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¶ … United States Central Bank The economic history of the United States from the time since the Reconstruction period of the Civil War has certainly varied through epochs of both prosperity and of despair. Analysis of the trends which influenced and have been made manifest during this time period indicate the interrelation of several events, people, agencies and structures that have had a significant impact on the economics of this country.

The chronological development of the United States' monetary history began well before the Civil War, and has always revolved around the controversy surrounding the development of a central bank. Although the charter for the Bank of the United States (originally conceived by Alexander Hamilton in 1701) had expired in 1837 largely due to Andrew Jackson's refusal to renew it, the lack of such a financial institution and its eventual re-establishment has proven highly influential in the economic history of this country.

This paper will demonstrate that the measures the United States was forced to employ without a central banking system, as well as the measures in which it was able to effect once it implemented one in 1913, have had a powerful influence on the disparate economic climates throughout the country's history. Although speculation exists that the actual reason behind the waging of the Civil War was to re-establish a central U.S.

bank, the fact remains that there was no such institution both before the war and during the period of Reconstruction immediately afterwards, which spanned approximately from 1865-1877. During this particular time period, the economy of the United States was still divided between the war-ravished Southern agricultural system, which was badly failing following its defeat in the war, and a fledgling industrial system in the Northern states.

In addition to huge losses of arable land that were destroyed by Unionist troops during the combat, the Southern agricultural economy, which had been dependent upon slave labor to thrive, was virtually barren of employees to work the land and yield financial profit. The output of traditional lucrative crops (such as tobacco, cotton, and sugar, in particular) plummeted during Reconstruction.

Politically, the effects of the abolition of slavery and of the various Reconstruction acts was in large part a barrier to the Southern economy, which had previously been a significant contributor to that of the United States as a whole. While Northern Reconstruction efforts sough to enfranchise new freedmen with social measures that included the right to vote and rights of citizenship, the Southern states faced the arduous task of rebuilding their economy -- without a central U.S. bank to support it.

The following quote indicates the difficulties which challenged the economy of Southern states, and subsequently that of the United States as a whole. "The collapse of the movement for southern independence involved the failure of every bank of issue and stamped every dollar of the circulating medium of the Confederacy as worthless. Banking enterprises had to be rebuilt from the foundation (Anderson, 1943, p. 1)." In response to the severity of such economic issues, attempts were made by many Reconstruction partisans to re-distribute the land in the South to former slaves.

Although many of these measures met with little or varying degrees of success, the final solution would certainly be less radical than those proposed by the "fire-eater" Republicans such as Charles Sumner, Benjamin Wade, and Thaddeus Stevens. Sharecropping was widely adopted throughout the Southern states and incorporated the system of the propagation of a plantation under a single owner, while parts of it were partitioned to those who leased the lands (who were either African-American or Caucasian), and shared the profits with the plantation owner.

The outcome of such measures and the slow process of revitalizing the independent banking institutions in the South was that the United States' economy shifted from the agricultural, small nation of farmers which Thomas Jefferson initially envisioned to an industrial nation led by developments in the North and the Western regions of the United States, due in large part to the advent of the railroad and the influx of immigrants. The United States' economy became increasingly based upon industrialization during the turn of the 20th century.

Several factors account for this trend, including the development and increased use of the railroad, which not only allowed nationwide access to resources and personnel for industry, but which also allowed for an industry in itself as some of the first monopolies and trusts were created around the lucrative profits produced by its business. The production of steel was also responsible for growing industrialization, as it allowed a firm foundation upon which to build upon and the creation of another industry in itself in terms of its production and development.

Additionally, the immigration waves of Eastern and Southern Europeans (primarily Italians and Jews) provided the country with a steady source of labor with which to carry out the industrialization process. A resulting social and economic consequence of the Gilded Age political industrialization taking effect throughout the country was that the agricultural focus on farmers became particularly barren. The shift towards industry created recessions and banking panics in 1893 and in 1907, during which times farmers were the most affected.

In direct response to such barren economic periods during what was generally a prosperous time in American history, the Populist Party was created (and from its ashes, the age of Progressivism), which sought to keep American industry and its effect on the economy honest. While the Populist Party directly championed the agricultural concerns of farmers, the Progressive Party was created early in the 20th century in attempts to stem the tide of corruption spreading throughout both industry and politics.

The outcome of these political attempts to keep the United States economy virtuous and to sanitize the trend towards large business that supported it was that the Federal Reserve System was implemented in 1913. Despite the fact that this national monetary source was divided into 12 sections, it still constitutes a centralized bank since there is a single chairman overseeing these various segments. A number of substantial effects of the Federal Reserve System are noted throughout economic and other areas of history in the United States.

