History of Finance In America

Money, wealth, and economic freedom are some of the most important factors to consider in the history of the United States. Many colonists traveled to America in search of more economic opportunity. Many believed that by traveling to America they could change their fortunes. In a little over 200 years, the US became one of the richest nations on the face of the planet.

Prior to the American Revolutionary War, in the years leading up to 1776, there was no American government, rather the individual colonies we subservient to England as a whole, but different in their economic affairs. Many colonies used their own money that often did not work in other colonies. Gold was always accepted, as were several other forms of trade such as animal pelts and dry goods. Once the United States declared their independence from England, they essentially had to create a functioning government from scratch. There was a Congress made up of representatives from each of the states, but the national treasury was essentially bare. It was only through the securing of international loans and the donation of private wealth from some prosperous American businessmen that saved the fledgling country from ruin before it even began.

After the war, America had to set out creating a national treasury system that had henceforth been unknown in the Colonies. The first stock market, the Philadelphia Stock Exchange, was founded in 1790 in a coffee house. It was quickly overtaken by the New York Stock Exchange (NYSE), due primarily to the NYSE’s ideal location on Wall Street in New York City. A national monetary system needed to be created and managed, along with the institution of taxes to repay debt incurred during the war. The creation of the republican government was accomplished with economic freedom uppermost in the Founders minds. In the succeeding years, America went through a tumultuous economic period with such institutions as a government sponsored bank and increased tariffs to promote industrial growth and prosperity. Leading up to the Civil War, America changed its economic system many times in ways such as the rechartering of the national bank system and the lowering of tariffs to promote westward expansion by railroad.

During and after the Civil War, the US economy boomed. Simply put, the Union became rich while fighting the Southern Secessionists. They had cities, industry, crops, and natural resources that all grew immensely during and after the war. At the onset of the War, the Treasury was a small institution. Through the implementation of new taxes (often wrapped in a cloak of patriotism) and the sale of government bonds, the nation was able to prosper and grow. The end of the war ushered in the Gilded Age, a de-facto second Industrial Revolution. During this time, tycoons ruled the day and industry boomed. Free land was given to citizens by the government in an effort to move people out of the cities and into the western frontier. Railroad companies were paid by the mile to connect the East and West coasts. This mad grab for money led to many scams and scandals, but also secured its place as the greatest period of economic growth in the history of the country.

At the beginning of the 20th century, many businessmen had made their fortunes courtesy of monopolies and federal subsidies. Many workers became disenfranchised and this new middle class became suspicious and tired of tycoons and their policies. They favored government intervention and regulation in order to secure free enterprise. Several innovations during this time, such as Henry Ford’s assembly line and the spread of electricity gave rise to even more industrial and economic growth. World War I broke out and federal taxes were increased for a time to pay for the war. While short lived, the effects had to be undone following the war. Thanks in no small part to Ford, the automobile industry exploded, which had a similar effect on associated industries such as oil, gas, rubber, and glass. The economy was better than ever until the Wall Street Crash of 1929. This crash ushered in the period known as the Great Depression, a 10 year period in America that had a stark effect on other Westernized countries as well. Several factors led to the crash, including Americans taking out loans to buy stock, an oversupply of food crops, and political actions. After a few of the major banks in New York City put their own money into the stock market in an effort to stave off a depression, panic selling started and Americans couldn’t dump their stocks fast enough. This sell-off created a void in the market and severely decreased confidence in the American economy. The Great Depression also saw the death of the Gold Standard, meaning paper currency was no longer backed by an equal amount of physical gold. In effect, paper money was now just a promise from the government.

About the Author:

Chloe is a freelance writer that focuses on luxury asset trends for Borro Private Finance.