Über die Autorin bzw. den Autor

Milton Friedman (1912-2006) was awarded the Nobel Prize in Economics in 1976. He was a Senior Research Fellow at the Hoover Institution and had previously taught at the University of Chicago, from 1946 to 1976. He was also a member of the research staff of the National Bureau of Economic Research from 1937 to 1981. Anna Jacobson Schwartz (1915–2012) was a research associate at the National Bureau of Economic Research, which she joined in 1941. She is a Distinguished Fellow of the American Economic Association and a Fellow of the American Academy of Arts and Sciences. During her distinguished career, she has made major contributions to the economics of business cycles, banking, monetary policy, and financial regulation.

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A Monetary History of the United States 1867-1960

PRINCETON UNIVERSITY PRESS

Contents

Preface.................................................................................xxi1. Introduction.........................................................................32. The Greenback Period.................................................................153. Silver Politics and the Secular Decline in Prices, 1879–97.....................894. Gold Inflation and Banking Reform, 1897–1914...................................1355. Early Years of the Federal Reserve System, 1914–21.............................1896. The High Tide of the Reserve System, 1921–29...................................2407. The Great Contraction, 1929–33.................................................2998. New Deal Changes in the Banking Structure and Monetary Standard......................4209. Cyclical Changes, 1933–41......................................................49310. World War II Inflation, September 1939–August 1948............................54611. Revival of Monetary Policy, 1948–60...........................................59212. The Postwar Rise in Velocity........................................................63913. A Summing Up........................................................................676Appendixes..............................................................................701Director's Comment......................................................................809Indexes.................................................................................815

Chapter One

This book is about the stock of money in the United States. It traces changes in the stock of money for nearly a century, from just after the Civil War to 1960, examines the factors that accounted for the changes, and analyzes the reflex influence that the stock of money exerted on the course of events.

We start with 1867 because that is the earliest date at which we can begin a continuous series of estimates of the stock of money in the United States. When the National Banking Act was passed during the Civil War, it was believed that state banks would shortly go out of existence. As a result, organized federal collection of statistics for state banks ceased, though, as it happens, state banks suffered only a temporary and never a complete eclipse. Accordingly, there is a serious hiatus in statistical data. Better data are available for the period before the Civil War than for the years from 1863 to 1867.

Money played an important role in economic and political developments in the United States during the period we cover—as it so often has in other periods and other places. We have therefore been led to examine some of these developments in considerable detail, so much so that this book may read in part like a general economic history. We warn the reader that it is not; it is highly selective. Throughout, we trace one thread, the stock of money, and our concern with that thread explains alike which episodes and events are examined in detail and which are slighted.

The estimates of the stock of money we have constructed give for the first time a continuous series covering more than nine decades. These estimates, graphed in Chart 1 (and given numerically in Table A-l), show clearly the impress of most of the major episodes in U.S. history since the Civil War.

The most notable feature of the stock of money is its sharp upward trend. In 1867, the first year for which we have an estimate, the public held about $585 million of currency—consisting at the time mostly of "greenbacks" issued to help finance the Civil War, plus national bank notes and subsidiary coinage—and $729 million of deposits in commercial banks or a total of $1,314 million of what by one definition— and the one we use here—may be called money. In addition, the public held $276 million in deposits at mutual savings banks, or a total of $1,590 million of what, by a broader definition, may about as reasonably be called money. Our figures do not classify deposits in commercial banks at this early date into demand and time deposits, because this distinction had little meaning, either for banks or their customers. Reserve requirements for banks were levied against deposits, without distinction between demand and time. Demand deposits, like time deposits, frequently paid interest; and time deposits, like demand deposits, were frequently transferable by check. The distinction became of major importance to banks (and so reliable data became available on a continuous basis for the two categories separately) only after 1914, when the Federal Reserve Act introduced differential requirements for demand and time deposits. Accordingly, we have no estimate for 1867 for a third and narrower possible definition of money, namely, currency plus demand deposits alone.

In mid-1960, the last year for which estimates are presented in Chart 1, the public held about $29 billion of currency (consisting mostly of Federal Reserve notes but with an appreciable residue of silver certificates and subsidiary coinage as well as a number of other relics of earlier monetary history), $110 billion of demand deposits, and $67 billion of time deposits in commercial banks, or a total of $206 billion of money by the terminology we use. In addition, it held some $35 billion of deposits in mutual savings banks and under $1 billion of postal savings deposits, or a total of $242 billion of money plus such deposits. The public held 50 times as many dollars of currency at the end of the 93 years spanned by our figures as at the beginning; 243 times as many dollars of commercial bank deposits; and 127 times as many dollars of mutual savings deposits.

The total we designate as money multiplied 157-fold in the course of these more than nine decades, or at the annual rate of 5.4 per cent. Since the population of the United States nearly quintupled over the same period, the stock of money per capita multiplied some 32-fold, or at the annual rate of 3.7 per cent. We can break this total into three components: 1.9 percentage points, which is the rate of rise in output per capita; 0.9 percentage points, which is the rate of rise in prices; and a residual of 0.9 percentage points, which is the rate of rise in the amount of money balances, expressed as a fraction of income, that the public chose to hold. So great is the power of compound interest that this residual small rate of growth corresponds to a rise in the public's holdings of money from a sum equal to less than 3 months' income in 1869 to a sum equal to more than 7 months' income in 1960. Of course, as Chart 2 shows, these developments did not proceed steadily; and it is with the vicissitudes along the way that this study is mostly concerned.

In discussing these vicissitudes, we frequently find it convenient to mark off periods by dates at which business activity reached a cyclical peak or trough. We use for this purpose the reference cycle chronology established by the National Bureau of Economic Research. Our extensive use of this chronology perhaps justifies an explicit caveat that we do not present a comprehensive history of cyclical movements in economic activity in the United States. Monetary factors played a major role in these movements, and conversely, nonmonetary developments frequently had a major...