Federal Reserve Note," not backed by precious metals; its value comes from a legal tender law.

Legal Tender and Fiat Money

• Kublai Khan used legal tender laws to force acceptance of paper money (fiat money) in exchange for goods.
• The French government used similar methods, enforcing paper money's acceptance with extreme measures.
• US legal systems have a similar "legal tender" system.
• The "legal tender" status makes US dollars accepted in payment, in most circumstances, preventing refusal without penalty

Inflation and the Value of Money

• Inflation occurs when a government prints too much paper money without sufficient precious metals to back it.
• Historical examples show that inflated paper money loses value, while stable, convertible currencies retain their worth.
• The value of money is determined by people's willingness to accept it in trade.
• The author attributes economic problems to corruption in the legal system, suggesting that an idealized system isn't supported by contemporary legal frameworks.