The Economic History Podcast Financial Systems and Growth
8 snips
Feb 2, 2021 
In this discussion, Richard Sylla, Professor Emeritus of Economics and former President of the Economic History Association, delves into the evolution of financial systems in the U.S. Following independence, he explains the formation of a currency union and the essential elements for a successful financial revolution. Sylla highlights the influence of early banking practices and the monumental challenges faced during the Revolutionary War. He also connects modern financial systems to economic growth, drawing parallels with historical examples and emphasizing governance's pivotal role.
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Colonial America's Fiat Money Innovation
- Early American colonies innovated by issuing fiat paper money starting with Massachusetts in 1690.
- These bills of credit functioned as currency backed by the ability to pay taxes, fueling economic growth.
States Lost Fiscal Powers But Gained Banks
- The U.S. Constitution centralized monetary and import taxation powers, removing these from states.
- States compensated by chartering banks and profiting from them, easing their fiscal burdens.
Key Components of Financial Systems
- A modern financial system includes strong public finance, a stable currency, a central bank, banks, securities markets, and corporations.
- The U.S. rapidly developed these elements, sparking a financial revolution far quicker than Europe.
