Introduction to Finance

bimetallic standard 
monetary 
standard based on two metals, 
usually silver and gold
full-bodied money 
coins that 
contain the same value in metal as 
their face value
token coins 
coins containing metal 
of less value than their stated value
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The Spanish dollar often was cut into eight pieces or “bits” to make change. Sometimes the U.S. quarter dollar is 
referred to as “two bits.” This term originated from cutting the Spanish dollar into “pieces of eight.”

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2.5 Development of Money in the United States
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The production of gold coins began in 1795 with the $5 and $10 coins. The issuance of 
full-bodied gold dollars was authorized in 1849, and production continued through 1889. For 
several decades, the value of a U.S. dollar was expressed both in terms of silver and gold. All 
gold coin production was stopped in 1933, and in 1934 U.S. citizens were prohibited from 
holding monetary gold in the United States. This restriction was extended in 1961 to gold held 
abroad by U.S. citizens. All restrictions on holding gold in money form were removed in 1975.
Paper Currency 
The evolution and use of paper currency in the United States have been 
characterized by a very erratic history. While some paper money was issued by individual 
colonies, the fi rst eff ort of a government to issue paper money occurred when the Continental 
Congress authorized the issuance of notes called Continentals to fi nance the Revolutionary 
War. While these notes were denominated in dollars, they had no backing in either silver or 
gold. Rather, they were backed only by possible future tax revenues to be gathered when the 
colonies became independent. As you might guess, the Continentals soon became worthless. 
This led to a long period of distrust of paper money. After a brief experience with two national 
banks, American banking went through a period of no federal regulation and nonuniformity 
in operating laws. State-chartered banks issued their own paper currency almost at will and in 
many cases with no or little backing of their notes with gold or silver deposits.
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