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The Future of Central Banking: A Lesson from United States History


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  • Keynote Speech by Bennett T. McCallum

    (Carnegie Mellon University and National Bureau of Economic Research (E-mail:


The United States Constitution evidently calls for monetary arrangements with a strict metallic standard-gold, silver, or bimetallic. How were these provisions overturned so as to result in todayfs fiat- money arrangement with no trace of a metallic standard? A crucial step involved Supreme Court decisions after the Civil War with regard to the constitutionality of the fiat ggreenbacksh issued during the war. The reasoning expounded by the Supreme Court in these decisions relied importantly on a failure to distinguish between monetary and fiscal policy provisions. Essentially the same failure has been present in much of the recent discussion concerning the financial crisis of 2007-09.

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Article provided by Institute for Monetary and Economic Studies, Bank of Japan in its journal Monetary and Economic Studies.

Volume (Year): 28 (2010)
Issue (Month): (November)
Pages: 27-34

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Handle: RePEc:ime:imemes:v:28:y:2010:p:27-34

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Keywords: Metallic standard; Fiat money; U.S. Constitution; Legal tender cases; Monetary versus fiscal policy;

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