Book Summary Essay Example
The book, A Monetary History of the United States, 1867-1960, highlights the American economic history in a succinct and chronological manner. The authors, Milton Friedman and Anna Schwartz, prepared the book in the 20th century and sought to underpin the ways economists perceive the monetary theory as well as the country’s policies. Today, the book is one of the most referred and cited academic resources in the study of economics. The in-depth information and coverage of the period between 1867 and 1960 allow the reader to obtain important knowledge regarding the growth of the country’s economy as well as the policies that were put in place by the governments during the period. Through a chapter by chapter summarization of the content, it is clear that the book is an essential resource in the study of economics.
Chapter 1: Introduction
This chapter opens the book’s emphasis on the economic development of the United States over the years. The authors begin the chapter with a stock market trace that spans approximately a century. The chapter examines various factors that contributed to the changes experienced in the country since the Civil War up to the 1960s. Besides, the chapter incorporates an analysis the aspects that changed the stock market and contributed to its influence on the subsequent course of events. The authors also mention the National Banking Act and its importance throughout the study of American economy. For this reason, this chapter essentially paves the way for the readers seeking to have an overview of the effects of introduction of monetary currencies on the American financial growth. Also, the chapter asserts the importance of political developments in determining the nation’s economic growth projection over the years.
Chapter 2: The Greenback Period
The period between the completion of the American Civil War and the time when gold payments resumed was known as the Greenback Period. During this time, there were unusual interests to the monetary payments, hence, leading to the development of the National Banking System. The system created a banking structure that enhanced the country’s financial growth after the completion of the Civil War. Accordingly, the authors suggest that the Greenback Period resulted in the creation of a fiduciary standard that required no government agency to commit itself as the sole seller of gold, which eliminated the concept of fixed pricing of the commodity. The exchange rates were floating freely because there were no fixed rates between the United States Currency and that of other nations across the globe. In this chapter, the authors provide historical perspectives on the role of gold as well as the introduction of monetary currencies in the country. The chapter also highlights the problems that were associated wit this period, which encumbered the nation’s economic growth. Finally, the chapter closes with the economics of resumption to underline the fiduciary standards that were developed at the time.
Chapter 3: Silver Politics and the Secular Decline in Prices, 1879-97
This chapter explores the gold standard that the country was using in relation to other countries with which the USA was trading with globally. The return of the gold standard ensured that the stock of money was still a significant aspect of consideration when determining the exchange rates between the country’s dollar and various currencies used by other nations. The authors argue that the most important channel of influence was the National Bureau’s dates that created the cyclical trough in 1897. Accordingly, this chapter underpins an important aspect of history, which implies that the US held about 5% of the world’s gold stock, which were used as monetary reserves by the country. In this regard, this chapter assesses the movement from fixed exchange rates with different currencies to the use of money stock in banking to make the gold stock price higher than the normal trade partners.
Chapter 4: Gold Inflation and Banking Reform, 1897-1914
This chapter focuses on the inflation rates of the prices of gold and the importance of this trend to the American economy. Accordingly, the upward rise of the price of gold across the country was also characterized by similar trends in the global scale. As a result, the upward scale of the rates of growth resulted in increased consumer price index, however, the events of this period differed from the rest of the history significantly. In the book, the authors suggest that the resumption period foresaw a global scale growth of the world stock. The increased demand for gold proved to be a substantial element of the USA’s growth in the economic sector. The authors postulate that this period allowed the United States to benefit from the increased consumption and exchange rates. Some of the aspects that the authors seek to address in the chapter include velocity of money, wholesale price index, real income, money income, and the implicit price index. Throughout this chapter, it is clear that the authors succinctly underline the key aspects of gold’s involvement in the nation’s financial growth.
Chapter 5: Early Years of the Federal Reserve System, 1914-21
The complete abandonment of the gold standard across the globe following the completion of WWI made it difficult to effectively incorporate and develop the Federal Reserve System. As a result, the country altered its money and banking structures in an effort to produce legislative enactments that were designed to adapt its federal system for wartime periods. Essentially, the changes increased the stock of money inflation rate at a time when the USA remained neutral during the war. At the end of the war, the USA monetary authorities enhanced the development of a new law whose sole purpose was to time and characterize declines in the money stocks during the years. Subsequently, the Federal Reserve was formed to provide elastic money that changed substantially based on the quantity. The implementation of the Federal Reserve System required supervisory bodies that ensured control and retirement of the money was achieved. Consequently, the Federal Reserve System became a fundamental development of the country’s rich economic history.
Chapter 6: The High Tide of the Reserve System, 1921-29
The chapter explores different aspects of the Reserve System’s growth and prosperity. Besides, the authors determine the influences that the Reserve System had on the country’s economic growth during the 1920s, which are paramount to understanding the progress and policies that the government enforced during the time. Subsequently, the authors address the changes in the American commercial banks and their operations under the control of the Federal Reserve System. Without a doubt, readers get to learn various aspects related to the principles of the country’s money policies in relation to the economic growth and developments over time. Also, the authors underline the concept of bills versus the government’s financial securities used to provide viable outlets for the nation’s economy. Consequently, this chapter provides fundamental arguments that relate to the concepts of high-powered money and that ratios of deposit and reserves, as they were vital to the economic strategies set by the government.
