July 1789:?The value of copper coinage collapsed giving George Washington's new government our first financial crisis.
Leading up to the crisis, supplies of British and Irish copper coin currencies were completely cut off?during the Revolutionary War (1775 to 1783).??Copper pennies were melted down for the war effort. To remedy this problem, government sponsored mints to make copper coins. The problem was that the spread between the value of copper and value of the coin (called?seigniorage) became so great that it encouraged counterfeiting and cheating by government sponsored mints using less expensive alloys.
Flooded with underweight copper coins (the government declared illegal) and counterfeits, the public lost confidence in all copper coins. In New York City, during the summer of 1789, the bottom fell out. Merchants refused to accept copper coins at any price which started the “Copper Panic of 1789.”
?
“...Many of the retail shops are shut: The cries are suspended in the streets, and it is with difficulty the poor can purchase bread of the bakers or vegetables in the market:...” New York Packet of August 18, 1789
?
The Founding Fathers bought their way out of the crisis by "turning on the printing presses." Paper pennies were printed on a special paper that the bank had procured from Benjamin Franklin -- the paper, coupled with the design of the note, made it almost fool-proof against counterfeiting. The new paper money entered the system through government spending and exited through taxation.
The last 100% copper penny was issued in 1857….and now you know.
#FunFactFriday #NowYouKnow #Trivia