Another thread, this time just dealing with Gov. Brainard's claim that competitive banknote issuance "led to the need for a uniform form of money backed by the national government." There are more myths here than you can shake a stick at.
(1) Most antebellum notes weren't discounted because their backing varied from bank to bank. Discounts often reflected transport and other costs of returning notes to their sources for specie. Laws against branching and poor transport were the main cause of such discounts.
(There were of course also plenty of bad banks. But laws were to blame for those, too! Notes of doubtful banks were not generally accepted: brokers would by them, and notes of failed banks, at heavier discounts.)
Discounts declined dramatically between 1837 and 1863. By the last year, most discounts were under 1%. All New England currency had long been at par for that entire region.
Establishing a uniform currency was not the Union government's main goal when it passed the national currency (bank) acts of 1863-4. The goal was to sell more war bonds--that is, to sell the new "uniform" backing for banknotes and thereby place funds at the govt's disposal.
That uniform bond backing is NOT what made national banknotes a uniform currency. This was done by requiring, in the 1864 act, that all national banks accept other national banks at par, Hey Presto! Uniformity. But it came at no small price.
It was but one of many factors (the bond backing requirement was another) to blame for the notorious "inelasticity" of the new national bank currency: jstor.org/stable/3117442…
That inelasticity was entirely the result of Civil War legislation better suited for steering $$$ to the gov't than for providing for a safe, sound, and stable currency system.
All things considered, I believe we'd have been better off had state banks not been forced to stop issuing currency. Read and judge for yourself: onlinelibrary.wiley.com/doi/abs/10.111…
Read about the crises that resulted, how having a truly competitive, market-based currency system would have improved things, and how we got stuck with the Fed instead here: cato.org/publications/p…
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