YouSaid · the spoken record

Jane Knodell

lines on the record: 112
first: 2023-01-02
most recent: 2023-01-02
sittings or episodes: 1
sources: podcast

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“Well, there was a continental congress, basically, which was managing the financing of the war. So there were the state governments or colonies or whatever they were at this time, I guess were no longer colonies, they're state governments in a way. are still issuing their bills of credit, and their helping finance the war with their borrowing and their currency emissions. And then the continental Congress is also issuing currency called the Continental. My colleague Farley Grub at Delaware has just written a new book that's coming out next year with University of Chicago Press about the Continental Dollar and everyone said that it depreciated rapidly and in a sense it did in that there was high price inflation”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Right. And so when you say war is often inflationary because it costs so much, as well as it destroys the factors of production, to what degree, yeah, was the revolutionary war inflationary and inflationary relative to what? So we have inflation now, oh, the dollar, the US dollar is buying me fewer goods. The euro is buying fewer goods. But what was that currency that was buying fewer goods? Was it only the paper currency that was experiencing inflation? And yeah, also, can you just speak to the financing of the Revolutionary War? And I recall how soldiers weren't getting paid. Who were being lent to? Because there was no US government.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Right. And so obviously during the war, you know, the US was not issuing any of this kind of security. So when I was, what I was referring to before was like Hamilton's refinancing scheme, that, you know, we're now a new nation. You know, hopefully we're putting, you know, let bygones be bygones. And we're going to try to attract some capital from Europe and England. In the Revolutionary War, you know, the French were always at war with England, so they're happy to support these rebels. And I think Amsterdam, there could have been some of the same thinking in the Holland, in the Dutch. That's a really good question. But they did do some borrowing to the revolutionary effort, which was very important because otherwise it would have been even more inflationary than it was.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“And if you're an individual in a developed country, like let's say the Netherlands, you have gold and silver, what might tempt you to lend silver to a country that only started existing a few years ago and that is fighting a war? I mean, it seems like a pretty risky investment. To what degree did the US Treasury before it even existed the rebels, revolutionary war, how do they fund their efforts? Because, you know, if you're a Dutch banker, it seems like kind of a risky investment.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Their borrowing in species equivalents, so they're borrowing in sterling, that is from England. Their barring in French francs. and they're barring in gilters. It turns out that Amsterdam, Holland was actually a very important creditor of the United States. And so we had to make repayments to those people in basically the species equivalence of their currencies in order to maintain good standing as a borrower, which is very important to any new nation.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“That's right. And a lot of the gold was also, the gold coin was also minted in South America because, of course, we had very little, you know, we started, we did some, you know, mining of gold and silver in the 19th century, but this time nothing. We're doing nothing. So we had the silver and the gold and all these colonies had different values vis the species. Now I would argue that the species was the best form of money, right? So it's useful to think of money as a hierarchy. There's always like one body. Kind of at the top, and then others are kind of defined in relationship to that one. So this was still, you know, species was really king at this time. Now, when the US government borrowed, I believe that they were borrowing species. And it was when they borrowed abroad, right?”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Right. So the dollar was defined by law in the coinage law of I think seventeen ninety. And I mean, that was part of you're going to have one nation. You're going to have now one dollar. Because in the colonial period, all the colonies basically had their own dollars, right? Which was paper money in the 18th century. And those dollars had different values visy, the main form of species was. The peace The peso the very fine, finely produced silver coin, most of which was being minted in Mexico.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“And what was money back then when someone said, oh, the US government owed money to whom did it owe that money and in what form did it borrow money by the lender gave them gold and the US government gave them a certain certificate? Was that certificate viewed as money? Individual banks themselves, did they have sort of circulating bills that were backed by gold? Were those bills viewed as money or was only gold or as you and other scholars call it species? Was that considered money? When people say, oh, the US government owed $35 million. I'm just making that number up. What is that $35 million? What was $1 meant to be? Because, again, the US dollar, as we know it, the greenback did not exist till the 1860s.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“And so the bank was going to assist with that refinancing of the debt. The debt became longer term debt, so that was part of how they paid for it, which is going to push out their repayment period, you know, many, many years. And we're going to give the U.S. government the customs revenue. And so that really built the credibility of the federal government in its ability to actually service the debt. But you still needed a bank to kind of make it all work. That was the purpose for the first bank.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“So we had the Revolutionary War comes to an end. The seventeen eighties were a period of a lot of monetary and financial chaos, really. And there was no real stable monetary unit. There were very few banks, and the federal government had assumed a lot of the debts of the state governments, right? Well, this was part of Hamilton's plan was that we had all this revolutionary war debt. And the federal government was going was to assume much of that debt, which would put the state governments when the states were very powerful at this time, right? The state governments on better fiscal footing because they no longer had to service this debt. But now that responsibility. Shifted over to the federal government.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“Okay, great question. So the first bank was chartered in seventeen ninety one And it had a twenty year charter. And Dixilla has written a lot about the first bank and also David Cohen, one of his students, his very nice book on the first bank. And it's broadly agreed that the purpose of the first bank was to assist with Hamilton's project, Hamilton Alexander Hamilton being the first Secretary of the Treasury, to the first bank was part of Hamilton's project to place the finances of this new federal government on a firmer footing.”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT
“So, I want to delve deep into central banking, particularly within the US central bank. So there's the, before the Federal Reserve, there was the second bank of the United States, and then there was the first bank of the United States. Let's dive deep into the first bank of the United States, which I think was founded in the late 1700s. What were the motivating forces of why the United States needed a central bank or the creators thought that they needed a central bank? And to what degree was it different from the Federal Reserve that we think of today?”
2023-01-02 · Forward Guidance · A Masterclass In Central Banking | Professor Jane Knodell · IDENTIFIED FROM THE TRANSCRIPT