With a central money supply, inflation and deflation could be more readily caused (simply by printing copious quantities of money or retracting it). Additionally, it is no coincidence that the United States' imperialist attempts began in earnest shortly after the creation of the Federal Reserve System, which may be evidenced by the country's initial foray into World War I in 1917. The economic influence of such a war was so beneficial -- as the following quotation proves -- that such an enterprise would be repeated in the coming years.

"Over four million Americans served in the armed forces, and the U.S. economy turned out a vast supply of raw materials and munitions (Rockoff, 2008, p. 8)." Despite the economic prosperity which typified much of the 1920's, the vast majority of the third unit of U.S. history spanning from 1921 to 1945 is characterized by the bleakest economic times in this country's entire history.

Much of the penury the United States endured was due to the Great Depression and the time period of the New Deal, which required another major armed conflict (World War II) to end it. In spite of the Stock Market crash of 1929, a large number of the reasons behind the Depression can be traced to the Federal Reserve System, as the following quotation demonstrates.

"The Federal Reserve played a key role in nearly every policy failure during this period, and so the major lessons learned from the Great Depression concern the function of the central bank and the financial system…First, the collapse of the finance system could have been stopped if the central bank had properly understood its function as the lender of last resort. Second, deflation played an extremely important role deepening the Depression.

And third, the gold standard, as a method for supporting a fixed exchange rate system, was disastrous (Ceccheti, 1997, p. 1)." The initial solutions to the Depression were the proposed measures of the New Deal, a series of legislation and policies which President Roosevelt implemented ostensibly to lessen the effects of the economic crisis and restore the U.S. econmy. But similar to the way in which the Federal Reserve System was largely responsible for the Depression, Roosevelt's New Deal policies actually had the opposite effect of prolonging the Depression.

The following quote from former Treasury Secretary Henry J. Morgenthau Jr. In 1939, during testimony before the House Ways and Means Committee, alludes to this fact. "I say after eight years of this Administration we have just as much unemployment as when we started… And an enormous debt to boot" (Burton, 2008, p.2). The debt Morgenthau Jr. refers to was substantially caused by FDR's government spending during the New Deal.

The most successful response to the fiasco of the New Deal and the barren days of the Great Depression was the United States' involvement in World War II. As a result of the draft, the unemployment rates which had been at record low levels, was able to right itself. Once again, the U.S.'s industry-based economy was able to flourish with new needs to produce and manufacture goods and products to be used globally.

The secular tendencies in economic policy responsible for this revival would be continued for several years to come. Predictably, the end of fascism which concluded with Adolph Hitler's defeat in World War II (in 1945) brought about the reign of a new international terror: communism. The "red scare" would be utilized both domestically and abroad to fuel United States economic interests that would prove influential to the country's history.

The relation of the United States' capitalist attempts to combat communism can again be traced back to its central bank, the Federal Reserve System, if not in actual case of point then at least symbolically, since the reserve system engendered the capitalist way of life which communism was allegedly threatening. The defending of capitalism and the eradication of communism were responsible for much of the economic boom of the United States during its post-World War II years. A political issue highly influential to the state of the U.S.

economy during this tenure was the Cold War fought against the Soviet Union, which was the chief propagator of communism throughout the war. As the latter attempted to extend its "Iron Curtain" to envelop as many nations as possible, the United States had cause to engage in many military and political encounters throughout the globe, such as the Korean War, the Cuban Missile crisis, and the more direct Cold War with the Soviet Union itself.

Each of these engagements offered fresh attempts for industry to provide munitions, weapons, and other viable products which helped aid the United States economy. The result of these attempts to preserve a global system of capitalism not only included the surging of the economy due to the manufacture of industry, but also provided for and encouraged the fostering of international trade on a global stage.

This commitment to free enterprise was typified by the Anglo-American agreement, in which the United States and Britain discussed the planning and implementation of a world-wide economy, as the following quotation readily indicates. "The Anglo-American agreements established rules for a relatively open and multilateral system of trade and payments, but they did so in a way that would reconcile openness and trade expansion with the commitments of national governments to full employment and economic stabilization (Ikenberry, 1992, p.

1)." The post-World War II economic boom was due in large part to the United States efforts' to combat communism (by waging the Cold War), so that its free-enterprise could be established in a global market -- all of which would buttress its centralized bank, the Federal Reserve System.

Perhaps the most significant manifestation of the proposed global economy which the Anglo-American agreement planned can be evidenced from the usage of the World Wide Web, which links millions of people at the touch of a button and has provided for the U.S. economy -- and several of its workers -- instantaneous global access. In the final epoch of American history, which details the time period from 1976 to the present, the U.S. economy is decidedly secular.

An important sociological impact of this situation is that the earning potential for United States laborers has.