Chapter 7: The Great Contraction, 1929-33
The period between 1922 and 1933 was characterized by the start of the nation’s first ever banking crisis. Besides, the country was faced by another banking crisis in 1931, which threatened the sustainability and efficiency of the Federal Reserve System to the USA’s future. Due to these threats, the country fell into a banking panic because of the changes in the stock of money. Over time, the stock market succumbed to the crises and crashed, further increasing concerns towards the viability of the Federal Reserve System. Despite the threats, bank failures and panic created loopholes for the country to fill and achieve future success the development of the nation’s monetary policies. Also, the open market purchase program in 1932 allowed the government to sell bonds and securities to improve its sustainability and prosperity.
Chapter 8: New Deal Changes in the Banking Structure and Monetary Standard
This period offered sticking contrast to the previous chapter because it underlines the fact that monetary policies were accorded little recognition and importance in the context of the country’s economy. However, the American foundations for the financial structure were modified in a profound manner. The departments attempted to help the country outgrow the impacts and threats characterizing the previous periods, hence, the passive nature of the monetary policy in affecting the country’s economic events. The chapter also endorses the changes made on the Federal Reserve System’s perceived powers, which included the regulation and monitoring of the banks and other financial institutions. During this period, the government conducted various experiments to spearhead the economy’s recovery from the previous years. For this reason, some of the experiments were flexibility of the exchange rates, temporary elimination of the gold standard, alterations in the way gold was used and obtained privately, and the silver purchases used in the market. Thus, the changes in the monetary structure and banking structure were instrumental to the recovery process outlined in Chapter 7.
Chapter 9: Cyclical Changes, 1933-41
Periods of severe contractions were followed by economical vigorous rebounds. In this chapter, the authors highlight monetary changes, prices, income, and velocity in the country following the Great Contraction. Accordingly, the chapter presents an observation that the population was growing at the time, which affected per capita outputs. During the cyclical peak, the authors argue that the revival did not go well because of its erratic and uneven nature. The banks were reopened, which opened the way for industrial production and personal income growth. At the time, the National Industrial Recovery Act was passed in 1933 to help raise the wages of different workers employed at the industries. Nevertheless, the net income and private investment did not rise during this period despite the enactment of the National Labor Relations Act and various minimum wage legislature. Another notable law that was enacted during this time included the social security taxes.
Chapter 10: World War II Inflation, September 1939-August 1948
This chapter discusses the effects of the second World War on the local and international monetary exchange rates. Besides, the authors suggest that the war ushered inflation in a way that differed from the previous ones experienced during the Civil War and WWI. Subsequently, the wholesale prices of goods had already grown and rose high, while the stock money was tremendously developed. Essentially, the authors suggest that velocity fell at the time, which illustrates that the changes were vital to the country’s financial development. The chapter provides an assessment of the events leading and succeeding the Civil War and World War I in an effort to clearly identify the inflation rates reported at the onset of World War II.
Chapter 11: Revival of Monetary Policy, 1948-60
The revival of monetary policy followed the recessions and contractions that the economy experienced. In the chapter, the authors argue that the country started to experience financial stability on the money stock changes, however, velocity remains unstable. Consequently, the steady economic growth in the stock of money was in stark contrast with the previous applications of the monetary policy. After WWII, the economy resumed the monetary policy and started to reap huge benefits that were instrumental in the financial growth that the nation experienced. Accordingly, this chapter sheds more light on the factors that pushed the government to revive the monetary policy to improve performance.
Chapter 12: The Postwar Rise in Velocity
The velocity of money became an interesting aspect during the postwar period, which has been on a steady trend over the years. Accordingly, the attributed factors behind the velocity of money undergoing secular declines were associated with the rise in per capita incomes. As a result, this chapter addresses the trends in the rise in velocity of money after the completion of the second world war. Without a doubt, it is important to address the fact that the trends were evident interoperations of a predominantly single-direction observations. As a result, the authors postulate that the economy was beginning to stabilize during this time, which has since been a major core to the overall outcomes of the reinstatement of the various laws and legal aspects of monetary policies, labor laws, and minimum wage stipulations.
Chapter 13: A Summing Up
This final chapter in the book offers a summation of the trends, influences, and factors that played major roles in the development of the American economy. The authors provide in-depth summaries regarding each United States monetary history and the need for readers to understand the near-century aspects that contributed to the country’s financial might over the world. Accordingly, the authors found that behavioral changes in the stock of money associated with various economic changes, prices, and money income. Besides, the authors argue that there exists a close interrelationship between economic changes and money policies, which has been a stable feature of the nation’s immediate financial growth and development. Third, the changes that the government instituted were often independent, however, they do not offer clear reflections of the changes in the economic decisions and policies instituted. This chapter offers the fact that wars played more roles in doubling the stock money. The wars were instrumental in the country’s eventual growth and dominance across the globe. With this in mind, it is clear that the book offers fundamental insights to the readers who seek to understand the concepts and trends that have been essential to the USA’s economic development.
