Abandoning Gold Helped Dollar Gain Preeminence (Part 2)

March 27 (Bloomberg) -- The birth of the U.S. was paid forby both a debauched paper currency and large debts that it soondefaulted on. When Alexander Hamilton became Treasury secretaryin 1789, his job was not just restoring the country’s credit byrestructuring the debt and imposing new taxes; he also had toclean up the mess that was money in the early U.S.

Hamilton proposed to base the monetary system on both goldand silver. Gold had advantages, including greater stability, heargued, but it would be disruptive to withdraw the large amountsof silver that were already in use. He proposed “ten dollar andone dollar gold pieces, one dollar and ten cent silver pieces,and one cent and one-half cent copper pieces,” and the Mint Actof 1792 largely followed his recommendations. As gold and silverwere both widely recognized bases for money at the time, thiswas relatively uncontroversial.