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MoneyWhence It Came, Where It Went$
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John Kenneth Galbraith

Print publication date: 2017

Print ISBN-13: 9780691171661

Published to Princeton Scholarship Online: May 2018

DOI: 10.23943/princeton/9780691171661.001.0001

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The Great Compromise

The Great Compromise

(p.97) Chapter 8 The Great Compromise

John Kenneth Galbraith

James K. Galbraith

Princeton University Press

This chapter examines the dual monetary system that existed in the hundred years after 1832, a period characterized by basic compromise. The compromise which followed the demise of the Second Bank of the United States had some negative consequences. Recurrently, and reflecting the euphoria stimulated by other causes, banks were created and loans were made with abandon. People then started coming to the banks for their money. These were the panics. The chapter considers the turbulent years after 1832, focusing on the emergence of free banking, the resulting bank failures and greenbacks, agitation for more greenbacks, the pressure for the coinage of cheap silver, and the recurrent panics—all of which combined to make the financial system of the United States, according to Andrew Carnegie, “the worst in the civilized world.” The passage of the National Bank Act (1863) establishing a new system of national banks is also discussed.

Keywords:   dual monetary system, Second Bank of the United States, euphoria, banks, panics, free banking, bank failures, greenbacks, National Bank Act (1863), national banks

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